Old EV batteries are great for energy storage. A worse weight-to-capacity ratio doesn't matter for batteries sitting on the ground. A battery that holds only 70% of its original capacity is considered worn-out for EVs (and even replaced under warranty), but grid storage isn't driving anywhere, so any capacity left is still useful.
With battery packs probably you can do some smart things to make the degradation curve look more linear, but again there is only so much you can do.
If it happens multiple times in the same module you replace a whole module of cells. The packs can usually be disassembled and parts replaced, but the modules are usually soldered down to prevent/mitigate thermal runaway.
Also you can't mix cells of different chemistry or capacity together in the same module. So really if one fails in a module you replace the whole module. Or, in their case, just keep the module there disconnected until the whole battery fails then you scrap the whole battery pack. I assume it is not worth it for them to do any kind of replacements.