Battery Manufacturing for Hybrid and Electric Vehicles: Policy Issues
Released: 2013-04-04T00:00:00

Introduction

Since 1976, Congress has funded programs to develop high-density, low-cost batteries to operate electric and hybrid vehicles. In the American Recovery and Reinvestment Act of 2009 (ARRA; P.L. 111-5 ), Congress authorized support for lithium-ion battery manufacturing, with $2.4 billion in grants. Since then, President Obama has asked Congress to further expand these initiatives with additional R&D funding requests and a recommendation that an electric vehicle tax credit be expanded to $10,000 and converted into a federally funded rebate program, available to consumers at the time they purchase a vehicle.

Promotion of electric vehicles and the batteries to power them is part of a long-standing federal effort to reduce oil consumption and air pollution. This effort has taken a variety of directions, including mandated use of biofuels and research into hydrogen-fueled vehicles. Development of vehicles that use electricity as a power source, either by itself or in conjunction with smaller, supplementary internal combustion engines, is part of this initiative. In general, the cost of operating a plug-in hybrid or all-electric vehicle is substantially less than the cost of fueling a gasoline-powered car or truck, but up-front costs are much higher. Depending on the source of the electricity, the total carbon footprint of an electric vehicle may be less than that of a vehicle with a traditional internal combustion engine.

The major hurdle in providing a large national fleet of hybrid electric vehicles (HEVs), plug-in hybrid electric vehicles (PHEVs), and fully electric vehicles (EVs) is the size, cost, weight, durability, and safety of the batteries that would power them. Because battery technology is crucial to the development of these vehicles, the U.S. Department of Energy (DOE) has funded research by universities, federal laboratories, and the private sector over several decades on a variety of new types of batteries. Automakers have also invested substantial amounts in research.

As manufacturers have brought hybrid, plug-in hybrid, and fully electric vehicles to market, U.S. policymakers have become concerned about the development of an electric vehicle supply chain in the United States. This report examines the nascent battery manufacturing industry and considers efforts to strengthen U.S. capacity to manufacture batteries and battery components for hybrid and electric vehicles.

How Does a Traditional Automobile Engine Work?

For the last 100 years, Americans have primarily driven vehicles with internal combustion engines. An internal combustion (IC) engine burns fuel inside a combustion chamber when a mix of fuel and air is sprayed into it. The mixture is compressed by a piston while a spark plug produces a spark that ignites the fuel. The resulting combustion, and the expanding gases, drives the piston back down. The piston is connected to a crankshaft which, in turn, powers the axles and propels the vehicle. See Figure 1 for a cross-section diagram of part of an IC engine.

Most modern vehicles use either gasoline or diesel as a fuel source because they are energy dense and inexpensive. Gases are a byproduct of the combustion. The engine's exhaust valves remove them from the cylinder and send them on to the car's exhaust system. The engine's heat, another byproduct of the combustion process, is the source of a vehicle's heating system in the winter.

A critical element in a car's engine operation is the battery. When a driver turns the key in the ignition, the battery's stored energy is drawn down, powering the electric engine starter and thereby cranking the engine.

Operation of an Electric Vehicle

An electric vehicle operates differently from a vehicle with an IC engine. An all-electric vehicle is powered by electricity with a large, rechargeable battery, an electric motor, a controller that sends electricity to the motor from the driver's accelerator pedal, and a charging system. These parts of an electric vehicle replace the IC engine, fuel tank, fuel line, and exhaust system in a traditional car. While the IC engine is central to the operation of a traditional vehicle, it is the rechargeable battery that is central to the operation of an electric vehicle.

All-electric vehicles recharge their batteries by plugging them into a household electrical outlet or a special charging station. As discussed later in this report, there are different kinds of electric vehicles. Some are all-electric and others are hybrids, with small electric motors and small IC engines (using both electricity and gasoline as a fuel). Some of the hybrids can be plugged in for recharging, and others, such as the original Prius, are recharged from their gasoline engine and other internal systems.

Battery Technologies

Batteries are a form of energy storage. They store and release energy through electrochemical processes. All battery technologies have two fundamental characteristics that affect battery design, production, cost of operation, performance, and durability:

Power density is the amount of energy that can be delivered in a given period of time, affecting how fast a vehicle accelerates, and Energy density is the capacity to store energy, affecting the range a vehicle can travel.

There is generally a trade-off between these two characteristics: some battery technologies have higher power density with a correspondingly lower energy density and vice versa. For vehicle applications, it is desirable to have both high power density and high energy density to compete with the high power and energy density of gasoline and other petroleum-based fuels. Battery alternatives to gasoline power have so far not achieved this parity and are heavy, large in size, and costly.

The first rechargeable lead-acid battery was invented in France in 1859. By the 1880s, French inventors improved the design, which in turn enabled the development of new types of electric automobiles at the beginning of the 20 th century. Auto manufacturers, however, soon discovered that the lead-acid battery is better suited for supporting IC engines than for powering vehicles.

There are a number of reasons why this 19 th -century technology has been the battery of choice around the world for so long. Lead-acid batteries are simple, inexpensive to manufacture, and based on a technology that is widely understood and easily duplicated. Relatively small in size, the batteries fit easily in the engine compartment, are durable and dependable, and require virtually no maintenance. Most importantly, they provide sufficient bursts of energy to start engines, while recharging over many cycles. In addition, 98% of lead-acid batteries are recycled, among the highest recycling rates for any manufactured product, thus minimizing the environmental impacts of disposal.

The typical automotive lead-acid battery is encased in a durable plastic casing. It generates 12 volts of electricity through six interconnected compartments (called cells), each of which contains 16 metal plates, set in an electrolyte solution of water (65%) and sulfuric acid (35%). The internal cell plates and separators are shown in Figure 2 . The positive anode side of each plate is coated in lead oxide; the negative cathode side in lead. As electrons move from the anode, they generate up to 2 volts of electricity within each cell. The cells are arranged in a series so that the electricity passes from one cell to the other, making the charge additive. By the time the charge has passed through each of the six cells, 12 volts of electricity are discharged through the terminals on the top of the battery to start the car and run the other automotive components.

Once the gasoline-powered engine is started, it not only powers the pistons in the engine, thereby moving the car forward, but through the alternator it also provides recharging for the battery. In this process, the chemical process that created electricity is reversed: a flow of electrons moves backwards from the cathode toward the anode, restoring the chemicals on the plates to their original position. This ongoing process of charging and recharging the battery takes place automatically as the car is being driven.

The lead-acid battery has been the standard battery technology for most of the past century, but because of its low energy density, it is poorly suited for electric vehicles. A 2010 DOE report noted that batteries have been "too costly, too heavy, too bulky and would wear out too soon." Were a group of lead-acid batteries placed in a hybrid or all-electric car, they would take up an inordinate amount of space and would add exceptional weight to a car. Accordingly, new kinds of batteries are being developed that offer higher power and energy densities for these types of vehicles.

What Are the Alternatives?

Given the shortcomings of lead-acid batteries, researchers have sought better battery technologies since the 1970s. One of the first commercially feasible technologies automakers adopted was the nickel metal-hydride (NiMH) battery. Because it has greater energy density and is lighter than a similarly powerful lead-acid battery, NiMH batteries became the choice for early hybrid vehicles. They are used in many hybrid vehicles today, including the Toyota Prius and Honda Insight. Toyota announced in 2009 that after testing alternatives, it would continue using NiMH batteries in many of its hybrid vehicles.

A second technological approach involves improvement of lead-acid batteries. Recent federal research grants were given to two U.S. lead-acid battery manufacturers to advance use of lead-carbon in batteries and to further work on an "ultrabattery" that could replace NiMH with a more efficient, lower-cost alternative.

A third technology is the "Zebra" battery, using sodium-nickel chloride chemistry. These produce 50% more energy than NiMH and, according to some manufacturers, as much as some lithium-ion batteries. These so-called "hot" batteries have operating temperatures up to 360 degrees (F) and reportedly perform well in very hot and very cold climates.

The most prominent major new battery technology is based on lithium, a naturally occurring and lightweight metal used in laptop computer batteries. Li-ion batteries have high energy and power densities. Because lithium is lightweight, it can be fabricated into large battery packs for use in hybrid and electric vehicles. An important characteristic of lithium is that it is reusable and can be extracted from depleted batteries and recycled for use in new batteries. Ford Motor Co. began using only lithium ion batteries in its hybrids in 2012.

There are several types of lithium-based battery technologies available for commercial application; not all automakers are using the same approach. While the types of chemistries shown in Table 1 differ, they have similar energy and power densities.

The Basics of Lithium-Ion Batteries

Li-ion batteries share five basic structural components with lead-acid batteries: cathode, anode, separator, electrolyte solution, and a durable case. Li-ion batteries, like many other batteries, also have a safety structure in light of potential chemical leakage and flammability. Figure 3 shows a cross-section of a lithium-ion cell in cylinder form. An anode is the point on the battery where current flows in from outside; the cathode is the point where the current flows out of the battery. During electrical discharge, lithium in the anode is ionized and emitted, along with electrons, into the electrolyte. The ions and electrons move through the porous separator and into the lithium metal oxide cathode, where the electric current they have produced is discharged.

Li-ion battery cells can also be manufactured in rectangular shapes using gel as the electrolyte, and then encased in laminated film. Rectangular cells can be more efficient because their shape means more finished cells can be assembled in a battery pack, increasing the density of the battery. The main parts of the cell and their functions are the following:

Battery packs containing Li-ion cells are much larger than a conventional lead-acid battery. In the Chevrolet Volt, the battery pack is 6 feet long, weighs 435 pounds and is arranged in a T-shape that sits under the center of the passenger cabin, as shown in Appendix B .

Automakers have not disclosed the costs of the Li-ion batteries they use. As discussed later in this report, the batteries reportedly cost from $375-$750 kWh, making a 16 kWh battery cost as much as $12,000. Fully electric vehicles with a longer driving range would need as much as 35 kWh, meaning that the batteries alone would cost more than many vehicles now on the road. To travel 300 miles on battery power, it is estimated that vehicles would need a capacity of 100 kWh of stored electric power.

The Li-Ion Battery Supply Chain

Because they are lightweight and have relatively high energy intensity, Li-ion batteries have been used predominantly in a range of small consumer products that are manufactured mainly in Asian countries, so many Li-ion battery manufacturers have located production in Asia. Automotive batteries are one of the fastest-growing applications. Navigant Research, a private firm formerly known as Pike Research, forecasts that the worldwide market for lithium-ion batteries in light duty transportation will grow from $1.6 billion in 2012 to almost $22 billion in 2020, and that "the Asia Pacific region will continue to be the global leader in both Li-ion production and consumption in the transportation industry, with support by major governments for aggressive goals in plug-in vehicle (PEV) production, creation of charging infrastructure, and incentives for consumer purchases."

Japan and South Korea held an estimated 80% share of global production of advanced Li-ion batteries in 2010; China, 12%; others, nearly 6%; and the United States, about 2%. While ARRA sought to spur development of a U.S. electric vehicle supply chain, many of the recipients of stimulus grants have not prospered, as discussed later in this report. Although present demand for Li-ion vehicle batteries is low, it is still possible that U.S. market share could increase in the next decade if demand for electric and plug-in hybrid vehicles increases. (Navigant estimates that worldwide electric vehicle sales will reach 3.8 million annually by 2020.)

The potential demand for Li-ion automobile batteries may encourage creation of a domestic battery supply chain. In ARRA, Congress encouraged this development with $2.4 billion of grants for battery manufacturing facilities.

There are several market factors that may favor the creation of a domestic supply chain. First, most U.S. auto plants practice just-in-time manufacturing, with key suppliers located near the assembly plants they supply. Automakers may want their Li-ion battery suppliers near their plants as well. In addition, the heavy weight of large Li-ion batteries for cars and light trucks makes it more cost-effective to assemble those batteries near the motor vehicle assembly plants where they will be used, rather than transporting them for thousands of miles.

The Li-ion battery assembly plants, however, are only the final link in a lengthy supply chain that includes research and development, raw material search and mining, manufacture of equipment to make Li-ion batteries and cases, assembly of the batteries and electronics themselves, marketing, financing, shipping, and customer service. Much of this supply chain did not exist in the United States prior to the passage of ARRA.

A 2010 report on the Li-ion battery supply chain by Duke University's Center on Globalization, Governance & Competitiveness (CGGC) divides the Li-ion supply chain into four levels. The automakers are the first level. Tier 1 suppliers are generally larger supplier firms that directly sell to the automakers. Tier 2 and 3 suppliers often supply the Tier 1 supplier with components.

Tier 3 Suppliers

There are a number of Tier 3 U.S. suppliers of lithium compounds, electrolyte solutions, and graphite (used on anodes). Two of the world's largest suppliers of lithium are U.S.-based FMC Lithium and Chemetall Foote, a division of Rockwood Holdings. Chemetall alone supplies over a third of all lithium used in the world, sourcing it from brine deposits in Chile and ore from a mine in North Carolina.

According to the Mineral Information Institute, "most lithium is recovered from brine, or water with a high concentration of lithium carbonate. Brines trapped in the Earth's crust (called subsurface brines) are the major source material for lithium carbonate. These sources are less expensive to mine than rock such as spodumene, petalite, and other lithium-bearing minerals." While U.S. firms have a strong foothold at this level of the supply chain, most of the raw material comes from abroad, although sites in Nevada are being developed to supply the U.S. market.

It is estimated that the United States has approximately 760,000 tons of lithium. The resources in the rest of the world are estimated to be 12 million tons. The United States is the world's leading consumer of lithium and lithium compounds. The leading producers and exporters of lithium ore materials are Chile and Argentina. China and Russia have lithium ore resources, but it is presently cheaper for these countries to import this material from Chile than to mine their own.

Industry analysts say there is no shortage of lithium in the foreseeable future and that by 2020, there may be excess supply, driving down prices and undermining investments by current producers.

In addition to lithium, manganese, nickel, cobalt, copper, and aluminum are used in different forms to make Li-ion batteries. While there are diverse sources for most of these minerals, some are concentrated in a few locations that could have implications for supply or pricing. For example, more than a third of the world's production of cobalt comes from the Democratic Republic of Congo, and some rare earth minerals used in producing electric vehicle components are mined primarily in China.

U.S. suppliers have strong positions in the manufacture of several other basic materials used in battery manufacturing. Novolyte makes electrolytes at its Baton Rouge, LA, plant, and a Honeywell facility produces high-quality lithium salt for use in electrolytes. Future Fuel Chemical in Batesville, AR, produces graphite components used in anodes.

Tier 2 Suppliers

Moving up the supply chain, the Tier 2 suppliers provide components and chemicals for Li-ion cells, as well as electronics used in the final battery packs (see Table 2 ). U.S. firms included in this part of the supply chain are Celgard, the world's third-largest producer of separators, as well as DuPont and Applied Materials. ConocoPhillips and Superior Graphite produce active materials and binders used for anodes. 3M, Dow Kokam, and SouthWest NanoTechnologies make active materials, binders, and carbon electric conductors for cathodes.

Electronics developed for Li-ion batteries are similar to those used in consumer goods, and are used to manage various battery functions. They check the voltage and cell balance and monitor and report charging status. Chips are also used to monitor and regulate the temperature of the Li-ion battery so it does not overheat. Texas Instruments, Atmel, and Maxim Integrated Products are among the electronics and controls companies that produce electronic components. Other components used in the battery include the steel or aluminum can, which houses the Li-ion cell (made by H&T Waterbury); insulators; safety vents; gaskets; and center pins.

Tier 1 Suppliers

Tier 1 suppliers put all the pieces together into a battery. The cell and battery-pack manufacturers are the most visible part of the U.S. electric battery supply chain, but this stage has been the weakest link. Prior to ARRA, only one company—Indiana-based EnerDel—had operated a domestic high-volume anode and cathode coating and cell manufacturing facility. Many U.S. pack manufacturers still import cells. For example, the Li-ion cells used in the in GM Volt's batteries are made by LG Chem in South Korea, shipped to Michigan, and made into batteries there.

This is the part of the supply chain that has received significant federal subsidies through ARRA to jump-start U.S. production, as described in the following section. The firms that are building Li-ion manufacturing capacity in spring 2013 include LG Chem; Johnson Controls; A123 Systems ; and Dow Kokam.

These U.S-based facilities compete with Asian facilities that have been making and marketing Li-ion batteries for consumer products in large volumes for decades, including BYD, Hitachi, NEC, Panasonic, Samsung, and Toshiba. U.S. makers of Li-ion vehicle batteries will need to achieve high-volume production to realize economies of scale and drive unit costs down. Achieving adequate volume may remain a challenge for the Tier 1 suppliers in the United States in light of a highly competitive marketplace for battery packs.

Researchers at the Massachusetts Institute of Technology highlighted the central role of scale in vehicle electrification:

Manufacturing is key to achieving a commercially successful EV battery pack. Low cost is only achieved in large-volume, highly automated factories. This raises two issues. Successful development of EVs requires attention to both R&D and manufacturing of battery systems. Understanding possible economies of scale in manufacturing is an important aspect of battery technology development since manufacturing cost is decisive in the ultimate economics of EVs. Second, battery manufacturing will not necessarily occur in the country that creates the battery technology. This is an especially vexing political question in the US where it is widely believed, perhaps correctly, that high-technology manufacturing of products such as batteries is taking place abroad, especially Asia, despite low labor content. Both issues have implications for the government role in supporting EV development.

The Role of the Automakers

The Tier 1 suppliers deliver batteries to the automakers for final assembly into vehicles. The automakers' role is quite different from that with traditional lead-acid batteries, which are simply dropped into a vehicle's engine compartment and connected to the electrical system. In manufacturing hybrid and fully electric vehicles, the automakers provide additional critical, proprietary technologies that mesh the battery's output with the vehicle's overall operation. GM has highlighted one such technology application in its Chevy Volt:

"Three different systems are used to regulate the temperature of the coolant," said Bill Wallace [GM's Director of Global Battery Systems]. "When the Volt is plugged in and charging in cold weather, an electric heater at the front of the battery pack is used to warm the coolant and pre-heat the battery. During normal operations, the coolant is passed through a heat exchanger at the front of the car, while a chiller in the air conditioning circuit can be used to dissipate heat from the battery when temperatures really climb."

The management system monitors feedback from 16 thermal sensors arranged throughout the battery pack to maintain a spread of no more than 2 degrees centigrade from the optimal temperature across the pack.

Automakers are integrally involved in the design and production of Li-ion batteries for their vehicles. As GM observed, "the Volt's battery pack design is directly coupled with the vehicle design to assure complete integration between the battery pack and the vehicle." This means that the automaker's decision as to which battery to procure will be in effect for a prolonged period, perhaps the life of the vehicle model, as a battery designed for one vehicle may not function optimally in another. Some automakers have entered joint ventures or partnerships with battery manufacturers. The batteries for the Nissan Leaf all-electric vehicle are sourced from a Nissan partnership with NEC, for example, and Toyota has a battery joint venture with Panasonic. These arrangements may benefit the battery manufacturers by permitting large-volume production, but may also tie the battery manufacturer's fate to the success of a single vehicle manufacturer.

U.S. automakers appear to have rejected such corporate alliances, deciding instead to shop for batteries for particular models. For example, General Motors sought competitive bids before selecting South Korea-based LG Chem for its Volt Li-ion battery, reportedly over A123 Systems, which at the time was U.S.-owned.

The Battery Manufacturing Process

Li-ion batteries have generally been produced in Asia, near manufacturing sites for battery-dependent portable consumer products. But the transition from small, consumer-goods batteries to larger batteries for motor vehicles may well open the door for new entrants into the industry. In the motor vehicle industry, according to one analyst, "extended cycle life, high specific energy, and safety in extreme conditions—necessitate much tighter tolerances on material and manufacturing specifications, and often require a fundamental rethinking of core battery technology." This implies that the companies that have been most successful in manufacturing Li-ion batteries for consumer products will not necessarily dominate the automotive market.

The first step in manufacturing a battery is to procure the lithium, which is mined primarily in Chile. The mineral is refined into a white powder (lithium carbonate) at Chilean plants and shipped as either a powder or as 11-pound ingots to Tier 2 or 3 manufacturers.

The Tier 2 and 3 suppliers convert the ingots or powder into lithium metal that is used in battery cells. This is a highly automated process requiring great precision. The manufacturers apply an extrusion process to the ingot and flatten it into a more manageable piece of metal which is 1/100 th of an inch thick and 650 feet long. Eventually, the metal, rolled even thinner (1.25 miles long), will produce over 200 batteries. Because the lithium metal strip can stick to itself, a soft film is laminated to it so it can be further wound into spools.

At this stage, the lithium is divided into individual cells, heated at a high temperature for 90 minutes, and then tested for electrical transmission capabilities. A punch machine cuts out cells in the sizes needed for their application (automobiles, cell phones, laptops, etc.). It has been estimated that 70% of the value added in making Li-ion batteries is in the development and manufacture of the cell itself (compared with, for example, only 15% in the assembly of the battery and 10% in electrical and mechanical components).

The individual cells are packaged carefully and shipped to a Tier 1 fabrication plant, where they are sprayed with molten metals that will establish the anodes and cathodes of the battery cell. The cathodes, as shown in Table 1 , are especially important in the battery function, because there are different options for their chemical composition and they have unique characteristics which each manufacturer has developed and may have patented. Some cathode manufacturers may partner with companies that specialize in producing advanced cathode materials. As the battery industry develops, Tier 2 battery component plants may be built adjacent to the Tier 1 facilities, as geographic proximity is generally seen as a competitive advantage in the supplier-automaker relationship.

Tier 1 manufacturers and automakers assemble the individual cells, fabricate the modules, and assemble all components from Tier 2 and 3 suppliers into battery packs ready for placement in a motor vehicle. Battery packs have 250-500 cells. GM chooses to do the final battery pack assembly at its Brownstown, MI, plant, giving it more control over how the battery pack interacts with the vehicle's overall power system. As one analyst noted, "the fact GM is keeping 100% of the battery integration in-house illustrates the centrality of the battery in electric vehicles."

ARRA and the Battery Supply Chain

In 2009, ARRA provided $2.4 billion in stimulus funding to support the establishment of Li-ion battery manufacturing facilities in the United States. At the time it was enacted, the Obama Administration asserted that ARRA investments may lower the cost of some types of electric car batteries by 70% by the end of 2015, enabling the production of as much as 40% of the world's advanced vehicle batteries in the United States. In August 2009, DOE announced that it would fund 48 new advanced battery manufacturing and electric drive vehicle projects for PHEVs and EVs in over 20 states, stating, "the grantees were selected through a competitive process conducted by DOE and are intended to accelerate the development of U.S. manufacturing capacity for batteries and electric drive components as well as the deployment of electric drive vehicles to help establish American leadership in developing the next generation of advanced vehicles."

DOE provided $1.5 billion in grants to accelerate the development of a domestic battery supply chain, including

$28.4 million to develop lithium supplies; $259 million to produce Li-ion cell components such as cathodes, anodes, separators, and electrolyte solution; $735 million to make cells using diverse chemistries such as iron phosphate, nickel cobalt metal, and manganese spinel; $462 million for pack assembly facilities; and $9.5 million for a lithium recycling facility.

Appendix A provides detail on these grants. The seven largest grants, totaling more than $1.2 billion—half of total grant funding—went to the companies in Table 3 .

The remaining ARRA funding for new electric battery development was allocated for two related goals: (1) $500 million was provided for U.S. production of electric drive components for vehicles, including electric motors, power electronics, and other drive train components; and (2) $400 million for purchase of several thousand PHEVs for demonstration purposes, installation of a charging station network, and workforce training related to transportation electrification.

The Obama Administration has contended that ARRA spending had an immediate impact in transforming the U.S. advanced battery industry. In a statement issued in January 2011, when Vice President Joe Biden visited the Ener1 battery manufacturing facility in Mt. Comfort, IN, the U.S. Department of Energy (DOE) said ARRA would increase U.S. advanced technology battery manufacturing capability from two plants and a 2% global market share to more than two dozen manufacturers and a projected 40% of the world's EV batteries by 2015, and that it would cut the cost of batteries in half by 2013. DOE reports that the cost of Li-ion batteries dropped from $1,000/kWh in 2008 to $500/kWh in 2012. DOE seeks to lower the cost to $300/kWh by 2014 and $125/kWh by 2022.

In February 2013, the DOE inspector general issued a report concerning the ARRA grant to LG Chem, identifying $106 million in "inappropriate" payments to the company. In congressional testimony in March 2013, Inspector General Gregory Friedman said that the grant language did not require a transfer of manufacturing from LG Chem's Korean operations to the new Michigan plant, although that was the intention of the grant.

Moving beyond ARRA, President Obama has outlined several initiatives that could make electric vehicles more affordable, calling on Congress to

Raise the tax credit for electric vehicles to $10,000 and make it a rebate from the dealer available to a car buyer at the time of purchase. The Administration argues that a rebate would encourage more Americans to buy electric vehicles if they did not have to wait to file their tax return to realize the savings. Automobile dealers, many of whom oppose it, would be integral to this plan as the rebates would be made available at point of purchase. Raise R&D investment in electric drive, battery, and energy storage technologies. The President's FY2012 budget proposed to increase funding for the DOE Vehicles Technologies program from $304 million to $588 million, with a goal to "move mature battery technologies closer to market entry through the design and development of advanced pre-production battery prototypes." Instead, Congress authorized $328 million. For FY2013, the Administration requested the program be funded at $420 million, a 28% increase over FY2012. DOE's budget request states that the FY2013 activities "focus on meeting the President's 2015 electrification goal, and addressing key program goals through 2020 and beyond." Establish a $2 billon energy trust fund that uses revenues from offshore oil and gas leases to support development of cars and trucks powered by electricity, biofuels, and natural gas.

In addition, the Administration launched the EV Everywhere Challenge, committing $50 million of federal funds to "set technical goals for cutting costs for the batteries and electric drivetrain systems, including motors and power electronics, reducing the vehicle weights while maintaining safety, and increasing fast-charge rates." As part of this program, DOE is also sponsoring the Workplace Charging Challenge, with a goal of achieving a tenfold increase in the number of U.S. employers offering workplace charging in the next five years.

Federal Support for Battery Technology R&D

Congress first acted to support electric and hybrid vehicle technologies in 1976, when it established a demonstration project that was to lead to the federal purchase of 7,500 electric vehicles. The legislation was vetoed by President Gerald Ford on the grounds that it was premature to demonstrate vehicle technologies before adequate batteries had been developed, but Congress overrode his veto. This law initiated DOE's hybrid and electric vehicle research and development program. Recognizing that advanced technology vehicles were only as good as the batteries that would propel them, DOE began a research program to improve existing—that is, lead acid—battery technology and to study what were then advanced concepts of battery chemistry, such as sodium sulfur and lithium iron metal sulfides.

A number of electric demonstration vehicles were produced in the following years by Ford, General Motors, and American Motors, but Congress realized in 1978 that producing so many demonstration vehicles quickly was unrealistic. It stipulated a new schedule, mandating the introduction of only 200 vehicles in 1978, 600 in 1979, and more in the 1980s. However, President Ronald Reagan cancelled the program in 1981, basing the decision in part on a critical 1979 General Accounting Office report. GAO asserted commercialization would require a major effort to improve electric vehicle technology, strengthen the electric vehicle industry, establish a new market, and create an infrastructure to support it. It found that the private sector demonstration project was premature and urged refocusing of government R&D.

In subsequent years, DOE continued research on vehicle energy storage options. In 1990, California mandated that zero emission vehicles be sold by major automakers, ushering in new interest in hybrid and electric vehicles. The Energy Policy Act of 1992 ( P.L. 102-486 ) directed DOE to develop a research, development, and demonstration project for fuel cells and electric vehicles.

DOE has provided support to the research programs of the U.S. Council for Automotive Research (USCAR), which was established in 1992 as the U.S. motor vehicle industry's research consortium on advanced vehicles. USCAR houses the U.S. Advanced Battery Consortium (USABC), focused on research and development of battery technologies.

Partnership for a New Generation of Vehicles

In 1993, the Clinton Administration expanded the scope of advanced vehicle research by establishing the Partnership for a New Generation of Vehicles (PNGV). This initiative was a public-private partnership between the federal government and USCAR. Its goals were to (1) leverage federal and private sector resources to develop advanced manufacturing technologies, within 10 years; (2) produce near-term improvements in automobile efficiency, safety and emissions; and (3) triple vehicle fuel efficiency from the average 1994 level to 80 miles per gallon, while still meeting all environmental regulations and keeping the cost affordable.

A top priority of the program was to develop advanced auto manufacturing technologies that would spawn production of vehicles with low gasoline consumption and emissions. PNGV officials believed that if such vehicles were attractive commercially, then they would sell in high volumes, driving down costs. While PNGV supported work on a broad range of manufacturing technologies and products, such as new lightweight materials and new fuels, a prominent aspect of the program was the decision of the automakers to seek to build diesel-powered, hybrid-electric vehicles (HEV) through this program. Consequently, PNGV's focus included research and development of advanced energy storage systems for use in HEVs.

Battery research under PNGV was focused primarily on NiMH and Li-ion batteries because these technologies were thought to offer the best prospects for performance, cost, durability, and safety. In a review of PNGV in its final year of 2001, the National Research Council (NRC) of the National Academy of Sciences reported that while the new batteries were not ready for widespread use, "The soundness of choosing these [NiMH and Li-ion] systems for development is confirmed by the substantial progress made by PNGV toward most of these targets and the commercial use by all Japanese HEVs of either NiMH or Li-ion batteries."

FreedomCAR and Beyond

The Bush Administration revamped PNGV administratively, as there was no statutory basis for it. In its place, it established in 2002 a similar initiative with more of a focus on commercial as well as passenger vehicles and on fuel cell research: the FreedomCAR and Fuel Partnership within DOE. USCAR was still the private sector partner, but other federal agencies that had been part of PNGV, such as the Department of Commerce, were no longer involved. In addition, five major oil companies, including ExxonMobil and Chevron, joined the research effort to develop more efficient IC engines focused on hydrogen fuel cells and, eventually, hybrid electric vehicles. Two utilities, DTE Energy (Detroit) and Southern California Edison, also joined the Partnership.

As with PNGV, the new initiative included an energy storage program, called "FreedomCAR and Vehicle Technologies," or FCVT. It built on the research base of predecessor programs with industry-government technical teams. About 61% of the federal research funding was spent on work at the national laboratories, 35% on industry research, and 4% on university and other types of research. Its goal was to demonstrate that high-power Li-ion batteries would be able to meet the performance targets for hybrid electric vehicles. Over three-fourths of FCVT's spending was directed toward development of high power density batteries for near-term use in hybrid vehicles. The remainder supported long-term exploratory research to find the high energy density technologies for a second-generation Li-ion system that would be appropriate for use in electric vehicles.

The Obama Administration has continued DOE's Vehicle Technologies research and development program in addition to promoting battery manufacturing. Current research emphasizes reducing the cost and improving the performance of Li-ion batteries and assessing new materials for cathodes, such as manganese oxides and iron phosphates. These may eventually offer cheaper and more stable alternatives to lithium cobalt oxide, contributing to cost reductions for electric vehicles.

Table 4 shows federal spending on battery and battery-related research and development since 2002. Between 2008 and 2012, federal spending on battery research increased by 86%.

Advanced Technology Vehicles Manufacturing (ATVM)

Congress established the ATVM program at DOE in 2007 to help raise fuel economy standards for vehicles and to encourage domestic production of more fuel-efficient cars and light trucks. ATVM is authorized to award up to $25 billion in loans, funded by a $7.5 billion appropriation to cover the loan subsidy costs. To date, five companies have received $8.4 billion in loans, primarily for work on hybrid and electric vehicles: Fisker, Ford, Nissan, Tesla, and the Vehicle Production Group. The program has $16.6 billion of loan authority remaining. For a discussion of this program, see CRS Report R42064, The Advanced Technology Vehicles Manufacturing (ATVM) Loan Program: Status and Issues , by [author name scrubbed] and [author name scrubbed].

Growth Prospects of the U.S. Battery Industry

The U.S. battery industry will grow only as fast as the hybrid and electric vehicle market. There has been significant interest in new types of vehicles, as shown by the list of current and future hybrid and electric vehicles in Appendix C . Nearly all automakers are offering some type of electric vehicle, and a small but dedicated consumer base is increasingly purchasing some form of electric car or pickup truck. In 2012, more than 434,000 hybrid and more than 52,000 electric vehicles were sold in the United States. Combined, these partial and total electric vehicles comprised 3.38% of sales in 2012, up from 2.37% in 2010.

In his first term, President Obama set a goal of having 1 million fully electric vehicles on the road by 2015. In February 2011, DOE issued a report stating that "leading vehicle manufacturers already have plans for cumulative U.S. production capacity of more than 1.2 million electric vehicles by 2015, according to public announcements and news reports." However, DOE's past projections of annual electric vehicle sales have proven optimistic, and the goal of 1 million electric vehicles sold by 2015 appears ambitious. Nonetheless, the Administration seems to remain committed to its pledge, as the DOE budget for FY2013 states that "the FY 2013 [Vehicle Technologies program] activities focus on meeting the President's 2015 electrification goal."

In addition to the level of federal support, these other factors will influence the development of a domestic advanced battery industry:

Cost. There is a consensus that the current cost of electric batteries is too high. Most automakers have not said how much their batteries cost "because of proprietary information, and battery companies may sell batteries below cost in order to gain market share." Battery costs are commonly expressed in kilowatt hours (kWh). Recent reports indicate that Li-ion batteries cost about $500/kWh, which would mean the 16kWh Volt battery would cost $8,000 and the 24kWh Leaf battery would cost about $12,000. (The 2013 Volt retails for $39,145, and the 2013 Leaf for $28,100.) If production of batteries were to increase substantially, then economies of scale could drive these costs down, as could research breakthroughs. The U.S. Advanced Battery Consortium has a mid-term target of $250/kWh and a longer-term goal of $100/kWh. Charging. Electric vehicles will need to be recharged as often as every day, depending on how far the cars are driven. Current charging applications using standard 110-volt household current (called Level 1 charging) can take over 12 hours. Homeowners can install more powerful charging stations at home, but a 240-volt charging station (Level 2) would still require a car to charge for six hours or more. At commercial 440-volt charging stations (Level 3), a driver would have to leave the vehicle for 30 minutes if its battery is depleted. In addition, the driving range of an electric vehicle drops if many accessories, such as air conditioning, are used, potentially requiring more frequent recharging. A related issue is the availability of charging stations to service electric vehicles. DOE counted 5,612 charging stations accessible to the public as of March 2013. In March 2013, ChargePoint and ECOtality, which together handle about 90% of U.S. public car charging, announced a joint venture to make access to chargers easier for motorists. Range . Many vehicles with IC engines can travel over 350 miles before needing a refill of gasoline. Vehicles with electric motors have a shorter range, which may cause some consumers to avoid purchasing them. The U.S. Environmental Protection Agency (EPA) estimates that the Leaf can travel 73 miles before recharging, and the Volt, 37 miles. (The Leaf is an all-electric vehicle; the Volt also has a small gasoline tank that extends its total range to 379 miles.) Ranges are lower if the heater or air-conditioning is used extensively, as the power for these accessories is drawn totally from the battery. However, improvements in regenerative braking systems, which provide power for the vehicle and simultaneously recharge the battery, may extend range. Price of gasoline . Sustained high gasoline prices would be expected to spur stronger demand for fuel-efficient vehicles, including hybrid and electric vehicles. Improved IC engine technology. A number of low-cost vehicles with IC engines now tout fuel efficiency of 40 miles per gallon (mpg) or more. They include the Chevrolet Cruze, Hyundai Elantra, Ford Fiesta, and Ford Focus. The hybrid Toyota Prius is rated at 51 mpg. The most fuel-efficient cars with IC engines sell from just under $14,000 to $23,000, well below the current cost of either the Volt or Leaf, even after the $7,500 federal tax credit. Improved fuel efficiency in IC engines may reduce the attraction of electric vehicles. Subsidies by other governments. The U.S. government is not alone in wanting to establish a Li-ion battery supply chain. Governments in Japan, South Korea, and China are providing similar incentives. Japan is currently the leader in manufacturing of advanced automobile batteries, although its industry is modest given the low level of global demand. South Korea has announced a $12.5 billion investment in the "Battery 2020 Project," which seeks to make that country the dominant battery manufacturer in the next decade. China has a similar national policy and is reportedly investing $15 billion over the next decade.

European manufacturers have generally favored further improvements in IC engines, and there is a greater acceptance of diesel engine fuel economy technology than in the United States. Europeans, however, are seemingly beginning to embrace electric vehicles. German Chancellor Angela Merkel said at a 2011 auto forum that "if we want to remain the world leader in automobiles, then we have to be at the forefront of electromobility." BMW, Daimler, and Volkswagen all have electric vehicles ready for market, as shown in Appendix C . But the poor performance of European auto sales since the end of the recession is having an impact. According to a New York Times report, BMW has been reemphasizing conventional technology and downplaying the prospects of electric vehicles.

Conclusion

Without action by the U.S. government in 2009 through ARRA, there would be little likelihood that the United States would have any foundation in the Li-ion battery supply chain. Automakers have been clear that minus those incentives to build plants here, they would have sourced many cells straight from plants in Asia. As shown in Appendix C , nearly all automakers are offering electric vehicles, and some of the federal and private investments made since the recession have increased capacity in the domestic battery supply chain. GM Chairman and CEO Dan Akerson told an audience in March 2013 that "the era of using electricity to help improve performance and fuel economy is already here and the trend is only going to grow."

Electric vehicles are still in their infancy, and there is a gap between the Administration's goal of having 1 million electric vehicles on the road by 2015 and consumer demand for such vehicles. Sales of both GM's Volt and Nissan's Leaf have fallen short of the manufacturers' initial forecasts, but when hybrid vehicle sales are added to the mix, vehicles able to run on battery power are gaining in popularity.

Two major obstacles may stand in the way of the United States creating a significant electric vehicle industry based on a domestic electric battery supply chain. First, there is intense international competition, both in vehicles and in the batteries to power them. Whatever their long-run prospects, electric vehicles and batteries are unlikely to be profitable for manufacturers in the near term. Some have called for additional government support and public education so that alternative-vehicle fuel systems such as hybrid and electric vehicles are more readily deployed, and the benefits of the cleaner environment they may create are more widely understood and accepted by consumers. Given that capacity outstrips current demand for both vehicles and advanced batteries, the point at which a domestic battery industry could stand on its own, without federal support, cannot be predicted.

Secondly, to attain broader consumer acceptance and thereby build the scale to drive down production costs, battery technology needs to advance further to address cost, range and recharging issues. It remains uncertain that Li-ion batteries will be the ultimate solution. As a recent academic report asserted:

Lithium-ion batteries may never have adequate energy density to independently power a household's primary multi-purpose vehicle. Although there have been significant improvements in battery technology since the 1990s, policymakers should consider a large increase in federal R&D investments into innovative battery chemistries, prototyping and manufacturing processes.

Advanced battery manufacturing is still an infant industry whose technology and potential market remain highly uncertain. Its development in the United States is likely to depend heavily on how the federal government further addresses the challenges of building a battery supply chain and promoting advances in battery technologies.

Appendix A. ARRA Awards

Appendix B. Hybrid Vehicle Battery Placement

Appendix C. Current and Planned Electric and Hybrid Vehicles in the U. S. Market