Batteries are quickly becoming crucial to the future of the grid and the auto industry, but the U.S. makes hardly any of this critical resource itself. President Biden says this is a matter of strategic importance, and this week his administration launched new efforts to invigorate domestic manufacturing.
The numbers are pretty stark, Jeff St. John reports.
- China makes about two-thirds of the global supply of lithium-ion anodes and electrolyte solution and more than 40 percent of the cathodes and separation materials used in most of the world’s advanced batteries.
- The U.S. is a distant follower in all these categories, with its best showing being in anode manufacturing, where it accounts for about 10 percent of global capacity.
- China also controls more of the raw materials for batteries.
This lopsided leverage over a newly pivotal resource is ringing the same kinds of alarms in foreign policy circles that dependence on foreign oil used to. As Washington, D.C.-based think tank Securing America's Energy Future put it in a report on the topic:
American global authority, national security and the country’s auto industry — the backbone of the U.S. advanced manufacturing sector — are all under threat.
The irony here is that years of a "hands-off, let the market decide" approach to U.S. industrial policy has left American firms less able to compete in the global marketplace than their peers in countries with less aversion to planning. And in the case of solar cells and lithium-ion batteries, much of the underlying science happened at U.S. government funded labs to begin with.
At this point, it's hard to catch up to incumbents that have already invested billions of dollars in their gigafactories.
But the battery market is still quite young, and the winners today have no guarantee of continued dominance. Breakthroughs are still possible — I've heard from numerous startups about how they're innovating on the manufacturing side, reducing the capital required to get their factories up and running.
And the DOE's new policy says that projects that receive federal support "must manufacture a significant portion of their products within the U.S.," Jeff notes. Clear your schedule for all the soon-to-be announced factory ribbon cuttings.
Can home retrofits grow as rapidly as solar?
This question of how government should encourage markets ties conceptually with an op-ed we published from analyst Richard Roberts. Richard argues that policy intervention could accelerate the home energy retrofit market just like it helped the global renewables market.
There are structural differences between those industries; home retrofits encompass a range of technologies and tend to be more localized than renewables development. But buildings drive 40 percent of U.S. emissions, by some counts, so any lessons learned would go a long way.
Like solar and wind, retrofitting relies on technologies and processes that become cheaper as deployment scales up. That means that once a tipping point is reached, the industry can and will go exponential. The tipping point for the retrofit industry will come when the (falling) market cost for renovations intersects with the (rising) market value for improvements. After that, just as we are now seeing for renewables, market forces will kick in and drive a rapid takeoff.
Roberts ends with a warning that's eerily relevant to the battery manufacturing discussion happening in D.C. right now:
But it won’t happen automatically. The central lesson of the renewables revolution is that government intervention is critical to build new markets.
The 1980s are so over.
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