Common Tragedies

Thoughts on Environmental Economics

Batteries not included

Posted by Rich Sweeney on December 18, 2008

For some reason, we’ve reached a point in this country where no policy is supportable unless it promises to kill at least two birds with one stone. Even if an individual goal, like say mitigating climate change or boosting employment, is worthwhile on its own, we need to tie its solution to some other end before we’ll support it, even if the marriage reduces the policy’s effectiveness along both dimensions. As someone who’s clearly pro “green” (whatever that is) this has been my main problem with the green jobs movement. If jobs become an acceptable metric of climate policy success, we’re all in big trouble.

Which brings me to batteries. One of scarier shotgun marriages being tossed around liberal circles lately has been the green auto bailout. This is the idea that we can save Detroit by giving them money in exchange for their commitment to build a fleet of electric vehicles. The only problem is that they don’t currently know how to do that. Specifically, the battery technology is years away, while Detroit needs the money yesterday. But many of the true believers remain undeterred, suggesting that we can pay Detroit to build the car “shells” now, and store them until the batteries are ready. [I'll let you insert your own 5 year plan joke here.]

So I was already thinking about this today when Tmoney emailed me a Wall Street Journal article (sub. required) reporting on a consortium of US battery manufactures seeking $1 billion in US loans to manufacture batteries in the United States. Now I’m all for subsidizing R&D, but there were some unsettling justifications for the program subtly weaved into the narrative. It’s not that electric car batteries don’t exist, they just don’t exist at a competitive price. Tesla will gladly sell you an electric roadster for $100K. So you’d think that if we really want a fleet of electric cars, we’d be trying to get the batteries from the cheapest source available. Think again. The battery industry has largely migrated from the US to Asia over the past two decades because of cheaper costs and locational spillovers (where do all of your electronics come from?). But this loan would stipulate that all of the money be spent in the US, creating green jobs (there’s bird number two). There is also the vague warning from unspecified “experts” that “battery technology and manufacturing capacity could become as strategically important as oil is today” (and there’s the third bird, national security). I’m no battery expert, but I fail to see the parallels with oil, a geographically concentrated, finite natural resource.

6 Responses to “Batteries not included”

  1. Evan Herrnstadt said

    You’ll regret this post when North Korea discovers a rich vein of unmined laptop batteries.

    Seriously though, didn’t we just talk about Bolivia having half of world lithium reserves? If Li-Ion batteries are the way (which maybe they aren’t), that’s got to be a consideration.

  2. Thom said

    Its telling that all of the battery tech startups in the US are doing their manufacturing overseas as well (A123, etc). A factory shared by 10+ of such companies would have to be either super low level to be useful to all of them simultaneously, or would require picking some winners.

    A billion in loan guarantees (which, granted, probably won’t cost $1 billion) would be much better spent on some advance purchase agreements or the basic R&D that is still necessary to make battery-powered EV’s cost effective.

    Furthermore, the comparison to Sematech isn’t terribly exciting. A super-quick Google Scholar search reveals things like “Sematech induced members to cut their overall R&D spending on the order of $300 million per year” (Irwin & Klenow, 1996) and others. Lets hope that isn’t the result the battery people are seeking (getting someone else to pay for R&D they would otherwise do).

    As Rich points out, this is all predicated on the idea that having expensive battery manufacturing here is a ‘good thing.’ What is our highest priority now (and going forward) – “green collar jobs” or meaningful reductions in our demand for fossil fuels? If its the former, lets be honest about it and just subsidize manufacturing directly, regardless of what is being made (since the point is to increase manufacturing employment). If its the latter, lets focus on the most cost effective ways to get there (gas taxes, public transit, etc). Sure, its possible to pursue those priorities simultaneously, but does it make sense and is it the best way to spend our money?

  3. Rich Sweeney said

    oh evan, you iowans kill me. just cause we have lots of corn doesn’t mean we need to make everything out of it ;)

    seriously though i got some emails about the bolivia thing we posted a while back. apparently there’s tons of lithium out there, and we haven’t even really looked for it because there’s not enough demand for the supplies we already know about. check out this aptly named blog – http://lithiumabundance.blogspot.com/

  4. Doug said

    There is also the vague warning from unspecified “experts” that “battery technology and manufacturing capacity could become as strategically important as oil is today”

    Strategically important – like computer manufacturing and semiconductor manufacturing? (Taiwan)

    Where are the loan guarantees to make the equipment that runs the internet in the gool ol’ USA?

  5. Hello. I think that this is exactly the correct business model.
    car with out battery. Also the Gaz Car sell without Gazolin.
    The battery should be leased only . the battery is going to be replace almost every day. this will be done by the exchange stations and can’t be private property.

    Nir Aperovich

  6. Phillip Huggan said

    There are many externalities and you probably get into trouble by tackling too many of them at once. Energy independance. Preventing preventable future AGW. Employment in a recession/depression. These three you can probably safely hit 3 birds with one stone.
    IDK much about the merits of energy independence. Maybe existing social transfer payment can handle sustained unemployment of 9%. An additional extra % point incurs an additional cost, mostly increased crime rates and increased need to grow transfer beareaucracy. A further increase to 11% incurs increases even more than the 1% increase to 10%, and so on until at some point your police and civil defense infrastructures fail to prevent a domestic Iraq-ing of social and physical assets.
    For future AGW, the hope is a carbon tax/cap-n-trade will cover it.
    The two above costs probably aren’t enough to recapture the manufacturing of commodity products from China especially when considering long-term factories (Americans are retiring sooner than Chinese), and the employment benefit accrues to unemployed workers, who in this example are not chemical engineers (though there may be some of these laid off) and could probably only handle a community college level of reschooling. They could be carpenters very easily, they could work on a wind turbine assembly line. They could manufacture the low speed inner city commuter cars that ARE mature (30mph). They could manufacture high speed rail components and do all the construction work for installing new rail lines and power lines (these aren’t going to China), at least until the depression/deficit point of inflict is reached (maybe at 11% unemployment just letting people watch TV or walk around homeless is cheaper than a subsidized battery job, IDK).
    I’m guessing the tone of this post is support for Big-3. Well this guy, who represents the true source of jobs and income for America’s future, is being crowded out by subsidies to dumb bankers and to Big-3: http://www.nytimes.com/2008/12/18/business/smallbusiness/18sbiz.html?ref=smallbusiness
    There are import tariffs on every Japan vehicle already and oil is heavily subsidized already. Defence is subsidized. All finance, a subsidized joke. Yes batteries are maybe a bad subsidy because the high speed cars are about two years ahead of unemployment and maybe longer for some transmission line redundancy. But it seems to be used here as a weasely example to represent the enter Green Jobs spectra. And if I suggest other job categories I have the feeling you’ll point out there is no carbon tax cap n trade and it would be better to wait till then. When you are forgetting to tabulate is that unemployed people aren’t cheap. And a poor population isn’t healthy.

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