Case Study: Axion Power International

Product and service mix

Axion Power International, Inc. develops, designs and manufactures advanced lead-acid batteries and energy storage components.

In contrast to conventional lead-acid batteries, which use negative electrodes made of lead, Axion's batteries use PbC® technology, which replaces the negative electrodes with activated carbon electrodes. As a result, Axion's batteries last three to four times longer than conventional lead-acid batteries, charge up to ten times faster, and weigh 40 percent less because they contain 40 percent less lead. These lead-carbon batteries are environmentally friendly as they can be recycled into new lead-carbon batteries.

Axion's batteries can be used in a variety of energy storage and power delivery markets including:

• Renewable energy (wind and solar)
• Electricity-grid (load-leveling and peak-shaving)
• Hybrid and electric vehicles

Axion's chief executive officer, Thomas Granville, explains that going forward, the renewable energy market will be the company's most important market:

"Because wind doesn't always blow and the sun doesn't always shine, the power that is generated from the solar panels or wind turbines can be stored by the battery packs and discharged at night or when the sun isn't shining."

Company location logic

Axion was established in Canada in 2004 as a research and development (R&D) company. In 2006, the company was presented with the opportunity to buy a manufacturing plant in New Castle, Pennsylvania, and transitioned the entire company to New Castle. As Granville describes it:

"When we were initially presented with the opportunity to buy the plant in Pennsylvania, we were thinking of also keeping our operations in Canada. We went to Pennsylvania and explored the plant and talked to people who used to work at the plant. We found a very diligent and willing workforce."

In addition to the workforce, Pennsylvania became an appealing state for Axion to relocate because of the receptiveness of the state government. Granville explains:

"I've done work in several other states over time, and never met anyone like the Pennsylvania government [officials]. It starts at the top, with Governor Rendell, who has been out to visit the plant twice. They come and ask what they can do to help. We tell them and then they come back, having done it. It's amazing how they work for the benefit of business and their community to create jobs."

Company size and structure

The company is currently capitalized at over $30 million, and expects that number to double over the next few years. After moving to Pennsylvania, Axion gradually grew their workforce to more than 50. The company is currently in the market for new hires.

Relationships with partners in the value chain

Axion Power has strategic partnerships with some major brand-name lead-acid battery suppliers. Under one of the company's contracts, Axion is provided with the raw materials and then uses their own workforce to manufacture the batteries.

The company has established a relationship with the New York State Energy Research and Development Authority to provide back-up power to utility sites. Axion is also working on a peak energy saving project with the City University of New York.

Immediate plans

Axion is currently expanding. The company expects 2009 revenues to be sharply above those in the past, mostly because the company is transitioning into a manufacturing entity. In past years, Axion was more of an R&D company and did not make products. Going forward in 2009, Axion is now making several products that have received approval. According to Granville:

"We want to grow technology here and reinvent ourselves from the old coal and steel towns into more of a technology corridor. At a time when a lot of companies are outsourcing their work, we've found that the quality of the worker in Pennsylvania justifies an investment in them."

Axion sees various global market opportunities for its batteries, which are projected to exceed $4.3 billion in combined annual sales by 2009, according to Frost & Sullivan.

Although Axion has not been directly affected by the financial crisis, the company's end users have been impacted, leading to a downturn in inventory demand. Granville explains the chain reaction: "Distributors stock fewer batteries for their customers because customers are buying less, so battery companies have fewer orders from their distributors. It indirectly puts pressure on contacts they have with us. It's a chain effect here."

Top opportunities for future growth

With government contracts, Granville hopes to see a rise in demand: "The Obama administration wants to do something about emissions and oil dependence and also create jobs and fuel the economy."

The company expects to increase sales in their proprietary PbC® products for energy storage. Axion has been approached with inquiries to get involved with projects aimed at small villages in the U.S. and overseas that lack grid access and are in need of power support. Granville sees potential: "It's almost fairyland with all of the potential applications that are out there; however we can only focus on a number of them."

Axion intends to continue developing and selling their products in the U.S. before expanding to other markets abroad. According to Granville, "there is a lot of interest from Europe and the Far East, but we don't want to run before we walk. We want to demonstrate that we can make the product here and get it sold through end users here before we start reaching out to other areas."

Top requirements to capitalize on opportunities

Axion is working with government officials in Arkansas to establish a program that would train people at community colleges for converting gasoline-powered vehicles to electric and dual mode vehicles. With education and a new way of thinking in Washington, Granville believes it is time to take advantage of this new opportunity. Converting 1 percent of the U.S. vehicle fleet could create 44,000 new jobs going forward. Vehicle conversions can be done for less than $10,000. If a tax credit was connected with this, then the return on investment would be realized in two or three years. Granville describes how this could work:

"Tax incentives to convert vehicles wouldn't flow directly to us but would flow to end users and consumers, which absolutely needs to be done. You could attach a federally subsidized loan program that would allow the consumer to pay the conversion off in two years, which would eliminate the risk. There would be minimal risk involved for the government, and we would be pouring money into banks and the economy. This would be an immediate return on the economy and the environment."

Axion is not currently in need of financing but acknowledges that more money is always needed than anticipated. As Granville puts it:

"Having more money in the till would allow us to get products out more quickly. We've looked at some of the Obama lending opportunities that are out there, but our focus is more on making the product. There are also opportunities for low-interest loans and grants that the larger companies are asking for to expand and build more plants when they haven't even made a product yet. We spend our time, resources and energy in developing and selling a product and not in trying to get free money and low-interest loans."

This case study was prepared by Collaborative Economics for Environmental Defense Fund.

Posted: 17-Feb-2009; Updated: 24-Feb-2009