When President Trump was in power in the US, he was adamant that the way to protect US jobs was to keep cars being made in the good old fashioned Internal Combustion Engine way – but what he risked was the world moving to Electric Vehicles ahead of the US, and a blow to the US economy that it could not have recovered from. President Biden is driven by the same fears, but his approach has been completely different and this week he made it clear that $3.1 billion from his Bipartisan Infrastructure bill would be dedicated to the development of a supply chain for EV batteries.
Without this type of “lead from the front” example the US risks something like $1.1 trillion to the US economy each year which stems from the automotive business. During the Trump administration something like a 5 year lead was handed to not only China, but to Europe as well on electric cars.
Biden’s answer throughout his administration, from the day he took control, has been a keen focus on fixing the supply chain.
Around 10 million US jobs are directly associated with the automobile industry, and some 5% of all US jobs depend on the automotive sector. A further 28% of people work in transportation – cede all that to China and all economic hell would break loose.
This $3.1 billion is really about orchestrating how and where the raw materials for the batteries that will drive the EV revolution, will come from and the money is being administered directly by the Department of Energy (DoE) and this is as much about recycling imported batteries as securing supply lines for new raw materials.
It is straight forward – how can government hand-outs help attract suppliers to do the right thing to ensure that the US makes more batteries and components for batteries inside the US?
The infrastructure investments will support the creation of new, retrofitted, and expanded commercial facilities as well as manufacturing demonstrations and battery recycling. DOE is also announcing a separate $60 million to support second-life applications for batteries once used to power EVs, as well as new processes for recycling materials back into the battery supply chain.
We’re not sure that using old EV batteries on the grid, which have already experienced some cell decay and which are getting closer to thermal runaway, is going to be a welcome re-use where lithium ion is concerned. The DoE refers to grid storage as “less demanding” which is quite obviously dumb, given the Moss Landing situation.
There are already concerns in the grid and DER communities of overheating and fire in lithium ion battery usage on the grid – we still have not seen either phase of the Moss Landing record breaking battery installation returned to action since both phases experienced sprinklers being triggered. But even so, either this $60 million won’t be taken up or it will be wasted, as it is unlikely to lead to a new stream of activity.
On the other hand perhaps this can be used to stimulate a second active chemistry for chemical batteries. However the DoE has shown in the past it has limited interest in other chemistries – for instance when it investigated the supply chains for Grid energy storage in February the DoE only looked at Lithium-ion, lead-acid, Vanadium and Iron Flow, Thermal energy storage and Sodium-ion chemistries and Metal-air batteries (Zinc Oxide) and magnesium and aqueous zinc batteries – hardly a full set – there are at least five others which are far more promising.
But this is because it’s main priority is to “save” the US car industry, and most of those other grid technologies have already fallen behind the cost curve of Lithium ion and have little chance of ever catching up – except through government action.
“Positioning the United States front and center in meeting the growing demand for advanced batteries is how we boost our competitiveness and electrify our transportation system,” said US Secretary of Energy Jennifer Granholm, as this money was announced.
The truth is that the lithium ion market in the US is about 5 years behind the rest of the world and will never hit its target – to supply most of its EVs with batteries made in the US – any time before 2027, and possibly a long way beyond that. The manufacture of the raw chemicals is also unlikely to be supplied within the US, but also the aims to get 40% of this manufacture to be among underserved and disadvantaged communities in keeping with the Biden Administration’s Justice40 commitment, is also unlikely.
Almost all the plant capacity is already in place for the US to make a major leap forward by 2027, but while the country continues to have a shortfall, other countries – in particular China – will be prone to dumping their cheaper lithium ion batteries into the US – and for every EV that GM, Ford and Stellantis cannot find sufficient battery for – US pure play EV makers like Tesla, along with European and Chinese rivals, will take a sale – slashing the big three’s US market share. So the US dare not put tariffs on Chinese batteries, or else it will self-inflict a Trumpian “hole in the foot” from friendly fire. Or will it?
The biggest concern is that a lack of lithium ion batteries for those companies could lead to a supply constrained market, which as we know from natural gas, coal and oil – means higher prices for battery. Which means higher prices for EVs from US suppliers, and in turn means smaller market shares for any supplier caught the wrong side of an ailing battery supply chain.
Right now this money is dedicated to any chemical battery, but this means by the DoE’s own assertion that this is expected to be composed of more than 99% lithium-ion batteries and then just a few flow batteries on the grid – a view we find short-sighted as there are various start-ups (both sides of the Atlantic) with alternative battery chemistries just right for grid deployment, if not for EVs.
In effect this amounts to a $3 billion give-away to the major US car companies and their suppliers which plan local manufacturing.
The DoE announcement notes that battery costs have fallen more than 90% and since 2008, which implies it thinks that will continue – but without advantages for setting up battery manufacturing more rapidly in the US – that it unlikely to be remain true prior to 2027 (see Rethink Energy paper entitled There are too few global lithium-ion gigafactories for EVs.
If it makes critical materials for lithium-ion batteries—such as lithium, cobalt, nickel, and graphite—more easily obtainable in the US, the DoE will mostly be helping help overseas companies be better partners to US car makers.
The National Blueprint for Lithium Batteries, authored last year by the Federal Consortium for Advanced Batteries, and led by DOE had aims to secure access to raw and refined materials or discover alternatives; support the growth of a US materials-processing base; to stimulate the US electrode, cell, and pack manufacturing sectors and enable US end-of-life reuse and recycling at scale and to maintain advanced battery technology leadership. This spend is its response to achieve all of that.
The Bipartisan Infrastructure Law directs more than $7 billion to strengthen the US battery supply chain (so expect more announcements), and also includes $7.5 billion for electric vehicle chargers, $5 billion for electric transit buses, and $5 billion for clean and electric school buses.
Finally the DoE also announced another $45 million in funding to support the domestic development of advanced batteries for electric vehicles – which we take to mean to hurry up the adoption of solid state lithium ion across the industry and to promote faster charging and perhaps design out of lithium ion the tendency for the batteries to catch fire.
Given that Tesla is in partnership with both Panasonic and LG for battery supply in the US and CATL in China; and that GM is in partnership almost entirely with LG over battery supply, even though like Tesla it has some skin in the game on design; and that Ford is in a partnership with SK Innovation, and Stellantis with both Samsung and LG, almost all of this money is going to end up in the hands of Korea suppliers, doled out by US car makers, but creating US jobs.
Now just what we need for the US to entirely shoot its car industry in the foot are tariffs on Chinese suppliers and a Commerce Department investigation, like the current one on Solar panels, into Korean suppliers, who also have factories in China (all of them). At least that won’t happen while Biden is in control. Will it?