Battery Industry Challenge
Rebuttals To Flawed National NAS Report And Challenge To Battery Industry
INTRODUCTION: For your edification this long weekend: In this posting, we return to address in greater detail the faulty assumptions underlying the conclusion by the National Research Council's (NRC) fuel cell analyst team that it would be a mistake to commit to plug-in vehicles because battery costs will remain high for over a decade.This report has gained wide attention. And on the same day that GM opened its new Michigan battery plant, the Boston Consulting Group (BCG) released a study saying it would take decades for plug-ins to become competitive without subsidies.
We believe BOTH reports are mistaken and are already being eclipsed by industry developments.
Real-world information is already a step ahead of their assumptions. Battery and auto manufacturers would not be spending tens of billions of dollars on factories to support over a dozen new plug-in vehicle models unless they saw a long-term path to low-cost, competitive components. We back this up below with citations from multiple sources — including just-in news of the first response from a National Lab to the NRC report.
We hope they will deter these reports' unquestioned acceptance by journalists, analysts and legislators. Read to the end and you'll find our explanation of how these studies affect the US Department of Energy's future plans. And you'll see our call to some missing voices — battery manufacturers and automakers besides GM and Nissan — to release some vital proprietary information. Multiple constituencies need the full story to understand battery economics and help shape public and private strategies. This is all-important as priorities are being set in Washington and across the globe.
REMINDER ON OUR INITIAL RESPONSES: This posting goes beyond our December "Plug-In Community Needs to Respond to Outdated/Biased NAS Report" on the National Academy of Sciences/NRC document. (See other comments on our posting at http://green.autoblog.com/2009/12/22/squaring-off-again-plug-in-advocates-respond-to-anti-phev-repo/ and http://blogs.edmunds.com/greencaradvisor/2009/12/plug-in-backers-say-recent-slow-growth-phev-report-has-hydrogen-bias.html .) And in three postings last April (all found at http://www.calcars.org/news-archive.html ) we and others criticized BCG's report for the President's Automotive Task Force.
NRC CRITICISMS BOILED DOWN: Here we focus on just the central organizing assumption they presume will dramatically limit EV and PHEV acceptance through the next decade: high battery costs. Most notably, the reports say today's PHEV battery packs can cost well over $1,000/kilowatt-hour. They see it taking 10 years for packs to drop from $1,000+ to the $400/kwh necessary to make unsubsidized EVs and PHEVs competitive. Even by 2030, the NRC says the battery premium for a Volt-like PHEV with a 40-mile range would still be over $10,000. Anticipating that long before then, governments will stop providing the $5-$10,000 subsidies necessary to sell cars with $15-$20,00 packs, they conclude only a "battery breakthrough" or a quintupling of oil prices will motivate consumers to buy plug-ins.
SHORTCOMINGS AND MISINTERPRETATIONS OF THEIR APPROACH: They limit expected price reductions to the low rate expected for already-high-volume and already-cheap laptop and mobile phone battery cells. They don't evaluate PHEVs with 10 or 20 mile ranges, which have much smaller batteries and very different economics than PHEV-40s and all-electric vehicles. They don't count the cost savings from an all-electric vehicle not including an internal combustion engine. And they don't factor in the likelihood of an eventual cost to emit carbon - already an assumption in much corporate long-range planning. Finally — and fundamentally — they don't follow standard research procedures used in similar studies to document their cost assumptions, look at cost sensitivities or conduct a bottoms-up cost model. Add in all these flaws and ignore the results and reports below, and we can see why they forecast EV and PHEV sales totaling a few million by 2020 — instead of the tens of millions that automakers already plan to build and expect drivers to buy.
CLOSELY-HELD INFORMATION: It's hard to get battery pack pricing data. Each battery manufacturer and automaker sees its costs as key to its competitiveness. With some batteries selling at dramatically high retail prices, manufacturer prefer to limit access to pricing forecasts for cells or packs in large volumes to potential automotive customers. And since automotive batteries are not yet mature products, price and performance continually evolve. With such competitive pressures and rapid-fire changes, researchers and even governments are often left with incomplete, inconsistent, out-of-date, or even erroneous price data.
LIMITED DISTRIBUTION EVEN OF PUBLIC INFORMATION: It's frustrating that many useful insights are trapped behind firewalls that some conference organizers short-sightedly enforce. They often limit distribution of presentations to those who paid to attend their conferences. (We've often suggested they experiment to see if they gain more attendees next time and achieve their broad goals more by unlocking their gates.) Fortunately we have been able to glean much from reports some authors choose to post online and from media reports.
MULTIPLE SOURCES FOR MORE REALITY-BASED DATA: Below, we've gathered information from primary sources — two automakers, and no battery manufacturers — and secondary sources including electric utility organizations, independent advocacy groups, and academic research cited or commissioned by government agencies. We cover the implications of the information we have gathered, then challenge industry players, including battery manufacturers, to release some of their proprietary pricing data. They will ultimately benefit through more support for plug-in vehicle incentives, building demand, and thereby expanding the marketplace for all players. We start with extracts from some reports that directly rebut the NRC:
AUTOMAKERS: GM TO AUTOBLOG GREEN: BATTERIES ALREADY CHEAPER THAN REPORTS'
FORECASTS: "There do appear to be some holes in the new [NRC] study. For example, the study cites a current cost of $1,000-1,200 per kWh for automotive lithium ion batteries. That figure may be as much double the actual cost if General Motors is to be believed. When we spoke with Denise Grey and Jon Lauckner from GM this week they both hinted that the Volt battery was actually in the $500-600/kWh range now and they expect this number to drop." http://green.autoblog.com/2010/01/08/study-battery-electric-vehicles-unlikely-to-be-cost-competitive/ . "Grey tells [AutoBlogGreen] GM is working closely with suppliers to cost optimize all of the pack's components and hopes to hit the US Advanced Battery Consortium target of $300/kWh by 2015." http://green.autoblog.com/2010/01/07/general-motors-builds-first-volt-battery-pack-on-production-line/ . (Note: these figures and those below refer to actual available energy — 8 kwh, not 16 kwh, in the case of the Volt.)
GM TO CNN: NRC'S BLOATED ESTIMATES: "GM spokesman Rob Peterson called the NRC's estimates of battery cost 'bloated,' saying the Volt's battery would cost much less than that. Battery costs will also come down quickly, he said. 'Our starting point, which already costs much less than they estimate, is just the first step,' he said." http://money.cnn.com/2009/12/15/autos/nrc_plug-in_hybrid_report/
AUTOMAKERS: NISSAN/RENAULT CEO CARLOS GHOSN BETS HEAVILY ON PLUG-INS: "Ghosn is so sure the vision will work that he's building factories to assemble 500,000 EVs a year — 10 times more units than General Motors Co. is planning to make of its Volt hybrid." And (talking about battery cell, not pack costs): "[Deutsche Bank AG analyst in New York Rod Lache] predicts that high-volume manufacturing will cut battery costs — now $650 per kilowatt-hour — in half by 2020. Ghosn says costs will fall faster. He's working on batteries with twice the range of Leaf's and has teamed up with Sumitomo Corp. to sell used batteries that can no longer withstand automotive requirements but can store power for utilities. [thereby effectively bringing down battery prices for the consumer]" From a long and comprehensive review by Bloomberg reporters John Lippert, Kae Inoue and Laurence Frost http://www.bloomberg.com/apps/news?pid=20601109&sid=aJEVrzt2t.8o&pos=11 . And as Nissan arranges for billions of dollars in financing to lease its batteries for EVs, it has worked with financiers whose due diligence looks at proprietary cost, reliability, and longevity data unavailable even to the NRC and BCG. The total Nissan-Renault investment is over $6 billion http://www.bloomberg.com/apps/news?pid=20601090&sid=a0vDcOKdXYoM .
ARGONNE NATIONAL LAB EXPLAINS HOW SCALE AFFECTS BATTERY COSTS: In what looks like the most detailed analysis to date, "Factors Determining the Manufacturing Costs of Lithium- Ion Batteries for PHEVs," Paul A. Nelson and Danilo J. Santini from Argonne National Laboratory and James Barnes, battery expert at the US Department of Energy, in May 2009 project the mass production costs to the vehicle manufacturer at $255/kwh for a PHEV-20 and $210/kwh for a PHEV 40 (table p.6). The authors go on the say, "The cost estimates in this study assume a stable rate of pack manufacture at a high rate of 100,000 packs/yrIf the plants were designed for [only] 10,000 battery packs per year, a reasonable production level for the first year for both a new battery pack design and a new vehicle, then the unit costs for the batteries would be approximately 60 to 80% higher. If, in addition, the plants were designed to be expanded for future production or the plant equipment was amortized over a shorter period to allow for the uncertainty of future orders (discontinuous production), the unit battery prices would be even higher. Thus, the low production rates anticipated for initial production of the batteries creates serious per-vehicle battery cost barriers that must be subsidized either by vehicle manufacturers or governments in order to achieve a viable long-term PHEV battery market." (p.9) The paper was delivered at EVS-24, May 2009 in Norway; it's found at http://www.cars21.com/files/papers/Nelson-Santini-Barnes-paper.pdf
(Along the same lines, but not from the Argonne studies: The NRC report indicated that Li-ion batteries are already in high volume production for laptop computers and cell phones, so their costs are unlikely to fall rapidly. It did not mention that, while laptop and cell phone cells have become commodities selling at fairly stable prices as low as $200/kWh, cells for plug-in vehicles are quite different and are still produced in low volumes at prices that are far above materials costs, with a lot of room to fall rapidly.)
MORE AS WE WENT TO PRESS: (as they used to say) As we were about to post this, we saw "Cost-Effective PHEV Range: Battery Costs Versus Charging Infrastructure Costs," a presentation to the Transportation Research Board's Annual Meeting, "Investing in Our Transportation Future — BOLD Ideas to Meet BIG Challenges," on January 12 by Argonne's D.J. Santini. This may be the first response we've seen from a government entity comparing the NRC study to Lab and other studies. (And it happens to have been presented to another branch of the NRC!) Slides include ones titled, "Battery Cost Estimates are Hard to Compare. Many Factors Influence Our $/kWh vs. NAS & Others" and "The Recent Incremental PHEV and E-REV Price Increases Estimated by Argonne CTR Staff Are Well Below those of the NAS." We encourage journalists to request the study from TRB or Argonne. (A PDF of last year's presentation by Santini is available for $25.) And we hope a version of this talk will soon be online at no charge from one or the other place.
THE NRC MAY NOT HAVE NOTED CARB'S CONCLUSIONS: The California Air Resource Board's Zero Emission Vehicles Review led to a White Paper in November 2009. From its detailed appendix, "Status of ZEV Technology Commercialization," http://www.arb.ca.gov/msprog/zevprog/2009zevreview/attachment_a_tsd.pdf , based on multiple studies, we highlight four key points:
- Cites its commissioned study by TIAX that, with volume production, battery pack prices for PHEVs will reach $340-$400/kwh in the time period ending 2015 (p. 17).
- Tesla Motors already buys laptop cells for $200 per kWh and in a costly and time-consuming procedure, carefully packages them for EVs. As they mechanize and expand this procedure, their EV packs will come in under $400/kwh. (pp. 17-18)
- From ARB surveys: "Some automakers reported PHEV and BEV near-term, moderate volume costs would be on the order of $500-$600 /kWhr, with evolutionary changes and moderate volume production 'next generation' design changes necessary before costs move further down into the $400-500/ kWhr range." (p. 19)
- Finally, the section concludes: "No automaker has stated that current design, or even next generation Li Ion batteries, will achieve sufficiently low cost to make them competitive with conventional vehicles without ongoing government incentives and/or tax credits. Several automakers do, however, believe that Li Ion battery systems will evolve sufficiently to allow automakers to sell cost competitive PHEVs and BEVs sometime prior to 2020" (p.25)
THE ELECTRIC UTILITY INDUSTRY VIEW: The Electric Power Research Institute has been centrally involved in plug-in vehicle development for more than a decade. With the Natural Resources Defense Council, EPRI produced the authoritative "Environmental Assessment of Plug-In Hybrid Electric Vehicles" in 2007. Now "Plug-In Hybrid Electric Vehicles: Promise, Issues and Prospects" is by Fritz R. Kalhammer (battery expert and longtime consultant to EPRI and government agencies), Haresh Kamath, Mark Duvall, Mark Alexander (Project Manager, Director of Electric Transportation, and Project Manager, respectively at EPRI), and Bryan Jungers (researcher at the UC Davis Institute of Transportation Studies). They concur with the Argonne Labs projection that $200-$400/kwh battery packs are feasible with technology now available. And they conclude, "investments in HEVs and PHEVs with mass-produced Li Ion batteries promise to pay back within the nominal 10-15 year lifetime of a vehicle, even at today's driving energy (fuel and electricity) prices and vehicle efficiencies.These conclusions hold without invoking longer- term economic incentives for PHEVs and/or penalties for excess CO2 emissions from conventional vehicles. However, such incentives and penalties will be instrumental in helping to offset the higher costs of batteries produced at lower rates during the introduction of PHEVs." That careful statement is on p. 6; the chart on p. 7 shows a PHEV-40 having an even-better near-term payback of 10.5 years and a few years out, 4 years. This EVS-24 paper can be found at http://steps.ucdavis.edu/People/bdjungers/Plug-In%20Hybrid%20Electric%20Vehicles%20-%20Promise,%20Issues,%20and%20Prospects.pdf . We hope to hear more from EPRI soon.
ADVOCATES: The Electrification Coalition has taken the lead in pointing to flaws in the NRC study: find links at to its press release and fact sheet at http://www.electrificationcoalition.org/news.php . The Washington Post published EC CEO Robbie Diamond's response to its over-the-top editorial; his letter said in part, "the NRC seems to ignore these economies of scale. The NRC has done much important work over the years. In this case, however, its assumptions are badly out of line with industry and government estimates, and its conclusions — and unfortunately, those of the Post editorial that relied on them — suffer as well." Its reply at http://www.electrificationcoalition.org/news-response-to-nrc.php says, "The NRC study significantly overestimates current battery costs, placing them out of line with published research by DOE National Laboratories, exhaustive research by auto-industry analysts and current industry experience." It cites conclusions from its own comprehensive "Electrification Roadmap" that, "Based on current and expected industry costs, a PHEV-40 will be cost effective for consumers in 2015 — without any government subsidy whatsoever."
FILLING IN THE MISSING PIECES
WHERE DOES THIS LEAVE DOE, WHICH COMMISSIONED THE NRC STUDY? The Department of Energy has much data internally and from its national labs that conflicts with this report. But it has not reacted publicly even as the report's consequences circulate mostly unchallenged in the media and in Congress. Outside parties can help DOE validate its commitment to electrification and continue to sponsor research grants, loan guarantees, ARPA-E, and the US-China EV Initiative. With more data on the jobs and environmental impacts, DOE can catalyze volume purchases of both new vehicles and conversions of much of its existing military, civilian, and postal service fleet. These programs will in turn accelerate technology development and volume production — leading to further cost reductions for batteries and other components.
WAITING IN THE WINGS: We're hoping that battery manufacturers — the key primary source — will weigh in over the next few weeks, along with automakers other than GM and Nissan. In 2009, 14 U.S. companies formed the National Alliance for Advanced Transportation Batteries. They and many others are committing billions of dollars to this effort because they think they'll soon be selling their product in the millions of units. While citing their confidence that costs are declining, that batteries are lasting longer than ever, and that carmakers can draw down more than the 50% of the available energy used by GM's Volt, these companies have volunteered little data, though some have said privately that they are willing to respond if asked.
MOMENT OF OPPORTUNITY FOR THE BATTERY COMPANIES: These companies strenuously work to remain friends with everyone as they aggressively expand their businesses, gain customers, and compete on rapidly improving technology. Even understanding that, our fond hope zeroes in on the very first session of the Electric Drive Transportation Association Conference in Washington. It's aptly named, "Batteries for Electric Drive Vehicles: Manufacturing Challenges and Opportunities" http://www.electricdrive.org/index.php?ht=d/sp/i/13921/pid/13921 .
ON JANUARY 27, we urge the CEOs, founders and top executives from leading suppliers Johnson Controls-Saft Advanced Power Solutions A123 Systems, Ener1, Inc. Electrovaya, and Compact Power each to take five minutes to compare the NRC's outlook to the mid-term prospects for their batteries' performance and cost in mass production. We urge them as well to release their slide shows to the general public — not just to industry insider attendees at the conference. If they do, they'll help ensure the expansion of their entire industry. They'll earn the thanks of all those working to accelerate the electrification of transportation. And you'll hear about it from us!
**Felix Kramer is the founder of the California Cars Initiative - a Palo Alto-based nonprofit startup of entrepreneurs, engineers, environmentalists and consumers promoting 100+MPG plug-in hybrid electric vehicles (PHEVs). You can read more from Felix at www.calcars.org.