A123, Solyndra, and EV Battery Innovation

800px-Chevrolet_SPARK

Battery maker A123 Systems Inc. recently filed for bankruptcy protection, making it the latest in a series of clean energy companies to falter. Without a doubt, this unfortunate development is set to become the next political football in much the same way Solyndra has dominated the energy policy debate. But let’s be clear, A123 is not Solyndra. Solyndra’s downfall was falling silicon prices and rampant Chinese green mercantilism erasing any competitive edge its technology had in the market. On the other hand, A123 has had to deal with an acute business problem: no one is buying electric cars yet so the demand for its batteries remains low. But what really sets A123 apart from Solyndra is that A123 still developed genuinely innovative technology. In fact, Johnson Controls – the U.S. company that is purchasing A123’s key assets – will continue manufacturing during the bankruptcy process and A123’s innovative battery is still set to power the all-electric Chevrolet Spark. As ITIF Senior Analyst Matthew Stepp is quoted as saying in the Detroit Free Press, “This isn’t going to be the last we hear of A123’s battery technology. This is just a step in the process of U.S. battery technologies getting better and better.”

In fact, A123 is indicative of how far the U.S. advanced battery industry has come and how far it still has to go before becoming globally competitive. Three takeaways are particularly relevant to the ensuing debate:

1. Failure is part of the innovation process. Not every clean energy company or innovative clean energy technology is going to succeed. That’s how innovation works, especially when developing advanced technologies that are high-risk and high-reward. In other words, policymakers should not be scared off by failure – the risk of failure certainly did not scare off all of the members of the Michigan congressional delegation, Democrats and Republicans, when they petitioned the Energy Department for federal investment in A123 through the Stimulus in 2009. Simply put, the U.S. advanced battery industry is in the early stages of development and should be viewed as such.

2. We need more EV battery innovation, not less. A123 actually had success in developing a breakthrough lithium-ion battery that could potentially make electric vehicle (EV) battery packs lighter by not requiring a heating and cooling system, while extending the packs’ lifetime. The innovations were not enough, by themselves, to make EVs cost and performance competitive, but they are a part of the EV innovation puzzle.

Yet, thanks to critical investments in battery innovation by ARPA-E and DOE investments in next-generation battery manufacturing, the U.S. battery industry as a whole has clearly made significant technological progress in a few short years. EV battery pack costs have been cut in half in less than 4 years to around $500/kWh. New battery designs by ARPA-E-supported Envia could potentially cut costs further to $300/kWh. And continued investments in battery innovation will be what drive down battery costs and increase performance to the goal of $100/kWh. A broader view of the battery innovation imperative is critical to framing the A123 story.

Ultimately, investments in clean energy innovation, such as in A123’s battery design, are working and we need more of it, not less. Case in point: Johnson Controls sees significant value in A123’s innovative automotive technologies and advanced manufacturing processes and has agreed to purchase those assets. “Our interest in A123 Systems is consistent with our long-term growth strategies and overall commitment to the development of the advanced battery industry,” Alex Molinaroli, president of Johnson Controls Power Solutions, commented on the purchase.

3. The bankruptcy is also evidence that better clean energy policies are needed, not evidence to eliminate policy support altogether. A123’s struggles can in large part be linked to low demand for electric vehicles. ITIF recently noted that there is a substantial gap between domestic EV battery production capacity and actual battery demand because people simply aren’t buying enough EVs. But as ITIF laid out in a report released just last week, Shifting Gears: Transcending Conventional Economic Doctrines to Develop Better Electric Vehicle Batteries, there will not be widespread adoption of EVs until they are both cost and performance competitive with gas cars and getting there requires more battery innovation. More public investments in innovation and manufacturing are vital to ensuring that batteries continue to improve and fall in cost. More aggressive partnerships among industry, the Department of Energy, and the Department of Defense are critical to scale-up new battery ideas instead of relying on consumer purchasing that won’t come until the technology fits their idea of what a vehicle should be. But getting to this discussion means we need to move past the false dichotomy that government support for next-generation EV batteries should continue or be eliminated and nothing in between.

It cannot be said enough: this is how innovation works, it’s how the U.S. can become the global leader in advanced battery technology, and it’s how low-carbon technologies like EVs will become an affordable reality. Policymakers and advocates should not suddenly become gun shy as clean energy innovation progresses. Instead, they should recognize weaknesses in clean energy policy and investments and fill those gaps. The policies that invested in A123’s breakthrough battery design ideas are not one of those weaknesses. Instead, its failure is evidence that more needs to be done to accelerate the innovation process such that better batteries make it to the market quicker and next-generation EVs can start speeding off the assembly lines.

Above photo is of the all-electric Chevrolet Spark, which is set to use an A123 battery. Photo credit: Wikimedia Commons.

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About the author

Matthew Stepp is a Senior Analyst with the Information Technology and Innovation Foundation (ITIF) specializing in climate change and clean energy policy. His research interests include clean energy technology development, climate science policy development, transportation policy, and the role innovation has in economic growth.