Episode Transcript

Cortney Piper: Welcome to Energizing Tennessee, powered by the Tennessee Advanced Energy Business Council and FirstBank. We’re your number-one podcast for news about Tennessee’s advanced energy sector. I’m your host, Cortney Piper.

Welcome back to Energizing Tennessee, powered by TAEBC and FirstBank. Today, we’re speaking with a leading battery materials and technology company with operations in the United States and Canada about the industry’s unique challenges and opportunities. In previous episodes, we’ve talked extensively about significant investments in electric vehicles.

From the cars to the policies that bring them onto Tennessee roads, but one topic we need to explore more is how we must massively scale up or onshore our critical mineral supply chain to meet our electrification goals. One company tackling this massive puzzle is Novonix. I spoke with the company’s CEO, Dr. Chris Burns, about what they are doing to enable the widespread adoption of EVs as a leading domestic supplier of battery-grade synthetic graphite. As always, if you like what you hear, subscribe to our channel, and don’t forget to leave a rating or review. It helps us reach a wider audience to champion Tennessee’s advanced energy sector.

Energizing Tennessee would not be possible without the support of TAEBC members and our sponsor, FirstBank. To learn more about FirstBank and how they can support you or your business, visit firstbankonline.com.

Today on the show, I’m speaking with Dr. Chris Burns, Chief Executive Officer of Novonix. Chris, thanks for talking with me today.

Chris Burns: Absolutely. Thanks for having me on Cortney.

Cortney Piper: First, tell our listeners a little bit about yourself and how you arrived where you are today.

Chris Burns: Absolutely. So, my background is material science.

I have a PhD in physics. I started in the battery material space about 15 years ago and really got focused on long life battery technologies, vehicles, and energy storage systems and how we could develop new materials faster. And that took me through founding Novonix back in 2013, which we’ll talk about.

I spent a couple of years working with Tesla and technical material programs. And then we started the pursuit that we’re on now to really become a major contributor to the battery supply chain with a big focus on everything that we’re doing in Chattanooga and making synthetic graphite.

Cortney Piper: Yeah. And Novonix had quite the entry into Tennessee in 2021.

I remember the U.S. Secretary of Energy, Jennifer Granholm came to our state to celebrate Novonix’s new facility in Chattanooga. So tell our listeners about Novonix and what makes the company so unique.

Chris Burns: We’ve gotten great support, both locally in Chattanooga and the state and federally. And I’m sure we’ll talk about a lot of that, but I think really what sets Novonix apart is we’re focused on developing battery materials, processing solutions that have lower environmental footprint.

This really came off of the time that I spent with Tesla, this need to localize both battery cell manufacturing, but then almost more critically, the battery material supply chain. We’re so reliant on Asia and specifically China. And one of those biggest problem statements is graphite. So graphite is the negative electrode in the battery.

It’s one-half that makes the battery work. It’s a critical material, and China controls something like 98%,99% of the processing of battery grade graphite.

Cortney Piper: Wow.

Chris Burns: In 2017, we really set out to develop new technology that we could scale here in North America for what felt like an impending need for localization.

And we thought that would be 2020, 2021, you know, we got COVID instead, and that set things back. But of course, we came out of that with almost more momentum than we could have ever expected. In terms of the announcements from General Motors Ford, and Tesla and all the expansion of electrification and support from the government.

And that led us to. Buying our Riverside site in Downtown Tennessee. And it was great to have Secretary Granholm come and celebrate this type of investment really starting to flow back here in the US.

Cortney Piper : Chris, talk to us a little bit about what is graphite and what does it do in a battery?

Chris Burns: The battery really has two sides positive electrode, which is things you may hear about like Nickel Manganese Cobalt, NMC, or Lithium Iron Phosphate, LFP.

And the other side is the negative electrode. Traditionally and typically that is graphite in and of itself, and the graphite actually holds the lithium atoms when the battery is charged and lets them out when it’s discharged. So it is one of the key active elements of the battery, and it comes in both natural and synthetic graphite.

So you can mine from the Earth, graphitic carbon and change its size, shape, chemistry, purified and have it ready to go into a battery. Or what we do with synthetic graphite is we actually start with carbon rich precursor materials. A lot of the times petroleum coke and Phillips 66 is a domestic supplier of these types of materials.

They made 150 million investment in the company in 2021. And we take those coke materials and, we do all the same types of things, change their size, shape, chemistry, but we heat them up to these ultra high temperatures to actually convert them into graphite. And then they’re ready to go into a battery.

And the thing that sets synthetic graphite apart from anything else on the anode side or the negative electrode side of the house is its ability to repeatedly take in lithium and let it out. So it can last thousands of cycles. And so back to the discussion of long life battery chemistries, synthetic graphite is the key anode material for that.

And you’ll hear about new chemistries and silicon and lithium metal and solid state, and they’re all going to have a role as energy storage as an industry grows, but synthetic graphite really holds that key to extended longevity and why we chose to focus on it as a key material to scale up here in the U.S.

Cortney Piper: Now, I do want to talk a little bit more about some of the challenges and opportunities you see in the battery industry. But before we get into that, I want to ask you a little bit more about Novonix’s startup story and more about how you all came to be. So, we know that your core technology began in Dr. Jeff Don’s lab at Dalhousie University. Walk me through those first stages of how Novonix came to be. And did you ever imagine you would be where you are right now?

Chris Burns: Well, I’ll answer the last part first. It’s the easiest. No, right. You know, the journey kept presenting opportunities and myself and the team kept kind of taking on those opportunities and challenges, too.

Go after something bigger. Right. And so, as I said, I started 15 years ago in the space working with Dr. Don, and we developed testing technology to test batteries faster. And the whole premise was instead of laptops and cell phones that need to last a couple of years when we want vehicles and grid energy storage that needs to last 10 years, 20 years, and you want to change the chemistry, how long does it take you to figure out if it’s better or worse, right?

These are very long application lives. So we developed technology to test batteries in only a couple of weeks instead of six months, 12 months, 18 months to get those types of answers. And Novonix was started around providing that equipment and service to the industry. And that’s grown to about a hundred person team in Canada.

We have battery pilot lines. We do development work across the sector. It’s really a key enabler for the business because of the complexities that are around battery materials. But it was really the time at Tesla that shined the light on the opportunity to really enter the material space, and we were doing work with a team in Chattanooga and we set up the animal materials part of the company specifically focused around that core technology and growing it exactly there in Chattanooga.

Cortney Piper: So if I were to walk into your Chattanooga facility, just describe to me what it is like today. Who am I seeing? What are people doing? How many people are there?

Just kind of take our listeners through an audio tour of your Chattanooga facility.

Chris Burns: Sure. So, we have two sites in Chattanooga. We have our development site over in Lookout Valley, and that’s a 120,000-square-foot site. There’s an order of 50 people based out of there. It’s where we do all of our process development, product development and sampling at the pilot scale to battery customers around the world.

We’ve signed agreements to supply core power, Panasonic Energy, We have an investment from LG Energy Solution. We just recently announced the testing development agreement with Power Co., Volkswagen’s battery group. So, we’ve worked with all of these leading tier one cell manufacturers as well as some of the OEMs.

And at that site, there are people running processing equipment where we take in feedstock materials, which are typically petroleum coke based products, oil and gas by products. And we change their shape, their size, their structure. We heat them up to extremely high temperatures around 3,000 degrees Celsius and convert them into these battery ready products.

And we do that, everything from the kilogram scale to the ton scale at that Lookout Valley facility. And then at our Riverside site, this is where we’re starting to deploy our first mass production lines. So it’s an incredible facility, great infrastructure. I mean, it was what brought us to that building when we did a search on where we wanted to really build our first site.

And that opportunity and staying in Chattanooga and all the benefits of the area and the Tennessee Valley Authority and all of that, made that a perfect opportunity for us. And so again, there’s a huge engineering focus there, and basically, production campaigns are ongoing as we continue to commission and run mass production scale assets that we’ll produce. Hundreds or thousands of tons of these same types of products as we move into production later this year and through the coming years to scale up.

Cortney Piper: So now let’s go back to bigger picture with the industry. Talk to me about some of the challenges and opportunities in the battery space.

Chris Burns: I think the opportunity is clear and immense, right?

Energy transition is a thematic that, you can talk about vehicles, you can talk about grid storage, you can talk about any number of things, but We need to decarbonize so many sectors, and that’s going to mean changes in the way we generate power, but it’s also going to mean changes in the way we consume and utilize energy on our grid and energy storage, not just batteries, but all forms of energy storage, pumped hydro.

There’s, there’s the big project there in Chattanooga. These are all going to be a critical part of it, but batteries are really going to be at the core of so many of these technologies. So we have the opportunity to make a huge impact at the societal level on huge sectors, transportation, grid energy, and that’s what has our team motivated.

I mean, that’s the passion and the vision to be able to look at electric vehicles driving down the road in a couple of years and say, we make materials that are powering those cars, right? That’s what has everyone motivated, but the challenges are real. I mean, we are trying to build a new industry here in North America. We developed many of those core technologies, some of these core critical materials here in North America, and they went offshore to be manufactured at a lower cost, but that’s not what’s happened now. The Asian countries in China specifically have now gotten in the lead in terms of technology capability, all of this.

And now we want to reshore technology. We want to develop new technology. But we want to scale from zero when these industries are already at full scale for 20 years in Asia. So we have very large investments to make, including our Riverside site and future sites that we’re looking at. And we have a kind of classic challenge in these types of industries where we have to demonstrate the production of our products and qualification of our products at mass production scale to secure contracts because these are all specialty materials, they’re not commodities. But how do you finance building a plant before you have contracts to buy the product? And I think our entire industry is caught up in that a little bit, and the government is stepping in and playing a critical role. We’ve been the recipient of a lot of support from the federal government to help invest in bridging that gap, demonstrating mass production, and having the certainty to secure offtakes and supply agreements from people like Panasonic Energy.

So I think that is going to be the biggest challenge. Is that the pace at which we can move in North America relative to China and the cost, the capital cost of building these manufacturing big infrastructure projects, not just graphite, where one little vertical of the of the battery supply chain, which is one vertical of energy transition.

These are immense tasks to undertake. So the government has a role to play, and the private sector has a role to play business strategy for them and diversification and their supply chain of people like Panasonic core and others. All of those are contributing factors that are going to lead to a handful of companies becoming very successful as they grab hold of the market share in the growing North American space.

That’s going to become immense over the course of this decade.

Cortney Piper: You mentioned reshoring. And I want to talk about that a little bit more. What do we need to do? What more do we need to do as a country to, well, I guess it would just be onshore that industry. Like you said, we developed the technologies, but then it went overseas for manufacturing and production, and they’ve got a 20 year lead on us.

I know that you all received the Inflation Reduction Act aimed to onshore or reshore part of that industry. What more do you think we need to be doing as a country as a society to reclaim our leadership in this area?

Chris Burns: I think, first of all, there’s a lot of amazing things happening. The government really understands the role that they need to play in A.) Investing in the development of the supply chain, but then also protecting those investments. We can look at any number of materials, but obviously, to stay on graphite, we have a $100 million grant under the Infrastructure Law package that is going toward our Riverside facility.

We just received this $103 million tax credit allocation under 48C that is going toward our Riverside facility. That’s $200 million of nonrepayable federal capital being invested in Chattanooga and Riverside. I mean, that’s an incredible contribution, but the government can’t pay for the full projects, right?

So there’s still a lot of money that has to come next to it. And we have to prove that we can deliver the high performance materials at the right cost points. So they have grants, they have tax credits, they have vehicle incentives under section 30D to buy from a non foreign entity of concern countries such as China, and most recently, they announced that the section 301 tariffs on a lot of these critical materials, including graphite, will be coming back. And so there’s not one silver bullet, there’s not one thing that the government can do because it is a high technology space. The differentiation between the batteries from the key battery suppliers and the materials that they want they’re not commodities.

But the government has to come in and put all of the support structures around and funding and protection to ensure that we’re on a level playing field and incentivized to invest against in a scaled existing Chinese supply chain. But the private sector has to stand right next to that with their types of commitments, like Panasonic in having a focus on local production of batteries and local consumption of those materials.

So. Everyone has a role to play in this, and I think the one thing that hasn’t come fully into the fold here in North America, but we’re starting to see it in Europe more, is carbon intensity we need to understand how to ensure that we’re not making clean products in the concept of electric vehicles with dirty supply chains. And there should be pricing or incentives or things like that that come into play. That was a big focus of all of our technology. How can we be more energy efficient, less emissions, lower global warming potential? And I think that’ll be the next big thing for the government to tackle.

Cortney Piper: And you mentioned the 48C program and that Novonix had received a $103 million tax credit under what is called the Qualifying Advanced Energy Project Allocation Program. We all refer to it as 48C. And I remember when the Inflation Reduction Act first came out, we had members in the Tennessee Advanced Energy Business Council that were just sort of scrambling to try and understand what these tax credits were, what these programs were, how we could take advantage of it, and we even went through an exercise as an organization when the IRS was asking for feedback before they drafted rules of, you know, okay, so how should we implement this? So it actually does what we intend it to do. So I know our members and our listeners would be really interested to hear what that process was like to receive dollars from that 48C program that was part of the Inflation Reduction Act.

Just walk us through what that was like.

Chris Burns: Sure, and I might even take it back all the way to the grant that we were selected for as well because what you said, I mean, the IRS asked for comments. They want to understand the industry, and they want to understand how to support. And I say the industry very broadly, right?

Because the graphite industry looks very different than a lot of other industries that this is supporting, and they’re trying to move , they being the government are moving at a pace that’s unprecedented. Unprecedented with an amount of capital. That’s unprecedented, right? They are trying to get money out the door.

And to use Jigar Shah of the Loan Program’s office word, deploy, deploy, deploy, right? I mean, they want, yes, this isn’t just to cut ribbons and shake hands, right? This is to actually make an impact, right? So, the first big piece of investment capital was the Infrastructure law grants back in 2022. And I think they got flooded with applications.

And so I think they took a lot of that into consideration when they thought about things like 48C or, or the next round of Infrastructure law grant funding. How do we make sure that we have a manageable body of work and can pick the projects that are going to get there. And I think for 48C specifically, one of the critical criteria s that they use, which doesn’t have a exact definition, but I really think it speaks to the goal of the project.

It was commercially viable, right? And so they didn’t want to see my opinion, right? They didn’t want to see applications for projects that were conceptual. Or that could happen, or that if we started now, we could start the engineering, right? Or don’t have customers, right? They wanted to make sure that they were going to put money to work on projects that were going to meet the timeline of the program.

Because, you know, really, there’s a kind of a four year window. It’s, Double phased for permitting and placing into service, but they don’t want to select projects that might not get built inside that timeline. And so we had to go through a full application and we applied for two sites. We applied for our Riverside project and we applied for our potential Greenfield new build project, which we weren’t selected for.

I think for that exact reason, Riverside is a standing site supply agreements in place, investment already happening. This is a project they can support. And it’s going to get to the other side. And so we had to do a, significant body of work around the plan, the operations plan, anything with permitting environmental, the full financial models, investment banking style, financial models, these are our criteria.

So these aren’t things that get slapped together. They have to be something that has already been a concerted effort of the business and a huge focus. For a material project that’s going to get done. And I think when you look at, and I’m not sure if more have been disclosed, there were only about a half dozen 48C awardees that we saw publicly disclosed.

And ours was a pretty big allocation of $100 million in the critical minerals field. And so we’re pretty proud of that being a competitive process and showing. Kind of, in our opinion, how far in front Novonix is, and because of the investments we’ve been able to make to date in Riverside and continuing to secure those types of opportunities.

Cortney Piper: Well, Chris, what is next for Novonix?

Chris Burns: The next part’s the fun part. We get to start producing and selling graphite I mean, we’ve been seven years now to develop new technology for processing graphite, made huge investments along the way. So much of it focused in Chattanooga, and at the end of this year, the first full lines at Riverside come on with our 3,000 ton per year run rate so that we can go through all of our final mass production qualification sampling and audits and start deliveries next year to Panasonic.

And like I said, this is the motivating statement for the people in the company, we’re going to be able to point at vehicles and say that we supply graphite into the batteries that are in those vehicles, and that is the thing that’s driving not just us, but I think so many people in this industry forward is the opportunity to make that type of impact at a societal level. So it’s really exciting and we’re, we’re looking forward to the next six months where we hopefully bring more customers into Riverside and make announcements about our planned expansions, even beyond Riverside.

Cortney Piper: Incredible.

We are so grateful and appreciative that you chose the state of Tennessee and we can call you part of our advanced energy economy in this state. Dr. Chris Burns, Chief Executive Officer of Novonix, thank you for coming on the podcast. Tell our listeners where they can learn more about you and Novonix.

Chris Burns: Yeah. Thanks, Cortney. To learn more about us, check out our website, novonixgroup.com. We also post a lot on LinkedIn in terms of our updates under Novonix.

Cortney Piper: And that’s our show. Thanks for tuning into Energizing Tennessee, powered by the Tennessee Advanced Energy Business Council and FirstBank. We’re glad to be your number-one podcast for news about Tennessee’s advanced energy sector. If you like what you heard, please share it with others or leave a rating and review.

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