AUTOS:

States see rebirth in battery manufacturing

Kevin Czinger, an all-Ohio football player in his high school days at Cleveland's St. Ignatius High School, returned to his home state last month, making as big a splash as he did on the football field.

Czinger, the president and CEO of CODA Automotive, announced that his company was planning to build a battery manufacturing plant outside of Columbus, contingent on a loan from the Department of Energy. The announcement was hailed by Ohio politicians, who hope to capitalize on the growing demand for electric vehicle batteries.

"CODA's decision to open a facility in our state means that Ohio workers will help manufacture the cars of the 21st century," said Ohio Sen. Sherrod Brown (D). "Ohio is quickly becoming a national leader in clean energy component manufacturing for the auto industry."

Of course, the same could be said about Michigan, Kentucky or California, all states that host battery manufacturers. They are all hoping to seize upon the technology that could redefine the auto industry, becoming what Michigan was to the combustion engine.

"It is really positive to see so much activity in the battery space and that the country has made an investment in a battery industry," said Robbie Diamond, president and CEO of Electrification Coalition, a group dedicated to promoting the spread of electric vehicles. "It's important that the benefits from this new industry that we're so focused on accrue to Americans and that we have a robust EV industry and that they're built and manufactured here."

Batteries, either because of their weight, price or capacity, are seen as the best spot for improvement in electric vehicles. But current mass manufacturing of batteries has been largely based in Asia, with little room for large-scale innovation in the United States.

Keeping the batteries at home means more room for innovation, not to mention mass manufacturing without shipping costs from abroad and the ease of building them near auto plants. It is also a potential windfall industry that brings hundreds of jobs with each plant.

The federal government is heavily incentivizing the plants, offering 30 percent tax credits under the federal recovery act as well as $2.4 billion in federal grants. But states, in a bid to keep the plants within their borders, are doing even more.

Take Michigan: Seeing batteries and electric vehicles as the future of the auto industry, the state made it a priority to host the plants and was the first in the nation to offer tax incentives to battery companies. According to data from the Michigan Economic Development Corporation, tax credits totaling $335 million were signed into law in January 2009. Since then, the credits have been expanded to $800 million for battery manufacturers, as well as additional local incentives.

Those incentives have paid off, with 16 companies working on projects in the state.

"This is a game-changer for Michigan. It's the birth of an industry," said Nathan Pilon, the manager of marketing and communications for MEDC.

But others are hoping to capture the plants. When CODA was exploring regions to build its first U.S. battery plant (The company currently manufactures its batteries in China with Lishen Power Battery), it fielded bids from Ohio, California, North Carolina and Atlanta. In the end, Ohio offered the best package, with incentives totaling an estimated $100 million. Money came from the city of Columbus, the state government and private investors like Limited Brands Inc. CEO Leslie Wexner, who joined Czinger at the press conference announcing the Columbus plant.

But what set the bid apart, said Czinger, was the city's commitment to purchase vehicles for use in government and commercial fleets in the region.

"You see dramatically different levels of coordination, organization, seriousness, a desire to create jobs," Czinger said. "If you look at each one of those things, Ohio was at the high end of the scale dedicated to getting it done."

Potential for plants

Czinger likes to describe batteries as a "disruptive force" for the auto industry. After all, a decade of battery research revolutionized the size and capabilities of cell phones and laptops.

"If you look at [conventional cars], the difference is the engine. For electric vehicles, the difference is the battery," said David Howell, the lead engineer for the Department of Energy's vehicles technology program.

Currently, there are several families of batteries, each with its own advantages. Some batteries are best for hybrid vehicles because they can provide quick, powerful pulses. Others are designed to sustain high power for long periods of time, best for all-electric vehicles. Howell said all families are being researched heavily and that there is no single "winner" in the bunch. Even further down the line are lithium air batteries, which could be lighter and more powerful.

DOE funding for battery research has tripled since 2006 and currently sits at $76 million. But most of it is happening on a small scale. Having industrial plants close to the U.S. research teams means innovation and testing can take place with enough force to find out what really works. That can also help bring down the cost of batteries long term, equally lowering the cost of electric vehicles.

For states, the plants offer much-needed economic stimulus and job openings. Michigan Gov. Jennifer Granholm (D) has estimated that advanced batteries will bring 62,000 jobs to her state, and the CODA plant is expected to create 1,000 jobs in the Columbus area. Those are valuable for states that lost thousands of manufacturing jobs in the recession. (Michigan continues to have among the nation's highest unemployment rate at 13.6 percent.)

"The Ohio manufacturing base has historically provided steel and components to the U.S. auto industry," Czinger said. "Fundamentally we needed to put in money to stabilize a very large jobs organization that is our current automotive industry. I believe myself that battery-electric technology is a disruptive technology to that whole value chain."

The administration has been equally bullish on the potential of the battery industry.

"This is the beginning of a revolution in the production of energy in the country," Vice President Joe Biden said at the groundbreaking of a battery plant in Midland, Mich., last month.

With that much potential, states are understandably fighting hard for the rights to host the battery plants and create industry-friendly communities. Columbus Mayor Michael Coleman wants to create a network of battery and EV manufacturers to work in tandem with Ohio State University researchers. California officials have talked about making Silicon Valley, already a tech hub, a base for advanced battery research.

But for many companies, the manufacturing experience and proximity to auto companies that Michigan offers is too much to resist, with or without financial incentives. Andy Chu, the vice president of marketing and communications for lithium-ion battery maker A123 Systems Inc., said his company chose to build a plant in Michigan because it offered an all-around better package.

"I like to think of the three P's: people, private capital and policy," Chu said. "In Michigan, there's a lot of auto-related engineers, there's a lot of people to draw upon. ... Michigan has been very generous to automakers, and having a state and local government that supports this effort is important."

Many battery makers are partnering directly with auto companies to guarantee a market (Toyota Motor Corp. and Panasonic Corp., for example, have been partners since 1996), so Michigan is a natural fit, given the car companies' roots.

To Pilon, the state's history and success as the center of the automotive industry for decades was enough to attract battery makers. He even knew of several companies that had left, either to go abroad or take advantage of other incentives, only to return because the work force in Michigan was that much more knowledgeable.

"Middle-of-the-road business costs, a great quality of life," Pilon said, listing advantages of the state. "We've got a great infrastructure with highways and roads; we have proximity to Canada and the rest of North America."

Still, those factors are not always enough to persuade plants to come to the state. Czinger said the fleet factor was crucial for CODA's decision -- he wanted to make sure that the batteries and cars would be used at once (Pilon said Michigan did not make similar offers). Other companies are looking to be close to supply chain partners, like anodes, cathodes or the material that lines the battery cells. Others are looking for assurance that there is space for batteries outside of vehicles, primarily for energy storage from wind or solar plants.

Still, Diamond noted that the best way to incentivize battery plants was to make sure states had the tools in place to get citizens to use electric vehicles.

"The real strategic challenge is to make sure we're not stranding these investments and that we have a deployment strategy," he said. "The worst thing that happens is to strand the assets."

Want to read more stories like this?

E&E is the leading source for comprehensive, daily coverage of environmental and energy politics and policy.

Click here to start a free trial to E&E -- the best way to track policy and markets.