Batteries, China, and the Climate

Hi, it’s Drake in New York. It’s possible that governments have gotten too good at convincing companies to build batteries. But first...Thre [View in browser]( [Bloomberg]( [by Drake Bennett]( Hi, it’s Drake in New York. It’s possible that governments have gotten too good at convincing companies to build batteries. But first... Three things you need to know today: • Apple jumps over Microsoft again as [the world’s most-valuable company]( • Adobe’s results signal it’s [taking part in the AI boom]( • Tesla investors support [Elon Musk’s $56 billion pay package]( Too many batteries The story of humanity’s response to climate change is, for the most part, one of failure. Failure to adapt our behavior and adopt new technologies fast enough; failure to burn less fossil fuel, plant more trees and eat less beef. One area where we aren’t failing, though, is in battery production. Models showing how the world might meaningfully reduce carbon emissions all require that transport be largely electrified, and that a large chunk of the power grid switch to renewable sources. That means more and better batteries for cars and trucks and possibly even airplanes, and big, grid-scale batteries to store power when the sun is down or the wind calm. Battery technology has kept pace with that challenge. In recent years, the capacity has dramatically improved, while cost has dramatically dropped. Looking to kickstart domestic manufacturing while burnishing their green credentials, [the Biden administration]( and other governments have piled on, announcing major subsidies for battery plants in their home countries.  The result may be too much of a good thing. The capacity of all the world’s battery factories will be five times global battery demand by the end of next year, as BloombergNEF [points out in its latest Electric Vehicle Outlook](. “Europe also faces a glut of battery capacity, yet governments are pushing for more,” Bloomberg News wrote this week. “Swedish battery maker Nortvolt AB has a [plant under construction in Germany](, but the country’s Economy Minister Robert Habeck is already [lobbying the company]( to build another.” This suggests that things may get bumpy for battery makers, at least in the near term. Something similar is already playing out with solar panels, another technology that benefited from heavy government support in many countries, especially China. That country’s aggressive and massive subsidies to its domestic industry have helped flood the global market with cheap solar cells, driving competitors elsewhere out of business. An oversupply of batteries could drive their prices down in a similar fashion, leaving governments to decide whether to lend even more aid to battery companies struggling to turn a profit. US Treasury Secretary Janet Yellen has [made a point of complaining about this](, even as the Biden administration subsidizes its own domestic solar cell and battery makers. Still, there are worse things than hypocrisy. Those massive, market-distorting Chinese subsidies have helped speed up the development of solar panels and electric vehicles and batteries. This has driven down the costs and quickened their adoption. The other kind of protectionist measure that the Biden administration has taken, however, has the opposite effect. The administration recently announced that it was slapping a 100% tariff on Chinese electric vehicles. Doing so protects American manufacturers, whose EVs are far more expensive than China’s. But if the Biden administration succeeds in reducing the competitive advantage of China's cheap green technologies, it probably also slows their global adoption, slowing the shift away from carbon as a result. If EVs and batteries remain more expensive for longer in the US, fewer people will buy and use them, and the world will warm more. That’s the tension at the heart of this kind of tech policy, which tries to stimulate domestic manufacturing while also advancing a broader global goal. Sometimes the needs of the former conflict with the latter. And when push comes to shove, the planet usually loses out.—[Drake Bennett](mailto:dbennett35@bloomberg.net) One to watch [Joe Zhao, a managing partner at Millennia Capital, talks on Bloomberg Television about the outlook for chip companies in the AI era.]( Bloomberg Technology podcast [Foundering: The OpenAI Story is a narrative podcast that examines the rise of Sam Altman, from the time he was a 19-year-old startup founder, then the head of Y Combinator, and now the billionaire king of this AI boom.]( Get fully charged Google has partnered with a Nevada utility and a geothermal energy startup to run data centers on electricity [derived from the earth’s own heat](. Snowflake ends an investigation into a cyberattack that [may have affected about 165 customers](. Oracle’s embattled contract to revamp digital medical records for the US Department of Veterans Affairs [is extended for a year](. OpenAI appoints former US cyber chief [Paul Nakasone to its board](. Medical data firm Tempus raises more than $410 million [in an initial public offering.]( More from Bloomberg Bloomberg Screentime: The entertainment landscape is shifting rapidly. Cable empires are crumbling, streaming giants face new challenges and innovative forces are on the rise. Join Bloomberg's Lucas Shaw in Los Angeles on Oct. 9-10 for look at the future of media. Network with industry titans, immerse in live experiences and enjoy a curated collection of local eats. Get your tickets today. [Learn More](. 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