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White House Report: GM Volt is Not Ready for Prime Time

In it's March 30, 2009 summary determination that GM had failed to propose a viable bankruptcy alternative, the President's auto industry task force said:

"GM is at least one generation behind Toyota on advanced, "green" powertrain development. In an attempt to leapfrog Toyota, GM has devoted significant resources to the Chevy Volt. While the Volt holds promise, it is currently projected to be much more expensive than its gasoline-fueled peers and will likely need substantial reductions in manufacturing cost in order to become commercially viable."

This extraordinary conclusion has been public for weeks but I've not seen it reported by any mainstream media. I would have missed it entirely if Plug In America, an EV industry trade group, hadn't made a point of issuing a press release that was drawn to my attention by one of my readers. While the White House did not specifically lay the Volt's problems at the feet of the battery industry, Plug in America did. In their refutation of the auto industry task force report, Plug in America said:

"California law requires that the Volt and other plug-in hybrids come with a 10-year warranty. To ensure this longer life, automakers are as much as doubling the size of the battery pack, increasing cost to manufacturer and consumer. But not a single production plug-in electric vehicle sold to date, from GM’s early EV1 to today’s Tesla, has had a warranty of more than five years, noted Plug In America advisory board member Chelsea Sexton.

“To support early deployment, California should relax the warranty requirement for cars like the Volt to five years, phasing to 10 years over time,” said Sexton, a former GM employee. “This alone could cut the number of batteries required by as much as half and reduce the cost of each vehicle by thousands of dollars."

The warranty reduction would not impose added liability on GM or consumers, Sexton noted, because President Obama has said the federal government will guarantee the warranties of GM and Chrysler vehicles should they go bankrupt. And dealers can sell extended warranties, providing additional security for consumers who want it as well as revenue when auto companies need it most.
"

In January 2009 the DOE released its 2008 Annual Progress Report for the Energy Storage Research and Development Vehicle Technologies Program that concluded Li-ion batteries were not ready for prime time in PHEV and EV applications.  In March 2009 the President's auto industry task force issued a report that the GM Volt, the first Li-ion powered PHEV proposed by a major manufacturer, was not ready for prime time.

Is anybody out there listening to the facts or are the PR jungle drums from a few undercapitalized Li-ion battery developers simply drowning out the voice of reason and prudence?

Cheap Li-manganese batteries from LG-Chem and $7,500 in Federal Tax Credits are not enough to make the Chevy Volt commercially viable. Comparable batteries from Ener1 (HEV) were not enough to keep Th!nk out of fiscal reorganization in Norway. More expensive Li-phosphate batteries from A123 Systems are unlikely to keep Chrysler out of bankruptcy. While Li-phosphate batteries from Valence Technology (VLNC) and comparably priced Li-titanate batteries from Altair Nanotechnologies (ALTI) are being tested in hybrid transit buses and other commercial vehicles that may put enough stress on the batteries to justify their high cost, none of the companies I criticized last July has demonstrated any ability to meet the challenge and do the heavy work of powering America's transportation future.

I love the Li-ion batteries in my laptop and cell phone and believe it Li-ion an excellent choice for applications like electric two-wheelers (E2W) and other vehicles where there is a rational relationship between vehicle weight and passenger weight. But it is high comedy to suggest that Li-ion batteries will ever be able to power 300 pounds of passengers and 3,000 pounds of steel for 40 or 50 miles at highway speed. It's like using 5,000 golden hamsters to pull a stagecoach when what you really need is a horse.

I've been rational, analytical, courteous and engaging for the last ten months, but it's high time for somebody to stand up and call bullshit on the shameless Li-ion hucksters who have nothing to offer but happy-talk forecasts and hype! It's also high time for taxpayers to stand up and say "Not with my money you don't!"

America's leading Li-ion battery developers including Altair Nanotechnologies, Ener1 and Valence had combined losses of $93 million on $42 million of 2008 sales, yet they sport a combined market capitalization of $1 billion. In comparison America's leading lead-acid battery manufacturers including Axion Power (AXPW.OB), C&D Technologies (CHP), Enersys (ENS) and Exide (XIDE) carry a comparable combined market capitalization even though they had combined profits of $140 million on $6.2 billion of 2008 sales.

Something is dreadfully wrong with this picture. Summary data for each company follows.


Ticker
Price
Per Share
Mkt Cap
(millions)
Sales
(millions)
Income
(millions)
Altair Nanotechnologies Inc. ALTI $1.29 $120 $6 ($29)
Valence Technology Inc. VLNC $2.22 $273 $29 ($21)
Ener1 Inc HEV $5.40 $613 $7 ($43)
Group Total


$1,005 $42 ($93)






Axion Power
AXPW.OB
$1.40
$49
$1
($11)
C&D Technologies
CHP $2.10 $55 $375 ($8)
Exide Technologies XIDE $4.66 $352 $3,698 $58
Enersys ENS $13.96 $670 $2,162 $101
Group Total


$1,126 $6,236 $151

For months my message to storage sector investors has been simple: the energy storage sector will ride the crest of an investment tsunami as we enter the cleantech revolution, but cleantech is all about price vs. performance and there is no room for irrational expectations. The DOE has said the same thing and now the President's auto industry task force has joined the chorus. Lithium dreams have become an investor's worst nightmare. It's time to wake up and smell the coffee, go to work and solve our problems to the best of our ability with cost-effective technical solutions like compressed natural gas and advanced lead-acid and lead carbon batteries.

The airbrushed Li-ion centerfolds may have serious investment merit in the future, particularly if somebody in the EV world develops a product that is proud to be an EV instead of pretending to offer the functionality of a family car. But that day is not today and investors need to stop deluding themselves. Cool technology that cannot provide a cost effective solution to real world problems has all the nutritional value of rainbow stew. So let's stop wasting time and money on feel-good solutions that cannot work and get to work solving the problems with readily available and cost effective technologies.

Disclosure: Author is a former director and executive officer of Axion Power International (AXPW.OB) and holds a large long position in its stock. He also holds small long positions in Exide (XIDE) and Enersys (ENS).

John L. Petersen, Esq. is a U.S. lawyer based in Switzerland who works as a partner in the law firm of Fefer Petersen & Cie and represents North American, European and Asian clients, principally in the energy and alternative energy sectors. His international practice is limited to corporate securities and small company finance, where he focuses on guiding small growth-oriented companies through the corporate finance process, beginning with seed stage private placements, continuing through growth stage private financing and concluding with a reverse merger or public offering. Mr. Petersen is a 1979 graduate of the Notre Dame Law School and a 1976 graduate of Arizona State University. He was admitted to the Texas Bar Association in 1980 and licensed to practice as a CPA in 1981. From January 2004 through January 2008, he was securities counsel for and a director of Axion Power International, Inc. a small public company involved in advanced lead-carbon battery research and development.



was posted on AltEnergyStocks.com.


       

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Comments

Honesty in a White House Report, even when it's something we don't want to hear.

Change we need.

A reader just sent me an e-mail that said:


"Hello,
I really like the Alternative Energy articles, but it hurts to hear US manufacturers are a generation behind Toyota
I agree with most of what you say but today you mention "Compressed Natural Gas as an alternative fuel.
Mr. Boone Pickens is just loving your comment on natural gas.
I disagree that compressed natural gas is a viable alternative energy power source.
* First you need to find a "Lightweight" gas container that will pass all the US gov. testing
* You need to change peoples mindset about having compressed gas on board their car.
* You need to find clean natural gas with a reliable and constant Octane Rating.
Natural gas in the US pipeline is sold with a guaranteed BTU content for furnaces Etc. and no effort is made to control octane.
Without a known and controlled octane, Engine Manufacturers will have to design to the lowest octane and all the advantages of high octane natural gas go out the window."

I've been writing favorably about CNG for several months and this is a new issue for me; one where I don't have an answer. I will try to learn more.

Hehe leave it to JP to give periodic plugs for Axion on here :) Why don't you sell your Axion battery to GM, or Chrysler or Toyota? My guess is you can't, because the low power to weight ratio makes it unfeasible. Can your batteries last 10 years?

Also, reducing the warranty period to 5 years knowing that the batteries only last 5 years?? Who would buy a car that's gonna require thousands of dollars in retrofitting in 5 years? Sure let's screw the consumer, because the r&d is just sooo hard, we don't feel like doing it. Or how much does Miss Sexton expect extended warranties to cost when they are pretty much guaranteed to have to pay out thousands of dollars replacing the battery pack within the warranty term? I venture to say: the cost of replacing the battery pack. Someone has to pay for it sometime.

I think the DOE's position makes sense. Keep working on it till it's good enough.

If you come out with a lead acid alternative first, great. If LiIon gets there first, great. I wouldn't say stop funding either technology, because we're all liable to lose. In fact, my feeling is there's still way too little r&d going into battery technology given what a huge effect it has on our present and future.

Steve, I pray that GM Chrysler and Toyota are the last names on Axion's list of potential customers. Selling components to the auto industry is a great way to insure your profit margins will be squeezed to zero and your business will be entirely dependent on their business cycles. It's like having a wife with really bad PMS. There are too many alternatives in other applications for me to worry about autos.

Power to weight is not an issue because the PbC is a battery supercapacitor hybrid. Volume to weight can be a serious issue if you're thinking in terms of cars with plugs. However I think there's reason to believe the idea of cars with plugs will die a natural death soon because the economics can't work.

I'm a huge fan of R&D on every known chemistry and every potential chemistry because we need better battery solutions than we have. That being said it's foolish to subsidize new factories to make products that are still in the R&D stage. Right now, all of the Li-ion developers are basing cycle-life claims on computer simulations and have no earthly idea how their products will work in the real world. The only way to test a system as complex as a PHEV is to build several hundred or several thousand and put them on the road for several years in the hands of normal users like you. When those tests are done, we'll know exactly what the performance profile is. Until those tests are done, we'll have guesses based on computer simulations.

We need to have a horse race before crowing a champion. Build them all, test them all then commercialize the system or systems that work best. Everybody is impatient and wants an answer today without first doing the work needed to arrive at an accurate answer. Surrendering good science and adequate testing in the name of expediency is always a bad idea.

You say now that you're a huge fan of r&d on every known chemistry, but any time you mention Li-ion it's negative (ex: quick-charge LiFeSO4), and Pb positive (besides sometimes acknowledging the weight issue). Why? Pb is obviously not a factor for passenger vehicles, so stop mentioning it in that context. If you wanna convert huge trucks, that's great, but you pollute passenger vehicle arguments with Pb as well. Li is currently the only viable option for passenger vehicles, but you dismiss it out of hand pretty much every time you mention it. You say that plug-in and full electric vehicles are pipe dreams and they'll just die or be relegated to 1% of the passenger vehicle market. What's your solution? What's the DOE's solution (from your most recent article)? Give up, make do with 1% electric penetration as predicted, and keep burning oil? Well, you'll run out or be regulated out of existence soon enough, don't you think? If the economics don't make sense now, they soon will, and if you have no alternative you're out in the cold. Are you just gonna sit on your hands? What's the point of your article? (This should've been under the other article, but it proves my point about your rambling.)

While Li is winning the race now and may even get huge subsidies, that doesn't mean that we'll be stuck with shitty technology forever (ie: we gave the race to a gimpy horse). A cash infusion on all fronts will most likely help technological development, it will certainly help the economics (hell we're already subsidizing fossil fuels, why can't we subsidize clean energy?). The point is that your idea of laissez faire, which is what was being practiced up until now regarding green tech, has not worked, enough r&d wasn't done, and now we're behind. Unless you have a better idea, we need to spend some money to get things rolling. We need these technologies yesterday. How would you go about expediting the process? I think all technologies should get a piece of the pie, but it makes some sense that the most promising ones get a bigger piece. Maybe it's a little too much taken away from r&d, but there's also advances to be made in large scale production, which you can't make unless you're producing on a large scale (I realize there's raw material constrants etc., but I'm sure we can all agree that some advances are possible and are happening).

My point is I think many of us would appreciate a more constructive tone from you, but you beat "Li is bad" to death and don't offer any real alternatives. If you could be a bit more objective in your articles and reduce the negative rambling, that would be great :) We're interested in facts, not so much your personal opinion skewed by your affiliations or your political beliefs.

Steve, I am in favor of conducting research and development across the board. I don't even have a problem subsidizing proven technologies. But I object strenuously to premature manufacturing subsidies for technologies that have not been proven in the real world.

Hybrid electric vehicles are among the most complex electromechanical systems in the world. The only people who have demonstrated any expertise in manufacturing them are Toyota and Honda. The only battery technology that has proven itself in long term real world performance testing is NiMH.

The data we have on Li-ion is all based on computer modeling of test rack results. Nobody has put Li-ion into a fleet of vehicles and put those vehicles into the hands of end users to see how they perform. Nobody has any tangible evidence to support the loudly hyped claims of energy efficiency and gas mileage because PHEVs have not been built or tested. Nevertheless, the Li-ion crusaders loudly claim "we don't need no stinking tests - just give us our subsidies."

I think the idea of subsidizing battery manufacturers who have no experience to build batteries that have not been thoroughly tested into vehicles that have not been thoroughly tested is insanity raised to the third power. Li-ion is not winning any race. It's developers have declared victory so that they don't have to run a race or prove any of their claims.

Research it - I'll support subsidies to pay the costs. Conduct real world testing of prototype products in the hands of real people - I'll support subsidies to pay the costs. But build it without complete research and without complete real world testing? Nobody but a freaking moron would accept the idea much less support it.

We don't let any other industry sell new products to consumers without proper testing. The battery industry must be held to the same standard.

Li-ion is currently winning the race based on feasibility, meaning other chemistries are currently worse for the high capacity applications we need to really get off of oil.

I'm not gonna keep arguing with you about the benefits and drawbacks of investing in production of "unproven" technology. I agree with your points to an extent, but not that it's a complete waste.

But what do you suggest we do instead, other than "Conduct real world testing of prototype products in the hands of real people"? How long will that take? What then? How long will the oil last? How long will the planet last?

From what you're saying you don't think we'll move to battery power for automotive transportation in the forseeable future. What do we do instead?

And what's the point of developing and testing advanced batteries, which you supposedly advocate, if plug-in vehicles will never exist (little contradiction on your part)?

Steve, with due respect Li-ion is not winning anything based on feasibility, it is waging a successful PR campaign based on forecast feasibility. There isn't an honest battery producer in the world who will tell you that their solutions are cost effective for PHEVs today. What you'll hear instead is how cost effective their products are going to be in the future after somebody builds them a manufacturing plant so that they can realize economies of scale that the Japanese have never even come close to.

We need to do an immense amount of research, but the hard fact is that no batteries are cheap enough to do what people want them to do.

There are many engineers who would suggest that an adequate testing program should run for the entire anticipated life of a device. I personally think that's a bit excessive but claiming a 10-year cycle-life for something that hasn't been tested in its planned use for at least 3 or 4 years seems misleading by definition.

It may be a difference in our ages, but I remember all too well the panic over warnings that we were entering an ice age, the panic over warnings about the population bomb and the panic over the Y2K computer problems. None of the dire warnings have come true because they're always exaggerated. In the final analysis, is always in the best economic interest of an academic to make things seem worse than they are because it assures additional funding. If in fact the dire global warming predictions are true, then we are already too late to change anything because even if we changed all our evil ways tomorrow, India and China could not and would not.

The ultimate challenge facing our globe is that six billion people know how good 500 million of us live, and they all want their piece of the pie. If we are going to make room at the table for those who are working hard to earn a place, we have to minimize waste and find relevant scale solutions for water, energy, food and every imaginable commodity.

Pure EVs and pure HEVs are resource efficient designs that minimize waste. We need the best and most advanced batteries we can develop for both applications.

PHEVs are an unholy chimera that requires the worst resource inputs of both technologies and offer the efficiencies of neither.

I repeat, by feasibility I meant that there are NO OTHER feasible alternatives. It's winning by default (not the best situation but this is what we got) and that's why it's getting the funding. We can bitch and whine all we want but unless we can show a chemistry that will even remotely fit the parameters for EV application (weight, volume and energy capacity being big ones), it won't get funding.

So now you're saying that we WILL have pure EVs? That it's a desirable goal?

Ok, how do we get there?

If you ask a class of first graders "how much is two plus two" and you get answers ranging from 6 to 12, you don't give the kid who said 6 a star for having the best wrong answer. A solution either works or it doesn't. If nothing works for the parameters you've established, you change the parameters and lower your sights a bit.

The reason that over 90% of the EVs in the world run off lead-acid batteries is that it is the only economically feasible technology. It only becomes unfeasible when you set the operating parameters too high.

John, what about the NiMH batteries? They have been tested across the span of their life, by their use in Toyota RAV4-EVs. If enough pressure amounted, the government could enact eminent domain to force Chevron to license more high powered NiMH batteries.

The big issue with NiMH is that the rare earth metal lanthanum is the "M" for automotive batteries and 95% of global supply comes from China, which has already said that it will need all of its rare earth production for domestic use within a couple of years. See:

http://www.altenergystocks.com/archives/2009/06/how_shortterm_supply_constraints_will_impact_booming_hev_markets_1.html

You'll also want to check back tomorrow for the next installment.

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