05/23/11 12:34pm

Article By: The Energy Collective

In the spring of 1519, Hernán Cortés landed with a fleet of 12 ships near present day Veracruz, Mexico.  The flotilla held 500 Spaniards, a dozen horses and a few cannons.  Cortés’ aim was to conquer the Aztec Empire and take possession of its great wealth.  Many of Cortés’ men, impressed by the 25,000,000 Aztecs guarding that wealth, had second thoughts about the venture.  But Cortés famously burned his ships, leaving his men little choice but to proceed inland.

Through a series of improbable coincidences, Cortés’ strategy worked out well for Cortés, which is the only reason we know the story of the burning ships today.  One cannot help wondering, however, in reading this week about the unfortunate end of the JCI-Saft battery joint venture, whether a similar strategy did not work out so well for Johnson Controls, Inc.

On Wednesday, Johnson Controls filed suit in Delaware asking the Chancery Court to dissolve the JCI-Saft joint venture.  The Web site GigaOM reported that “Johnson Controls is unhappy because the Saft deal is restricted to automobiles and the partnership is holding [Johnson Controls] back from pursuing a broader focus on selling batteries for the power grid, a multi-billion dollar market that seems to be growing substantially recently.” 

In 2009, JCI-Saft won a $299 million advanced battery grant from the U.S. Department of Energy, the largest single grant awarded under the FOA-26 program.

If the GigaOM report is accurate, it would seem that in order to seal its deal with Saft in 2006, Johnson Controls agreed that neither it nor JCI-Saft would manufacture advanced batteries for any market other than the electric vehicle market.  That was a Cortés-like move, given that no such market even existed in 2006.  It would be tempting to admire the gutsiness of the call, except for the fact much of the bet was placed with U.S. taxpayer dollars.

This was a tough week for the U.S. advanced battery industry.  A123 Systems reported disappointing earnings and Ener1’s stock price was hammered, in each case because of slower than hoped for growth in the electric vehicle market.  It is too soon to know how things will turn out for A123 Systems or Ener1.  But both are working hard on new products and new markets, which could help bridge the gap until a more mature electric vehicle market develops.

Advanced batteries are a powerful new technology that can serve a wide array of functions and make the world cleaner, safer and more mobile.  But it is still early in the advanced battery age.  Which functions will be called to market and in which order is a story that is still unfolding.  The best strategy for companies playing in this market is to be nimble, be opportunistic and keep your options open.

This is a cross-post from TheEnergyCollective.com.

The Energy Collective is the web's premier site for sophisticated energy policy discussion. TEC is an independent, moderated community of professionals focused on the complex challenges of meeting the world's energy needs sustainably.

Original Post: http://theenergycollective.com/jim-greenberger/57860/nimble-and-opportunistic-wins-advanced-battery-race