Lead-Carbon: A Game Changer for Alternative Energy Storage

For several months I’ve been telling readers that emerging lead-carbon battery technologies will be game changers in alternative energy storage. Last week, The Economist published an article about Axion Power International (AXPW.OB) titled “Lead-acid Batteries Recharged” and I found a recent report from Sandia National Laboratories on its side-by-side testing of lead-acid, lead-carbon and Li-ion batteries. Now that Axion’s management is talking to the press and Sandia is releasing independent data, I feel free to explain more fully why lead-carbon technology is so disruptive. I don’t like table pounding, but this is probably the most important Seeking Alpha article I’ve written.

Lead-carbon batteries are different from other types of batteries because they combine the high energy density of a battery and the high specific power of a supercapacitor in a single low-cost device. The primary goals of lead-carbon research have been to extend the cycle lives of lead-acid batteries and increase their power. Basically, developers start with conventional lead-acid chemistry and add carbon components to the negative electrodes. While the carbon components do not change the basic electrochemistry, they increase specific power and reduce a chemical reaction called “sulfation” that occurs during charging cycles and is the principal reason ordinary lead-acid batteries fail. Over the last several years, lead-carbon researchers have followed three different development paths:

• Blending carbon additives into the lead sulfate paste that is used for negative electrodes;
• Developing split-electrodes where half of the negative electrode is lead and the other half is carbon; and
• Completely replacing the lead-based negative electrode with a carbon electrode assembly.

The DOE’s 2008 Peer Review for its Energy Storage Systems Research Program included a slide presentation from Sandia that summarized the results of its cycle-life tests on five different batteries including a deep-cycle lead-acid battery, two lead-acid batteries with carbon enhanced pastes, a split-electrode lead-carbon battery (the Ultrabattery) and an advanced lithium-ion (Li-FePO₄) battery. While the tests performed by Sandia focused on smoothing power output from wind turbines and used a 10% depth of discharge from a 50% initial state of charge, which means more testing will be required before comprehensive comparisons are possible, the following graph highlights the magnitude of the cycle-life improvements that lead-carbon technologies offer today.

(Click to enlarge)

This Sandia graph is the first time I’ve seen independent comparative test data for advanced lead-acid technology, advanced Li-ion technology and emerging lead-carbon technology on the same page. Since it’s coming from Sandia I have no reason to suspect a technology bias. Frankly, I can’t see the daunting cycle-life superiority that Li-ion advocates claim. When I practiced law in Houston we affectionately called that phenomenon “all hat and no cattle.”

In addition to the cycle-life data represented by the colored lines, the Sandia graph provides parenthetical power data expressed in terms of “C rates;” a measure of the time required for a battery to deliver its stored energy. For example, if a 10-volt battery has a nominal 100 Amp-hour rating, it can theoretically deliver 500 watts for two hours at a 0.5 C rate; 1,000 watts for one hour at a 1 C rate; 2,000 watts for a half hour at a 2 C rate; or 4,000 watts for 15 minutes at a 4 C rate. Historically, lead-acid batteries have had C rates of less than one while higher C rates have been the exclusive province of supercapacitors and premium-priced battery chemistries.

As the Sandia graph shows, they began testing the lead-carbon Ultrabattery at a 1 C rate, doubled the power and tested at a 2 C rate and then doubled the power again and tested at a 4 C rate. By the time the testing was completed, the Ultrabattery had survived more than 17,000 cycles at increasing C rates. This is just one series of tests, but it provides irrefutable proof that lead-carbon is re-writing the rules when it comes to both cycle-life and battery power.

Since Sandia said it far better than I can, I’ll simply reprint the summary slide from their Peer Review presentation.

(Click to enlarge)

A 10-fold improvement in the performance of any technology is by definition highly disruptive. The fact that lead-carbon achieved these disruptive performance gains using cheap and plentiful raw materials that are readily available from domestic sources and easily recyclable for use in new batteries using existing infrastructure is an absolute game changer; particularly when the closest comparable technology is based on expensive imported raw materials that are not easily recyclable for use in new batteries using existing infrastructure.

The five entities that are actively developing lead-carbon battery technology are:

• MeadWestvaco (MWV), a packaging material and container manufacturing company that is developing activated carbon additives for the lead sulfate pastes used in conventional lead-acid batteries;
• Australia’s Commonwealth Scientific and Industrial Research Organisation (CSIRO), which has developed a split-electrode lead-carbon battery that it calls the Ultrabattery;
• Japan’s Furukawa Battery (Frankfurt - FBB.F), which licensed the Ultrabattery technology from CSIRO and has successfully road tested its device for 100,000 miles in a modified Honda hybrid;
• East Penn Manufacturing, a privately held manufacturer of lead-acid batteries that is using carbon additive pastes in experimental batteries and has recently acquired an exclusive U.S. sublicense to manufacture the Ultrabattery from Furukawa; and
• Axion Power International, a small manufacturer of lead-acid batteries that has developed a formidable U.S. patent portfolio in lead-carbon battery technology that will begin commercial production later this year and has partnered with Gaia Power Technologies for a NYSERDA funded utility substation support project that was discussed in the DOE’s 2008 Peer Review.

Cycle-life test results for the MeadWestvaco and East Penn batteries with carbon-enhanced pastes are both included in the Sandia graph, as are test results for the split-electrode CSIRO-Furukawa Ultrabattery. While Axion didn’t participate in last year’s tests, presumably because it wanted to defer third-party testing until PbC batteries using manufactured electrode assemblies are available later this year, Axion’s strategy to replace the entire lead-based negative electrode with a carbon electrode assembly is the most aggressive of the three technical approaches to lead-carbon batteries. Based on my knowledge of how the various components interact in a lead-carbon battery, I believe Axion’s strategy will probably result in longer cycle-life and higher power than either the carbon-enhanced paste technologies developed by MeadWestvaco and East Penn or the split-electrode technology developed by CSIRO.

I’m a vocal critic of Li-ion technology because it requires expensive imported raw materials, the bulk of the global manufacturing base is in Asia, the batteries are far too expensive for large-scale energy storage systems and there are many alternative uses for Li-ion batteries that are largely insensitive to battery prices. I’ve previously cautioned that the best lead-acid batteries are more than adequate for many emerging energy storage applications and a new generation of advanced lead-carbon batteries will change the landscape dramatically. The Sandia graph is the first independent confirmation I’ve found, but I’m certain that more information will become available as the lead-carbon battery developers complete their testing and introduce commercial products to the market.

I’m the first to agree that normal lead-acid starter batteries do not stack up well against Li-ion in terms of cycle-life or power. However the picture changes dramatically when you understand that lead-carbon batteries are expected to offer comparable cycle-lives and power for about 40% of the cost of Li-ion. I believe Li-ion is the only rational choice for portable electronics, power tools, electric bicycles and hybrid scooters. I also have little doubt that Li-ion will retain the supermodel prize for sleek packaging, size and weight. However, when it comes to large-scale energy storage applications like HEVs and utility support installations, size and weight are simply design issues. They are not mission critical constraints that justify paying a 150% premium for comparable performance.

In the early days of the first five industrial revolutions, function was more important than form, substance was more important than style and fundamental economics drove the mass market to the cheapest solution. There is no reason to believe cleantech, the sixth industrial revolution, will be any different. Lead-carbon batteries are game changers for alternative energy storage, a coming investment tsunami.

Currently, industry leaders in the lead-acid battery group including Exide (XIDE), Enersys (ENS) and C&D Technologies (CHP) are valued at substantial discounts to industry leaders in the Li-ion battery group including Valence Technologies (VLNC), China BAK (CBAK) and Advanced Battery Technologies (ABAT). The same is true for leading developers of lead-carbon battery technology like Axion Power International, which trades at a huge discount to Altair Nanotechnologies (ALTI) and Ener1 (HEV). I expect the valuation pendulum to swing in the other direction when the market comes to grips with the fundamental economic advantages of advanced lead-acid and emerging lead-carbon batteries.

In closing I want to share an image from cartoonist Jan Darasz that was published in the Winter 2008 edition of Batteries International magazine with my Seeking Alpha article on the importance of rebuilding America’s domestic battery manufacturing infrastructure.

Disclosure: Author holds a large long position in Axion Power International, a leading U.S. developer of lead-carbon batteries. He also holds small long positions in Exide and Enersys and may make other energy storage investments in the future.

Comments

[battman:]

Another great article. It appears that there are a few companies that are on the right track and appear much more concerned with running a good company than making splashy headlines with no substance (a la Zenn).

Jan 18 10:11 AM

[TSVee:]

Remarkable.

Admittedly this is only one type of test, but the lead carbon battery (In this case Ultrabattery) is showing just how radically different the performance is compared to the VRLA lead battery. Its not even the same creature. If this type of life cycle advantage stays true in some other test scenarios such as deep discharge, calendar life, etc, that will say lots about the future. Also, we need to examine real-world figure in terms of comparative energy density and power density.

This, however, seriously seems to be one piece of the puzzle less to query, and it connects your core assertions ... the the "costs less" piece and the "highly domestically manufacturable" piece and the "highly recyclable" piece and the "not subject to huge component price increases" piece.

A few more tests like that, and we have a an alpha-ish clarity. Must feel nice.

Jan 18 11:41 AM

[joeboat:]

How about the all important recharge rate? Energy storage is not very efficient if most must be spilled off during peak production due to a batteries inability to absorb.

Jan 18 12:24 PM

[John Petersen:]

Battman, thanks for the kind words. I work hard to stick to third-party sources, provide links to the data, and explain why I believe what I believe. I'm delighted to have drawn a really sharp reader base.

TSVee, until recently, Axion had some preliminary energy density and deep cycle life data on its website that provided a snapshot as of April 2007. At the time, they were over 1,450 cycles at 90% DOD, energy density was roughly equivalent to lead-acid in terms of Wh/Kg, but the volumetric number was a little low because of a 40% reduction in lead-content. There was no detailed specific power data, but the reported recharge speed was about 5x lead-acid. There has been a lot of development work over the last 2 years and while I don't know what the current numbers are, there are some really smart people working on getting to a manufactured electrode assembly that can be used in any existing LAB plant. When that happens, the speed of a nationwide rollout through partnering arrangements with existing manufacturers could be very fast. These are my old team-mates so I'm proud of them, but you might want to check out the Management and development team biographies starting on page 38 of this SEC filing:

www.sec.gov/Archives/e...

Jan 18 12:40 PM

[John Petersen:]

joeboat, the neat thing about adding supercap characteristics is that it boosts power while slashing recharge times. It's my understanding that the C rate actually measures both discharge and charge, but the engineers out there probably know better than me.

Jan 18 12:43 PM

[TSVee:]

The test showed recharge rates (and discharge rates), but under this test scenario, not all the one's we'd like to see.

Still, it is a major step forward in showing that lead-carbon is very very different from its predecessors. The combination of what appears to be electrostatic storage in the carbon with electrochemical storage in the lead is a tremendously different thing -- it is not just a matter of longer-lasting electrodes. These are hybrid battery-capacitors.

A 1C Rate is a rate which would fully charge the battery in one hour, as I understand it, and a 4C rate would recharge the entire battery in 15 minutes, in theory. That said, it is important to note that at (this test's) 50% state of average charge and with only +- 10% depth of charge / discharge, the C rates can be high in many technologies. (If one is levelling the output of a wind generator, one does need to move the juice in and out with high C rates, so if the battery could only handle say 0.4C, it would be a not very good.) But in this case, the 4C for both lithium Ion and lead-carbon is pretty darned nice.

Still, we can all see that there are half a dozen different linds of tests needed to characterize the Lead-Carbon concept better.

On Jan 18 12:24 PM joeboat wrote:

> How about the all important recharge rate? Energy storage is not
> very efficient if most must be spilled off during peak production
> due to a batteries inability to absorb.

Jan 18 12:59 PM

[Renzo:]

Thank you for another installment in a stellar series of articles. The way you logically categorize the technologies and their power/energy profiles makes the arcane understandable.

It seems that Axion and ZBB are both looking at a similar niche in the grid storage market with their Power Cube and ZESS modules. Are these products complementary or competetive? It seems that PbC provides better short term (frequency regulation) power, whereas Zn/Br is better for longer-term (peak shaving) power. Is this correct?

Jan 18 01:01 PM

[tredleon:]

Mr. Peterson - Your articles are very well researched and provide clear, convincing arguments on the prospects of lead-carbon batteries in the upcoming energy revolution. However, when you conclude that somehow a company like Axion is "undervalued" in relation to a company like ABAT, that is where your argument is flawed. The issue is not with ultimate value of the technology that Axion may possess, but whether the existing shareholders (or someone who may buy the stock tomorrow) will earn a better return with Axion or with ABAT. Axion's shortcoming as an investment has to do with it's lack of capital - with only $8M of cash on hand at the end of September '08 and an annual cash burn rate (i.e. operating losses and capital expenditures) in excess of $8M, unless Axion is sold at a premium, the current shareholders will have to go through a very dilutive capital raise to keep the company alive to reap the value of its technology. With the capital markets in disarray, equity offerings for micro-cap technology companies are very pricey - the biotech space is littered with companies that have had to dilute their shareholders 50%+ to raise the capital to get them to that next "milestone", where the promise of their technology will be proven. So, while Axion may have the intellectual property that will prove to be very valuable in the new energy economy, as an investment alternative today, Axion's shares present a very risky proposition. Perhaps after the cloud of potential dilution has cleared, it may make sense to invest in Axion. But unless you are hoping for a buyout, the risk of your current ownership stake in the company being cut substantially is too great.

PS Thanks for the great articles - very informative and well written.

Jan 18 01:24 PM

[frflyer:]

Any idea why Exide fell 20% friday? I don't see any news that would cause such a big drop on high volume.

At P/S 0.10, forward P/E 2.4, P/Book 0.79 it certainly looks cheap.

Jan 18 01:37 PM

[TSVee:]

Renzo:

On Jan 18 01:01 PM Renzo wrote:

> Thank you for another installment in a stellar series of articles.
> The way you logically categorize the technologies and their power/energy
> profiles makes the arcane understandable.
>
> It seems that Axion and ZBB are both looking at a similar niche in
> the grid storage market with their Power Cube and ZESS modules.
> Are these products complementary or competetive? It seems that PbC
> provides better short term (frequency regulation) power, whereas
> Zn/Br is better for longer-term (peak shaving) power. Is this correct?

I did not see a negative lead-carbon assessment for peak shaving in this study, I did see a positive assessment for short-cycle power leveling. zinc-bromide is much more developed than lead-carbon, so we'd all like to see a similar comparison in an arena like shaving. I think these things will be more common now, because we (as in the nation) need to place our bets soon.

Simply, there needs to be another test for the peak shaving application. And that test needs to compare batteries versus each other, but also in terms of other possibilities such as large scale hydro-lift and pneumatic storage. Its a separate issue, and one of several that need to be dissected with the same clarity as this study.

Tredleon:

Your comments seem reasonable, but if you take into account 50% dilution in pricing, you can make your decisions more peacefully. Yah pays to play, and the state of the finances always needs to be factored in.

The extension of your argument is that one should not touch anything that is not loaded with cash; a rather limiting prospect if one is trying to find the next disruptive thing. For me, test results are "everything", but the fact that this is a very different and potentially disruptive technology available from a very well-established domestic manufacturing base is the other "everything".

Jan 18 01:45 PM

[John Petersen:]

TSVee, I know there are a lot more tests that need to be performed and documented, but I suspect you have a far better idea of what they would be than I do. I have every reason to believe the research staff is doing everything to document the technology properly, but I've been out of the loop for about a year and don't have any kind of firm idea about what data will be released and what the timing will be. I'm very confident that all data will be thoroughly documented before it's released. The board wouldn't tolerate anything less.

Renzo, from what I know about ZBB, they're looking at multi-hour discharge profiles while Axion is focusing more on the 15 minute to one hour range. ZBB's prospects look pretty bright from where I'm sitting. In the final analysis, if this market grows from $25 billion to $100 billion like the experts predict, everybody will have more business than they can possibly say grace over.

Tredelon, When it comes to valuing companies, I look at the premium between market capitalization and stockholders equity. For ABAT the premium is $64 million; for ALTI the premium is $52 million; for HEV the premium is over $500 million and for Axion the premium is closer to $32 million. I like ABAT's plan to focus on things like the Veken scooter and electric bicycles. The places I see big trouble are companies that want to power EVs or the stabilize the grid with $1,300 per kWh batteries.

I wouldn't be so sure about Axion's need for a capital raise anytime soon. The board throws nickels around like manhole covers and the company has about $8 million of revenue backlogged. If development proceeds apace, Axion will have substantial recurring revenue before it needs more money, and financing roll-out of a commercial product is far different from financing R&D.

Frflyr, no idea why, just licking my wounds with everyone else.

Jan 18 02:14 PM

[GloomBoom.com:]

This is great technology and it is definitely a game changer. Great article!

Jan 18 03:42 PM

[highplainsb...:]

Suggest you read this press release published back in Sept 2005 on Axions intentions to start a Carbon anode battery plant. At that time the plan was to have the plant up and producing batteries by 2006.

www.axionpower.com/pro...

Specifically :

Commenting on Dr. Buiel's appointment, Thomas Granville, Axion's chief executive officer said: "We are thrilled to have Dr. Buiel choose Axion as we begin the transition from processing kilograms of carbon to processing metric tons of carbon. Ed's first project will be to direct procurement and installation for our planned carbon electrode manufacturing facility. This new facility, which should be operational by the first quarter of 2006, will give us the in-house ability to manufacture carbon electrodes for our application prototypes while generating ancillary revenue from third-party sales. We believe that Dr. Buiel's experience in activated carbon manufacturing will accelerate the development and commercialization timeline for our planned HEV energy storage systems by a minimum of 6 to 9 months. In addition, his long-standing working relationships with thought leaders at the USCAR Consortium and Sandia National Laboratories should prove invaluable as we refine our e3 Supercell technology and introduce application prototypes for HEV and grid-connected applications."


Seems like there still is quite a bit of "all hat and no cattle".

Jan 18 03:43 PM

[andrewjmcd:]

Fireflyenergy is a battery company that split off from Caterpillar and has won DOD grants for developing their Microcell™ foam material. This carbon foam technology is suppose to dramatically increase the Wh/kg.

There claims are quite impressive.
Minutes to recharge and up to 50% weight reduction.
Deep discharge ability.
A 70% reduction of lead


Their OASIS battery is entering trials this month with some trucking companies, according to their website.

Unfortunately this is a private company.

Jan 18 04:18 PM

[John Petersen:]

Highplains, you're quoted press release spoke to Axion's beliefs when Dr. Buiel was hired away from MeadWestvaco. Within a couple months Dr. Buiel found an real factory that he could use as a development lab and he's spent the last three years working with an exceptional manufacturing crew developing a technology that can be easily moved into battery plants worldwide. Sometimes it's better to let the guys who know the technology and the details of quality manufacturing develop a plan and execute it. I would encourage you to read the management biographies that I referred to in my first response to TSVee. It all goes back to learning to crawl, learning to stand, learning to walk and then learning to run. The first three stages have already been completed. It will be fun watching the fourth from the sidelines.

Jan 18 04:26 PM

[John Petersen:]

andrewjmcd, Firefly is private, but they've entered into a manufacturing relationship with C&D Technologies (CHP) and were expecting to begin product shipments for large-scale demonstration to begin right about now. As near as I can tell, the Firefly / C&D product has some real benefits and I'm eager to learn more.

Jan 18 04:29 PM

[John Lounsbury:]

John Petersen - - -

I can only echo the praise of other commenters. You have so expanded my horizons in the energy storage business and in getting a much better understanding of the various technologies.

Thanks again.

Jan 18 11:30 PM

[John Petersen:]

John Lounsbury, you'll never know how delighted I was to find the Sandia graph because their is such a wide gulf between educated opinion and third-party test results. I've always read that it takes five years to bring a battery product from conception to reality and the toughest part is getting to a technology that works in a factory environment. Life is good.

Jan 19 01:11 AM

[bartpr:]

jp, you hae not mentioned johnson controls as a lead acid battery supplier.
they are one of the top three suppliers of batteries for the auto industry.
i dont see any mention of this tech in their literature.

i see tha xide offers pv storage batteries. do you know if there is any
work being done by them with pb/c?

Jan 19 07:39 AM

[john s. gordon:]

like wow.
> jack

Jan 19 08:38 AM

[John Petersen:]

bart, Johnson Controls is one of the biggest auto battery suppliers in the nation, but it's other business lines take it way out of the pure play energy storage group - it's more of a diversified auto products company. Since lead-carbon doesn't offer huge advantages for starting, lighting and ignition, it probably won't work its way all the way down to the JCI types. Likewise, I've not seen any public information about Exide being interested in lead-carbon technology.

Jan 19 09:02 AM

[Kevin Murphy:]

Back when I worked in the computer field, Exide was the leader in batteries for uninterrupted power supplies -- large scale batteries that could power a mainframe installation for several minutes. I've also seen Exide batteries in solar installations, powering homes via juice from the sun.

Seems like lead carbon is idea for these applications, so I'm surprised that Exide is not interested in the technology. Are they just napping?

Jan 19 10:45 AM

[John Petersen:]

Kevin, over the years I've come to view development partnerships with industry leaders as two edged swords. On the positive side they increase credibility, sometimes result in development cash and drive stock prices. On the negative side they usually contain exclusivity, preferential pricing and right of first refusal terms that can be very painful over the long term. They also have a tendency to drive stock prices to levels that are not sustainable even if everything goes according to plan. In general, I prefer a go it alone strategy until a company is far enough advanced to force a bidding war. Then things get fun.

Jan 19 11:07 AM

[searcher:]

Clearly, the payoff, assuming developmental and production advances that don't require substantial dilution, rests with a very senior partner, if not with a purchaser to fund significant production, distribution and marketing.

Jan 19 12:52 PM

[John Petersen:]

Searcher, the ultimate payoff would be several senior partners all buying electrode assemblies and servicing different markets.

Jan 19 01:01 PM

[TSVee:]

John,


On Jan 19 01:01 PM John Petersen wrote:

> Searcher, the ultimate payoff would be several senior partners all
> buying electrode assemblies and servicing different markets.

So this is a similar business model to (not technology), say, Firefly's foam electrode model. It seems to me that not just anyone can make these carbon electrodes reliably at present, so licensing the carbon electrode manufacturing may not be wise, stability-wise. That said, eventually, the big fellas will want to do it.

But these are very nice problems to have to deal with. I get ahead of myself.

Jan 19 01:47 PM

[John Petersen:]

TSVee, the plan has always been to perfect the electrode manufacturing process, patent the electrodes and manufacturing processes seven ways from Sunday, make enough finished batteries to establish demand in a variety of markets and then fall back to the role of being an electrode manufacturer that sells to a number of battery producers. I don't ever see Axion licensing the technology outright. It's more like an Intel plan where Axion will sell the core component to anyone who wants to build a better product for their high-end customers.

Jan 19 02:03 PM

[xb74:]

Is there a specific application for which for which the advanced lead-acid technology is well-suited? My guess is the batterys would too heavy for electric cars since they are 3 times heavier than li-ions.

Jan 19 02:57 PM

[John Petersen:]

xb74, there are big differences between the weight advantages Li-ion claim when they use a standard starter battery for comparisons and weight advantages you get using best available lead acid. But if you're read some of my recent posts, you know that pure EVs are not going to be happening anytime soon and when you get down to the HEV and mild hybrid level, lead-carbon works wonderfully. Then you have fork lifts, uninterruptible power supplies and more potential utility applications than one can imagine. Right now, the global battery market is a $25 billion business and lead-acid accounts for all but $7 billion of that total. Over the next few years, consensus has energy storage sales surging to over $100 billion. So the much easier question is where will lead-carbon be inadequate: anything you need to carry around, power tools, electric bicycles and hybrid motor scooters. Everything else is fair game. My most recent article on the economics of electric vehicles is at:

seekingalpha.com/artic...

Jan 19 04:11 PM

[Mayascribe:]

It will be interesting to listen in to Exide's webcast on February 5th. Would love to know why the stock dropped $1.09 a share to 4 bucks even. The trading volume was so heavy, the stock dropping so fast, that I thought Exide's battery plant possibly caught fire like the lithium plant that did last year in South Korea (which sent CBAK shares up, temporarily). No fire! No news at all! I decided to scoop up some shares when Exide dropped below $4.00, where, for the most part, the stock traded at for the balance of the session, after whomever dumped a lot of shares on this news-less day.

Usually, when there's good news coming, a stock tends to creep up, especially with Obama's mega stimulus plan forthcoming. I can not understand why the stock took such a drop. I checked into Madoff's holdings; no Exide listed. So maybe, it was the hedgefund, Tontine, afterall, dropping shares from redemptions when it appeared they had already done so in December.

Maybe this was just another anomaly of this bazaar market, or, maybe it was due to Options Thursday. Or, maybe, it was a reaction to how "little" in Obama's plan will go toward improving the grid ($12 billion)

Very bewildering. Completely threw the charts out of whack, making them useless for the forseeable future.

Another good article, John. Always feels good to have a "pat on the backside" in support of your well-reasoned beliefs!

Jan 19 05:09 PM

[D. McHattie:]

The best articles always seem to have the best discussions. Interesting that John Lounsbury is here commenting on your article because his articles similarly produce very intelligent discussions.

Thanks for sharing your very good work with us.

Jan 19 06:43 PM

[tireman63:]

You have answered all my questions today--I have not been this overawed since my days as a freshman EE major at Rice Institute in Houston back in '48. (did not finish, by the way) Great work--absolutely tops

Jan 19 10:27 PM

[longtermstocks:]

Big fan - thanks!!!

Jan 19 11:55 PM

[John Petersen:]

Mayascribe, I have no idea why Exide fell, but remain confident that it's a wonderful value at today's prices. I wish I had a better feel for where the presidential infrastructure plans were going to land, but storage sure looks to be a big element for stabilization and smoothing. So all the indicators are looking up.

D. McHattie, one of the most fun parts of doing this is drawing comment from regular readers who frequently know more than me and either challenge my positions or ask for detailed explanations. Mr. Lounsbury is one of my favorite commenters because he's always probing.

Tireman, you'll get a kick out of the resume for the Chairman of Axion's Technology Committee: "Dr. Schmidt is employed as a Senior Research Fellow in the Department of Chemical and Biomolecular Engineering at Rice University in Houston, Texas. Between September, 2003 and March, 2008, he was previously the Executive Director of the Carbon Nanotechnologies Laboratory (the “CNL”) at Rice University in Houston, Texas. Dr. Schmidt is an expert in the field of carbon nanotechnology and single-wall carbon nanotubes."

Jan 20 03:18 AM

[Crocodile:]

Exide was down Friday in sympathy with JCI which reported weak earnings, including in its battery business. Dow Jones reported the following comments from Exide's IR person:

Carol Knies, Exide's senior director of investor relations, said Johnson Controls is "certainly a much different company than Exide." Johnson Controls, however, does sell products in one of its segments that competes with Exide, she noted.

She added that while Exide supplies batteries to auto makers, it's not as exposed as Johnson Controls to General Motors Corp. (GM), Ford Motor Co. (F) and Chrysler LLC.

Jan 20 01:11 PM

[TSVee:]

Crocodile:

Thanks for that.

Let's face it, it's a "school-of-fish" market, now that nobody knows what anything is worth anymore.

Jan 20 05:07 PM

[hall999999:]

" When it comes to valuing companies, I look at the premium between market capitalization and stockholders equity. For ABAT the premium is $64 million; for ALTI the premium is $52 million; for HEV the premium is over $500 million and for Axion the premium is closer to $32 million"

That doesn't seem like a useful way to compare the valuation of companies. Of course there is going to be a difference in premium between companies that have very different levels of cash, income, etc. By that reckoning Exxon is wildly overvalued with a $230B difference between market cap and stockholder equity. Also, as reported by Yahoo finance Axion has a market cap of $26M and stockholder equity of $10M for a $16M difference. Put another way, their market cap is 2.6 times their equity while ABAT's market cap ($128M) is only 1.8 times their equity ($70M).

Jan 20 06:20 PM

[Mayascribe:]

Crocodile: Thanks for the Exide input. But any stock that goes down 25 % in one day should not be in sympathy to another stock in its sector. Just look at the banks today!

Obviously, I'm just kidding!

In an update to my 12 trillion amount that I read (and wrote here, above) about the amount of Obama's infrastructure stimulus plan, I have now also read 28 trillion, as well as saw on CNBC that the amount was going to be 32 trillion. Figures nobody seems to really know the figures.

On another note: Warren Buffet is famous for disregarding the trading long strategy to be divdersified. Rather, if he believed in a company's strategic position, the fundamentals, and the company's future, then he went in hard and fast, and was willing to take a beating up to 50% on that particular stock.

Cramer, on the other hand, is all about diversification, and high yielding stocks that will pay you while you wait this crisis out.

I was a believer in Cramer. But when a company like GE that has a yield in the 9 percent range drops some 40 percent since Buffet famously bought it at $22.00 a share, I have to wonder about whether either is right.

I've been easing out of the market, and recently, more aggressively going back toward a cash position; only buying a little more of Exide, and some gold mining stocks, the exact same one's I had previously sold. (What's with all these relentless commercials willing to pay me hard cash for my class ring?)

Stocks I'm keeping a close eye on within the infrastructure sector other than battery stocks are: (TRN), (PWR), (ABB), (SDXC) and, you guessed it, (GE).

And, of course, corporate bonds, which stand in line to be paid to before BOTH preferred and common shares. Right now, corporate bonds, I believe, are the best way to fight this weeping market. Freeport Macmoran, Weyerhauser, and Williams Pipeline are my most recent purchases (through my broker, and not within my experimental day trading account).

Go Steelers!

Jan 20 08:11 PM

[John Petersen:]

Hall, I said that ABAT was richly valued compared to Exide, Enersys and C&D. I also said Axion was undervalued compared to ALTI and HEV. Why do you insist on mixing apples an oranges by comparing ABAT to Axion? They're clearly at different stages of development and not comparable.

I would love to hear why you think ABAT with annualized sales of $45 million and equity of $75 million is fairly valued $127 million when Exide with annualized sales $3.7 billion and equity of $485 million is only worth $282 million.

Jan 21 12:38 AM

[hall999999:]

In my previous comment the part in quotes are your words. Also, my comment had nothing to do with which apples or oranges you were comparing but merely with the method you used. I gave the example of Exxon. Applying your definition for assigning value to the other end of the spectrum you could say that some crappy pink sheet stock with a $1M market cap is an outstanding value because there is only a $1M premium over stockholder equity.
You just said that this measure can't be used to compare two companies at different stages. I'm saying that it can't be used to compare any two companies. At best it is a way to get a quick sense if a stock is cheap (like XIDE) or expensive (like HEV). Furthermore, one could argue that companies like ABAT and CBAK are at a different stage of development than XIDE or ENS and thus that isn't an apples to apples comparison either.

I didn't claim that ABAT deserves a premium to Exide. I couldn't say for certain why the market values Exide less. Some possible reasons that I see:
- they have a big chunk of debt
- they have lower margins and lower growth prospects
- big balance sheet items like "goodwill" and "intangible assets" that are
less than concrete parts of stockholder equity; or "inventory" that could
change from an asset to a liability during a recession.

Jan 21 03:11 AM

[John Petersen:]

Hall, we are obviously looking at things from different perspectives. I figure everybody has been beaten down by the recession and the only sensible approach is to search for long term value as the recession abates and the global economy returns to a more healthy position. Since I don't feel particularly comfortable analyzing detailed short-term analytics, I'd rather focus on things like market cap as a percentage of assets, equity, sales and long-term earning potential. It's basically a value approach where the next 12 months are not as big a concern as the next 10 years. I once had a broker who taught me that stocks are either undervalued, fairly valued or overvalued; and investors make money by picking the undervalued shares and holding them till they are overvalued. I have no idea where ABAT sits on the valuation spectrum and frankly don't care, because I know that it is not as undervalued as Exide, Enersys and C&D. By transitivity, Exide, Enersys and C&D have a much higher chance to meet my expectations than ABAT does.

Jan 21 03:55 AM

[TSVee:]

Hall: I can see that you are a pretty-good and logical scrapper, and that this one is merely warming up. John has been having all to easy a time of it in this article's commentary, so your thread is probably good for his soul.

John: That was said with some humor.

Both: Allow me to preach the obvious for a few seconds. {Stands on soap box}

In trying to reduce relative "over-under" value to a thirty second generalized calculation of any form, one can only be one of three things: (i) entirely wrong, (ii) mostly wrong, or (iii) naive.

These things are like triangulation; you either need to overlay many shallow angle readings (i.e. multiple technical ratio methods), or you need to add in the wide-angled intersecting clarity of some seriously-company-spec... "perspectives". I'm sure one could write a book on ... oh say ... look at all those books.

So John, I believe that Hall is going to wipe the mat with you on that quickie assertion, because he merely needs to trot out some Jesuit extremes. Not that you are wrong though. More likely, you have entered a possible next line of topic for your articles ... "which companies are the best values intersecting with which technologies are the ones to watch?" That could be a barn burner, and a difficult one.

{exit soap box}

Jan 21 09:11 AM

[catalite:]

Johnson Controls (JCI), a major manufacturer of car batteries, missed earnings and guided below consenses, depressing the battery group.


On Jan 18 01:37 PM frflyer wrote:

> Any idea why Exide fell 20% friday? I don't see any news that would
> cause such a big drop on high volume.
>
> At P/S 0.10, forward P/E 2.4, P/Book 0.79 it certainly looks cheap.

Jan 21 12:01 PM

[catalite:]

I'm wondering how the market for energy storage is going to grow to $100 billion in the next few years with oil and natural gas so cheap. Unless we get a carbon tax (which I'm in favor of), or oil and natural gas prices double in price, I dont see how market forces are going to create $100 billion in demand. I'm a big believer in global growth, so a double in oil and natural gas certainly possible, but do you see other economic factors that are going to drive the energy storage market? White House tax credits alone won't do it.


On Jan 18 02:14 PM John Petersen wrote:

> TSVee, I know there are a lot more tests that need to be performed
> and documented, but I suspect you have a far better idea of what
> they would be than I do. I have every reason to believe the research
> staff is doing everything to document the technology properly, but
> I've been out of the loop for about a year and don't have any kind
> of firm idea about what data will be released and what the timing
> will be. I'm very confident that all data will be thoroughly documented
> before it's released. The board wouldn't tolerate anything less.
>
>
> Renzo, from what I know about ZBB, they're looking at multi-hour
> discharge profiles while Axion is focusing more on the 15 minute
> to one hour range. ZBB's prospects look pretty bright from where
> I'm sitting. In the final analysis, if this market grows from $25
> billion to $100 billion like the experts predict, everybody will
> have more business than they can possibly say grace over.
>
> Tredelon, When it comes to valuing companies, I look at the premium
> between market capitalization and stockholders equity. For ABAT the
> premium is $64 million; for ALTI the premium is $52 million; for
> HEV the premium is over $500 million and for Axion the premium is
> closer to $32 million. I like ABAT's plan to focus on things like
> the Veken scooter and electric bicycles. The places I see big trouble
> are companies that want to power EVs or the stabilize the grid with
> $1,300 per kWh batteries.
>
> I wouldn't be so sure about Axion's need for a capital raise anytime
> soon. The board throws nickels around like manhole covers and the
> company has about $8 million of revenue backlogged. If development
> proceeds apace, Axion will have substantial recurring revenue before
> it needs more money, and financing roll-out of a commercial product
> is far different from financing R&D.
>
> Frflyr, no idea why, just licking my wounds with everyone else.

Jan 21 12:40 PM

[John Petersen:]

Catalite, it really is a shame that Exide tends to track the automotive sector because their revenue base is so much broader. It's not so surprising that JCI is getting beaten up because they are so auto industry dependent across a wide variety of product lines.

The $75 to $100 billion future market number comes from work by a couple firms including Merriman Curhan Ford and Lux Research. It also ties well to figures previously released by Sandia that talk about the magnitude of the storage opportunities in the utility sector. In fact, my entire series of articles (32 at present) deals with different aspects of the storage sector and the current technical alternatives. I agree that cheap oil will have a negative short term impact, but I'm a believer that we passed an inflection point for "peak cheap oil" in the late 90s and we will once again see prices in the $70 to $80 range by the time the recession ends. From their, the price march is inexorably up. For more detail see:

seekingalpha.com/artic...

If you're interested in reading the entire series to get a better idea of where I'm coming from an where I think the sector is going, the best starting point is my author's page:

seekingalpha.com/autho...

Jan 21 01:30 PM

[creativforce:]

Big news about world lithium resources today. Is TRU true?:
Outlook: Lithium Industry Will Be Pushed in to Oversupply through 2013
22 January 2009
Lithium consultants TRU Group Inc. says that its updated lithium outlook for presentation at the IM Lithium Supply & Markets Conference Santiago 2009 will conclude that the industry is not immune from the global recession and will be pushed into oversupply this year through 2013.

Global use of lithium will decline sharply by at least 6% in 2009 and demand is unlikely to bounce back any time soon as consumers put off buying laptops or cell phones containing lithium batteries.

It is likely now that some expansions and new projects will be delayed or cancelled until market conditions improve. However, new and large uses for lithium will start having a major impact on demand within the five-year horizon: Lithium use in electric vehicle batteries and lithium alloys for aircraft.

TRU forecasts that demand will be strong and sustained in these two segments over the long term 2020. The industry does need at least one of the announced pipeline production projects to come into production and also could do with another new project as the market tightens around 2015-2017.

New lithium producers still will need to be cost-competitive with existing salt lake brine based producers in South America and China. Emerging technology may make some of the undeveloped medium-sized (brine) lithium resources quite attractive. The industry through expansion and development of new resources will have no problem meeting demand, the outlook concludes.

TRU Group Inc., based in Toronto, Canada and Tucson, USA, are industrial management and engineering consultants with a strong capability in lithium project development. The firm is a world leader in resource evaluation, salar exploitation, brine and mineral lithium extraction and processing technologies—those in use, prospective, and leading edge.

TRU has evaluated and modeled most of the known existing lithium properties and advised a number of players on a wide variety of lithium resource, engineering, process, business and investment issues.

The outlook presentation will be posted on the site after the conference on 27 January 2009 at the link trugroup.com/Lithium-M...

Jan 22 03:01 PM

[John Petersen:]

creativforce, TRU posted news of their presentation as a comment to one of my other articles. So I guess there's no reason to question lithium availability over the next 10 to 15 years while li-ion batteries struggle to overcome their horrific cost handicaps and become economically feasible. It does trouble me a bit when True talks about the market tightening in 2015 - 2017 when peak cheap oil concerns will be far more critical than they are today. Does that mean we get to run out of oil and run out of lithium at the same time? Wouldn't that be wonderful.

Until there is a credible third party analysis showing plentiful lithium for the next 50 - 100 years, I'm not impressed. A 10 - 15 year supply is just enough to get us into trouble. It is certainly not enough to get us out of trouble.

Jan 22 03:32 PM

[D. McHattie:]

John, not sure if you're still responding to comments on this article. But there is 1 issue that continues to trouble me about this company - why has it taken so long for this technology to reach market?

I'm not an electrical engineer so my understanding of the product development lifecycle is limited but it still seems like an awfully long period of time that they've been 'testing'. I mean, the company went public almost 5 years ago now and it seems they have little more than a 'memorandum of understanding' and the odd strategic alliance.

I would have thought that one of the major makers of lead acid batteries would be using their technology for existing applications by now, never mind prospective use in alternative energy.

What gives?

Jan 23 01:00 PM

[John Petersen:]

McHattie, the product development cycle is moving along on schedule because it always takes about 5 years to move an innovation from the idea stage to the product stage. The issue is not so much getting a demonstrable phenomenon that works in a laboratory, but getting to a reliable product that can be manufactured in bulk at a reasonable cost. In my 30 years of practice, clients have rarely failed in the laboratory. The failures came when they tried to engineer and build a product that duplicated the laboratory results at a reasonable cost.

The variety of industrial engineering and product design issues that Axion has faced and overcome is mind boggling. The current electrode assembly design works well in New Castle. It will also work well in most other lead-acid battery plants. Developing an electrode assembly that can be used as a plug-and-play replacement in almost any existing factory is part of what's taken so long. The first automated lines to manufacture electrodes will be installed later this year. Once products are rolling off the line, ramping up electrode production will be far faster and cheaper than building new battery plants from the ground up.

I'm delighted that Axion has made it this far with no ties that bind it to a larger partner. Contracts are great for credibility but they usually come at a very high cost in terms of future restrictions on commercialization. It's the rare company that gets to this stage while retaining free agent status, but it bodes very well for the future.

Jan 23 02:55 PM

[D. McHattie:]

Thanks John - that's a good explanation. I've got you on my watchlist so I look forward to your updates as progress is made or bumps in the road are discovered.

Jan 24 08:18 AM

[leh:]

Nice work, John. Some very interesting data here; thanks for the contribution.

Jan 29 12:52 PM

[John Petersen:]

speculawyer, I'm with you 100% on the cycle life issue and argued for months that Li-ion claims of 10 or 20 thousand cycles were pointless. Rather than argue with people who think more is better regardless of mundane concepts like the time value of money, I've just accepted the assertions and proven that no matter what they cycle life assumptions are, Li-ion is not cost effective.

The Sandia chart simply shows that the claimed longevity advantages do not exist. So if you take away long cycle life and you recognize the energy density of safe li-ion is only about 2x advanced lead acid, tell me again why anyone would want to spend 200% to 500% more money to get the same basic performance. You surely wouldn't argue that size and weight are mission critical issues in a car would you?

Jan 29 03:13 PM

[John Petersen:]

speculawyer, you're obviously a very fast study. This particular test was among the most brutal one can perform because it runs the battery up and down rapidly starting from a low (50%) state of charge. Similar results are expected in a variety of other charge-discharge regimes.

The problem is that no matter what battery technology you choose, the numbers go to hell in a hand bag as soon as you buy more range than you are going to use every single day. To see how the numbers shake out for an EV 40 and an EV 100, please take a look at:

seekingalpha.com/artic...

Even the ultra-small and ultra light don't work from an economic perspective unless you use all the battery power you buy on a regular basis. Heck, the best price I've seen anybody talk about for an ultra-light car battery pack is 17,500 from Ener1 for the Th!nk City. That big a capital investment in the batteries won't get you to break even over 10 years unless gas prices are above about $5.

The biggest problem all of the Li-ion producers have in common is the desire to compare their best with a standard VRLA made for starting, lighting and ignition. The VRLA shown in the chart was actually a carbon enhanced lead-acid made by MeadWestvaco. The CSIRO lead-carbon device has already been tested in a Honda retrofit and the results were a 2.8% drop in fuel economy and a $2,000 vehicle price savings. The Axion lead-carbon is being manufactured in small lots today and will be available in much larger volume later this year. So far Axion hasn't bothered with the HEV market because they're too busy with a utility substation project funded by NYSERDA that needs 225 kWh of batteries that are now awaiting shipment.

This whole arena is changing very rapidly and I think now is perhaps the worst time in history for somebody to crown a winner and tell the contenders to go home. The decision is far too important and the unknowns far too many.

Jan 29 04:15 PM

[viswanathan...:]

Congradulations on the new developement on Lead Acid battery chemistry which have not seen much improvement in energy density considerably!
I have the following few technical points which may be cleared if permissible.
1. Correct me if I am wrong: It is understood that the internal resistance as well as weight reduction are improved due to due to the use of better current collecting and light weight negative grid. But the basic electrochemistry is the same Pb-acid
2. I hope the positive active material is the same Lead-di-oxide and any carbon addtive is there in this too? It is Flat or tubular +ve?
3. What is the major cause for the end of cyclic life, is it the negative or the positive material or the Pos or Neg grid ?
Thanks.

Mar 31 09:47 AM

[John Petersen:]

viswanathan, the best place to go for the kind of technical detail you want is axionpower.com under the "technology" tab. There is also some good information in the presentation you can access from the "investor" tab.

Mar 31 10:43 AM