Alternative Energy Storage Stocks: Review and Outlook 67 comments
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Last August I published a short list of pure play energy storage stocks and promised to track them over time. Since then I’ve modified the list to add two companies [i] and delete three others [ii], but the core remains stable. Tradition holds that New Year’s Day is a wonderful time to reflect on the past and plan for the future. While 2008 is not a year that most investors will remember with fondness, I will honor tradition by returning to my list, summarizing market performance since August, noting current market capitalization values and offering my unvarnished opinions about likely performance in 2009. My December 31, 2008 review and outlook list follows.
click to enlarge
The five primary drivers that I relied on in formulating my 2009 outlook are:
- The ongoing recession of uncertain depth and duration;
- The capital cost per kWh of storage capacity for various energy storage technologies;
- The potential end-user markets for products based on various energy storage technologies
- The relative market capitalizations of companies in comparable stages of development; and
- The time-proven wisdom that last year’s top performers are not likely to be next year’s top performers.
On my first pass through the list I considered whether a company had substantial revenue from product sales or had a clear path to substantial revenue over the next 12 months. Recessions are hard on everybody because demand for consumer products dries up and commercial buying decisions are frequently deferred. While increased spending on maintenance typically offsets part of the contraction in demand, everybody suffers. Recessions are particularly unkind to development stage companies that don’t have revenues or a clear short-term path to revenues. In connection with the preparation of my 2009 outlook, I assigned negative marks to companies that do not currently have a product that can be manufactured by them and sold into an existing market in the next 12 months.
On my second pass through the list I considered the relative capital cost per kWh of storage capacity. In making that assessment, I used the capital cost hierarchy that I built from recent cost estimates published by Sandia National Laboratories that I’ve annotated to highlight the principal potential market segments for each of the technologies. For a more exhaustive presentation of the advantages, disadvantages, commercial status, current R&D and potential applications of the various technologies, please see pages 18 and 19 of the Sandia report. Since recessions tend to favor the best affordable technology over the best available technology, I assigned negative marks to companies that are focusing on the development and commercialization of objectively expensive products unless the primary users of those products are relatively insensitive to battery costs.
click to enlarge
On my third pass through the list, I considered the relative size of the potential primary and secondary markets for various energy storage products based on the companies’ stated goals. Since potential market size is a long-term rather than short-term factor, I did not limit my analysis to a one-year time horizon and focused instead on long-term potential assuming successful development of technologies that are still in the demonstration stages. While that analysis was necessarily subjective, technologies that have limited scope of application received lower marks than technologies that have significant potential in a wide variety of substantial markets.
On my fourth pass through the list, I considered the relative market capitalizations of companies in comparable stages of development. There are substantial disparities between the relative valuations of the development stage companies and there are also substantial disparities between the relative valuations of the companies that are already manufacturing and selling comparable products. I assigned negative marks to companies that have unduly high market capitalizations when compared to a sub-group of peer companies in a comparable stage of development.
On my final pass through the list, I considered the recent market performance of the various companies compared with their long-term historical performance. In the absence of specific objective reasons for price increases or declines, I assigned higher marks to companies that are underperforming when compared to their peer group and lower marks to companies that are significantly outperforming their peer group.
Since my 2009 outlook is particularly unkind to Ener1, Valence, Altair and Beacon, I think a fuller discussion of my reasoning is probably in order.
Ener1 (HEV) is a development stage company that lost its potential first mover advantage when Toshiba introduced its SCiB lithium-titanate product line last September. It then lost its principal customer when Th!nk was forced into public administration. As a result Ener1 has turned to its principal stockholder, the privately held Ener1 Group, for a $30 million credit lifeline. Despite uncertainty about whether Ener1 will ever manufacture or sell a product beyond the “me-too” lithium-polymer devices that its recently acquired Korean subsidiary manufactures, it carries a market capitalization that’s only 13% less than the combined market capitalizations of Exide and Enersys. To put things in perspective, these two companies collectively sell about $6 billion of products per year and have combined annual earnings that are about 150% of Ener1’s pro forma stockholders equity. Ener1’s gravity defying performance over the last year was impressive, but I don’t see any way that it will be able to maintain an $800 million market capitalization while comparable transition-stage companies are valued in the $40 to $100 million range.
Valence (VLNC) sells Li-ion batteries that it manufactures through Chinese subsidiaries. Despite the fact that its competitors including Hong Kong Highpower (HPJ), Advanced Battery Technologies (ABAT) and China BAK (CBAK) all have solid technologies, far stronger balance sheets and significantly higher annual revenues, Valence carries a market capitalization that is two to five times greater than its peers. I don’t see how Valence can maintain a disproportionately high price in a recessionary environment when both A123 Systems and China BAK manufacture comparable products using the same basic chemistry.
Altair Nanotechnologies (ALTI) and Beacon (BCON) are both pursuing opportunities in an exotic utility support niche known as frequency regulation. For several months I’ve been trying to get a handle on what frequency regulation services are worth without much success. Last week I received an inquiry from a potential client who told me that frequency regulation services in California had an annual revenue potential of approximately $250,000 per megawatt, but pending regulatory changes would probably increase that number. If comparable values prevail for the Altair and Beacon projects, they’re looking at a relatively uninspiring four-year payback on capital investment without accounting for operating and maintenance costs. Since Altair is also testing a battery solution for hybrid transit bus applications that may prove to be a cost effective use of its technology, I think its business model carries less risk than Beacon’s approach which puts all the eggs in a single basket. On the other hand I think Altair’s higher market capitalization largely offsets the business model risk.
Some commenters will undoubtedly suggest that my favorable outlook for Axion Power International (AXPW.OB) is biased because of my prior relationships with Axion. But that doesn’t change the fact that I’ve watched Axion’s technology develop over the last five years and have spent enough time working in the energy storage sector to understand that an inexpensive general purpose product with broad usefulness across a variety of applications has much greater short term potential than a more-expensive product that’s designed to satisfy the highest performance requirements of a particular market niche. It all goes back to my basic belief that customers will gravitate to the best affordable technology before they decide to pay a substantial premium for the best available technology. When my fundamental view of market dynamics is combined with the fact that Axion is presently trading within a few cents of its all time low, I can’t help but have high expectations for 2009.
I’ll revisit this list at least quarterly over the next year and either gloat or eat crow as appropriate. In the meantime I would like to wish everyone a Happy New Year and the optimistic thought that 2009 has to be better than 2008.
Disclosure: Author holds a large long position in Axion Power International (AXPW.OB) and small long positions in Exide (XIDE) Enersys (ENS) and Active Power (ACPW).
[i] Hong Kong Highpower and Active Power have been added to the list.
[ii] VRB Power Systems [VRB.V] and Electro Energy (EEEI) have encountered significant business difficulties and I’ve stopped reporting on their stock performance. I’ve also stopped reporting on SAFT Batteries SA (SGPEF.PK) because of the difficulty in providing data on foreign companies without complex exchange rate conversions.
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This article has 67 comments:
Dear John, I apologise for thinking you were Dr. C.Wirth.
My post is off topic and brief therefore.
If you favour lead battery storage are you talking of submarine type batteries?
"The RFP follows a feasibility study performed by the Electric Power Research Institute last year that found that the most feasible solar technology currently available for a large-scale plant here is parabolic trough.
It utilizes a series of trough-shaped mirrors to focus sunlight onto an oil-filled tube, and then uses the hot oil to generate steam. The steam is used to turn a generator, producing electricity. When combined with thermal energy storage, this solar technology is capable of generating electricity at night, as well as during cloudy periods, the utilities said in a joint news release.
The parabolic trough technology technology looks the most promising and most economically feasible, in part because it has been field tested the most, Buell said.
The study also mentioned that potential locations could be near Albuquerque or Lordsburg in southwest New Mexico, although no more specific information on potential sites was available, Tri-State spokesman Jim Van Someren said.
If the RFP process is successful, the utilities plan to have a contract negotiated by the end of 2008, and the solar facility could be generating electricity by 2011."
Albuquerque Journal Tuesday July 1, 2008
Let's see what happens.
We're still questioning whether solar and wind have enough BTU's IN to produce the advertised KWh out at 3412.14163 BTU = 1 KWh.
But we do not question that there is some good money to be made selling wind and solar electric generation equipment to those who do understand the laws of thermodynamics, or HEAT RATE and CAPACITY FACTOR.
seekingalpha.com/artic...
Have you considered China Ritar Power (CRTP.OB)? They make lead acid batteries and are profitable, do >80% of their business outside of China, are adding production lines and are moving more into alternative energy storage. They seem to have a good growth story but I don't know enough about them to evaluate them amongst your group. Here's their latest quarterly results.
finance.yahoo.com/news...
This update is terrific. I hope you keep monitoring the vital signs of this vital developing area thoughout 2009 and beyond.
DiggerUK - - - Thanks for the "open letter". I thought that was the case but I do appreciate the confirmation.
billp37 - - -
Useful information about a solarthermal application. Thanks.
To all - - -
I have been daydreaming about a hybrid photovoltaic-thermal generating system. It is a generating facility that levels electrical production across 24 hours and multiple days by using PV when the sun shines and stores the thermal energy for generation in other hours. The idea is based on the waste of thermal energy when doing PV and the waste of PV energy when collecting thermal energy.
Confession: I don't have the foggiest idea about what such a configuration might look like.
Questions:
1. Is this, like many day dreams, a fantasy?
2. Is there any merit to having an integrated facility or would seperate thermal and PV generators make more sense?
Enough dislosure about my daydreams.
Happy New Year to all.
You mentioned WW2 subs, and it reminded me of a picture I took of my son at the Submarine Museum in Portsmouth. He is standing next to a 1/1.5 metre high sub battery with his mobile in his hand. (remember the early jokes about mobiles :)
I couldn't believe that subs still used such old technology. Obviously with success.
I was on the search engines till dawn. Now you talk about composite foam, asymmetric lead, carbon hybrid. You do realise that some of us are back at work tomorrow.
Help us out here which sites give me the specs of these beasties?
On Jan 01 09:22 AM John Petersen wrote:
> DiggerUK, the article you want is at:
>
> seekingalpha.com/artic...
>
>
Digger, the developer of the composite foam is Firefly Energy:
www.fireflyenergy.com/
They have recently partnered with C&D Technologies for the production of their Oasis line which is directed specifically at the needs of long-haul truckers who need sleeper cab power when the engine is off.
The developer of the lead-carbon hybrid is Axion Power International:
www.axionpower.com
A similar lead-carbon device from Australia's Commonweath Scientific and Industrial Research Organisation was tested recently in a retrofitted Honda hybrid. The short story on that road test was the battery performed well, the added weight reduced gas mileage by about 3% but an OEM solution would have SAVED $2,000 on the price of the car. See
www.autobloggreen.com/.../
Respectfully,
Charles
I wonder if you had considered adding some of the ultracapacitor companies to your list? eg. JEOL, ZNN (eestor proxy)
If you have but didn't I'd be curious to know why. You might also be interested in the discussion at:
theeestory.com/
Thanks
1.) You focus on the costs associated with implementing Beacon's flywheel technology but make no mention of their pending application for the $50mm Department of Energy (DOE) Loan Gaurantee Program.
Beacon already has a strong existing relationship with the DOE through past projects and they are optimistic about receiving the cash.
phx.corporate-ir.net/p...
2.) In addition, as of September 2008, Beacon has also stated that the first 20MW plant will cost about $50mm, each successive plant will cost $25mm, and that they expect to earn $10mm per year for each plant.
3.) The flywheels lifespan is approximately 20 years and requires little to no maintenance.
See page 15 on the below.
library.corporate-ir.n...
Compelling Economics
• 20 MW plant cost goal = $25 million (2010)*
*First plant will be approximately 2x
• Up to 80% EBITDA margin – zero fuel consumed,
high efficiency and minimal maintenance required
• Equipment designed for 20-year life
• 20 MW plant revenue/year = approx. $10 million
(Based on 2008 NY-ISO pricing)
• Additional revenue streams from carbon savings
Were these points a simple oversight due to lack of your research or is this a reflection of your bias to Axion who is threatened by the success of Beacon?
All the best
Justin
juggernaut that will dominate the HEV market going forward and probably define price and value parameters in this growing market. As usual, Toyota is perfectly positioned to benefit here given their 50% ownership stake in Panasonic EV. While these guys may not be pure plays in this sector, to ignore them is kind of like ignoring Google in the internet search market.
Yes, there will be plenty of Chinese copycats/knockoffs both legal and otherwise but IMO the Japanese and Koreans continue to lead the pack here (sorry for the pun) in dependable long-lived cutting edge batteries.
U.S. pipsqueaks like Valence are probably dead meat with A123 looking like the only serious player here to date--and they are tiny and in need of massive further funding. Ener1 is a Detroit dog that will likely continue its nosedive into obscurity/incompetence... Saturn Vue HEV battery pack recalls. In the end I agree that many of these smaller players are still overvalued with bankruptcy a real possibility in the next year or two.
The altair battery built for AES was $1M/2MW/.5MWh system. So at $500K per MW battery cost, and $250K per MW revenue potential, that would be 2 years payback.
In the comments section of the article, it was said that proposed revenue might be closer to $460K per year per MW. If everybody got their MW vs MWh correct, could the Altair system really have a payback period of just over a year? Just doing the math, can anyone clarify this for me?
John, you know my preferences, ALTI and ABAT, but I still continue to follow AXPW on a technical basis for you.
Aitvaras aka paultaut.
Have a happy...
JP, at the outset let me make it perfectly clear that Beacon is no threat to Axion and Axion is no threat to Beacon. Frequency regulation is a world unto itself and it's one of the few applications that I've never known Axion to consider. So your suggestion of bias is way off base.
As to your economic assertions, 80% EBITDA on $10 million of revenue is $8 million. Interest on a $50 million loan at an assumed rate of 6% is another $3 million. So the cash available for spending after Beacon pays direct operating costs and interest on the project finance debt is $5 million per year. If the loan term is 20 years with level amortization, there will be $2.5 million of spendable cash per year that Beacon will actually be able to use for things like SG&A, which average $2 million per quarter. So you're still looking at big losses that cannot be long supported with the $11 million in net cash I would expect Beacon to have at the end of this year. I'm not saying the task is impossible and I truly hope Beacon succeeds, but the numbers still show a lot of risk.
Leh, sanyo/panasonic are going to be far too busy with laptop batteries to fool around with EVs and PHEVs because the economics don't work. A couple weeks back I did a cost benefit analysis of using various batteries for a 40 mile light EV and the numbers don't work for Li-ion until gas prices are north of $4. If you start pushing out the vehicle range, the numbers get absurd very quickly. About the only technology that makes sense at anything approaching current gas prices is the lead-carbon alternative. The following link will take you to the prior article.
seekingalpha.com/artic....
scuba, as I told Charles Amico earlier, a revenue number of $460,000 per year would be much more attractive than the $250,000 per year I was told last week by a prospective client. But we still have a case where the Altair device cleared first round testing last year and is now in long-term performance testing. I think it may perform very well for AES, but they spent years testing their NaS systems before deciding whether they worked well enough. The Altair test will be complicated by the fact that it looks like AES is planning a side by side comparison of the Altair and A123 solutions. If that's the case, orders are at least a couple years out and I've spent too long working as a securities lawyer to have a lot of confidence in the capital markets immediately after a crash. I was there in '87 and nobody was able to do a significant deal till early '89. My biggest hope for Altair is the bus application because it could be a killer and it needs the cycling capacity of the Altair batteries. But these are not easy times in the battery business and the lack of a clear path to revenue scares me to death.
I agree with you that Altair faces tremendous challenges ahead. Will they run out of money, get additional financing, or actually begin selling something as 2009 unfolds? It looks to be a nail biter. I also agree that the testing for any grid application will be a slow prospect to develop, and that A123 complicates things for them. On the more positive side, the NaS applications were less efficient and something like 6x as expensive as Altair’s offering. So, if the payback is as quick as I think it is for the Altair product, then perhaps the utility companies would be a little more willing to take a chance on this new technology. Also, regarding the bus applications, even though the economy is bad and oil is cheap, buses have something like a 12-year lifespan. So, lets hope that anybody buying a bus will look at the fuel savings and the likely rise in oil prices over the life of the bus and determine that SOME type of hybrid/alternative fuel vehicle is a must. Heavy duty, long cycle life HEV applications are Altair’s strong suit, lets hope they can actually win some contracts before its too late. Lastly, I would also remind you that they have some pretty good military prospects in the works. The Navy system will also be likely slow to develop, given its size and importance to a ship. The Army artillery batteries could be a near term, but smaller surprise.
It would be virtually impossible for all of them enmass to make the kind of changes to our needs that I can see occurring within the next 3 years. But everything will help. What is not economically feasible now, might be 18 months from now. So Now would be a better place to start. IMO
aitvaras, I'm convinced that demand in this sector will grow to $100 billion over the next few years. That means the sector could easily support 20 or 30 billion companies with billion dollar top line revenues. It's also diverse enough that it will take that many companies to provide solutions for all of the principal application subgroups. The places that people still have irrational expectations are raw material availability, performance enhancement curves, time to market and at least in the case of EVs and PHEVs the fundamental economics of the market.
I'm a valuation fundamentalist. I believe that comparable companies in comparable stages of development should have roughly comparable market valuations. When I see valuations that are objectively low when compared to a peer group, I see opportunity. When I see valuations that are objectively high, I see risk. In November I bought XIDE and ENS because they were attractively valued. I'm up close to 100% on both. It's not rocket science, just looking for strong fundamentals that have been beaten down to unreasonable levels.
I am new to Seeking Alpha, but have read over your many contributions. Thanks for your views on the developing electrical energy storage industry. You're way off the mark on Beacon Power, though. Their use of flywheels in this day of exotic chemicals and advanced batteries intrigued me, so I've looked into it. Frequency regulation, controlling for the constant supply/demand imbalances on the nation's grids, is a bIg and important market. It wastefully consumes 2%-3% of our power generation each year, and the need grows worse as more renewables are added to the stable of generators. The market's been estimated at over $2 billion, but due to the gradual compliance of the balkanized grid operators with FERC's open-bid rules, Beacon won't say it's more than half that. In any case, their fast-response flywheels are the solution -- all kinds of advantages over batteries -- and looks to be highly profitable as well. And they are ready to go -- approved for half the ISO's in the country and ready to build out!. They're not selling product, they're selling a service. Yes, the industry is very slow to move, but Beacon got in on the ground floor. There's more to say, but no room here. Two basic points: (1) Better freq. reg. is Step One in the massive ($2-3 trillion) upgrade of the grid that's so badly needed. (2) Beacon's service is critical to the grid's ability to handle renewable genereators. Without it, all those green megawatts are marooned megawatts -- mostly restricted to off-grid use while the coal fires keep burning. Not surprisingly, I am long on Beacon stock.
JLBR
The issue I have with all of the grid based systems isn't value; it's time to market. Because a stable grid is one of the most important things a country can have, utilities are extremely resistant to wide scale use of new technology until the long-term reliability of the technology has been proven. You do that by following the path Beacon has laid out - build a facility, get regulatory clearance for a demonstration project and then run the project for a two to five years to prove the value and reliability. If you're really lucky, you may be able to get regulatory approvals and funding for a series of demonstrations in different parts of the country. But it's not a market where you can build a plant today and then start rolling out additional facilities on a 90 to 180 day construction cycle.
Today's investors frequently have irrational expectations with respect to timing. When those expectations are not met, their reactions are often extreme and far less focused than they should be. We are dealing with a baby industrial segment that's going to be massive. But it will take time, adequate capital and patience. I love this sector and like the fundamental business plans of most sector participants. My only real criticism is reserved for the people who want to make battery packs for 100 mile range EVs.
I applaud Beacon's work and hope its demonstration project works the way they hope it will. But this is a trial where the jury will be out for at least a couple years.
Your Beacon Power links to library.corporate-ir.n... were useful. I'd like to do further research on that database, however, I don't see how one would search it, I just get a thomson-reuters home/search page which doesn't pull up that file. Could you clarify this for me?
(My apologies for a tangential thread.)
The links came directly from beaconpower.com - both the homepage and investors section, under presentations.
John - I am curious to hear your thoughts on the $50mm loan garuantee from the DOE. Assuming your calculations above are correct, that is using one 20mw plant. It is feasible that Beacon has 2 fully running this year at a minimum (Stephentown and somewhere in Ohio now that the MISO has passed tarriff regulations specifically pushed for by Beacon on Dec 23rd)
phx.corporate-ir.net/p...=
In my honest opinion, I think the criticism you are receiving on your analysis of Beacon is that you are focusing on this immediate point in time and fail to mention the influence they've had in the market, the inroads they've made with the FERC and ISOs, and the potential revenue growth ahead of them. I'd like to see your do some math assuming 2,3,4,5,6 functional 20mw plants up and running.
jp17622, the question you posed is really for Beacon's management because I don't know. I understand all too well the difficulty of financing and growing a small public company because I've spent my entire career doing it. I also understand that management teams can be overly optimistic when establishing timelines and budgets. My rule of thumb for any planned development is "It takes twice as long, costs twice as much and is generally half as successful." Frankly, I'm nowhere as concerned about what management is doing as what investors are expecting. The Beacon team seems to be doing a good job and following a solid plan. My only concern is timing and short attention span capital markets.
Recognition of risk is not criticism. It's merely a fact of business life and a critical part of any well-reasoned investment decision.
The lower capacity factor of wind and solar is well understood. From what I've seen it is taken into consideration in the energy plans that call for ramp up of both solar and wind.
For instance it would take 300 MW of wind to equal 120 MW of coal power. But the wind power is cheap and clean and needs no fuel ever. No mountain tops blown off, no billion gallon spills of toxic coal fly ash sludge.
Solar thermal (CSP) with heat storage designed to run all night would have the same capacity factor or nearly the same as a coal plant.
Many CSP plants probably won't be designed to run all night, partly because it's not considered necessary.
John Lounsbury
Your dream may come true.
"I have been daydreaming about a hybrid photovoltaic-thermal generating system. "
www.businessweek.com/g...
article on Zenith Solar - Israeli company making consentrated PV systems that also make and capture heat.
An interesting and ambitious proposal, and an excellent overview of solar thermal can be found at TREC. They plan to build solar thermal plants and HVDC lines in North Africa, the MidEast, and possibly southern Europe.
The plants will provide electricity, usable heat, and desalinization of sea water for Europe, North Africa and the MidEast.
Read about here:
www.solarserver.de/sol...
More on CSP at these links:
www.salon.com/news/fea...
climateprogress.org/20.../
www.altenergystocks.co...
solarsouthwest.org/
Here's a list of solar thermal companies.
Abengoa Solar
Acciona Solar
Ausra
BrightSource Energy
Iberdrola
Solar Millennium
Solar Reserve
Sener
SkyFuel
eSolar
Solel
Torresol
Stirling {Stirling and Infinia use a sterling heat engine instead of steam turbines.}
Infinia
Sun Power(not the PV company)
Solar Thermal projects in U.S.
from Green Wombat website:
"Stirling has moved to silence the naysayers by filing a license application with the California Energy Commission for its first solar power plant - the world’s largest - a 30,000-dish, 750-megawatt project to be built 100 miles east of San Diego on 6,100 acres of federal land controlled by the U.S. Bureau of Land Management. (A energy commission licence application - an extremely detailed and expensive document; Stirling’s runs 2,600 pages - is considered a sign that a project has the wherewithal to move forward.)"
"Solel last July signed the world’s largest solar power deal when it agreed to supply California utility PG&E (PCG) with 553 megawatts of green electricity to be produced by a massive solar thermal power plant to be built in the Mojave Desert"
Ausra is building 175 MW plant near San Luis Obispo CA
Brightsource has had 900MW approved by power companies for the Mojave Desert
This is spread over 2 or 3 plants.
Acciona Solar 64MW plant Nevada Solar One pilot project.
There are 355MW of CSP pilot plants running since the late 1980s and early 1990s in Mojave Desert. (without heat storage)
Abengoa Solar's 280 MW parabolic trough project with 6-hour molten salt storage in Arizona.
Florida Power and Light (FPL) has filed in California to build 250MW plant Mojave.
Yes, FPL has seen the light and is now in the solar thermal business in other states.
In Spain, Solar Tres, a 17 MW central receiver design with 15 hours molten salt heat storage is underway. It will run 24/7 will generate 110.6 GWh/yr, equivalent to 6500 hrs of full-load operation or a 74% utilization factor.
"The same acre can produce 10 times as much energy from wind as it can from corn ethanol, 180,000 miles per acre per year. But both corn ethanol and wind power pale in comparison with solar photovoltaic, which can produce more than 2 million miles worth of transport per acre per year." www.ecogeek.org/conten...
To be fair, wind actually only uses a tiny percentage of the land it is sited on. It can coexist with agriculture. But CSP is not intermittent, on the other hand.
see: earth2tech.com/2009/01......
Keep it real.
Boy, John, this egregiously inaccurate comment really makes me question the depth of your knowledge and research here, at least regarding EV/PHEV battery packs. Panasonic EV is the main (and as far as I know sole) producer of the Prius NIMH packs and has been for years. Toyota bought into 50% of Panasonic EV several years ago to assure battery pack supply for its hybrids, and as far as I can see the relationship has been screamingly successful. With over a million Priuses sold to date, that's a lot of damned batteries, and the packs themselves have an outstanding reliability record to date. How could you not know this?
Sanyo has long been an acknowledged leader in lithium cells and builds HEV packs as well, and the assumption out there is that the recent Panasonic buyout of Sanyo was at least in part motivated by P's desire/need to accelerate its expertise and production in lithium batteries. In addition, Toyota announced several months ago a billion dollar commitment to both advanced NIMH and lithium production for its hybrid packs, with new factories for each.
So here we have three of the largest corporations in Japan working together on one of THE biggest carrots in the battery world, namely robust, reliable, competitively priced HEV packs. Tell me how any of the U.S. pipsqueaks stand a chance against this juggernaut. And did you see Ford is already making noises about possible battery pack shortages for its brand new Fusion HEV due out this spring? Guess who the supplier is? Sanyo.
The only serious competition I see out there right now in this segment are other large corporate partnerships like Johnson/Saft, Continental/LG Chem, Subaru/Nissan/NEC & Mitsubishi/GS Yuasa--all large international corporations with deep pockets and a ton of motivation and competitive vigor--and all committed to making lithium work. I think you need to do a lot more homework before you start making pronouncements about lithium packs not being economically viable as almost the entire automotive world appears to think otherwise.
findarticles.com/p/art...
Separately, while I agree lithium packs are not quite "there" yet in terms of price and reliability, I think we'll see a radical change within the next 2-3 years as all the previously named partnerships' hard work on these new lithium packs starts to bear fruit. Scale will bring down prices, another huge disadvantage to smaller startups in this segment since they don't have the kind of built in partnerships with the automakers that the big boys do.
In short, large scale battery production demands a tremendous amount of capital, which these smaller companies just don't have access to. Our best and brightest hope here in the US? Read Andy Grove's recent pleas to Intel to consider advanced battery production for HEV packs and the like. Grove is now retired from Intel but has become a huge convert to the HEV movement and has taken it on as a personal crusade. Grove thinks Intel is uniquely positioned and equipped to become a leader in cutting edge batteries if they put their minds (and capital) to it. Given how dominant Intel has been in the computer ship field, it's hard to argue with him. IMO this is precisely the kind of big creative buildout move this country needs to help get back on track as the world's technology leader.
findarticles.com/p/art...
www.electronicsweekly....
The ugly truth is that EV demand will never develop once regular guys understand how ridiculously expensive that solution will be. I really think you need to spend some time reading some of my earlier articles including:
seekingalpha.com/artic...
and
seekingalpha.com/artic...
My entire archive is available on the "More Articles" page and every one of them deals with this sector.
Ni-MH batteries that are rated at 400 cycles last for 5 years in a typical Prius. The big push for Li-ion arises from people who have an agenda that transcends economics. I'm convinced that the agenda will run into a brick wall once people understand the costs. Despite all the wonders of Li-ion technology, battery manufacturers are never going to convince somebody who passed high school math that a Li-ion battery that costs two or three times as much as Ni-MH and is rated for 3,000 cycles makes economic sense in anything bigger than a laptop or electric bicycle.
I'm 21 years old and wanting to invest a relatively small amount of money into the alternative energy storage sector following the recent successes of a friend. My question, should I spread this money between multiple companies (I'm leaning towards ABAT and XIDE) or put them all in one company. Thanks so much for the website, it's very informative, but all this new knowledge is very overwhelming!
Thanks,
Lee
Thanks,
Lee
It seems to be well below the radar. What do you know about their prospects?
Jonno, I'm watching Electrovaya from a distance but don't talk about it because I try to stay away from stocks that are not registered with the SEC. Also, Seeking Alpha actively discourages discussion of sub-$1 stocks in order to maintain their reputation.
<<The ugly truth is that EV demand will never develop once regular guys understand how ridiculously expensive that solution will be.>>
John,
You're ignoring the economics of scale as well as the billions of dollars of R&D that are pouring into lithium pack development by virtually every major auto maker on the planet. BYD, Continental, LGChem and others have already proven that lithium technology works--now we just need to start adopting it on a large scale to get the pricing to feasible levels.
Re: your stats on NIMH HEV packs, they're just plain wrong. Years ago California mandated a 10-year 150,000 mile warranty on HEV packs and other states have followed suit, so this is the very high mark that Toyota and others must shoot for when they introduce their packs to the US market. To Toyota and Panasonic's credit, the Prius NIMH packs have greatly exceeded all expectations, with no more than a few hundred needing to be replaced under warranty. That is an amazing stat given a million cars sold. Better yet, pricing has come down on these packs both new and used, with used replacements available eBay for as little as $500.
What makes you so sure lithium pack prices won't follow suit once a few million have been sold and the Chinese and others start cranking them out in number? Govt subsidized early adopters will no doubt pave the way but this is a political no brainer for both the U.S. and China, and in fact BYD's first orders for its new $22,000 60-mile PHEV hybrid (on the market as of last week in China) are from govt-sponsored entities, so the fact is it's already happening.
And with several countries now signed on to Shai Agassi's Project Better Place, including Israel, Spain, Denmark, and Australia, I think it's just plain foolhardy to be ruling out what looks to be the future for small, ultra efficient vehicles, namely lithium-powered PHEVs and HEVs, someday likely mated with the clean diesel engines you mention. The Priuses' success speaks for itself, and is the perfect example of a committed manufacturer being willing to sell the initial production runs at a loss on the conviction that eventually the car will prove profitable. I see no reason why a similar curve won't be followed with PHEVs and lithium.
As a part-time observer, I appreciate the discussions of these issues and have a few questions to help me better understand. First, am I properly understanding the business problem as 'how to cost effectively provide some ancillary services such as frequency response or voltage/reactive support or regulation reserves,?' And if this is generally on point, then 'where might those services come from and at what price?'
In the short term, aren't all electricity generating resources capable of providing these services? If so, in circumstances with some available generating capacity (almost all hours of the year in almost all locations in the U.S), isn't fuel cost the only significant variable? Also, if the high voltage network needs to respond to the additional stresses of higher saturations of renewable energy going forward, is it unreasonable to anticipate that the network will be designed and built going forward to better accommodate such stresses, providing relief to the demand for these ancillary services? Is it possible that the 'elasticity' of the network will be evolving significantly over the next several years?
Depending on how these questions are viewed, I wonder whether, as you proceed through various filters for the companies you follow, it might be useful to carefully watch natural gas futures prices (and price volatility) as a variable in assessing the business prospects of these companies.
While it's important to watch for significant movements of the supply curve (breakthrough technology), it may also be very important to keep tabs on the demand curve (ancillary services in wholesale electricity market rules, fuel price and supply risks, renewable energy interconnection requirements, transmission network capital construction spending) for insights on long-term viability of the companies you follow.
Happy new year.
For reasons that I've already talked about at length, I don't believe the happy talk about economies of scale. Batteries are not like electronics. Over 75% of the cost of a typical battery is raw materials. Each raw material has a fixed electrochemical constant that cannot be exceeded. Most battery chemistries are already within a couple of percentage points of perfection. Moreover, fundamental economic laws state that as demand for scarce materials increases, so does the price. So if you can't improve the basic chemistry and you can't slash your materials costs, where the heck are the economies of scale going to come from.
You're making a Catch 22 argument about how producers are going to buy for a dime, sell for a nickel and make it up on volume. People want to believe that battery prices are going to magically fall because of future economies of scale. I'm just being straight and telling people that won't happen.
Digging a little deeper into specifics, the Prius battery packs had 1.8 kWh of capacity in the Gen-I vehicles and 1.3 kWh of capacity in the Gen-II vehicles. Don't take my word for it. Go and see yourself at:
www.toyotapriusbattery.../
In case you're not up on the conversion formula:
volts x amp hours = watt hours.
I did a full pricing and cost benefit analysis on an EV 40 and an EV 100 in my Storage Needs to Take Baby Steps Article that I referred you to earlier. If you think my numbers are wrong, please show me where.
It's no darned fun telling children there is no Santa Claus because they are simply crushed by the news. It's also no darned fun telling people that the economic numbers for Li-ion powered EVs don't work. But truth is a funny thing. It's truth whether we like it or not.
You get way out of my league when you start talking about network resources and how they may change over time. Heck, I have a hard time keeping up with storage and the writing is merely a hobby.
If I planned to make major investments in frequency regulation and wanted to fully hedge my position, I would probably consider many of the issues you've raised, but it's way beyond the scope of what I'm willing to do right now.
I have to laugh when people carelessly repeat the tired mantra about toxic disposal issues with batteries. The real problem children of the industry are disposable batteries for flashlights and other consumer goods that individuals carelessly discard. In the case of lead-acid batteries, the national recycling rate is over 99% of all batteries sold. In the case of industrial batteries of all classes, the recycling rate is as close to 100% as you can get because it is a criminal offense to improperly dispose of potentially toxic substances. It is also stupid because big batteries have immense material values that can only be recovered by the owner if the battery is sold to a recycler. There are recycling issues in the battery sector but they have nothing to do with protecting the environment and everything to do with getting materials that are pure enough to use for new batteries.
But truth is a funny thing. It's truth whether we like it or not.>>
John,
You're conveniently ignoring the "truth" of falling NIMH prices as well as the dynamics of commodity pricing and the relative abundance of lithium,
which happens to be the one of the most common elements on earth.
I've seen the arguments for lithium scarcity--one guy named Kahlil--and they strike me as bogus and poorly supported by fact. The fact is lithium is NOT a difficult element to harvest and never will be. It takes some natural reserves, which are abundant, a drained lake, and lots of sunlight. Supply will meet demand as demand increases and prices will fluctuate as all commodity prices do.
Separately, your quote regarding the reduced capacity of the 3rd gen Prius battery pack only tells me that Toyota has learned how to increase the cars' fuel efficiency while simultaneously cutting battery weight and probably cost. This is utterly typical of the Japanese and one of the big reasons they continue to make the best cars on the planet. It's no secret that weight reduction is a key factor in fuel efficiency, and Toyota has worked hard to make the newest Prius lighter, with major weight savings in the hybrid drivetrain as well as the battery.
<<It's also no darned fun telling
> people that the economic numbers for Li-ion powered EVs don't work.>>
All I can say is the Chinese car maker BYD appears to be telling us the opposite with its $22K PHEV that claims up to 60-mile all-e range and is available today in China. I'm not so naive as to buy that range number until it's been verified, but even if the range is half that, this is a remarkable achievement. Warren Buffett believes enough in this company to own 10% of it. How do you explain the price point here, which to me looks extremely competitive? Seems to me if this car is even close to the specs advertised and the selling price not massively subsidized by the mfgr, your entire argument about lithium HEVs can be thrown out the window.
Follow the money, my friend--and tell us why you're smarter than Buffett, Toyota, Carlos Ghosn at Nissan, Shai Agassi, and all the other auto and battery makers that are pouring billions into lithium research and production as we speak.
We'll put this to rest for now and let the future unfold, but the surge in hybrid sales when oil went north of $100/barrel is not something you can argue. And Honda's new hybrid Insight, priced several thousand dollars below the Prius, shows the probable direction the Japanese are going in, especially in this depressed market environment--namely, cheaper hybrids aimed at middle class consumers. If this trend continues and the Koreans get on board (which is inevitable IMO), I think we'll be seeing compact, 5-passenger hybrids well under $20K within 3 years.
I think where we really disagree is re the issue of what's possible in the way of HEV efficiency gains and, specifically, gains in battery pack performance. You look at the battery chemistry alone and see only minute improvements possible--I look at Toyota's new Prius and see a 3rd gen that claims to be 10-15% more fuel efficient over the previous model--and with a smaller bulletproof 150,000 mile NIMH battery pack second to none.
In short, the battery is just part of the story in HEV application, and even with the battery pack alone I think you underestimate the potential for dynamic improvement via very basic modifications such as temperature management and other BMS tweaks.
Case in point: LGChem has apparently figured out a way via sophisticated computer BMS controls to make lithium ion a safe chemistry in HEV applications--at least this is my understanding of what they've achieved with the Chevy Volt packs to date, which are testing very well.
This is a big leap forward, and IMO just the start of what's possible: Get a few advanced chipmakers like Intel or AMD involved in this field and I think we'll continue to see rapid advances in these batteries' capabilities, including range capacity, safety, and life expectancy. Toyota and PanasonicEV have pointed the way with the remarkable performance of their HEV NIMH packs, and in honing ALL the elements of efficiency that have resulted in the Prius's success.
In short, battery chemistry is just one part of a much larger dynamic in just about any application, especially HEVs, and BMS improvements will be key in unlocking any battery's true potential. I've been personally involved with e-bikes for about ten years now, and have seen some remarkable advances in these bikes and their batteries over the past three years alone due to the advances in lithium chemistry. The same type of change is coming very soon in the automotive HEV world--likely at a faster pace due to the $$$ being poured into it right now--and I have no doubt the early Chinese lithium batteries I've ridden will be looking like complete dinosaurs in a year or two. Get the sticker price under $20K and these pups will sell; tell me they're not the ultimate college kid car being both PC and cheap to run on a daily basis.
In countries other than the US that have much higher gasoline taxes (like the $3.50 per gallon I pay in Switzerland) the economics change rapidly. But as long as the US government wants to subsidize private cars with cheaper gas than anywhere but the middle east . . .
I still have to disagree with you on the likelihood of major cost savings and performance increases in raw battery performance. The chip makers are great at physics, but chemistry is far more limiting.
In a new article that got posted today, I put out a chronological list of battery chemistries and their related costs. There have been some new materials added to Li-ion over the last few years, but the basic chemistry has been in production for longer than NiMH with a more open patent regime (e.g. no Cobasys). So the oft-promoted idea that NiMH is old while Li-ion is new is simply inaccurate. Li-ion batteries are made by the gazillions for portable electronics and the Japanese have spent the last 20 years doing everything in their power to perfect the technology. There will almost certainly be improvements, but they won't be Moore's Law class improvements.
We need to be doing more with HEV's in general and recuperative braking in particular. It would also be nice if somebody could get US drivers to reconsider diesel because the diesel technology that I see on the roads every day here in Europe bears no resemblance to the diesel technology I grew up with in the States. I drive a 10-year old Audi because it's paid for and we rely on rail and air for the vast bulk of our long-distance travel. But when I replace the car, a diesel HEV will be my first choice.
Yes, I agree pure EVs will likely not happen in our lifetimes and that ultra-efficient HEVs are where it's at. Tesla and all the other failed or failing pure EV companies are proof in the pudding. As you say, the economics just don't work for a purely electric motor vehicle. HEVs are a whole nother bag, and we both agree that a clean diesel electric hybrid would rule.
Just found this blurb on the new Honda Insight, which looks sweet indeed, and is apparently to be priced lower than I thought--under $20K, which is the sweet spot I mentioned. All the points Honda makes about how they've achieved their efficiency goals are the ones I was trying to make in my previous post--just not as eloquently.There's no mystery why the Japanese continue to lead here in HEV tech, and I look for only more great things from them in the future.
From Honda Motors:
"The 1.3 litre Insight is powered by Honda's acclaimed IMA system, which has been extensively modified to reduce its cost and weight. With careful engineering of key components and refinement of manufacturing processes, the cost of the hybrid system has been significantly reduced. This ensures that Insight can be sold at a very competitive price without compromising ability, quality, environmental performance or profitability.
The Insight will benefit from a significant cost reduction in Integrated Motor Assist (IMA) components resulting in the most affordable hybrid vehicle to date. This dedicated hybrid vehicle will be offered as a 5-door hatchback with seating for five passengers and built on a newly developed platform. Engineers have mounted the compact control unit and battery beneath the boot space to give the Insight both a low centre of gravity and the practicality of a conventionally powered hatchback.
This reduction in cost has not been brought about by compromising the quality of the Insight, instead the Japanese manufacturer has tasked its engineers with finding more intelligent cost reduction solutions.
Insight will utilise various technologies, including a function to assist more fuel efficient driving giving customers a further improvement in real world fuel consumption. Along with the Civic Hybrid, the new vehicle will be produced at Honda's Suzuka factory in Japan which recently has expanded hybrid motor production line.
CO2 emissions and fuel economy are targeted to be at a similar level to the existing Civic Hybrid, giving drivers a flexible and highly practical lower environmental impact car. At its expected price point, Insight will have a unique combination of passenger space, luggage capacity, emissions and economy. "
Be sure to read today's post.
I noticed that you mentioned Firefly Energy earlier,
www.fireflyenergy.com/
If their advanced lead acid batteries can store 3 or 4 times the energy as conventional lead acid batteries and cost much less than lithium batteries why do you think Detroit is ignoring them as a viable solution to the $8,000 GM Volt battery? From what I have read they could supply a 16kwh battery pack that would weigh less than the current lithium Volt battery. According to Firefly their advanced lead acid batteries have no heating or fire risk problems. Is GM run by idiots. I can still remember the 240Z getting great power and mileage using direct injection decades before GM. The 240Z did not have pollution problems even without a catalytic converter because of more complete combustion.
Honda could get rid of the Insight's transmission and replace it with the same electric motor used by GM and Tesla. Add some software and Firefly batteries and GM's Volt is unable to compete. It is time for Detroit to get serious.
Thank you for your informative reply on the Firefly battery. However I have a suggestion that I believe would make your posts more relevant to readers. You continually refer to PURE EV's. The PURE part turns the discussion into a moral argument with TRUE BELIEVERS. Plug-in, Extended Range, etc technologies exist for obvious reasons. Electric motors are much more efficient than ICE engines of any variety. The Battery, Ultra-capacitor, ect (energy storage technology) is the electric motor's problem area.
There also exists ICE technology that is better than diesel. It is not mentioned because these technologies do not retain their advantages in continually variable LOAD situations. The Extended range option, like a diesel electric locomotive system, use ICE under a fixed load and RPM to charge a battery or feed an ultra-capacitor. No transmission is used resulting in less weight more efficient fuel utilization. However the Volt using the relatively inefficient GM gasoline fueled ICE engine still claims 50 MPG during Extended Range operation, after 40 miles on battery alone.
I believe that GM could do better and do so at a lower cost of product. They continue to be penny wise and pound foolish. They need to let their engineers have more input and tell their accountants to sit in the corner and count their beans until all the options are on the table for cost analysis.
The biggest problem I have with this series of articles is my own limited professional experience. I can speak with some authority on what the various types of storage devices do and how the companies that make them are positioned, but I really don't have a broad depth of knowledge when you get down to how batteries are used in specific applications. Also, the thrust of Seeking Alpha is directed to stocks that people can invest in rather than technologies that companies should be pursuing.
Ultimately that's the reason I try to stay very involved in responding to comments and encouraging discussions. In a few short months we've gotten to the point where the discussion is more interesting than the article. The credit for that phenomenon goes to people like you who know what they're talking about and take the time to contribute.
I truly appreciate it and while I don't want to stray too far from my area of expertise in the main body, I love the digressions in comments.
www3.toshiba.co.jp/sic...
www3.toshiba.co.jp/sic...
Yes, many electricity generating stations burn fuel 24/7. However, those plants are not waiting simply to provide the 'smoothing' of voltage and frequency on the system throughout the day. To me, this suggests that a storage device can or will fully displace a conventional generation resource, and is unrealistic in almost all cases.
In other words, the 'price point' at which these technologies might be considered a strong competitive alternative is not the capital cost of a power plant, it is the avoided cost of fuel needed on the margin to provide these services. My back-of-the-envelope calculation is that this is a pretty low number these days on a $/MWh basis.
As you know, most power plants are called upon to provide an energy product, some as 'baseload,' some 'intermediate,' some 'peaking.' Systems operators know with good confidence well in advance whether a power plant needs to be ready to deliver energy. So, please be careful to not suggest that a new technology will displace existing forms of generation for the provision of these various kinds of 'smoothing' services.
In addition to providing energy products, ancillary services, including voltage and frequency support, and the provision of various kinds of reserves, ranging from momentary to hours in duration, are provided. Since the bulk of the generation fleet is ready, willing, and able to deliver these energy and ancillary services products, a proxy for the value of batteries, capacitors, or other technologies can be represented by the avoided fuel costs. Right?
In addition, as the saturation of renewable generating technology rises, I believe it is very reasonable to anticipate that the high-voltage transmission network will be planned, constructed, and operated to accommodate much greater stresses than possible today. Some of that capability could be provided by these new technologies, some will be absorbed by conventional transmission technologies. But the stresses on the system, whether they are presented by generators or customer demands, will be absorbed at a much higher level. A transmission system being better able to withstand these stresses will mitigate the demands for storage, in my view.
I do agree that a broad range of new technologies will come along that will serve to increase the overall efficiency of the electricity production and delivery network, everything from higher thermal efficiencies in power plants to more efficient power lines and more automated system protection equipment, as well as the array of technologies that you follow. The nation can ill-afford the multi-billion dollar subsidies that go to supporting inefficient technologies, and investors can spot this stuff a long way away.
As a personal investor, the bottom line for me remains --- strong due diligence should acknowledge that the success of these new technologies will depend significantly on a) historically high fuels prices and price volatility, primarily natural gas for power generation, and b) the extent to which the electricity transmission network is enhanced to better accommodate a broader range of stresses than is capable today.
Based on these criteria, when I can see clear evidence of sustained higher and rising natural gas prices, and a crumbling electric transmission network that can't deliver at today's high performance levels, I will take a long hard look. But, if I see compelling evidence of these two criteria, I'm not so sure I want to be living in this country, either.
Thanks again.
seekingalpha.com/artic...
Utility scale storage it isn't as much a question of replacing base load generation as supporting transmission and distribution. The article was based in part on a 2004 Sandia report that you can find here:
www.sandia.gov/ess/Pub...
A more recent update can be found here:
www.sandia.gov/ess/Pub...
I applaud your diligence and think it is absolutely necessary before any investment. A big part of my goal in writing on Seeking Alpha is to give people a solid idea of the issues they need to understand and be comfortable with before investing in storage. I love this type of back and forth so please don't stop questioning.
I looked at those scandia links you mentioned for Clean. Interesting, but it is ignoring the fact that many million electric utility customers may soon be driving EREVs, PHEVs, or EVs that have very large batteries to be charged. The cost of those storage devices will be to the CUSTOMER not the UTILITY. I was proposing that a very very very smartGRID be developed to balance THE UTILITY'S power generation and CUSTOMER USAGE. That is the biggest problem according to those Scandia links.
The solution is more computer control of the T&D GRIDS. Letting MILLIONS of micro-processors on smart chargers act as CUSTOMER AGENTS to contact COMPUTERS CONTROLLING THE GRIDS to request authorization for power usage to SAFELY BALANCE power GENERATION and USE.
When huge wind and solar power generation facilities actually are developed to the point that they can produce a significant percentage of our power we can also use various power storage technologies to prevent overloading the T&D grids when demand is low and use that stored power when demand is high.
However the very very very smartGRID could also integrate millions of small distributed CUSTOMER wind and solar power generators to do the same thing by modifying the software in Computers controlling the Distribution grids without the cost to the utilities of building huge wind and solar plants. Millions of solar roofs could be more reliable than a few 10 square mile solar collection projects in Arizona or New Mexico. Thinking BIG is not necessarily SMART.
BYD is selling a $29,000 all electric car in china with 250 mile range, which must be more than 25kWh. I believe GM's numbers of $250/kWh.
Status quo thinking will get you into trouble in this market. Power Lithium is quickly moving, and will soon be the winning chemistry on all fronts, cost included. It may not be the winner for UPS and offline stuff, however.
Jason, there is lots of happy talk about collapsing li-ion battery prices but that doesn't change the fact that about 80% of battery cost is raw materials and we live in a commodity constrained world. Argonne is planning to release a new cost study this summer that should clarify expectations and may even change my views. But I'm too old to believe in a commodity price fairy.