Don't Dilute America's Battery Future
Any day now, the U.S. Department of Energy will announce how it will allocate $2 billion to promote the manufacturing of advanced batteries in this country. The decision will profoundly affect how well the U.S. battery industry competes in the world market for lithium-ion battery cells.
Because of lithium-ion's superior power and energy density compared with earlier battery chemistries, electric vehicles and plug-in hybrids will soon begin to compete with and replace motor vehicles powered by internal combustion engines.
Unfortunately, U.S. industry shows every sign of missing out on this paradigm-changing technology. While Detroit was building gas-guzzling SUVs and large pickup trucks, the Japanese, South Koreans and Chinese were perfecting the manufacturing of lithium-ion battery cells with heavy government support. Their governments understand that he who makes the batteries will one day make the cars. Today, U.S. companies produce less than 1 percent of all lithium-ion battery cells.
The $2 billion federal investment will give the U.S. battery industry a last chance. But with more than 160 applicants -- each with its own political champions and technology advocates -- there is a serious danger that this chance will fall victim to the political expedience of spreading the money around and trying to make everyone happy.
That must not happen. Getting it right will require an industrywide collaboration that ensures technological and industry flexibility, large-scale production and domestic ownership of cell technology.
Technological flexibility is critical because lithium-ion technology is changing rapidly. Betting on any company just because it claims current technology leadership could be a bad and stale bet. Likewise, betting on individual battery companies based on their relationships with existing automaker supply networks also might backfire as the use of electrified vehicles will significantly disrupt existing auto supply and distribution chains.
Another key is to ensure low costs by making lithium-ion battery cells in large quantities. Spreading the battery awards widely around the battery industry will doom the chances of any U.S. firm successfully competing in the world market. Success requires scale.
Finally, it is critical that U.S. companies maintain control of basic cell-manufacturing technology. Semiconductors are a parallel. In the late 1980s, the U.S. semiconductor industry organized SEMATECH, a public-private consortium of U.S. companies, which, with about $500 million in federal grants, reversed the loss of semiconductor manufacturing technology to Asia. SEMATECH is largely responsible for U.S. companies leading the world today in computer technology.
The most important lesson of SEMATECH is the need for U.S. companies to collaborate when struggling with heavily subsidized foreign rivals. It maximizes technological flexibility, permitting new batteries to get to market quickly. It permits the pooling of limited resources to produce low-cost lithium-ion cells. And it ensures domestic automakers will have priority access to a key component that may determine which companies make the cars of the future.
It is time for a new SEMATECH -- this time for lithium-ion battery cells.
James J. Greenberger is the founder and secretary of the National Alliance for Advanced Transportation Batteries and a partner in the law firm of Reed Smith LLP in Chicago.
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