Stimulus Package will Plow Billions into Batteries - Money Well Spent?
I came across this piece at MIT Technology Review that highlighted how battery technology companies are poised to reap significant benefits of the federal stimulus package. Obviously this is part and parcel with the scrambling going on to save the U.S. auto manufacturing industry (oh… if it were just that simple). The bigger question is - why exactly is this a good bet?
Don’t get me wrong - I am all for breakthroughs in battery technology and energy storage. Particularly for use in managing the power grid, but I think its telling that while funding for cleantech and green ideas has been exploding, capital has been somewhat slow to flow into battery technologies - which should be a warning sign to the government check signers.
I think part of the problem is highlighted right in the MIT piece - despite its rah rah tone. Are there really these “economies of scale” that are touted out there for battery technologies?
Battery manufacturing is largely automated, so labor costs aren’t much of a concern, he says. Rather, the battery industry developed in Asia because countries there, particularly Japan, developed portable electronics and hybrid vehicles, creating a market for batteries.
Well if battery labor costs aren’t a concern in the battery construction process due to automation - then how exactly will increased manufacturing volume result in the 10x economy of scale that one will need to make batteries cost effective for autos? Certainly there are some administrative and R&D costs that can be amortized across larger scale production. But with 100s of thousands of batteries already going into Priuses, Hondas and other mild hybrids - its not as if we are talking about moving from a custom, handbuilt industry to one that will reap the benefit of automated production. Despite this battery costs are still quite high - replacement batteries for a ‘09 Prius run more than $2K and a plug in version would require at least 4x the battery capacity - the Chevy Volt battery is said to be in the “tens of thousands” range for cost - on a car that should retail around $30K - but probably won’t.
Even if we do get some amortization of R&D and Administrative costs, we still have miles to go with regard to investing in R&D for better batteries (lighter and more power dense) since current technologies still fall well short of competing IC technologies for ease of use/performance/etc. - so its fair to assume much of those economies will need to be plowed back into the development of future products just to keep these firms relevant vis a vis competing technologies rather than passed to buyers in savings.
Then of course there is the real potential that hybrid and electric technologies get eclipsed by something else - hydrogen is one potential (though not any time soon) and biofuels is another (though not ethanol)… In fact a competitively priced biodiesel (which doesen’t exist today) would make hybrids pretty much obsolete overnight - diesel car technologies arlready are in widespread use globally (even if they are still a curiosity here in the U.S.) - so there is limited pain for the manufacturers. And heres, the real kicker, depending on the source of the fuel - those biodiesels will be have a lower carbon foot print than even a 100% electric car - which in much of the world is really a coal burning car…
Capital is reluctant to invest in battery manufacturing because without massive subsidies there is no evidence that hybrids are a long term viable technology for autos as a primary form of motivation - at least for the American market. Perhaps those dollars would be better spent on increased work on alternative fuels and hydrogen production technolgies - where there does appear to be interest from private capital. Of course if I owned a battery company I would be investing in lobbyists…. probably can get a pretty good ROI on them…
