Battery Talk: Lena Beckmann (Webasto) and Sebastian Scholz (Munich Re - Green Tech Solutions)

"Giving customers more certainty for electrification and accompanying them from the beginning"

The success of electrification is closely linked to the development and growth of battery storage for mobile and stationary applications. Where do we stand on the topic, what are the current opportunities, challenges, but also risks? In this interview, we brought together two subject-matter experts who look at the topic of battery storage from different angles: Lena Beckmann, Head of Product Management Battery at Webasto, and Sebastian Scholz, Product Lead Energy Storage Green Tech Solutions from Munich Re, the world's largest reinsurer.

Easy Way:What do you associate with the topic of batteries from your perspective?

Lena Beckmann:At Webasto, I'm responsible for the service and hardware portfolio for batteries in the commercial vehicle sector, and I'm looking very positively at the topic, which is incredibly dynamic right now. Overall, we see that our customers are strongly engaged in electrification. Motivations for this are the green footprint, CO₂ savings, technical advantages through electrification, and regulations in the market. This is also reflected in our customers' requirements. They are now no longer just asking for batteries, they need solutions from our overall portfolio. This dynamic is reinforced by the current challenges in the area of infrastructure, energy storage supply and the current shortage of raw materials.

Sebastian Scholz: Despite looking through "a risk lens", we are very positive about electrification and about developments in battery technology. After all, an increase in green power will increase the use of energy storage systems in grids. This brings new business opportunities but also long-running technology risks. Munich Re sees itself here as a risk transfer partner for the industry. We bring risk management expertise and risk capital into play, which ensures that industry partners, for example, have to set aside fewer reserves for long-term liabilities and thus have more capital available for research and development, or for marketing and sales, to grow further.

Easy Way:Mr. Scholz, what financial risks do you see in the expansion of battery storage systems?

Scholz:The technical development of battery storage systems for today's use cases is still quite young. In many cases, storage systems simply have not been used and tested under certain stress patterns for more than 10 or 15 years. The industry lacks time series data and it is not conclusively predictable how storage assets will perform under prolonged stress. We want to remove this uncertainty from manufacturers' business models and insure manufacturers against product and performance warranty claims from their end customers, which tend to run for long periods of time. In insurance jargon, this is called "backstopping." In this way, we contribute to a strong and sustainable development in this area.

Beckmann:Risk mitigation is also very important for our customers, and there is increasing demand for this. To give our customers more security, we accompany them throughout the entire path of their electrification projects. That's why we don't just offer individual products, but strengthen our customers in all phases of electrification with valuable services. With our 360-degree service portfolio, we support our customers throughout the entire lifecycle of an electrification project. This starts in the initial phase of the project, when the customer may not even know how to electrify yet. We take a close look at the use cases and the data behind them to understand how the system needs to be designed to achieve the targeted service life, for example. In the series production phase, we assist with training and support, among other things. Finally, the end-of-life phase of the batteries begins, for which we are also working on solutions. With "Guarantee Plus" we offer an extended warranty to give our customers more security.

Easy Way: What does this extended warranty for batteries look like, and how does it benefit the customers of Webasto?

Beckmann:When we discuss batteries in the commercial vehicle sector, these are capital goods for our customers. For example, cranes can have up to ten battery packs installed. These are large investments and customers want to ensure that the batteries are reliable and have a long service life. This is particularly important in the construction equipment sector, as users cannot afford long downtimes. Depending on the use case, we offer a warranty extension of up to 8 years. We want to show that we trust our products and their reliability and performance. We trust our stress tests and simulations, and with the warranty extension, we want to take away the uncertainties for our customers and make it easier for them to decide to go into electrification.

Scholz: I can use this example to explain well where we start with our solution. The promise of Webasto of an extended manufacturer's warranty and warranty extension is a bold step to convince customers of the quality. Our backstop now works like this: The manufacturer - that is, Webasto - that provides an eight-year warranty incurs liabilities; after all, capital must be set aside for potential warranty claims. The capital is therefore firmly tied up and cannot be used for development and other business activities. Munich Re Green Tech Solutions assumes these liabilities to a certain extent and hedges them accordingly. Product or performance guarantee insurance consists of three words. The first two words - product or performance guarantee - relate to the promise made by our industrial customers and we take care of the insurance, taking risks on our books and giving our customers more room to maneuver. This is where we see the leverage for great growth potential for our industrial policyholders.

Easy Way: Let's move back to battery technology. Ms. Beckmann, you said that with a lot of stress testing and simulations, you can foresee and improve the long-term safety, longevity, and performance of battery technology. How would you describe your quality claim?

Beckmann: Our claim is that as an established automotive supplier, we also want to deliver automotive quality in the battery sector. We offer individual batteries for automotive OEMs and standardized batteries. We manufacture both battery types to the same automotive standards on a multi-product line at the same plant in Schierling. It is very important for us to meet all relevant standards, tests and certifications as we have in the automotive sector. For example, we have tested our products according to the ECE R100 Directive and CE certification. This involved not only simulations but also, among other things, the use of our test center in Hengersberg.

When we talk about our quality and our system thinking, we also think about battery thermal management. Similar to us humans, batteries have a kind of "feel-good" temperature. In this spectrum, they function optimally, can be charged quickly and have the lowest aging. To ensure this temperature window for the battery, we have developed a plug-and-play solution with eBTM (electric battery thermal management). Again, we test to automotive standards to keep the batteries in the optimal states and provide more assurance of life and operation.

Easy Way: When manufacturers like Webasto test so rigorously and products become safer and more reliable accordingly. What risks then remain that can be assumed by a risk carrier?

Scholz: Compliance with industry standards is essential, and no manufacturer can afford not to meet these standards in the future. Risk transfer can never be a substitute for this. As a risk transfer partner, we are not there to plug holes and insure things that are not fit for purpose. 

However, we know - also from other industries in which we have been active for more than a decade - that excessive material aging occurs repeatedly and unpredictably. The material has been inspected and tested, but it still ages faster than expected. Ultimately, these are manufacturing defects that can simply happen despite high quality standards. Our task is to cover this residual risk. Often, we have to deal with a 'serial loss'. This means that the entire batch of a product has the same defect. This can result in a product recall and usually relatively high losses.

Easy Way: Ms. Beckmann, you have already spoken briefly at the beginning of the interview about the challenges of electrification in the infrastructure sector. Can you be more specific about that?

Beckmann: Here, one focus is on the area of construction sites. Incentives have to be created and there has to be a certain willingness to look at one's own processes. In the Scandinavian countries, a lot is being tried out. Other countries are not as far along. In the construction sector, the processes on the construction site have been ingrained for decades. For example, once a day or as needed, the tanker truck comes to refuel all the equipment. After a few minutes, the vehicles are back in operation with a full tank. This does not work with electric construction machines. You can't hook up all the machines to the charging station in quick succession, the infrastructure is limited, and you might not even be able to draw enough power from the city grid. 

So how do I provide the energy on the construction site, and how do I get everyone involved to change their thinking? You have to take a close look at the load profiles and use cases of the machines and think about how to use them efficiently. In doing so, downtimes can be optimized and good solutions can be found with clever charging strategies such as 'snack charging'.

Scholz: Do you offer the charging infrastructure directly at the construction sites? Do you also consider a decentralized charging solution for a large construction site?

Beckmann: We're not quite there yet in the construction sector, but we are in other areas. One example is the airport application area. There, we already supply batteries for the ground support equipment and offer various services. In the construction sector, the replacement of batteries could be worthwhile. It's true that the battery packs have high capacities, which makes them heavy and often impossible to remove from the equipment manually. But there are large machines on construction sites that could help out. We are currently working with our customers in the construction sector to find out how we can improve the processes on the construction sites so that electrification fits into the workflow on the construction sites.

Easy Way: We've only talked about the 'first life' of the batteries so far. But what happens when the batteries are no longer suitable for use on the road or on construction sites? Do you have any solutions for that yet?

Beckmann: The batteries are definitely still suitable for other applications. We are currently equipping our production site in Schierling with a large second-life battery storage system to compensate for peak loads. For the load peaks, we need green electricity from the grid; the rest of the electricity we get from our PV system. To make us independent, we build a storage system with our batteries to store the electricity from the PV system. From this, we learn a lot also about our own batteries. In parallel, we are working on a better recycling strategy. Here, too, we have to look into the crystal ball to anticipate the future. Currently, recycling costs money, but the shortage of raw materials will be with us for a long time. Maybe no one will want to return batteries in the future because the materials are so valuable.

Scholz: The topics of 'second life' and 'recycling' are also very exciting for us as risk carrier because we look at the entire life cycle of the battery asset. I see a lot of potential if, for example, a battery in a Second Life application is reused in a stationary application instead of a vehicle. Stationary requires a lower stress profile, so it's easier to stay within the "comfort corridor" for the battery. The interesting thing here is that with Second Life, there is likely often a transfer of ownership. When the asset is sold, the buyer wants to know if "the patient" did well in the first life, if there is "a medical record". This is exactly our topic already in First Life. Then it comes down to interpreting time series data from a First Life application and deriving how the batteries will behave in a Second Life application and what load patterns and residual capacities can be reasonably expected. None of this is trivial, and it's an exciting topic for the future.

Beckmann: These scenarios are also on our radar. With 'Field Data Monitoring', we record the battery's field data. With this, we want to find out whether the batteries were only loaded as defined in advance and contractually stipulated to be able to give the extended warranty. A lot can be derived from this and we can offer tailored services, including digital services.

Easy Way: Shortage of raw materials, the pressure to scale up quickly, infrastructure challenges. Where will we be in e-mobility in five years' time?

Scholz: In e-mobility, too, we are already insuring long-term product and warranty commitments of our industrial policyholders to their end customers. The potential here - in e-mobility - is perhaps even greater than in the stationary sector. Things will get interesting where the two areas meet in the future, namely precisely on the subject of Second Life, which we have just discussed. The sooner we are involved as an industrial insurance partner along this value chain, the more transparently long-term risks can be assessed and priced. This increases investment security for all parties involved and avoids major losses that have a negative impact on the overall ecosystem in which we all operate.

Beckmann: In the short term, the entire industry is facing challenges. There is a shortage of raw materials, we are feeling the price increases. But we are getting all the goods we need, so we are able to deliver. Of course, our customers are also affected by the shortage of raw materials. This is slowing down many in the electrification process. They can only partially complete the vehicles because they lack essential components such as chips. For these companies, the question is whether they should buy batteries now and then put them into storage. That also ties up capital. However, we assume that all this will stabilize as the geopolitical and market situation improves. Then the wheat will be separated from the chaff among suppliers. In Asia, we see suppliers who at first glance appear to be inexpensive, and on the other side of the spectrum, solution and system providers such as Webasto. Ultimately, solution providers who offer an all-round carefree package will come out on top.

Easy Way: Thank you very much for the detailed conversation, Ms. Beckmann and Mr. Scholz!