USA Today - 21 Oct 09

Prof. Robert B. Laughlin
Department of Physics
Stanford University, Stanford, CA 94305
(Copied 23 Nov 09)

States Eager to Power Up Electric Car-Battery Industry

By Sharon Silke Carty
October 21, 2009

The EnerDel H240 battery was designed specifically for a Toyota Prius.

DETROIT - The U.S. government has made it clear that developing a domestic auto-battery industry - for advanced batteries to power next-generation electric cars - is a priority. That has states scrambling to be sure they get a piece of the action.

This week, business leaders, politicians and entrepreneurs will gather in Detroit at a conference called "The Business of Plugging In" to discuss the future of plug-in electrics and plan how to attract and develop businesses involved in plug-in vehicle development.

But many states have already been working hard to attract such businesses. Much of the current economic development around batteries is happening in and near the Midwest, in states such as Michigan, Indiana, Wisconsin and Kentucky. Those states have lost lots of manufacturing jobs in the past two decades and are searching for ways to keep their citizens employed. But other states, such as California and Oregon, also are competing for the business.

Michigan Gov. Jennifer Granholm is upfront about her state's ambitions: "We want to establish an entire advanced-battery industry in Michigan with manufacturers and suppliers located here, creating new economic activity and more new jobs."

Michigan this year enacted advanced-battery tax credits that will give up to $700 million in refundable credits to companies that develop and manufacture in the state. Indiana also has tax credits for battery companies that locate there, as do Oregon, New York and Kentucky.

International Competition

But the battle for these jobs isn't just among U.S. states. The USA as a nation is battling government-backed efforts for battery leadership by China, Japan, South Korea and Germany.

"It's a slugfest as to who's really going to be dominant," says Tom Kinnear of the University of Michigan's Zell Lurie Institute for Entrepreneurial Studies. "But the key to becoming a leader is not developing the manufacturing ability. It's being the first to come out with the next great breakthrough."

The industry is still working for a technological breakthrough that will make high-power batteries small enough and stable enough to work reliably in cars.

And for that, the industry needs money. The Energy Act of 2007 set up $25 billion in direct federal loans, some of which have been distributed to develop hybrid batteries. The U.S. Senate is considering the Advanced Vehicle Technology Act of 2009, which would give $2.9 billion in grants for green technologies such as battery production. That's on top of $2.4 billion in high-tech grants approved in August.

"This legislation will help ensure the cars of the future are built here in Michigan and elsewhere in the U.S., creating good-paying jobs and reducing our dependence on foreign oil," said Rep. Gary Peters, D-Mich. "Other nations are investing heavily in these technologies, and we cannot afford to be left behind."

Asian Nations Ahead

Most batteries used in today's gasoline-electric hybrids are not U.S.-made. Toyota's Prius uses batteries made in Japan. Ford's Fusion uses batteries from Japan's Sanyo.

That will remain largely true for a new generation of plug-in hybrids, which will rely at least some of the time on electricity alone. General Motors will assemble battery packs for its electric Chevrolet Volt in Brownstown Township, Mich. But individual battery cells will be made in South Korea by LG Chem.

The switch to more battery-powered cars could, in theory, make the U.S. as dependent on foreign countries to power future cars as we are now on Middle East nations for oil, if the U.S. has no domestic battery production.

Japan and China have made that commitment to the battery industry. Japan has invested more than $1 billion in its battery companies. China, attempting to become a global force in the car market, has been pumping money and energy into developing electric-only cars, hoping to leapfrog other countries that already have strong auto industries. A recent McKinsey & Co. study forecasts the Chinese electric auto market will be worth $220 billion by 2030. There are already plans for electric vehicle recharging stations in Beijing, Shanghai and Tianjin, infrastructure that's critical to getting consumers on board with new plug-in battery vehicles.

The U.S. financial commitment will help the nation advance ahead of other countries, says Dror Ben-David, CEO of ETV Motors, based in Israel. Ben-David says the Israeli government is hesitant to invest in the battery industry because it's not sure what demand will be for the technology in the future.

And many private investors, he says, are wary of ponying up the capital needed to develop these products. The U.S. government's investments will give America a leg up, he says.

"Undoubtedly, it gives the advantage to U.S.-based companies," he says. Plus, the government investment helps create a market for these products, because without financial backing, the batteries may never be advanced enough to gain wide consumer acceptance.

None of the discussion will matter if the market for electric cars falls flat. Hybrid electric cars make up less than 3% of the U.S. market, and demand fell once gas prices dropped late last year. Kinnear says that how big the industry will be is, to some extent, out of battery makers' hands.

"It depends on the customer base being willing to buy these vehicles," he says. "There hasn't been much of a tendency to pay extra for the technology. You need the price of gasoline to be around $5 a gallon for it to make sense."