Battery Energy Storage Systems: End-of-life but not end of responsibilities

Large scale energy storage in the form of Battery Energy Storage Systems (BESS) is a crucial technology for the UK energy market to achieve net zero by 2050. However, the lithium-ion batteries used in BESS projects are also notoriously tricky to dispose of due to their toxic properties and the risk of fire hazards.

Many early projects commissioned in the UK are starting to come to the mid-point of their lifespan, with most having a duration of 10-15 years. In the wake of the introduction of the new EU end-of-life regime, this is a good opportunity for producers and operators of BESS to consider their end-of-life obligations.

In this article, we look at the current regime for BESS recycling in the UK and the new EU regulations coming into force between now and August 2028. If your business is involved in producing, importing and/or operating a BESS facility in the UK, having a plan for decommissioning the components and an understanding of who has responsibility for recycling them is essential.

The Current UK Regulations

As outlined in our 2022 article, the current rules in the UK are set out in the Waste Batteries and Accumulators Regulations 2009 (WBAR). These impose "take back" obligations on producers of industrial batteries to collect them from end-users in certain circumstances:

• Where the producer supplied the end-user with the batteries during the compliance period;

• Where the end-user is unable to return the battery to the original producer and the battery is of the same type as those produced by the producer; or
   
• Where the end-user is not able to return the battery to the original producer for any other reason (Regulation 35).

As a result, producers are usually responsible for taking back industrial batteries and ensuring they are properly treated and recycled by an approved battery treatment operator or exporter (Regulation 38). The term "producer" has a wide definition under WBAR, such that it captures importers of batteries to the UK as well as manufacturers.

The New EU regime: How are the rules changing?

A new regime adopted by the European Parliament will come into force by way of a phased introduction between August 2024 and 2028 (Regulation (EU) 2023/1542). This regulation amends the 2006 directive (EU Directive 2006/66/EC) and will take effect automatically in EU member states. Although the UK is no longer an EU member, the new EU regulations remain relevant since many producers and manufacturers import the same products into both the EU and the UK.

In addition, given that numerous BESS facilities will reach the end of their useful life over the next five years, the updated EU regime may signal policymakers in the UK to update and refresh the regulatory regime to ensure it is still fit-for-purpose.

Extended Producer Responsibility

The key change introduced by the new EU regulations is the concept of 'Extended Producer Responsibility': in addition to the existing obligations, producers must cover the costs of collecting, treating and recycling all collected batteries (Regulation 101). As under the previous regime, the new regulations apply to producers of industrial batteries in relation to batteries they make available on the EU market for the first time.

While the obligations on producers are enhanced by the new EU regulations, producers will now be able to exercise those obligations collectively by operating through 'Producer Responsibility Organisations'.

Producer Responsibility Organisations ("PROs")

PROs are parties authorised to fulfil the extended producer obligations on behalf of producers under the new EU regime. A producer will be able to appoint a PRO to fulfil their obligations to collect, treat and recycle industrial batteries on their behalf (Article 57). The PROs must be specifically authorised for this purpose under Article 58.

Although the new EU rules enhance the obligations of producers, they also provide flexibility as to how those obligations are discharged. Producers are likely to find that appointing a PRO to undertake their end-of-life obligations will be more efficient than doing so themselves. What the PRO market will look like remains to be seen, but it is likely that the new regime will increase the demand for these organisations.  In light of the new regime and the burgeoning PRO market, it will be of vital importance that robust arrangements between producers and PROs are put in place to ensure that producers comply with their obligations.

Market implications

As above, though the new EU rules do not apply directly in the UK, businesses who import and place batteries on the EU and UK market will need to be aware of the implications.

In our experience, BESS importers tend to be reluctant to take on producer-related responsibilities and usually seek to push these onto the manufacturer or to the end-user. Understandably, end-users are not willing to take on the financial and regulatory risk.

To this end, we have seen parties come to commercial arrangements which expressly allocate the cost of discharging the obligations, such that the obligation remains with the party providing the BESS system, but that party is compensated for the increased compliance costs.

There is nothing in the current regulations to prevent parties from coming to such arrangements. However, it is important to note that under the WBAR the buck will always stop with the "producer" regardless of where costs lie.

The EU regime's PROs concept is likely to ameliorate some of the discomfort around this responsibility, as producers will be able to outsource the lion's share of their end-of-life obligations to an approved body.  This creates a culture of shared responsibility and, in our view, takes better account of the realities of the obligations since not all 'producers' are best placed to undertake them.

How can we help?

Our team has significant experience helping clients to navigate the complexities of end-of-life obligations. We can assist in drafting contracts at the outset of a project to address these issues early on and guide clients through the potential disputes which may arise further down the line.

Please do get in touch with our team if you have any questions.