Friday, October 22, 2010

High costs of making batteries stall affordability of electric cars

High costs of making batteries stall affordability of electric cars. By Mike Ramsey
The Wall Street Journal Europe, page 22, Oct 19, 2010
http://online.wsj.com/article/SB40001424052748703735804575536242934528502.html

The push to get electric cars on the road is backed by governments and auto makers around the world, but they face a hurdle that may be tough to overcome: the stubbornly high cost of the giant battery packs that power the vehicles.

Both the industry and government are betting that a quick takeoff in electric-car sales will drive down the price of the battery packs, which can account for more than half the cost of an electric vehicle.

But a number of scientists and automotive engineers believe cost reductions will be hard to come by. Unlike with tires or toasters, battery packs aren't likely to enjoy traditional economies of scale as their makers ramp up production.

Some experts say that increased production of batteries means the price of the key metals used in their manufacture will remain steady—or maybe even rise—at least in the short term.

These experts also say the price of the electronic parts used in battery packs as well as the enclosures that house the batteries aren't likely to decline appreciably.

The U.S. Department of Energy has set a goal of bringing down car-battery costs by 70% from last year's price, which it estimated at $1,000 per kilowatt hour of battery capacity, by 2014.

Jay Whitacre, a battery researcher and technology policy analyst at Carnegie Mellon University, is skeptical. The government's goals "are aggressive and worth striving for, but they are not attainable in the next three to five years," he said in an interview. "It will be a decade at least" before that price reduction is reached.

The high cost of batteries is evident in the prices set for early electric cars. Nissan Motor Co.'s Leaf, due in the U.S. in December, is priced at $33,000. Current industry estimates say its battery pack alone costs Nissan about $15,600.

That cost will make it difficult for the Leaf to turn a profit. And it also may make the Leaf a tough sell, since even with government tax breaks the car will cost more than twice the $13,520 starting price of the similar-size Nissan Versa hatchback.

Nissan won't comment on the price of the battery packs, other than to say that the first versions of the Leaf won't make money. Only later, when the company begins mass-producing the battery units in 2013, will the car be profitable, according to Nissan.

The Japanese company believes it can cut battery costs through manufacturing scale. It is building a plant in Smyrna, Tenn., that will have the capacity to assemble up to 200,000 packs a year.

Other proponents of electric vehicles agree that battery costs will fall as production ramps up. "They will come down by a factor of two, if not more, in the next five years," said David Vieau, chief executive officer of A123 Systems, a start-up that recently opened a battery plant in Plymouth, Mich.

Alex Molinaroli, president of Johnson Controls Inc.'s battery division, is confident it can reduce the cost of making batteries by 50% in the next five years, though the company won't say what today's cost is. The cost reduction by one of the world's biggest car-battery makers will mostly come from efficient factory management, cutting waste and other management-related costs, not from fundamental improvement of battery technology, he said.

But researchers such as Mr. Whitacre, the National Academies of Science and even some car makers aren't convinced, mainly because more than 30% of the cost of the batteries comes from metals such as nickel, manganese and cobalt. (Lithium makes up only a small portion of the metals in the batteries.)

Prices for these metals, which are set on commodities markets, aren't expected to fall with increasing battery production—and may even rise as demand grows, according to a study by the Academies of Science released earlier this year and engineers familiar with battery production.

Lithium-ion battery cells already are mass produced for computers and cellphones and the costs of the batteries fell 35% from 2000 through 2008—but they haven't gone down much more in recent years, according to the Academies of Science study.

The Academies and Toyota Motor Corp. have publicly said they don't think the Department of Energy goals are achievable and that cost reductions are likely to be far lower. It likely will be 20 years before costs fall by 50%—not the three or so years the DOE projects—according to an Academy council studying battery costs. The council was made up of nearly a dozen researchers in the battery field.

"Economies of scale are often cited as a factor that can drive down costs, but hundreds of millions to billions of ... [battery] cells already are being produced in optimized factories. Building more factories is unlikely to have a great impact on costs," the Academies report said.

The report added that the cost of the battery-pack enclosure that holds the cells is a major portion of the total battery-pack cost, and isn't likely to come down much. In addition, battery packs include electronic sensors and controls that regulate the voltage moving through and the heat being generated by the cells. Since those electronics already are mass-produced commodities, their prices may not fall much with higher production, the study said.

Lastly, the labor involved in assembling battery packs is expensive because employees need to be more highly trained than traditional factory staff because they work in a high-voltage environment. That means labor costs are unlikely to drop, said a senior executive at one battery manufacturer.

When car makers began using nickel-metal hydride batteries, an older technology, in their early hybrid vehicles, the cost of the packs fell only 11% from 2000 to 2006 and has seen little change since, according to the Academies study.

Toyota executives, including Takeshi Uchiyamada, global chief of engineering, say their experience with nickel-metal hydride batteries makes them skeptical that the prices of lithium ion battery pack prices will fall substantially.

"The cost reductions aren't attainable even in the next 10 years," said Menahem Anderman, principal of Total Battery Consulting Inc., a California-based battery research firm. "We still don't know how much it will cost to make sure the batteries meet reliability, safety and durability standards. And now we are trying to reduce costs, which automatically affect those first three things."

Press Briefing

Oct 22, 2010

President Obama: It Gets Better
http://goo.gl/fb/yoePW

When Will Our Progressive Corporatism Nightmare End?
http://blog.heritage.org/2010/10/22/morning-bell-when-will-our-progressive-corporatism-nightmare-end

Employers, Insurance and Health Care
http://goo.gl/fb/yGQBG

Fed’s Plosser: Bad Incentives Drove Much of Financial Crisis
http://blogs.wsj.com/economics/2010/10/20/feds-plosser-bad-incentives-drove-much-of-financial-crisis/

Partnership for Sustainable Communities Awards Grants to Build Infrastructure…
http://goo.gl/fb/UNUFo

OFA: Progress In Iowa
http://goo.gl/fb/Mi4Iu

Offshore Oil Drilling in Shallow Water: Good Safety Record, Less Risky
http://www.instituteforenergyresearch.org/2010/10/21/offshore-oil-drilling-in-shallow-water-good-safety-record-less-risky/

Jobs and Economic Security for America's Women Report
http://goo.gl/fb/3cGgP

Remarks by the President at a Rally in Portland, Oregon
http://goo.gl/fb/oSPzX

Can Yoga Be Christian? - An exercise craze provokes questions of body and soul
http://online.wsj.com/article/SB10001424052702304510704575562651537656366.html

Tax Cut Facts: How Obama’s Tax Cuts Are Helping American Families
http://goo.gl/fb/1yO7X

San Francisco's Public Pension Revolt - The city has cut back on almost every service: Summer schools have been shut, potholes deepen, parks close early, and services for the poor have been pared to the quick.
http://online.wsj.com/article/SB10001424052702304510704575562350166984886.html

Building Stronger, Sustainable Communities Through Strategic Coordination
http://goo.gl/fb/Y6EyG

The Tea Party Is Wrong About Earmarks - Why just accept the president's spending priorities? Congress has the right and duty to make appropriations in the public interest.
http://online.wsj.com/article/SB10001424052702304510704575562442197836742.html

The Role and Perspectives of Arms Control and Confidence- and Security-Building Regimes in Building Trust in the Evolving Security Environment
http://www.state.gov/t/avc/rls/149779.htm

Soros Bets on Nevada - The campaign to hijack state judicial selection
http://online.wsj.com/article/SB10001424052748703859204575526164036476490.html

President’s Working Group on Financial Markets Releases Money Market Funds Report
http://www.treas.gov/press/releases/tg918.htm

Britain's 'Austerity' Lessons - What Margaret Thatcher can teach David Cameron—and the Republican Party
http://online.wsj.com/article/SB10001424052702304023804575566431921159198.html

New Haitian Mango Centers will Increase Production and Incomes for Thousands of Haitian Mango Farmers
http://www.usaid.gov/press/releases/2010/pr101021.html

NPR's Taxpayer-Funded Intolerance - All Americans, particularly those of Arab or Muslim descent, should protest the firing of Juan Williams
http://online.wsj.com/article/SB10001424052702304023804575566363119493650.html

Focus on Nutrition:  Creating Inclusive Partnerships and Deepening our Knowledge
http://blogs.state.gov/index.php/site/entry/nutrition_partnerships_and_knowledge

Providing Jobs and Economic Security for America's Women
http://www.whitehouse.gov/blog/2010/10/21/providing-jobs-and-economic-security-americas-women

Struggles and Triumphs: Afghan Governor Naeemi Discusses Progress in Afghanistan
http://blogs.state.gov/ap/index.php/site/entry/naeemi_nato_afghanistan

A Free Trade Agreement with South Korea Would Promote Both Prosperity and Security
http://www.cato.org/pub_display.php?pub_id=12490