Smart Grid's Enabler - Alternative Energy Storage

America’s electric power grid is subject to immense inefficiencies that arise from the interplay between centralized power generation, local power consumption and on demand utility service. To put things into a broad perspective, the nameplate capacity of U.S. generating facilities is about 1 million Megawatts (MW), so if all of our power plants ran 24/7 we would have a theoretical annual generating capacity of 8.7 billion Megawatt-hours (MWh). Since demand for electricity fluctuates on both a daily and seasonal basis, total electric power generation in 2007 was only 4.2 billion MWh, or less than 50% of nameplate capacity. The goal of the Smart Grid is to maximize the efficiency of existing generating facilities and accommodate the integration of renewable power resources. Since many better-qualified authors are writing volumes about transmission and distribution, demand management and renewable power technologies, I’ll limit this article to manufactured energy storage devices; enabling technologies that will be the beating heart of the Smart Grid for the next 10 to 20 years.

Last August I wrote Grid-based Energy Storage: Birth of a Giant, an introductory article that offered an overview of the potential uses for energy storage systems in the electric grid. At the time I confessed that the subject matter was a bit out of my depth, a problem that was compounded by a dearth of third-party analysis on specific applications. Mercifully, all that changed in December 2008 when the Department of Energy’s Electric Advisory Committee (EAC) published two reports that are must reads for investors that want to understand how the Smart Grid will develop, and position their investment portfolios to profit from cleantech, the sixth industrial revolution.

The first EAC report, “Smart Grid: Enabler of the New Energy Economy,” explains how the Smart Grid will use advanced technology to transform the energy production and distribution system into a more intelligent, resilient, reliable, self-balancing, and interactive network that enables enhanced economic growth, environmental stewardship, operational efficiencies, energy security, and consumer choice. The companion report, “Bottling Electricity: Storage as a Strategic Tool for Managing Variability and Capacity in the Modern Grid,” explains why the evolution of the Smart Grid will depend on cost effective energy storage, particularly in the early stages, while other distribution and demand management solutions are being developed, adopted and implemented. This report divides Smart Grid energy storage applications into three functional classes: generation; transmission and distribution; and end-user, and then provides thumbnail descriptions of each potential energy storage application. Since my goal is to encourage readers to download and study the EAC reports and other source documents, this article will use summary tables to identify the major application classes and the existing and emerging manufactured energy storage devices that are expected to be useful in those applications.

I’ll apologize up front for giving short shrift to pumped hydro and compressed air energy storage. Both are highly efficient for storing massive amounts of energy and both are subject to physical and environmental constraints that limit where facilities can be built. More importantly, there are no pure-play public companies that focus on either storage technology, so spending a lot of time discussing cool technologies that you can’t invest in seems futile.

One of the most important concepts in any discussion of grid-based energy storage is discharge duration; or the optimal time required for a particular device to release its stored energy. Some grid-based applications require discharge durations measured in hours, others require discharge durations measured in minutes and still others require discharge durations measured in seconds. In general, manufactured energy storage devices that can store large amounts of energy are not good at discharging the stored energy quickly. Likewise, manufactured energy storage devices that can discharge energy quickly do not generally store large amounts of energy. Since the big challenge for utilities is to only provide slightly more power than customers need at any particular moment in time, they have to focus on peaks and valleys, rather than the averages. That's why a comprehensive solution will require a multi-pronged approach that uses a variety of manufactured energy storage devices to meet particular needs.

The core data in the following table comes from a July 2008 Sandia National Laboratories report on its Solar Energy Grid Integration Systems – Energy Storage (SEGIS-ES) program. While the original Sandia table focused on the current and projected capital costs for manufactured energy storage devices that can be used in solar power projects, the basic cost structure applies to all Smart Grid applications. Since the EAC’s Bottling Electricity report states that the principal purchase decision metrics in Smart Grid applications will be installed cost, reliability, discharge duration and cycle life, I’ve reordered the Sandia data to create a cost hierarchy and provide summary information for each type of storage device. More detailed information on the advantages, disadvantages, commercial status, current research and development and potential applications for each type of manufactured energy storage device can be found in the SEGIS report.

click to enlarge

The following table is my attempt to integrate the cost and performance data from the SEGIS report with the Smart Grid application information in the EAC’s energy storage report. My goal is to identify the principal technologies that might be useful in each application and highlight the technologies that seem most likely to prove cost-effective. Since the EAC’s report highlights the need for substantial additional research, development and testing to better identify the optimal technology choices, the table is only one man’s informed view through a cloudy crystal ball.

At first blush, the percentages of generating capacity that could be satisfied by energy storage systems seem pretty modest, a mere couple of percentage points here and there with higher margins for alternative power installations. But those tiny percentages become massive potential revenue numbers when you consider that the capital cost of energy storage installations ranges from $150,000 to $1.3 million per MWh. Since the principal competitors in the energy storage sector are small compared with similarly positioned companies in other sectors, I believe energy storage is likely to be a veritable investment tsunami that will offer extraordinary returns.

Most of the buzz in the alternative energy sector focuses on renewable power, demand management technology, advanced power transmission systems and batteries for electric vehicles. In the process, the media has largely overlooked the reality that energy storage devices are essential enabling technologies for both transportation and the Smart Grid. A number of analysts are predicting that annual global demand for energy storage devices could grow from $25 billion to $100 billion over the next decade. Most estimates of future growth in the automotive market talk about battery sales in the $15 to $20 billion range. The much larger growth will come from using energy storage technologies to support the development and evolution of the Smart Grid. While size and weight may matter when it comes to automotive applications, they will be meaningless in grid-based applications where installed cost, reliability, discharge duration and cycle life are the critical metrics.

There are two pure-play public companies in the flywheel sector. Active Power (ACPW) manufactures systems that use low-speed flywheel technology to provide backup power for server farms and a wide variety of commercial and industrial installations. Since Active Power’s technology is modular, scaling systems to provide Smart Grid support should be relatively simple and I expect Active Power to be an early beneficiary of the trend toward grid-based energy storage. Beacon Power (BCON) has recently begun field-testing of utility scale governor response and frequency regulation systems. While Beacon will likely require a couple years of testing before utilities are willing to commence wide-scale implementation of Beacon’s technology, its stock offers significant long-term potential.

There are five pure-play public companies in the advanced lead acid battery group including Exide Technologies (XIDE), Enersys (ENS), C&D Technologies (CHP), Ultralife Batteries (ULBI) and Axion Power International (AXPW.OB). Each of these companies has proven products that can be rapidly integrated into storage systems for the Smart Grid. Moreover, Axion’s pioneering work on lead-carbon devices promises a level of performance, power and cycle-life durability that has not previously existed in the lead-acid world. In addition to its activities in the transportation sector that have resulted in a couple of significant grants, Axion is involved in two utility scale demonstration projects. Since lead-acid is frequently perceived as old-tech, the group trades at a significant discount to comparable companies that focus on other advanced battery technologies. I believe the market valuation metrics will normalize as the Smart Grid opportunities become more widely understood.

There are three pure-play public companies in the lithium ion group that have expressed an interest in the Smart Grid market. Altair Nanotechnologies (ALTI) has shipped a utility scale frequency regulation system for testing and both Ener1 (HEV) and Valence Technologies (VLNC) have taken preliminary steps to evaluate the potential for using their technologies in utility scale applications. Since size and weight are not mission critical issues in utility scale installations, I expect the cost of Li-ion technology to be a significant impediment. However, there are limited Smart Grid applications like frequency regulation that could benefit from extreme high performance batteries.

The only pure-play public company actively involved in the commercialization of Zinc-Bromine flow batteries is ZBB Energy (ZBB), which has recently partnered with Eaton for the global distribution of its flow battery systems.

Foreign companies that have active plans to manufacture products for the utility sector include France’s SAFT Groupe (SGPEF.PK), which has partnered with ABB for large-format Li-ion devices, and Japan’s NGK Insulators Ltd. (NGKIF.PK).

While I am primarily concerned with the economic and business aspects of the energy storage sector, it would be naive to overlook the current political context. As of Friday afternoon, the Senate version of The American Recovery and Reinvestment Act of 2009 included the following provisions that may directly impact the sector:

"For an additional amount for `Energy Efficiency and Renewable Energy', $14,398,000,000, for necessary expenses, to remain available until September 30, 2010: * * * Provided further, That $2,000,000,000 shall be available for grants for the manufacturing of advanced batteries and components and the Secretary shall provide facility funding awards under this section to manufacturers of advanced battery systems and vehicle batteries that are produced in the United States, including advanced lithium ion batteries, hybrid electrical systems, component manufacturers, and software designers:

* * *

For an additional amount for `Electricity Delivery and Energy Reliability', $4,500,000,000, for necessary expenses, to remain available until September 30, 2010:

* * *

For capital expenditures and necessary expenses of acquiring motor vehicles with higher fuel economy, including: hybrid vehicles; neighborhood electric vehicles; electric vehicles; and commercially-available, plug-in hybrid vehicles, $600,000,000, to remain available until September 30, 2011."

While there are any number of provisions in the legislation that have the population and the politicians up in arms, the planned Federal incentives for the battery sector seem to have broad support and are not likely to change much.

Two billion dollars in Federal grants for domestic battery manufacturing is immense. For the reasons discussed in this article, I think there’s good reason to believe that in light of the recent EAC reports, grid-based energy storage may also qualify for a portion of the $4.5 billion earmarked for Electricity Delivery and Energy Reliability. If one assumes that batteries and associated control systems will probably represent 1/4 to 1/3 of the $600 million EV acquisition appropriation and recognizes that there will be substantial pressure to ensure the funds are spent on domestically manufactured batteries, the impact on a handful of stocks could be immense.

Disclosure: Author is a former director of and holds a large long position in Axion Power International, a leading U.S. developer of lead-carbon batteries, and also holds small long positions in Active Power, Exide, Enersys and ZBB Energy.

Comments

[Redwood_1:]

I'd like to see how you're coming up with the assumption that compressed air is in any way an efficient storage mechanism. From a mechanical standpoint, it's an incredibly lossy process, and one subject to pretty extreme maintenance requirements to boot. Pumped hydro storage is only nominally better when you consider the environmental costs of diverting and storing the water, but at least it isn't converting so many kilowatt hours into noise, which is where most compressor energy ends up.

Feb 09 02:35 PM

[John Petersen:]

Redwood, all the numbers for CAES, which is actually a hybrid technology that uses excess electricity to create compressed air and then uses the compressed air to bypass the compression stage of a gas turbine and cut gas use by about 50%, say that it's cheap for mass storage. Likewise the numbers for pumped hydro also look very good. Every time I write an article about storage and don't at least mention these alternatives, I get criticized by somebody for the omission. Since I forgot to put thermal solar in my disclaimer I'll do so now.

There are no pure play public companies focused on thermal solar so I won't talk about that technology either.

All of these large scale physical storage options strike me as technically interesting and potentially economic because my simple calculator does not have an environmental costs function. But in all honesty I'd rather not talk about any of them because I can't invest in them.

Feb 09 03:23 PM

[bwafool:]

John:

Thanks for another interesting, well-written article.

I've started investigating options for consumer peak-load shifting, allowing end users to take advantage of TOU (time-of-use) pricing now provided by a number of electric utilities. Lead-carbon batteries seem to fit in that app pretty well.

Another approach is thermal storage, which has been around for years in the commercial-industrial space. Ice Energy [web link: ice-energy.com ] is an interesting startup firm that's developed the Ice Bear 30 hybrid AC/energy storage unit, sized for small-medium businesses but which might perhaps also work for high-end residential apps.
www.ice-energy.com/tec...

I would be interested in your comments on Ice Energy and similar thermal energy storage approaches and possible investment ideas.

Feb 09 04:04 PM

[Conan the B...:]

John: what's going on with AXPW?

I don't understand why there aren't more insiders buying, even Averill seems to have stepped aside.

The move below $1 has done it for me. Maybe its going down because of the economy but I no longer have any faith in it.

Feb 09 05:39 PM

[Mayascribe:]

John: Thank you for covering the Grid angle. This is where I believe the real money will be both spent by Uncle Sam, and made by investors. (Far more powerful than car batteries.) Not just in the USA, but elsewhere, not only in the developed world, but also, and especially, in emerging markets. The tangled morass of electric wires of the USA's past still exists in the third world. I've seen it in many countries. Already, some third world countries are skipping by the telephone pole and wiring phase right into wireless. This does not mean that we/they/all countries will fill the air with microwaved transport of electricity, but rather, the controlled delivery of wattage power, aside from the microwave telecommunication.

Hence, the smart grid is forthcoming. It's going to be huge, again, far more investment than in car batteries.

Nobody anywhere can argue that electricity is crucial. Proximate to zero does anything operate without it. Credit commerce ceases. You can't get your garage door open. Computers don't work. When the traffic lights stop, "grid-lock." Refrigeration stops. Spoilage increases. Beer taps run warm. Trains can stop.

Although, when these times occur, it reminds me of the glee of a childhood snow day; time to tobogan! As an adult, there's still a certain warming feeling that when the power's out, you can still go over to the candle lit local tavern. When you can't turn on your TV, open the frig for fear of spoilage, track the market on your computer, write an email, use facebook, or Wii, play online poker, do your job...where else is there to go when nothing works?

But batteries do work! Who lights a candle without a flashlight?

That's why worldwide money has to pour into the grid. That's why I like stocks like Switch and Data Systems (SDXC), and Trinity (TRN) and General Electric (GE), though GE has its issues. IBM, amongst amny others, is right there, too.

So many of your articles have been about vehicular batteries, and the comments of those articles have brought forth is full of opinion, zeal, knowledge and emotion.

But the real, much more important issue, is the grid. Once the infrastructure is modernized, the best "absorb, hold and deliver" battery companies will become a neccesary part of anyones forward looking portfolio.

Feb 09 11:19 PM

[icebear:]

The major way utilities buffer wind, solar, etc. is by installing additional generating capacity in conventional hydro plants. It is cheap and easy. However, this capacity is not rally available for continuous use. Part of the large difference between 8.7 and 4.2. Also, some natural gas plants are also used in a similar way.

Feb 09 11:19 PM

[John Petersen:]

bwa, thermal storage (including ice) is interesting to me personally, but its not a field that I feel comfortable discussing in depth because I don't have any real background in physical storage.

Paultaut, it's as much a mystery to me as it is to you. Sometimes you just have to scratch your head and say "$1.2 million in grant announcements and the 10-day average slides by a nickel, go figure." Any reason I could offer would be pure conjecture.

Mayascribe, I agree with you wholeheartedly. The real story is and always has been the grid, but without third-party backup to explain how and why storage will be critical to the Smart Grid, I'd be spouting opinion instead of discussing the thoughts of people who know more than me. I've been wanting to get away from the EV debate for months because I think it distracts people from the real opportunity, but until I had covered all the important questions readers were answering, I had to keep slogging though the swamp.

Icebear, my original "Birth of a Giant" article has a daily use chart from California that shows the difference between daytime and nighttime demand. When you add the seasonal differences from summer to winter, you end up with generating infrastructure that only runs at about 50% capacity year-round. Another article on frequency regulation that I wrote last year has another graph that shows the kinds of peaks and valleys utilities have to contend with on a minute by minute basis. See:

seekingalpha.com/artic...

Most of the tools utilities use for short-term regulation involve keeping generators running and using them to add or subtract power as needed. The system is very fuel and carbon intensive and needs to change as we transition to a smarter grid. The EAC reports are well worth the time to download and read.

Feb 10 12:45 AM

[John Petersen:]

Paultaut, I didn't mean to sound glib in my initial response to your post but the rationale for insider buying in small companies is very different from the rationale for insider buying in large companies. It also gives rise to major risks for insiders who buy during the period between the end of a fiscal quarter and the release of results for that quarter.

Axion's core group of insiders has invested about $15 million of their own cash at prices higher than the current market. So they could average down a bit on their per share cost, but only at the risk that somebody might claim they bought based on non-public information.

I don't share your loss of confidence because I know that market prices frequently have nothing to do with fundamental value.

Feb 10 05:29 AM

[Michael Fit...:]

i haven't done any calculations (haven't had any coffee yet...), but my gut feel is that the sheer size of battery capacity needed to provide ample and adequate energy storage for an alternative energy based smart grid will simply be enormous. i wonder if the price estimates for these various battery technologies have taken into account the magnitude of total battery production needed for energy grid backup and for providing batteries for EV's and hybrids? have you by any chance done so? perhaps this could be calculated in cubic meters of batteries needed to smooth out the supply. perhaps it is in the articles you refer to - i haven't read them yet.

there are two storage mechanisms I've been asked about previously that were not covered in this article: electrolysis and molten salt. does the omission of these two technologies mean they aren't cost efficient or that they are technologically insufficient in some way? thanks. btw - good article.

Feb 10 10:21 AM

[Michael Fit...:]

ok, while making my coffee i realized what my real problem is with battery storage of alternative energy. rather than store the energy in batteries in order to put that energy back on the grid to recharge EV and hybrid batteries, why not come up with a process that simply charges the end-use batteries directly? in other words, have a bank of EV batteries at the alt energy site, charge them at the site, and truck (or rail) the charged batteries into cities and towns such that they can be exchanged for discharged batteries. kinda like project better place's process, just expanded to the grid. this would have the advantages of lower overal battery requirements and prevents the losses associated with transmission and distribution. it would of course require standardizing on battery design types, both electrically and physically such that a minimum of different battery types would be used.

Feb 10 10:34 AM

[John Petersen:]

Fitz, it's always nice to get a kind word from another SA contributor. You are spot on when it comes to the scope of the problem; it's immense. Currently, the utility-scale demonstrations use shipping containers filled with batteries and control electronics. That kind of modular approach works well for large user power quality and distributed T&D support. Some larger installations I've seen pictures of are free-standing buildings filled with racks of batteries. From what I've read so far, it looks like most storage will be distributed rather than centralized. So there will be a lot of batteries, but they won't all be in one place.

My Birth of a Giant article has a great 2004 vintage graph from Sandia that puts a dollar value per kWh on the various classes of storage. The high end of the value spectrum is frequency regulation and T&D support and the low end is things like diurnal storage and intra-day load shifting. It's complex but includes a huge amount of information. The bottom line is that somebody is going to need to find a cheaper battery.

Frankly when it comes to large scale installations (> 20 MW), I think we will have to depend on somebody developing really efficient physical systems like pumped hydro, CAES, molten salt or something else. My sense is that electrolysis will be a much tougher nut to crack, but I'm a firm believer in the creativity of the American people when a problem needs solving.

Download both of the EAC reports. They are fascinating.

Feb 10 10:43 AM

[creativforce:]

Again a great article! But I wonder if all this energy investment money is going to disappear along with the TARP money. I am getting fed up waiting for the smart grid to start happening. I've been reading about the need for it since the 80's and have lost money every time I have tried to invest in it. I remember a Buckminster Fuller lecture I attended in '82 where he predicted that the smart grid would end the cold war because solar power would flow around a global grid from countries in daylight to countries in darkness.

The trouble as I see it is the Homer Simpson effect. Once your home plugs into the grid, they have you by the short hairs for life. Homer gets a paycheck no matter how much he charges, no matter how short sighted he is, and no matter how much he screws up. If we could deregulate energy like we did the phone companies, then cool stuff would start happening. If AXPW sold their batteries at Home Depot, I'd buy a windmill and enough batteries to disconnect. The off-grid battery systems available today are dangerous, require constant maintenance and have very short life spans. But the incredible life span of these batteries you have written about here make it seem like you could count on them for decades like you do your furnace. If they could develop a turn-key home energy system for under $30,000, it would be the biggest revolution since the PC.

I like Fuller's utopian dream of sharing free energy, but since that ain't gonna happen, I want my own.

Feb 10 11:23 AM

[Dave Marsh:]

ACPW just announced and their numbers looked better than I expected, with revenue up 59% and 28% for 4th qtr and FY2008 respectively, record gross margins of 31%, and a fairly strong outlook for Q1. I not hyping it, since I don't own it, but I likely will. John, since you are long this already, do you know why it's shown as "deficient" on it's continued listing requirements (at least on my Ameritrade platform)? Is it more than just the low stock price? It seems cheap here with P/S less than one.

Feb 10 12:26 PM

[John Petersen:]

Creative, for an application like taking a residence off the grid a product like ZBB's 50 kWh zinc-bromine system might make more sense. A house needs hours of steady power rather than shorter bursts at higher power. Plus, the ZBB product is available now and if the Sandia cost estimates are accurate, it's priced at the upper end of your range. See:

www.zbbenergy.com/prod...

Amish Rake, I think the politically correct term is "small hydro" which, together with its first cousin tidal power, does appear to have some potential in the right setting. Mercifully, both are generating technologies rather than storage technologies so I don't need to know a lot about either.

Feb 10 12:33 PM

[John Petersen:]

Dave, the only problem I know of with ACPW is the stock price, but given the appeal and other rules Nadsaq has adopted to prevent de-listings, that is not a major short-term worry for me. Moreover, since ACPW's trading at about 75% off its 12 month high and has almost doubled since I bought it a month ago, it looks like a solid speculative play. For investors who are looking for more safety and a better chance of catching the long-term wave, I really think diversification across the entire sector is the way to go.

Feb 10 12:38 PM

[isaac the t...:]

Fitz,
I believe its alot more energy efficient (and thus cheaper) to send remotely produced electricity to battery banks that are close to the end users via transmission lines, as opposed to physically transporting the batteries- since they are heavy. I'd like to have abanl of PbC batteries right across from my NG filling port in my garage, with my plug-in NG Ford ultracapactor SUV in between.

John,
Do you think that the PbC technolgy is something that other companies can easily reproduce on their own, if axions work proves viable on a large scale?
Thanks.

Feb 10 12:50 PM

[Advill:]

110% agree with creativforce, the "do it yourself" is an important part of the future smart grid, it s not only the average usage of less than 50% of installed generation, the grid will be in the technical posibility of parity in the customers capacity of "consuming-delivering" to the grid ( a local version of Buckminster dream), Google plans are in that direction , the possibilities of delivering power to the grid if they are able to handle it is amazing.

In Spain the price of electricity is in a continous market, prices are moved by things like meteo reports (last week with the strong winds the price was -11%).

In US case a drop in the price is foresable as interconnection of systems allows an increase in that 50% actual usage, if you add a system where you can "sell" or "storage" and "consume" from the grid then you have the market that John is previewing.

In this case GE, J & J etc, will have an important portion of the market, batteries and PV or microturbines or any other DIY hardware will be on the wave too.

What are we going to do with that amount of electricity?

Feb 10 01:01 PM

[Mayascribe:]

I'm guessing here...that one of the very last components added into building a car, is the battery.

I'm also guessing that one of the last components added into a solar plant, a geothermal or tidal plant, or a field of wind towers, would also be the batteries.

Yes, Exide recieved a nice contract from Penske, and grants and cheap loans galore are coming from Uncle Sam. However, I still feel that batteries will not recieve their due recognitions until later this year at the earliest. Batteries are the last to be installed pretty much in everything that requires a battery, right down to the wireless mouse that I will soon hit "publish" with.

####

The novel idea Mark Fitz's of transporting fully charged batteries by rail seems intriguing, at least to this guy who remembers in his childhood standing near the high tension wires rising out of Hoover Dam. They do crackle. That crackle is a huge loss of energy.

The problem I see with this approach is that then there would be a need for two, or three times as many batteries, due to the downtime. Adding in the cost of transport and storage, there would have to be a significant savings over the inefficiency of those high tension wire crackles of wasted electricity I heard many years ago.

Here's hoping, John, that you can attract those more familiar with this sector of energy storage to contribute here as you have with EV's.

Feb 10 01:12 PM

[nakedjaybird:]

BWA - right on; end-use storage: add on a little stored heating and/or cooling via products that exist and are already used (refrigerators [ice] - simple thermal storage - get rid of the standard ovens/stoves and their 220v hookups and anything "red". Avoid any conversion inefficiencies wherever possible (like batteries!).

Instead, push local/remote no-moving-parts biofuel injected solid state generators that capture/and or make use of all the energy; no conversion losses on the way in or out. John will be able to invest in these SOON. Then we can throw away many of the other schemes. Oh yes, and God DOES NOT forbid solar PV and wind, at the home, etc., jic.
Nor hybrids on the hyway.

And on the front end, pumped hydro opportunities do exist and are only complicated by regulators, of which we should eliminate about 80% (or more!).

Amazingly, according to JOhn, less that 1/2 our electrical generating capacity is utilized. So that 12 Quads of annual electricity we do generate (at 40% effeciency because of not using the low pressure steam) and the grid we already transmit and distribute on (losing max 10%) could easily be bumped up 50% using existing technologies and with the extra 6 Quads we would have enough energy to electrically power all the existing Transporaton industry that currently consumes 25 Quads and produces only 5 Quads or useful work, wasteing 20 Quads (80%) of it's energy from all the crude in the internal combustion engine conversion. Come on electrified interstate ferries and grid.

Throw in the solar PV and wind AFAP (as fast) and AMAP (as much) and our problems are solved. Storage?? Come on LEADERSHIP.

Feb 10 01:21 PM

[John Petersen:]

UPDATE: The stimulus bill passed by the Senate did not change the provisions quoted above.

Isaac, Axion is pursuing a platform technology strategy and intends to become a manufacturer of electrodes that will sell to others who already have lead-acid manufacturing plants. The biggest part of their R&D has focused on creating a component that will work in most existing plants. While I try to stay away from assessing patent issues, it's IP position seems pretty strong.

Advill, this is a target rich environment to be sure and the reason that I like storage so much was beautifully summarized by Kirstin Olsen Kahill of Google who said today "We can't build this product all by ourselves.

"www.iht.com/articles/2...

It's really fun to be a pundit when you can look at a sector like storage and say "I have no idea who the big winners will be, but anybody who stays in the game will be a smashing success so I don't need the best."

Mayascribe, I have the sense that your concerns over shipping and inventories are two of the biggest problems facing battery replacement schemes. I would add labor costs and the relatively poor economics of EVs to the list. In any event these articles seem to draw comment from some very well informed readers and I always appreciate the dialogue.

Feb 10 01:29 PM

[Advill:]

Mayascribe describes the original problem of the electrical grid The energy can not be stored (at least at a decent cost) that is still true with batteries and has nosense unless you are able to deliver energy and somebody is able to receive it....at the right price

In this point of storage there is a new way of producing a "low energy electrolisis" which was announce by Daniel Nocera of MIT that I think could become one of the backbone of the grid revolution see:

web.mit.edu/newsoffice... ,

and many others links are in Google,what this MIT fellow reports, if feasible to implement is one of the basis of the cleantech.

As far as i know there are still iniciatives in relation with this matter yet.

Regards

Feb 10 02:58 PM

[NorthernPiker:]

John,

For each specific energy storage application, there is a capital cost target, the break-even point, that must be met by any particular technology or its sub-flavors. This approach would be a technology-agnostic basis of evaluating the economic viability of storage options.

One application is time-of-use rate arbitrage, or consumer load shifting, that consists of the retail customer storing off-peak energy from the grid every night and, the next day, using it or selling it back to the grid during peak hours. For this application, the net revenue is the difference between the value of the peak energy sold back to the grid, or used by the customer, minus the off-peak cost of this energy less the losses in charging and discharging of the storage device and minus the cost of the storage device system, whether it uses batteries, compressed air or utracapacitors. (This application is similar to a PHEV application except the gain is gasoline savings, not electrical energy savings.)

The case that I looked at is a customer who uses a battery to store off-peak electricity costing 6¢ per kWh and sells it the next day for 16¢ per kWh with a 15% round trip energy loss. With a 6% cost of funds, and a 100% DOD cycle life ranging from 500 to 5,000 (about 13.5 years at one cycle per day), the break-even point of battery cost per kWh ranged from $41 to $289, respectively; to wit:

500 1,000 2,000 3,000 5,000
$41 $78 $145 $201 $289

Of course, this break-even point would be further reduced by the cost of other energy storage system components - inverter et al.

At a 10¢ per kWh differential between peak and off-peak rates, current battery costs are too high for this application, even with government largesse in the form of 0% loans. Here's the break-even point for 0% cost of funds. (Yeah, it's 8.5¢ times the cycle life.)

500 1,000 2,000 3,000 5,000
$42.5 $85 $170 $255 $425

Feb 10 02:59 PM

[John Petersen:]

Advill and Northern Piker, my original "Birth of a Giant" article includes a 2004 vintage graph from Sandia that shows cumulative demand for storage in California as storage costs decrease. With current battery costs, only the applications on the right half of the chart are cost effective. As storage costs decline, the applications on the left hand side become worthwhile. But even at current costs, the California demand figure could be 10,000 MW and the national (8 x California) number could be 80,000 MW. You start multiplying those numbers by $150,000 to $1.3 million per MW and it's an immense potential revenue. See:

seekingalpha.com/artic...

Feb 10 03:19 PM

[Stockguy456:]

Very nice and well thought out article thanks!!

Energy storage should be a major factor in reducing the dependence on oil.

Does anyone have any information if the Obama administration or DOE have people who understand AE??

Feb 10 04:09 PM

[TinyTim:]

Don't want to pop this smart grid bubble. But breakdown the DOE nameplate capacity of 1.09MMW into three parts. About 210MW are baseload generation (always online), 372MW are online in less than 24hrs, 512MW are online in 30 minutes.

So tell me again, what's the advantage of energy storage?
Why store it when you can turn it off in the first place? Much of the quick start generation is relatively low capital, but high fuel cost jet turbine powered generators.

I would like to see more load leveling to improve the ROI of expensive steam plants. Ideally, this would be done recharging electric cars during off peak night hours.

Also, why isn't pumped storage regen double counting capacity?

Feb 10 04:55 PM

[John Petersen:]

Stockguy and TinyTim, the third paragraph includes hot-links to both of the DOE's Electric Advisory Committee reports. They explain both the costs and benefits of using storage instead of the current structure TinyTim wrote about. There is probably nothing other than fuel supply constraints, fuel costs and carbon emission issues to keep utilities from doing things they way they always have. But when you put those things together with the EACs conclusions that V2G won't be feasible until after 2020 and other DOE conclusions that plug-in vehicle sales won't exceed 1 million units per year before 2030, there is a pretty big gap between what we have and what we need.

Feb 10 05:08 PM

[Old Wizard:]

John And Fitz, I think John's articles are a refreshing attempt to actually do some analysis of alternatives. An observation about the smart grid, If there is so much debate about the method for storing intermittant supply that comes from wind and solar if those two sources are to be significant, what does building out the grid mean? Just a carryover from filter theory, Impulses must be carefully addressed if the system is to be stable.Does building out the grill mean that the control functions will only deal with current sources and attempt to optomize it or is it something more? Since the grid has to deal with peaks and valleys, the more interconnection the more complex the contol function becomes and must deal with many local peaks in what is a non linear problem.

Feb 10 06:38 PM

[John Adam:]

John Petersen, I am getting the impression that my idea for a smartGRID is nothing like what the EXPERTS are talking about. As you say:
<<they have to focus on peaks and valleys, rather than the averages.>>

It seems that THEY want to lower the peaks and raise the valleys (off-peak) of the power use curve. That ignores the power generation curve, drawn on the same paper, that must be somewhat larger to avoid blackouts and could be a strait line if it was only produced by today’s nonrenewable fossil fuel, nuclear, geothermal, and hydro which can operate 24/7.

<<Most of the buzz in the alternative energy sector focuses on renewable power, demand management technology, advanced power transmission systems and batteries for electric vehicles.>>

THEIR idea for DEMAND MANAGEMENT is that millions of their customers are going to spend big bucks buying software, for home computers, to tailor and control their power usage based on off-peak power pricing considerations. Personally I think that their AVERAGE CUSTOMER has no intention of committing any of his time or resources to such intellectually taxing activities. Gamming on a Play Station is about as much IT as Mr. AVERAGE is up to doing.

You are correct in stating:

***<<In the process, the media has largely overlooked the reality that energy storage devices are essential enabling technologies for both transportation and the Smart Grid.>>

That is because although Mr. AVERAGE CUSTOMER will not jump head long into allowing a home PC to manage his life he will still very likely drive to work each day. But, in these days of expensive dirty terrorist oil, electric powered vehicles appear to be an economical environmentally friendly alternative which means that battery storage will be important and used by Mr. AVERAGE.

If MR. AVERAGE uses a smartCHARGER to charge these large batteries for his transportation the power use curve could become another nearly straight line like the power generation curve. A micro processor in the smartCHARGER would act as an agent for Mr. AVERAGE and request authorization to charge from the electric utility’s computers. That would synchronize the power distribution and usage curves. That is my smartGRID. The cost to the electric companies would be minimal corresponding to expanding their NEW smartMETER systems to process the smartCHARGER requests for authorization. We already have the infrastructure to generate twice electric power we need and we could very likely make do with what we actually generate now by using wasted energy to charge the batteries.
BUT, If we decide to use highly variable renewable power generation such as wind, and solar power to replace significant amounts of the old reliable 24/7 fossil, nuclear, hydro, ect. Power, we will need large storage capacity to store power when too much is being generated and to make up for periods when insufficient amounts of renewable power is being generated.

***<<I think there’s good reason to believe that in light of the recent EAC reports, grid-based energy storage may also qualify for a portion of the $4.5 billion earmarked for Electricity Delivery and Energy Reliability.>>

Now here is where the <<pumped hydro and compressed air energy storage>> makes much more cost effective sense than batteries for storing HUGE amounts of power generated by a electric utility. That is what Scientific American seems to think, www.sciam.com/article.... .

Feb 10 07:59 PM

[Douglas Hvi...:]

On Feb 09 02:35 PM Redwood_1 wrote:

>compressed
> air is in any way an efficient storage mechanism. From a mechanical
> standpoint, it's an incredibly lossy process, and one subject to

Depends on your mechanism. Isentropic compression wastes energy heating the air. Isentropic compression wastes energy cooling it. 95% isothermal is available for stationary applications. A 95% isothermal compression&expans... would be 90% efficient! The equipment is more expensive and complex, which is why almost all uses are isentropic. Maintenance needs depend on the mechanism also - the standard designs are cheap, but wear poorly. Isothermal C&E scales up very well.

Feb 10 09:10 PM

[nakedjaybird:]

Tiny tim = pumped storage doesn;t nrecessarily go thru the same turbines.

Feb 10 09:51 PM

[nakedjaybird:]

Old wizzard- building out the grid can be as simple as providing a canal large enough to function regardless of the leaks.

Feb 10 09:55 PM

[Joe Eckstein:]

I haven't read the whole article yet, but I wanted to mention that just the opening paragraph reminded me of the energy management aspect of the video game SimCity 2000 that I played a long time ago :)

Fun stuff!

Feb 11 12:14 AM

[John Petersen:]

John Adam, I don't think they're as worried about getting day and night to a straight line as smoothing minute to minute variability. See:

seekingalpha.com/artic...

The problem as I understand it is that each time you add a new renewable resource to the grid you increase short-term variability and without major stabilization resources you'll have an unstable grid.

Mercifully, everyone realizes that depending on Joe to do the work himself isn't going to happen and the long term vision seems to rely on smart everything. Unfortunately it takes decades to move a country from stupid everything to smart everything and the transition will be difficult - a great time for storage solutions that do what the user end of the system can't until it's better developed. I have a great deal of hope that somebody out there will get into CAES, molten salt or hydrogen storage in a big way, but until that happens we need to work with the toolbox we own today

Feb 11 01:27 AM

[Artiecab:]

How does ActivePower compare/compete with Beacon Power?

Feb 11 02:55 AM

[John Petersen:]

Artiecab, as I understand their products, Active Power is selling low-speed flywheels to customers that need clean uninterruptible power for server farms and other large electronics installations. Beacon, on the other hand, is testing high-speed flywheels with a focus on governor response and frequency regulation. So it basically boils down to differences in power output and discharge duration. Beacon puts out more power faster and Active Power puts out less power for a longer period of time.

Feb 11 06:33 AM

[Advill:]

The smart grid for the AVERAGE CONSUMER of John Adam will be much like the internet is right know, some will use to invest their savings, some to play second life others just to check e-mails and others to make money of it.

The smart grid will be alike... AVERAGE CONSUMER will decide if they conect his PHEV to the grid and receive an income for it, or perhaps the washing machine will be program to operate only after 4:00AM, or maybe he decides to install PV panels in his roof and deliver energy directly at the moment or perhaps he decides to store it in a flywheel or li-ion batteries to deliver it at 12:14 PM every day....and so on , as a stock market.

Nice scenario but it will take decades in US and centuries in the world, is easier in Denmark, Holland or Germany, even Spain, before the US.

Regards.

Feb 11 07:36 AM

[John Petersen:]

CORRECTION: I just noted that the $600,000,000 allocation for HEV and EV purchases was pared to $300,000,000 in the final Senate Bill. I apologize for the error.

Feb 11 09:51 AM

[NanooGeek:]

A Canadian company, VRB Power has several irons in this potential fire, such as molten salts and "vanadium flow-battery technology". Gave up on their stock years ago, so haven't been watching them very closely.

Feb 11 12:08 PM

[NanooGeek:]

... oops, perhaps make that *had* technology. Perhaps someone picked up their I.P.

Feb 11 12:11 PM

[Artiecab:]

I'm trying to find out the better investment. I know you said Beacon would be significant in a year or two, but who will be the "dynamo" ultimately in this scenario? And which is better for states and governments - Active or Beacon. Thanx, John.


On Feb 11 06:33 AM John Petersen wrote:

> Artiecab, as I understand their products, Active Power is selling
> low-speed flywheels to customers that need clean uninterruptible
> power for server farms and other large electronics installations.
> Beacon, on the other hand, is testing high-speed flywheels with a
> focus on governor response and frequency regulation. So it basically
> boils down to differences in power output and discharge duration.
> Beacon puts out more power faster and Active Power puts out less
> power for a longer period of time.

Feb 12 01:03 PM

[Artiecab:]

P.S. With almost entirely good news on Active Power, why isn't their stock soaring?

On Feb 12 01:03 PM Artiecab wrote:

> I'm trying to find out the better investment. I know you said Beacon
> would be significant in a year or two, but who will be the "dynamo"
> ultimately in this scenario? And which is better for states and governments
> - Active or Beacon. Thanx, John.

Feb 12 01:04 PM

[John Petersen:]

Artiecab, "better investment" is one of those loaded terms that has far more variables than I could ever begin to deal with so the only honest answer I can offer is "I don't know."

A few weeks ago when ACPW was half the price it is today, I thought it was a better short-term play than Beacon, but that was solely based on the fact that I though ACPW had been beaten down by almost 90% from its one-year high.

If I was making the same decision today with both companies trading at about 75% of their one-year highs, I'd probably buy a little of each because they're more complimentary than competitive. If ACPW has tremendous success it will help BCON overcome barriers more rapidly and the inverse is also true.

I'm heavy in Axion because of my long history with that company and I believe it has a solid position in the lead-acid group. That being said, if I was sitting with a pile of cash today, I'd spread it across three or four companies in the lead-group because I don't think I'm smart enough to pick a single winner.

About the only group that I would personally avoid is Li-ion and that's just because I don't believe the proposed products will live up to all the hype and most of the Li-ion stocks are far more expensive than the stocks of better established companies with less glamourous chemistry.

Everything I've read says that the growth in the storage sector over the next few years will be enormous. That leaves me very comfortable with the idea that all of the survivors will be solid investments. A few weeks ago I wrote an article on the valuation metrics I use for my personal investing. But beyond explaining the methods I use and the factors that I think are most important, I don't feel confident advising anybody about buying or staying away from a particular stock. The article is at:

seekingalpha.com/artic...

As far as "why isn't their stock soaring" I like Ben Graham's explanation that “In the short run, the market acts like a voting machine, but in the long run it acts like a weighing machine.” Also, from the perspective of somebody who bought ACPW at $.26, I think it's doing just fine. The same is true for the ENS that I bought under $6.

Feb 12 05:14 PM

[Artiecab:]

I thought lead acid battery storage was passe' and flywheels were the way to go?

Feb 13 11:25 AM

[John Petersen:]

Artiecab, I'm a huge fan of lead acid batteries because they're cheap, they're easily recycled, they're scalable and recent advances in lead-acid technology promise cycle lives and power profiles that are much closer to NiMH and Li-ion than they are to the starter battery in your car. The current rechargeable battery market is about $25 billion per year. About 75% of that total goes to the lead-acid side of the ledger. The market is so huge that there will be room for lots of companies to do real well, but the king is alive and well notwithstanding rumors of ill health.

Feb 13 12:51 PM

[JLBR:]

John,
Thanks once again for a useful article helping us all think critically about long-term EES (electrical energy storage) investments. An analyst friend still has trouble with the very concept of utility-scale electrical storage -- thinks it's like "dry water." Dropping conceprtualization barriers is a good exercize for all of us, I think, to really see the long-term possibilities. Grid stabilization, grid interconnection for renewables, and a merchant market in energy arbitrage (generate or buy cheap, store, then sell to the grid when dear) are reasonably obvious aplications. But an idea already mentioned by other commenters seems worth considering more carefully: storing energy in mobile, truck- or rail-mounted batteries and hauling across the country (using on board electrical energy, of course) to interconnect with the grid directly wherever needed? This would not simply be an enabler of the "smart grid" but a cost-reducing complement. It would make use of that other infrastructure upgrade project which is going forward for sure, the interstate highways and bridges, rather than competing for funds. It would avoid the siting problems and be a far more flexible alternative to building the hugely expensive long-distance transmission lines now contemplated from the sunny deserts in the south west to the cloudy cities in the northeast. Using recyclable, light-weight batteries that store "electricity" in non-electrical form (lightning strikes would not be fun!!), this would seem a feasible option someday. As an industry, electricity hauling would probably push current physical science research very hard but that's the fun part and scientists today are certainly engaged (Stephen Chu, are you listening?), and perhaps most importantly it would be very technology-upgradable, able to quickly utilize innovations and improvements coming from physics labs. So we wouldn't be plagued by obsolescence in another 20 years In contrast, long-distance transmission lines are fixed and prohibitively expensive to upgrade. And, not to forget, it would generate all kinds of jobs here in the USA -- from science to engineering to truck driving to e-depot management. The next step (or maybe this woud come sooner) would be kw-size batteries in the backyard much like propane tanks today. I'd be interested to see you make a quick pass at the economics of such an idea and suggest which if the currently known storage technologies might be a possible starting point. Thanks again for your articles.

Feb 13 01:09 PM

[John Petersen:]

JLBR, since you've obviously been reading me for a while, you know that I'm a real stickler for working from third-party data because it helps me avoid the talking head syndrome and at least show readers why I believe what I do. I did a quick Google search and found that rail shipping costs are about $0.03 per ton mile in the US. The highest energy density Li-ion batteries can only hold 200 watt-hours per kilogram, or about 200 kWh per ton of batteries. So transporting a ton of Li-ion batteries by rail for 2,500 miles would cost about $75, or roughly $0.375 per kWh.

The news I've been reading about new power trunk-line proposals seems to focus on ultra-high voltage DC transmission, which is a lot like comparing fiber optics to copper wire in terms of carrying capacity. So while siting issues will be problematic to install the new lines, their carrying capacity will be far greater than we currently see in the utility world. From a cost benefit and carrying capacity perspective, the new lines are the only way to go.

Feb 13 01:41 PM

[realist2:]

@ Northern Piker

I already help the grid with battery storage in my electric vehicle and with V2G. Why? 'Cause it makes the power required to recharge my vehicle free for me.

Don't forget to factor in small scale RPS plays for storage, especially for residential/commercial grid tied solar and V2G. I currently use the differential on RPS alt utility paid relative to my residential retail price alone to make my 100% wind power, through a subscription plan with my regional power utility, free, without any peak/non-peak differential in my state, for my electric vehicle use, by doing my V2G to use the utility paid alt energy price differential to my advantage. These little things can add up to making battery storage a meaningful part of how it's going to work large scale.

As solar become more integrated and price paid goes back down, I'll probably want to advocate my utility to focus on peak/non-peak differentials (many utilities already do this, as you point out), so us little ant users can be financially motivated to do a better job on the power smoothing, rather than just trying to maximize the alt energy differentials. After even more alt energy and user habit forming penetration, the utilities can eventually back off on both alt energy and peak differentials. At least, that's how this little ant sees it.

Feb 13 05:27 PM

[engstudent:]

Hi John, regarding that chart of the amount of the various EV elements I posted in your previous article, thanks for pointing out that lead and nickel were the wrong way around! That's why you're the due diligence guy, I guess!

Well anyway I decided to incorporate it into a small blog if you want to check it out and lemme know what ya think:

maximumEV.blogspot.com

Feb 13 09:03 PM

[Ames Tiedeman:]

The "smart grid" build out looks like a multi decade long investment in the future.

Feb 21 09:34 AM

[gjashley:]

I often wonder if this chap will ever tire of regurgitating the same article (which always leaves me feeling that he is shilling for Axion & Enersys)

Mar 04 03:44 PM

[John Petersen:]

In a word, NO.

There is a fundamental market disconnect between the market prices of storage sector stocks and the cost effectiveness of the storage solutions the various companies are manufacturing or developing. As long as technical potential is valued more highly than economic potential, I'll have plenty to talk about. Once the market comes to the realization that in the real world best affordable technology trumps best available technology, I'll have to find something else to occupy my time.

Mar 05 01:45 AM

[Mad Hedge F...:]

Here's a thought. For those out there still looking for a “smart grid” play, take a look at Quanta Services (PWR). The Houston based company offers design, construction, and maintenance of power infrastructure networks. At a 17 multiple of next year’s earnings it is not cheap, and the shares have already posted a double since the March 9 low, so the action is definitely there. But when the full force of Obama’s stimulus plan hits, the 30% earnings growth that is the current consensus forecast may look a tad low. The Federal Energy Regulatory Commission (FERC) has already announced $10 billion in programs, and “smart grids” are one of the few places in the energy space where the government can spend money and generate an immediate result. Up to 10% of America’s electric power supply is thought to be lost through resistance from decrepit power lines and inefficient distribution. That works out to a lot of tankers from the Middle East or train loads of coal from Appalachia. Never underestimate the power of a buzz word to boost earnings. Buy on the inevitable dip.

Apr 22 11:19 AM