Battery makers to get jump-start

WASHINGTON — The Energy Department is getting ready to hand out about $2 billion in grants to create a domestic industry for electric-car batteries, and 122 companies are scrambling to get pieces.

The companies range from small, niche firms to giants such as Dow Chemical and Johnson Controls. All are promising a combination of innovation and ability to deliver new products on a commercial scale to prevent the United States from trading dependence on foreign oil for reliance on foreign-made batteries.

"We've had 20 years of bad behavior in the United States in terms of developing ideas into products," said Mary Ann Wright, chief executive of Johnson Controls's joint venture developing hybrid battery systems.

Now policy makers hope that helping domestic battery manufacturers will produce economic savings that often come with large-scale production and which are needed to make electric cars affordable. With funds provided by the stimulus bill in February, the Energy Department can cover up to half the cost of a battery-related project.

"This investment will not only reduce our dependence on foreign oil, it will put Americans back to work," President Obama said in March. "It positions American manufacturers on the cutting edge of innovation and solving our energy challenges."

The federally funded battery effort has its skeptics. Grants are expected to focus on lightweight lithium-ion batteries similar to those found in laptops. They are the newest thing in a business that had not changed much since lead-acid batteries were invented a century and a half ago.

But U.S. hopefuls face stiff competition from foreign firms such as Japan's Panasonic and Sony, and South Korea's LG Chem, which already dominate the lithium-ion battery market in power tools, laptops and cellphones. Some domestic firms have recruited foreign companies as partners in new U.S.-based manufacturing facilities.

Wary of subsidies

Moreover, some economists warn of the perils of government subsidies.

"To the extent that this is part of a broader industrial policy scheme, I'm against it for all the reasons I've always been against it," said Charles Schultze, a Brookings Institution senior fellow and former chairman of the Council of Economic Advisers. "If you're not heavy-handed about screening (applications), you're going to get a lot of the equivalent of political pork."

Some industry experts also note that lithium-ion batteries may not be ready for tough road conditions, that they generate a lot of heat, and that there is no infrastructure for recycling them.

For the moment, it is easier to recycle lead-acid batteries, like those in combustion-engine cars, or nickel-metal hydride batteries, like those in the current generation of hybrid vehicles.

Goal: 1 million electrics

Nonetheless, Obama has set a goal of having 1 million electric cars on the road by 2015, and the Energy Department is trying to make sure a large share of them are powered by U.S.-made batteries. In addition to the $2 billion in grants it is expected to announce soon, the Energy Department can lend from a separate $25 billion program.

It has already announced a $1.6 billion loan to help Nissan develop an electric car, including the modification of its plant in Smyrna, Tenn., and a $465 million loan for Tesla, partly for a battery-pack facility to supply Tesla and Daimler.

Here's a quick look at some of the companies, big and small, that hope to benefit:

• Johnson Controls, the world's largest maker of lead-acid batteries, is applying with Ford to make lithium-ion batteries at a Michigan plant that once made automobile interiors.

The Wisconsin-based company says that the project would be up and running within 15 months, creating 4,700 jobs for Michigan, where unemployment has climbed to 15.2 percent.

The state of Michigan is also offering about $150 million in tax breaks and grants.

Last year, Johnson Controls made 112 million conventional car batteries; a joint venture in France already makes lithium-ion car batteries.

• Dow Chemical has asked for $140 million in Energy Department grants to scale up production of raw materials for batteries, as well as $550 million to cover about half the cost of setting up plants to manufacture battery packs in Michigan and Missouri. A South Korean company, Kokam, would be a partner in the venture.

• A company called A123 Systems also thinks it deserves federal support. It has developed a lithium-ion battery using its own technology, which it says will deliver more power, endure more abuse and last longer than other batteries. The technology may be used in cars made by SAIC in China and by Chrysler. General Electric has invested in the company.

• Quallion is another contestant for battery grants. Founded in 1998 by biotechnology and aerospace entrepreneur Alfred Mann and lithium-ion battery specialist Hisashi Tsukamoto, Quallion has focused on high-priced niche markets such as custom aerospace uses, medical-device implants and battery packs that soldiers can carry more easily on the battlefield.

Now Quallion has applied for up to $200 million to build a plant in Santa Clarita, Calif., that would make batteries for trucks and heavy vehicles, which could use them to avoid idling at truck stops. The Environmental Protection Agency says truck idling accounts for 11 million tons of carbon-dioxide emissions and for 960 million gallons of diesel-fuel use.

If Quallion gets the federal grant, state and local governments have promised to provide financial incentives and land.

• One of the smaller firms seeking Energy Department grants is run by Charles Haba, who was part of the team that pioneered semiconductors at Fairchild Semiconductor and later at Intel.

Haba seeks $100 million in grant money to cover half of the cost for a lithium-ion- battery plant in Los Angeles.

The city wants to install 400 megawatts of energy storage, and lithium-ion batteries can store energy from solar and wind facilities and help provide a more continuous supply of energy from those sources.