Moderator: Mary Good University of Arkansas at Little Rock
Moderator Mary Good asked participants to offer thoughts on “where we are and what are the pieces we should pick up with the next meeting that will be devoted to this area.” Bill Harris of Science Foundation Arizona, Les Alexander of A123, and Gary Krause of the Michigan Economic Development Corporation were asked to open the discussion.
As “a citizen concerned with the competitiveness of the country and some of the opportunities that clearly exist,” Mr. Harris said he was “extraordinarily impressed with what is going on in Michigan relative to the impression that newspapers give of the state of dire despair.” He recalled an old GM advertising line, “It’s Not Your Father’s Oldsmobile,” in the 1980s. “I think this is not the Michigan that your father knew as well,” he said.
Michigan’s outstanding universities and talent pool have long been assets, Mr. Harris noted. “But the tragedy was the narrowness of the economic base for so long around one industry that may not have modernized the way it should have.” He said he also was impressed at how well Michigan’s government functions. “When I hear there was a vote for $1 billion in incentives and there were a handful of negative votes, I would like to exchange legislatures for a few days” with that of Arizona, he said. “I can get you a whole lot of ‘no’s’ that you seem to be missing.” In the upcoming Washington meeting on batteries, “I think it is important to convey the sense of momentum, determination, and I would say competence that is here,” Mr. Harris said.
Another interesting message from the conference is the possibility of interactions among states or a big region, such as between Kentucky and Michigan, Mr. Harris said. “I think Kentucky’s goals and ambitions with Argonne match nicely with what is going on in Michigan, and there could be reasons to look at doing things together.”
It also is important for the U.S. to find a way to do large-scale manufacturing, Mr. Harris said. “I think if we stay with small businesses and are not able to compete with the big boys in Asia, we are making a serious mistake,” he said. NIST’s activity in manufacturing is important, but after 30 years it may be time to fine-tune that program, he added. “That was an important activity when it started,” Mr. Harris said. “It may need to take a look at where it is today and where the world is today and be bold about what it can do for the future. I
say that not as a criticism, but as a challenge, opportunity, and complement to what it is needed.”
Finding better ways for federal agencies to partner with states to add real value to the economy also is important, Mr. Harris said. “Too often, it seems the feds come in with a good idea,” he said. “But they are not really connected to the state apparatus and state entities. I also do not think we get the return on investment that we need” he said.
Mr. Harris suggested that the National Academy of Sciences invite speakers of state houses of representatives to these forums. “I think you need some legislators to understand what other states are doing,” Mr. Harris said. “The absence of informed representatives hurts the dialogue. Too often we forget about including state legislators in meetings like this, and that hurts their knowledge and information.”
Dr. Good said she liked the idea of inviting state representatives. “It is true that those are the fellows who have to vote ‘yes’ on some of these initiatives, and we need to get them on our side,” she said. The real problem, she acknowledged, is getting them to come. But if they are invited to Washington for such a meeting, the state will pay for it and some might see value in such a trip, she suggested.
Dr. Good asked Les Alexander, general manager for government solutions at A123, for his view from an industry perspective.
The coordination of state, federal, and military efforts has been important to driving development of the advanced battery industry, Mr. Alexander said. “Where I hope we continue to go is to look at demand-driven stimulation rather than stimulating manufacturing and research,” he said. “That is not to say manufacturing and research aren’t important. But we need to continue to pull through the technology into demand and applications to get the vehicles out on the road.”
Measures such as federal fleet purchases, incentives to encourage cities to adopt alternative energy, and grid applications “all are important to continue to strengthen the foundation we have built here,” Mr. Alexander said. “It is important for legislators and researchers to continue to look at the end game, which is to change our economic environment and fossil-fuel use.” While battery companies can keep conducting research in these areas, “it is important to get applications out on the street,” he said.
Dr. Wessner asked Mr. Alexander to cite the main risks facing A123.
One of the biggest is that A123 will not be able to operate its new U.S. plants at full capacity, Mr. Alexander said. Although A123 currently projects that its capacity will be fully utilized, if electric vehicles are not built or purchased “there is a risk this industry will go away,” he said. Successful launches of the Volt and Leaf are important.
Mr. Alexander noted that other nations that do not have the immense infrastructure of the U.S. for motor vehicles are looking at hybrids and electrics as their main source of transportation—just as cell phones are more important
than land-line telephones in certain emerging markets. “If we don’t embrace this technology, we could lose it,” he said.
Dr. Good agreed. “That means the issue of government procurement becomes very big.” She asked Gary Krause of the Michigan Economic Development Corp. for his opinion.
Mr. Krause first commented on the presentation by Eric Shreffler of the MEDC, which made it seem that the whole process was “so orderly and methodical.” From the inside, he said, “the exercise was a lot more exciting and a lot more breathtaking at times, with outcomes not necessarily predetermined.”
He said he was pleased to hear there was general agreement that the task of policy is not finished. “The easy part is incentivizing companies to get involved in the industry,” he said. “The more difficult aspect of this is that, now that the dog has chased and nearly caught the car, what do we do next? That is something that we as a state are really very concerned about.” Michigan has “literally bet the farm on this particular aspect of a broader policy for industrial diversification,” Mr. Krause said. There is $6 billion in state, federal, and private investment on the table, Mr. Krause pointed out. “That is a lot. So the issue of completing this task from a policy standpoint really is key.” The MEDC “will be doing everything in our power to protect, enhance, and leverage those considerable investments that have already been made,” he said.
In terms of market drivers, Mr. Krause said he “was a bit disappointed.” The National Academies should address “why it is so difficult for federal agencies, which have their hands on certain levers, to incent this industry,” he said. “Why is it so difficult to get better cooperation in terms of military applications, the postal service, and even general governmental use of vehicles?” He said response has been “tepid, and we really need to concentrate on that a little more.”
Another major issue is acceptability of electric vehicles, Mr. Krause said. “I was encouraged that the discussion got beyond passenger cars,” he said. “The real payoff comes when one gets into those larger trucks, the off-road vehicles, and the construction and agriculture applications.
Mr. Krause said Mr. Sperling’s presentation on the cultural shift in attitudes toward electric vehicles was interesting. “What is needed here is a very educational process,” he said. “This thing is seemingly being pushed from a government and industry standpoint. And all of the discussions seem to go around why we can’t do this rather than why we can do this.” There are “real advantages” to electrifying transportation, he noted. “That excitement just doesn’t seem to be coming through. I would suggest that the educational effort be very different and not have a heavy fingerprint of government on it. It really needs to be about why there is an advantage to electrifying vehicles.” Mr. Krause said if the push is from the federal government perspective, “the very shrillness of the atmosphere those kinds of discussions take place in will discredit the process.”
Dr. Sastry of the University of Michigan said she “couldn’t agree more” with Mr. Krause’s point that “this cannot be a top-down, force-fed kind of
thing.” Instead, “we really need to engage the next generation of companies and people,” she said. Dr. Sastry said she also agreed with other speakers that the U.S. still needs to keep stressing innovation and scaling up, and that success stories should be highlighted. She suggested engaging student teams, education programs, and programs like the X Prize.41 She noted that the University of Michigan’s Energy System Engineering program proved successful and that others will follow. “What you are seeing now with Michigan Tech and Wayne State are follow-on programs that are excellent and marks of success,” she said. “What Andy Levin talked about was a mark of success.” Dr. Sastry said it would be great if a forum were created for innovators in the industry and academics.
Regarding Mr. Krause’s concern that too much of the vehicle electrification effort is driven by Washington, Dr. Wessner said that the goal “is to keep the DOE and Congress focused and keep at least some of the funding coming.”
Dr. Wessner also noted that Detroit has been able to sell cars of “great to medium quality through advertising for years.” He said he loves the Jeep ad campaign “What America Makes Matters” and that it is a great message. “I am quite confident they can sell these cars,” he said. He said he understands the Tesla electric car “smokes.” Dr. Wessner also recalled that when Detroit pushed sport-utility vehicles, a substantial tax credit was successful. Perhaps the $7,500 tax credit for electric vehicles should be doubled, he said. Dr. Wessner said he also wonders if Michigan can impose a tax on gas and use the proceeds for the advanced battery initiative.
As in many states, gas taxes are “a very hot button right now,” Mr. Krause responded. “We haven’t figured out what happens as vehicles become more efficient,” he said. “As we burn less gas, it decreases the amount of dollars available for infrastructure and road improvements. That is something that has been plaguing many states.” Michigan almost left more than $400 million in its share of federal gas revenues coming back to the state because it couldn’t match the percentage to access those funds, he explained. “So the issue of how we tax transportation is going to be a critical debate, and Michigan is just one of many states with a similar problem,” he said. “So the ability to divert some of those dollars to even higher objectives, I suspect, isn’t a priority yet.”
Dr. Good said she agrees the “whole question of how to maintain the infrastructure presently paid by gasoline taxes will be interesting as we get greater efficiency. We still have to pay for the infrastructure.”
Louis Infante of Ricardo Engineering asked whether there are similar forums to discuss the broader changes required in transportation infrastructure of the future that are needed to support the battery industry. He asked if the National Academies sponsors a forum on the transportation system “that would allow all of us to see how the good work done here and supported by the state of
41 X Prizes of $10 million and up are awarded by the X Prize Foundation, a non-profit institute, for breakthrough accomplishments such as development of the first private vehicle for space and ultra fuel-efficient vehicles.
Michigan integrates into things like the grid.” This would reduce business risk and give investors and a better idea how to run their businesses, he said.
Dr. Good responded that the National Academies does not do enough of that. “We have a tendency to look at a piece of the system, but not understand the impact a piece has on the system as a whole. Many times, the piece then fails because we did not properly understand how it would fit into the system,” she said. “We just aren’t very good in this country at doing systems analysis.” The National Academies has done some work on the topic, “but it is fairly academic,” she said. “As far as I remember, most have been anchors for doorways.”
Dr. Wessner agreed that “this country is not very systemically inclined, even in matters of great import, such as defense.” While more should be done, the problem is always making such studies relevant to lawmakers busy with constituents and to Congressional committees, he added. The Transportation Research Board of the National Academies has a “vast range of ongoing work in this area,” Dr. Wessner said.
What distinguishes the STEP board “is that we focus on how to actually deploy and what intermediating institutions are needed to bring public-private partnerships together to facilitate the advance of technology,” he said. “What you heard from MEP and MEDC is the sweet spot of our analysis—how do you push technologies up the learning curve and down the cost curve.” The board also tries to come up with “actionable items” for legislators. “They can’t execute on broad analysis,” he said. “They need very particular things to do.”
Dr. Wessner also explained that this conference is part of a wider study of state and regional policy. The STEP board is looking at best practices in bringing technologies forward. “Needless to say, this is a critical area,” he said, “and one that has national implications.”
To encourage more focus on macro system issues such as the grid and the transportation system, the debate should be framed in terms of national and economic security, Mr. Harris suggested. “President Eisenhower was able to get the national highway system done that way, and we have not evolved a lot since then,” he said. “On national security issues, we are good. And transportation and the grid are clearly national security issues. The longer we kick this ball down the field, the more difficult it is going to be to really change the country and free ourselves of the Middle East.”
Legislation that increases demand will help create the infrastructure, Mr. Alexander said. “As a battery company, I cannot go to the party without the vehicles. We can create the best battery in the world, but without vehicles to put them in what will happen is that this industry will go back overseas and we will have stimulated another country’s industries.”
The government needs to say it will convert half of its fleet and spur buying programs by municipalities, Mr. Alexander said. “We need a national buying program so we can move this technology.” In terms of passenger cars, consumers must see electric vehicles on the road to become interested, he said. “Your neighbor has to have one,” he said. “That is the best source of advertising.
Then it will take hold. Right now, it’s not going to take hold by having five or six cars here and there, or a military base that has a golf cart running around. We appreciate these little pockets of the DOE doing something over here and the DOD doing something over there. But we need a massive, consolidated effort.”
Dr. Good said the upcoming Washington meeting on batteries should include people who can speak to “pull-through” and whether or not there is an appetite for getting people to talk about procuring such vehicles. “In many ways, that seems to be the secret of success,” she said.
Nothing advances a technology faster than on-the-road experience, Mr. Krause said. “That is why it is so critical to get deployment,” he said. Deployment also will help development of manufacturing and the supply chain, and provide knowledge useful to advance everything from basic materials research to grid technology. “But let’s stop talking about this stuff and let’s get those vehicles, knowing that the first generation isn’t going to be without some difficulty,” he said.
A member of the audience asked about the influence of fuel prices. “In the industry, we were all amazed to see the kinds of shifts in behaviors that took place just a couple of years ago when fuel prices went high,” he said. “We saw people who were absolutely diehard SUV drivers suddenly downsize and were happy about it.” Even though fuel prices are not the complete story, “that lever, that ability to regulate what is happening with fuel prices is a really critical part of this puzzle,” he said. “Without that you aren’t going to get the demand and we don’t have a battery industry. I think it deserves a lot of focus.”
Dr. Wessner concluded the conference by thanking representatives from the state of Michigan and leading universities for taking part. “You have provided us with a remarkable range of information and insights, which will be extremely helpful,” he said. An important role of the National Academies is to convey such information to Congress and the DoE. “When people say U.S. government, states, and the university community cannot cooperate, they clearly have not been in this room. I congratulate you for that.”
Dr. Wessner thanked the MEDC and Gary Krause in particular for their help in organizing the conference and lining up speakers.