Earlier this week I had the opportunity to meet with Ways and Means Committee Chairman Sander M. Levin (D-MI) in Chicago and speak with him about the future of the advanced battery industry in the United States. Chairman Levin is among the strongest supporters of the industry in Congress and understands as well as anyone the critical importance of our industry to the future economy and energy security of the United States.
I spoke specifically with Chairman Levin about NAATBatt’s concerns, previously expressed in this column, about possible short term overcapacity in the industry and the negative impact such overcapacity might have on the future of electric drive. I outlined NAATBatt’s thoughts on the role that stationary storage applications, and in particular community energy storage, might play in making the industry’s short term prospects a little brighter and promoting consumer acceptance of electric drive. Chairman Levin was very interested in NAATBatt’s ideas and asked me to reduce them to writing. In lieu of my usual column this week, I reproduce below the letter I sent to Chairman Levin at his request:
Dear Mr. Levin:
The ARRA recently provided more than $1.2 billion of government funding for advanced battery manufacturing plants, many of which are being constructed in Michigan. It was anticipated that those plants would produce the advanced lithium-ion batteries that will power the first generation of mass produced plug-in electric vehicles (PEV’s). Those vehicles will enter the market later this year.
Several analysts predict that the capacity of the plants being constructed with ARRA funds will significantly exceed market demand for first generation PEV batteries. A recent study by Roland Berger Strategy Consultants puts installed capacity at more than 200% of actual market demand through 2017. Shut downs and layoffs at new ARRA-financed battery plants would be economically and politically disastrous. Finding ways to fill that capacity is of paramount importance.
A good short term solution would be encouraging the more rapid deployment of community energy storage (CES) technology. CES involves locating relatively small (25-75 kW) distributed stationary batteries in neighborhoods, each battery servicing a few houses or small commercial loads. Each CES battery provides back-up power to the connected loads and support to the local electricity distribution system. In addition, by using advanced control software, multiple CES units can be networked together to provide a multi-megawatt power resource, which can be used to support wholesale electricity transmission, ensure power quality and balance variable renewable electricity generation on the grid.
CES will also play a critical role in supporting the market for PEV’s. One of the greatest threats to the PEV market is the fragility of local electricity distribution networks. Many such networks will not be able to handle multiple homeowners served by the same substation coming home after work, plugging in their cars, and turning on their TV’s and air conditioners, all at the same time. PEV-related blackouts and brownouts will significantly sour the market for PEV’s, both among consumers and local regulators. Market surveys indicate that 98% of PEV owners expect to charge their PEV’s at home. But recent experience indicates that time of day charging may not be well accepted. Consumers want their side of the grid to remain dumb. When a consumer plugs in her PEV, she wants it charged immediately, not at the convenience of the local utility.
CES solves all of these problems. By locating batteries in neighborhoods, immediately proximate to consumer load, utilities can wheel electricity into neighborhoods at times of low demand and let consumers use it at the consumers’ convenience. CES will permit electricity distribution systems to handle widespread PEV recharging at peak times but permit grid operators the flexibility to manage the acquisition and transmission of electricity in the most efficient way possible. American Electric Power and DTE Energy both have pilot CES projects under study.
Most importantly, the types of batteries used in CES systems can be the same or very similar to the types of batteries used in PEV’s. The same factories built with ARRA funds to produce PEV batteries can be used to produce batteries for CES. Demand for CES systems would keep those factories operating at full capacity and their work forces fully and productively employed.
Sections 3-5 of the Electric Drive Vehicle Deployment Act of 2010 (H.R. 5442) anticipate investing billions of federal dollars in public recharging infrastructure for PEV’s. No doubt this investment would be helpful. But the lack of public recharging infrastructure is not the principal barrier to widespread adoption of PEV’s – the principal barrier is the high cost of advanced PEV batteries. Those costs can only be reduced by increasing the volume of advanced batteries produced and the experience (and resulting innovation) of American battery manufacturers in working with lithium-ion technology. Investing heavily in CES systems will permit this to occur.
I would urge you in considering the next energy bill to prioritize the needs of electric drive carefully. Top priority should be given to investing in CES systems — and to making sure those investments are made quickly.
Very truly yours,
