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Jan 27, 2012

EV Battery Company’s Bankruptcy Doesn’t Mean the Sky is Falling

 

Brace for another wave of complaints about Energy Department support for emerging energy technologies and another round of stories about electric vehicles’ troubles.

Indiana-based Ener1 Inc., recipient of a $118 million grant to make lithium-ion batteries for electric cars and other applications, filed for Chapter 11 bankruptcy reorganization, inviting comparisons with solar equipment maker Solyndra, which went bankrupt after receiving a DOE loan.

Ener1 was hurt by the June bankruptcy of Norway's Think Global, in which Ener1 had invested and which was a major customer for the batteries. Reuters reported that Ener1's court filing said the company faced "intense competition" from other battery makers such as Toyota, as well as Chinese and Korean rivals that have lower manufacturing costs.

In the current polarized political environment, the bankruptcy of a clean energy company that received government aid will lead to criticism of all such aid. Part of the problem with that is, politics aside, innovation is what the U.S. needs to out-compete China and others. Turning away from new technologies such as EVs or solar energy creates the double whammy of perpetuating our dependence on coal and oil (which threatens our economy), and putting us even further behind in the global clean energy race.

The United States burns 13 million barrels of oil a day for transportation at a direct cost of $2 billion. That oil dependence also incurs hidden costs totaling roughly $1.5 trillion a year, or 12 percent of gross domestic product.

Rocky Mountain Institute, in its Reinventing Fire roadmap to a stronger economy fueled by clean energy, shows how electric vehicles hold promise both for breaking oil’s lock on transportation and for serving as energy storage vessels that can help transform our aging, dirty electricity system.

A bankruptcy filing doesn’t mean the sky is falling and shouldn’t be an excuse to remain reliant on fossil fuels.

But we should expect overblown comparisons with Solyndra, which faced political scrutiny over allegations that the Obama administration pushed a loan guarantee despite known troubles and favored the company because investor George Kaiser was a fundraiser for President Obama.

And each story on Ener1 will regurgitate the flawed storyline that EVs are flopping. But supporters can take heart that California regulators on Friday approved rules intended to result in 1.4 million zero emission vehicles on California roads by 2025.

Ener1 said it will complete its restructuring in 45 days and had arranged $81 million of new equity financing. It plans no job cuts and will honor its commitments, which include military contracts to develop batteries for unmanned aircraft and work on battery storage for a microgrid for the 2014 Winter Olympics in Sochi, Russia.

“While it’s unfortunate that Ener1 … has entered a restructuring process,” the investment of “private capital demonstrates that the technology has merit,” Jen Stutsman, a spokeswoman for the Energy Department, said in an e-mail to Bloomberg

Companies in emerging industries do struggle. Obama acknowledged as much in last week’s State of the Union address in a thinly veiled reference to Solyndra as he also noted that government research led to breakthroughs in freeing natural gas from shale.

“Our experience with shale gas shows us that the payoffs on these public investments don't always come right away,” Obama said. “Some technologies don’t pan out; some companies fail.”

Automotive history confirms this, as well. The turn of the last century saw scores of companies emerge seeking to seize advantage in the new auto industry. Almost all of them, from Argo Electric to Duesenberg, Essex and Stanley Steamer, folded. General Motors was formed by combining fledgling companies. And what happened to Commodore computers?

Efforts to innovate toward a clean-energy economy will face setbacks but will continue. Ultimately, this transition will be led by business, as Reinventing Fire suggests. Those innovators will find their niche and not only lead the way, but lead change in America—like Ford or Microsoft in past revolutions.

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