Battery as economic savior?

An abandoned Packard factory in Detroit.

The New York Times Magazine this weekend has an expansive article by Fast Compnay editor Jon Gertner on the burgeoning lithium-ion battery industry in Michigan. The gist of it is that federal efforts to boost the battery industry are actually a fairly radical return to “industrial policy,” an idea that has long since fallen out of favor politically.

The thinking goes that the market will ultimately decide which industries will thrive and survive, so the government has no business interfering with the inevitable. Problem is, while the U.S. avoids large-scale support of emerging industries, countries like South Korea and China have no problem with it whatsoever, and when they guess correctly, they clean our clocks.

And battery technology seems like a pretty safe bet. Lithium-ion batteries in particular are compact and powerful enough to meet the demands of ever-proliferating mobile electronic devices, but are also making possible the first generation of truly viable mass-market electric cars.

So why Michigan? Clearly the state has a surplus of skilled manufacturing workers, and (I suspect) the rent’s fairly cheap. But what I didn’t realize (maybe you did) is that labor is comprises about 5 percent of the cost of making a battery, which means that the higher labor costs in the U.S. are only a small factor in the final cost of the product. Advances in technological or production efficiency could easily make a Michigan factory outperform a Chinese one.

The downside to all of this? Even if brought to scale, the battery industry couldn’t replace all the manufacturing jobs lost in the past few decades, so it’s unlikely we’ll see Detroit return to its previous glory anytime soon. But a successful battery revival could have implications on industrial policy that expand into other areas of the clean energy economy.

At any rate, I recommend reading the article in its entirety.

Photo by wyliepoon via Creative Commons

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