Feds should set goals, then get out of the way
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The federal government can properly juice long-term economic growth by encouraging new technologies.
But the Obama administration overspent in a misguided splurge on batteries. Wishful thinking trumped market realities. Eager to encourage new, low-carbon industries, the federal government provided grants of more than $100 million each to four companies to build lithium ion batteries for electric and hybrid vehicles. Here's how that worked out:
• A123 Systems filed for Chapter 11 bankruptcy in October.
• Dow Kokam's majority owner, Dow Chemical, wrote off its stake.
• EnerDel entered and emerged from Chapter 11 this year. It is concentrating on buses and stationary uses for its batteries.
• LG Chem Power has delayed production of lithium ion batteries.
The underlying problem is basic. Demand for the batteries is limited. The batteries are expensive to produce and inflate sticker prices of most electrics to well above $30,000, excluding federal and state rebates and tax credits.
That's a tough sell in a market with many excellent gasoline-powered subcompacts available for less than $20,000.
So why did the federal government wander into the weeds?
It is proper for the federal government to set strategic goals and standards. In this case, the Obama administration sought to create jobs quickly in low-polluting industries. That's laudable.
But the market should find the best way to accomplish those goals, a method known as technology neutral. The auto industry has thousands of engineers eager and able to explore hundreds of ways to cut pollution and create jobs. Batteries are just one possible route.
A technology-neutral approach takes more time and patience. But it tends to create lasting solutions that consumers are able to afford and willing to buy.
