Holland hopes to become leader in advanced battery manufacturing

Aug 10, 2011

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Thursday President Obama heads to Holland, Michigan. Mr. Obama will tour a new plant that will make lithium-ion batteries for electric and hybrid cars.

Michigan’s newly-branded “smart coast” welcomes Obama for the second time in 13 months. Last summer he came to the ground breaking of a different battery plant.

Randy Thelan is president of the non-profit, economic development group in the region, The Lakeshore Advantage.

“We are the advanced energy storage capital of all of North America and we see this as a great opportunity going forward.”

Advanced energy storage is a fancy phrase for long-lasting lithium-ion batteries.

President Obama’s stimulus package boosted advanced battery production. Michigan companies got 77% of the federal grants for battery manufacturing. Some of the companies include DOW Kokam, A123 Systems and General Motors. But, roughly half of the money funneled to Michigan went to build two battery plants in Holland.

Why Holland?

  • Location - Companies in mid and Southeast Michigan are closer to the big three automakers in Detroit. But Holland is close to Detroit, Chicago and Milwaukee; all key cities for the battery industry.
  • Relatively cheap electricity - The City of Holland operates its own power plant. The two battery plants are expected to be Holland’s largest utility users.
  • Local tax incentives - Holland city council agreed to let the two plants operate tax free for the next 12 years to seal the deal to locate in their city. Once the tax-free zone is over, the two plants alone will likely make up almost half the city’s tax base. That would be a major boost to the city’s income.
  • Bonus – a well-educated workforce, and the location on near the lakeshore

Advanced battery manufacturing would join furniture manufacturing, food processing and auto components as the region’s main industries.

Holland Mayor Kurt Dykstra admits, in a way, the city has taken a risk

“Will everybody in 20 years be driving an electric vehicle? I doubt it. Maybe – but I mean I doubt it.

Dykstra and many others I spoke with we're quick to point out there are a lot of other potential uses for long-lasting batteries; everything from cell phones and laptops to equipment for the U.S. Department of Defense.

Dave Hurst agrees there is a risk. He studies emerging markets for alternative vehicles for Pike Research. Most of these new battery plants will start producing batteries over the next year or two. Hurst warns there could be an oversupply of batteries in the short term.

“I don’t not anticipate that this is all going to come crashing down on Holland. I think Holland made some wise choices in attracting these but I think there are going to be some growing pains on the short term of it.”

Oliver Hazimeh heads the e-Mobility practice at global management consulting firm PRTM. He agrees the potential for advanced battery technology will only improve in the long term.

“I would say for once I think Michigan was kind of ahead of the curve early on to secure some of the funding and put that seed funding into the state and create jobs.”

Hurst predicts many mergers and acquisitions between battery manufacturers in the next few years. Hurst says it’ll be tough for new-comers to the battery industry to compete against companies in Asia whose governments have supported the industry for years.

Plus Hurst thinks main stream car buyers will be surprised by the upfront cost of electric vehicles. That means demands could be lower than expected.

Even believers like Holland Mayor Kurt Dykstra haven’t run out and bought an electric car yet.

“I haven’t bought a car for a good number of years,” Dykstra laughs, “My General Motors vehicle and Ford vehicle are both running well and they’re paid for and why exactly would I want to get rid of them?”

Dykstra says he would consider a hybrid or an electric vehicle next time he goes car shopping.

He and Thelan are confident the risk Holland took to attract the two battery plants will be worth it.

A couple hundred workers have already been hired between the two plants in Holland. Now the region is working to attract the supply chain.

They hope President Obama’s visit will help cement their new brand as an advanced battery manufacturing hub – Michigan’s new smart coast.