R&D Tax Credits for the High-Risk Battery Business

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        It is crucial for many of the today's leading edge technologies and future large scale industries to obtain low cost, reliable, and safe energy which can be supplied by long-life, rechargeable batteries. The U.S. is now competing with other nations to be a leader in this rapidly growing, $42 billion worldwide battery market, which is growing by 8.6 percent annually.

        The U.S. Federal government has recently invested unprecedented amounts in battery research and development. Despite these large battery investments, technology improvements have been slow and recently, many of the most exciting ventures have gone bankrupt. New innovations in battery technology are underway and Federal tax incentives are available for companies investing in eligible leading-edge activities.

The Research & Development Tax Credit

        Enacted in 1981, the federal Research and Development (R&D) Tax Credit allows a credit of up to 13% of eligible spending for new and improved products and processes. Qualified research must meet the following four criteria:

  • New or improved products, processes, or software
  • Technological in nature
  • Elimination of uncertainty
  • Process of experimentation

        Eligible costs include employee wages, cost of supplies, cost of testing, contract research expenses, and costs associated with developing a patent. On January 2, 2013, President Obama signed the bill extending the R&D Tax Credit for 2012 and 2013 tax years.

Federal Stimulus Grants and Other Economic Incentives

        The U.S. Federal government and some State governments have recognized the importance and need for new battery technology and have provided hundreds of millions of dollars in economic incentives during 2009 and 2010 for battery manufacturing and research and development.

        In 2009, President Barack Obama provided a $2.4 billion package designed to spark new battery research as part of the American Recovery and Reinvestment Act. Figure 1 below shows five major recipients of these economic incentives. With continuing resolve, the nation is now proceeding with a more traditional government sponsored research approach.

Grants Recieved by High Risk Battery Companies

Battery Companies Face Bankruptcy

        Evidencing the technological challenge and high-risk nature of these investments, four of these companies confronted bankruptcy only a few years later in 2012 and 2013.

        A123 Systems filed for Chapter 11 in October 2012. A123 Systems has won approval from the bankruptcy court to exit and will pay off creditors by setting off its assets. The company is also changing its name to B456 Systems.

        Exide Technologies filed for bankruptcy protection in June 2013 as part of a restructuring process. Exide had $1.9 billion in assets and $1.1 billion in liabilities according to Delaware's bankruptcy court. The company struggles with $31 million in debt interest payments due in August 2013, and $51.9 million worth of bonds. Bankruptcy lenders gave the business six months to compose an acceptable business and nine months to file for bankruptcy.

        ReVolt Technology was unable to raise necessary new capital and the company filed for Chapter 7 in October 2013. ReVolt will be liquidated not restructured.

        EnerDel's parent company, Ener1, was the third battery company to file for bankruptcy in New York State at the end of December 2012. The company's bankruptcy is listed at $73.9 million in assets and $90.5 million in debt.

Industries Dependent on Battery Technology

        The five major industries tackling the battery technology impasse include electric vehicles, robots, fuel efficient planes, utility electric grids, and mobile devices.

  1. Electric Vehicles:
    The fate of America's fledging electric car industry is dependent on innovations in battery technology. The economic theory is that battery costs will steadily decline as electric car production volumes increase. Battery costs are anticipated to decrease by 60 to 65% by 2020. Furthermore, in 2020 it is predicted that:

    • Approximately 26% of the new cars sold will either be electric or hybrid cars
    • 11 million new cars sold will be lithium-ion battery powered
    • The electric battery vehicle battery market will be worth $25 billion

    Figure 2 The electrification path for automobile power technologies:
    Alternative Fuels Diagram

    Rechargeable battery based systems can support the entire electric vehicle, including the engine and accessory systems. These rechargeable batteries have recently become a popular choice due to advanced lithium-ion technology (Li-ion) and high energy density. Increasingly, more cars will operate with further power consuming driver-assist systems.

    To date, limited driving ranges of batteries have inhibited the electric car industry. The typical electric car driving range is between 60-76 miles. Although most drivers only drive between 40 to 60 miles per day, in unusual cases or emergencies they do not want to be restricted by short distance capabilities.

    High-profile luxury electric car manufacturer, Tesla Motors, uses long-lasting Li-ion battery technology and offers a driving range of 244 miles. Tesla also developed roadside 'Superchargers' which use solar power to charge electric cars and can output a megawatt hour (enough energy to supercharge eight Tesla cars). These 'Superchargers' are capable of replenishing three hours of driving within 20 minutes of charging.

  2. Robots:
    The Scientific American's 2009 scientific study indicates the need for improved batteries in robot technology and how the current limited battery life presents the biggest constraint for the widespread introduction of robots. The medical, home vacuum, military, and manufacturing robot categories are dependent on improved battery technology and efforts to accomplish that task qualify for Federal tax incentives.

    The da Vinci Surgical System allows surgeons to perform complex operations through increased precision, control, and dexterity using state-of-the-art robotic technology. In April 2008, the University of Illinois at Chicago medical team performed the world's first fully limited invasive liver surgery for living donor transplantation, removing 60% of the patient's liver while maintaining a healthy patient.

    The robot manufacturer, iRobot, makes both home vacuum and military robots. iRobot's Roomba cleans the surface of household floors while its PackBot disposes of bombs, protecting first responders in battle. "Kiva's robots run low on charge beyond eight hours, after which they automatically return to charging stations. Longer lasting batteries would allow their warehouse systems to use fewer robots, lowering costs." says Mitch Rosenberg, Kiva's spokesman. Kiva Systems and other robot categories are among several robot manufacturers dependent on battery technology to innovation and improvement.

    Recently, the Baxter Robot has received widespread attention due to its output impact on U.S. manufacturing. Baxter distinguishes itself from other industrial robots due to its behavior-based 'common sense', sensory features, and adapting to its task as well as its environment. It requires no complex programming, or costly integration. Baxter can be easily introduced into a wide variety of manufacturing plants, even ones that have never previously considered robotic automation, due to its low price point. One of Baxter's features is the use of effective, rechargeable Li-ion batteries. Baxter's manufacturing robot is identified as one of the top ten R&D opportunities identified by MIT.

  3. Fuel Efficient Planes: Boeing Dreamliner Design
    Boeing's latest aerospace innovation, the Dreamliner 787, is 20% more efficient than similar-sized aircraft. The 787 distinguishes itself from prior aircrafts by its low weight and improved efficiency, results of Li-ion battery usage instead of nickel-cadmium (Ni-Cad). Li-ion batteries hold approximately three times the amount of energy as that of the same-weight Ni-Cad battery. The replacement of these batteries relieves the 787 of approximately 200 pounds, increasing the aircraft's fuel efficiency. Li-ion battery packs are more environmentally sustainable as they can be sold to recycling companies at the end of their 10,000 mile energy life.

    The downside of Li-ion technology is the instability of this compound. The Boeing design must evenly space the locations of its eight battery cells in order to prevent overheating of batteries and the ignition of fire. Airbus eliminated Li-ion batteries from their aircraft designs to avoid possible delays in productions and have adapted its design to accommodate Ni-Cad battery power.

  4. Utility Electric Grids
    Solar PV technology has undergone large improvements in cost and yield, yet has not been adopted on a large scale due to the technology's intermittency. Solar power regularity and dependability vary based on location, weather, season, and time of day, which poses a problem for end users and utility grids that depend on reliable access.

    Inexpensive, high-capacity, long-life energy storage alleviates the inconsistency of solar technology. Innovative battery storage at the grid-level allows for excess generated energy to be stored, which facilitates the use clean energy technologies and creates a reliable, smooth power flow. In order to maintain the national grid, battery cells with large store capacities are needed to prevent potential large-scale outages. Utilities like Con Edison, National Grid, Enel, and GDF SUEZ are testing zinc batteries by Eos Energy Storage. These batteries are half the size of a refrigerator and, if testing passes, can be a major factor in alleviating heat related power outages.

    City University of New York is implementing and testing zinc battery storage from Urban Electric Power, in an effort to reduce peak energy usage as part of NYS Energy Research and Development Authority. Pacific Gas and Electric, in California, is testing sodium-sulfur batteries and Duke Energy is testing lead acid batteries. Current energy storage technology has not gained widespread use, one reason being cost; companies engaging in relevant battery technology R&D activities are eligible for tax incentives.

    Portland General Electric, the largest seller of renewable energy, revealed its Li-ion energy storage system in Oregon. As part of the Pacific Northwest Smart Grid Demonstration Project, R&D for the 5 megawatt storage system was lead by Battelle.8 Beacon Power will begin construction of a 20 megawatt energy storage plant in Hazle Township, PA. Beacon intends to improve and regulate services by storing excess energy as kinetic energy.

  5. Mobile Devices
    Most mobile devices are powered by rechargeable and effective lithium-ion batteries. Li-ion pocket cells are used in smart phones and tablets, which are enclosed by multi-layered anode and cathode sheets with separators between them. Li-ion cells are infused with a liquid electrolyte, which allows an exchange between the anode and cathode, supporting the charge/discharge battery cycle. Smart-phone batteries are generally a single lithium-ion cell to accommodate the phone's small size.

    Consumers are looking for the newest, most innovative smart phones, causing battery manufacturers to improve upon certain aspects of lithium-ion battery technology. These aspects include battery cycle life, battery calendar life, run time per charge, charging rate, affordability, size, and application support.

    The startup, SolePower, is working on a power generating shoe insert for cell phone charging. Available in 2014, these insoles are not embedded into the shoes like other foot-powered chargers so it can be swapped between different shoes. By capturing the energy in one's step and storing it in an external battery, the energy can then be converted to usable electrical power.

Major Research Institutions Work towards Improvement

Major Battery and Energy Storage Hub

        The U.S. Department of Energy has formed the Joint Center for Energy Research, JCER, where five departments of energy national laboratories, five universities, and private companies' objective will be to advance energy-storage technology and a next generation battery. "We want technology... that can satisfy two needs of society: One is for transportation services; to have a less expensive, more lightweight battery. And the other is for storing energy on the grid, which is becoming more and more of an issue." Its objective is to produce a battery with approximately five times more energy than today's batteries at one-fifth's its current cost. This outcome should be achieved by 2018. The Department of Energy will give a total of $120 million worth in grants to 23 R&D projects over the next five years.

Figure 3: Organizations involved with the JCER battery project:

Organizations involved with the JCER battery

Future Battery Formulas

        Harvard professor, Jennifer Lewis, and her researchers are currently testing microscopic rechargeable Li-ion batteries produced by a 3D printer . Each lithium-oxide battery carries 1 milliwatt of charge, weighs 1,000 times less than the lightest Li-ion battery, and can be equipped with microphotovoltaic cells to enable solar recharging of the batteries.

        The 3D printing of these batteries is extremely compact, containing 8 or 16 levels of zigzag pattern within .25 mm or .5mm. This battery technology could power biomedical implants, sensors, tiny electronics, hearing aids, or flying drones. Lewis and her researchers are testing other materials, shapes, and sizes to increase battery life.

        Researchers at Stanford University have created a rechargeable zinc-air battery that would be a better alternative to the Li-air solution as it has higher durability and activity at a smaller cost. Zinc-air batteries work by combining oxygen with zinc metal inside a liquid electrolyte. The byproduct is zinc oxide which creates an electrical charge. During the researching phase, oxygen and zinc are regenerated, which in turn renews the zinc oxide.

        Zinc-air batteries use a cobalt-oxide catalyst for discharging and a nickel-iron hydroxide for recharging. Professor Hongjie Dai of Stanford's chemistry department says "We achieved record high-efficiency for a zinc-air battery, with a high specific energy density more than twice that of lithium-ion technology". The novel advantages of zinc-air battery usage include its low cost and abundant zinc metal supply as well as its increased operational safety of the non-flammable electrolyte materials.


        "It's the dawn of the energy-storage age" says Bill Radvak, President of American Vanadium. The demand for rechargeable batteries is drastically increasing as the market for mobile devices is growing. By 2016, the battery market is supposed to peak at about $86 billion.

        Li-ion batteries have taken a substantial role in the electronic market, yet the low availability of lithium oxide will raise the prices of this material. As lithium oxide becomes a high price commodity, the goal of future companies will be to mass produce a cheaper alternative such as zinc and nickel batteries.

        Improved battery technology is key to many of the countries' distinct, growth potential industries. The scope of the challenge is illustrated by some large and sudden failures as well as innovative beginnings. Federal and State tax incentives are available to support companies engaging in battery technology R&D activities.

Article Citation List



Charles R Goulding Attorney/CPA, is the President of R&D Tax Savers.

Andrea Albanese is a Manager with R&D Tax Savers.

Charles G Goulding is a practicing attorney with experience in R&D tax credit projects for a host of industries.

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