Michigan faces fierce competition in race to be world’s battery capital

A researcher at Illinois' Argonne National Laboratory examines a lithium-ion battery, something the state of Michigan is hoping will help the auto industry escape from its economic doldrums. (Creative Commons photo courtesy Argonne National Laboratory via Flickr)

Just a couple of years ago, Cobasys LLC of Oakland County’s Orion Township seemed like the gleaming, silver edge of a prized toy in an old-fashioned Cracker Jack box.

Founded by a former General Motors chief, Cobasys supplied the nickel-metal hydride batteries for the hybrid version of the Chevrolet Malibu. And there was economic warfare going on between Michigan and Ohio, with Cobasys as the prize. Tax abatements were given, state help offered, infrastructure support thrown in, along with money for job training. With frustrations over Cobasys in mind, there was some discussion in Michigan government and economic circles over how Ohio appeared to offer better incentives for companies than Michigan.

It is now two years, and an economic and technological lifetime, later. Nickel-metal hydride batteries are largely viewed as yesterday’s technology. The hybrid Malibu? That’s history. And Cobasys is getting ready to file for bankruptcy protection.

In today’s climate, what seems like a desperate battleground for state technological and economic survival one year can look like a very dated, silly issue the next. But one positive thing has remained with us as a result: Michigan is now all set with goody-bags-full of incentives for battery companies that want to set up shop, or expand, in Michigan.

Rick Wagoner, then the chairman of General Motors, speaks at the North American International Auto Show in January where he said that batteries for the Chevy Volt will be made at a production facility to be built in Michigan. (Creative Commons photo by Grist.org via Flickr)

Look out, Ohio. And Indiana. And Kentucky. Yes, they all have dreams of becoming the center of the U.S. lithium-ion battery industry, too — possibly throwing a wrench in Michigan’s plan for automotive battery dominance.

Companies and technologies — no matter how promising they appear — come and go. That’s why private investors are urged to diversify. But cash-strapped governments betting on their future cannot afford to. Nickel metal hydride is definitely out. Corn ethanol was last year’s news. Now, Michigan Gov. Jennifer Granholm has visions of this state reviving itself as “the world’s epicenter for automotive research and design … literally redesigning the entire notion of the automobile.” Or, at the very least, “what we want to do is be the domestic place where batteries are produced,” Granholm wrote late last month.

It appears that Michigan, this time around, is at least focusing on the right technology at the right time.

Companies like lithium-ion battery developer Sakti3 in Ann Arbor are living off of venture capital funding but are eager for government funding in order to survive. They will develop their technology in the direction government wants them to go. And everybody from the Obama administration on down has decided that government incentives and funding will focus around development of lithium-ion batteries for hybrid and electric vehicles. Funding for hydrogen fuel cell development has been cut at the federal level. The energy secretary says that it’s just too far away from being ready for prime time.

David Cole, chairman of the Center for Automotive Research in Ann Arbor, agrees with both the focus of Michigan’s big technological and economic push and with the aspirations of Michigan’s governor. After all, with leading battery companies like A123 Systems and LG Chemical with branches in Michigan, the state at least has a shot.

“You might as well start out with some really significant players,” Cole said. “And that’s exactly where we are right now in this state.”

Cole said Michigan’s main thrust is actually in two areas. Lithium-ion batteries are getting most of the media coverage, but the state is also pushing non-food biofuels. We’re not talking about corn ethanol, but companies like Boston-based Mascoma, which can make cellulosic ethanol from a number of different kinds of feedstocks. The company is working on a plant in Michigan’s Upper Penninsula that will turn wood chips into fuel.

A good way to illustrate how to combine both of Michigan’s thrusts — lithium-ion batteries and non-food biofuels — is to look at the planned hybrid electric Chevy Volt. If you operate it on a mix of E-85 (15 percent gasoline, 85 percent alcohol) the effective mpg of the gasoline in the fuel is 400.

“When you combine those two technologies,” Cole said, “you really can end up with some game-changing capability.”

It all sounds great on paper, but that still leaves the question of whether Michigan can become, as the governor wants, the leader in these technologies rather than simply one more player.

Indiana recently signed a deal to bring lithium-ion battery developer EnerDel to its borders in a deal that could bring more than 850 new jobs.

And Ohio still is a thorn in Michigan’s side … or lower.

Recently, BASF — the world’s largest chemical company — proposed construction of one of North America’s largest lithium-ion battery material production plants in Elyria, Ohio. The plant would make use of technology licensed to BASF from Argonne National Laboratory in Illinois. Plant construction would be made possible thanks to a Recovery Act grant through the U.S. Department of Energy. If all the chips fall into place, the new plant would represent the highest ideals behind Obama’s stimulus plan, not to mention public-private partnerships coming together to create jobs and move cutting-edge technology from the lab to the marketplace.

And none of it would happen in Michigan.

This is not to minimize Michigan’s own respectable public-private partnerships between academic institutions, automakers and private industry. However, even the optimistic governor should be aware that the state is not only competing with Asia in building a lithium-ion battery infrastructure, but with neighboring states with ambitions just as sweeping.

There is, however, one important difference: Michigan, as far as it has fallen from grace as the center of automotive manufacturing, still has further to fall if it is not careful.

Cole calls the lithium-ion battery push the “offensive” side of Michigan’s plan for economic revival. What he calls the “defensive” can also be categorized under “be careful what you wish for.” An all-electric drive means some major retooling in the auto industry.

“If we get electrification of the powertrain — if that goes big — the impact on the transmission business, the general powertrain business here could be hit very, very hard,” Cole said. “We could lose some very important manufacturing and we would at least want the replacement manufacturing being here rather than someplace else.”

So, in Michigan, everybody’s talking about batteries. But what they’re really talking about, compared with competing states with similar aspirations, is a much bigger chunk of Michigan’s future.

Will the state win the battery war?

“That remains to be seen,” Cole said. “We certainly have a shot at it. This is not something that’s out of the realm of possibility.”

These days, that will have to do.