By Dave Brown — Exclusive to Lithium Investing News

Russian Capitalist Acquires Ener1

Russian entrepreneur Boris Zingarevich has obtained control of United States lithium battery manufacturer Ener1. The $81 million investment by the Russian businessman, who has close links with Russian President Dmitry Medvedev, has raised some concerns for US-based media outlets. 

The Obama administration has a strong track record of employing public funding to advance “green energy” and lithium battery technology research; however, in the wake of notable bankruptcies, including those of Solyndra and Ener1, criticism has been presented. The government had invested $118 million in Ener1 through federal stimulus programs, with an additional $80 million in local and state initiatives. The company had recruited top US scientists at the Argonne National Laboratory in Illinois to develop and produce leading-edge battery technology for electric cars and defense purposes.

Most recent initiatives

The Advanced Research Projects Agency – Energy (ARPA-E) has allocated $43 million for two new programs aimed at developing energy storage technologies that will promote efficient and secure energy supplies.

One program will fund research of advanced function and control technologies to improve the performance, safety, and duration of energy storage systems. It is intended to pioneer a new generation of electric and hybrid-electric vehicles, and improve the practicality of the domestic electricity grid.

The second program recognizes the role that small businesses play in developing energy storage technologies, and is soliciting small business applicants to develop stationary and transportation energy storage technologies. This initiative, which includes research to advance low-cost, grid-scale storage, particularly for utility companies, involves implications for lithium investors. Three additional research areas for vehicle energy storage include battery designs, chemistries, and architectures.

Increased commitment

A recommitment was evident in President Obama’s $3 trillion budget request for this October. President Obama requested a five percent increase in federal spending on non-defense research and development that, while relatively small, is noteworthy because it comes at a time of intense political scrutiny and economic pressure. The proposed research expense confirms the government’s priority for lithium battery technologies.

The Vehicle Technologies Program stands to benefit from the proposed budget as it would receive a 27.7 percent increase in funding to $420 million. Support for advanced battery and electric drive technology would increase by 73 percent as part of Obama’s continued focus on vehicle electrification. The budget highlights plans to support cooperative research and development with the automotive industry on electrochemical energy storage, power electronics, electric motors, electric traction drive, advanced combustion engines, and lightweight and propulsion materials.

Although the Solyndra case and strong resistance in Congress pose risks for loan guarantee programs and the overall budget proposal, bipartisan and industrial interest should offer support for the Vehicle Technologies Program. This may interest may insulate the program from major cuts and could be a tailwind for the overall lithium industry.

Headwinds for some manufacturers

In an interview with Lithium Investing News Paul Gifford, an advanced level battery consultant explained his analysis for future Department of Energy [DOE] funding, “I think there is a down side for any company that has not successfully competed for DOE money. There certainly was a lot out there and I would think there would be a level of credibility to the technology in being selected to receive DOE funds. But, having said that, the company that will be most successful will secure a contract with a major company. Having contracts with companies like Fisker might be nice, but you can not get the [sales] volumes you need for low cost.”

Resource nationalism?

Vice President Joe Biden said earlier this year, “[t]he question is which nation is going to seize the future. Some nation is going to grab it by the throat. One of the nations of the world is going to lead the world in green energy and technology.”

The roller coaster journey that has followed Ener1 from its inception into the battery business in late August 2005, to January, when it filed for bankruptcy, to its revitalization as a private company in March certainly has some links to Russia.

A Russian bank lent Ener1 up to $100 million in September 2010, and by the end of the next month the company had agreed to supply lithium batteries to the Russian power grid.

Russian appetite for lithium technology

Earlier in the year, a large lithium battery plant was opened in Novosibirsk, on the West Siberian plain, as a joint venture between a Chinese lithium battery manufacturer and RUSNANO. It is anticipated that the factory, called Liotech, will produce up to 500,000 lithium batteries per year. The batteries will be used to power electric vehicles and larger bus batteries in addition to a variety of energy storage applications and emergency power supplies.

Lithium exploration and production companies to benefit

The global demand for lithium is a current theme, whether it is initiated from the US or whether Russia attempts to become more prominent. As the electric vehicle industry takes a firmer foothold, both lithium production companies and exploration projects should generate higher levels of investment interest.

 

Securities Disclosure: I, Dave Brown, hold no direct investment interest in any company mentioned in this article.