What Should the United States Do to Regain Leadership in Lithium-Ion Battery Manufacturing? — by Dave Roberts

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Dave Roberts
Chief Innovation Officer of the State of Indiana
Vice President of NAATBatt International

               Dave Roberts

As innovative advancements commercialize disruptive technologies that will forever change the way move, communicate, and buy our free-range turkeys from a farm within ten miles, a natural question is where the enabling technology was made and how secure is it.  Without disrespect to other technologies currently available or being developed, lithium-ion is the best answer we have today for many of these critical applications.  And it is natural and good for the nation to want to have a leading position (or at least be in the conversation) relative to manufacturing at least a meaningful portion of our projected demand.

So what should be done?  I agree with my friend, Jaime Navarette, that the question is a bit misleading in that it presumes that the U.S. was a leader in the past (we can probably agree Japan, Korea, and now China are the manufacturing leaders), as well as his conclusion that the answer is demand.  But my perspective differs on prior attempts to gain leadership and the proper role of government to address it now.

First, the 2009 strategy was part of the massive $831 billion stimulus package designed to pull the U.S. out of the Great Recession.  Roughly half of the $2 billion for advanced battery systems was in the form of capital infusion to increase domestic manufacturing capacity, with the largest recipients being Johnson Controls ($299.2 million), A123 ($249.1 million), Dow Kokam ($161.0 million), LG Chem ($151.4 million), and EnerDel ($118.5 million).  I had a ring-side seat to how this capital was deployed and the impact of supply-side government stimulus while at EnerDel from 2011-2014, serving as their CEO from 2012-2014.

What happened across all recipients of ARRA funding was that manufacturing capacity was indeed built out, but there was no corresponding plan to stimulate broad demand.  Without demand, the companies that received the grants had an artificially inflated op-ex burden that couldn’t be met organically, so people were laid off and companies’ ownership or assets changed hands.

Second, Jaime and I agree that the answer is stimulate demand.  The difference is in the role of government to do that.  I’m not an economist, but if I were, I would be firmly in the demand-side camp.

Rather than taxing people into a behavior they don’t want or can’t afford since most proposed taxes are regressive, one strategy is for the government to be actively engaged in the market on the demand side.  This can happen many ways, with the following only quick examples:

–       Electrify or hybridize the entire government vehicle fleet (see former Indianapolis Mayor Greg Ballard (R) as a leader here);

–       Integrate energy storage systems on all government buildings;

–       Equip FEMA, DHS, and FOBs with ruggedized solar-genset-battery systems;

–       Subsidize the purchase of public vehicles (buses and otherwise) for local municipalities;

–       Subsidize integration of storage on the grid to facilitate compliance with FERC Order 841;

–       Otherwise subsidize utility adoption of storage system assets;

–       Most importantly:  require that the batteries – NOT battery systems – for these purchases and subsidies be made in the U.S.A.

Notice none of these strategies involve subsidizing individual consumer purchases.  There are two main disadvantages to that strategy:  (1) consumers are fickle and purchasing decisions are not typically solely based on price, and (2) motivating sufficient demand to impact the industry takes far too long.

In summary, nobody can convince me that EnerDel, Dow Kokam, A123, Johnson Controls, and LG Chem’s U.S. operations wouldn’t have been far better off receiving a collective $1 billion in purchase orders ten years ago.  I hope we don’t make the same mistake again.

Dave Roberts serves as Vice President of NAATBatt International, as well as the Chief Innovation Officer for the State of Indiana and an attorney at Gutwein Law.  His comments are his own, and should not be in any way attributed to or be perceived as endorsement by Indiana or Gutwein Law.