TSEP#208 From Concept to Blueprint: Battery Passports as Enablers of Transparent, Competitive, and Circular Value Chains

We scoped or sketched this concept of a battery passport project when we saw the initial draft of the EU regulation from the commission that had a very similar idea. And then we saw those gaps in the law, right, where just a few things were incompatible, lots of uncertainty. And you know, it takes time to implement this by the industry. And so we wanted to set out to support the industry to make this happen in time, in quality, so everybody benefits. Batteries have become an indispensable part of our decarbonisation effort, powering electric vehicles and energy storage systems worldwide. However, their ecological and social impacts often remain hidden. The EU-wide mandatory digital battery passport set to take effect in February 2027 aims to change this. It is designed to become a key instrument for ensuring the sustainable scaling of battery value chains worldwide. But who's driving this initiative? What will the battery passport look like in practice? And how will it impact private consumers and most importantly industries? They tuned for a one-on-one on the EU battery passport and an insight into one of the pioneering projects bringing it to a live the battery pass project. Welcome to the Smartory Podcast, a podcast for and with the creators of the new energy world. A world in which energy will be renewable, decentralized and digital, bringing together electricity, heat and mobility. Let us show you how we will get there and who will get us there. Very much looking forward to be talking to my guest in this episode, Thelmann Wahle. Director of Sustainable Automotive and Batteries at Systemic, a world-leading systems change advisory. And most importantly for this episode at Systemic, he has been developing and leading the Battery Pass Project, a three-year multi-stakeholder consortium with leading industrials and academic institutions in the battery sector. But I'm quite sure he'll tell us all about it himself. Welcome Thelmann. Isaac, good to be here. Let's start at zero because we have an international audience, so they're not always in tune with what's happening in the EU. What is a battery passport and why is it important? So battery passports are a requirement that the EU described in the EU battery regulation, which came into effect last year. And it will be a small database that every battery that comes into the EU market will have to carry starting February 2027, containing around 90 data points on all sorts of elements from sustainability through lifecycle and performance of the batteries. And what kind of batteries are we talking about here? So it's covering almost all batteries, other than the small handheld ones. So that's automotive batteries, batteries of light means of transport. So that's scooters and bikes, for example, and also industrial batteries, anything larger than two kilowatt hours. Now you said it's covering those kind of batteries, but who's responsible for then actually introducing the battery passport? Is it mainly, let's be honest, the manufacturers in China? Is it your vendor? Is it your OEM based in Germany, for example? So it's going to be the company that puts the battery into the European common market. And they're the so-called economic operator. And that is a term from market compliance and is linked to the, you know, well-known CE label. And whoever puts the battery onto the market, it will be accountable to actually establish and run and keep up to date that battery passport. And just to step one level up, what's like the overarching goal that the EU has in mind with introducing the battery passport? Like what's the why behind it? The battery passport is the first of many digital product passports, so called DPPs, that the EU has as an overarching program of their circular economy action plan of the last legislator. And the idea is to provide more product related information that could then be used by businesses to create business models, especially in circular economy and life extension, right, make more out of a given product, but then also to consumers, helping people make informed decisions on the performance and also on the sustainability of batteries. And lastly, it also is meant to support execution, ultimately, of laws where information that are relevant on say the state of health of a battery, for example, could be used by the regulators to execute legislation that exists and also improve policy making overall. And just given we record this episode here in the beginning of March, of course, we know there's big geopolitical turbulence. So is that also a means to drive European competitiveness and access to resources in regards to rare minerals, etc? That has been the plan since the outset of the digital product passports program. I think the development also of the battery sector in particular to stay with the battery passports narrowly has been, well, let's say quite dynamic, right? When the whole program started out, we expected to have better manufacturing at scale in Europe by European manufacturers like Northwold or ACC, and to really go steep uphill. And then the battery passport could become a differentiating factor also for the EU manufacturers. Now, we all know that hasn't played out so far as planned. And then also just yesterday, actually, the Commission has proposed a package on supporting the European automotive industry that lowers a bit the pressure on CO2 targets and therefore probably will slow down a bit the adoption of electric vehicles. So with all that, the entire external setting is evolving and slowing down a little bit. But I think the overarching target remains valid that the battery passport and information on batteries will become really interesting and valuable for anybody that puts this on the market. And by the way, not only European manufacturers, manufacturers from anywhere, right? Could be Chinese, could be the US that sell into the EU and therefore support productivity of the batteries and sustainability. So to sum up, the battery passport should support transparency along the value chain competitiveness of the batteries produced and then also resilience for the European market. Now you said the EU makes it a requirement. We have those companies bringing the batteries into the market, being responsible for creating the passport. You said I think you mentioned 90 data points. So how much detail has there been on behalf of the EU in regards to a framework that companies can work with? Because I guess that's the segue actually to be talking about your consortium and how that came about. So how much blank space is there to be filled and by whom? So indeed you allude to our consortium and we set that up and we'll get to that I guess in a second in order to fill the blank spaces and reduce the complexity because the battery regulation itself is hundreds of pages long, has a dozen or so annexes. It's quite arcane and complex to understand. And at the same time, while there is a lot of detail on the data points, a lot of the methodologies that are required to actually record them, capture them and put them in has not been developed yet. And so we wanted to make a proposal and that fills a few of those gaps as far as that's possible. The second element is that importantly, we talk about two dimensions of a battery passport. One is the content and the other is the system, the technological framework, so to speak, right, IT implementation and that one itself, it will also be standardized and determined to a degree by the European Commission and through another law, the ESPR, the Eco Design for Sustainable Products Regulation and there's a standardization process as well, JTC24, that is developing that technical framework. And so between those two dimensions, we try to support this with the consortium and there's still very much work to be done in order to finalize both the methodological approach and the systems criteria. So just to break it down into very simple words, on the one hand, you need to make sure, you know, I don't know how many cycles the battery has, what kind of minerals are in there. And then probably the much bigger challenge is which, yeah, communication protocols are OEMs using with their suppliers or with the end consumers, which digital platforms does it run on, etc. Yes, so it's important to keep in mind, so this law is technology neutral, right, that you will not prescribe which software or platform to use to actually determine this. They will also not run and own the data. This will be a decentralized system where the only thing that is centralized at the commission or national level will be a registry, right, the metadata that allows the whole system to work on one unified architecture. But how to do it actually is up to each individual company, following the methodological rules to get consistent data. But it's really a matter of more of a change and software program that companies will have to respond with in order to tailor their own solution to their really individual needs. That really sounds like a huge task, because if I imagine I want all the data beginning in the mining somewhere, mining lithium, for example, all the way through its production, its usage, all the way to the recycler, and then ideally a company using those minerals again to produce the next battery, whatever, that's a huge value chain. So what kind of stakeholders need to come together? Ultimately, everybody along the entire value chain will be affected in more or less intense ways. I think what's important to keep in mind is while it sounds overwhelming, 90 data points really is not a lot for a company, right, or for software, for that matter. And the vast majority of these data points are already available in companies. We talked about it, the economic operator will be responsible. So that's the one that puts together the cells into a final product or produces a battery pack, for example, and they tend to have access to the vast majority of the data or can get it from their cell manufacturer. And they, of course, for CO2 footprint, for example, they would have to then, you know, accumulate the data maybe from their suppliers. So that responsibility is kind of passed up the value chain. Ultimately, this sounds much more overwhelming than it is, because this is a more matter of bring together data that already exists in a company into one place and digitalizing it. So we want to also emphasize it's more of a change process, rather than, you know, building something fundamentally new. It's a matter of managing the smart and getting the right people in the company and with the suppliers together to put it into one place. Now, when you say we, I think on the one hand, you're talking about you guys at systemic at as an advisory, and on the other hand, as you being part of the consortium, the battery pass project, which was a consortium, I think, funded by the German government to sort of like spare had the implementation of the EU requirements, right? That is correct. So we set out 2021 systemic with a couple of partners from a previous project, the circular economy initiative Germany, where we identified that data is crucial over the lifetime of a battery in order to, you know, get the best out of it, both in manufacturing and then throughout the life. And we scoped or sketched this concept of a battery passport project when we saw the initial draft of the EU regulation from the commission that had a very similar idea. And then we saw those gaps in the law, right? Where just a few things were incompatible, lots of uncertainty. And, you know, it takes time to implement this by the industry. And so we wanted to set out to support the industry to make this happen in time in quality. So everybody benefits. Yeah. And so we brought together this consortium. Systemic took the lead of in total 11 companies and organizations. And so that's two of the large German automotive manufacturers. That's two leading pathoductive material manufacturers and recyclers of Europe, as well as architects, the German Academy for technical sciences, VD renewables. So that's electronic engineering and to innovate a circular and twice and opens for a software protocol for pride of fire. So in total, we have this, this really powerful group, kind of like a sprint team that we thought would be just about capable to deliver all the necessary insights. And, you know, it's still fairly small, it should be able to be nimble and actually produce really palpable outputs throughout the project. And I think we did a pretty decent job at that. So what were your concrete conclusions of diving really into the implementation of the EU battery passport and creating a blueprint for it? Well, for one, that companies can start and need to actually start now. And so there is remaining ambiguity for sure, because some of the rules are still to be determined for standardization processes or delegated regulatory acts by the Commission. But it's relatively small fraction and companies can start and need to start now because 2027 is not far away. And that's the first. And I think the content guidance that we developed is a really useful tool for companies to get smart about this very, very quickly. We actually turned this into a DIN DKE spec, spec 99100, which is the first standard on digital product passports globally. So that makes it really easy for companies to do this. We also developed a technical framework that is now the base for that standardization process. And that gives a really great kind of canvas of standards that companies could be using and software types that would allow this to actually be possible. And then we also looked into making this possible. So we built a software demonstrator and that showed right within a couple of months, you can actually build the tech. And so it's totally viable as a matter of doing this in the company. So to the needs of the company. And that leads to the last one, the value. So we did a study really looking into is there are these use cases that everybody hypothesizes about really true. And so we identified 12 that we were able to corroborate with industry. And we also modeled and quantified three of them. And we've found really resounding positive response from industry, where a lot of players that really, you know, take this as a more proactive, ambitious project, see a potential to actually generate business value from that. So once again, in my own simple words, so basically, you wrote a help book to understand the EU regulatory, the EU regulation. So that was the content guide, you sort of really dove into creating a standard that really brings all value, all stakeholders together and allows them to build systems that are interoperable. And then you based on that, you build actually a software, how all of this could be implemented as a demonstrator. So basically, you build an actual battery passport or a blueprint for a battery passport that companies could use. And then you were checking out, okay, now we've got this. And of course, we want to go further than compliance, how could we actually use this to make money? Yeah, that's correct. Now, in that, and what was the most challenging, basically, and what are the most important points to be aware of? Well, I think in the project, we figured as with all consultia to baseline everybody and kind of form that group. So you're really effective and can get to the point. I think everybody that's worked in a multi-stakeholder consultia knows this, that's, it's a lot of effort and work. At some point, systemic had eight people full time on this, and overall, probably 50 people contributed. So it's been a pretty big lift. And we were really glad to have the 8 million grant funding by the German government that allowed us to like lift this in terms of kind of takeaways for the implementation of battery passports themselves. I think the two that stand out to me is for one, the overwhelming complexity by the law, I think it's much, much, much more complex than the content actually requires. And that makes it very difficult to communicate, right? People are kind of overwhelmed. And that doesn't need to be like that. And so we hope that with our content guidance and tech guidance, we help to reduce that complexity. And the second bit is the way that it's perceived, because it ultimately is a compliance topic for the companies, right? They see the law and they say, oh, this is market conformity requirement. If you don't have a battery passport, you can't sell your battery. So it immediately becomes a risk and compliance topic in a company. And it should be, right? Because it's ultimately really crucial for their ability to sell in Europe. But ultimately, the people that you want on that kind of project are much more in corporate development and tech in sales. And that sometimes put this in a niche in a company and makes it more difficult to implement than it would have to be. And therefore, we suggest really look at this not only as a pure compliance thing, and not only as a software program, but really as a change program that you can think of as an opportunity creator for the company, think through how that could affect your relationships with your customers, with your suppliers, can you use the data internally or for new business models? And well, frankly, take that opportunity to update your processes, right? Like your internal data accumulation and processes to just get fit for a digital future. And let's break it down to two very concrete examples. If you talk about change process, for example, how could you profit off the battery pass in the role of being a fleet operator? Well, the fleet operator, it would be more of a user of the battery passport. And since right day, they actually own or operate actual vehicles on the road. And one interesting data point for that in the battery passport is the state of health of batteries that could allow additional and low effort assessment of the state of health and residual value of vehicles. So that could potentially, you know, support greater resale value of vehicles or also looking into second life applications. Now, it does sound like work, you said, you know, it also comes with the change process transformation usually also is costly. So does that mean like an added price attack for the consumers in the end? Well, I mean, it doesn't come entirely for free, that's for sure. But we are quite convinced that actually the data that you accumulate for one, it's already available by and large. And so the price that is probably often overestimated. And second, by having better digitalized processes internally, and making this thinking of this as a business case, and this could actually lower life cycle costs of batteries. One example is for example, battery recycling, that of course, everyone that puts batteries onto the market will have to pay for upfront rights with the EPR fees, it's going to produce a responsibility. Now, when battery recycling gets more affordable, that actually lowers those fees, for example, ultimately improving price of a battery over of the lifetime. And the battery recyclers, frankly, they're all very excited about this because the data in the battery passport easily accessible, and as it is set up, promises to them that to support, for example, automated disassembly, automated sorting, just better information on what's in the batteries to optimize their recycling processes. So that's value creation, we're making things more efficient at the very end in the recycling process. In between, as a consumer, you said it might be a little bit more expensive, but it does also provide some benefits. What could be actual benefits looking from a consumer perspective? So for consumers, we think there's a bunch of value add. One is having a transparency on the sustainability and to human rights due diligence. But of course, right, some people are more interested in that than others. Another bit is to have the data available to hand and provide to their repair shops, for example, so that could lower costs in servicing. And the third one, ultimately, could be having access to the performance of your battery and checking besides the one in the dashboard, if you have access to the dashboard with a second data point, how good is your battery still? All right. So lots of benefits to reap independently from where you are in the value chain. Now, that was a project spearheading the implementation of the battery pass in Europe, driven by Germany. I'm sure there's a lot of initiatives in other places of Europe, maybe the world. So what place does this project take in the overall implementation of the battery pass? And will Germany continue to support that project? Where does it go from here? Yeah, so there's a bunch of projects and a lot of them have been popping up while we were already active. We have been working with the global battery lines and Katina X to notable project or programs since the beginning. Importantly, the global battery lines, they also develop a battery passport program. And they're doing something else in the EU. And that is, I think, an important takeaway for everybody that's listening in the global battery lines. Battery passport is another thing, then the EU battery passport also really valuable, but really focused on upstream sustainability. It's not going to help be compliant with the EU. But the global battery lines is doing a great job at providing greater transparency and value chains on batteries. And so we've been working with them throughout also co-creating methodologies, for example. Katina X is an interesting example because it's an industry initiative that is developing kind of an app store for industrial software. And they have developed bases for battery passport implementation, not so much methodological, but really actually getting it on the ground, getting it implemented. And we think that's super valuable for companies that are implementing this. What's interesting is internationally, there are a bunch of both regulatory and independent programs that now kind of follow the lead of the EU. So it's another example of the EU shaping global markets through their regulation. So Korea, Japan, China, all large battery manufacturing markets, they all have now programs that actually link to or meant to link to the EU battery passport. And therefore, you know, the global ecosystem is starting to be shaped as well. So there's a whole global ecosystem being ramped up right now. I guess if you want to make business in the European Union at the moment, you have to be aware of the battery pass coming in, talking from now just a little bit less than two years. So that's not a lot of time. The good news is, with the battery pass project, now you really have the groundwork to go into the space. Specifically, I guess if you're a small and medium sized company that cannot leverage all this research and implementation work by itself, I guess that's a good starting point to really save costs, reach out into the battery pass project team and see how you can build upon the foundation work. Thanks for your insights, Tillman. Thank you, Sir. It was really good. You can find out more about this topic on two websites, the batterypass.eu and systemic.earth. And of course, you can also visit the exhibition platform, the Smarter E Europe, which with EES Europe and Power2Drive Europe offers everything there is to know about batteries. The exhibition itself will take place in Munich from 7th to 9th of May 2025. More information on thesmartere.de