Recycling this way batteries that are not good for cars but fine for less demanding applications would be really smart. Is there any indication that they actually do this?
Seems they alluded to exactly that some years ago (2008!): http://www.teslamotors.com/blog/mythbusters-part-3-recycling... "... at some unfortunate point, the ESS will come to the end of its useful life in the application :(. However, it might be possible to use the ESS in other applications. For example, the ESS could be used as a power source for off-grid backup or load leveling. "
I think they've been doing it in one-off situations with Solar City now for a while. If they are not doing exactly this with this venture, I'd be surprised.
