Over the past few months several analysts have predicted dire times for the U.S. advanced battery industry. Most negative assessments point to a purported government-funded overbuilding of manufacturing capacity for advanced lithium-ion batteries relative to the small and slowly developing domestic market for such products.
It is certainly true that the domestic market for electric vehicles and grid-connected energy storage, which was the target of much of the recent capacity build-out, will be slower to develop than many had hoped. The domestic automotive and electricity markets are among the most mature and complex sectors of the American economy. In mature markets, new technology tends to bring incremental improvements to systems that already work quite well. As a consequence, appetite for risk in these sectors is low. New technologies are adopted slowly and carefully and with a degree of deliberation that often seems agonizingly slow.
But analysts who have looked at these mature U.S. markets and predicted doom for domestic advanced battery manufacturers have overlooked a potentially important factor: export markets, particularly in the developing world.
At first blush, the idea of finding lucrative markets in developing countries for advanced U.S. technology that the domestic U.S. markets are still largely unwilling to adopt sounds bizarre. But there is logic to it. In developing countries where the electricity grid is not large, complicated and reliable, investments in grid-connected energy storage will have a noticeable and immediate impact on reliability. Moreover, even relatively expensive grid-connected energy storage systems may be seen by developing world grid operators as a less expensive investment than investing in the incumbent technology necessary to bring their grid to First World standards.
The obvious analogy is to wireless telephone technology. Many developing countries have simply given up on building the large and complicated fixed-line telephone infrastructure that is still the core of First World communications systems. As a consequence, the ratio of mobile phone subscriptions to fixed-fixed line phone subscriptions in the developing world is significantly higher than in much of the developed world.
A similar phenomenon may also develop in electric vehicles. To date, China has invested more money in electric drive technology than any other country. Driving that investment is the Chinese government’s calculation that existing petroleum supplies and infrastructure will be insufficient to permit Chinese consumers to adopt motor vehicles at rates enjoyed by developed world consumers. Electric drive is a way to bridge that gap. The governments of other, if perhaps not quite as rapidly growing, developing countries will undoubtedly make the same calculation.
The interest of the developing world in electricity storage, both grid-connected and mobile, could be a big opportunity for U.S.-based advanced battery manufacturers. Rather than being defined, and having their fates dictated, by mature and slowly growing domestic markets, those manufacturers may be able to take advantage of an export market that could, in the short term, represent a much better opportunity than domestic sales.
The U.S. government is waking up to this possibly good news story. At the 2011 NAATBatt Annual Meeting and Conference on September 7-8, 2011 in Louisville, representatives of the U.S. Department of Commerce, The Export-Import Bank of the United States and the International Finance Corporation (a division of the World Bank) will talk about programs and incentives which can help U.S. battery manufacturers take advantage of growing foreign markets for their products. In addition, Terry Copeland, CEO of Altairnano Technologies, and Chris Cowger, CEO of Ener1 will talk about how they see opportunities for advanced energy storage in the export market. Both Altairnano and Ener1 have recently focused on that market with some success.
All of this, of course, may leave a number of New York-based analysts (none of which, other than Needham and Lux, have registered to attend the meeting in Louisville) with egg on their faces. While the success of U.S. advanced battery manufacturers in foreign markets is by no means assured, it is the kind of opportunity that can produce needed sales for the industry. The opportunity must be explored. Go to the link for the 2011 Annual Meeting and Conference on www.naatbatt.org to see how to be part of that exploration.