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| Why it’s hard for this green energy plant to become a White House ‘success’ | |
| (35 minutes later) | |
| The Florida lithium ion battery plant President Obama is set to visit on Friday is a case study in the difficulty of stimulating the American economy and creating jobs in an era of rapid technological change. | The Florida lithium ion battery plant President Obama is set to visit on Friday is a case study in the difficulty of stimulating the American economy and creating jobs in an era of rapid technological change. |
| Obama, seeking to cement his legacy and rally popular support, will hold up the plant as a model of how the economic stimulus legislation he fought for seven years ago helped pull the economy back from an abyss. He will credit stimulus money with encouraging the construction of the Jacksonville plant, creating jobs and contributing to American leadership in clean energy technology. | Obama, seeking to cement his legacy and rally popular support, will hold up the plant as a model of how the economic stimulus legislation he fought for seven years ago helped pull the economy back from an abyss. He will credit stimulus money with encouraging the construction of the Jacksonville plant, creating jobs and contributing to American leadership in clean energy technology. |
| However, the story of the sleek, modern 235,000 square foot manufacturing plant is more nuanced than that. Parts of the facility, owned by Saft America, are idle. Though management originally forecast profits as early as 2013, the plant is still losing money as it vies for a piece of the battery market. And the French parent company, Saft Group, recently wrote down the value of the factory. | However, the story of the sleek, modern 235,000 square foot manufacturing plant is more nuanced than that. Parts of the facility, owned by Saft America, are idle. Though management originally forecast profits as early as 2013, the plant is still losing money as it vies for a piece of the battery market. And the French parent company, Saft Group, recently wrote down the value of the factory. |
| “We are frustrated as well,” Ghislain Lescuyer, Saft’s chief executive, told an analyst in a conference call on Feb. 19. He said: “If we are realistic, I’m not pessimistic about Jacksonville. We have a huge factory which is really outstanding.” But, he added, breaking even “will take a few years.” | “We are frustrated as well,” Ghislain Lescuyer, Saft’s chief executive, told an analyst in a conference call on Feb. 19. He said: “If we are realistic, I’m not pessimistic about Jacksonville. We have a huge factory which is really outstanding.” But, he added, breaking even “will take a few years.” |
| The legacy of the stimulus is a hot political issue this year. The White House believes that Americans have forgotten just how precarious the economy was in 2009 and has been holding a series of events to remind them of the $787 billion stimulus package Obama backed — and of Republican opposition at the time. Obama believes that doing so will burnish his reputation and boost Democrats’ prospects this year, senior administration officials said. | The legacy of the stimulus is a hot political issue this year. The White House believes that Americans have forgotten just how precarious the economy was in 2009 and has been holding a series of events to remind them of the $787 billion stimulus package Obama backed — and of Republican opposition at the time. Obama believes that doing so will burnish his reputation and boost Democrats’ prospects this year, senior administration officials said. |
| [Obama advisers see steady economic growth and widening inequality] | [Obama advisers see steady economic growth and widening inequality] |
| The Saft story started in 2009, when after competitive bidding the Energy Department awarded the company $95.5 million under the American Recovery and Reinvestment Act to be used to build a lithium ion battery plant on the outskirts of Jacksonville. State and local tax breaks also helped, but Saft also put up half the money. | The Saft story started in 2009, when after competitive bidding the Energy Department awarded the company $95.5 million under the American Recovery and Reinvestment Act to be used to build a lithium ion battery plant on the outskirts of Jacksonville. State and local tax breaks also helped, but Saft also put up half the money. |
| At the time, Obama was predicting that there would be 1 million electric cars on the road by 2015, providing a market for new batteries. When the plant was finished in 2011, then-Energy Secretary Steven Chu praised the Saft plant for “powering the next generation of energy-saving electric cars and trucks” and reducing U.S. dependence on foreign oil. | At the time, Obama was predicting that there would be 1 million electric cars on the road by 2015, providing a market for new batteries. When the plant was finished in 2011, then-Energy Secretary Steven Chu praised the Saft plant for “powering the next generation of energy-saving electric cars and trucks” and reducing U.S. dependence on foreign oil. |
| Today, however, total electric and plug-in electric vehicles on the road number only about 400,000, according to Bloomberg New Energy Finance, and competition among vehicle battery makers is fierce. With gasoline prices low and new electric vehicle models still down the road, electric vehicle sales actually fell slightly in 2015 to 114,000, Bloomberg said. | Today, however, total electric and plug-in electric vehicles on the road number only about 400,000, according to Bloomberg New Energy Finance, and competition among vehicle battery makers is fierce. With gasoline prices low and new electric vehicle models still down the road, electric vehicle sales actually fell slightly in 2015 to 114,000, Bloomberg said. |
| “The EV space was expected to grow many-fold each year and it has,” said Ravi Manghani, senior analyst for energy storage at GTM Research. “But the pace at which that market has grown is definitely slower than the rate at which these companies brought their products online.” | “The EV space was expected to grow many-fold each year and it has,” said Ravi Manghani, senior analyst for energy storage at GTM Research. “But the pace at which that market has grown is definitely slower than the rate at which these companies brought their products online.” |
| [Opinion: The government has spent a lot on electric cars, but was it worth it?] | [Opinion: The government has spent a lot on electric cars, but was it worth it?] |
| In 2009, Obama repeatedly lamented that the United States only manufactured 2 percent of the world’s advanced batteries; Dan Utech, deputy assistant to the president for energy and climate change, says the figure has climbed to 20 percent. | In 2009, Obama repeatedly lamented that the United States only manufactured 2 percent of the world’s advanced batteries; Dan Utech, deputy assistant to the president for energy and climate change, says the figure has climbed to 20 percent. |
| Where are they going? Most of the batteries Saft sells go to electric utilities, which use them to back up wind and solar plants and to stabilize the grid. That wasn’t foreseen in 2009. Recently Saft won a contract to supply an energy storage system to stabilize the Kauai Island electrical grid in Hawaii, where the utility is deploying a new 12 megawatt photovoltaic array as a generating unit. Federal Energy Regulatory Commission rules also have opened the door for more sales to regional electricity grids, especially in the eastern United States. | Where are they going? Most of the batteries Saft sells go to electric utilities, which use them to back up wind and solar plants and to stabilize the grid. That wasn’t foreseen in 2009. Recently Saft won a contract to supply an energy storage system to stabilize the Kauai Island electrical grid in Hawaii, where the utility is deploying a new 12 megawatt photovoltaic array as a generating unit. Federal Energy Regulatory Commission rules also have opened the door for more sales to regional electricity grids, especially in the eastern United States. |
| The utility market helps the clean energy cause, but there too, Manghani said, “there has been this race to the bottom in terms of costs” and many firms are suffering. He said “Saft is one of the better performing higher efficiency product vendors. The flip side is it tends to come with higher costs. It is not the cheapest battery manufacturer in the market today.” | The utility market helps the clean energy cause, but there too, Manghani said, “there has been this race to the bottom in terms of costs” and many firms are suffering. He said “Saft is one of the better performing higher efficiency product vendors. The flip side is it tends to come with higher costs. It is not the cheapest battery manufacturer in the market today.” |
| Other Saft products go to the military, such as for the F-35 Joint Strike Fighter, or satellite telecommunications or the Airbus A350. Saft also makes modules used for increasingly popular rapid stop-start automobile batteries. | Other Saft products go to the military, such as for the F-35 Joint Strike Fighter, or satellite telecommunications or the Airbus A350. Saft also makes modules used for increasingly popular rapid stop-start automobile batteries. |
| The pace of change in all these lithium ion battery markets is so fast that the company discloses them in the risk section of its annual report. “The Group cannot guarantee that this technology will be a success, and it cannot be ruled out that different technologies will meet the same needs. Thus, some companies have recently developed batteries using emerging technologies that are likely to be in competition with the lithium-ion technology.” | The pace of change in all these lithium ion battery markets is so fast that the company discloses them in the risk section of its annual report. “The Group cannot guarantee that this technology will be a success, and it cannot be ruled out that different technologies will meet the same needs. Thus, some companies have recently developed batteries using emerging technologies that are likely to be in competition with the lithium-ion technology.” |
| But at least Saft has survived and it still expects its Jacksonville facility to ramp up as demand grows. The facility still has about 280 permanent workers, and 40 percent of the jobs are held by military veterans. (Unemployment in Jacksonville has tumbled from a high of 11.2 percent in 2010 to 4.5 percent.) | But at least Saft has survived and it still expects its Jacksonville facility to ramp up as demand grows. The facility still has about 280 permanent workers, and 40 percent of the jobs are held by military veterans. (Unemployment in Jacksonville has tumbled from a high of 11.2 percent in 2010 to 4.5 percent.) |
| Other major recipients of money under the advanced battery program went bankrupt, including EnerDel, which received $118.5 million. Some reemerged in different forms. The company A123, whose $249.1 million grant was the second biggest, went bankrupt before being acquired by Wanxiang, a Chinese company with wide U.S. holdings. Japan’s NEC bought the part of A123’s technology applicable to stationary storage. | Other major recipients of money under the advanced battery program went bankrupt, including EnerDel, which received $118.5 million. Some reemerged in different forms. The company A123, whose $249.1 million grant was the second biggest, went bankrupt before being acquired by Wanxiang, a Chinese company with wide U.S. holdings. Japan’s NEC bought the part of A123’s technology applicable to stationary storage. |
| Altogether, the Energy Department gave away $2.4 billion to 48 projects under the advanced battery and electric drive portion of the stimulus package. The Energy Department says that three projects were not completed and at least five major recipients have closed their doors, but more than 20 other battery manufacturers including Saft are still in business. That includes a General Motors battery assembly plant. | Altogether, the Energy Department gave away $2.4 billion to 48 projects under the advanced battery and electric drive portion of the stimulus package. The Energy Department says that three projects were not completed and at least five major recipients have closed their doors, but more than 20 other battery manufacturers including Saft are still in business. That includes a General Motors battery assembly plant. |
| The Energy Department also says that lessons were learned from some of the flawed projects. With $48 million in funding under the Recovery Act, Chrysler developed and deployed more than 140 advanced plug-in hybrid electric pickup trucks. Although some of the vehicles experienced technical issues, the company is applying lessons learned in the development of the 2017 Pacifica plug-in hybrid minivan, an Energy Department spokesman said. | The Energy Department also says that lessons were learned from some of the flawed projects. With $48 million in funding under the Recovery Act, Chrysler developed and deployed more than 140 advanced plug-in hybrid electric pickup trucks. Although some of the vehicles experienced technical issues, the company is applying lessons learned in the development of the 2017 Pacifica plug-in hybrid minivan, an Energy Department spokesman said. |
| “The president’s critics threw a lot of dust in the air about the energy investments,” said Utech. He added that in the end “the results were transformational.” (White House officials used the word ‘transformational’ at least four times during a call for reporters on Thursday.) | “The president’s critics threw a lot of dust in the air about the energy investments,” said Utech. He added that in the end “the results were transformational.” (White House officials used the word ‘transformational’ at least four times during a call for reporters on Thursday.) |
| Outside analysts agree that the administration had to be judged on the overall package of projects. | Outside analysts agree that the administration had to be judged on the overall package of projects. |
| “I don’t necessarily see it as a success or failure for the government to have invested in Saft or A123,” said Manghani, noting that even venture capital firms have failures. “You could grade the government not necessarily as an A-plus but I don’t see it as a failure on government’s part just because one of their investments didn’t do as well as it would have liked.” | “I don’t necessarily see it as a success or failure for the government to have invested in Saft or A123,” said Manghani, noting that even venture capital firms have failures. “You could grade the government not necessarily as an A-plus but I don’t see it as a failure on government’s part just because one of their investments didn’t do as well as it would have liked.” |
| When it comes to Saft, Utech said Thursday that “clearly we think it’s a success story.” | When it comes to Saft, Utech said Thursday that “clearly we think it’s a success story.” |
| Meanwhile, Saft’s chief executive takes a sober view of his company’s future. | Meanwhile, Saft’s chief executive takes a sober view of his company’s future. |
| There are very few electric cars today, Lescuyer said. “Why? It’s not because it’s not a good concept. It’s just because it takes time to get adopted, because it takes time to validate.” | There are very few electric cars today, Lescuyer said. “Why? It’s not because it’s not a good concept. It’s just because it takes time to get adopted, because it takes time to validate.” |
| “How many of you tomorrow will install a residential renewable system in your house,” he continued. “Will you do it tomorrow? Two years from now? Five years from now? And what we see in the industry is the same. It takes time.” | “How many of you tomorrow will install a residential renewable system in your house,” he continued. “Will you do it tomorrow? Two years from now? Five years from now? And what we see in the industry is the same. It takes time.” |