Plans to lure a Canadian battery company to the Hudson Valley with a slew of government incentives, including job-creation tax credits, loans, and federal subsidies, appear to be a dud. It’s a reminder that when it comes to picking winners in the energy-storage space, taxpayers are often losers.
Zinc8 Energy Solutions was working toward a “dependable low-cost zinc-air battery” that could help a renewable-heavy electric grid maintain service when the sun isn’t shining or wind isn’t blowing. The company last year announced, to high-voltage fanfare, plans to open its first manufacturing site outside Kingston in Ulster County.
But things changed suddenly last week as the CEO resigned, employees were laid off, and the stock price cratered (hitting zero at one point in trading).
This shouldn’t have been much of a surprise. More than a decade after its founding, Zinc8 still wasn’t profitable and hadn’t yet begun major production. Company officials in April told investors they had instead “relied on non-operational sources of financing to fund operations.”
The losses here weren’t as severe as they’ve been on other state-backed technology flops, such as the Buffalo SolarCity plant or the silicon wafer play in Albany, where the state paid for tens of millions of dollars of equipment. The incentives were largely crafted around production: state officials had awarded $9 million in Excelsior tax credits, which are tied to employment, and the plant was poised to get a refundable federal tax credit (cash payment) for each battery cell it built.
State taxpayers, however, had spent $8 million on the industrial park where Zinc8 was meant to be the anchor tenant.
The biggest loser appears to have been the Ulster County Industrial Development Agency. The IDA in March let Zinc8 borrow up to $10 million for “acquisition of machinery, equipment, fit-up and improvements to the facility.”
It’s not clear how much of that had gone out the door. By comparison, Zinc8’s market cap today stands at US$1.4 million.
It’s also unclear whether the company will be able to support the handful of demonstration projects for which it received public funding through NYSERDA, the state energy agency, and the state Power Authority.
Durathon Lessons Don’t Endure
It’s not the first time officials have picked the wrong batteries.
Battery technology is a high-stakes and constantly evolving market where customer needs and resource availability are in flux. Government economic development officials—who lack psychic predictive powers to begin with—can’t meaningfully speculate whether a battery concept or design will meet customer needs at the best price a few years down the line.
And Zinc8 warned them as much, citing risk factors including:
that we may not be able to secure sufficient financing on favorable terms or at all in order to continue operations; that our technology fails to work as expected or at all; that our technology proves to be too expensive to implement broadly; that customers do not adapt our products for being too complex, costly, or not fitting with their current products or plans; our competitors may offer better or cheaper solutions for battery storage; general economic, market and business conditions; increased costs and expenses; inability to retain qualified employees; our patents may not provide protection as expected and we may infringe on the patents of others; and certain other risks…
It was one thing for federal policymakers to encourage domestic battery manufacturing in general, but New York and Ulster County officials targeted Zinc8 specifically as a source of job-creation, when that sector has been anything but reliable.
The people who bet on Zinc8 appear to have learned little from the disastrous public dalliance with GEMx, a General Electric subsidiary whose Durathon battery was all the rage a decade ago. State taxpayers sank $12.5 million into equipping a manufacturing plant in Schenectady County, where Metroplex, the local economic development agency kicked in $5 million (or $32 per county resident).
Less than three years later, the operation was shuttered. As GE put it:
The energy storage industry continues to evolve, and though Durathon battery technology is well-suited for certain applications, today it is just not cost-effective enough to manufacture at a competitive price point compared to other battery technologies.
State taxpayers got back pennies on the dollar, while Metroplex forgave the entire $5 million.
Betting on trendy emerging businesses makes for great publicity, allowing federal, state and local elected officials to be seen “doing something” about New York’s difficult business climate. But it’s a dreadful substitute for actually doing something about it.