Killing the Electric Car Again

When U.S. gasoline prices soared to more than $4 per gallon in the summer of 2008, drivers and automakers ramped [...]

April 14 2009 by Ronald Bailey

When U.S. gasoline prices soared to more than $4 per gallon in the summer of 2008, drivers and automakers ramped up the search for new ways to fuel cars. Energy hawks worry about continued U.S. dependence on oil from hostile countries- we import more than two-thirds of the oil we use. In addition, concerns about global warming are also driving the search for new, low-carbon ways to transport people and goods. Congress has passed a biofuels mandate requiring the production of billions of gallons of ethanol to pour into our gas tanks. The big unintended downside is that turning food into fuel boosts food prices and may not even help reduce greenhouse gas emissions. Cars using hydrogen fuel cells are a no-go. Fuel cells are expensive; no good way has been found to store enough fuel in a vehicle’s tank and most hydrogen is produced using natural gas, which means that global-warming carbon dioxide is emitted anyway. So why not just burn natural gas, rather than waste energy producing hydrogen?

So the most intriguing possibility is using electricity to drive cars. Some gas-electric hybrid vehicles, like Toyota’s Prius, are already on the road. The Prius uses Nickel- Metal Hydride (NiMH) batteries to power an electric motor to assist its gasoline motor to drive it and increase its gas mileage. The batteries are recharged by both the gasoline engine and by capturing energy used during braking (regenerative braking). For example, the EPA rates the Prius at 60 miles per gallon in the city and 51 mpg on the highway. Introduced in 1997, more than 1 million have been sold worldwide, 600,000 of them in the U.S. Despite their improved gas mileage, current generation hybrid automobiles, including the Prius, are still essentially gasoline-powered vehicles.

That’s where plug-in hybrid-electric vehicles (PHEV) come in. PHEVs flip the current hybrid formula- instead of gas-powered cars assisted by electric motors and batteries, PHEVs will be electric-powered cars assisted by gasoline motors. Ideally, PHEVs would mostly run on electricity from batteries, using their gasoline motors as range-extenders to charge the batteries once they’ve run out of juice. In a world of PHEVs, gasoline stations would go the way of livery stables, since cars would get most of their energy by being plugged in at home at night or at parking garages and meters during work hours.

If most Americans switched to driving PHEVs, imports of foreign oil would fall, as would the emissions of the greenhouse gases thought to be warming the planet. By how much? A study done by the Department of Energy’s Pacific Northwest Laboratory in 2007 sketched out a scenario in which 84 percent of cars, light trucks and SUVs (about 200 million vehicles) were PHEVs, traveling an average of 33 miles per day on electric power. In that scenario, the country would reduce its consumption of oil by 6.5 million barrels per day, which is equivalent to 52 percent of current U.S. petroleum imports. Greenhouse gas emissions would be cut by as much as 27 percent.

The problem: the batteries.

NiMH batteries are all right for the quick charge and discharge of today’s gas-electric hybrids, but can’t hold enough charge to take a car very far on its own. Toyota plans to introduce a PHEV version of the Prius in 2009 using NiMH batteries, which would propel the car in electric-only mode 10 miles or so. For further distances, carmakers are looking to the same battery technology that animates our laptops and cell phones, lithium-ion batteries. Lithium-ion batteries can hold a much greater amount of charge and weigh a lot less than NiMH or conventional lead-acid batteries. For example, the lithium battery in GM’s much-touted Chevy Volt weighs 400 pounds whereas the conventional batteries in its all-electric EV1 10 years ago weighed 1,200 pounds (see photo for comparison, p. 47). The Volt will travel 40 miles on a full charge. The average American commute is 32 miles roundtrip, so ideally most drivers would hardly ever use their car’s gasoline motor. Assuming the Volt is used mostly for commuting, it could get theoretically get infinite miles to the gallon.

While faltering GM’s Volt has garnered much of the media’s attention, every other major automaker in the world has also announced in the past year that it plans to produce a hybrid-electric or fully electric product. Last fall, Chrysler claimed that it would be debuting hybridelectric versions of its Jeep Wrangler and its Town & Country minivan with an all-electric range of 40 miles, just like the Chevy Volt. In addition, Chrysler will produce an all-electric sports car which would have a range of 150–200 miles on a fully charged battery.

Ford Motor promises to release an electric commercial van in 2010 and an electric commuter car in 2011. Big automakers around the world are also promising that consumers will be able to drive plug-in hybrids and electric vehicles off dealers’ lots in the next two to three years. Among them are Nissan-Renault, Daimler- Benz, BMW, Mitsubishi, Toyota and an intriguing Chinese manufacturer, BYD. In addition, numerous startups, including Tesla Motors, Think, Fisker, Aptera, Zenn and Phoenix Motors, promise to do an end run around the stodgy majors.

Politicians are clearly anxious to jump-start an electric car revolution. President Barack Obama has promised to put 1 million PHEVs on the road by 2015. The new $787 billion stimulus bill adopts President Obama’s proposal to offer consumers a $7,500 tax credit for PHEVs as a way to encourage consumers to buy them. Since the PHEVs are likely to cost $10,000 more than comparable gasoline powered vehicles, consumers will need all the encouragement they can get. Unmentioned is the fact that only about half of Americans pay enough tax to take advantage of a tax credit that big.

But without a plentiful supply of reliable long-range batteries, all of these promises of a glorious, electrically driven future are just so much hot air. So where are the millions of batteries going to come from?

Surveying the world, it is clear that foreign manufacturers are currently in the lead when it comes to making lithium-ion batteries. In January, GM announced that it would use lithium-ion batteries produced by the North American subsidiary of the Korean chemical giant, LG Chem, in its Chevy Volt. LG Chem beat out A123 Systems, a lithiumion battery maker headquartered in Watertown, Mass. In February, Ford announced that the batteries for its PHEV and electric vehicles would be supplied by a joint venture between Wisconsin-based Johnson Controls and the French battery producer Saft Groupe SA. The actual batteries will not be manufactured in the U.S., but in Saft’s factory in Nersac, France.

In December, Nissan and NEC announced a $1.1 billion joint venture to build a battery factory that sometime after 2011 will produce enough lithium-ion batteries for 200,000 hybrid and electric cars. Last year, Matsushita, which owns the Panasonic brand, teamed up with Toyota to build a $1 billion plant to make lithium-ion batteries by 2010. In December, Honda and old-line battery maker GS Yuasa Corporation announced a joint venture with an initial investment of $170 million to build a new lithium- ion plant. Hyundai will introduce standard gas-electric hybrid models in 2011 and plug-in hybrids in 2013, using batteries supplied by LG Chem. Japanese industrial giant Sanyo will produce lithiumion batteries for Volkswagen beginning in 2011.

China is currently the world’s biggest maker of lithium batteries of all types. In fact, one of the more intriguing entrants into the PHEV and electric car markets is the Chinese battery maker, BYD. BYD, which stands for Build Your Dream, is now the world’s second-largest producer of cellphone batteries. BYD jumped into the car business when it bought a small bankrupt state-owned automaker in 2003.

At the Detroit Auto Show in December, BYD rolled out what it calls the world’s first mass-produced plug-in hybrid, which goes by the not-so-snappy name of F3DM. The company claims that the car will travel 62 miles on a full charge (compared to the Volt’s 40). BYD says that it plans to introduce the car into the American market in 2011. The sticker price will be $20,000 to $25,000, compared to the Volt’s rumored $40,000. Even more amazingly, BYD says that it will produce a five-passenger all-electric crossover vehicle that can travel 250 miles on a single charge. That’s as far as the $109,000 Tesla all-electric two-seater sports car will travel now. BYD gained some credibility when MidAmerican Energy Holdings Co., a subsidiary of investor Warren Buffett’s Berkshire Hathaway Inc., bought a 10 percent stake in the company for a $230 million investment in September.

So why are foreign manufacturers dominant in cutting-edge battery technologies? After all, many of the critical lithium-ion technology breakthroughs were developed in the U.S. In a 2005 analysis for the National Institute of Standards and Technology, consultant Ralph Brodd concluded, “The U.S. battery companies ‘opted out’ of volume manufacturing of lithium-ion batteries, primarily because of a low return on investment compared with their existing business.” Instead of the Energizer bunny, Sony became the first company to commercialize lithium-ion batteries for electronics applications back in 1991. Asian battery manufacturers also benefited hugely from their proximity to the world’s leading cellphone and computer manufacturers, which are also Asian.

Dependent on Batteries Instead of Oil?

“A small, fragmented battery industry will not long survive in the face of determined Asian competition,” argues consultant Ralph Brodd. “Other countries are investing heavily in the manufacture of lithium-ion cells. Those countries understand that whoever makes the batteries will one day make the cars.” So how do American manufacturers overcome the Asian lead? Not only do politicians want to subsidize hybrid-electric cars, they also want to subsidize battery manufacturers. In September, the U.S. government launched its $25 billion Advanced Technology Vehicles Manufacturing (ATVM) loan program. That program aims to jumpstart automotive technologies that improve fuel economy by at least 25 percent over comparable 2005 models.

In December, a coalition of 14 American high-tech companies, including 3M, Altairnano, Dontech Global and FMC, joined together to form the National Alliance for Advanced Transportation Battery Cell Manufacture. The Alliance immediately began lobbying the federal government for $1 to $2 billion to develop one or more manufacturing and prototype development centers in the U.S. Two months later, Congress more or less granted the Alliance’s wish: The new $787 billion stimulus bill allocates $2 billion in grants for advanced battery research.

And battery makers are rushing to take advantage of these government incentives. For example, A123 Systems, which lost out to LG Chem in supplying the Chevy Volt batteries, produces batteries based on nanotechnology research done at the Massachusetts Institute of Technology. In January, A123 Systems applied for $1.84 billion in direct loans from the ATVM program for constructing a new cutting- edge lithium-ion battery factory it wants to locate in Michigan.

In December, both houses of the Michigan legislature voted nearly unanimously for $335 million in tax rebates to lure manufacturers of the world’s most advanced batteries to the state. General Motors immediately declared that it would build such a new factory to assemble lithium- ion battery cells supplied by LG Chem, along with a new 31,000- square-foot battery R&D facility.

Another big player among U.S. battery makers is Indianapolisbased EnerDel, a subsidiary of New York-based Ener1. Ener1 formed EnerDel in a 2004 joint venture with Michigan-based auto-parts maker Delphi and Japanese conglomerate ITOCHU. Unable to resist the lure of the battery-savvy East, EnerDel bought a majority stake in a Korean battery manufacturer in October. This gives the American company the capacity to produce battery packs for approximately 45,000 full-electric vehicles, or 450,000 hybrid-electric vehicles.

However, EnerDel suffered a setback when the Norwegian electric car company Think Global ran out of cash in December. The company has a contract with Think Global to manufacture batteries for 10,000 vehicles. EnerDel has now applied for a $480 million loan from the Energy Department to double its production capacity for hybrid vehicle battery packs at its Indiana plant by 2011 and to build a second plant capable of producing enough batteries for 1.2 million hybrid-electric vehicles by 2015.

With billions in cheap government money available, it is no surprise that there is a rush to line up at the withdrawal window. The Department of Energy has already received 75 applications asking for $38 billion in loans; the Advanced Technology Vehicles Manufacturing program is authorized to issue only $25 billion.

Who Needs Batteries Anyway?

Game-changing innovations may depend upon battery supply. Industry circles were set abuzz when legendary venture capitalist John Doerr of Kleiner Perkins mentioned during Congressional testimony in January an unnamed lithium-ion startup that has developed batteries that can power electric vehicles “twice as far, and eventually three times as far, to over 100 miles before recharging.” The company is supposedly building a factory in the Midwest and will ship batteries by the end of the year.

But are batteries the real key to our electric car future? The Silicon Valley startup Better Place Project wants to treat electric cars like cell phones. Headed by former software executive Shai Agassi, the company aims to create an infrastructure of plug-in recharging spots located in parking lots and at parking meters, along with a network of battery switching stations. Most of the time, Better Place cars would be charged up at home or during work. On longer trips, drivers would pull into fully automated Better Place battery exchange stations where the drained batteries would be pulled out and replaced with fully charged batteries in under three minutes, analogous to exchanging propane tanks for barbecue grills today. The batteries would be owned by Better Place and consumers would purchase electric charges like they do cell-phone minutes.

Better Place contemplates an open source model in which any battery manufacturer could make a battery that meets Better Place standards. Better Place seems to be running a bit ahead of current technology when it suggests that the batteries would fuel a car 100 miles before they need to be switched out. The company is already working with governments in Israel, Denmark, Hawaii and Australia to set up extensive networks of plug-in recharging spots and of battery switching stations. Renault and Nissan have agreed to build the electric cars for Better Place.

Then there is the secretive EEStor, headquartered in Cedar Park, Texas. EEStor is developing ultracapacitors. Like batteries, ultracapacitors are energy storage devices. Unlike batteries, they store energy electrostatically, not chemically. EEStor claims that its ultracapacitor weighs just under 300 pounds, charges in minutes and can propel an automobile 250 miles. If true, this would be a revolutionary technological breakthrough.

The core of EEStor’s ultracapacitor involves a nanotech formulation of an aluminum-coated barium titanate powder, immersed in a polyethylene terephthalate plastic matrix. Unlike batteries, it never degrades. The company has contracts with the small Canadian electric car company, Zenn Motors, and defense contractor Lockheed Martin. Despite being issued a patent in December, considerable skepticism is warranted since nobody outside the company is known to have seen a working version of the device.

But why not combine ultracapacitors and batteries? That is the strategy of the Washington state-based startup AFS Trinity Power Corp. The company’s dual energy storage system uses conventional lithiumion batteries buffered by ultracapacitors that deliver current fast for acceleration. Consequently, batteries last a lot longer. AFS Trinity claims that its prototype SUVs can travel 40 miles on a full charge. AFS Trinity filed for $2.5 billion in loans from the DOE’s $25 billion “green retooling” fund.

Peak Lithium?

Not only might the U.S. be exchanging dependence on foreign oil for dependence on foreign battery makers, it might also be at the mercy foreign lithium suppliers. The internal combustion engine made petroleum the world’s most important commodity; electric cars could do the same thing to lithium. Most of the world’s lithium is currently produced in Chile and Bolivia. Already, Bolivian President Evo Morales, a leftist hostile to the U.S., has made it clear that he plans to extract top dollar from his country’s lithium resources. Even more worrisome is the claim that world will run out lithium before it runs out of oil. This concern was outlined in a May 2008 report by William Tahil, the founder of the French consultancy Meridian International Research. He argues, taking into account a projected 25 percent yearly growth in portable electronics, that there will be only enough lithium left over to produce batteries for 1.5 million Chevy Volt-type vehicles by 2015. Tahil’s assertions about an impending lithium shortage are hotly disputed. A 2000 report from the Argonne National Laboratory in Chicago toted up global reserves and concluded, “Long-term supply should not be a major concern.”

The Swiss startup Revolt Technology claims to offer a technically sweet solution to any impending lithium shortage-zinc. Revolt asserts that its rechargeable zinc-air batteries have the potential to deliver four times the energy density of lithium-ion batteries at about the same cost. Zinc is less scarce than lithium and consequently cheaper.

Who Killed the Electric Car?

Despite the hype in the press releases from carmakers and battery manufacturers and the billions in subsidies being showered on them by politicians, it is unlikely that our highways will soon be clotted with PHEVs and all-electric cars. All of the projected battery manufacturing worldwide adds up to at most enough to produce 1 to 2 million PHEVs per year. Recall that President Obama promised only that there would 1 million PHEVs on the road by 2015. Contrast this with the fact that in 2007 carmakers globally produced 70 million vehicles powered by standard internal combustion engines. The global fleet numbers 810 million vehicles, of which 240 million travel on American roads. Clearly, cars powered mostly by electricity will constitute a tiny proportion of the world’s vehicle fleets for some time to come.

What about further down the road? If Europe imposes stringent carbon controls on automobile emissions to address global warming, Wolfgang Bernhardt, a partner at Roland Berger Strategy Consultants in Stuttgart, Germany, told Automotive News in November, “I can see up to 3 percent of all cars being pure electrics by 2020, with a further 19 percent being plug-in hybrids.” Alan L. Madian, director of consulting firm LECG, told the Washington Post that, even with “heroic” assumptions, new electric cars would make up 50 percent of new vehicles being sold by 2030 and only 8 percent of cars on the road.

The Department of Energy PHEV study found that when compared to 27.5 miles-per-gallon internal combustion vehicles, the break-even premium for a PHEV at $2.50 per gallon is $3,500 when electricity costs $0.12 per kilowatt hour. At $3.50 per gallon, the premium rises to more than $6,500. Since batteries are expected to boost the average cost of each vehicle by as much $10,000, gasoline will have to cost more than $5.00 per gallon before PHEVs make economic sense to most drivers. Of course, generous federal subsidies can help overcome this financial disincentive and/or the government could double or triple gasoline prices by imposing a substantial tax on it.

A 2006 activist “documentary” about GM’s ill-fated foray a decade ago into battery-powered cars, the EV1, asked, “Who killed the electric car?” The filmmaker offered an elaborate conspiracy theory involving oil companies, but the truth is that clunky, inefficient batteries did the electric car in. And unless there is a spectacular breakthrough in electricity storage technology, clunky, expensive batteries will kill it this time, too.

Ronald Bailey is Reason magazine’s science correspondent.