BETTER BATTERY: Despite a better battery technology, U.S.-based manufacturer A123 Systems failed to thrive.
Image: flickr/Suzy Jackson
High-tech battery manufacturer A123 Systems Inc. will go to auction tomorrow as part of bankruptcy proceedings, almost one week after Energy Secretary Steven Chu unveiled an initiative to develop high-performance energy storage to enhance U.S. cars and utilities.
A123, which produced lithium iron phosphate batteries and initially received $249 million from the Department of Energy, filed for bankruptcy in October. Speaking last week at a news conference announcing the Joint Center for Energy Storage Research (JCESR), Chu reiterated his contention that faltering startups are typical in an emerging industry and that new research will cement America's role in the global energy sector.
"In any new technology development, not every company succeeds," Chu said. "Never should the United States say that 'we had some that didn't succeed as well as others; we shouldn't be in the game.'"
Chu added that DOE's role in A123's future is to protect taxpayers and retain the technology advantage in the United States. "If we let Germany, Korea and Japan own this space, then we will fail," he said.
Several foreign firms have expressed interest in bidding for the battery company, including China's Wanxiang Group Corp., Germany's Siemens AG and Japan's NEC Corp.
However, the Committee on Foreign Investment in the United States (CFIUS) could block these bids. The Treasury Department agency notes on its website that its mandate is to "review transactions that could result in control of a U.S. business by a foreign person ('covered transactions'), in order to determine the effect of such transactions on the national security of the United States."
This may include A123's auction, because the company had taxpayer backing and used research from DOE national labs. Agency spokeswoman Kara Alaimo would not reveal whether CFIUS is reviewing the auction and said in an email that, by law, the agency cannot disclose this information to the public.
U.S. company hopes to prevail
Milwaukee-based Johnson Controls Inc. is also eyeing A123, particularly its automotive battery division, and will submit a bid tomorrow. "It is our hope we will prevail at auction," said MaryAnn Wright, vice president for technology and innovation at Johnson Controls. "We really see it as complementary to what Johnson Controls already does." The company received $300 million in DOE funding in 2009 under the American Recovery and Reinvestment Act in the same tranche that financed A123 (ClimateWire, Aug. 6, 2009).
Wright noted that Johnson Controls is also an industry partner for DOE's new battery hub. "We've been deeply involved since the call for proposals came out," she said, echoing Chu's point that innovation is critical to America's energy sector and economic future.
DOE will base JCESR at Argonne National Laboratory outside Chicago, and the center will receive $120 million from the department over five years. The state of Illinois will contribute $35 million. Partners include several universities, other national labs and private companies (E&ENews PM, Nov. 30).
Chu said the target is to produce batteries that are five times better and five times cheaper in five years. "If they do a good job, [the program] will be renewed," he said, likening the scope and urgency of JCESR to the Manhattan Project. "You've just got to do what Oppenheimer, Fermi and Seaborg did, OK? No pressure. Starting now."
Wright said Johnson Controls will help scale up applied battery research at JCESR and will bring prototypes and new designs to the market. In return, Johnson Controls will have some access to patents and innovations developed under the program. "We negotiated intellectual property rights and obligations as part of the partnering process," Wright said.
See what we're tweeting about
5 Comments
Add CommentThere is no need or valid reason for the US government to promote individual companies. The government can and should help fund basic research but that is all. If an idea is good, private industry will produce it more efficiently if the government stays out of the process. It was bad economic policy for the US to have tried to promote this industry in the US. The proof is in the results. Companies going broke and US taxpayers holding the bag.
Reply | Report Abuse | Link to this
Reply | Report Abuse | Link to thisThe problem was the economy stayed too low for too long cutting demand for batteries and keeping gas prices low. Sadly mosdtly because repubs kept the economy down by such things as not passing the debt limit in 2011 and still not doing s decent budget even as we speak has knocked 3% of GDP from our economy, the difference between a barely muddling through and a good economy.
But like PV makers they need to make their own markets as too many makers and not enough customers. Battery ones need to make EV's, grid storage, time of day home/business storage where one buys cheap power at night and sells at higher rates in the day, etc and sell, lease them.
And PV makers need to build their own powerplants and sell the power and/or sell, lease turnkey plug and play systems including mountings, panels, inverters that just plug into an 120 or 240vac outlet.
Sitting on your hands waiting for customers is not a winning way.
Sisko,
Reply | Report Abuse | Link to thisIf you think that then do you think the US should not have bailed out the auto industry? I think you make a valid point but we're talking about the direction of an entire nation, not just a single company. If there was a company out there better equipped to help us to obtain clean energy transportation I'm sure that company would be the company getting the money. Bases solely on the article it appears that there is a great deal of coordination between many academic institutions and businesses to make this succeed. Would you prefer that something like this be under something like NASA?
As far as your comment about the private industry, well that's the problem. They don't have a good way to do it, and even if they did Americans would not be quick to support. As a country we are very resilient to change. I myself driving a manual truck and would be very not pleased to go a battery driven car. It would be no fun because there would be no shifting. I'm sure many other American's such as myself would hate the idea of switching from our gas vehicles. If the price from EVs doesn't come down the same price as their gas counterparts there will never be a private sector. I remember how much people hated the transition from a normal transmission to the CVT. There was no "shift" of gears so it was to smooth for people, if I remember correctly Jeep installed something to create this feeling.
-Josh B, Ohio
Great! The DOE is busy distorting yet another market, and frittering away another multiple million taxpayer dollars while doing so. Your tax dollars at work.
Reply | Report Abuse | Link to thisThe comments above seem very simplistic. Energy is a complicated field and if you talk to executives at major oil companies, they point out that building a new energy infrastructure is a difficult and expensive process, longer than many innovators or their investors understand. A basic problem with batteries is that their rate of improvement is approximately 7-8% per year, which means it takes a decade to double performance or halve costs, in other words much more slowly that Moore's law with silicon. Seeking to improve performance dramatically is an excellent goal, but as Toyota has demonstrated with improving quality and with hybrids, practical experience with both production and usage is also important: in other words, innovation does not just take place in the lab, it also takes place as a result of usage and from process/business model improvements. Politically, the challenge in the US is that US politicians in both parties are reluctant to use price to encourage growth in demand for clean tech or to permit higher prices in the marketplace to encourage investment. They have as a result, taken a back door to encouraging efficiency, using transparency (e.g. LEED which illustrates the total cost of ownership for building leases) or regulation (increased CAFE requirments). Once the average fleet efficiency increases, gas prices will inevitably increase without major consequences to low income Americans.
Reply | Report Abuse | Link to thisThe alternative approach would have been more complicated, i.e. raise prices but provide a payment to users based upon historically lower prices. This would have kept the cost of transportation effectively the same, but incented people buy more efficient and less polluting forms and take advantage of continuing surviving payments.
While using price would have been more effective, transition programs are complicated to explain and possibly impossible to explain in the simplistic marketing campaigns that seem to be the rule.
But what is clear is that saying that markets will solve all problems overlooks the problem that other countries are subsidizing research and a first mover advantage will allow descending a learning curve much fast. Markets don't exist in a vacuum. Government investment in roads, railroads and airports facilitate transportation. Government taxation and subsidies already bias transportation choice.
The cost of capital for a new company is affected by risk. The uncertain policy environment in the US raises the cost of capital and lowers the benefit expected by users.