## ADVANCED AUTOMOTIVE BATTERIES

_______________________________________________________________________________________________________________________________ _____________ MENAHEM ANDERMAN, Ph.D., President

Tel: (530) 692-0140 E-mail: info@advancedautobat.com Fax: (530) 692-0142 P.O. Box 1059 Oregon House, CA 95962 www.advancedautobat.com

January 6, 2010



### Feedback on ARB’s Zero-Emission Vehicl e Staff Technical Report of 11/25/2009 including attachment A: Status of EV Technology Commercialization

General

Thank you for the opportunity to provide feedback on your recent staff report. The overall report is an excellent document that provides a r ealistic assessment of a very complex subject. I am in general agreem ent with the theme of the report, its assessment of the progress in the relev ant technologies, and t he comments regarding the challenges and risks ahead.

As part of a current multicli ent study of the outlook for EVs and PHEVs, I have recently had the opportunity of visiting the battery technology groups of nearly all the major carmakers and foremost advanced automotive ba ttery developers in the six countries with the largest automotive industries. It is cl ear that the level of effort in PHEV and EV battery development has greatly increased over the past three years. However, according to most of the companies I vi sited the commercial viability of these technologies for the mass market is still highly questionable, and that of FC vehicles is even further on in the future.

Virtually all the current dev elopment programs involve Li-Ion batteries. Due to their higher energy density and correspondingly lower volume and weight per unit of energy, Li-Ion batteries simplify vehicle design. Ye t most EV development programs in major car companies are focused on subcompact to com pact cars with batteries of 15 to 35kWh and real-life driving ranges of 70 to 125 mile s (generally similar to the NiMH-powered vehicles developed under the MOA with CARB during 19 98-2001). Thus, the lighter weight of Li-Ion batteries is not being trans lated into longer driving ranges. There are several reasons for this, the most import ant being high battery co st. Carmakers reckon that vehicles with larger capacity batteries (40 kWh and up) would be too expensive for market acceptance.

EV Battery Technology

My visits confirmed the industry consens us that the challenges to the mass commercialization of EVs & PHEVs are largel y related to batterytechnology. They include:

1. SafetyADVANCED AUTOMOTIVE BATTERIES Menahem Anderman, President

Tel: (530) 692-0140 E-mail: info@advancedautobat.com Fax: (530) 692-0142 2 Significant improvements in Li-Ion batterysafety have been achieved following the major safety-related recalls of Li-Ion batteries for computers and other applications in 2006. Yet the safety of most Li-Ion batte ries for EVs is far from proven. Some safety enhancements come with a higher manuf acturing cost, some with a sacrifice in performance and many through improv ements prompted by the experience gained during the early stages of pack integration and field tria ls. Safety is of course the most critical paramet er and trumps any plan to reduce cost or improve performance.

2. Reliability / Manufacturability

After safety, reliability is the next most importantcriterion. Battery reliability in the field is critical and most experienced battery manufactu rers are careful to take the time to optimize cell and pack engineer ing, and to develop manufacturing equipment and processes that can support the high-thr oughput, high-yield production of a reliable product. The industry must l earn from the past experienc e of those NiMH automotive battery developers who had projected low pr icing and high performance but failed to establish reliable manufacturing processes, and essentially dropped out of the market. Manufacturing is generally more demanding for Li-Ion batteries than for NiMH batteries and to meet the high-voltage, high-energy, high-power, and long-life requirements, the importance of proper cell, pack, and manufacturing engineering cannot be overemphasized.

3. Durability

There have been significant improvements in Li-Ion battery cycle and calendar life capabilities since the CARB 2000 panel repo rt and our update in 2003. The technology seems adequate for EV applications, at least in relation to cycle life, with over 2000 cycles at 70—80% DOD demonstrated by se veral developers. However, the more difficult area to control is calendar life since Li-Ion batteries degrade as function of state of charge (SOC), temperature, and time. Battery life is affected by cell chemistry, pack design, cooling method (if any), and vehicle duty-cycle. It is important to note that some of today’s most publicized EV efforts involv e batteries with no active cooling and whose life expectancy in warm weather is likely to be far shorter than the 10-year CARB emission-control warranty. He re again the most experienced long-term players in the industry stress that they prefer to prioritize battery life even if it is at the expense of cost and performance. Please recognize that econom ic analyses of EVs based on a 10-year battery life will simply shatter if the actual battery life in the field does not meet this expectation, and two or more batteries are required over the useful life of the car.

4. Cost

In our current multiclient study we put c onsiderable effort into analyzing battery cost based on: i) ab initio cost models utilizing rea listic cell and pack designs and quotations for materials from several ke y materials suppliers, and ii) se veral actual cost estimates given by major battery makers to major car make rs. When we apply our base estimates to the volumes studied by the CARB 2007 Technology Panel, we obtain considerablyADVANCED AUTOMOTIVE BATTERIES Menahem Anderman, President

Tel: (530) 692-0140 E-mail: info@advancedautobat.com Fax: (530) 692-0142 3 higher battery cost estimates for EVs, nam ely $500 to $700/kWh in 2015, for the 500- MWh case (a plant producing 20,000 packs averaging 25kWH each annually), and $375 to $500 per kWh for a plant producing 2,500MWh (100,000 25kWh packs annually) for the 2018-2020 timescale.

We focused our study on data from the major materials, cell, and pack producers and avoided projections from less experienced companies. This may explain the higher pricing in comparison with t he CARB Panel study. Also, we and our information sources priced in what we believed will be necessary to meet the most important criteria for commercialization, namely safe ty, reliability, manuf acturability, and durability. (In this connection we suggest avoiding the use of Tesl a data as criteria for battery cost. Tesla uses computer cells that have a life expectan cy on the order of 2 to 4 years, and there are no data in the public domain to project th eir durability and reliability in a vehicle battery. Tesla may have a business motiva tion other than profitability to sell an aftermarket battery option wit h the original vehicle.)

The cost of PHEV batteries per nominal kWh, depending on duty cycle, is expected to be 20% to 30% higher than that of EV batteries . However, since their usable capacity is likely to remain between 55% and 70% of nominal, as opposed to 80% to 90% for EV batteries, their effective cost is about 60% to 100% higher.

5. Performance

Modern EV Li-Ion battery cells deliver 100 – 140 Wh/kg and 200 – 275 Wh/liter with good power. These numbers show a greater spread for battery packs as they are affected by the weight and volume of the coolin g scheme, if any. It is worth recalling that the best cylindrical consumer cells deliv er 220 Wh/kg and 600 Wh/liter. The gap in performance between the best consumer cylindric al cells and current EV cells is related to the compromises made in the design of EV cells to support the four key requirements of safety, reliability, durability, and cost. EV cell and battery performance can possibly be increased with the four key parameters still be ing satisfied, but this will take several years to confirm. In the case of PHEV batteries, the most important objective will be to increase their usable capacity and thus thei r effective energy densit y, thereby reducing their cost.

Technological breakthroughs with a positive impact on performance are always possible but cannot be predicted, nor can policies be based upon them. Furthermore, significant improvements in performance (from, say, high-voltage cathodes or silicon anodes) will only be beneficial if they do not reduce the batte ry’s ability to meet the four important key requirements. We nevert heless remain hopeful that the recent major international public and private investments in battery technology will, in the long run, yield batteries with higher performance.

Advanced Vehicle Status and Policy Recommendations

At fuel pricing below $4 per gallon in the US, the total cost of owning and operating advanced vehicles will clearly exceed that of conventional vehicles. With gasoline atADVANCED AUTOMOTIVE BATTERIES Menahem Anderman, President

Tel: (530) 692-0140 E-mail: info@advancedautobat.com Fax: (530) 692-0142 4 about $4-5 per gallon, hybrid-electric vehicles become cost competit ive. PHEV vehicles will only become cost-competit ive when the price of gasoline exceeds $7 per gallon – even if we assume batteries with an 8-year life (which is far from being proven) and battery pricing below $500/kWh (late in the decade). Electric Vehicles will reach that point at similar or even higher gasoline pric e levels, depending on battery size (and thus vehicle range). These numbers include t he assumption that Li-Ion PHEV and EV batteries will prove safe, reliable, and durabl e, and that price r eduction efforts are successful. We do not have good estimates for FC vehicles but their economics in the next 20 years are likely to be even more pr oblematic than that of PHEVs and EVs with a100-mile range.

It is generally accepted in the industry that the closer the technology is to the market, and the more experienced a particular com pany is in high-volume manufacturing and application of the prod uct, the more conservative (or realistic) that company will be relative to future cost/performance ratios . Applying this maxim to advanced vehicle development (as described in the ARB sta ff report and the studies quoted therein), indicates that the cost and durability projec tions for fuel cells are probably the most speculative. The same projections for PHEV and EV batteries are of intermediate credibility, while for Li-Ion HEV batteries theyare somewhat more reliable, and for NiMH HEV batteries, quite reliable. It is also important to re member that HEVs require no investment in infrastructure, PHEVs a limit ed investment (involving a greening of the grid), EVs a somewhat larger investment, and FCs a massive investment in hydrogen production and distribution.

Furthermore, during my visits it also becam e apparent that several (but not all) car companies had redeployed technica l staff from fuel-cell devel opment to work on Li-Ion batteries. In addition, some of these co mpanies also mentioned that technology investment in the FC-component supply ch ain is in decline. These two changes combine to reduce the likelihood of the fast progress in f uel-cell technology that was expected a few years ago.

We maintain that it is very unlikely that eit her FC vehicles or batte ry electric vehicles could be competitive in the mass mark et before 2020, or probably even 2025. To reduce CO 2 emissions from vehicles, starting in 2015, it is clear that CARB will have to promulgate and enforce some severe restri ctions, and increase them annually to meet the desired goal. Providing limited incentiv es for early demonstrations of advanced technologies (PHEV, EV and FC vehicles) c ould complement its policy but should not constitute its basis, so as to allow t he policy to remain technology-neutral.

We propose that CO 2 -emission regulations should also be accompanied by an increase in fuel cost via a fuel tax or other mechanism. This may ve ry well be the most effective way to accelerate the introduction of tr ansportation with near-zero carbon footprint by affecting the demand for fossil fuel. Although dr ivers may have to pay more for a gallon of gasoline, with good education that can be so ld to the public and their use of more fuel-efficient vehicles will minimize the co st impact. Furthermore, a reduction in fuel consumption may alter the s upply/demand equation sufficiently to delay future oil-price escalation. Eventually, a win-win situation could develop with t he consumer benefittingADVANCED AUTOMOTIVE BATTERIES Menahem Anderman, President

Tel: (530) 692-0140 E-mail: info@advancedautobat.com Fax: (530) 692-0142 5 from a lower overall fuel bill, the environment from lower CO 2 emissions, and governments from increased revenue—al l in support of the energy supply and environmental causes.

The ARB staff’s assessment that a notabl e impact on the environment will lag behind new product introduction by 20 to 30 years is correct. It is the main reason to promote the expanded use of HEVs. This technologyis road-proven and already delivers an approximately 40% reduction in CO 2 emissions, and even more in pollutant emissions. A 50% market share for strong hybrids in Ca lifornia by 2020 is feas ible and would thus reduce CO 2 emissions from new cars by about 20%. In contrast, given the problems in using the existing electrical grid, the envir onmental benefits of PHEVs in comparison with HEVs are relatively small. When th is is compounded with the more difficult commercial threshold for mass production of PH EVs, the likelihood that these vehicles can make a notable impact on the environm ent within the next 20 years is slim.

RECOMMENDATIONS

Based on our understanding of the technical and commercial barriers to the introduction of advanced vehicle, we recommend the follo wing guidelines for future policies:

1. CARB to increase the requirements fo r new-vehicle fuel efficiency by about 4% per year, starting at the earliest feas ible date and conti nuing indefinitely,

2. CARB to initiate a drive to increas e gasoline taxes nationally, in collaboration with interested political and env ironmental lobbying groups,

3. CARB to enact policies to accelerate the “greening” of California’s electrical transmission grids, and

4. CARB to provide some incentives fo r the early introduction of EVs and FC vehicles provided they are matched wit h measurable progress in drastically reducing the carbon footprin t of the energy source (e lectricity or hydrogen).