WEBVTT - This Is What's Hard About Building a US Domestic Battery Industry 0:00:03.160 --> 0:00:18.920 Bloomberg Audio Studios, Podcasts, radio News. 0:00:20.440 --> 0:00:23.919 Hello and welcome to another episode of the Odd Lots Podcast. 0:00:24.000 --> 0:00:26.239 I'm Joe Wisenthal and I'm Tracy Alloway. 0:00:26.360 --> 0:00:28.319 Tracy, I feel like a few years ago there was 0:00:28.360 --> 0:00:32.760 a lot of talk about, Okay, this evy battery boom 0:00:33.080 --> 0:00:37.240 is coming, and we don't have yet the raw materials, 0:00:37.320 --> 0:00:41.479 the basic commodities necessary to supply all the demand for that. 0:00:41.880 --> 0:00:44.680 Yes, I would say even before a few years Yeah, 0:00:44.760 --> 0:00:47.000 do you remember there was a time I guess it 0:00:47.080 --> 0:00:50.320 must have been like early twenty tens or maybe even 0:00:50.400 --> 0:00:54.000 before then, when rare earths were all the rage and 0:00:54.040 --> 0:00:56.360 everyone was talking about like, oh, put your money in 0:00:56.440 --> 0:00:56.920 rare earth. 0:00:57.120 --> 0:00:58.320 The clue is in the name. 0:00:58.440 --> 0:01:00.880 There aren't that many of them. There won't be enough 0:01:00.880 --> 0:01:03.680 to go around. And then that kind of came and went. 0:01:03.800 --> 0:01:07.920 But then you're right, it resurfaced in recent years because, 0:01:07.920 --> 0:01:11.640 of course, we do have this pressure or desire depending 0:01:11.680 --> 0:01:16.600 on your viewpoint, of shifting to electric vehicles, which require batteries, 0:01:16.800 --> 0:01:20.320 which require a whole bunch of materials to actually make them, 0:01:20.319 --> 0:01:22.760 and there was a lot of hand ringing over whether 0:01:22.880 --> 0:01:25.120 or not there would be enough of these materials to 0:01:25.160 --> 0:01:29.240 go around where the materials actually come from. That was 0:01:29.280 --> 0:01:32.640 a big point of contention and concern. If you're dependent 0:01:32.720 --> 0:01:35.720 on one source i e. China to get all the 0:01:35.720 --> 0:01:38.800 stuff you need for battery making, then what happens when 0:01:38.880 --> 0:01:42.959 China starts to restrict those materials, which is fast forward 0:01:43.000 --> 0:01:45.920 to twenty twenty three exactly what we saw happen. 0:01:46.360 --> 0:01:48.480 Yeah, I think that was a great summary. There's a 0:01:48.520 --> 0:01:52.120 lot here for us. This story touches on a lot 0:01:52.160 --> 0:01:54.920 of our themes because you know, one of the things 0:01:54.960 --> 0:01:57.920 we talk about is that, as you mentioned, there's a 0:01:58.000 --> 0:02:00.520 sort of the replacement of one set of kamades and 0:02:00.640 --> 0:02:03.120 oil and gas, et cetera, a brand new set of 0:02:03.120 --> 0:02:06.240 commodities that are also potentially going to be quite scarce. 0:02:06.400 --> 0:02:10.600 There's also just a question of what catalyzes investment because 0:02:10.600 --> 0:02:13.200 as we know, when it comes to raw materials, there 0:02:13.280 --> 0:02:16.800 is a lot of upfront cost and there's also the 0:02:16.800 --> 0:02:20.119 future is wildly uncertain in terms of like how much 0:02:20.160 --> 0:02:22.560 we'll need and how much demand there will be. So 0:02:22.600 --> 0:02:25.760 you know, we've talked with A Jiggershaw, for example, of 0:02:25.840 --> 0:02:29.359 the Department of Energy's Loan Programs Office multiple times on 0:02:29.400 --> 0:02:32.880 the podcast about why for example, when it comes to 0:02:32.960 --> 0:02:38.120 sort of new energy investment, traditional private sector financing vehicles 0:02:38.240 --> 0:02:40.880 maybe aren't up to the task completely. Why there are 0:02:40.919 --> 0:02:44.920 other market mechanisms or non market mechanisms that might be necessary. 0:02:45.560 --> 0:02:49.720 Uncertainty about demand supply, What is even the future of 0:02:49.919 --> 0:02:52.840 battery technology right? Because there are competing visions of what 0:02:52.919 --> 0:02:54.880 the batteries that will power evs will look like and 0:02:54.880 --> 0:02:58.480 whether it's solid state or lithium ion or something totally different. 0:02:58.800 --> 0:03:02.800 So how do you catalyze investment with so much upfront costs, 0:03:02.840 --> 0:03:05.480 so much uncertain return at a time of a highly 0:03:05.560 --> 0:03:06.360 uncertain future? 0:03:06.960 --> 0:03:10.799 I find that an absolutely fascinating question because again, these 0:03:10.800 --> 0:03:12.920 are things that a lot of people would argue we 0:03:13.040 --> 0:03:17.640 actually need. But are they being naturally incentivized by the 0:03:17.720 --> 0:03:21.200 market to actually have more of them? Or do they 0:03:21.240 --> 0:03:24.480 come through government initiatives such as the Department of Energy 0:03:24.639 --> 0:03:28.200 and the Loan Program's office, or do they maybe come 0:03:28.240 --> 0:03:31.840 from the companies themselves. You know, we've seen Tesla move 0:03:31.960 --> 0:03:35.120 to build up its own supply of the things it 0:03:35.280 --> 0:03:38.520 needs for batteries, So there are all these interesting questions 0:03:38.560 --> 0:03:42.200 of how this stuff actually gets financed. And also, just 0:03:42.240 --> 0:03:44.280 to take a step back, I have a bunch of 0:03:44.360 --> 0:03:47.000 questions about what the stuff actually is because I see, 0:03:47.320 --> 0:03:50.440 you know, I see words like graphite and manganese and 0:03:50.480 --> 0:03:54.280 things like that thrown around Germanium, and like, okay, I 0:03:54.320 --> 0:03:56.640 get that they're used for making batteries, but I don't 0:03:56.920 --> 0:03:59.680 really know the specifics. So I would love to know 0:03:59.760 --> 0:04:00.520 more about that. 0:04:00.600 --> 0:04:02.680 One of my worst moments when I was at TV 0:04:02.840 --> 0:04:05.480 host several years ago is I was interviewing one of 0:04:05.520 --> 0:04:08.520 our reporters here at Bloomberg and I just like blurted 0:04:08.560 --> 0:04:11.320 out like she was talking about cobalt prices, and I 0:04:11.360 --> 0:04:13.760 was like, what is cobalt? And I like felt so 0:04:13.920 --> 0:04:16.400 bad because like I'm making your reporter anitary, like what 0:04:16.520 --> 0:04:18.839 is this basic? You know? But she nailed it, but 0:04:18.880 --> 0:04:22.400 there was like this, yeah, she nailed it, But I 0:04:22.400 --> 0:04:23.560 felt like so bad because that's it. 0:04:23.680 --> 0:04:24.279 I didn't mean it. 0:04:24.279 --> 0:04:26.000 As like a gogic question. I was like, no, what 0:04:26.080 --> 0:04:27.359 is oil? What is cobalt? 0:04:27.400 --> 0:04:27.880 Anyway? You know? 0:04:27.920 --> 0:04:31.120 The other thing to you know, mention, how okay? There 0:04:31.160 --> 0:04:33.599 was all this talk about do we have enough right now? 0:04:33.720 --> 0:04:36.159 There's a double whammy. I feel like in this space 0:04:36.240 --> 0:04:38.720 because a actually a lot of spot prices for some 0:04:38.760 --> 0:04:42.479 of these alternative commodities have actually plunged the last here. Also, 0:04:42.680 --> 0:04:45.200 there's a big theme and maybe it's sort of fun, 0:04:45.240 --> 0:04:48.599 but maybe it's real of like EV sales maybe aren't 0:04:48.600 --> 0:04:50.920 taking off quite as fast as expected, or at least 0:04:50.920 --> 0:04:54.520 for the legacy automakers still figuring out their groove. Maybe 0:04:54.560 --> 0:04:56.359 hybrids are going to be the thing for the moment. 0:04:56.520 --> 0:04:59.200 And then finally, higher interest rates and the effect that 0:04:59.200 --> 0:05:01.280 that has on supply, And that's a big theme we 0:05:01.360 --> 0:05:03.960 talk about, which is okay in theory, we want more 0:05:04.000 --> 0:05:06.440 supply of all the things to make goods cheap, but 0:05:06.520 --> 0:05:10.640 of higher interest rates impair investment in capex heavy things. 0:05:10.920 --> 0:05:13.039 What does that do to supply? So I think, like 0:05:13.080 --> 0:05:15.080 we said, there is just a lot of meat here 0:05:15.320 --> 0:05:17.200 for us to chew on, so to speak. 0:05:17.000 --> 0:05:20.760 Lots of questions, not least among them what is graphied 0:05:20.920 --> 0:05:22.120 and rare earth minerals? 0:05:22.160 --> 0:05:24.960 Anyway, All right, well, let's dive right into it. Someone 0:05:25.040 --> 0:05:28.120 who is a perfect guest right involved in this space 0:05:28.160 --> 0:05:30.360 and can hopefully answer every one of our questions due 0:05:30.360 --> 0:05:33.400 to firsthand experience. We're gonna be speaking with doctor Chris Burns. 0:05:33.680 --> 0:05:36.839 He is the founder and CEO of Novonics, a battery 0:05:36.880 --> 0:05:41.160 materials and technology company. Previously, he spent two years at 0:05:41.160 --> 0:05:44.000 Tesla's so someone right in the thick of it. Chris, 0:05:44.040 --> 0:05:45.839 thank you so much for coming on odd Lots. 0:05:46.120 --> 0:05:48.360 Yeah, great, thanks for having me. I'm really excited to 0:05:48.400 --> 0:05:49.359 dive into these topics. 0:05:49.440 --> 0:05:50.159 Well, what did we start? 0:05:50.200 --> 0:05:51.280 What is a Novonics? 0:05:51.560 --> 0:05:54.640 So NOWVONICX is a battery materials and technology company and 0:05:54.680 --> 0:05:57.800 we've been focused for ten years on longer life battery 0:05:57.839 --> 0:06:00.880 technologies and now on this movie meant to localize the 0:06:00.880 --> 0:06:03.919 supply chain, and we're going to talk about graphite and 0:06:03.960 --> 0:06:07.040 why that was one of these critical materials and minerals 0:06:07.080 --> 0:06:11.600 that we need to electrify vehicles, energy storage systems, and 0:06:11.640 --> 0:06:14.240 why we needed to develop the right types of technology 0:06:14.279 --> 0:06:15.640 to do it here in the US. 0:06:16.040 --> 0:06:18.560 So I'm going to start with a really basic question, then, 0:06:18.600 --> 0:06:21.039 which is where does graphite come from? I feel like 0:06:21.480 --> 0:06:24.240 we're in a high school science class or something. Where 0:06:24.240 --> 0:06:27.960 does graphite come from? And you also make synthetic graphite, 0:06:28.120 --> 0:06:30.919 so I understand where that comes from, but what is 0:06:30.960 --> 0:06:33.800 the process for actually making synthetic graphite and what is 0:06:33.880 --> 0:06:36.400 the role in the battery supply chain. 0:06:36.880 --> 0:06:40.400 Sure, so let's back up and say where is graphite used? Right, 0:06:40.520 --> 0:06:43.280 So in the lithium battery of a positive electrode and 0:06:43.320 --> 0:06:46.560 a negative electrode, and the positive electrode are these materials 0:06:46.600 --> 0:06:50.560 like nickel, manganese, cobalt, and MC lithium iron phosphate LFP, 0:06:50.680 --> 0:06:53.120 these types of terms you may hear, and the negative 0:06:53.160 --> 0:06:56.279 side of the battery is almost always graphite, so it 0:06:56.320 --> 0:06:59.400 represents about forty percent of the volume of any battery 0:06:59.480 --> 0:07:02.280 is actually graphite, and it's where the lithium ions actually 0:07:02.279 --> 0:07:04.440 go and get stored to store the energy and then 0:07:04.440 --> 0:07:07.800 get released during discharge. And so it has been a 0:07:07.839 --> 0:07:10.800 foundational part of lithium ion batteries since the early nineties 0:07:10.800 --> 0:07:14.240 when they started. And you can use graphite in two 0:07:14.280 --> 0:07:18.880 forms in lithium batteries, natural graphite and synthetic graphite. And 0:07:18.960 --> 0:07:21.880 so natural graphite, to answer your question, comes from the Earth. 0:07:22.160 --> 0:07:26.280 It is carbon that is formed into perfectly layered graphite 0:07:26.640 --> 0:07:29.840 that has been entered that state because of being under 0:07:29.880 --> 0:07:31.480 time and pressure in the Earth's crust. 0:07:31.720 --> 0:07:33.720 It's the same as the stuff that you would get 0:07:33.840 --> 0:07:36.680 in a pencil, almost like coal. In fact, I think 0:07:36.720 --> 0:07:38.840 some of it comes from coal, right, or you can 0:07:38.880 --> 0:07:39.840 harvest it from coal. 0:07:39.920 --> 0:07:42.880 So on the synthetic side, you can make graphite. Oh, 0:07:42.880 --> 0:07:46.320 I see different carbon rich precursor materials. So on the 0:07:46.400 --> 0:07:48.280 natural graphite side, you dig it out of the ground, 0:07:48.720 --> 0:07:51.560 you change its size, its shape, it's pure, and then 0:07:51.600 --> 0:07:54.400 you purify it, typically through heavy acids, and you can 0:07:54.400 --> 0:07:56.080 put a surface coating on it and then it's ready 0:07:56.080 --> 0:07:58.960 to go into a battery. And on the synthetic graphite side, 0:07:59.080 --> 0:08:03.320 it's a very similar process, but instead of starting with graphite, 0:08:03.600 --> 0:08:07.000 we actually start with other carbon rich precursor materials, and 0:08:07.000 --> 0:08:09.960 one of the most common is petroleum coke. Another is 0:08:10.000 --> 0:08:13.240 coal coke that's used in China. And so you take 0:08:13.280 --> 0:08:15.920 these materials, you change their size, their shape, and instead 0:08:15.960 --> 0:08:18.800 of purifying them, we actually heat them to really high 0:08:18.840 --> 0:08:22.520 temperatures about three thousand degrees celsius, and it changes the 0:08:22.560 --> 0:08:25.440 atomic structure into graphite and then it's ready to go 0:08:25.440 --> 0:08:28.200 into a battery. So we develop technology really focused on 0:08:28.240 --> 0:08:30.239 that high temperature process. 0:08:30.320 --> 0:08:34.120 For natural graphite. How is it distributed around the Earth, 0:08:34.160 --> 0:08:36.120 And I imagine there's a difference between how it's sort 0:08:36.160 --> 0:08:41.160 of geologically distributed versus in practice where it's actually extracted, 0:08:41.200 --> 0:08:43.319 because I seem to recall from the old days in 0:08:43.440 --> 0:08:45.760 rare earths. There's other people like, well, they're not actually rare, 0:08:45.840 --> 0:08:47.640 they are just only some places where they allow it 0:08:47.679 --> 0:08:50.360 because or they have much mining due to pollution, et cetera. 0:08:50.400 --> 0:08:52.600 So where where is the graphite and where do we 0:08:52.600 --> 0:08:53.520 get our graphite? 0:08:53.679 --> 0:08:56.440 Sure, So for the battery industry, you know, specifically, a 0:08:56.480 --> 0:09:01.200 lot of the graphite mining opportunities are in Australia, in Africa, 0:09:01.400 --> 0:09:03.840 in China, and of course there's a lot of projects 0:09:03.840 --> 0:09:05.280 looking to be developed in Canada. 0:09:05.440 --> 0:09:05.600 Right. 0:09:05.720 --> 0:09:08.280 Canada is going to be a great partner to North 0:09:08.320 --> 0:09:11.880 American's electrification here because of the resources they have. So 0:09:11.920 --> 0:09:15.000 there's a lot of active mining of graphite today really 0:09:15.040 --> 0:09:17.199 all over the world. But I think something you guys 0:09:17.240 --> 0:09:19.040 talked about in the intro is where are we dependent 0:09:19.080 --> 0:09:22.000 on getting the materials? But it's equally important to talk 0:09:22.040 --> 0:09:25.319 about where are we dependent on processing those materials? Because 0:09:25.480 --> 0:09:28.000 you know, we talked about the word commodity, right, but 0:09:28.080 --> 0:09:30.120 none of these by the time they're ready to sell 0:09:30.160 --> 0:09:34.400 to a battery maker an LGE A, Panasonic are commodities anymore. 0:09:34.480 --> 0:09:38.040 They are specialty materials made to a spec And right now, 0:09:38.480 --> 0:09:41.520 even if let's say natural graphite can be sourced more globally. 0:09:42.280 --> 0:09:45.719 All of the processing is in China, and that's our bottleneck, 0:09:45.720 --> 0:09:47.800 and that's what we need to change, not just where 0:09:47.840 --> 0:09:50.559 we get the raw materials, but where we upgrade those 0:09:50.640 --> 0:09:51.359 raw materials. 0:09:51.840 --> 0:09:55.080 Oh, this is interesting. So this makes a lot of 0:09:55.080 --> 0:09:58.959 sense because you see these headlines, like you know, billions 0:09:59.040 --> 0:10:02.679 of metric tons of rare earths or whatever discovered in 0:10:02.800 --> 0:10:04.760 I think there was one in Turkey recently, and in 0:10:04.800 --> 0:10:08.720 Sweden and in Wyoming, which feeds into my new get 0:10:08.840 --> 0:10:13.080 rich very slowly strategy of buying land out west and 0:10:13.080 --> 0:10:14.880 hoping that it just comes with a bunch of graphite. 0:10:14.920 --> 0:10:18.320 But anyway, so supply is not the issue here. It's 0:10:18.360 --> 0:10:22.760 the processing capacity. Because we are making these new discoveries. 0:10:22.760 --> 0:10:24.440 I don't want to stay on a regular basis, but 0:10:24.480 --> 0:10:25.640 there have been quite a few. 0:10:26.640 --> 0:10:30.600 Yeah, I think that's a critical distinction really where we focus. 0:10:30.800 --> 0:10:34.319 We're going to have an abundance of materials, right, and 0:10:34.960 --> 0:10:37.080 I think two things about that. We will continue to 0:10:37.120 --> 0:10:40.839 discover new resources, right, whether it's lithium, whether it's nickel, 0:10:40.840 --> 0:10:45.000 whether it's graphite. And then we also will have recycling 0:10:45.080 --> 0:10:47.560 start to play a significant role in bringing some of 0:10:47.559 --> 0:10:50.200 these materials back into the supply chain, you know, over 0:10:50.240 --> 0:10:52.160 the coming years. Right, So when you take the long 0:10:52.280 --> 0:10:56.280 term vision, you know the cyclical economy for lithium ion batteries. 0:10:56.640 --> 0:10:58.720 When you think about what mining is, you're trying to 0:10:58.760 --> 0:11:01.920 harvest these minerals from very low concentrations. 0:11:02.040 --> 0:11:02.160 Right. 0:11:02.240 --> 0:11:05.599 Graphite might be two to fifteen percent of what you 0:11:05.720 --> 0:11:07.880 dig out of the ground is graphite in a mining project. 0:11:08.000 --> 0:11:10.839 Nickel is very much lower than that. But when you 0:11:10.880 --> 0:11:12.880 harvest them from a battery, you already have the elements 0:11:12.920 --> 0:11:15.960 you want in concentration, right, So it's very efficient. But 0:11:16.040 --> 0:11:17.920 until we start having a lot of those batteries reach 0:11:18.040 --> 0:11:20.319 end of life, it can't feed a huge amount of 0:11:20.320 --> 0:11:21.040 the supply chain. 0:11:21.080 --> 0:11:25.920 Why has China seemingly developed the processing capacity before a 0:11:26.000 --> 0:11:27.880 lot of other countries They seem to have a head 0:11:27.880 --> 0:11:30.839 start in this. Was this just the nature of their 0:11:30.880 --> 0:11:33.200 proximity to the actual supply and the fact that they 0:11:33.240 --> 0:11:35.640 were willing to, at least for a while, dig it 0:11:35.720 --> 0:11:36.440 out of the ground. 0:11:37.280 --> 0:11:39.719 Well, I think it's less about the materials and more 0:11:39.720 --> 0:11:43.880 about the processing because, for example, China on the graphite 0:11:43.920 --> 0:11:46.240 side has started signing off takes to buy all of 0:11:46.280 --> 0:11:49.160 this natural graphite from projects that are outside of China. 0:11:49.640 --> 0:11:52.360 Back to the financing discussion, people need off take, right, 0:11:52.400 --> 0:11:53.800 and so if China is the only place you can 0:11:53.800 --> 0:11:56.199 get your off take, then off take Sorry did that 0:11:56.320 --> 0:11:57.520 just mean say supply agreements? 0:11:57.559 --> 0:12:00.440 Yeah? Okay, so no, but in other words, like a 0:12:00.480 --> 0:12:03.000 committed order book. So we're going to build you know 0:12:03.080 --> 0:12:05.120 that you know that you have an environ. 0:12:05.040 --> 0:12:08.480 Exactly right, And so especially for large capital mining projects, 0:12:08.559 --> 0:12:10.880 you need to have these finance to be financiable. 0:12:11.040 --> 0:12:11.199 Right. 0:12:11.559 --> 0:12:13.720 And if China is the only market that's buying, then 0:12:13.840 --> 0:12:16.160 you go to China and you sell your products. Right. 0:12:16.559 --> 0:12:18.559 But then the question is really not how did they 0:12:18.559 --> 0:12:22.719 develop the resources, but how did they develop the process technology? 0:12:23.040 --> 0:12:25.360 And I think this really goes to, you know, kind 0:12:25.400 --> 0:12:29.160 of unfortunately one of these classic stories of offshoring technology. 0:12:29.559 --> 0:12:29.760 Right. 0:12:29.960 --> 0:12:32.840 The key lithium ion battery materials that I just talked 0:12:32.880 --> 0:12:36.680 about and MC was invented and patented here between you 0:12:36.720 --> 0:12:39.040 know labs at Delhousie where I did my PhDe and 0:12:39.440 --> 0:12:44.200 argon national lab. Lithium phosphate developed here, right, But when 0:12:44.280 --> 0:12:47.480 it came to starting to commercialize and scale batteries, we 0:12:47.520 --> 0:12:49.840 said it's too expensive to make these materials in the US, 0:12:50.120 --> 0:12:53.439 Let's make them in China. And then very quickly China 0:12:53.480 --> 0:12:56.280 started to develop more and more technology, more and more 0:12:56.320 --> 0:12:59.079 processing around all of those materials. 0:12:59.480 --> 0:13:02.640 So I take the point about expenses and offshoring, but 0:13:02.840 --> 0:13:06.880 how much of it, if any, was environmental concerns, Because 0:13:06.960 --> 0:13:09.800 you know, you mentioned giving materials an acid bath to 0:13:09.880 --> 0:13:12.880 purify them. I don't necessarily think of that as a 0:13:12.880 --> 0:13:17.200 particularly environmentally friendly activity, So I just wonder if that 0:13:17.400 --> 0:13:20.200 played into that calculation at all. 0:13:20.360 --> 0:13:23.240 So I think, you know, when we started off shoring technology, 0:13:23.240 --> 0:13:25.080 it was to drive the cost down. And then when 0:13:25.679 --> 0:13:28.480 you know, the end market continued to put pressure on costs, 0:13:28.480 --> 0:13:31.080 then you know that allowed for let's say, shortcuts to 0:13:31.120 --> 0:13:34.640 be taken in jurisdictions like China where environmental controls are 0:13:34.679 --> 0:13:37.040 not as rigorous. So there are concerns about how they 0:13:37.080 --> 0:13:40.360 handle acid waste streams in our sector. I talked about 0:13:40.360 --> 0:13:44.480 this very high temperature process, so there are concerns about 0:13:44.480 --> 0:13:46.640 how they build their plants to do this today in 0:13:46.720 --> 0:13:48.960 terms of the emissions that come from those sites, the 0:13:49.000 --> 0:13:52.360 power intensity of those sites, and so this idea of 0:13:52.360 --> 0:13:55.280 a clean car and a dirty battery became very topical, 0:13:55.440 --> 0:13:57.800 you know, kind of five years ago, and this is 0:13:57.840 --> 0:14:00.440 one of our big challenges as well. We want to 0:14:00.480 --> 0:14:03.200 reshore supply chain, which means we need to do it 0:14:03.240 --> 0:14:07.160 with the right technology, but that also comes at a cost, 0:14:07.360 --> 0:14:10.480 and so back to financeability and back to government incentives 0:14:10.480 --> 0:14:12.720 and all of these programs. We're trying to balance a 0:14:12.760 --> 0:14:15.200 lot of pieces of the puzzle here in order to 0:14:15.240 --> 0:14:20.239 develop not just materials independence, but that process technology independence. 0:14:20.320 --> 0:14:23.960 I want to ask one more question about China's dominance 0:14:24.120 --> 0:14:27.240 in the refining or aspect. When you say, like, okay, 0:14:27.240 --> 0:14:29.360 it was cheaper to do it in China, you know, 0:14:29.400 --> 0:14:32.160 and I think of being able to do something cheaper 0:14:32.160 --> 0:14:35.040 in China, like your mind goes first to labor costs, 0:14:35.040 --> 0:14:38.840 et cetera. How much is it labor and how much 0:14:38.880 --> 0:14:42.200 at this point is it about lower cost labor, Like 0:14:42.240 --> 0:14:44.480 when you think about the various cost that goes into refining, 0:14:44.480 --> 0:14:46.800 how much is labor? But how much is also at 0:14:46.840 --> 0:14:51.600 this point just scale and expertise and learning by doing, 0:14:51.640 --> 0:14:54.080 Because it seems like, yes, labor is probably cheaper in 0:14:54.160 --> 0:14:56.920 many aspects in China, but also like once you've been 0:14:56.920 --> 0:14:59.480 doing something for a long time. You just get good 0:14:59.520 --> 0:15:02.280 at it in a way that someone starting from a 0:15:02.280 --> 0:15:04.640 standing start might not expect to be good at it 0:15:04.680 --> 0:15:08.360 for years, even if you could somehow hold labor cost constant. 0:15:08.800 --> 0:15:10.880 I think that's exactly right. You know, I went there 0:15:11.000 --> 0:15:13.520 to have some benefits and costs that you see in labor, 0:15:13.600 --> 0:15:15.960 you see in capital intensity things like this that are 0:15:16.240 --> 0:15:19.800 let's say more obvious. But that was twenty years ago, right, 0:15:19.840 --> 0:15:23.000 And over those past twenty years now they've developed scale 0:15:23.120 --> 0:15:26.040 efficiency and I mean they've had subsidies throughout that way 0:15:26.080 --> 0:15:30.120 to incentivize their industry to become the dominant force here, right. 0:15:30.160 --> 0:15:32.320 And so that's the balance between why it went but 0:15:32.400 --> 0:15:36.160 then also now why it's challenging to compete because they 0:15:36.160 --> 0:15:39.640 didn't just take technology and you know, copy US technology 0:15:39.680 --> 0:15:42.080 or anything like this. They've now advanced that technology to 0:15:42.120 --> 0:15:43.480 get the leaders in the world. 0:16:00.040 --> 0:16:03.280 Okay, let's talk about the efforts to bring more of 0:16:03.280 --> 0:16:06.960 that capacity to the US. So what is happening? How 0:16:07.080 --> 0:16:09.520 much has you know, I know, like when the Inflation 0:16:09.680 --> 0:16:12.720 Reduction Act went through, one of the big things, Senator 0:16:12.800 --> 0:16:15.400 Joe Manchin was like, I'm very concerned about our dependence 0:16:15.480 --> 0:16:18.400 on raw materials from China, so that became an incentive. 0:16:18.760 --> 0:16:21.920 What from your view of the world, what has the 0:16:22.000 --> 0:16:26.080 Inflation Reduction Act if any, What is the effect in 0:16:26.200 --> 0:16:28.040 terms of catalyzing domestic capacity. 0:16:29.000 --> 0:16:31.880 I think it's critical. And you know, we started our 0:16:31.920 --> 0:16:35.080 Annimateials group in twenty seventeen, so okay, you know a 0:16:35.120 --> 0:16:37.240 little before all of this way, because I had just 0:16:37.320 --> 0:16:40.840 left Tesla where this problem statement became pretty obvious, right, 0:16:40.880 --> 0:16:45.320 this idea of localization, this dependence on China and graphite specifically, 0:16:45.520 --> 0:16:47.880 was an area that I was focused in, and so 0:16:48.840 --> 0:16:50.440 we had been saying for a long time the government 0:16:50.480 --> 0:16:53.960 has to play a role here because we have challenges 0:16:54.080 --> 0:16:57.040 competing dollar for dollar with China for all of those 0:16:57.080 --> 0:16:59.120 reasons you just talked about, whether it's their lower cost 0:16:59.120 --> 0:17:02.720 structure or now advancement in technology. And so the government 0:17:02.760 --> 0:17:06.040 has now come in and when you look at and 0:17:06.119 --> 0:17:09.320 we'll take graphite as the specific example, the policies in place. 0:17:09.359 --> 0:17:11.600 We have the Inflation Reduction Act where we can qualify 0:17:11.640 --> 0:17:14.960 for things like forty five acts, Advanced Manufacturing Production tax credit. 0:17:15.080 --> 0:17:17.960 What is its all that out specifically what that means, 0:17:18.000 --> 0:17:20.199 so that is a ten percent of our cost of 0:17:20.280 --> 0:17:23.400 goods back to us in tax credits on an ongoing basis, 0:17:24.320 --> 0:17:27.440 or we can apply and potentially be eligible for forty 0:17:27.480 --> 0:17:30.639 eight C and forty eight C is thirty percent of 0:17:30.680 --> 0:17:33.520 your capital investment on a clean energy project back in 0:17:33.560 --> 0:17:36.080 tax credits. So these are programs that are worth one 0:17:36.160 --> 0:17:39.280 hundred or hundreds of millions of dollars in tax credits. 0:17:39.680 --> 0:17:41.960 We were, of course the recipient of one hundred million 0:17:42.000 --> 0:17:45.720 dollar grant under the Infrastructure Law Package. That's a great thing. 0:17:45.760 --> 0:17:48.760 We have an application with the Loan Program Office. And 0:17:48.840 --> 0:17:51.800 Graphite has been identified as a critical mineral in all 0:17:51.840 --> 0:17:54.240 of the policies, and it also is in the Section 0:17:54.280 --> 0:17:57.800 three oh one tariffs, the twenty five percent tariff from China. 0:17:57.840 --> 0:18:00.320 There's an exemption on that tariff right now. But when 0:18:00.359 --> 0:18:02.719 you say is the government playing their role, look at 0:18:02.720 --> 0:18:05.119 those policies right They're doing what they can. But we 0:18:05.200 --> 0:18:08.040 need to make sure that all those policies are harmonized 0:18:08.560 --> 0:18:11.239 and really going to something you talked about in the 0:18:11.240 --> 0:18:14.240 intro catalyze, not just the development of technology, but the 0:18:14.280 --> 0:18:16.920 investment in scale. That's the big challenge that we face 0:18:17.000 --> 0:18:17.400 right now. 0:18:17.960 --> 0:18:21.000 So speaking of an investment, I have at least two 0:18:21.160 --> 0:18:26.000 questions specifically related to Tesla. So number one, when you 0:18:26.040 --> 0:18:28.159 say you worked at Tesla, how many people ask you 0:18:28.240 --> 0:18:31.040 if you know Elon Musk. Notice that I did not, 0:18:31.160 --> 0:18:34.919 in fact ask that question, but I rephrased it slightly. 0:18:34.920 --> 0:18:40.520 And then secondly, why not just develop this particular business 0:18:40.960 --> 0:18:44.280 within Tesla? I mean, we have seen Tesla start to 0:18:44.400 --> 0:18:48.760 go this well, maybe vertical integration is too strong a word, 0:18:48.800 --> 0:18:53.320 but it is striking deals with specific suppliers for the 0:18:53.359 --> 0:18:56.800 materials it needs for batteries. So clearly this is of 0:18:56.880 --> 0:18:59.639 interest and concern for them. Why not just develop the 0:18:59.640 --> 0:19:03.680 company within the auspices of Tesla? And maybe this gets 0:19:03.680 --> 0:19:06.760 a little bit to the idea of like natural market 0:19:06.800 --> 0:19:10.760 forces and investment versus those that are incentivized by the government. 0:19:11.480 --> 0:19:15.960 Sure, so, no, I don't know Elon, and almost everyone asks. 0:19:16.320 --> 0:19:20.040 But the but I think when you think about Tesla's strategy, 0:19:20.040 --> 0:19:22.320 I think there's two things. You know. The first kind 0:19:22.320 --> 0:19:25.080 of obvious statement is you can't do everything right. And 0:19:25.160 --> 0:19:26.200 I mean, if they need. 0:19:26.160 --> 0:19:28.240 I don't know, Elon seems to like be making it 0:19:28.440 --> 0:19:34.280 pretty good, run spaceships, neulinks, tunnels, satellites. I mean, okay, 0:19:34.320 --> 0:19:36.920 that flamethrower, the flamethrower, like you'd make a good run 0:19:36.920 --> 0:19:38.439 of doing Twitter anyway, keep. 0:19:38.280 --> 0:19:40.280 Going, Well, that's the house of evil, not the house 0:19:40.320 --> 0:19:43.200 of truths, right. But again, you know, there's so much 0:19:43.240 --> 0:19:45.480 investment that needs to happen in every vertical of the 0:19:45.480 --> 0:19:50.840 supply chain, lithium, nickel, graphite, you know, electrolyde development, separator materials, 0:19:50.880 --> 0:19:53.920 every single piece, and so you you kind of can't 0:19:53.960 --> 0:19:56.320 fight every war, right, and so when you do look 0:19:56.359 --> 0:19:59.520 at what Tesla has done, you know they focused and 0:19:59.640 --> 0:20:02.439 the what the industry is focused on. You know, what 0:20:02.600 --> 0:20:06.119 was the first metal that everybody got critically focused on? Lithium, 0:20:06.240 --> 0:20:09.640 Then everybody started talking about nickel. Graphite has forever been 0:20:10.040 --> 0:20:13.960 kind of the forgotten critical mineral, right, And it's because 0:20:14.200 --> 0:20:17.919 actually graphite is what prevents in many ways air quotes 0:20:17.960 --> 0:20:21.119