DOE: Lax oversight pushed taxpayer-funded battery tech to China

By Benjamin Storrow | 10/21/2022 01:32 PM EDT

Energy Department investigators tracked the path of vanadium redox flow battery technology from Washington state to China.

Department of Energy headquarters in Washington.

Department of Energy headquarters in Washington. Francis Chung/E&E News

A government laboratory failed to adequately monitor a cutting-edge battery storage project, ultimately paving the way for technology developed by federal scientists in the United States to be deployed in China, according to an investigation by the Department of Energy.

The DOE investigation examined how vanadium redox flow battery technology developed at the Pacific Northwest National Laboratory found its way to China. It followed an NPR investigation this summer and criticism from Sen. Marco Rubio, a Florida Republican, who expressed concerns taxpayer-funded technology is being deployed by Chinese firms.

DOE investigators concluded that frequent staff turnover and an inadequate record-keeping system prevented the lab from adequately tracking UniEnergy Technologies, a Washington state-based company that licensed the lab’s battery technology. The lab was also too lenient with the battery-maker when it ran into financial difficulties, DOE investigators determined, according to a summary of a DOE report provided to E&E News.


“It is also difficult to fully understand why PNNL continued to provide UET formal and informal relief from its license obligations despite years of apparent non-compliance,” investigators wrote. “UET’s struggle to meet its license obligations was not a one-off event but rather appeared to be a consistent pattern throughout most of its tenure as a PNNL licensee.”

The focus on PNNL’s battery technology comes amid dramatic changes in the world’s technological and political landscapes. Where DOE once encouraged collaboration with Chinese researchers and companies on clean energy, the Biden administration views Beijing as an economic rival and has sought to limit technological transfers. The administration recently cut down Chinese access to advanced semiconductor technology over worries it was being used by the Chinese military to develop advanced weaponry.

Vanadium flow batteries have existed for decades and have long been seen as a potential way to store renewable electricity generation. Researchers have been attracted to their durability, with batteries lasting for decades, and by the ability to scale the battery up or down to store more energy or deliver more power, depending on a customer’s needs.

Yet vanadium flow batteries have largely lost out in the early energy storage race to lithium-ion batteries, which are cheaper and became the go-to technology among power companies looking for energy storage options.

Lithium-ion batteries have raced ahead of other battery technologies because they are used in other applications, like electric vehicles and devices, attracting billions of dollars in investment, said Eric Hittinger, a battery researcher at the Rochester Institute of Technology.

“We’ve not yet seen a real competitor in the battery space within stationary storage,” he said. “The vanadium battery’s challenge was, how do you grow that industry, how do you get from the lab and prototype batteries to the first $10 billion in sales that will help you perfect the technology, bringing down the cost and making it competitive.”

Yet vanadium could still play an important role in battery markets in the future, as the world looks for alternatives to lithium-ion batteries.

Many Chinese companies have taken the long view of battery technology, acquiring technologies that are not immediately useful today with an eye toward dominating battery markets in the future, Hittinger said.

In the case of PNNL, researchers at the lab found a way to increase a vanadium flow battery’s storage capacity and reduce its costs by using hydrochloric acid as part of the electrolyte solution used in the battery, DOE investigators said.

One of those researchers, Gary Yang, left PNNL to start UniEnergy and licensed the technology he helped develop at PNNL.

One DOE official, granted anonymity to speak more candidly about the situation, said federal researchers often follow the technology they work on into the private sector, as part of the effort to bring it to market.

But the company quickly ran into trouble.

Sourcing materials for the battery was expensive. Its pilot projects in the U.S. floundered. And the company’s bills began to rack up, going unpaid.

An investigation by Crosscut, a Seattle-based nonprofit news site, found that the company owed $317,000 in rent and never paid back a customer who invested $468,000 for a battery UniEnergy never delivered.

As it struggled, UniEnergy began to cast its attention toward China.

In 2016, the company entered into a sublicensing agreement with Dalian Rongke Power Co. Ltd., a Chinese vanadium flow battery manufacturer. PNNL signed off on the deal, in a decision that was in keeping with U.S. policy at the time, DOE investigators wrote.

But PNNL’s faulty record-keeping and lax oversight prevented the lab from intervening before UniEnergy ran into financial trouble, they said. The company defaulted on a loan in 2020. The lender sold UniEnergy’s assets, including PNNL’s assets, to Vanadis Power BV, a Dutch firm.

PNNL signed off on the deal, concluding UniEnergy was in compliance with the terms of its license at the time. Terminating the license would have been complicated as it was used as collateral in the loan, investigators said. Still, they concluded PNNL should have stepped in. The lab terminated Vandis’ licensing agreement this summer.

“The Lab had a reasonable basis for not consenting to the transfer to Vanadis. While it may have been legally challenged, the review team concluded that the Lab likely had several potentially reasonable bases for not consenting to the transfer,” the investigators wrote.

Meanwhile, Rongke Power was moving ahead with vanadium flow batteries in China. The company celebrated the installation of an 800-megawatt vanadium flow battery — the world’s largest such battery — earlier this year, according to Energy Storage News.

The Biden administration has sought to prevent such situations from occurring.

Last year, it issued a new rule updating a 1984 law governing commercialization of federal technology. The update essentially seeks to ensure taxpayer-funded technology is employed in U.S. manufacturing. Foreign companies using the technology abroad would need to obtain a waiver from DOE.

The PNNL report “underscores DOE’s commitment to transparency in its stewardship of taxpayer investments that are propelling next generation technologies and bolstering America’s competitive edge,” DOE spokesperson Charisma Troiano wrote in an email. PNNL referred a request for comment to DOE.

Still, the rule changes would not have prevented a situation like UniEnergy. A DOE official said the update will apply on federal licenses going forward and cannot be issued retroactively.

The UniEnergy case has attracted criticism from some Republicans on Capitol Hill.

“For far too long, the [Chinese Communist Party] has captured vital U.S. technology through illicit means and the carelessness of government agencies and businesses,” Rubio wrote in a letter to DOE Energy Secretary Jennifer Granholm (Greenwire, Aug. 19).

DOE is briefing the relevant congressional committees in its findings.

In their report, DOE investigators wrote PNNL should address its record-keeping deficiencies within 30 days. The changes should be overseen by DOE’s office in the Pacific Northwest. The lab should also update its licensing procedures to ensure taxpayer-funded technologies “are manufactured in the U.S. by American industry and labor, to better secure domestic supply chains and strengthen U.S. Competitiveness.”

A DOE official, granted anonymity to speak more candidly about the situation, called the UniEnergy case unusual, but conceded the department did not know if other labs similarly struggled tracking federally licensed technologies. National laboratories have considerable discretion over granting and overseeing federally licensed technology. DOE is currently reviewing national labs licensing procedures, the official said.

“I think anytime you see an issue at one facility it raises concerns,” the official said. “It is just good stewardship to kind of take a look across the complex.”