Consider This from NPR - How The U.S. Gave Away Cutting-Edge Technology To China

Episode Date: August 9, 2022

Researchers at an American national laboratory spent years developing cutting-edge vanadium redox flow batteries. But now, a Chinese company is making those batteries in a factory in northeastern China.An investigation from NPR's Laura Sullivan and Northwest News Network's Courtney Flatt shows how the U.S. federal government gave away American-made technology to China. In participating regions, you'll also hear a local news segment to help you make sense of what's going on in your community.Email us at [e-mail] more about sponsor message choices: podcastchoices.com/adchoicesNPR Privacy Policy

Just north of Seattle, near the shores of Puget Sound, sits an empty warehouse in Mukilteo, Washington. We used to have ten shipping containers here. There were empty containers back here. Customers and clients coming for visits. Chris Howard used to work in that warehouse with more than a dozen other engineers and researchers for an American company called Uni Energy. The name is still on the sign out front. They were building a battery, not just any battery, something called a vanadium redox flow battery. It was about the size of a refrigerator. And Howard and the rest of the employees thought it was going to change the world. It was more than a job.

It was a lot of blood, sweat, and tears into developing a product that we were really excited about and really proud of. Unlike batteries in cell phones, even cars, these batteries could charge and discharge energy for as long as 30 years. And this particular design seemed to hold enough energy to power a house. Researchers pictured people plunking them down next to their air conditioners, attaching solar panels to them, and everyone living happily ever after off the grid. It was beyond promise. We were seeing it functioning as designed, as expected. They thought the batteries would be the next great American success story. That is not what happened. Today, that warehouse sits shuttered, empty. All the employees who worked there were laid off, and those batteries, they are now being made at a factory

in northeastern China. Consider this. Cutting-edge technology developed in an American national lab paid for with American tax dollars was given away to a Chinese company. Using internal government documents, an NPR investigation tells the story for the very first time and shows how the U.S. may have lost the next big thing to China yet again. From NPR, I'm Mary Louise Kelly. It's Tuesday, August 9th. This message comes from WISE, the app for doing things in other currencies.

Send, spend, or receive money internationally and always get the real-time mid-market exchange rate with no hidden fees. Download the WISE app today or visit WISE.com. T's and C's apply. It's Consider This from NPR. It's a favorite promise of politicians. Keep manufacturing jobs and technology in America. Thank you. Please, everybody have a seat.

Let's go back to February 22, 2011. It was a Tuesday, and then-President Barack Obama was in Cleveland, Ohio. The world wants American goods. And my administration is going to go to bat for America's businesses around the world. You should know that. After shouting out LCD screens and fiber optic cables, Obama turned to an up-and-coming technology that seemed to show promise. And I have no idea what this is. Vanadium redox fuel cells. That's one of the coolest things I've ever said out loud.

Researchers at the federal government's Pacific Northwest National Lab surely would have agreed. For the past five years, they had been developing vanadium redox technology, getting it ready for commercial use. And this came at a time when the Obama administration was making a major push to reinvigorate American manufacturing. So we have a huge opportunity at this moment to bring manufacturing back. But we have to seize it. That's Obama at his State of the Union address the following year, 2012. Tonight my message to business leaders is simple. Ask yourselves what you can do to bring jobs back to your country and your country will do everything we can to help you succeed. That same year, Uni Energy Technologies was founded with a license to make the vanadium

redox flow batteries developed at the National Lab. And as the company grew, claims about supporting American technology and manufacturing kept coming from the White House, regardless of which president lived there. We're bringing manufacturing back to the United States, big league. We're reducing taxes. It was a particular fixation for Donald Trump during his time in office. I remember when I was growing up, let's see, made in America, all over the place. A little bit made in the USA, but made in America. Everything had made in America. And we're starting that again. And it's happening again, as you know. We're here today. And Trump's successor would pick up that baton, too.

And if we think we're not in a race, well, guess what? Take a look at China. Take a look at China. President Biden last summer at a Mack Trucks facility in Pennsylvania. It's a straightforward solution. Support and grow more American-based companies. And yet, it was the federal government itself that let those cutting-edge batteries slip away. NPR's Laura Sullivan and Courtney Flatt from Public Radio's Northwest News Network will pick up the story from here, with their investigation into how vanadium redox flow batteries ended up being made in a factory in China. The Chinese company didn't steal this

technology. It was given to them by the U.S. Department of Energy. An NPR investigation found the department allowed the technology and jobs to move overseas, violating its own licensing rules, while failing to intervene on behalf of U.S. workers in multiple instances, according to internal department emails. Now China is forging ahead, investing millions into this cutting-edge green technology that was supposed to help keep the U.S. and its economy out front. It just is mind-boggling. Joanne Skivoski is the vice president of finance for a U.S. company called Forever Energy that has been trying to get a license from the department to make the batteries here for more than a year.

This is technology made from taxpayer dollars. It was invented by a national lab, and it's deployed in China, and it's held in China. To say it's frustrating is an understatement. Department of Energy officials declined NPR's request for an interview and wouldn't explain how technology that cost U.S. taxpayers $15 million ended up in China. But after NPR sent department officials detailed questions laying out the timeline of events, officials terminated the license it gave to the Chinese company. In a statement, officials said the department, quote, takes American manufacturing obligations extremely seriously and is now, quote, undertaking an internal review of the licensing of vanadium

battery technology. The story of how this happened begins where the battery was born, three hours southwest of Seattle, in the basement of a government lab called the Pacific Northwest National Laboratory, where Courtney went to visit. You got your goggles on? Yep. Vince Sprinkle works with energy storage here at the lab. We're going to go down into the Redox Flow Battery Lab.

It was down here in 2006 that more than two dozen scientists began to suspect that a special mix of acid and electrolyte could hold unusual amounts of energy without degrading. It turned out to be right. Do you feel kind of like on the cutting edge of learning about these batteries? Yeah, we are. I mean, I think we've got one of the leading research groups in the country and probably the world in this technology. It's because of this leading edge that when a success happens, the lab encourages scientists to go out and see if they can make and sell the inventions in the real world. The lab and the U.S. government still hold the patents because American taxpayers paid for the research, but the Department of

Energy licenses the patents to scientists and companies willing to take a shot. In this case, it took six years and millions of taxpayer dollars to discover the perfect battery recipe. Gary Yang was the lead scientist, and he was excited to see if he could make them. In 2012, he left the lab with the license in hand and started Uni Energy Technologies at the warehouse in Mukilteo, Washington. I left the lab, followed the legal process, and started Uni Energy Technologies in Washington state. He hired engineers and researchers, but then he ran into trouble. He says he couldn't find any U.S. investors. I talked to almost all major investment banks. None of them invest in batteries.

So he turned to a Chinese businessman in a company called Dalian Runka Power and its parent company, which agreed to invest and even help manufacture the batteries. And so began a slow shift. First, Chris Howard said, it was just some parts. Ultimately, it was the whole process. Manufacturing was subsequently shifted to our sister company in China, and they would take on that role. In 2017, Yang and Uni Energy formalized the situation and gave Runka Power an official sub-license, allowing the company to make the batteries. So here's the thing. Companies can choose to manufacture in China. But in this case, Yang's original license clearly says on page six he has to sell batteries in the United States.

And those batteries have to be, quote, substantially manufactured here. Yang acknowledges he didn't do that. He was mostly selling batteries in China, and the batteries he did sell here were largely made in China. But he says in all those years, the department never raised any concerns or intervened. Then, in 2019, Chris Howard said he and the other engineers were called to a conference room. Supervisors told them they, too, would have to go to China to work there for four months at a time at Runka Power. And that was set to be increased on the premise that there were certain government programs, Chinese government programs that would support funding efforts. So it was unclear, certainly to myself and some of the other

engineers, what the plan was. In a statement, the department said that license monitoring is a priority and that a review of this case is underway. All of which brings us to Yang. Yang was born in China, but he is a U.S. citizen and got his Ph.D. at the University of Connecticut. He says he wanted to manufacture here, but at the time China was doing more to encourage battery production. And he told us China could do it better. In this field, manufacturing, engineering, China ahead of U.S. China is ahead of the U.S. Ahead of U.S.

Many wouldn't believe engineering--wise, I had. He says far from helping China, the Chinese engineers were helping his U.S. employees. But you can see in several news reports at the time, it was helping China. The Chinese government launched several large demonstration projects and announced millions in funding. As things began to take off in China, here in the States, Yang was once again in financial trouble. So he made a decision that would again keep the technology from staying in the U.S. He transferred the license from UniEnergy to a company called Venatus. Venatus is based in the Netherlands, and we will set up a holding company in Switzerland. Ruloff Plottenkamp is Venatus' founding partner. Plottenkamp told NPR the company's plan was to continue making the batteries in China,

and then set up a factory in Germany, and eventually maybe the US. He says he has to manufacture in Europe, because the European Union has strict rules about these things. It has to be a European company, or certainly a non-Chinese company in Europe. But the United States has these rules too. And any transfer of a U.S. government license needs U.S. government approval. Which Yang apparently had no trouble getting. We looked at department emails and found that last summer on July 7th, one of the top officials at UniEnergy wrote to a government manager at the Department of Energy

lab in Washington, saying they were going to make a deal with Venatus. We believe they have the right blend of technical expertise, the official wrote. The manager wrote back that he would need confirmation. A second employee sent confirmation an hour and a half later, and the license was transferred. Now, if anyone from the lab or the Department of Energy during that hour and a half thought to check whether Venatus was an American company or whether it intended to manufacture in the United States is unclear. Even Venatus's website says it plans to make the batteries in China. Department of Energy officials told us they take all license transfers seriously and have recently closed significant loopholes. But they acknowledge their efforts rely to some extent on, quote, good faith disclosures by the companies, which means

if companies like UniEnergy don't say anything, the U.S. government may never know. It's a problem government investigators found has been going on for years. In 2018, the Government Accountability Office found the department lacked resources to properly monitor its licenses, was relying on antiquated computer systems, and didn't have consistent policies across its labs. It was an American company, Forever Energy, that actually read the Vanadium battery license and raised a red flag more than a year ago. Joanne Skivosky and others there say they repeatedly warned department officials that the Uni Energy license was not in compliance.

Officials repeatedly told them it was. How is it that the National Lab did not require U.S. manufacturing? Not only is it a violation of the license, it's a violation to our country. Skivosky hopes that now that the department has revoked the license, Forever Energy will get a chance. They're hoping to open a factory in Louisiana. We are ready to go with this technology. Skivosky told us it will be hard at this point for any American company to catch up. Industry trade reports list Dahlian Runkey Power as the number one manufacturer of vanadium flow batteries worldwide. And the bigger question looming over all of this is whether China will stop making the batteries once an

American company is granted the right to start making them. That may be unlikely. Chinese news reports announced this summer that China is about to bring online one of the largest battery farms in the world, hoping to set new records for energy output. The reports say the entire battery farm is built out of vanadium redox flow batteries. That was Courtney Flatt from Public Radio's Northwest News Network, along with NPR's Laura Sullivan. You can read their entire investigation at NPR.org. It's Consider This from NPR. I'm Mary Louise Kelly.