To Build a Battery Industry, New York Needs Help from Washington
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- Posted on February 28, 2018
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New York wants to be a global leader in batteries. It pumps tens of millions of dollars annually into energy storage research, development, and demonstration projects, and it looks like this effort is starting to pay off. In October, for instance, a group of companies announced a $130 million investment to build a “giga-factory” in the Southern Tier to produce a new kind of battery.
Governor Cuomo’s January 2 announcement of an aggressive target to add batteries to the state’s grid seems like it should fuel further growth. If New York customers are buying grid-scale batteries, it seems logical that New York companies should be selling them. Yet, that’s not necessarily so. In fact, it’s quite likely that most of these batteries will come not only from outside New York, but outside the United States – from Asia, and from China in particular.
The battery industry today looks a lot like the solar industry did ten years ago, and what happened in solar is a cautionary tale for any state that seeks to build a battery industry. Even though the solar panel was invented in America and the United States led the world in solar panel manufacturing for decades, we now import 95 percent of what we consume.
Unfortunately, it’s probably too late to do much about the situation. The President used the tools available to him when imposed tariffs on solar panels Monday, but trade law just doesn’t give him much to work with, and these measures are unlikely to bring manufacturing back to the United States.
Here’s how we got to this sad pass. The solar panel market grew rapidly – about a thousand-fold since 2000. Growth was driven largely by technological innovation and by state and federal policies that required utilities to buy solar panels and provided subsidies to residential and commercial customers as well as utilities to do so.
But: these policies generally said nothing about which solar panels Americans should buy. Not surprisingly, low cost was the key consideration for most buyers. Chinese solar panel manufacturers cut prices to rock bottom and won the market, putting many domestic manufacturers out of business.
What matters – and what New Yorkers who dream of a big battery industry in the state should take note of – is how China won. It won by providing massive, trade-distorting subsidies to its producers, so they could flood the American market with cheap, simple products. President Obama was unable to stem this tide, and President Trump’s effort seems likely to follow the pattern.
So: back to batteries. Cheaper and better batteries will enable two of the biggest transformations of the 21st century economy: the replacement of internal combustion engines with electric propulsion in vehicles and wider use of renewables in electricity generation. Governor Cuomo is targeting an industry expected to grow by 200-500 percent to $50-100 billion per year by 2025.
But the Chinese are already moving to seize this opportunity, using the same playbook they used to dominate global solar panel manufacturing. In October 2017, the Chinese government announced a coordinated ten-year plan aimed at world leadership in battery manufacturing, and it is squeezing western car companies with the aim of dominating electric vehicle manufacturing. Meanwhile, the United States is still using the same playbook it used to lose the solar industry.
An oft-cited definition of insanity is to do the same thing over and over and expect different results. By this standard, U.S. clean energy technology policy is insane. It’s time for this country to adopt a new playbook.
States like New York have an important role to play. They can design policies that encourage demand for batteries from countries that play fair in global markets. But Washington must take the lead. Congress should revise trade law so action can be taken before imports wipe out whole sectors. The President should assertively enforce existing law and work with allies to modernize global trading rules so they have real teeth. These reforms in trade policy should be linked to tax, regulatory, and technology policies that will stimulate battery innovation.
Governor Cuomo’s battery plan is pointed in the right direction. But it won’t get near the finish line without help from Washington to constrain China. New York’s representatives in the nation’s capital, such as Republican Chris Collins and Democrat Paul Tonko, have taken a strong interest in the industry. New Yorkers should encourage them to push even harder for the federal government to plays its essential part in bringing this 21st century industry home.
Photo Credit: James Almond via Flickr