Yes, both effects take place. As Bruce mentions, because of the aging effect, the internal resistance of the batteries increases. The internal resistance is the main cause of "wasted" power (converts it to heat) and loss of effective capacity, so as it increases, more power is wasted and capacity reduced.
Since voltage also drops as the battery discharges, the increased resistance causes it to reach cutoff voltage earlier and so reduces its effective capacity. An old lithium-ion battery which is not powerful enough to run the device it was designed for may still be useful in a lower current application.
An ideal battery management and recycling system begins as soon as a battery is no longer usable. After their use, batteries should be properly collected and sent for end-of-life treatment.
They power everything from electric vehicles, scooters and bikes to digital devices, and are essential to store energy from intermittent renewables. As the demand for batteries as clean energy solutions grows, so does the need for effective battery recycling to ensure a sustainable and competitive industry.
This is coming from a consumer perspective but I hope it's still interesting enough to be answered here. The primary aging effect in a Lithium-ion battery is increased internal resistance (caused by oxidation of the plates). This doesn't affect the Ah capacity, but it does reduce voltage and waste power at high current.
An old lithium-ion battery which is not powerful enough to run the device it was designed for may still be useful in a lower current application. General Motors and Nissan are reusing old electric car batteries as stationary storage for homes and businesses.
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