Alternative Energy Storage Is an Investment Tsunami 50 comments
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Alternative Energy Storage: An Investment Tsunami
Change often comes as a surprise because it develops while we’re focused on other issues and by the time we notice the change, it’s already history. In a recent presentation attended by Eric Wesoff of Greentech Media, clean-tech venture capitalist Vinod Khosla reportedly said, “500 million people on earth enjoy a lifestyle that 9 billion people will want in 2050.” Actually, it would be more accurate to say that 6.2 billion people already know how the other 500 million live and every single one of them wants his piece of the dream. The trick will be finding a way to raise the standard of living in developing economies without crushing the standard of living in developed economies. For that to happen without catastrophic conflict and horrific environmental consequences, the world must find relevant scale solutions for persistent shortages of water, food, energy and virtually every commodity you can imagine.
I’m an incurable optimist who believes that “In America we get up in the morning, we go to work and we solve our problems” (from The Lost Constitution by William Martin). But we can’t solve persistent shortages of water, food, energy and commodities without first minimizing waste. We also can’t wait for miraculous new technologies to painlessly solve urgent problems. We have to go to work today with the toolbox we own and be ready to replace our tools with better ones when they become available.
When I started this series of essays, I was confident that energy storage would become a major investment trend over the next several years because cost-efficient storage can substantially reduce waste while enhancing the reliability of many alternative energy technologies. Since then, the fundamental market drivers have developed far faster than I imagined and what I initially described as a rising tide is now looking more like an investment tsunami as a handful of micro-cap and small-cap companies gear up to compete for $50 to $70 billion of rapidly developing annual demand for large format energy storage systems. Important developments over the last few weeks that hint at the magnitude of the coming tidal wave of change include:
| October 27th | C&D Technologies (CHP) entered into a manufacturing partnership with Firefly Energy for the commercialization of a microcell foam electrode developed by Firefly that can almost double the run time and cycle life of lead acid batteries used in long-haul trucks and off-highway equipment. |
| October 27th | Ener1 (HEV) bought an 83% interest in Enertech International, a Korean manufacturer of lithium-polymer batteries that it had previously used to fabricate prototype battery packs for plug-in electric vehicles that Norway’s Th!nk plans to introduce next year. |
| November 6th | Exide Technologies (XIDE) bought Mountain Power, a Canadian developer of large capacity lithium-ion batteries for the communication, utility, medical, military and industrial markets. |
| November 12th | Axion Power International (AXPW.OB) showed its shareholders a modular system that will use its PbC batteries (an advanced lead-carbon battery/supercapacitor hybrid) to provide on-demand power for a substation support and upgrade deferral project funded by NYSERDA. |
| November 19th | Beacon Power Corporation (BCON) received provisional regulatory approval from ISO New England for the commercial use of a modular system that uses an array of high-speed flywheels to provide on-demand power for frequency regulation. |
| November 19th | A123 Systems delivered a modular system that will use lithium-phosphate batteries to provide on-demand power for frequency regulation projects managed by AES Corporation (AES). |
| November 21st | Altair Nanotechnologies (ALTI) received regulatory approval from the PMJ Regional Transmission Organization for a modular system that uses lithium-titanate batteries to provide on-demand power for frequency regulation projects managed by AES. |
| November 25th | A123 Systems filed a third amendment to the registration statement for its planned IPO, which tells me that the offering will probably go forward in December despite the most uncertain market conditions in decades. |
| November 25th | France’s Saft Batteries (SGPEF.PK) and global infrastructure giant ABB (ABB) announced the joint development of a modular system that uses lithium-ion batteries to provide on-demand power for frequency regulation and other utility applications. |
The trend toward reduced waste through energy storage is not going to develop over a period of years like I predicted – the tsunami has already hit the beach and washed away my fantasies of fame and glory as a prophet of the new energy age. But after three months of extreme market turbulence, there is still a good opportunity for astute investors to position their portfolios for an unprecedented growth surge in an established industrial sector that has historically carried rust belt valuations but will very likely graduate to something approaching clean-tech valuations.
Unlike most clean-tech writers, I have nothing complimentary to say about the economic potential of plug-in electric vehicles, at least as currently proposed. Installing a 5-pound battery pack on a 35-pound bicycle to reduce strain on the rider makes sense. So does installing a 20-pound battery pack on a 175-pound motor scooter to boost city-driving mileage into the 180-MPG range. But using 1,000-pound battery pack to power a 3,500-pound family car at highway speeds is the epitome of arrogant extravagance. I have little doubt that a small market will develop among technical dilettantes like me that have nothing better to do than spend $40,000 to $150,000 for a souped-up golf cart. But there isn’t a snowball’s chance in hell that plug-in electric vehicles will ever be cheap, reliable or safe enough for regular guys. EVs provide easy sound bites for the politicians who supported the egalitarian ideal of home ownership for all through the magic of sub-prime mortgages, but the mirage fades immediately when the auto industry’s proposed plug-in electric vehicles are subjected to even a cursory cost-benefit analysis.
Notwithstanding my criticism of lithium-ion technology for plug-in electric vehicles, I’m delighted to see a broad-based drive to introduce lithium-ion technology in the utility sector because utilities have a unique ability to take full advantage of the long cycle lives, fast recharge rates and high overall efficiency of the technology. I’m even happier to see the key players in the bulk storage sector take a modular approach to their products which will make it easier for utilities to mix and match storage products to fit the needs of a particular installation. While single technology installations are possible, my understanding of basic utility needs leads me to believe that multiple layers of energy storage using a variety of different technologies will ultimately be the norm.
Last week’s edition of Forbes included a good introductory article on grid storage entitled "Hold that Electron", which explained some of the storage options available to utilities, but didn’t address how those technologies can work together to satisfy day-to-day operating requirements. The following table is my effort to add a little more detail and give readers a better idea of how utility scale storage system will likely be configured.
| | Capital Cost | | | |
| Storage Category | $/Watt | $/kWh | Key Applications | Discharge Interval |
| Flywheel systems | $2.50 | $10,000 | System stability & power quality | 0 to 30 seconds |
| Lithium-ion batteries | $4.25 | $1,750 | Power quality & regulation | 0 seconds to 15 minutes |
| Advanced lead-acid batteries | $2.20 | $540 | Regulation and spinning reserves | 0 seconds to 1 hour |
| Sodium sulfur and flow batteries | $3.00 | $500 | Spinning & replacement reserves | 0 seconds to 4 hours |
| Compressed air & pumped hydro | $1.25 | $10 | Replacement reserves | 10 minutes to 8 hours |
Because of the incredible transformation that is currently sweeping through the storage sector I remain very bullish on the short to medium term prospects for most companies in the sector. While Altair is overvalued compared to its peers, the only stock that really worries me is Ener1 because its business model depends on the success of plug-in electric vehicles, its market capitalization is exorbitant when compared with every other company in the storage sector and it does not compare favorably with A123 Systems using established valuation metrics. So I have to reach the same conclusion as Lux Research in its recent report on Energy Storage for Electric Vehicles:
Investors should be wary of EV-related business plan claims. Particularly when it comes to pure EVs, every expectation ever set by a start-up company has slipped – and the audacious goals of Project Better Place look effectively unachievable in anything like the time frame it has proposed. Many of these businesses offer real opportunity for long-term enterprise value creation, but to make sound judgments, investors from venture capitalists to project financiers should take every timeline they see in the EV field and stretch it out by a factor of 2x to 3x.
Disclosure: Author holds a large long position in Axion Power International (AXPW.OB), has recently bought small long positions in Exide (XIDE) and Enersys (ENS) and may make additional storage sector investments in the future.
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This article has 50 comments:
I agree with storage at the utility level , which is key. Nice to catch up with you again . I'm in ENER1 , ZBB, looking at others. Thanks for these ideas !
Chi, I am aware of the potential of hydrogen, but nobody's economically making or storing hydrogen on a commercial scale today and heaven only knows when they will. But I'll be thrilled to have a new energy storage tool available when somebody develops one that makes economic sense.
> jack
What happened to this Co. ?
This $ Criisis is hurting many....
If you could buy a car that cost $6K less than comparable models and got a "per-mile" contract that was 30% cheaper per mile than gasoline-fueled vehicles, would you do it?
Those are the choices consumers will have shortly. Whether via offerings like the Think, or the innovative business model (first introduced by Ford and Edison) being pursued by BetterPlace, electric options are inevitable. Todays' market conditions make the EV tsunami inevitable.
The only guys on the other side of the argument are the auto manufacturers, who have vast investments in the factories to make internal combustion engines, and think those investments give them competitive advantage. "Any damn fool can bend metal," said one exec; "it takes guts and brains to make great engines." Today a factory tooled to make V8s is a subprime toxic asset, and the guys who built them are asking taxpayers to bail them out for their stupidity.
A transition to EVs could actually put US auto manufacturers back on top; in a higher oil cost world, long-distance transport of cars becomes a significant part of the vehicle cost.
But as they say, you can lead a horse to water but you can't make him think.
The U.S. has enough geothermal, solar, wind, water and potential gravity to supply all its needs with a reliability of 100%.
An underestimated benefit of solar panels for utilities is that they reduce peak load and the need for new generating capacity.
The latest direct-drive (less maintenance) windturbines produce electricity more cost-effective then a coal-fired powerplant.
Invest in publicly listed solar PV companies, geothermal, windturbine manufacturers, cement and concrete, water/air pumps and transmission line manufacturers and related services.
Why smooth such phases in a larger system (the grid as a whole) which is about to crumble for entirely different reasons?
Battery technology is capital intensive and risky.
The only renewable battery technology is zinc-air because zinc-oxide can be recycled into zinc in solar ovens.
If the DOT didn't have a million rules, tinkerers would put some really interesting things on the road.
They also have developed a 140 mile batt on a single charge for vehicals. See http:phoenixmotorcars.com web site for more details.
The writer holds shares in Alti - which you should share in the Tsunami.
But, again, as for storage on the demand side of the equation, which you don't wish to address vis-a-vis generation and inbetwix surge storage capicity, EV's may provide some demand sponge flexibility, but something like commercial and industrial refrigeration using insitu storage permitting significant flexible demand at point of use is being overlooked (not unlike making ice or additional cold salt, etc., when excess power is available, and "melting" the ice when demand power is peaking). Do that all over the US in major ciites and industrial complexes, the same places that create the demand. That's just refrigeration. Now look at other demand loads that can be shuffled accordingly. Try heating. HVAC? Things where we don't even lose the inefficiencies of charging/discharging that batteries, flywheels and other stored enery devices inherently contain (internal resistances, overcharging and unrecoverable disassociation of gases, etc.).
Now, you may say that those or enough of those systems cannot be turned on and off quickly enough (shut down and started up too much), which may be true currently (no pun intended), but with the advent of the applied computer/communication... technologies and ability to monitor and control millions of systems in a variety of ways, utilities will be able to not only reach in and turn off residential refrigerators as well as commercial and industrial loads in a fashion that no one will notice, but not even the refrigerator or the other loads will find it strange.
We have computers controlling the turning off and on of up to 18 harmonic phases of 3-phase motors, and the motor doesn't care. In fact, that control ability makes a 20hp motor deliver the low speed torque of an 80 hp motor. That's good. Point being, the computer controls the number of phases turned on and off for a 60hz motor. Is that fast enough for your repsonse times? Frequency regulation?? Within 60hz? At the final load, the end user.
2. The price is whatever we make it; Nickel is recycleable, the cost can be minimial. NiMH lasts longer than the life of the car.
3. There EXISTS an all-electric practical and fun family and work car: the Toyota RAV4-EV, you can see it on SealBeach.org
Doug Korthof
562-430-2495
to visit and drive in the Toyota RAV4-EV, powered by the sun
Has this author NEVER HEARD of the EV1, HondaEV, Toyota RAV4-EV, which use NiMH batteries??
Lithium is used by GM to delay the introduction of EVs; no one has ever made a successful Lithium EV that's lasted more than 50,000 miles without significant battery degradation.
Study, and don't speak about stuff before!
Naked, you may be able to use PHEV and EV to soak up excess night-time power, but when you unplug you vehicle to go to work it is no longer part of the grid and until somebody tells me they are going to have a plug at every parking space (when pigs fly) all those PHEV's and EVs will do nothing for grid stability. Beyond that, I'll be happy to add new solutions to my toolbox when they're developed. But that won't keep me from waking up tomorrow and working to solve my problems.
Searcher, I've spent enough time in Asia to worry about American high school graduates (like my youngest daughter will be this year) who don't have the fundamental skills I was taught at that age. It's going to be a nasty wake up call for a big portion of the population.
Douglas this is my 20th article since July. I've never had a single bad thing to say about NiMH and probably never will. But there are no pure storage companies in that space and these articles are directed toward people who are interested in investing. For HEV use I think NiMH is a far more reasonable solution than any of the proposed Li-ion products. If you asked me to describe the best currently achievable HEV solution, it would be a high efficiency diesel or CNG with either NiMH or lead-carbon.
(It appears that the last administration was unable to grasp the significance of these problems.)Â
As to the cost effectivness of alternate energies, subtract the subsidies from oil and the economic viability of alternatives is instant, not future. Remember, you and I paid for the subsidies to big oil through our tax dollars.
Thanks for this important article.
Any more thoughts on this John?
I only dream of the biodiesel injected burner with no moving parts and solid state waste heat recovery devices directly powering the Chorus Motor with the only on-board stored energy device being a GRASS TANK. Two manybe three years away.
I noticed you did a toe-dip into Exide, and hope you caught it to establish an average share price below three bucks. Even if the Dow goes down after New Years to 7000 or below, like many pundits are calling for, I'm still reasonably sure that owning Exide below three dollars is a very safe long term play.
Perhaps the hardest part for this investor to figure in this hyper volatile market, is when to establish a long position. Exide is the only stock I now own that I will hold on all the way through this global economic mess.
I think the most amazing thing I rarely see written about here at Seeking Alpha, or elsewhere, is that all you have to do right now is follow where Uncle Sam is using his bailout money. As you know, John, I started day trading a little of my investment money about when you started writing here, and am doing pretty well.
I will spend the next few days watching Ford, GM, and Citibank, tremulously, finger right near the sell button, as all my profit from the Wachovia Bank bailout are on the line.
I expect the leaders of Saft, Ener1, A123, JCI, and on and on in the auto suppliers and battery sector will be watching the congressional hearing Tuesday.
I can already hear the, "Phew!"
Keith, getting BLM permission for anything is very tough and there is always somebody opposed to almost everything, a recipe for delay and cost overruns. But since our local grid in Switzerland is effectively 100% nuclear, hydro and pumped hydro I've got some experience and its wonderful. I even jettisoned the UPS for my computer.
William, there are a lot of layers of risk on the EEStor capacitor. But if they get to a product that works and makes economic sense, I'll have nothing but nice things to say.
Naked, I'll be attending a "Smart Grid" webinar today and will hopefully know more after than I did before. The trick with HEV batteries will be sizing them for the particular task so that the batteries reach the end of their useful life when the HEV does. Otherwise you have people like A123 talking about re-tasking 10 year old batteries for other uses. The thing I find most fascinating is the richness and diversity of measures that will be required. Storage will be a critical part of the equation, but only a part.
Gil, I'm not aware of the work, but if history is any guide it will be touted as a solution long before it's ready for commercial use.
User242611, I'm not aware of any ETFs with that narrow of a focus and would worry that in a sector this small some very risky companies would end up overweight because of nosebleed level stock prices.
This is one bazaar time! I reflect....wish I were more brazened!
Perhaps...an idea for you is to do a little research on what the percentage of float is being shorted right now on all these Energy Storage Sector stocks. If you did, you'd laugh at Ener1's.
(tell me where to put my money, period) Sheesh!
Take the GM Zolt which only the rich will be able to afford. By the time it comes to market, Toyota will have its next Generation Prius rolling out. Solar Panels built into the roof to provide additional electricity for all of the unnecessary bells and whistles currently in fashion.
I don't know who will win or who will lose. I would like to get in at the very bottom and sell at the very top but I know it isn't going to happen. So I'm willing to wait for the next winner to manifest itself by going up because of a big contract. And if I miss the first 50% or 100% of the upside, so what. At least, I will not be locking money up waiting for a undefined period of time.
PZD is a Solar ETF. I know of ETFs dealing with Alt. Energy but I don't think there will be any in the storage area for some time. Lots of players but Most pure plays are sub $5.00 and not ETF material.
The case is Univ of Texas and Hydro Quebec vs A123 and Black & Decker (3:06-CV-1655 B, North District of Texas) regarding patents 6,514,640 (i.e. "640" patent) and 5,910,382 (i.e. "382" patent). The case is stayed pending a ruling by the USPTO.
By the way, has everybody seen this at Greencarcongress?
Michelin to Commercialize Electric Active Wheel Technology
1 December 2008
Michelin’s Active Wheel integrates brake disk, electric motor and suspension motor.
Michelin’s Active Wheel, an in-wheel system comprising a brake, 30 kW (40 hp) electric traction motor and electric suspension motor system, will be used in the Heuliez-produced WILL electric vehicle (battery or fuel cell), due to be available to fleet owners in 2010. The WILL grew out of a concept developed by Heuliez and Michelin and features networked services innovated by Orange.
Creative, the Firefly foam electrode is very similar in form and structure to the one PWTC was working on. Likewise, Axion's PbC battery eliminates about 40% of the lead weight. A brief article on a comparable lead-carbon hybrid made by an Australian government agency can be found at: www.autobloggreen.com/.../
Second, think critically about resources and the needs of billions of people to use those resources. Is there enough lithium on earth to provide two billion cars with several hundred pound batteries? Enough nickel? What are the economics of mining/recycling that much of a semi-rare element? If you think today's prices are high, imagine if the whole world starting consuming it at once. Gold would be yesterday's precious metal! EV's might be uneconomical long before things got that ridiculous.
Third, I cannot understand how folks advocating energy independence and green living don't get excited about (cheap) 40-50 mpg hybrids and insist instead on pure EVs. Those hybrids are a huge improvement over our current fleet of <20mpg conventional cars and are the only economical and technologically capable solution on the table TODAY that could reduce our oil consumption by half. Getting fired up over hypothetical, unproven technology and panning existing medium-term solutions seems impractical.
Fourth, we all need to realize that in the long run, the rise of China means our lives have to change. Suburbs and exurbs will end. 3,000 sf detached houses will end. 4,000 lb cars to commute 20+ miles back and forth to work will end. Affordable airfare will end. Our cities will resemble Tokyo and our towns will resemble those in continental Europe. It won't be the so-called green movement that mandates these changes, it will be economics, and the sooner we change, the wealthier we will be. Light rail beats any EV in terms of both economics and environmental impact.
The expense of preparing the registration may have been pre-committed by the investment banks, and at no current cost to A123, so that isn't necessarily a clue. GE apparently added $30m to their A123 investment recently -- that looks like a better clue.
The patent thing may "magically" get resolved shortly before the IPO leaving scant time to fully explore the implications until the stock is at nosebleed levels.
For sometime now, I have been impressed with MDI's compressed air approach to a green vehicle. The potential environmental benefits of this approach supercede any of the battery based platforms, hybrid or otherwise.
End of life cycle issues can be significantly reduced simply by eliminating batteries from the equation. A society with 50 million electric/hybrid-electr... vehicles will have the problem of disposing/recycling those batteries every seven or so years. The cost to the environment and to the pocketbook will be significant. On the other hand, manufacture of relatively simple compressed air engines requires less raw materials from our planet, than any combination of internal combustion, electric, or hybrid technologies at the front end, with less impact on the back end.
Moreover, the cost to produce and subsequently to purchase compressed air vehicles is anticipated to be significantly lower than most other configurations. Such downscaled economics should provide for a more rapid adoption of a green technology and a windfall to a society's economic bottom line.
If compressed air can be applied to vehicular energy storage, then it can surely be available for other energy storage needs as well.
Perhaps not as "sexy" or "geewhiz" as hydrogen, or super capacitors, but possibly the most cost effective approach going today. I vote for parsimony.
I wouldn't so much as visit the water closet if I were trading this ETF, as it's leverage three times the market movement.