DOE Budget a Bonanza for Battery Builders

Announced on February 14, the Obama administration’s Department of Energy (DOE) budget recommendation is a big valentine to those working on developing batteries for electric vehicles.

As we said last year, the current administration has focused the majority of its vehicle technologies research and development dollars on EVs. This is a significant reversal from the attention given to fuel cell vehicles and biofuels such as ethanol during the second Bush administration. As with last year, the request completely omits funding development for these two technologies, which is a significant blow to the companies developing those alternatives.

For fiscal year 2013, the DOE is requesting a total allocation for the Vehicle Technologies program of $420 million, down from the $588 million requested last year, but still a 27-percent jump over the $329 million that Congress actually approved last year.

The new budget calls for an increase of 73 percent in funding dedicated to “Batteries and Electric Drive Technologies.” This $203 million would represent 48 percent of the total vehicle technologies budget, up from the 35 percent included in last year’s budget. As you can see in the accompanying chart, three research areas would receive less investment in 2013 while no other area would receive an increase of more than 20 percent, a further indication that battery R&D is where the federal money is.

These numbers show a consistent viewpoint between the DOE and the automotive industry: For plug-in electric vehicles (PEVs) to succeed, major improvements are needed across the board for EV batteries. The technology currently being used in today’s plug-in vehicles is not sufficient to sell millions of these vehicles annually. Improvements are sorely needed in making the batteries last longer, cost less, store more energy, and produce more power for the majority of consumers to consider buying a PEV.

Let’s not forget that there continues to be tangible progress in battery development. Lithium ion batteries are seeing improvements in all of these areas annually, as the estimated installed cost per kWh for an entire battery system fell from nearly $900 in 2010 to below $800 in 2011.

Thanks to the billions of dollars of private capital, and in part the $2 billion in grants from the 2009 American Recovery and Reinvestment Act for battery technology, R&D on battery technology development is accelerating. However, the fruits of this investment won’t be fully realized for a few years to come due to the deliberate process of commercialization within the automotive industry. In some cases (such as the award to EnerDel), no benefits are likely to be seen from the government funding, but every program has its winners and losers. The additional research battery being undertaken this year is unlikely to provide any benefit until the latter part of the decade, which requires patience that many investors lack.