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Charles W. Wessner, Rapporteur Subcommittee on Electric Drive Battery Research and Development Activities Committee on Competing in the 21st Century: Best Practice in State and Regional Innovation Initiatives Board on Science, Technology, and Economic Policy Policy and Global Affairs

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THE NATIONAL ACADEMIES PRESS 500 Fifth Street NW Washington DC 20001 NOTICE: The project that is the subject of this report was approved by the Governing Board of the National Research Council, whose members are drawn from the councils of the National Academy of Sciences, the National Academy of Engineering, and the Institute of Medicine. The members of the committee responsible for the report were chosen for their special competences and with regard for appropriate balance. This study was supported by: Contract/Grant No. DE-DT0000584, TO# 29, between the National Academy of Sciences and the Department of Energy. This report was prepared by the National Academy of Sciences under award number SB134106Z0011, TO# 4 (68059) from the U.S. Department of Commerce, National Institute of Standards and Technology (NIST). This report was prepared by the National Academy of Sciences under award number 99-06-07543-02 from the Economic Development Administration, U.S. Department of Commerce. The statements, findings, conclusions, and recommendations are those of the author(s) and do not necessarily reflect the views of the National Institute of Standards and Technology, the Economic Development Administration, or the U.S. Department of Commerce. Additional support was provided by the Michigan Economic Development Corporation and Michigan's University Research Corridor. Any opinions, findings, conclusions, or recommendations expressed in this publication are those of the author(s) and do not necessarily reflect the views of the organizations or agencies that provided support for the project. International Standard Book Number 13: 978-0-309-25452-6 (Book) International Standard Book Number 10: 0-309-25452-3 (Book) Additional copies of this report are available for sale from the National Academies Press, 500 Fifth Street, N.W., Keck 360, Washington, DC 20001; (800) 624-6242 or (202) 334-3313; http://www.nap.edu/. Copyright 2012 by the National Academy of Sciences. All rights reserved. Printed in the United States of America

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The National Academy of Sciences is a private, nonprofit, self-perpetuating society of distinguished scholars engaged in scientific and engineering research, dedicated to the furtherance of science and technology and to their use for the general welfare. Upon the authority of the charter granted to it by the Congress in 1863, the Academy has a mandate that requires it to advise the federal government on scientific and technical matters. Dr. Ralph J. Cicerone is president of the National Academy of Sciences. The National Academy of Engineering was established in 1964, under the charter of the National Academy of Sciences, as a parallel organization of outstanding engineers. It is autonomous in its administration and in the selection of its members, sharing with the National Academy of Sciences the responsibility for advising the federal government. The National Academy of Engineering also sponsors engineering programs aimed at meeting national needs, encourages education and research, and recognizes the superior achievements of engineers. Dr. Charles M. Vest is president of the National Academy of Engineering. The Institute of Medicine was established in 1970 by the National Academy of Sciences to secure the services of eminent members of appropriate professions in the examination of policy matters pertaining to the health of the public. The Institute acts under the responsibility given to the National Academy of Sciences by its congressional charter to be an adviser to the federal government and, upon its own initiative, to identify issues of medical care, research, and education. Dr. Harvey V. Fineberg is president of the Institute of Medicine. The National Research Council was organized by the National Academy of Sciences in 1916 to associate the broad community of science and technology with the Academy's purposes of furthering knowledge and advising the federal government. Functioning in accordance with general policies determined by the Academy, the Council has become the principal operating agency of both the National Academy of Sciences and the National Academy of Engineering in providing services to the government, the public, and the scientific and engineering communities. The Council is administered jointly by both Academies and the Institute of Medicine. Dr. Ralph J. Cicerone and Dr. Charles M. Vest are chair and vice chair, respectively, of the National Research Council. www.national-academies.org

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Subcommittee on Electric Drive Battery Research and Development Activities Mary L. Good (NAE), Chair Ralph Brodd Dean Emeritus, Donaghey College President of Engineering and Information Broddarp of Nevada Technology Special Advisor to the Chancellor Robert Kruse for Economic Development Principal University of Arkansas EV Consulting at Little Rock W. Clark McFadden II Raymond G. Boeman Senior Counsel Director, Energy Partnerships Orrick, Herrington & Sutcliffe LLP Oak Ridge National Laboratory Daniel Sperling Michael G. Borrus Director, Institute Founding General Partner of Transportation Studies X/Seed Capital Management University of California, Davis Committee on Competing in the 21st Century: Best Practice in State and Regional Innovation Initiatives Mary L. Good (NAE), Chair W. Clark McFadden II Dean Emeritus, Donaghey College Senior Counsel of Engineering and Information Orrick, Herrington & Sutcliffe LLP Technology Special Advisor to the Chancellor David T. Morgenthaler for Economic Development Founding Partner University of Arkansas Morgenthaler Ventures at Little Rock Edward E. Penhoet (IOM) Michael G. Borrus Director Founding General Partner Alta Partners X/Seed Capital Management Tyrone C. Taylor William C. Harris President President and CEO Capitol Advisors Science Foundation Arizona on Technology, LLC v

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PROJECT STAFF Charles W. Wessner Sujai J. Shivakumar Study Director Senior Program Officer McAlister T. Clabaugh David E. Dierksheide Program Officer Program Officer David S. Dawson Peter Engardio Senior Program Assistant Consultant vi

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For the National Research Council (NRC), this project was overseen by the Board on Science, Technology and Economic Policy (STEP), a standing board of the NRC established by the National Academies of Sciences and Engineering and the Institute of Medicine in 1991. The mandate of the Board on Science, Technology, and Economic Policy is to advise federal, state, and local governments and inform the public about economic and related public policies to promote the creation, diffusion, and application of new scientific and technical knowledge to enhance the productivity and competitiveness of the U.S. economy and foster economic prosperity for all Americans. The STEP Board and its committees marshal research and the expertise of scholars, industrial managers, investors, and former public officials in a wide range of policy areas that affect the speed and direction of scientific and technological change and their contributions to the growth of the U.S. and global economies. Results are communicated through reports, conferences, workshops, briefings, and electronic media subject to the procedures of the National Academies to ensure their authoritativeness, independence, and objectivity. The members of the STEP Board* and the NRC staff are listed below: Paul L. Joskow, Chair Mary L. Good (NAE) President Dean Emeritus, Donaghey College Alfred P. Sloan Foundation of Engineering and Information Technology Ernst R. Berndt Special Advisor to the Chancellor Louis E. Seley Professor for Economic Development in Applied Economics University of Arkansas Massachusetts Institute at Little Rock of Technology William H. Janeway John Donovan Partner Chief Technology Officer Warburg Pincus, LLC AT&T Inc. Richard K. Lester Alan M. Garber (IOM) Japan Steel Industry Professor Provost Head, Nuclear Science Harvard University and Engineering Founding Director, Industrial Ralph E. Gomory (NAS/NAE) Performance Center Research Professor Massachusetts Institute Stern School of Business of Technology New York University *As of September 2012. continued vii

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William F. Meehan III Kathryn L. Shaw Lecturer in Strategic Management Ernest C. Arbuckle Professor Raccoon Partners Lecturer of Economics in Management Graduate School of Business Graduate School of Business Stanford University Stanford University and Laura D'Andrea Tyson Director Emeritus S.K. and Angela Chan Professor McKinsey and Co., Inc. of Global Management Haas School of Business David T. Morgenthaler University of California, Berkeley Founding Partner Morgenthaler Ventures Harold R. Varian Chief Economist Luis M. Proenza Google, Inc. President The University of Akron Alan Wm. Wolff Senior Counsel William J. Raduchel McKenna Long & Aldridge LLP Chairman Opera Software ASA STEP Staff Stephen A. Merrill Charles W. Wessner Executive Director Program Director Paul T. Beaton David S. Dawson Program Officer Senior Program Assistant McAlister T. Clabaugh David E. Dierksheide Program Officer Program Officer Aqila A. Coulthurst Sujai J. Shivakumar Program Coordinator Senior Program Officer viii

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Contents PREFACE xiii I. OVERVIEW 1 II. PROCEEDINGS 45 DAY ONE Welcome 47 Greg Main, Michigan Economic Development Corporation Opening Remarks I 48 Carl Levin, United States Senate Opening Remarks II Introduction by Charles W. Wessner, The National Academies 51 Sridhar Kota, White House Office of Science and Technology Policy 52 Opening Remarks III 56 Jennifer Granholm, State of Michigan Overview of NAS Study: Building the Battery Industry for Electric Vehicles 59 Mary Good, University of Arkansas at Little Rock Keynote Address Introduction by John R. Chalifoux, Original Equipment Suppliers 62 Association Debbie Stabenow, United States Senate 63 Panel I: The Federal Outlook for the U.S. Battery Industry 70 Moderator: Charles W. Wessner, The National Academies The Department of Energy Perspective 70 Patrick B. Davis, U.S. Department of Energy Vehicle Technologies Program ix

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x CONTENTS The Army Perspectives 76 Grace Bochenek, U.S. Army Tank Automotive Research, Development and Engineering Center John Pellegrino, U.S. Army Research Laboratory Panel II: The State of Battery R&D and Manufacturing in the United States 84 Moderator: Ralph C. Brodd, Kentucky-Argonne National Battery Manufacturing R&D Center The Battery Industry Perspective 84 Jason M. Forcier, A123 Systems Mohamed Alamgir, Compact Power The Automotive Industry Perspective 92 Nancy Gioia, Ford Motor Company The University/Startup Perspective 99 Ann Marie Sastry, University of Michigan and Sakti3 Panel III: Strengthening the Supply Chain 103 Moderator: Jim Greenberger, National Alliance for Advanced Technology Batteries Battery Manufacturer Perspective 104 Tom Watson, Johnson Controls Defining the Supply Chain: Gaps and Opportunities 107 Michael E. Reed, Magna E-Car Systems Battery Materials Availability and Recycling 110 Linda Gaines, Argonne National Laboratory Panel IV: Market Drivers: 117 Creating Demand for Electric Vehicles Moderator: Robert Kruse, EV Consulting LLC Incentives for the Electric Vehicle Market 118 Daniel Sperling, University of California-Davis The Industry Perspective: Transforming 123 the Automotive Industry Gary Smyth, General Motors

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CONTENTS xi Early Adoption of Hybrid Vehicles 125 Bill Van Amburg, CALSTART Panel V: Building the Battery Workforce 134 Moderator: Bill Harris, Science Foundation Arizona Workforce Needs and Opportunities 135 Robert Kamischke, EnerDel Technical Training and Workforce Development 138 Simon Ng, Wayne State University DAY TWO Welcome and Introduction 142 Andy Levin, Michigan Department of Energy, Labor and Economic Growth Panel VI-A: Federal and State Programs to Support 145 the Battery Industry Moderator: Charles W. Wessner, The National Academies The Department of Energy Battery 145 R&D Program and Goals David Howell, U.S. Department of Energy Department of Defense Battery 151 R&D Programs and Goals Sonya Zanardelli, U.S. Army Tank and Automotive Research, Development, and Engineering Center The Kentucky-Argonne 154 National Battery Manufacturing R&D Center Ralph C. Brodd, Kentucky-Argonne National Battery Manufacturing R&D Center Panel VI-B: Federal and Michigan Programs 159 to Support the Battery Industry Moderator: Sujai Shivakumar, The National Academies The Department of Commerce and the Role 159 of the Manufacturing Extension Partnership David C. Stieren, Manufacturing Extension Partnership

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xii CONTENTS Michigan Investments in 163 Batteries and Electric Vehicles Eric Shreffler, Michigan Economic Development Corporation Roundtable: What Have We Learned and Next Steps 169 Moderator: Mary Good, University of Arkansas at Little Rock Bill Harris, Science Foundation Arizona Les Alexander, A123 Systems Gary Krause, Michigan Economic Development Corporation III. APPENDIXES A Agenda 177 B Biographies of Speakers 181 C Participants List 205 D Bibliography 209

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Preface Responding to the challenges of fostering regional growth and employment in an increasingly competitive global economy, many U.S. states and regions have developed programs to attract and grow high-technology companies, develop the talent and resources necessary to create innovation clusters, and sustain manufacturing and high value employment. These state and regionally based initiatives have a broad range of goals and increasingly include significant resources that often focus on driving innovation and often in partnership with foundations and universities. These are being joined by recent initiatives to coordinate and concentrate investments from a variety of federal agencies that provide significant resources to develop regional centers of innovation, business incubators, and other strategies to encourage entrepreneurship and high-tech development. In this regard, the state of Michigan is making significant investments to develop an electrified-vehicle industrial cluster. The state offered more than $1 billion in grants and tax credits to manufacturers of lithium-ion battery cells, packs, and components. Michigan has also invested in research centers and skilled-worker training programs for electrified vehicles. Efforts by the federal government to ensure that the U.S. has a domestic manufacturing base for advanced batteries are complementing Michigan's initiatives. The federal government in 2009 awarded $2.4 billion in grants under the American Recovery and Reinvestment Act to manufacturers of lithium-ion cells, battery packs, and materials.1 A host of other financial incentives have also been introduced to help companies commercialize new vehicle technologies, build production lines, build supply chains, and encourage consumers to buy electric-gas hybrid cars. To review the developments, as well as the needs and challenges, of the U.S. electric drive battery industry in Michigan, the National Academies Board on Science, Technology, and Economic Policy (STEP), in cooperation with the Michigan Economic Development Corporation and the Department of Energy, convened a symposium, on Building the U.S. Battery Industry for Electric Drive Vehicles: Progress, Challenges, and Opportunities. The symposium, held on 26-27 July 2010 in Livonia, Michigan, and this report of that symposium, address the first of two key elements of the Statement of Task (described below) of a committee of the National Research Council. 1 The American Recovery and Reinvestment Act of 2009 (P. L. 115-5) is a $787 billion economic stimulus packaged signed by President Barack Obama on Feb. 17, 2009. See Department of Energy, "The Recovery Act: Transforming America's Transportation Sector--Batteries and Electric Vehicles," July 14, 2010 (http://www.whitehouse.gov/files/documents/Battery-and-Electric-Vehicle- Report-FINAL.pdf) xiii

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xiv PREFACE STATEMENT OF TASK The Overall Project An ad hoc subcommittee will plan and conduct two public symposia to review and analyze the potential contributions of public-private partnerships and identify other relevant issues for the Department of Energy, Office of Vehicle Technologies, Energy Storage Team's activities in the energy storage research and development area. The symposia will also identify lessons from these and other domestic and international experiences to help inform DoE as to whether its activities are complete and appropriately focused. Additional topics that emerge in the course of the planning may also be addressed. The two symposia will gather representatives from leading battery manufacturers, automotive firms, university researchers, academic and industry analysts, congressional staff, and federal agency representatives. An individually-authored summary of each symposium will be issued. This Report The symposium that is the subject of this report was held in Michigan in order to provide direct access to the policymakers and industrial participants drawn from the concentration of battery manufacturers and automotive firms in the region. The symposium reviewed the current state, needs, and challenges of the U.S. advanced battery manufacturing industry; challenges and opportunities in battery R&D, commercialization, and deployment; collaborations between the automotive industry and battery industry; workforce issues, and supply chain development. It also focused on the impact of DoE's investments and the role of state and federal programs in support of this growing industry. This task of this report is to summarize the presentations and discussions that took place at this symposium. Needless to say, the battery industry has evolved very substantially since the conference was held, and indeed some of the caveats raised by the speakers with regard to overall demand for batteries and the prospects of multiple producers now seem prescient. At the same time, it is important to understand that it is unrealistic to expect that all recipients of local, state, or federal support in a complex and rapidly evolving industry will necessarily succeed. A number of the firms discussed here have been absorbed by competitors, others have gone out of business, and others continue to progress.2 2 The Overview chapter of this report takes note of these recent developments.

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PREFACE xv THE CONTEXT OF THIS REPORT Since 1991, the National Research Council, under the auspices of the Board on Science, Technology, and Economic Policy, has undertaken a program of activities to improve policymakers' understandings of the interconnections of science, technology, and economic policy and their importance for the American economy and its international competitive position. The Board's activities have corresponded with increased policy recognition of the importance of knowledge and technology to economic growth. One important element of STEP's analysis concerns the growth and impact of foreign technology programs.3 U.S. competitors have launched substantial programs to support new technologies, small firm development, and consortia among large and small firms to strengthen national and regional positions in strategic sectors. Some governments overseas have chosen to provide public support to innovation to overcome the market imperfections apparent in their national innovation systems.4 They believe that the rising costs and risks associated with new potentially high-payoff technologies, and the growing global dispersal of technical expertise, underscore the need for national R&D programs to support new and existing high-technology firms within their borders. Similarly, many state and local governments and regional entities in the United States are undertaking a variety of initiatives to enhance local economic development and employment through investment programs designed to attract knowledge-based industries and grow innovation clusters.5 These state and regional programs and associated policy measures are of great interest for their potential contributions to growth and U.S. competitiveness and for the "best practice" lessons they offer for other state and regional programs. STEP's project on State and Regional Innovation Initiatives is intended to generate a better understanding of the challenges associated with the transition of research into products, the practices associated with successful state and regional programs, and their interaction with federal programs and private initiatives. The study seeks to achieve this goal through a series of complementary assessments of state, regional, and federal initiatives; analyses of specific industries and technologies from the perspective of crafting supportive public policy at all three levels; and outreach to multiple 3 National Research Council, Innovation Policies for the 21st Century, C. Wessner, ed., Washington DC: National Academies Press, 2007. 4 For example, a number of countries are investing significant funds in the development of research parks. For a review of selected national efforts, see National Research Council, Understanding Research, Science and Technology Parks: Global Best Practices, C. Wessner, ed., Washington, DC: National Academies Press, 2009. 5 For a scoreboard of state efforts, see Robert Atkinson and Scott Andes, The 2010 State New Economy Index: Benchmarking Economic Transformation in the States, Kauffman Foundation and ITIF, November 2010.

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xvi PREFACE stakeholders. The overall goal is to improve the operation of state and regional programs and, collectively, enhance their impact. WORKSHOP SUMMARY This report captures the presentations and discussions of the STEP symposium on Building the U.S. Battery Industry for Electric Drive Vehicles: Progress, Challenges, and Opportunities. It includes an introduction highlighting key issues raised at the meeting and summary of the meeting's presentations. This workshop summary has been prepared by the workshop rapporteur as a factual summary of what occurred at the workshop. The planning committee's role was limited to planning and convening the workshop. The statements made are those of the rapporteur or individual workshop participants and do not necessarily represent the views of all workshop participants, the planning committee, or the National Academies. ACKNOWLEDGMENTS On behalf of the National Academies, we express our appreciation for the insights, expertise, and perspectives provided by the many well-informed contributors to this meeting. We would also like to extend special recognition to Gary Krause from the Michigan Economic Development Corporation and his colleagues, along with McAlister Clabaugh and David Dawson of the STEP staff, for their commitment and excellent organization of the event. We are also indebted to Peter Engardio, formerly of Businessweek and now with the Boston Consulting Group, for his preparation of the introduction and summary of the meeting. We also wish to thank Dr. Sujai Shivakumar and David Dawson of the STEP staff for their tireless efforts to prepare the report for publication among many other competing priorities. NATIONAL RESEARCH COUNCIL REVIEW This report has been reviewed in draft form by individuals chosen for their diverse perspectives and technical expertise, in accordance with procedures approved by the National Academies' Report Review Committee. The purpose of this independent review is to provide candid and critical comments that will assist the institution in making its published report as sound as possible and to ensure that the report meets institutional standards for quality and objectivity. The review comments and draft manuscript remain confidential to protect the integrity of the process. We wish to thank the following individuals for their review of this report: Robert Bachrach, Energy & Environmental Solutions; Robert Boege, ASTRA; Martin Dober, Michigan Economic Development Corporation; and Paul DeCotis, Long Island Power Authority. Although the reviewers listed

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PREFACE xvii above have provided many constructive comments and suggestions, they were not asked to endorse the content of the report, nor did they see the final draft before its release. Responsibility for the final content of this report rests entirely with the STEP Board and the institution. Charles W. Wessner Mary L. Good

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