News Sustainable Biz Supply chain, expanding sales key to growth of battery industry
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By Nathan Peck | MiBiz
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NOVI — Now that the advanced battery industry has set down roots in West Michigan, many in government, the automotive industry and alternative energy storage have begun to wonder when — and if — the customers will make those investments worthwhile.
If the fact that The Battery Show — the advanced battery industry’s annual global trade show — moved its conference and expo to Michigan for 2011 and 2012 is any indication, then the state is moving toward the center of the advanced energy storage industry.
With questions arising around whether capacity has been overbuilt, many in the industry say the health of the battery industry depends the United States’ ability to attract the advanced energy storage infrastructure and supply chain.
That supply chain currently runs through Asia, but recently has begun to move stateside, as evidenced by the Feb. 2011 opening of cathode materials producer Toda America’s operations in Battle Creek. The company has licensed technology from the Department of Energy Argonne National Laboratory to produce the next generation of cathode materials for lithium-ion batteries.
Suppliers will begin to focus on the U.S. market as the industry matures here, said Chuck Reardon, commercial VP for Midland-based Dow Kokam.
“That is something we are very focused on — leveraging the supply chain. Relocating that to North America is a key factor” to continued growth of the AES industry, Reardon said. As production comes online in the U.S. and as suppliers in the Asia-Pacific region “see the success of local suppliers, they will begin to look here.”
The question, many say, revolves around creating economies of scale domestically. While the automotive market has garnered much of the attention early on — with President Obama calling for one million electric or plug-in vehicles on the road by 2015 — few say vehicles alone can drive the AES industry.
Demand for electric vehicles — both pure battery electric vehicles and plug-in hybrids — is expected to grow to 839,000 vehicles globally by 2014, accounting for just 1 to 2 percent of the total global vehicle market. That demand growth requires growth of manufacturing capacity in the U.S., said Jeff Kessen, director of automotive marketing for battery manufacturer A123.
“From a battery perspective, it is important to look at it as a market that is just beginning to develop. To reach 830,000 vehicles would require growth in capacity over what we have today,” Kessen said. “Even 1-percent penetration (into the automotive industry) will drive a significant amount of growth of the lithium-ion industry. People expect us to be disappointed in that figure, but it is significant when you look the size of the industry today.”
Kessen is confident that by being first to production, A123 has a competitive advantage.
“If you take the commercial vehicles into consideration, we have more than 10 programs in production already. We have the largest lithium-ion production plant in operation,” Kessen said. “We built capacity in Livonia to meet the demand we already have contracted in. You could characterize us as bullish on the health of the market, not just on passenger, but commercial vehicles also.”
A123 does not operate in a vacuum. Investments by Dow Kokam, LG Chem Power, Johnson Controls Inc. and others — in addition to A123’s facility in Livonia — will bring global lithium-ion battery production capacity 35 GWh by 2013, doubling the demand from vehicle manufacturers needed to build the planned electric vehicles, according to a study by Bloomberg New Energy Finance.
As with any growth industry, there will be consolidation as leaders emerge in the marketplace; that some ventures will not make it is not an indication of the failure of the industry, said Reardon. As the markets for defense and stationary applications emerge, he expects the industry to continue to grow and to begin realizing financial ROI in 2013 or 2014.
“Industries in this stage of growth will see consolidation and coalescence. We are working to make sure we are working with our customers across applications and geography to make sure that Dow Kokam is a strong, viable company,” Reardon said. “Looking across portfolios and multiple geographies, we are comfortable the with the demand picture.”
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