Public Investment in Innovation Central to A123 Advanced Battery Breakthrough

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Today A123 – a leading U.S. vehicle battery firm – announced it has developed a breakthrough lithium-ion battery that could potentially make electric vehicle (EV) battery packs lighter by not requiring a heating and cooling system while also extending the battery packs lifetime. This advance is a notable step towards addressing some of the central performance issues plaguing EVs. But while the battery innovation is an important milestone in EV development, it’s also a good example of how government investing in research, development and deployment (RD&D) is more important to making EVs competitive with gasoline vehicles than subsidizing the deployment of existing technologies.

A123’s new technology called the Nanophosphate EXT lithium-ion battery was developed with key support from the U.S. Advanced Battery Consortium (USABC), a public-private partnership among the National Labs, DOE, Ford, General Motors, and Chrysler. The consortium invests in pre-competitive R&D projects to develop higher-energy, better performing, and cheaper energy storage options for fuel cell, hybrid, and electric vehicles. USABMC is funded through a 50/50 cost share between the DOE and the private sector firm contracting the R&D.  Projects are chosen on a competitive basis through a cooperative agreement between USABC and DOE. In FY2011, DOE invested $13.45 million in the partnership (data found here, slide 2) and according to ITIF’s Energy Innovation Tracker is funded through the Vehicle Technologies Program within the Energy Efficiency and Renewable Energy Program (EERE).

The consortium funded a two-year project with A123 (EERE project information can be found here, pg. 27 and 32) to develop and test a next-generation design of A123’s exiting nanophosphate-based technology in different battery pack designs and to perform under different driving conditions.  At the end of two years, the battery innovation met many of DOE and USABC technology goals including operating in extreme temperatures, lighter pack weight, and a longer lifetime of charge depleting cycle (though as of the linked 2011 report, the technology did not meet system price goals).  A123 now hopes to deploy the new technology in hybrid-electric vehicles next year and potentially use the technology in all-electric vehicles in the future.

A123’s new innovation is an important step in making EVs affordable and performance viable. Existing EV models and designs have a fundamental problem: they’re much more expensive, but offer less performance, than gasoline-powered alternatives.  Existing EVs travel smaller distances on a single charge, have reduced performance in very hot or very cold climates, and have higher maintenance costs due to battery replacement. In other words, current-generation EVs really aren’t ready for prime time and significant innovations are needed before it becomes a viable option for all consumers.

Yet a large focus of U.S. energy policy has been on trying to accelerate the deployment of existing plug-in EVs by offering consumers a $7500 tax credit to offset some, but not all of its higher cost as well as investing in the scale-up of existing-generation EV battery manufacturing.

But this later-stage support has been less than successful.  According to the New York Times, consumers have purchased less than 10,000 Chevy Volt and Nissan Leaf EVs, putting into question whether the industry will meet the President’s goal of 1 million EVs by 2015. And low sales are causing companies like A123, one of the lynchpin EV battery producers to receive government support, to stumble and come under increased political scrutiny especially in the aftermath of high-profile bankruptcies like Solyndra.

So at a quick glance, A123’s announcement is important because it boosts the future prospects of EVs by potentially addressing some (but not all) performance issues at a time of great criticism of EV technology while also lending legitimacy to U.S. energy policy choices.  But on the contrary, both statements are correct but for the wrong reasons. In fact, A123’s breakthrough battery is an example of why government investment in RD&D, and not subsidizing existing technology through modest tax credits, is more important to the long-term viability of EVs.

Ultimately, it will be more innovations like this one and more public investment in advanced battery RD&D that will make EVs a reality and allow companies like A123 to grow.  Otherwise, policies that subsidize existing EVs or push the deployment of noncompetitive battery technologies is nothing more than putting the cart before the horse, which creates the very political issues A123 is wading through today.

Image Source: Copyright 2011 A123 Systems, Inc. All rights reserved.

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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.