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(Reuters) – General Electric Co (GE.N) plans to grow its nascent industrial-battery business to generate $1 billion in annual revenue by the end of the decade, the head of the world’s largest maker of electric turbines said.

The largest U.S. conglomerate said on Tuesday it was investing $170 million in its first factory to make the batteries, up from an initial $100 million targeted when it decided to make the move in 2009. The larger investment will double the plant’s planned capacity, GE said.

That reflects Chief Executive Jeff Immelt’s goals of turning industrial batteries — used in everything from hybrid railroad locomotives to backups for industrial systems — into a $500 million annual revenue business by 2015 or 2016 and to reach the $1 billion revenue mark by the end of the decade.

“This is a massive market where that kind of scale is important,” Immelt told reporters at the sprawling factory, built in a complex that once made steam turbines. “It also is a scale-based industry where you need to have your eyes set on manufacturing size to get down the learning curve and be cost-competitive. You don’t need a lot of customers to get a billion dollars in revenue.”

The Schenectady, New York, site will employ about 450 people at full capacity. It was chosen in part because it is minutes away from the company’s main corporate lab in Niskayuna, New York, which developed the technology.

ENERGY EXPANSION

Immelt has stepped up GE’s focus on energy over the past two years, including an $11 billion wave of takeovers in late 2010 and early 2011 funded by some of the proceeds of its sale of a majority stake in the NBC Universal media operation.

The company said it had received its first order for the batteries from South African engineering company Megatron Federal, which wants 6,000 to be used as backup power supplies at telecommunications sites.

“This is definitely the future of telecos and most grid-connected industries,” said Brandon Harcus, divisional manager at Megatron, who said the order was worth some $60 million.

GE received $15 million in funding from New York State authorities and $5 million from local officials for the plant.

GE’s energy division, which also makes equipment used in oil and gas production, last year generated about 30 percent of the group’s $147.3 billion in revenue and was also its most profitable segment.

GE’s rivals in the energy sector include Germany’s Siemens AG (SIEGn.DE) and France’s Alstom SA (ALSO.PA).

The new factory is not GE’s only investment in battery technology. It also holds a stake in A123 Systems Inc (AONE.O), a maker of lithium-ion batteries used in electric and hybrid cars. The company has seen its shares lose three-quarters of their value over the past year as it has begun to run short of cash.

GE also this month paused its rollout of another energy-related technology, temporarily halting construction on a solar-panel plant it is building in Colorado. Immelt said that move reflected a need to reassess how expensive it would be to build the panels, but said GE remained committed to the technology.

“We looked at where the industry is going and said, ‘We’ve got to be sure we are cost-competitive when we launch,'” Immelt said. “I think being in solar is a big part of GE’s future, I think we need to get there at the right cost point.”

(Reporting by Scott Malone; Editing by David Holmes, Matthew Lewis and Sofina Mirza-Reid)