U.S. Battery Consortium Seeks $1B: Is It a Waste?

By Michael Kanellos

Fourteen U.S. chemical and electrical companies have banded together to seek $1 billion in federal aid to jumpstart an effort to make advanced batteries for cars, according to, among others The Wall Street Journal. While some of the money will undoubtedly go to research, much of it will be dedicated to building supply chains, prototype factories and job training.

Right now, most of the battery industry is in Asia. In the past few years, a number of venture-backed startups — Boston Power, International Battery, Valence Technology (VLNC), Altair Nano (ALTI), A123 Systems, PowerGenix, ZPower — have sprung up in the U.S. with products and plans to improve batteries and bring batteries to the car market. Some of these companies focus on new types of battery chemistries and some focus on improving the overall performance while tinkering with the electronics to improve efficiency. Some such as PowerGenix have started selinig products.

Former Intel CEO Andy Grove is also prompting the company to get into the market for car batteries.

This may work, but it also has a lot going against it. Here are some of the reasons:

1. There is no Moore’s Law for batteries, people. Get used to it. Semiconductors can double in performance every two years because engineers have found ways to steadily decrease the size of transistors. It’s a lucky combination of hard work and physics.

Battery chemistry doesn’t work that way. Batteries improve about 6 percent every year — thus they double in performance every 10 years. At least this is what people like Elon Musk (CEO, Tesla Motors) and Christina Lampe-Onnerud (CEO, Boston Power) have told me.

Hence, tossing money at the problem won’t necessarily solve it.

2. Federal funding is great for research, but often misfires when used to build a market or factories. Back in the ’80s, 14 chip companies got together to form Sematech, which was supposed to make the chip and chip equipment industries competitive again. The U.S. did regain the edge over Japan in chips, but it wasn’t because of Sematech. Sematech opened up dialog between competitors, but other factors changed the market. It’s tough to find people to sing its praises these days.

“They’ve got a very short string to show on results,” said Robert Graham, the chief executive of Novellus Systems said back in 1991.

If this money were given directly to national labs and universities to train people in energy storage, it’d be great. It would be the proverbial New Deal on energy we keep talking about. But it will slip through the fingers as a biz dev project.

3. Electric cars are going to take a long time regardless of what the U.S. does. It’s hard to see that this will accelerate it much.

4. Silicon valley guys and startups hate the government and always complain about government. So let’s listen to them for once.

Sorry to be a pain, but battery chemistry just won’t be solved with flag waving.

Comments

[In the Know:]

Right on. This money would be dis appropriated. I agree there needs to be some sort of subsidy but not through some bureaucratic consortium, it will limit progress. Look at USABC. Its been around for decades. Sure, its nice for developing standards but not necessarily letting the free market work. Government's role is to make the conditions friendly for the free markets, not fund entities that have their hands out.

2008 Dec 18 03:51 PM

[NOWHEREMAN:]

In the know: Agree fully with your assessment. Do the entities holding their hands out include the Solar/Wind community or their funding a separate issue?

2008 Dec 18 09:49 PM

[Freedoms Truth:]

"There is no Moore’s Law for batteries, people. Get used to it. Semiconductors can double in performance every two years because engineers have found ways to steadily decrease the size of transistors. It’s a lucky combination of hard work and physics."

THANKS FOR STATING COMMON SENSE! Every new 'tech trend' tries to glom on to the 'moore's law' concept without understanding how and why it works. It works because you advance the lithography a bit and you can build 2X the transistors on the same area of silicon. You CANNOT ride moore's law to heaven in these other areas (it holds for solar PV too).

The best you can do is figure out how to get higher energy density per volume/cm^3 or weight/gram in the battery.

Research Consortia funding does help at some level, but the author is basically right. Given the fact that we will squander billions on a so-called 'stimulus' I think we could do worse than to help build up battery research, development and manufacturing here.

2008 Dec 18 11:59 PM

[John Lounsbury:]

When I compare (and I have in other comments and will not repeat the details here) semiconductor technology to battery technology, I see batteries no further developed than electronics were in the early 1960's. At best we are in the sorting out process for battery technology similar to when we were debating the relative merits of vacuum tubes and transistors.

There have been some excellent articles (and associated discussion comments) by John Petersen on this subject on Seeking Alpha.

2008 Dec 19 12:15 AM

[In the Know:]

Lithium Battery production today can only survive where the upstream supply chain in well developed, the materials are abundant, cheap, and of high quality, and the methods for manufacture are a leap frog advance compared to how they are made today. The cost is mostly materials. Whoever has access to this flat out wins.

It doesn't matter if production facilities are built through this consortium, the 14 companies aren't bringing much difference from each other and they would all be forced to use the same process. Some of the companies in the list are only enabled to be on the list because they convinced some venture capitalist that they have a better mouse trap. This path only allows them to have some non-dilutive funding and not have to take risk from a capital standpoint because they can't figure out how to produce.

Political routes are also being sought, Indiana Senators vs Michigan Governors trying to get billions of dollars moving through their states. I say let free capitalism work and if something has to be subsidized, focus on the raw material supply. Also, I have to emphasize again, government should focus on creating a healthy environment for this business to succeed in the US.

Comparing semiconductor technology to battery technology to me is like comparing a statue vs a human being. Both have advanced material engineering but one is static and one is active. This business need to be approached like a NASA or Nuclear Power Plant project vs a project like a Volt.



On Dec 19 12:15 AM jlounsbury59 wrote:

> When I compare (and I have in other comments and will not repeat
> the details here) semiconductor technology to battery technology,
> I see batteries no further developed than electronics were in the
> early 1960's. At best we are in the sorting out process for battery
> technology similar to when we were debating the relative merits of
> vacuum tubes and transistors.
>
> There have been some excellent articles (and associated discussion
> comments) by John Petersen on this subject on Seeking Alpha.

2008 Dec 20 11:03 AM

[frflyer:]

aitvaras

"Do the entities holding their hands out include the Solar/Wind community"

You must be kidding!
The solar and wind industries probably wouldn't need subsidies if they weren't competing with the MASSIVELY subsidized fossil fuel industry.

Annual tax credits and subsidies to oil, gas and coal are $49 billion a year.

Compare that with the $17 billion approved for wind, solar, geothermal, tide, wave biomass, energy efficiency and all the rest of the renewables combined.

The oil industry has been subsidized since 1918 with not one single subsidy ever being phased out.

The nuclear industry has received $100 billion in subsidies over the years.

Coal gets about $3 billion annually

The internet was subsidized over 35 years with about $400 billion.

Railroads were subsidized as well as electric infrastructure, and a whole host of other things that we take for granted.

If you include the hidden costs of fossil fuels, solar is already cheaper. Wind is one of the cheapest sources of energy.

2008 Dec 20 01:25 PM

[frflyer:]

Fossil Fuel subsidies.

According to a study- Koplow's 2007 report to the Organisation for Economic Cooperation and Development:
"Estimating U.S. oil and gas subsidies is very challenging. Subsidies rarely involve cash payments. Instead scores of U.S. government agencies and departments create hundreds of programmes to support the U.S. energy sector. And there is no requirement for the federal government to keep track of all this."

"Energy subsidies are often simply hidden from public scrutiny. It's only recently been revealed that 40 companies granted leases between 1996 and 2000 for drilling in the Gulf of Mexico do not have to pay royalties for the publicly-owned resource. This is worth nearly a billion dollars a year in lost revenue to the federal government, according to a 2008 study by Friends of the Earth (FOE), a U.S. environmental NGO, and may ultimately total 50 billion dollars."

"Subsidy programms from 1918 are still in place. "I'm not aware of any oil and gas subsidy that has ever been phased out," said Koplow, the leading expert on U.S. energy subsidies"

"In a time of skyrocketing oil prices and profits, why did the George W. Bush administration in 2005 authorise an additional 32.9 billion dollars in new subsidies over a five-year period?"

"This massive government intervention distorts energy markets, making it very difficult for alternative energy sources to compete without similarly massive subsidies. "And it promotes America's addiction to oil," Larsen added."
www.heatisonline.org/c...

2008 Dec 20 01:33 PM

[John Petersen:]

The proposed consortium funding for batteries belongs in the same class as Federal support for corn-based ethanol, a wasteful boondoggle that will create more problems than it solves. The fundamental premise of the consortium proposal is that the Asian model of using 5,000 hamsters to pull a stagecoach is best and that domestic manufacturers can't do it right.

There are far more important developments in the battery field than Ni-MH and Li-ion batteries, including using new materials and manufacturing methods to revitalize old technologies.

2008 Dec 22 01:09 AM

[xtremewinds:]

One of the companies of this consortium is Altair nanotechnologies and is untill now the best chemistry for advanced bateries, if you americans are blind like you was in the past, you re going to loose this big market in hands of asian factories, The lithium--nanotitanate is far away the best and only who proves very fast charging response (you can charge your car in 10 minutes with a special charger), and temperatures and security issues who make this chemistry the best for automotive and grid batteries.
So if you keep your mind of inexsistent free markets, again you re going to loose, so good luck in the future.

2008 Dec 28 03:00 PM