John Petersen

DOE Report: Lithium-ion Batteries Are Not Ready for Prime Time

Advill, part of my intense focus on consumer behavior was getting involved in biodiesel long before it was cool. A company that I represent started making biodiesel in Houston in 2002 because it had huge advantages in offshore oil and gas development where even a small diesel spill can add up to hundreds of thousands in fines. When the rage for using biodiesel as a transport fuel kicked in, we tried to sell into the trucking market and found that everybody was happy to use biodiesel as long as it didn't cost any more at the pump. As soon as there was any price premium, the demand evaporated. I don't see people other than the emotionally committed acting any different when it comes to electric cars. As long as the price is right, everything's cool. as soon as the price is too high, nobody buys.

Speculawyer, in the 1990s, Asian exports of lead-acid batteries almost destroyed the U.S. industry. Beginning in the early 2000s, home country demand for lead-acid batteries increased to the point where the number of batteries available for export plummeted, which has resulted in a boomlet of sorts as the U.S. manufacturers rapidly expand production to make up for the imports we are no longer able to buy from Asia. While Asia may have batteries available for export for a while, I have a hard time believing they are a reliable long-term source of supply. I've spent almost three months in Vietnam over the past 2 years and it is one exciting scary place that is teeming with well-educated hard working young people who all want cell phones and ipods and if they're really lucky, an electric bike or a motor scooter. The pictures I'm sure you've seen of three and four passengers on a 50 cc scooter are far closer to the rule than the exception. As their home country demand increases, I'm convinced we will see the same behavior with Li-ion batteries that we have already seen with lead-acid. The imports will become more and more scarce with each passing year and Asian manufactured final products will have first claim on production. They may be willing to sell all the batteries we want right now, but I do not believe that will be the case 5 or 10 years down the road.

Were I looking at this sector today I wouldn't even try to pick a winner because I think everybody in the sector will be a winner. That being said, I think the companies that trade at very high market multiples will not perform as well as the companies that trade at very low market multiples. A diversified portfolio with a little of everything might not perform as well as the gift of prophecy for one technology or stock, but it also avoids a lot of the downside risk.

DOE Report: Lithium-ion Batteries Are Not Ready for Prime Time

Speculawyer, I wish you luck with your investing.

DOE Report: Lithium-ion Batteries Are Not Ready for Prime Time

Speculawyer, I think it is absolutely too early to crown a winner or a loser. I don't think any technology should be widely implemented until it has been thoroughly tested and we have accurate cost data prepared in accordance with accepted management accounting standards.

I have to disagree with your assertions about LiFeP04 testing. There is no question that LiFePO4 has worked relatively well in power tools for the couple years the technology has been available. Everything else you mention is either anecdotal or what we lawyers like to refer to as mere puffery. In my opinion it is foolish to deploy anything on a wide scale until all of the contenders have been thoroughly tested and all of the costs and benefits have been calculated based on experience rather than hope.

I keep telling you and anyone else who will listen that I think Li-ion is the best thing on the planet for electric bicycles, hybrid scooters and other devices where the device to driver weight ratio is under 2 or 3. But using batteries to move 3,000 pounds of steel and a couple hundred pounds of passengers at highway speeds is an extremely difficult cost benefit proposition and until somebody proves he can bring in product at price for the long term, it is immoral to ask taxpayers to pay for an experiment that even the DOE says won't work under current conditions.

Someday, perhaps. Today, absolutely not!

DOE Report: Lithium-ion Batteries Are Not Ready for Prime Time

Northern, the statement is a fair summary of the DOE's conclusions.

It's a promising technology that has to overcome cost, performance, abuse tolerance and cycle life issues before the DOE believes it will be a commercial technology in the U.S.

The same goes for Europe. I have more writers telling me how much different things are in Europe and the US, but since I have lived in Europe for the last 11 years now, I know differently from personal experience.

The idea that we would build billion dollar factories to manufacture anything based on lab reports and engineering estimates is ludicrous. If the board of directors of a company decided to do that with the company's money, they would likely be subjected to a monster class action suit for malfeasance.

Li-ion has some promise . . . but do are a lot of technologies that never succeed in the world of commerce. The universally accepted steps in the development and introduction of any new product are build it; prove it's not dangerous; prove it works in a small sample under tightly controlled conditions; prove it works in a large sample under tightly controlled conditions; and then approve it for manufacturing and general use. Anything less is unconscionably irresponsible and I don't care what the technology is. We need to have a whole series of tests for a whole series of technologies before we can crown a winner.

DOE Report: Lithium-ion Batteries Are Not Ready for Prime Time

Speculawyer, I'll not argue with you about headlines written by Seeking Alpha or the plain meaning of the words used in the report. You obviously think the report says something different than I think it does. I think the best alternative is to let other readers decide for themselves.

I don't know GM's motivations for choosing LG over A123 and I don't know whether the batteries in the Volt will be different from the batteries in the Tesla, but I would venture to guess that you don't either.

The processing cost differences between separating useful lithium from a salt lake and separating lithium from hard-rock ore are measured in orders of magnitude. I think you should revisit my prior article on the differences before trying to go down that road with me:

seekingalpha.com/artic...

The last thing I would suggest is that anybody use lead-carbon in a mass produced product until it has been thoroughly tested in rigorous road tests. The fact is that people are trying to rush to judgment based on inadequate knowledge of the impact of their decisions. In my years I've never been impressed with the outcome of rushed decisions and my conservative nature tells me that when people tell me "we don't need no stinking tests" that's exactly the time we need them.

Rick, it's always good to hear from you.

DOE Report: Lithium-ion Batteries Are Not Ready for Prime Time

paultaut, if your logic about lead is correct, then you can kiss 75% of the US battery industry goodbye and replace it with products that cost 3 to 5 times as much and are difficult, if not impossible to recycle. It all boils down to a question of whether the 95% of the population that don't read Seeking Alpha can afford the solution. I've seen consumer behavior in the biofuels market and do not expect it to be any different in the storage market. If it doesn't save the consumer money, he is not going to buy it no matter how good somebody tells him it is.

Knee jerk reactions notwithstanding, lead-acid is the most recyclable and environmentally friendly technology on the planet and rumors of the king's imminent demise are significantly over-rated.

DOE Report: Lithium-ion Batteries Are Not Ready for Prime Time

NorthernPiker, BYD will reportedly charge an $8,000 premium over a $14,000 IC version to sell a PHEV-60 with a 16 kWh battery pack. A lot of bloggers and commenters have decided that the only way BYD can keep the PHEV price that low is if they can make LiFePO4 batteries at $300 per kWh. That leap of faith overlooks several critical questions that I can't answer including:

Is the car a deliberate loss leader like the Volt is reputed to be?
Can anyone describe the Chinese subsidies I've seen references to?
How do the economics look at current Chinese gas prices?
How many people in China or the US can pay a 60% premium for a plug?
What would the same car cost in the US after shipping, import duties and taxes, title and destination charges?
Does anybody believe that a US company with no manufacturing expertise will be as good as the largest Chinese manufacturer?
Does anybody believe that a US company will have the same cost structure (labor and other) as the largest Chinese manufacturer?
Does anybody believe a Chinese manufacturer has the same litigation and warranty risks as a US manufacturer?

So far the only hard cost per kWh data I've seen came out of the A123 prospectus which specifically delineated watt-hours shipped and cost of sales. That data is a very close tie to the DOE estimates. All of the other numbers you see floating around are back of the napkin calculations that ignore the questions I raised above. I wish every batter producer was as forthcoming as A123. The fact that they aren't leaves me quite uncomfortable.

DOE Report: Lithium-ion Batteries Are Not Ready for Prime Time

Speculawyer, 100% of the battery production for both Valence and A123 is currently in China. Likewise, 100% of the critical mineral production is in countries that aren't much friendlier to our interests than some of the middle-eastern states. Finally, none of the performance claims that people cry to the heavens have been proven in rigorous long-term road tests. They're all laboratory estimates that fly in the face of human experience that things never work as well at home as they do in the lab. I'll be fascinated to see how the blogger with the DIY Honda is doing three to five years from now. It may work just fine, but nobody can prove that it will work just fine. If was a lawyer for an automaker, I'd be lying awake nights fretting about the PR disaster, warranty liabilities and class action suits from putting an experimental product on the road. I'd also be lying awake nights worrying about whether the battery supplier had adequate finances or products liability insurance to cover potential problems. You can't ask a new car buyer to accept "as is" warranty disclaimers.

Douglas Korthof, you obviously have a good deal of knowledge in this field and I appreciate your insights. However I must ask you to teach and enlighten rather than scold and insult. I've got some great readers out there that want to understand the issues in what looks to be a hot investment sector. Disagreement and debate are wonderful, but they should always be tempered with respect.

DOE Report: Lithium-ion Batteries Are Not Ready for Prime Time

searcher, Fulton used his own money!

DOE Report: Lithium-ion Batteries Are Not Ready for Prime Time

Speculawyer, rather than arguing with you about what words mean, I'm more than happy to let readers make up their own minds. That's why I provided the link. The A123 data came from a November 2008, so it can't be too far out of date. I've checked Valence's disclosures and can't find enough data to permit a comparable calculation, but will be amazed if their cost of sales per wH of capacity is significantly different. I will also be the first to apologize for failing to anticipate their manufacturing prowess if they manage to do what no other Li-ion producer has done. VLNC is in the whole by more than $60 million and is hemorrhaging cash at a rate of $20 million per year. There is a big difference between offering investment advice and expressing an opinion on the markets. Overvalued stocks are like pornography, I know em when I see em and saying so is not advising anybody.

Waterskius, USABC is actually a consortium funded by the auto industry for years. They've done a lot of work in trying to establish performance, cost and reliability standards for EV applications. There is a new kid on the block that was created for the purpose of trying to get Federal money to build a battery R&D facility that could eventually be used for commercial production. The USABC, however, is different and well regarded.

ABAT & CBAK are U.S. companies in name only. All of their production is in China and the odds of that changing any time soon are small. I'll believe Valences chemistry is cost effective when the company puts out definitive cost per watt hour statistics. Until then, I have to live with DOE estimates which are clearly not cost effective.

Since over 98% of lead-acid batteries are recycled and the materials are used in new lead acid batteries, the environmental issue is, with all due respect, balderdash.

frflyer, I believe CNG is a solid short-term solution. I also live 15 miles from a nuclear plant and it doesn't bother me a bit. Mercifully, if somebody comes up with a good CSP proposal, they'll probably be able to make a good case for either guaranteed loans or electric reliability grants. I just wish everyone could stop arguing and get to work. Time's a wastin.

DOE Report: Lithium-ion Batteries Are Not Ready for Prime Time

Speculawyer, I did not summarize the DOE report. I quoted it verbatim. Since I had to assume that the DOE's description of the status of Li-ion R&D would draw a vitriolic attack from Li-ion proponents, I included a hyperlink to the full text of the DOE report in the first line of the article.

The first quoted section relating to high energy batteries appears on Page 4 of the report (page 18 of the PDF I downloaded from the DOE) and the second quoted section relating to high power batteries appears on Page 5 of the report (page 19 of the PDF I downloaded from the DOE).

The DOE is, as I said, relatively upbeat about the future of Li-ion, but it is also very clear that the enumerated technical hurdles have to be overcome before the technology will be cost-effective.

You and I have already been around the block on the fact that a DIY Honda conversion using factory seconds bought over the internet does not correlate to a major manufacturer that has to worry about product liability issues. So while it's an interesting anecdote, it has no bearing on manufacturing reality. My $1,300 per kWh number comes from the A123 registration statement. Your lower number comes from an internet blog. Which do you find more credible?

I am curious, when VLNC has a market capitalization of $250 million based on sales of $30 million and Exide has a market capitalization of $260 million based on sales of $3.5 billion, exactly who is promoting the snake oil? You may disagree, but I'm comfortable that the companies I recommend have substantial upside potential for new investors because they are not supporting outsized market caps based on little more than PR hype and promises of how good things are going to be.