Viewpoint: Offshore Battery Production Poses Problems for Military

By Marc D. Gietter
An airman tests the power of lithium batteries.

Photo: Defense Dept.

Lithium batteries — both rechargeable and nonrechargeable — have become ubiquitous in almost every weapon system used by the Defense Department. Although it is a relatively small consumer of lithium battery technologies when compared to the commercial market, the importance of these technologies cannot be understated.

Just about every piece of man-portable electronic equipment crucial to the success of U.S. warfighters on the battlefield is powered by some form of lithium battery. The reliance on them is expected to grow exponentially as the next generation of weapons — such as new tactical ground vehicles, unmanned systems and directed energy weapons — are designed around the high energy density and low weight of a lithium battery technology.

Unfortunately, their production, especially rechargeable lithium batteries, is virtually entirely from offshore suppliers. Since the Defense Department is a miniscule portion of the overall market, the products that are delivered are built to commercial requirements, which for many performance parameters do not meet military requirements.

To complicate the problem, the knockoffs and counterfeits produced by unscrupulous companies have entered the defense supply stream, endangering the safety of troops. Even those companies that have managed to maintain a domestic production capacity are having difficulty maintaining this capability due to the emphasis on procuring the lowest-priced, technically acceptable product as well as unstable demands and procurements. Moreover, many battery components, ranging from the raw materials to the cell components are produced overseas.

The dependence on foreign sources for raw materials and the manufacturing of batteries poses several significant concerns related to defense applications.

First, these products do not meet all of the required military performance specifications, thereby resulting in less than ideal mission performance.

Also, the lack of configuration control leaves the real potential for unsafe products entering the inventory.

There is also an inability to surge production to meet wartime demands. Past history has shown that battery demands can increase by over 20 times that of peacetime levels. There is no guarantee that production for commercial products will be diverted to meet this demand.

Long lead-times for components and materials is also a concern. They are currently measured in months, further complicating any sudden increase in production if required. As an example, the Chinese government is encouraging its manufacturers to secure the ability and raw materials to move from their present 55 percent share of global lithium-ion manufacturing to over 90 percent. The impact of this has already been felt in that some U.S.-based companies have been denied the ability to order material due to the lack of sufficient volumes.

And without a domestic production capability, there are no assurances that a foreign producer will even be willing to ship to the United States in times of conflict.

Beginning as far back as the 1990s there have been several efforts attempted to address these issues. They range from establishment of government/industry partnerships to outright government investments in critical industries and technologies. All of these efforts have achieved some success, yet they ultimately failed to achieve the desired result of a viable domestic production capacity.

The reasons for this are a combination of the lack of a well-established business plan to transition the technology from the research-and-development phase into production; funding — both private and government — to establish a production capacity; and a strategy to maintain a capacity by creating a Defense Department acquisition strategy aimed at protecting the capability.

There seems to be sufficient funding to develop a technology but a lack of available funds to push the developed technology through commercialization. This lack of program funds causes a dead zone or “valley of death,” which causes loss of personnel or premature sell off of technology. In general, the department has a good track record of developing state-of-the-art technologies, but does not do as well transitioning them into production and maintaining a domestic production capacity.

The nation needs to once again lead the next generation of battery technologies while ensuring that these technologies do not migrate offshore but rather transition into a U.S. domestic production base capable of delivering product that not only meets military requirements but is competitive in a global economy.

In reality, the battle to establish a production base for lithium batteries used in commercial electronics is probably already lost. That is not to say that establishment of a production capability for those battery configurations that are used by the military and meet all military requirements should not be an objective, but it has many hurdles to overcome for it to become anything other than a niche market dedicated to military applications.

The battle to be fought, and won, is for large format rechargeable lithium batteries, where the commercial market is still in its relative infancy. With the Defense Department leading and supporting the establishment of these batteries, it can easily be transitioned to the commercial market and thereby become self-sustaining.

It should also be stated that the basic technologies used in large format batteries are essentially the same as those used in other cell sizes. Therefore, the establishment and support of a national production capability for these cells has a potential benefit for all military lithium battery configurations.

Although a national policy related to lithium battery production would be ideal, due to competing priorities and funding limitations, this is unlikely to occur in the timeframe needed to avoid the lack of such a policy having a negative impact on the military. All is not lost in that there are actions that can be taken at a local level by a specific organization with specific needs that can have a positive impact.

One is to increase investment in research and development into state-of-the-art technologies. This investment should focus on developing both nonrechargeable and rechargeable batteries that meet all military requirements for both man-portable and large platform applications.

Efforts also need to be dedicated to making these technologies as affordable as possible, which will help increase commercial demand for the batteries. Initially this effort should be aimed at large format lithium cells and batteries for use in vehicle, airborne, underwater and directed energy weapons.

Another step is to support the transition of these technologies into production. Virtually any new technology has a high upfront manufacturing cost until demand-driven economies of scale are established. However, these costs can be minimized by investments in manufacturing technologies to help develop automated processes and offset initial capital investment costs. Another potential avenue is for industry to make these investments through the awarding of long-term production delivery orders. Industry despises uncertainty, and the lack of long-term contracts with consistent delivery orders discourages industry from making the investments required to remain competitive against foreign sources of supply.

A third recommendation is to support the production capacity once it is established. It is critical that any acquisition strategy be designed to assure that awards be limited to only domestic sources of the actual cells, in order to preclude U.S.-based companies from repackaging foreign cells into batteries. Additionally, combining interdepartmental procurements of similar battery types will provide for larger delivery orders resulting in lower unit costs.

And finally, assure that the warfighter constantly gets the best possible product. This is a twofold effort. First, the awards should be based on a true best value tradeoff analysis, not lowest priced, technically acceptable. Second, the specifications and associated documents should be consistently reviewed and updated to assure that they are not outdated and match what can be provided by the current state of the art.

It should be noted that all of these recommendations are very similar to those made in a report published by the RAND Corp. titled, “Soldier-Portable Battery Supply: Foreign Dependence and Policy Options.”

None of these efforts should take place in a vacuum, but require coordination between government and industry. Ideally this would be accomplished through the development of central points of contact within each department activity that will work together and with industry partners to create, implement and amend the overall strategy for the production base.

However, this is not to say that a specific organization within the Defense Department should not bring together the R&D community and industry to determine the best way to obtain a specific battery that meets their needs.

Citizens and soldiers alike rely on batteries on a daily basis, and batteries are integral components for large industrial, government and residential markets, such as automotive, military and consumer electronics, with no other power source technology emerging in the near or even distant future to completely supplant them.

The lithium-ion battery market, alone, is expected to reach $26 billion in less than 10 years. With electric vehicles, clean energy storage and mobile electronics requiring ever-more advanced batteries, the overall market for batteries is only just emerging, and is expected to reach $150 billion in just the next two years.

With a relatively minimal investment the Defense Department can not only secure domestic sources for critical technologies, but “prime the pump” to enable these same suppliers to capture and hold large international market shares. For example, the Defense Logistics Agency has procured batteries with a total value of more than $1.1 billion to support the military power source supply chain.

This does not include batteries that each of the services buy directly from vendors and manufacturers, or batteries purchased by prime contractors to integrate into various weapon systems.

There are broader national security and economic benefits to advancing domestic battery manufacturing. For example, achievement of the cost threshold for lithium-ion batteries to make electric vehicles more economically viable and practical for the general population would drive the United States closer to energy independence.

Furthermore, more economically advanced storage batteries would dramatically increase the practicality of renewable systems and micro-grids, which in turn would further alleviate our dependence on foreign sources of fuel.

Marc D. Gietter is owner of Crystal Clear Consulting and chair of NDIA’s Military Power Sources Committee of the Manufacturing Division.

Topics: Energy, Viewpoint

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