A123 Systems Opens New Factory

The lithium ion battery manufacturer A123 Systems announced the opening of a plant in Michigan that, when fully scaled up, could produce enough batteries per year to generate 600 MWh of electricity. The plant is the largest in North America.

The factory was built because of a $249 million grant from the Department of Energy. A123 Systems is looking to expand its manufacturing capacity to 760 MWh per year by the end of 2011.

It’s been a tough year for A123 since filing its IPO last September. The company dropped out of a supply deal with Chrysler for electric vehicles and also failed to secure a contract with GM for the Volt. The company’s stock has fallen 64% since the beginning of the year.

There have been some notable deals. A123 Systems has secured development contracts with a number of organizations and companies including: BAE Systems, Navistar, the Shanghai Automotive Industry Corporation and the U.S. Advanced Battery Consortium. The company has also diversified by expanding into grid stabilization and storage technologies for renewable energy, selling over 20 MW of systems for such applications around the world.

A new report out this week from Pike Research projects that lithium batteries have the most potential to dominate the grid services market. The research firm predicts that lithium ion technologies will make up around 70% of the market in the next nine years.

However, many onlookers are skeptical about the lithium battery market in general, saying that production costs are still far too high. In a recent filing, A123 reported that its cost of goods sold is around $1,370 per kWh. The Advanced Battery Consortium is targeting $500 per kWh by 2014. Because of the rise in demand for commodities like lithium and other metals, some analysts don’t believe that producers can achieve those cost reductions.

The plant’s opening is a major piece of news for the energy storage and electric vehicle markets. With dozens of automakers rolling out new electric vehicles and utilities helping with the development of tens of thousands of charging stations, this sector has certainly made some notable headway.

The big questions is: How quickly can companies like A123 get their costs down?

Below is a roundtable discussion on the energy storage market featuring Charlie Vartanian of A123 Systems.

[bc_video account_id=”” player_id=”” video_id=””]

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I am a reporter with ClimateProgress.org, a blog published by the Center for American Progress. I am former editor and producer for RenewableEnergyWorld.com, where I contributed stories and hosted the Inside Renewable Energy Podcast. Keep in touch through twitter! My profile name is: Stphn_Lacey

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