Updated with comment from Ener1: Norway-based electric vehicle developer Think has narrowed the “short list” of locations for its first North American manufacturing facility to at least three states, including Indiana, Michigan and Oregon. A Reuters article published late Tuesday reported that Indiana has a lock on the facility, citing an interview with the CEO of Ener1 Charles Gassenheimer. But the Ener1 chief — whose company holds a 31 percent stake in Think as well as a contract to supply lithium-ion batteries for the upcoming Think City electric vehicle — may have jumped the gun, as Inside Indiana Business reported and Think confirmed with us this morning.

Think spokesperson Brendan Prebo tells us that Indiana, Michigan and Oregon remain on the “short list” for the facility — the latest game-piece in an ongoing competition among states to woo advanced battery and electric vehicle factories, which raise the prospect of not only bringing manufacturing jobs and future business to a state’s economy, but also government investment. Prebo confirmed with us in an email that, “Indiana is one of the states on our short list for manufacturing sites and has been for quite some time,” but the company has not yet finalized a decision about the factory location. While Prebo did not disclose how many states are still under consideration, he said, “An earlier report that a decision had been reached was premature.”

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Amid heated debates over clean power sources, how to build out the smart grid, and the future of advanced transportation, one thing’s clear: Energy storage technology will play a key role in all of these transformations. Energy storage — from batteries to ultracapacitors to pumped hydro to compressed air — will be crucial for the development of electric vehicles, will make sporadic clean power (solar and wind) more reliable, and enable the utilities to more smartly manage power grid loads.

Energy storage provides the key to these innovations and will be the cornerstone of the economy that will emerge around the next generation of energy. Here are three questions for three experts — Rick Luebbe, CEO, EnerG2; Jill Watz, senior adviser, Vulcan Capital; and Ahmad Pesaran, principal engineer, National Renewable Energy Laboratory — that have spent years digging into the technologies, the chemistries, the economics, and the future hurdles for the deployment of energy storage. The following are edited excerpts of their answers:

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Lithium-ion battery maker A123Systems reported its first earnings this week since going public in September, showing a widening loss for the third quarter ($22.9 million, compared with $18.9 million a year ago), but also a revenue increase of 3 percent to $23.6 million, up from $22.9 million for the same period last year. What’s next for the company? This morning A123Systems is touting efforts to increase focus on the transportation market and battery cell development.

The company has formed two teams — the Automotive Solutions and Cell Products groups — and hired execs from Lear and Oshkosh subsidiary Geesink Norba to head them up. The divisions will operate alongside an existing group that has been focused on electric grid and consumer markets, according to A123’s release.

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As recently as August, the largest lithium battery recycler in North America — Toxco — snagged a $9.5 million grant from the Department of Energy to build out battery recycling capacity in Ohio and pledged to provide “end of life management” for advanced vehicle batteries “in a safe and environmentally sound manner.” But this weekend multiple explosions and a major fire at the company’s Trail, British Columbia recycling facility can be fairly called bad advertising for that business.

The event remains under investigation, but Toxco believes it was caused by an internal short in one of the batteries in storage at the Trail facility, which handled batteries ranging from smaller cell phone batteries up to some weighing 1.4kg (about 3 lbs.), Canada’s Globe and Mail reports. This adds fresh fuel to smoldering fears about the safety of lithium-ion batteries (you might recall the reports and photos of laptop fires caused by overheated lithium batteries in years past) for use in the upcoming generation of plug-in vehicles, as well as for recycling and disposal of the devices.

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Updated with additional info from ActaCell: Lithium-ion battery startup ActaCell has just added the state of Texas to its corral of high-profile backers. The state is providing a “pre-seed award” of $250,000 to ActaCell, according to a release from the Austin-based company this morning, and putting another $750,000 on “reserve” for the startup, which nabbed $5.8 million in first-round financing last year from investors including Google.org’s RechargeIT program, DFJ Mercury, Applied Ventures (the VC arm of Applied Materials and Good Energies.

Founded in 2007, ActaCell is working to commercialize lithium-ion battery cells and packs based on technology developed in the Material Science and Engineering labs of professor Arumugam Manthiram at the University of Texas at Austin. DFJ Mercury managing director Ned Hill said back in 2008 that the batteries — meant to have longer life cycles at lower cost than currently available options –  would be particularly valuable for the plug-in hybrid vehicle market. But ActaCell (one of our 13 lithium-ion battery startups to watch) has let few details slip since it spun off from the university.

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Envia Systems, a battery materials startup based in Hayward, Calif., has just entered an elite group: the 1 percent of applicants awarded a first-round grant under the Department of Energy’s high-risk energy tech fund, ARPA-E (Advanced Research Projects Agency-Energy). Given that Envia, founded in 2007, had previously announced only $3.2 million in venture capital financing, scoring $4 million in government funds this week has shifted the playing field for the startup.

As recently as August, when we spoke with co-founder and director Michael Sinkula about Envia’s cathode (or positive electrode) technology, the company was still operating under the radar, with a placeholder web site (it’s since been fleshed out a bit) and reluctance to provide much detail on its scheme to significantly cut the cost of batteries for electric vehicles. But Sinkula told us at the time that Envia, with less than 50 people on staff, was developing low-cost cathode materials specifically for vehicle batteries and working to optimize other components around the cathode in order to pack more energy into each lithium-ion cell. So what’s the new game plan?

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A123Systems, the Watertown, Mass.-based battery maker that marked a break in the cleantech IPO drought last month with its initial public offering, shortly after raking in $249 million in federal grants, is now heading to Japan. The company announced a deal this morning with IHI Corp. for the Japan-based heavy equipment manufacturer to sell A123’s lithium-ion batteries and battery systems in Japan to automakers and for use in ships, as well as in its power supply systems, starting next year.

IHI counts among its customers hybrid vehicle heavyweights and ambitious players in the race to develop plug-in vehicles for the mass market, including Toyota, Honda, Nissan and Mitsubishi. But those automakers have already made their own investments in battery technology for plug-in and hybrid cars, forming joint ventures with consumer electronics battery giants like GS Yuasa and NEC.

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Of the $151 million in grants announced this week under ARPA-E (Advanced Research Projects Agency-Energy), the Department of Energy’s highly competitive program for high-risk, early-stage energy technologies, more than a fifth — some $33 million — has been allocated for green vehicle projects. Since the program is meant to support work on tech that other investors consider too risky, each of the projects — from boosting the fuel economy of gas-powered cars to replacing lithium-ion batteries as the technology of choice for electric vehicles — represent something of a gamble. So when it comes to choosing ideas for transforming the auto industry and cleaning up transportation, how wisely is the DOE placing its chips?

According to Lux Research analyst Jacob Grose, who headed up the firm’s recent report on electric vehicle adoption, this first round of funding (there’s nearly $250 million left in the pot for later rounds) offers support for a strong balance of innovations. “Overall, I think the ARPA-E guys hit all the key areas for vehicle technologies,” by investing in the motors, batteries and electronics for today’s electric vehicles, as well as “some future technologies which are higher risk but may play a role in novel vehicles down the road,” and others that could help boost the MPGs of cars with the ol’ internal combustion engine.

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The investment and innovation pouring into lithium-ion battery technology for electric cars could be a major boon for a greener power grid. According to a new report out today from Pike Research, the global market for lithium-ion batteries in utility-scale applications (storing energy from intermittent renewable sources like solar and wind) is set to grow to $1.1 billion by 2018 — at a rate faster than at least 10 other energy storage options for the grid, including pumped hydro, compressed air and flow batteries.

“Utilities will be the downstream beneficiaries of innovation and investment in lithium-ion batteries for the transportation sector,” explains Pike Research senior analyst David Link in today’s release. Lithium-ion is “quickly becoming the battery of choice for electric vehicle manufacturers,” he says, and this trend will deliver improvements in storage capacity and economics that will spur the utility sector to follow suit. By 2018, Pike expects lithium-ion batteries to make up more than a quarter of the $4.1 billion stationary energy storage business.

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We don’t usually see recycling as much of a money saver for big ticket consumer electronics. Some electronics makers still charge a premium for devices that count ease of recycling among their green credentials, and some companies charge to reclaim their equipment for recycling. (For example, I’d have to pay $30 for Apple to take back my laptop for recycling unless I buy a new Mac to replace it). But for plug-in cars — overgrown consumer electronics in many ways — recycling the battery could be one of the keys to reducing cost.

According to electric vehicle infrastructure startup Better Place, whose plan involves buying hundreds of millions of dollars’ worth of batteries to “swap” into subscribers’ vehicles, manufacturing costs for plug-in car batteries won’t drop below €8,000 ($11,440) until after 2012. And at the end of eight years on the road (a “fairly conservative” estimate, says Better Place spokesperson Julie Mullins), a typical battery will have degraded down to 80 percent of its original capacity, and thus reached the end of its life in electric cars. But much of its value as an energy storage device remains. Enter: Recycling and reuse.

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