America Must Rebuild Domestic Battery Manufacturing Infrastructure

Last Thursday I briefly touched on several highpoints from a recent report by Merrill Lynch cleantech strategist Steven Milunovich, The Sixth Revolution: The Coming of Cleantech. In my closing, I suggested that if the report’s analysis is accurate and energy storage becomes a key enabling technology for the cleantech revolution, then it won’t be long before governments begin treating battery manufacturing companies as strategic national assets and adopting regulations, industrial policies and tariffs that are designed to favor their home country’s business interests. That observation started the mental snowball rolling downhill and I’ve spent several days pondering the question “Exactly where will all those batteries come from?” My preliminary analysis is more than a little disturbing.

Oil is a basic commodity that is consumer ready after minimal refining. The oil business can be quite profitable for resource owners, producers, refiners, distributors and employees who move petroleum products from the wellhead to the gas pump, but ancillary economic benefits to producing states are modest. Rechargeable batteries, on the other hand, are durable goods that are mainly used as components in other high-value manufactured products. This means that every battery produced creates a host of ancillary economic opportunities for the producing state.

America’s trading partners understand that exporting raw materials and components generates less economic benefit than exporting manufactured products. So while we have historically been at the front of the line when it came to buying oil from less developed countries, we will likely be pushed to the back of the line when it comes to buying batteries in bulk from countries that have or are building an industrial base. Let’s be realistic here, no self-respecting trading partner is going to sell components for products if it thinks it can sell finished products instead. Despite my unwavering support for the free flow of goods in the global market, I am not the least bit comfortable with the idea that America’s future should be subject to economic and industrial policy decisions made by foreign governments.

Most discussions of battery technology speak in terms of “battery packs” without ever describing what a battery pack is. In essence, a battery pack is nothing more than a number of individual cells that are put into a container and then hard-wired to provide the desired power characteristics. In the case of a lead-acid battery, the typical format is six cells in a rigid plastic box. In the case of NiMH and Li-ion batteries, the basic building block is the same cell you have in your mobile phone or camera. So if you want to power a laptop computer you’ll need battery pack with 12 to 16 cells; if you want to power an electric bicycle you’ll need a battery pack with 50 to 100 cells; if you want to power HEV you’ll need a battery pack with about 1,000 cells; and if you want to power an electric car you’ll need a battery pack with about 5,000 cells.

I’ve previously said that battery prices are almost meaningless in the context of a cell phone or laptop computer because battery cost is typically less than 5% of the retail purchase price. I’ve also said that battery prices will be a critical market driver in the case of an HEV that needs a $5,000 to $10,000 battery pack or an electric car that needs a $25,000 to $50,000 battery pack. While I’ve not delved into the intricate economics of a competitive market for batteries, it’s safe to say that a cell phone or laptop manufacturer will generally be less worried about battery prices than an electric bicycle manufacturer; who will generally be less worried about battery prices than an HEV manufacturer; who will generally be less worried about battery prices than an electric car manufacturer. In other words, the more you spend for the batteries that power your product, the more you worry about battery prices.

Readers who’ve been following my articles for any length of time know that I’m unrepentant critic of proposals to use NiMH and Li-ion batteries for the heavy work of powering vehicles and supporting the electric grid. I know that NiMH batteries are currently used in all of the available HEVs and I understand that Li-ion is the presumptive leader in the search for a new EV beauty queen. That knowledge, however, does not change the fact that using NiMH and Li-ion battery packs for transportation and grid support is like using 5,000 hamsters to pull a stagecoach. They may get the job done, but can we really afford to pay the price?

In my opinion, the insurmountable obstacles that will preclude the widespread use of Li-ion battery packs in electric vehicles and grid-support applications include:

• Product costs that are beyond the means of all but the most wealthy members of society;
• Cost benefit equations that only work for the mathematically challenged or emotionally committed;
• Capital intensive manufacturing infrastructure that simply doesn’t exist in the Americas;
• Intense competition for batteries that will be used in devices that have greater price flexibility;
• Reliance on manufacturers that are subject to foreign economic and industrial development policies;
• Reliance on rare and expensive raw materials that are imported from less-developed countries;
• Spotty product safety and performance histories that are improving but far from pristine;
• Product performance profiles that exceed reasonable application requirements several times over;
• Mature technology with little potential for new economies of scale or performance enhancements; and
• Unproven ability to recycle old batteries and use the recovered materials to make new batteries.

One of best parts of being an outspoken contrarian on a site like Seeking Alpha is that you get an extraordinary opportunity to hear why a host of readers believe you’re wrong. At last count, my 22 articles had drawn something on the order of 430 reader comments, so I like to think I have a pretty fair sense of the prevailing beliefs, prejudices, expectations and misconceptions. It’s interesting but not surprising to note that people who want to promote a particular opinion, philosophy, product or equity are usually responsible for the most egregious misrepresentations. I am not an unbiased observer when it comes to battery technology, but at least I’m honest about where my personal interests might conflict with or impair my objectivity.

Benjamin Disraeli reportedly said, “There are three kinds of lies: lies, damned lies and statistics.” In the battery industry, the most common statistical lies are based on the preposterous premise that the highest and best example of lead-acid battery technology can be found under the hood of your family car. It’s a garbage assumption that leads to garbage statistics, but it’s so insidiously reasonable sounding that people blithely accept the statistics without asking the critical question, “So how does your exotic battery chemistry compare with the best lead-acid technology?”

The following is a compendium of the cherished mythologies and incontrovertible realities that I’ve assembled from six months of reader comments.

Cherished Mythology: Lead-acid batteries are rust-belt technology.

Incontrovertible Reality: Lead-acid chemistry was ignored for almost four decades while fortunes were spent on NiMH and Li-ion research and development for portable electronics. Today, lead-acid researchers have access to materials and manufacturing methods that did not exist 40 years ago. When researchers began to evaluate the potential impact of new materials and manufacturing methods on lead-acid chemistry, the result was almost magical. The simple fact is that lead-acid batteries have advanced more in the last five years than NiMH and Li-ion batteries have since they were introduced.

Cherished Mythology: Lead-acid batteries are environmental hazards.

Incontrovertible Reality: With recycling rates approaching 99%, lead-acid batteries are the most highly recycled product on the planet and substantially all of the materials recovered through recycling can be used to make new batteries. Neither NiMH nor Li-ion chemistries can even come close to matching the natural resource efficiency and environmental safety of lead-acid batteries.

Cherished Mythology: Li-ion batteries are one-quarter of the weight of their lead-acid equivalents.

Incontrovertible Reality: The quest for safer Li-ion batteries slashed theoretical energy densities by 50% and significantly reduced the weight advantage. The recent introduction of Firefly Energy’s foam electrode technology has improved the energy density of advanced lead-acid batteries while reducing Li-ion’s weight advantage even further. Li-ion batteries still offer a modest weight advantage, but it’s ridiculous to agonize over weight in the context of a 3,000-pound car or a grid-connected power storage installation.

Cherished Mythology: NiMH and Li-ion batteries have more power than lead-acid batteries.

Incontrovertible Reality: The recent introductions of battery-supercapacitor hybrids like CSIRO’s Ultrabattery and Axion Power’s (AXPW.OB) PbC battery have improved the power profile of advanced lead-acid batteries to a level that’s competitive with NiMH and Li-ion batteries at a fraction of the cost.

Cherished Mythology: NiMH and Li-ion batteries have far longer cycle-lives than lead-acid batteries.

Incontrovertible Reality: The theoretical cycle-life of a battery is a gee-whiz number until it is compared with the needs of a specific product. If an EV will be recharged 350 times per year and the vehicle will have a 10-year useful life, anything over 3,500 cycles is waste. CSIRO’s ultrabattery technology reduces sulfation (the main cause of lead-acid battery failure) and Axion’s PbC technology eliminates the problem entirely. When development and testing of these recent innovations is fully documented, I expect the cycle-life differences between the major battery chemistries to be inconsequential.

Cherished Mythology: NiMH and Li-ion batteries will improve as the technology matures.

Incontrovertible Reality: NiMH and Li-ion batteries are already fully mature technologies. There have been big improvements in the safety of Li-ion batteries over the last 20 years, but those improvements have always come at the cost of reduced energy density. The only performance metric that keeps improving is cycle-life, which is already far too long for most real-world applications.

Cherished Mythology: NiMH and Li-ion batteries will get cheaper as demand increases.

Incontrovertible Reality: Roughly 75% of the cost of any battery is raw materials and NiMH and Li-ion batteries have been mainline industrial products for the last 20 years. Substantially all of the cost savings that can be realized have already been achieved. The only thing increased demand will do at this point is drive a relentless upward spiral in raw materials prices.

Cherished Mythology: Li-ion batteries are a silver bullet solution to energy storage problems.

Incontrovertible Reality: Li-ion batteries may well be the best storage solution for small format energy storage needs including cellular phones, power tools, portable computers, electric bicycles and hybrid scooters. Their cost effectiveness falls off dramatically when the battery pack is bigger than a breadbox. Even if Li-ion batteries could be cost effective in power-hungry applications like EVs and grid support applications, sound economics and rational industrial policies in producer states will invariably favor the production of 5,000 cell phones or 300 to 400 laptop computers over the production of a single EV.

Cherished Mythology: Plug-in electric vehicles provide a cost-effective path to a clean energy future.

Incontrovertible Reality: Plug-in electric vehicles may provide dramatic sound bites for politicians, car companies and environmentalists, but pure electric vehicles cannot be paying propositions until gas prices are far higher than they have ever been. Just this afternoon, I read that President Sarkozy is refusing to release a government-sponsored report that says EVs don’t make sense in France despite the fact that the bulk of French electric power comes from nuclear plants. The cheapest price I’ve seen reported for an EV battery is a $17,500 battery pack from Ener1 (HEV) that will power the Th!nk City, a bare bones commuter car that would likely get 50 mpg with a gasoline engine or 60 to 75 mpg with a diesel. If you depreciate the battery pack over 10 years and include 5% imputed interest on the unamortized balance, you’ll need to realize $22,313 in fuel savings to recover your hard costs. At 15,000 miles a year and 50 mpg for a similar gasoline powered car, you can’t break even on the battery unless gas costs more than $7.44 per gallon.

The Milunovich report is an exceptional work and I can’t disagree with any of his conclusions. I do, however, think he overlooked one critical issue – the rapidly accelerating rate of change. Historically, technical revolutions evolved over decades. During my lifetime, each major round of changes has evolved more rapidly than the last and been more pervasive and far-reaching. I believe the cleantech revolution will evolve far faster than anyone can imagine and while the cleantech revolution may have started in the U.S. and Europe, it has already become an unstoppable global force. We may not be ready for the tsunami of change the cleantech revolution promises, but it’s already here and our only remaining choice is to adapt or be swept away. We need to get up tomorrow morning, go to work with the toolbox we own, solve our problems as best we can and be eager to adapt new tools when they arise.

The pure play public companies that have the potential to make a meaningful difference in America’s energy storage future include Enersys (ENS), Exide Technologies (XIDE), C&D Technologies (CHP) Ultralife (ULBI), Axion Power International (AXPW.OB) and ZBB Energy (ZBB). The companies that have the potential to make a difference in Asia and Europe include Advanced Battery Technology (ABAT), China BAK Batteries (CBAK), Hong Kong Highpower (HPJ), Maxwell Technologies (MXWL) and SAFT Batteries (SGPEF.PK). The rest bear watching but are too immature or overvalued for me to seriously discuss them as potential investments.

Rational industrial policy dictates that our global trading partners will want to sell us finished goods instead of bulk components. Fundamental economics dictates that products like cell phones, laptops, power tools, electric bicycles and hybrid scooters will be more responsive to battery price changes than bulk products for EVs and grid support applications. In combination, these factors lead me to the inescapable conclusion that we cannot afford to use NiMH or Li-ion technology for EVs or grid support, and even if we could the battery producing countries cannot afford to reduce their production of other battery powered products to make room for our profligate demands.

America’s ability to profit from the cleantech revolution looks bleak unless it takes immediate and decisive steps to rebuild its domestic battery manufacturing infrastructure. Dithering, debating and daydreams are no longer options.

Disclosure: Author holds a large long position in Axion Power International, recently bought small long positions in Exide and Enersys and may make additional storage sector investments in the future.

Comments

[Douglas Kor...:]

Your numbers are <b>WAY</b> off. Battery packs for EVs are measured in kWh, and their cost in dollars per kWh.
You need 25 kWh to go 100 miles (150 in aerodynamic EVs), they must be deep cycling, and have a long cycle life.
Battery prices have been coming down; in 2000, at their high point, CARB estimated that the cost of a battery pack for an EV would be no more than $13,000 in limited production, and no more than $7000 in mass production. That translates to $300 to $600 per kWh of capacity.

Your figure of $25K to $50K comes from the enemies of EVs, like GM, who lie and make up false numbers. Even Toyota lies about this, because they don't want to allow ANY EVs, people grow to love them, and Toyota wouldn't be able to sell oil-fired cars. As for GM, it's just accustomed to lying and arresting its own customers, now, their shareholders are paying the price.

In fact, Lithium batteries in mass production are currently less than $300/kWh, and, except for the fact that Chevron is squatting on the battery patents for NiMH, NiMH would be even less, and it's the cheapest in terms of life-cycle cost. Lead acid, the next cheapest battery technology in terms of life-cycle cost, is about $50/kWh.

So why rely on the liars and crooks for your numbers?? They are proven failures, if you look at GM, imagine, a vast American company run into the ground by white-collar failures who blame the line workers for their failure to sell product to their customers. Well, GM drove us to Toyota, by seizing our cars instead of taking our money. Why listen to liars??

"...battery prices will be a critical market driver in the case of an HEV that needs a $5,000 to $10,000 battery pack or an electric car that needs a $25,000 to $50,000 battery pack..."

2008 Dec 15 10:39 AM

[John Petersen:]

In my view the CARB estimates of what things ought to cost go into the same class as the estimates that gave us ethanol blends nationwide; wishful thinking by people who want to promote a particular ideology.

People talk as if all Li-ion technologies were equal. They're not. The cheap ones overheat and explode which is never a good idea when your kid is sitting on top of the battery. The good ones cost north of $1,250 per kWh.

I don't just dislike Li-ion for plug-in vehicle applications. I dislike all proposed plug-in vehicle applications because nobody has ever shown me one that pays for itself using any kind of useful life and gasoline price assumptions.

That being said, I think the road tests that showed the CSIRO Ultrabattery could reduce the cost of an HEV by a couple thousand bucks while only reducing gas mileage by 3% is pretty cool.

Remember, it's all about money, free economic choice and working class people trying to get the best value they can for their dollar.

2008 Dec 15 11:15 AM

[HHarrison:]

From an electrical engineer:

I think there is certainly some merit to some of these points, let's have a look at some of your 'cherished mythologies':

1) Lead-acid batteries are rust-belt technology.

I've honestly never heard this one, agreed that it is silly. There are substantial uses of lead-acid battery packs that don't run on four wheels. It's just another way of storing electrical energy...and a cheap one if you can afford the weight required.

2) Lead-acid batteries are environmental hazards.

Fully agreed, lead-acid batteries are highly recyclable and will
only increase as raw material prices increase (salvage rates will increase)

3) Li-ion batteries are one-quarter of the weight of their lead-acid equivalents.

Why talk about weight when you immediately 'refute' this point by talking about energy density. It's a tradeoff as always. Lead acid has the energy storage to get your vehicle the distance you've targeted...great! But if you switch to NiMH or Lion and now you've doubled the range for
the same weight...but it costs more. How much is that extra range worth to you?

4) NiMH and Li-ion batteries have more power than lead-acid batteries.

Again, energy density is higher for Li-ion/NiMH (Chem 101). Lead-acid
does have a problem with high-discharge rates damaging the cathode
and reducing the lifetime of the cell. But, it can be discharged more fully without reducing its capacity. See for example why the Toyota batttery packs only discharge/charge the NiMH packs between 40% and 90% of
the actual capacity....there's your 50% decrease from theoretical density but the lifetime of the cells has increased (conservatively) 10x in terms of charge/discharge cycles. Lead acid hold up much better under full discharge/charge cycles....again tough choices to be made. That's also why a capacitor coupled battery makes so much sense in a vehicle as it can even out the very irregular load cycle. (acceleration and regen. braking (dis)charging the pack)

5) NiMH and Li-ion batteries have far longer cycle-lives than lead-acid batteries.

I touch on this above, lead-acid are great for full discharge/charge cycling, NiMH/Li-ion will exhibit a memory effect and lose capacity over time if charge discharge outside of a working range (approx. 40%-90% is what I use in my designs for NiMH)

6) NiMH and Li-ion batteries will improve as the technology matures.

I disagree that these are fully mature technologies...but in the end, energy is energy, it doesn't matter what it is stored in, if you can do what you need to with lead-acid, by all means go for it as it is easily the cheapest of the available battery technologies currently ($/Watt)

7) NiMH and Li-ion batteries will get cheaper as demand increases.

I don't have numbers at hand to agree or disagree with your assertion that 75% of the cost of NiMH/Li-ion is in raw materials. But I would suggest that every point you make about spiralling raw material prices will equally apply to lead-acid.

8) Li-ion batteries are a silver bullet solution to energy storage problems.

Fully agreed, there;s no free lunch.

9) Plug-in electric vehicles provide a cost-effective path to a clean energy future.

Not enough space to cover this one. But the best thing that would occur with a large EV fleet would be a place to store all of the non-constant output of alternative energy generation technologies (solar/wind/whatever) to be used effectively.

2008 Dec 15 11:25 AM

[Dudley C Pa...:]

What an interesting article. I expect battery technology to come on very strong in the coming decade but do not claim to predict the specific technologies. In the mean time, we should be building an infrastructure for handling the alternative electricity we will need. I think Pickens has a good idea about trucks using natural gas. We will have electric cars first. Electric trucks will come later.

2008 Dec 15 11:26 AM

[Doc 224899:]

Lithium, Nickle and Cobalt are the exact opposite of low-hanging metallurgical fruit. Anyone aware of the recovery costs of these metals today, and the reasons for the recovery costs, doubts that battery manufacturing can be multiplied on a scale sufficient to support a world-wide transition to battery-powered vehicles, unless fundamentally new battery technology is developed.

If one factors in the proportionately increased expense of trying to expand Lithium, Nickle, and Cobalt production during a decade of contracted base metal production globally, the impracticality of manufacturing batteries on the scale necessary for converting the world's vehicles to electric power become laughable.

2008 Dec 15 11:29 AM

[bobbobwhite:]

Battery technology was first invented in 1800, and has made very little progress for the time elapsed since first discovery. They are still heavy, massively polluting and inefficient electricity storage devices. Physics can't be changed or even altered.....massive amounts of electricity cannot be stored. All attempts to make this world into one powered by batteries is futile and stupid, and perhaps even more stupid and polluting than the internal combusiton engine.

The necessary breakthrough will be when the electricity for household, vehicle and industrial use is produced in quantity as it is needed, clean and efficient and non-polluting. If we must blindly pursue improving battery tech, that tech will be best used for personal gadgets.

2008 Dec 15 11:40 AM

[John Petersen:]

HHarrison, as I understand it you can measure energy density either by weight or volume. In automotive and stationary applications volume is not anywhere the issue weight is. Sony's original Li-ion chemistry came in at about 180 Wh/kg, but it had a nasty habit of overheating and exploding. The safer new generation batteries are coming in at 80 to 100 Wh/kg. The Firefly, CSIRO and Axion products all take out big chunks of the inactive lead weight which significantly increases energy density. Likewise, the CSIRO and Axion battery supercapacitor hybrids boost power, slash recharge times and allow for much greater depth of discharge (80% to 90%). There is a lot of fascinating research being done right now. But nobody is going to convince me that the solution is importing Li-ion from China.

This article is one of twenty-three. There are a wealth of links in the earlier articles that you may want to check out.

2008 Dec 15 11:44 AM

[HHarrison:]

On Dec 15 11:44 AM John Petersen wrote:

> HHarrison, as I understand it you can measure energy density either
> by weight or volume.

True, but my point applies equally well to both.

>In automotive and stationary applications volume
> is not anywhere the issue weight is. Sony's original Li-ion chemistry
> came in at about 180 Wh/kg, but it had a nasty habit of overheating
> and exploding.

Construction issue. In overdischarge cases Li-ion releases hydrogen gas (and it gets hot...boom). Sony had a piss-poor membrane design and in addition the quality control at the manufacturing end didn't help things. This allowed the hydrogen gas to pressurize rather than tripping a safety relief...stupid, stupid.....stupid.

> The safer new generation batteries are coming in at
> 80 to 100 Wh/kg. The Firefly, CSIRO and Axion products all take out
> big chunks of the inactive lead weight which significantly increases
> energy density. Likewise, the CSIRO and Axion battery supercapacitor
> hybrids boost power, slash recharge times and allow for much greater
> depth of discharge (80% to 90%). There is a lot of fascinating research
> being done right now. But nobody is going to convince me that the
> solution is importing Li-ion from China.

True, the vehicle based solutions have vastly different constraints than a bulk-storage case. Mainly in the load characteristics...it's incredibly 'peaky' which is why a capacitor added to the mix (with no comment as to the actual battery used) makes so much sense allowing the peaks to get smoothed out.

Agreed about the Li-ion imports, but the tech exists today for a decent solution (see the Prius, NiMH). Now add some additional capacity to the battery pack and add the option to plug it in as well as fuel with gas/diesal, and you start to bridge the gap to pure plugins (perhaps short-range at first, but things only improve over time)

2008 Dec 15 11:59 AM

[John Petersen:]

HHarrison, I am in favor of any solution that works and provides a net positive number on an Excel spreadsheet before tax subsidies. The most important points in this article are:

1. We can't let industrial development policies in Asia dictate our energy future;

2.

2008 Dec 15 12:05 PM

[John Petersen:]

2. We need to go to work today with the tools that exist and be ready to embrace new tools when they evolve.

3. People smarter than me need to figure out how to make the technology work because all I can do is run the numbers.

I'm terribly optimistic about the future, but I don't want to freeze in the dark while I wait for it to arrive.

2008 Dec 15 12:08 PM

[sylviechen:]

Keep watching developments in thermal electric solid state devices. These could solve the weight issue of an all battery energy source.

2008 Dec 15 01:13 PM

[catalite:]

I have had difficulty finding the patents of axpw. I have made several different types of search queries at patft.uspto.gov/, both in the issued and pending areas. I have looked at over a hundred patents and still have not found any belonging to Axion Power. I have also asked Axion three times for the patent numbers and/or who the patents are assigned to, but Axion does not respond. Could you provide me with the patent numbers? I'm simply an interested investor.

2008 Dec 15 02:20 PM

[John Petersen:]

From Axion's SEC filings:

We own six issued U.S. patents and have seven patent applications pending at the date of this report covering various aspects of our PbC device technology. There is no assurance that any of the pending patent applications will ultimately be granted. Our issued patents are:

U.S. Patent No. 6,466,429 (expires May 2021) - Electric double layer capacitor;

U.S. Patent No. 6,628,504 (expires May 2021) - Electric double layer capacitor;

U.S. Patent No. 6,706,079 (expires May 2022) - Method of formation and charge of the negative polarizable carbon electrode in an electric double layer capacitor;

U.S. Patent No. 7,006,346 (expires April 2024) - Positive Electrode of an electric double layer capacitor;

U.S. Patent No. 7,110,242 (expires February 2021) - Electrode for electric double layer capacitor and method of fabrication thereof; and

U.S. Patent No. 7,119,047 (expires February 2021) - Modified activated carbon for carbon for capacitor electrodes and method of fabrication thereof.

2008 Dec 15 03:00 PM

[Roger Arnold:]

I'm also a fan of Firefly's foamed carbon / lead-acid technology; I think it probably has a good future for stationary power applications -- say for backup and storage of residential solar power. Things where its weight penalty doesn't hurt it. But this article grossly oversells the technology against competing battery chemistries.

Not one of the "insurmountable obstacles" listed for li-ion technology are truly "insurmountable". Some are moderately challenging, we'll have to see how matters play out. But the "5,000 hamsters" analogy is bogus. Yes, that's what you'll find in the Tesla Roadster and other recent high performance (and very spendy) EVs. But that's only because there's been no alternative. Laptop batteries are what has been available to play with. It's where the market has been.

The big thrust in Li-ion development now is in "large format" batteries. There's nothing fundamental that says Li-ion battery are limited to the small cylindrical form factor of those used in laptops. The large format batteries, coupled with automated production and chemistries that don't require clean-room conditions for battery assembly, should bring costs down dramatically. In fact they've already begun to do so.

I don't understand the comments about foreigh suppliers. Are you saying, John, that countries with the capability of producing li-ion batteries will impose export tarriffs on their own manufacturers, so that their domestic suppliers of products using the batteries will be able to get them cheaper than anyone else? That could theoretically happen, but it's certainly contrary to how the business has worked to date.

And what makes you think that this country is incapable of manufacturing these batteries for itself? In fact, AFAIK, the leading developers of large-format, inherently safe Li-ion batteries are all American. Equipment for factory automation and process control is one of the few areas where American industry remains competitive on the world stage. And that's exactly what's needed for production of economical batteries.

2008 Dec 16 12:19 AM

[John Petersen:]

Roger, I would love to see any li-ion proponent come up with a detailed cost benefit comparison that fairly compares their li-ion technology with the best available lead acid alternative. I'll not argue that there are size and weight differences in the 2x range. I will question whether those differences are enough to offset the cost differences, just as I believe consumers will when they make buying decisions.

I understand that people are working on larger format li-ion and Valence has apparently introduced one, although the technical specifications on the individual cells remain unclear. But that's the exception rather than the rule. Most of the players are still proposing 5,000 hamsters.

In 30 years of working with small companies, I've never seen a situation where "moderately challenging" obstacles were not ultimately stacked one on top of the other. Since any of the moderate challenges can be a show stopper, the cumulative risk remains enormous.

When it comes to foreign suppliers, there is no question that if you give Chinese, Korean, Japanese or even French policy makers a choice of:

(a) using 25 kWh of batteries to power 50 high efficiency hybrid scooters that will generate $100,000 in manufacturing revenue and increase the mobility and job prospects for their citizens; or

(b) selling 25 kWh of batteries to a U.S. car manufacturer for $25,000;

the policy makers will choose the 50 hybrid scooters every time and the U.S. automaker will not get his batteries until the scooter manufacturer has used every battery he needs. The same holds for every possible use of a battery manufacturer's output. The priority will go to the buyer that provides the greatest revenue to the host country and adds the most to its economy.

I don't think the U.S. is incapable of manufacturing batteries for itself but I don't think people have spent enough time considering the critical importance of establishing that capacity because it's been far too easy to rely on imports.

If we don't want to find ourselves in a position where the only batteries we can get are batteries that somebody else doesn't need or want, we must establish domestic capacity and since that's generally a 2 to 3 year process, we're already late!

2008 Dec 16 02:05 AM

[john s. gordon:]

if we have to import our lithium from Congo we're in trouble. talk about places with no government....
> jack

2008 Dec 16 12:00 PM

[John Lounsbury:]

John Peterson - - -

You are providing a great service with your provocative and thorough discussion of battery technology issues. Discussion by commenters has been great.

That being said, it seems that battery technology (and energy storage in general) is too widely viewed as being "mature" with few new discovery prospects. Philosophically, I believe that, in general, the unkown is much larger (infinitely larger?) than the known. I see no reason to assume this does not include energy storage. May I remind you that the lack of vision regarding future prospects for discovery is not new. In the late 19th century there was a proposal to close the U.S. Patent Office since "everything of value had been invented".

Finally, I firmly believe that the small battery lithium ion business (cell phones up through electric scooters/bycycles) has a huge growth curve in the coming years.

Disclosure I have long positions in ABAT and CBAK.

2008 Dec 16 12:07 PM

[John Lounsbury:]

Two apologies - - -

1. To John PetersEn

2. To Bicycles

2008 Dec 16 12:13 PM

[John Petersen:]

jlounsbury, I agree with you on both counts.

The changes we will see in energy generation and storage over the next 10 to 20 years are going to be breathtaking. But at the same time I'm unwilling to freeze in the dark while I wait for the changes to occur, which is why I keep beating on the point that we need to go to work tomorrow with the tools we have and be ready to embrace new tools as they emerge.

As to ABAT and CBAK, I think they are absolutely on the right track by focusing on right sized mobility solutions in Asia. I've spent several months in Vietnam and Cambodia over the last two years and seen first hand what the needs are and what the needs are going to be. It's one of the few times you'll hear me say my language skills are not adequate to describe what I've seen. It's also what leaves me convinced that anybody who thinks the Asians are going to take 100 electric bicycles off their road so that they can put 1 EV on American roads is delusional.

The only way the US is going to get anything but the dregs of global battery production is if it builds it's own manufacturing infrastructure.

2008 Dec 16 12:29 PM

[nakedjaybird:]

We need to worry about US battery manufacturing no more than automobile manufacturing - when the time is right, foreigners will come - unless Excide decides to focus here instead of around the world.

We no longer need to depend on GM, F and Chrysler for autos, nor Westinghouse, B&W, C-E and GE for nuclear power as US built - so why worry about batteries??

2008 Dec 16 01:52 PM

[nakedjaybird:]

John - what is interesting about your argument against pure battery powered vehicles is that in the 60's we were saying that as soon as the cost of gasoline and electricity cross (the energy cost crossover), electric vehicles will fly; and now, you say it's the crossover of gasoline (energy cost) and the amoritized battery (materials costs); that means electricity is getting cheaper and/or materials more expensive: so we need the cheapest electric vehicle with the smallest battery.......the hybrid!!! That's for >50 mile ranges. And scooter and golf cart technology beefed-up and legalized for commuters <50 mile ranges.

2008 Dec 16 02:14 PM

[nakedjaybird:]

So what happened?? Eight Exide 12v Diehards at $60-$100 each or $500-$800 provides a 96v, 20kwr, 500 deep discharge cycle power pak and will do 20-30 miles a day moving postal and other delivery vans, including moving commuters; they do it every day in Europe. The users do have to care for their battery; maybe that's the difference. The battery cost is not the negative. The vehicle costs are reasonable too. So, where's the problem?? Could it be Madison Avenue marketing???????

2008 Dec 16 02:33 PM

[John Petersen:]

If you look at the foreign car makers, they're producing in the US using components that add to their home country balance of trade. BMW is already saturated in Germany and the only way they can sell all the parts they want to produce is to export them. Batteries are a whole different kettle of fish because they have so darned many uses. There is enough supply right now for global demands, but people are expanding capacity all the time. Sooner or later supply will become scarce and when that tipping point passes, exports will be the first to go. We already saw it with lead acid batteries in the 90s and early 00s. The market was flooded with Asian imports and the volume has dropped off every year as home country demand increased.

Nakedjaybird, at the end of the day the consumer has to see a clear path to saving money. My personal favorite is and has been an ultra-efficient diesel hybrid. Ford has a diesel available in Europe that gets about 65 mph. Hybridization should probably add 35 mpg. It is not a permanent solution because cheap oil will continue to get more scarce with each passing year; but it's a darned good start. If we wait for giant strides, we may wait forever. If we take cost effective baby steps every day, it's amazing the distance we'll cover between giant strides.

Actually the crossover is gasoline vs electricity plus amortized storage costs. I just didn't think that adding energy costs to make disastrous economics worse was worth the extra words.

2008 Dec 16 02:34 PM

[nakedjaybird:]

John - BMW, etc., would not be building that many parts in Europe if they were not exporting. They didn't start exporting to and bulding in the US because they were making too many parts in Europe. Me thinks they increased parts mfg'g in Europe after they created the demand in the US.

BTW I totally agree with the diesel hybrid concept. Now if we would just make it a BIODIESEL hybrid and sink Houston and our bury balance of payments problem.

And then, of course, I eagerly await the biofuel injected burner (with no moving parts) encompassed with solid state direct waste heat conversion to 20 hp electric powered vehicles with the only onboard energy storage being a 5-10 gallon GRASS TANK, refillable everywhere, providing unlimited range.

2008 Dec 16 02:50 PM

[Paul Killinger:]

I always enjoy your thoughtful posts, John. Thank you.

As I understand it, the two countries with large commercial deposits of lithium are China and Chile. If this is so, we may just be trading OPEC for OLEC.

And, as Boone Pickens likes to put it, "The lowest cost energy solution wins every time." That alone tells us why EV's and e-85 are certain losers in their present art forms.

NG (and coming gas hydrates) on the other hand is a sure winner. We can run our transportation economy on them for the foreseeable future.

Generating adequate electricity is a different matter. I believe the new Administration is going to ration fuel sources, thereby causing sharp increases in electric rates. The consumer blowback that follows will be interesting to see.

Recently I read something about power generation I didn't understand very well. It was a discussion about CHG (?) and the use of waste heat recovery in industrial settings to save substantial amounts of energy. Can you enlighten me?

2008 Dec 16 06:26 PM

[John Lounsbury:]

Mark Goldes and paulk8756 - - -

I gave you both a thumbs up rating because you both added significant value to the discussion, even though I disagreed with some of your points. This is the way I personally rate comments. I guess some may vote thumbs down if they disagree with something. That's the only way I can rationalize the negative rating for Mark's comment. I vote based on the quality of the argument and the contribution to the discussion.

2008 Dec 16 06:58 PM

[Mayascribe:]

Perhaps your best article yet, John, and by far the best comments. I'm amazed at how much technical knowledge has bloomed forth in the comments over the past month, or so. All due to you!

Basically, as a (temporary) day trader, all this information is vital to making decisions. But, I'm more a common sense guy, and now have come to agree with you about how lithuim technology has its place in smaller battery applications. With enough Exide on board (though I wish I had bought more) and now a little Axion position established (Did I just hear the resounds of a Swiss longhorn coupled with a Tyrolean yoddle all the way here to Philly?) I've turned my attentions to how will the grid move electricity around. Though I stilll think it's a little early, I've begun studying the corporate websites of, and reading up about switches, transmission towers, capacitors and the like., ie. (SDXC), (TRN) , and the obvious, (GE). Obama himself has told me to do this now many times!

Surely, I'm not the only one doing this--letting Uncle Sam tell me where to invest. I've made a ton of graphic bang-my-forhead mistakes since I started my experimental game this past July, 2nd. But once I latched onto this Uncle Sam investing notion my portfolio has zoomed. A little quick math states that the account is up 36.7 %. Not bad for a clueless day trader who studies his butt off.

The obvious conclusions I made last Friday, after reading that Bernanke was going to address the nation about the Fed rate, was that he was going to lower it. My economics degree says when this Fed basis is lowered, the dollar is devalued and the result is that commodities go up; sometime afterward, inflation comes, though more slowly with rising unemployment as it is. With the Friday Dow descending 196 points, I came out of a mostly cash stance and vigorously added to my gold positions; Yamana Gold (AUY), Jaguar Mining (JAG) and Minefinders (MNF), and a leveraged ETF (UYG) to cover the financials. BOOM!

I only do what I am told to do.

And now I own some Axiom.

These are extraordinary times.

One more comment: Doesn't Badoff look a little like the uncle of Danny Davito in the movie Batman? I feel deeply for the involved charities this demonic quack crushed. Badoff...what a great surname for a diabolical villian in a James Bond movie.

P.S. You know my belief that lithium will still play a part in gas aided cars. Yet, I won't bother to own ENER1 anymore.

2008 Dec 16 09:18 PM

[Peter Oppewall:]

Good article John.
I disagree that lithium-ion batteries are a "mature" technology. I attended the recent first World Conference on Lithium-ion battery Technology for Automotive applications held at Argonne National Labs in September. 58 papers presented over 3 days. One thing I can tell you is that improvements in energy density, power density, safety, and weight reduction while incremental up till now, are steadily improving with an approximate doubling over the past ten years in performance with some tradeoffs depending on chemistries. Cost is still a big problem, yet it is being addressed via exploitation of lower cost metals and combinations called "doping". The application of nanotechnology to battery composition promises to yield much more significant advances already demonstrated in the labs, and projected to be produced within 3 to 5 years. I invite you to visit EVtransPortal.com/curr... for article references such as "GM's Li ion anode and cathode with 3X capacity" or "interview with Dr. Yi Cui of Stanford" who recently was given $20 million by the Saudi's to fund his research. As for material supply costs being fixed, that does not account for economies of scale, nor do you account for the far more significant geo-political shift to end the long standing policies of privatizing the profits and socializing the costs of oil, and instead move globally toward cap and trade carbon policy, and eliminating oil subsidies in favor of tax policies that will drive consumers toward sustainable choices. The ability to store electric energy via stationary storage batteries will be a huge cost savings to the utility industry once the problem of who is going to integrate the stationary storage systems with the consumer and the grid is solved by third party investment. This is already happening in Japan (NEDO). The rest of the world just has not caught on yet. The practice of passing on the environmental, and health costs, not to mention the military and geo political cost of oil as an energy source is coming to an end. If the US invested what we spent last year on oil alone (700 billion?) in sustainable renewable energy, transmission and electric vehicle infrastructure, and energy storage manufacturing capacity, we would be able to eliminate dependence on foreign oil, and foreign batteries in short order.

2008 Dec 17 12:04 AM

[John Petersen:]

Paulk, I think you're probably referring to CHP which stands for combined heat and power and used to be called cogeneration. The goal is to squeeze every last drop of heat out of a quantity of fuel by using heat from exhaust gasses to do other work like providing process steam, heating and cooling for industrial use. It's a huge thing in the oil refining sector.

Jlounsbury, I get almost as much fun out of reading and responding to comments as I do writing in the first place. There are some very smart people out there and while I have opinions that I hold dear, I don't feel a compulsion to force them on anyone else.

Mayascribe, you keep getting performance like that and pretty soon folks are going to want you to manage their money. There are darned few who can claim portfolio growth since July so you've done well.

Peter, I believe there is a lot of room for improvement in Li-ion and with as many people as we have working out there, somebody's almost certain to come up with the next big thing, but it hasn't happened yet.

When it comes to something as pervasive, I'm an incrementalist. The Firefly, CSIRO and Axion technologies are big jumps forward in the efficiency of lead-acid and I'm sure others will do the same for Li-ion. But at the end of the day we need to make battery solutions that working guys can afford to buy and use. So the change will happen in a series of small steps rather than one or two big ones. In the interim it's dangerous for investors to assume that any one company or technology will dominate and relative values are critical.

Your point on oil is the foundation market driver for the coming change (together with global warming for those that have a personal conviction on the issue). Shai Aggassi likes to talk about it as the equivalent of a tax; but at least with a tax somebody benefits from government largesse which does not happen with oil imports.

2008 Dec 17 01:24 AM

[Road Runner:]

Don't clump all Li-ion batteries together! There are multiple types, but 2 stand out. The Lithium-Cobalt is the highest energy density and are used in cell phones. Lithium-Iron (LiFePO4) is not as high energy density but is far superior for vehicles. This is the battery in the Chevy Volt and the China-based BYD car F3DM. This is new technology just coming out of the lab. It has impressive characteristic that match well for plug-in hybrids. Keep your eye on this battery. A123 and Lithium Technology Corp make it in the US.

2008 Dec 17 01:30 PM

[John Petersen:]

Road, my only problem with LiFePO4 is price. A123s SEC filings show that their manufacturing costs were about $1.28 per watt hour ($1,280 kWh) for the first 9 months of this year. Since that number is significantly higher than the Ener1 rumor of $17,500 for 25 kWh, I don't think the economics work yet.

2008 Dec 17 04:17 PM

[Miro Kefurt:]

Fact is that EV can never compete with ICE (Internal Combustion Engine) in a "conventional car".

It is however practical and even cost saving for IN CITY transportation, NEV (Neighborhood Electric Vehicles) are already available in USA from number of companies (GEM, OKA, ZENN, Miles, ACG, etc.)

However the introduction of MSV (Medium Speed Vehicles) that can trave at 35MPH rather than the 25 MPH limit for NEV will make practical small CITY cars possible.

While 5 states have already passed MSV regulations, the NHTSA does not have such a category, so technically it is not legal to manufacture, import or sell any such vehicles in USA.

If you would like to change this, make a possitive comment to NHTSA
link to it is on our web okaauto.com

as for batteries the EXIDE ORBITAL batteries are the ones we use as they are cost effective in our OKA NEV ZEV.

No deterioration in performence since 2003 and as many as 15,000 miles of NEV use.

Price since 2003 hoever increased 325% per battery - OUCH !!!

2003 price for 4 kW pack $600
2008 price for the same $1,950 (includes transport to our factory).

2008 Dec 17 06:37 PM

[John Petersen:]

Miro, thanks for adding to the discussion. On the Exide Product you're using, I would love to have enough detail on the batteries to calculate a battery cost (at the factory) per kWh of useful capacity. So if you could send it along I would be grateful.

Your post raises a very interesting issue that I've not really touched on before relating to the range people are shooting for in a BEV. The thing that makes most of the BEVs so terribly expensive is using enough battery power for a 100 to 150 mile EV range. The numbers get far more sensible when the range drops back to something that approximates 40 miles per day, or 12,000 miles per year.

2008 Dec 18 12:14 AM

[Frankshay:]

Nice article and comments. It seems to me that an underlying assumption being used by John and others regarding PHEV's and EV's is that oil-based fuels will always be available in the amounts desired and when desired. There's increasing evidence that oil production is peaking and (current economic climate aside) when you can't buy what you need/want, when you need/want it, prices will surely skyrocket. We need to be changing now in order to prepare for the day when peak oil really starts to hurt us.

I wish some of the lightweight lead batteries were *more* available. I drive an EV conversion and would love to replace 1320# of lead with something half the weight. At this point, lithium is the best bet.

2008 Dec 18 09:24 AM

[John Petersen:]

User, I'm a firm believer that regardless of what happens with global oil production, the age of peak cheap oil has already passed and the growth in BRIC countries will continue to drive prices up. But I've spent the last five years concentrating on developments in the lead-acid space and am convinced that it's far too early to jettison a cheap technology with a substantial US manufacturing base with a successor that costs several times as much. C&D Technologies is scheduled to begin production of the Oasis series using the Firefly foam electrodes in the first quarter. Axion expects to be producing 1,000 PbC devices a day by the middle of next year. Both of these technologies can be rapidly rolled out using existing infrastructure if demand develops as anticipated.

I would encourage you to click on my more articles link above and review some of the other pieces I've written over the last few months.

2008 Dec 18 09:33 AM

[Brett Conrad:]

Battery centered vehicles become much more economic when subsidies are eliminated from oil. Oil is subsidized by the military protecting "America's" oil in the middle east, and our kids will be paying for our pollution and energy waste. If we make oil users pay the true cost (probably add $1.75/gallon) up front, alternatives become more economic, and will therefore be more rapidly adopted.

2008 Dec 22 10:24 PM

[John Petersen:]

Brett, I've lived in Switzerland for the last 10 years and am used to much higher gas prices than I had in the States. To put it in perspective, I filled my car yesterday and paid a little over $5 a gallon. As you might expect, the high prices make me think long and hard when deciding whether to drive or take a train. Parking is also a nightmare in most Swiss cities, which also favors the use of public transport.

Petroleum refining is no more expensive in Europe than it is in America but the difference in the the tax burdens on refined petroleum products is immense. Congress could make alternatives cost effective overnight by adopting a big new tax on gasoline, and probably go a long way toward balancing the budget in the process, but it would likely result in riots on the peaceful end and outright revolution at the other extreme.

2008 Dec 23 03:22 AM

[Michael Fit...:]

your title is dead on. imagine what the $700 billion paulsen and bernanke have thrown at the "financial crisis" could have accomplished had it been thrown at:

1) battery research, development, and manufacturing technology (similar to the Sematech organization in semiconductors)
2) wind and solar electric generation
3) building out the electrical grid infrastructure

i can only hope the obama team "get it" and use their "stimulus package" in a much more useful way (i.e. the above 3 items) than the ridiculous paulsen and bernanke strategy (just more money to the bankers and wall streeters who put us in this deep hole).

2008 Dec 27 04:17 PM

[Allen Phatimer:]

Although I don't know enough of the chemistry and engineering involved to have an educated opinion about the debate between which technology is superior from a price performance perspective, I do agree with your premise that America needs to have a horse in this race and appreciate your thoughts, as well as, the discussion that it initiates. Thank you for taking the time to spark this excellent dialogue.

Jan 15 12:49 AM