Stimulus funds build U.S. battery industry

The White House yesterday credited the American Recovery and Reinvestment Act with seeding a domestic electric-vehicle industry that could one day build 40 percent of the world's automotive batteries.

Nevertheless, industry observers said, financial independence for the fledgling sector remains years away.

An Energy Department report released today says in 2009, the United States had just two factories that built such batteries, for less than 2 percent of the world share.

Now that the Recovery Act has devoted $2.4 billion to the electric-vehicle sector, the report says, the United States is on track to mint 30 factories and build 20 percent of the world's batteries in 2012. By 2015, the share may swell to 40 percent.

In looking back on the stimulus, the administration argues that without federal spending in the electric-car sector, the industry would still be thriving, but it would be thriving someplace else.


The majority of electric-car parts and technology -- including the battery, the priciest component -- currently comes from Asia, and the Recovery Act sponsors manufacturing of batteries and cars, builds charging infrastructure and offers consumers incentives to buy the cars.

The idea is to push the electric-car sector through its infancy: to build enough that their prices decline, to deploy enough that Americans are convinced, and to have U.S. jobs in every link of the supply chain.

Across the electric-vehicle sector, observers said the stimulus helped, and they are more optimistic than ever.

'Jump-starting' an industry

"In general, the administration's efforts are absolutely jump-starting the industry. The U.S. will have capacity that the U.S. wouldn't have had otherwise," said Chris Paulson, director of strategy at CODA, a California-based firm releasing an all-electric sedan later this year.

"This is not a question of will someone build batteries, but of whom," he said.

Nevertheless, many companies are still applying for federal funds, and they're hoping the government doesn't trim the incentives that already exist.

Many uncertainties remain about the way to make electric cars everyday objects. For one, the cost of lithium-ion batteries -- the type used in the first flight of electric cars, released later this year -- is still too high to bring the car's price tag anywhere near those of gasoline-powered cars.

A common theme in the DOE grants has been to create economies of scale: to go from producing thousands of batteries to producing millions.

Ener1, for example, received a $118 million stimulus award last August to build a battery-manufacturing plant in Indiana. Rachel Carroll, the company's vice president of investor relations, said that at full capacity, it will be able to produce 60,000 battery packs for electric vehicles.

She said the company is applying for a loan under a non-stimulus DOE program to build capacity for another 60,000 battery packs.

Jim Miller, a senior electrochemical engineer for Argonne National Laboratory, said there's a big difference between making tens of thousands and hundreds of thousands of battery packs: The increased volume can drop costs 30 to 40 percent.

Volume goes up, prices go down

This partly comes from buying materials in bulk -- suppliers for the battery parts give better deals for larger purchases -- but also comes from learning how to use the factory more efficiently and getting more bang out of the plant's fixed costs.

Carroll of Ener1 said because the batteries are such a new technology, companies design them in very cautious -- and more pricey -- ways. She said Ener1's battery packs have "safety redundancies" to avoid accidents -- a definite no-no for any fringe technology.

As the batteries become more proven, she said, these safety redundancies will become unnecessary and they can be removed, along with all the cost of including them.

The Energy Department report put great faith in such innovations. Last year, an electric car designed to go 100 miles would have a battery that cost about $33,000. The report says that as factories achieve economies of scale, the price of such a battery should fall by 50 percent by 2013, then slide to $10,000 in 2015.

Exactly where manufacturers are now is a matter of some debate. Battery producers have become more secretive about how much it costs them to build a lithium-ion unit for cars. In recent years, $1,000 for every kilowatt-hour was a common benchmark; now, some observers say, they are seeing bids in the $600 to $800 range.

Another key uncertainty is whether Americans will come on board. The industry remains unsure exactly how demand will look: The cars may explode into popularity like the iPod, or they may trickle into the consciousness like the Toyota Prius.

A major ingredient is infrastructure: Electric-car advocates say the cars can never catch on unless the public feels there are ample places and ways to charge them.

The DOE report claims Recovery Act investments will boost the number of charging stations by a factor of 40, from roughly 500 in 2009 to over 20,000 in 2012. Those stations will largely be part of pilots meant to study how Americans actually charge their cars and glean insights that will be used to build the next wave of stations (ClimateWire, April 27).

If you build them, will they come?

Vishal Sapru, industry manager for energy and power systems at Frost & Sullivan, said while manufacturing is important, it's just as crucial that the infrastructure convinces Americans that an electric car is more than a novelty.

He said it will take three to four years "before we can have a true picture as to where this industry is going to be."

Genevieve Cullen, vice president at the Electric Drive Transportation Association, the industry's main trade group, said the industry is aware that the federal tap can't stay on forever. She said the association has pushed for legislation meant to stride over the first market barriers and then set the industry free.

"Everything that the industry is working for is to get at the initial market hurdles: consumer cost, manufacturing capacity, consumer awareness," she said. "Those are the things we're trying to get at in the near term, and those are all limited-time efforts."

As an example, she pointed to the $7,500 tax credit the Recovery Act offers to those who want to buy a plug-in hybrid vehicle. It doesn't phase out in a given year, but when a manufacturer sells 200,000 vehicles.

Two hundred thousand far exceeds the number of electric vehicles that any manufacturer has sold so far, but given that the eventual goal is to sell tens of millions, she said 200,000 represents "getting a meaningful foothold in national scale."



Latest Selected Headlines

More headlinesMore headlines

More headlinesMore headlines

More headlinesMore headlines

More headlinesMore headlines