Boston-Power Asks Feds for $100 Million to Build Better Batteries for Electric Vehicles; Filene’s Basement Warehouse Could Be Reborn as 600-Employee Factory

6/1/09Follow @wroush

The coming generation of electric and hybrid gas-electric vehicles will need safer, longer-lasting, faster-charging batteries. Boston-Power—the Westborough, MA-based known up to now mainly for its “green” lithium-ion laptop batteries—wants to supply them, and it’s pursuing federal stimulus money to fuel its bid.

At a planned media event today featuring Massachusetts Governor Deval Patrick, the company will introduce a new “green” lithium-ion battery for electric and hybrid cars called Swing. To build the new product, the company is unveiling plans for a 455,000-square-foot manufacturing facility to be located in Auburn, MA, a Worcester suburb about an hour’s drive from Boston.

Boston-Power says the proposed facility could create 600 new jobs, and both the company and state officials are describing it as a major step toward making Massachusetts into a vehicle battery mecca. “This is the state of innovation,” says Christina Lampe-Onnerud, Boston-Power’s founder and CEO. “It’s a state that is committed to clean technology and has been for a long time. We put Boston-Power’s headquarters here for the same reason. We believe manufacturing should be close to the innovation.” (Below is a complete interview with Lampe-Onnerud, who will also be a featured speaker at the June 24 Xconomy Summit on Innovation, Technology, and Entrepreneurship.)

Indeed, Boston-Power’s project, along with similar efforts at Watertown, MA-based A123Systems, could give the state a key foothold in the reborn auto industry if, as expected, federal bailout conditions force American automakers to retool for a new generation of greener vehicles. A123 landed a deal in April to supply Chrysler with lithium-ion batteries based on its MIT-bred nanophosphate technology. (Those batteries, however, will be built in Michigan rather than Massachusetts, thanks to a $100 million tax-credit lure extended by the Michigan Economic Development Corporation.)

Boston-Power's converted Ford EscapeBoston-Power’s plan to build in Massachusetts hinges on its ability to lasso a big chunk of federal stimulus cash. The American Recovery and Reinvestment Act of 2009, known colloquially as the stimulus bill, provides $2 billion for “facility funding awards” for “manufacturers of advanced battery systems and vehicle batteries that are produced in the United States, including advanced lithium ion batteries.” Boston-Power is applying for $100 million of that money. It also plans to hit up the Department of Defense for funds designated in the proposed 2010 federal budget for the construction of manufacturing facilities that contribute to national security.

The Commonwealth of Massachusetts has pledged up to $9 million for the Auburn facility—but that money is in the form of matching financing, meaning Boston-Power will have to secure the federal money first. The company says it’s “working closely” with state officials, including Governor Patrick, energy and environmental affairs secretary Ian Bowles, and Representative Jim McGovern (a Democrat who district includes Auburn), to pursue federal and state incentives.

Lampe-Onnerud says building the Auburn facility will cost far more than the $100 million the company is seeking from the U.S. government, but that “it’s enough to get private investors to believe that you can do battery manufacturing in the United States.” Without some pump-priming in the form of federal stimulus spending, she says, the financial markets might not back risky technologies in areas like energy and clean technology. “What I think the Obama Administration has realized, to its credit, is that if we want to be a player, the government has to help,” Lampe-Onnerud says. “It will not happen on its own.”

Boston-Power isn’t saying much yet about the Swing product itself, except that it will set new standards in the vehicle battery business for safety, lifetime, weight, cost, environmental sustainability, and energy density. (Lithium-ion batteries have a higher energy density, or energy output per weight, than most other battery technologies, and both A123 and Boston-Power have come up with engineering tricks that make it even higher.) But Lampe-Onnerud says the Swing builds on the same basic technology platform as the Sonata, which is marketed by Hewlett-Packard under the Enviro brand name. She adds that the manufacturing blueprints and procedures the company has already developed for its Sonata factories in Asia can be adapted relatively easily to make larger-format batteries for cars here in the United States.

And using an existing building—a warehouse off I-90 once used by the rapidly downsizing Filene’s Basement bargain clothing chain—will hasten the project, Lampe-Onnerud says. “This factory will be up and running full speed within three years, which is very fast in the battery industry,” she says. “We have experience with this type of manufacturing in Asia, so I think it’s a low-risk investment for the government.”

Boston-Power and other applicants for the battery-manufacturing grants have already submitted proposals to the government, and the Department of Energy plans to announce a list of grant recipients as early as July. Governor Patrick, Secretary Bowles, Rep. McGovern, Lampe-Onnerud, and other officials plan to promote the Boston-Power proposal at a noon ceremony today at the Auburn site.

Xconomy spoke with Lampe-Onnerud about the project Friday evening; a transcript follows.

Xconomy: How much of the actual cost of the proposed Auburn plant would be covered by the $100 million stimulus grant you’re seeking?

Christina Lampe-Onnerud: It’s not the whole amount, by far, but it’s enough to get private investors to believe that you can do battery manufacturing in the United States. For a company like ours, cash flow is everything. I believe that Boston-Power, 10 years out, will be a smashing success. But it’s tough in the early years because you’re growing the company at the same time you’re growing the top line. Revenue needs to grow and you need to establish market share at the same time as you’re innovating. This will allow us to invest, establish a manufacturing base in the U.S., and play a pretty significant part in this emerging market.

X: The $100 million you’re requesting represents one-twentieth of the entire amount set aside in the stimulus bill for advanced battery manufacturing. Isn’t that pretty ambitious? What will your strategies be for obtaining that money?

CL-O: One-twentieth of the stimulus bill money may seem like a lot, but they have been very clear that they are looking to fund only 7 or 8 companies. $1.6 billion has been put specifically into lithium-ion manufacturing, and we are one of the smaller players. There are several applicants that are asking for much more money.

This would be our fourth factory. We could take the blueprints and standard operating procedures and supply chains from Asia and move swiftly into the U.S.. So I feel the risk element is pretty low. Plus we’re going into an existing building. This factory will be up and running full-speed within three years, which is very fast in the battery industry. We have experience with this type of manufacturing in Asia, so I think it’s a low-risk investment for the government.

But as with everything when you talk to the government, you throw your idea over the wall and they will tell you whether they deem you worthy. We are super-committed and excited to do this. But if we’re not awarded, we are will also continue to apply for other support.

The U.S. markets will not bear this alone. What I think the Obama Administration has realized, to its credit, is that if we want to be a player, the government has to help. It will not happen on its own. The interesting opportunity for Boston-Power is that the U.S. is only one of the countries that has offered to talk to us. We will have some other opportunities as well, and my job as CEO will be to keep the company focused on the opportunities that will succeed. And I believe we’ll be very successful.

X: How easily can you transfer the technology you’ve developed for laptop batteries to batteries for electric vehicles?

CL-O: We developed Boston-Power not for portable electronics or automotive or for any specific market, but we looked at the battery first and looked at the specific items that needed to be addressed. We came up with a list of about 30 things, and that is the technology platform. Then we looked at the markets and asked, “What is the biggest pain point?” In 2005, we made the judgment that the laptop industry was a textbook example of unmet need. Batteries wore out so quickly that people had to take a power supply with them all the time. We had been wireless, but not cordless.

In this case, we opened a large-format [battery] lab only in October of last year, but the stimulus bill got us pretty stimulated. We had 60 days to pull together an application—which in some ways was not rocket science, because we already had the blueprints. But in 45 days we took the Swing battery, which was already in production trials in Asia, and is pretty similar to Sonata, using the same facilities, and we put it into a Ford Escape [a hybrid SUV] that we bought at a local car dealer. We took out the existing battery pack and modeled that, and found that we could fit [the Swing battery] into the existing design space and increase the energy density by 700 percent, and it worked on the first ride. So I think we have the opportunity to play a part in enabling a new era of transportation.

X: Now that you’re trying to enter the market for batteries for electric cars and hybrid gas-electric vehicles, do you see A123Systems here in the Boston area as a direct competitor? Up to now, you’ve been serving different markets.

CL-O: It’s remarkable that Boston has so many young companies coming up, and it’s wonderful to see the diversity of approaches and different leadership styles and different styles of communication and different approaches to technology. There isn’t one battery that is going to do this, nor is there one team. I feel very proud of our state in this case. I think that Governor Patrick and his staff, and Congressman McGovern and the people surrounding him, are saying that we need clean technology and we need green, and we need to empower a new generation of leadership. It’s pretty bold. There are very few states in the nation that see that, and we have the opportunity to have that.

X: A123Systems recently announced plans to build their own vehicle battery manufacturing facilities in Michigan, where the state government offered them a large package of tax breaks. Do you think that losing that facility to Michigan has prompted the Patrick Administration to offer more help to Boston-Power to make sure your factory gets built here?

CL-O: I don’t know, honestly. I have a deep respect for both Congressman McGovern and Governor Patrick. They’ve been around, and they meet a lot of people, and they decide who they want to help and who they want to bet on. I’m sure they wanted both, and I’m sure there were reasons for A123 to make a different choice. I’m very confident in our choice—that’s really all I can tell you.

What it comes down to for me is that this is the state of innovation. It’s a state that is committed to clean technology and has been for a long time. We put Boston-Power’s headquarters here for the same reason. We believe manufacturing should be close to the innovation.

X: I Googled the address of your new facility and came up with Filene’s Basement distribution center. Is that the facility you’re taking over?

CL-O: Yes. In line with our idea of being green, we decided not to use taxpayer money to build a new building when there are empty buildings that we can use. It’s a huge, 450,000-square-foot building next to a power station and very close to where our innovators reside every day. I think that’s great. It’s an opportunity to revitalize part of that area, and an opportunity to have another 600 people join our team and make a difference every day. We’re going to need operations people, production people, quality assurance people, both workers and managers.

Wade Roush is a contributing editor at Xconomy. Follow @wroush

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