The Battery Cell Is The Key Part Of Any Battery – Battery Startup In Position To Make A Bigger Splas

After three years in business, ActaCell Inc. is turning out the kind of lithium ion battery cells that could one day go into an electric vehicle.

The Austin startup is making them very slowly in its crowded North Austin development lab. But things are about to change soon for the company.

CEO Bill Ott estimates his company can hand-make about a dozen high-quality battery cells in a week. The company says it will take 96 of its cells, which are made in small soft pouches, to form the battery pack that delivers the power required for a hybrid electric vehicle. The company’s first target market is electric delivery trucks.

The battery cell is the key part of any battery, because that’s where the chemical change occurs that creates an electric current.

The startup is in its second round of raising crucial private investment funding and has chosen a prototype-stage manufacturing company to produce several thousand high-quality cells this year.

Once those prototypes are in the hands of potential customers and Department of Energy researchers, Ott thinks the company can show to the world that its technology will deliver better and cheaper batteries.

“These tests are absolutely crucial for us,” Ott said. “This is a critical year for us, but every year is critical for a startup.”

In 2009, ActaCell was a part of a concerted effort by some economic development activists to attract to Austin the headquarters of a consortium of companies seeking federal funding for a new battery manufacturing and development plant. That enthusiasm subsided quickly when the consortium chose another headquarters site, but ActaCell kept pushing ahead.

Even though the company is a tiny player in an industry dominated by corporate giants, Ott says his company has a reasonable pathway to business success, in part because industry conditions have aligned in its favor.

For one thing, the federal government has offered financial support and incentives to accelerate the development of alternative-fuel vehicles as part of a campaign to reduce the country’s dependence on foreign oil. That’s part of the reason why carmakers, including General Motors Co. and Ford Motor Co., are pushing to develop and sell new hybrid cars and all-electric vehicles.

Ott says that those vehicle-makers are far from satisfied with the cost and performance of today’s batteries.

GM, for instance, is reported to be paying more than $ 5,000 for each battery pack that powers its newly introduced Chevy Volt hybrid. GM would like to pay less for batteries, industry experts say, so it can make the Volt more cost-competitive with conventional gasoline-powered cars.

“In the final analysis, it is all about cost,” Ott said. “We have gotten a lot of interest because we are using low-cost material” in the battery cells.

Lithium ion battery technology has been used commercially since 1991, primarily in smaller products such as laptop computers and power tools. It is viewed as the preferred battery technology for electric vehicles because it delivers more power with less weight and space than older battery types. But lithium ion technology continues to evolve as researchers find new materials to improve performance and cut costs.

ActaCell gets taken seriously in the battery world because the company has strong ties to one of the world’s leading battery researchers, University of Texas engineering professor Arumugam “Ram” Manthiram. Manthiram is a co-founder of the company and the leading technical adviser, while he continues his full-time teaching and research at UT.

The Manthiram tie to ActaCell gives the company far more recognition and early credibility than it otherwise might have.

“But we still have to prove it from there,” Ott said.

Besides having highly motivated potential customers, Ott says his company has another factor working in its favor an impending glut of unused capacity at advanced battery factories that are under construction.

Thanks to federal stimulus spending, five companies including an affiliate of South Korea’s LG Group are building advanced battery plants in the U.S. When those factories go into operation next year, they are going to be hunting actively for promising technologies to use in their new high-production factories.

If ActaCell can get a commitment from an early customer, Ott is confident that he can negotiate a partnership deal with one of the five companies that received federal stimulus money. It will be a touchy negotiation, he said, because the manufacturing partner will also be a potential competitor.
“We are not going to own a $ 200 million battery factory,” Ott said. “We are going to work on materials that can be used in that large factory. That is the future of the company, and that is what we have to do.”

The battery industry can be tough on startups. Another Austin battery company, Valence Technology Inc., was started in 1989 and has been unprofitable for most of its history. But after struggling for years, Valence is starting to get sales traction.

The company announced a $ 13 million battery contract in August with Smith Electric Vehicles, which makes all-electric commercial trucks. Analyst Rob Young of W.M. Smith Securities Inc. in Denver says the company could make a profit next year, if its sales reach the $ 80 million level.

ActaCell’s Ott says the right forces are coming into play the federally supported push for wider production of electric vehicles and the push by vehicle-makers to drive down costs to speed up the adoption rate if his battery prototypes score well in tests.

The company so far has raised $ 5.8 million in private investment and an additional $ 1 million in a grant from the Texas Emerging Technology Fund.

ActaCell also won a small grant from the U.S. Advanced Battery Consortium, which is backed by GM, Ford and Chrysler. Those funds will pay for the testing and evaluation of ActaCell’s battery cells at the Department of Energy’s Argonne National Laboratory in Illinois.

In addition, the company recently won a $ 3 million grant from the Department of Commerce to develop another battery material for an all-electric vehicle. That grant could support the development of a second battery product line for ActaCell.

The private investment and public funds have helped the small company fill its laboratory with plenty of equipment most of it bought second-hand for making battery prototypes, testing them and doing accurate analysis on the special material the company has made for it to formulate its cells. The company does not divulge yet what material it is using.

One key addition to the lab is a 420-square-foot “dry room” a very low-humidity modular production room that is required to make lithium battery cells.

The room operates with less than one-half percent relative air humidity, the sort of climate conditions required to make properly working lithium ion cells.

ActaCell got a bargain price for its dry room by finding a California company had one it wasn’t using. It paid just $ 90,000 for the dry room, Ott said, which was about one-quarter of the going price.

“I have a good group of supportive investors,” Ott said. “We try to reward them by being frugal.”

Ned Hill, managing director of DFJ Mercury, an early investor in ActaCell, says the company’s bargain-hunting has a payoff. The less money ActaCell needs to raise in its early stages, the easier time it will have later on when it comes time to finance its anticipated growth.

“I have never seen a company that is better at efficiently using investment capital.” Hill said. “It’s really impressive how much they have gotten done on so little capital.”

While the company’s future depends on tests and evaluations done by potential customers, Hill said its own test results have made investors optimistic about its prospects.

“We think we’re in a very competitive position,” he said.