Why Pure Play Energy Storage Companies Could Double for Investors 56 comments
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For several months I’ve been writing about manufactured energy storage devices and the companies that develop and manufacture them. My basic theme has been that these devices are fundamental enabling technologies for cleantech, the sixth industrial revolution.
I’ve repeatedly said that profound economic changes were rapidly evolving and that energy storage would be a major investment theme for decades to come, but even my unbridled optimism could not keep pace with the realities. While most investors have been focusing on obvious problems like bad mortgages, tight credit and recessions, immense changes in the energy sector have gone almost unnoticed. As a result, most investors do not understand that the energy storage sector of today does not even bear a passing resemblance to the one I started writing about last summer.
The economic stimulus bill signed into law last Tuesday includes $2 billion in “facility funding awards” for manufacturers of advanced battery systems and vehicle batteries that are produced in the United States. In the context of an $800 million economic stimulus package, $2 billion is little more than a rounding error. In the context of an industry that would report approximately $1 billion of domestic property plant and equipment on a hypothetical consolidated balance sheet, the amount of the facility funding awards is mind-boggling.
In addition to the facility funding awards, the economic stimulus bill provides an indeterminate amount of grants for energy storage research, development, demonstration and deployment (“RDD&D”) as part of a $4.5 billion pool set aside for electricity delivery and energy reliability. Once again the RDD&D number is easily overlooked in the mega-bill, but it eclipses cumulative VC investments in the energy storage sector by a wide margin.
Finally, I’ve previously reported that the bill includes $300 million for Federal purchases of fuel-efficient vehicles and a substantial expansion of the tax credit regime for electric vehicles, but until I saw a chart in the Wall Street Journal that attached a $2 billion budget cost to the tax credits, I didn’t fully understand what was happening on the demand side of the equation.
When you add up $2 billion in facilities grants, a likely $1 to $1.5 billion in RDD&D funding and an additional $3 to $5 billion in tax credit subsidized consumer demand, it’s easy to see the truth in the late Senator Everett Dirksen’s legendary quip “a billion here, a billion there, and pretty soon you’re talking real money.”
When the Wall Street Journal recently asked Energy Secretary Chu about time frames, the Secretary said, “To really stimulate the economy and help the U.S. recover from this dire situation we're in, my feeling is, a substantial fraction, a majority of it … you're starting to cut checks within half a year to a year.” Later in the same interview, Secretary Chu observed, “The synopsis of the loans I've seen in innovative green energy -- they're in the hundred-million dollar range.”
When discussing the methodology he wanted to use in evaluating funding applications and allocating funds, Secretary Chu said “There's always a risk. . . . The protection is to get really good people to ask the right questions, to do a real evaluation. There are two ways of doing this: You can ask the right questions, and you can get people who are good at this sort of economic project management, who are experienced in "how do you smell something that doesn't look like it's going to fly?" or the financial business plan or basis of the company.”
Everything I’ve read so far tells me Secretary Chu is a pragmatist who understands that modest projects do more to create jobs than mega-projects; every project entails unavoidable technical, business and market risks; there is no single technology that can provide a cost-effective solution for all essential energy storage needs; and none of the principal players in the energy storage sector has the depth of management, technical and manufacturing expertise to successfully implement a mega-project.
While I have no doubt that some battery companies will make the same kind of piggish requests we saw in connection with the auto industry bailout, I believe the only sensible approach open to the DOE is diversification across a broad range of companies and technologies, which tells me that a large number of $100 to $200 million grants are far more likely than two or three mega-project grants.
I’ve been following a group of pure-play public energy storage companies since last August. While companies like Advanced Battery Technologies (ABAT), China BAK Battery (CBAK), China Ritar Power (CRTP) and Hong Kong Highpower (HPJ) may derive some collateral benefit from increased sales of tax credit eligible products, they are essentially Chinese companies that are not likely to be effective competitors for facility funding awards and RDD&D grants. If you eliminate the Chinese companies from my tracking list, the number of U.S. based companies that have a reasonable chance of effectively competing for a portion of the billions in grant funding gets very short.
The following table identifies twelve pure-play U.S. based public companies that I view as credible competitors in the DOE grant process. The table includes a summary product description, a classification of their current product commercialization status, their 12-month high stock price, last Friday’s closing stock price and their estimated current market capitalization. Every one of these companies is developing or manufacturing energy storage devices that will be essential to our clean energy future and each of them should be able to make a compelling case for a reasonable amount of manufacturing or RDD&D funding.
Click to enlarge
When you consider that the $1.9 billion combined market capitalization of these twelve companies is only a fraction of the available Federal grant funding, it isn’t hard to understand why I see significant potential for impressive short-term gains as the potential federal grants are reduced to approved funding applications over the next year.
I would not presume to pick the winners of the upcoming grant application process or even begin to guess the amounts that the various companies are likely to request or receive. I will, however, suggest that as a group, this short list of pure play energy storage companies stand to receive cash infusions that could easily represent 50% to 300% of their current market capitalizations and propel their business fundamentals to an entirely different level. I think a balanced portfolio of these twelve companies should be an easy double for investors over the next year regardless of what happens in the broader market.
Disclosure: Author holds a large long position in Axion Power International (AXPW.OB) and small long positions in Active Power (ACPW), Exide (XIDE), Enersys (ENS) and ZBB Energy (ZBB).
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This article has 56 comments:
www.technologyreview.c.../
I enjoy starting my Monday with a good read courtesy of your active mind and busy fingers. Upcoming earnings conference calls will allow opportunity to ask questions of company officials. Hoepfully we will learn more about specific company plans regarding the stimulus grants.
Most advisors I know think that announcing grant or loan applications is a bad idea because there is no upside for the company. Announcing an application usually has no market impact because the announcement must be tempered by the knowledge that the application can be turned down. On the other hand, rejection of a publicly announced application is generally seen as a sign of weakness. In my experience the only smart approach is file a grant or loan application quietly and then hold your tongue until your application is approved.
Beacon Power (BCON) is the only company who has applied and is well through the approval process for a $50mm loan guarantee as part of the original DOE Loan program. From all accounts, BCON will get formal approval within 4 weeks.
Happy to provide links if needed, but this has been all over all the news publications on the back of the Senate hearing on the DOE grants.
Not to mention - BCON's news release today about a parternship with AEP in Ohio!!
In U.S they put the money in one part of the process and then there is a "wait and see" result, biofuels in US are now belly up and affecting markets that were organized ina different way.
In your comment this aspect is ignored, they will have via public money 2X their capital.......and where is the market?, where are the price to that market?, VLNC has been in the Li-ion batts for 20 years...and GM choosed LG batteries group as supplier of Volt, same story with ethanol where Lignol or Suncor and some oters in the field are filling Chapter 11 AFTER Obama green plans.
A123 will get XXX millions to develop .....at what price, what use, which client?, same to many others that depends of 3r. parties for their success.
Regards
On Feb 23 03:12 AM John Petersen wrote:
> A reader sent me a link to a recent article in the MIT Technology
> Review that mirrors my sentiments and adds color to areas that I've
> not delved into. It's worth a read.
>
> www.technologyreview.c.../
>
> jack
(What I did do during the last couple of weeks, is sell off a most of my Exide shares at a loss, and then flip the remaining money into a gold mining stock--New Gold, Inc. (NG), which I then sold off last week, and then flipped it back into Exide on Friday at a much lower cost average price. I ended more than covering my losses, and now have Exide at a much better "pyshological" entry point. Though, I will add that with Cap gains taxes in mind, I really came out about even in doing this "flip.")
Although, maybe a spike here and there will happen when the news is revealed as to which stocks get the grants, I believe it will only be when the orders happen will the stocks go up and stay up, no matter how bad the coming weeks/months are going to be.
I think the future of the Energy Storage sector is going to go crazier than the Academy did over Slum Dog, kind of like how gold has been doing since last November 19th. Especially those, as you pointed out, domestic pure plays that recieve grants rather than loans.
I'm looking forward when these battery stocks start to rise. Right now I'm slowly accumulating in the "step down" approach, as all indications are, the market is going to continue downward, driven, I believe, by insurance companies, and the massive commercial real estate cratering that's yet to occur.
Thanks again, John, for keeping up battery geeks up to date!
Advill, I get so much criticism for asking those pesky questions about business fundamentals that I thought I'd try to avoid them today. Nevertheless, Secretary Chu has been clear about his intent to look at whether the business plan fundamentals will work. I think manufacturers that cannot demonstrate the ability to earn a reasonable margin by making and selling a cost-effective commercial product will have a hard time working their way through the grant process. The truth will only become clear after the fact, which is why I'm unwilling to go further than talk about the relative size of the subsidies and the relative size of the sector.
John Gordon, JCI is most certainly in the class of companies that will likely be able to make a compelling proposal, as are a half-dozen private companies. I leave JCI out of my discussions because batteries are only one-sixth of its business. But it is most certainly a fine company that is high on my list of likely grant recipients.
(China, with a quarter of the world's population, consumes over half the world's pork. Part of their stimulus package is earmarked toward pork!)
Yes - lots of small funding is much better than large funding. I've come across hundreds of possible significant technical advancements in the alternate energy sector in the last 5 years, but no one knows what will be the 5 to 10 winners that actually make a difference in volume production. When the government picks winners and heavily pushes them, like ethanol from corn (gasp), it often has bad consequences. Let the marketplace determine the winners, but give many companies and technologies a little push. I just saw where Tesla (the electric car company) is getting $250 million to help build a factory. That's great - enough to make progress, but not enough to push out competitors.
Actually Tesla applied for a total of $400 million in ATVM loans from the DOE, part for a battery plant and part for a factory. I have not seen anything to indicate that either of the loans have been approved and have reservations about whether they will be since I don't think Tesla can meet the rigorous lending criteria. For more detail see:
seekingalpha.com/artic...
The good news is that efficient batteries land soundly in both parts of the stimulus package. I'm sure there will be no overlapping, but if there is, I'm also sure you'll find out.
if you want a machine to convert grain + leftovers into lean meat, pig is probably the most efficient machine.
> jack
Mayascribe, the complexities and interrelationships are incredible. There are battery only provisions and there also grid provisions that include "demand response equipment" e.g. batteries. This time around it really is unique because the manufactured storage device sector will be able to drink from many cups. rather than just one.
searcher, I think a lot of those enterprises are called lawyers ;-), but I'm not aware of any public plays on that piece of business.
But what really scares me today much more than any news reading or on the tube, is the line drawing of today's DOW: If it were a ski slope, it would be "green" this morning, only turning to an easy "blue" this afternoon, with a tiny "black" run @ 2:20 until 3:00. We should be having double diamond drops!
The conclusion is that we are still not near capitulation, yet. That town down there is fogged in.
Here’s one tiny example. Alaska’s remote towns are finding TODAY that wind power is more economical for electricity production than diesel because, though Alaska has plenty of crude, it is very expensive to get diesel fuel to remote villages. Diesel there today (yes Feb 2009) is around $5 per gallon (ouch!). But, the one thing that is holding back wind from becoming an even bigger piece of electricity generation is unreliable winds. Cheap energy storage is needed to smooth out the peaks and valleys.
Hawaii is similar to Alaska, but not as extreme. It is trying to become an alternate energy economy with it’s great sun and wind resources. They are turning the once Pineapple growing only island of Lanai into a giant wind and solar farm. They will use undersea power cables to get that power to Honolulu on Oahu. Note that geothermal is mostly limited to the big island where the population is small. It is expensive to import fossil fuel to the islands so gas and diesel prices are high. Gas runs $.50 higher than the mainland (island lingo) national average. Energy storage is needed on Lanai to make full use of the undersea cables.
Then there is the giant Texas wind farm of T. Boone Pickens and partners. Along with hundreds of wind turbines will be a coal fired and natural gas fired plant. These are needed to offset uneven winds so the expensive power lines running to cities hundreds of miles away will be fully utilized all the time. Wouldn’t it be nice to replace the coal and natural gas plants with batteries or some other type of energy storage, and put up more wind turbines?
Roadrunner, I'm not convinced that we'll ever see alternatives as base load, but I'll be more than happy with enough storage to eliminate the short term variability. In any event, the changes we will see over the next 20 years are beyond my poor powers of imagination.
I agree that large scale renewable projects should be supported, but they don't need to be pilot projects only. Solar thermal has already had it's pilot project stage, and is ready for large scale deployment. Also, it has it's own cheap energy storage, when combined with molten salt heat storage. It can provide base load power on a large scale day and night.
Wind grew by 50% last year, so doubling in 3 years does seem a little less ambitious than what can be done.
What I would like to see is large govt loan guarantees, like was being offered to nuclear energy in the original version of the stimulus package. This would seriously propell the solar thermal industry, for instance, toward large scale development. Both it and wind can be built quickly and will both provide inexpensive power in the future. That would go a long way toward alleviating the credit crunch induced funding problem for these projects.
Related articles:
climateprogress.org/20.../
peakenergy.blogspot.co...
John
I was talking with a man who runs a small local battery company, called ARC Battery, which sells batteries and also makes them on a small scale. His market is largely for the marine industry, so lots of deep cycle batteries. I asked him a few questions about new battery technologies, and while he wasn't fully informed on all types, he did speak glowingly of lead foil batteries. He said they have been in the lab for quite a while, and have some winning characteristics, like excellent charge cycling. I hadn't seen lead foil mentioned in your articles, unless I missed it. Any comments?
Why the H would they do that? Well the electric utility companies could give them a cheap rate to charge the large batteries needed by Electric Vehicles of any sort. The customers could use smartCHARGERs with computer chips acting as their agents to communicate with BILLING COMPUTERS over the smartGRID, just like the smartCHARGERs do, to SCHEDULE and AUTHORIZE when the actual charging will take place. That will enable the electric utility companies to use more of ANY TYPE OF POWER BEING GENERATED including Wind, Solar, Geothermal, Nuclear, Etc.
Computer Monitoring using smartGRID IT Technology would also enable RELIABLE TRANSMISSION and DISTRIBUTION with a lower CUSHION between POWER GENERATION AND USAGE to prevent Brownouts and Power Outages.
This would MINIMIZE THE POWER THAT WE CONTINUE TO WASTE using 19th century electric Transmission and Distribution Technology.
Politicians and Lawyers that we are forced to chose between by our Good Old Boy run Political Parties may know how to pronounce and spell words like Internet and smartGRID, but they do not have a clue as to how their proper use to solve our problems.
They and Financial EXPERTS need to get out of the way and let Americans who understand Hard Science fix the messes they have created.
John Adam, we're not missing the connection at all. The hard reality is that developing the smart grid will be an incremental process that takes 20 years or more. The first stage will be smart metering with a layer of IT, the second will be smart end user appliances with an additional layer of IT and the third will be the possibility of a bi-directional system that allows HEV batteries to be used for grid stabilization. The system will develop incrementally because that's the way the world works. It cannot emerge fully-formed overnight and until the houses and the appliances installed in those houses are smart, the grid cannot be brilliant. These are not my conclusions. They come directly from the two reports from the DOE's Electric Advisory Committee reports that I cited in the following article.
seekingalpha.com/artic...
I do not agree with your 20 years or more time frame. The IT part of the project is well under way. I have a smartMETER on my house out in Ohio farm land. The programming and computer hardware parts exist or can easily created in a very short period of time.
However it is obvious that it will take many years to build the wind, solar farms, etc and the EV batteries involved. That is the incremental part of the solution. The technology already exists and we know how to build the hardware involved. Now the hardware will evolve, if you will, as time goes by, but workable EV batteries, wind turbines, solar cells, etc do exist.
Politicians, Lawyers, and various groups of undereducated constituents and clients are the problem. They need to get out of the way or go create their own miserable third world nation and let the rest of us alone to develop our technological dreams.
The computer chips that enable a smartMETER should not have to be replaced when its capabilities are upgraded to Gen 2, 3, 4, 5, etc. All the smartMETER chip does is send and receive data on the smartGRID with parameters and transaction IDs that are targeted at devices and or programs on their local HOME network or the Utility’s computers on the EXTERNAL network. That is what makes up the smartGRID and we can add capability without impacting what already exists using very limited hardware on the smartMETER.
All 58,000 members of Licking Rural Electrification in Central Ohio have smartMETERS now. We belong to a rural cooperative. It could be that we are more advanced than N.Y. City electric customers, but that just indicates that the nuts and bolts of the smartGRID are no big deal. Politicians, Lawyers, and various groups of undereducated constituents and clients are fighting the creation of Wind, Solar, etc power generation all over the U.S.A. Some are afraid of technology and some become rich and powerful by slowing change to a crawl. That is the mentality of the DARK AGES.
A 20 years from now new smart appliance I install, plug into my HOME Network will send a transaction ID and parameters to the same old smartMETER I have today and it will send them to the REALLY BIG COMPUTER owned by Licking Rural Electrification. That computer will look for the new smart appliance’s transaction ID on one of its modifiable tables and execute a program that will interpret the parameters and send a reply to the smartMETER that will send it to the new smart appliance in my home.
You said << Nobody is standing in the way of anything. In fact the biggest problem is public inertia and apathy. >>. All the public will need to do is plug in new devices. This is a plug and play, cut and paste world. The average person does not care or want to be BOTHERED with esoteric technology. The Politicians and Lawyers will fight every new appliance thinking that new appliances will be transmitting their owner’s financial information to thieves over the power lines. I have already heard such crap on FOX and CNN.
On Feb 23 11:37 AM Road Runner wrote:
> John, Good reading and good points. (Are you surprised to hear
> that from me after our lively debate on Lithium Iron Phosphate vs
> Lead Carbon batteries?).
>
> Yes - lots of small funding is much better than large funding. I've
> come across hundreds of possible significant technical advancements
> in the alternate energy sector in the last 5 years, but no one knows
> what will be the 5 to 10 winners that actually make a difference
> in volume production. When the government picks winners and heavily
> pushes them, like ethanol from corn (gasp), it often has bad consequences.
> Let the marketplace determine the winners, but give many companies
> and technologies a little push. I just saw where Tesla (the electric
> car company) is getting $250 million to help build a factory. That's
> great - enough to make progress, but not enough to push out competitors.
>
Fern, with due respect the Li-ion emperor has no clothes. You are correct that the only company that currently has Li-ion production capacity is HEV. The problem is they don't have any customers. It is insane to give anybody Federal money to build a factory to make a product that nobody can afford to buy for its intended use. I would also submit that breeding a new team of draft horses is far more sensible than trying to harness 5,000 hamsters to do the job.
Everyone, including me, is looking to the future of Li-ion once they solve the cost, performance, abuse tolerance and life issues that the DOE has identified as targets for ongoing R&D efforts. But until the R&D work is completed, you are talking about vaporware - not products.
There was a fascinating article on EVs a couple days ago that talked about 40,000 of them in California and 99% of them being NEVs. The vast majority are not powered by Li-ion, they're powered by batteries that work today. Your comments about environmental risks and recycling efficiencies for lead are, quite simply, hogwash.
One of the first concepts business students and investors learn is the time value of money - which teaches that a payment 10 years from now is far less valuable than a payment today. It is economic sophistry to believe that the "salvage value" of what will then be a 10 to 15 year old battery can justify a significant reduction in today's purchase cost. Battery technology does not improve rapidly, but I'll guarantee you that today's devices will be seen as technologically obsolete in 2025.
In the final analysis both of our opinions are meaningless because the only thing that counts is what Joe Lunchbucket will buy. In that market, Li-ion does not stand a snowballs chance in hell of succeeding.
I found this in MIT Review of March , you are one of the most informed in the field i think is very interesting.
www.technologyreview.c...
dmse.mit.edu/faculty/f.../
Regards.
The Space Shuttle was designed to run using an 8086 chip. It was only upgraded to a 80386 chip. Most of the power of today's latest chips is wasted processing graphics and very poorly written operating systems. It takes next to nothing to do the tasks of a smartMETER now and forever. smartMETERS and smartAPPLIANCES, like the Space Shuttle, also do not require huge amounts of computing power. Now the computers the Utility companies use to bill its customers and communicate to the smartMETERS can be easily upgraded to cost effective new chips when necessary. I doubt that the Utility company computers use a piggy Windows OS. Linux is a much better OS for server class computers. The latest versions of Linux will still very likely run on your old 80286 computer and would allow you to still do everything you want to do. Surfing the WWW might be a little slow because the old 80286 chip motherboards had slow graphics cards.
I was designing systems and leading projects to develop very sophisticated computer controlled manufacturing systems over 20 years ago. I know computers, big small and tiny. Al Gore, Obama, and that idiot W may all think that the smartGRID requires super computers, but I do not. Most of the work and cost to utilities involved in creating the smartGRID is the grunt work needed to replace many millions of old meters with smartMETERs. The rest is no big deal: installing software AMR (Automatic Meter Reading), CRC (Cooperative Response Center), SCADA (Supervisory Control and Data Acquisition), etc software at the Utility's office. The customer will plug-in the smart devices in their homes.
John Adam, I'm a firm believer that IT systems will always front run mass implementation by a wide margin and delighted to hear a professional's view that the IT portion is not as daunting as folks make it sound. The real hurdle I think we're facing is the replacement cycle on the principal energy using systems in an average home that are often measured in decades. Great IT cannot make up for bad user habits and I'll never guilt my mother into replacing her perfectly serviceable fridge just because something more efficient is available. Likewise even the DOE is projecting plug-in sales of less than a million per year by 2030.
Traveling Wave Nuclear Reactor using nuclear waste or depleted uranium:
www.technologyreview.c...
www.technologyreview.c.../
I'm impressed with you having your own smart meter technology there in rural Ohio.
Broward County (loaded with transplanted NYers) in South Florida are quite familiar with smart meter technology. Their power company, Florida Power & Light (FPL) has been deploying quite an advanced network of smart meters. I don't know if these smart meters can turn a toaster on and off. However, FPL is quite impressed. After initial testing of 50,000 meters, FPL will now deploy the meters to all its residential and commercial customers. Read more here......
www.businesswire.com/p...
Silver Spring Network provides the meters and the IT. I believe Silver Spring is privately owned. Al Gore and his venture capital company are big backers of Silver Spring. Al Gore sits on the Silver Spring advisory board. You know uncle Al and his Silver Spring will get a huge chunk of $ from the stimulus bill. I have no problem with Al Gore profiting. He works hard to promote green power technology.
Standards and protocols may be a problem for some smart meter companies, as the government requires "Internet based or other open protocols."
(F) Open protocols and standards. – The Secretary shall require as a condition of receiving funding under this subsection that demonstration projects utilize open protocols and standards (including Internet-based protocols and standards) if available and appropriate." (P.30, Section 405 A-F).
"if available and appropriate" sure sounds a bit murky.
USA Today has an interesting article.... www.usatoday.com/money...
Sorry for wandering off the subject of energy storage.
smlcap, I limit my discussions to storage because it's a digestible piece of the puzzle, a critical enabling technology and a sector where there is a lot of room for improvement. But the entire T&D chain is a target rich environment for investors.
One of the more disappointing changes from the original house bill to the final legislation was the consolidation $1 billion of R&D and $1 billion of manufacturing money into a single limited category. I personally think the original was a more rational allocation between hopes and reality.
Yes...I understand.
I read the news today oooh boy. And, it was good! Harry Reid will be introducing a new bill that will allow the federal government to trump individual states regulations, codes, etc etc, as they relate to interstate electrical power transmission. I think such a bill is important. It will make it a lot easier and quicker to get green power transmitted from Texas to Chicago, for example. I can only imagine going across 5 or 6 states with power and having to conform with individual states requirements. What a nightmare and waste of time that would be. Hope Harry gets his bill thru, shouldn't be hard thing to do now.
Yasser Arafat and Al Gore have both won Nobel Peace Prizes. How long until these people realize that continued stupid selections can lead to loss of credibility? However we do need Federal control over interstate electrical power transmission just like we needed the Interstate Transportation Act. The Stimulus Bill should have placed much more emphasis on this type of infrastructure and much less of it on Pork. Expanding the Transmission Grid will allow many Wind, Solar, Geothermal, etc projects to go forward putting people to work to produce renewable battery charging power for EVs to replace our dependence on Terrorist Oil Fuel for polluting ICE vehicles. The U.S.A. could rapidly take the lead in producing Electric Vehicles, batteries and renewable sources of power and its efficient transmission. That could put everyone to work and pay our debts even after a tax cut. Politicians have no business supporting any particular standards, protocols, or religions in their legislation.
John Petersen,
Those stationary liquid metal batteries could be incorporated into the smartGRID to catch any power not used to charge EV batteries and flatten the power usage curve. The off-peak power concept and the waste associated with it make no sense using a 21st century smartGRID. Hopefully the Politicians will not put language into laws that will limit the use of technology. These clowns could include language that limits the development of technology that uses Thorium or Butanol or Algae bio fuel.
At the price of electricity in central Ohio l calculated that the Volt should get the equivalent of 95 MPG when gasoline in $2.00 per gallon. Now at $3.00 a gallon, what it would cost with $100 oil, that would mean 1.5 times or 142 MPG equivalent. That only holds for commutes of 40 miles or less. The Volt generator powered by an ICE will supposedly get about the equivalent of 50 MPG to supply power to the electric engine on trips over 40 miles. Most of the working class, like me, commutes less than 35 miles each way, to and from work.
People are going to buy the Volt and we will see. The price of the Volt’s battery will go down and oil will go sky high. GM will price the first Volts to capture the market and gamble that the battery price will go down. Now if the Volt did not have an ICE powered generator that would be an entirely different case.
There is no ETF comparable to a GDX or a PBW for the advanced battery sector, right?
You have suggested taking a small position in each of the 12 companies in your storage device maker table - can you think of any other way for the amateur to get involved without him having to try to become an electrical engineer/CFA?
Ive been reading your posts for some time and have read the governmental reports you have linked. I find your opinion to be non biased which is nice to see in these days. However, that being said I am concerned that many of these small pure play battery companies will be pushed over by the big and influential Detroit automakers and lithium hopefuls. Please see this article in the nytimes.
www.nytimes.com/2009/0...
My concern is that while scientist who are familiar with, and test these battery technologies prove that lithium is not there yet in terms of costs and performance (the SEGIS report) I am reminded of the dot com and biotech bubble of the turn of the century, in that any company with tech attached to it was gold (in this case lithium). I feel that the mainstream media has fallen in love with lithium and so has congress, not to mention the influence the big Detroit automakers have over congress. Basically I am wondering your thoughts on this and the fact that alot of this stimulus and DOE money could be wasted to bail out Detroit and go to lithium makers riding the media blitz and therefore congresses pessure on the DOE to fund these enterprises.
JVW
seekingalpha.com/artic...
As long as battery capacity and daily use are closely matched, EV's based on current Li-ion prices can reach a 10-year break-even at a gas price of $3.69. While commenters consistently tell me that battery prices will plummet, nobody has ever explained where the fabled "economies of scale" are going to come from. So I'm far less sanguine about future battery prices than many. I won't tell you that significant cost savings are impossible, but I've been burned so often by the hot that I tend to blow on the cold. Only time will tell which view is right.
D. McHattie, there are a number of fine alternative energy ETFs, but the storage sector is so small right now that it would be very hard to get the required level of diversity under applicable market rules. For today, the only alternative I know of is a do-it-yourself portfolio of storage stocks.
jvanwest, thank you for the kind words. I try to stay neutral but a man's perspective is always colored by the path he's walked and I'm no exception to that rule. I may criticize Li-ion technology for its high cost and finicky nature, but I firmly believe R&D on the various flavors needs to increase. I also believe that over the short- to medium-term, lead-acid and lead-carbon are far more sensible. My fondest prayer is that over the long-term, somebody will invent something that makes everything we have today obsolete. I have no doubt that Li-ion will take a big piece of the available incentives because the press and politicians idolize supermodels. But as long as a reasonable slice of the pie is devoted to solutions that can be implemented today, I have no problem taking a risk on the others. Since Senator Arlen Specter (R-PA) was a critical vote for the stimulus bill and his State is home to Enersys, C&D and Axion, I would be amazed to see lead-acid and lead-carbon excluded.
Now I think we agree on most of the issues we have discussed since you say: <<you'll not hear me criticize the theory underlying the Volt>> and <<I also believe that over the short- to medium-term, lead-acid and lead-carbon are far more sensible.>>
Since GM is in love with Lithium I would like to see the Volt sold without a battery. Let the customer decide what battery to use. There is no reason why the producers of Lead-acid and lead-carbon batteries could not manufacture batteries that will fit and work in the Volt. With the automobile market being what it is, I would think that GM would be willing to let the customer decide. GM is not actually producing the batteries anyway. They might produce their own batteries in the U.S.A. in the future, so why not wait and see what their customers actually prefer? I do not see GM demanding that people use BP or Shell gasoline in their ICE vehicles.
If these lead based batteries cost much less and actually perform just as well as current lithium batteries GM is in no position to oppose such an idea. They should actually encourage the idea.
Consider what you said: <<While commenters consistently tell me that battery prices will plummet, nobody has ever explained where the fabled "economies of scale" are going to come from.>> Of course I am no Prophet willing to be stoned for a bad prophecy, but energy storage using nanotechnology is still in its infancy and growing at a truly astonishing pace. Every day I find something new being tried like a battery using both super capacitor and old lead acid technology. Why they did not use advanced lead acid is a mystery to me. Now I see something like this every day on the Technology Review email news, www.technologyreview.c.../ .
New technology is "where the fabled "economies of scale" are going to come from.". Very likely it will be nano-technology.
I'm a firm believer in nanotechnology and agree completely that if the hoped for advances are likely to come from anywhere, structured materials like carbon nanotubes and graphene will probably hold the key. I've also had the privilege of representing some of the finest nanotechnology minds in the country and understand the topic quite well. The term "nanotechnology'' as it is currently misused by battery companies means "ground really fine," and nothing more. They are not building new structures to perform particular functions or accomplishing anything more than maximizing reactive surface area. So while they are telling the literal truth about relying on chemical reactions that happen most efficiently in ultra-small spaces, there is no nano-magic other than maximizing surface area which in turn maximizes the chemical efficiency of the raw materials. FYI, it was my relationship with Dr. Howard Schmidt (who at the time was Executive Director of the Carbon Nanotechnology Laboratory at Rice University) that brought him to Axion's board in 2005.
Because of the Lithium battery overheating and fire problem, I actually considered the point you make: << the Volt must have power control circuits that are perfectly matched to the batteries the car will use>>. However I doubt that this power control is “hard wired”. A software modification could get around this problem. Even if chip software is not modifiable, in large production numbers, a replacement chip should not be very expensive.
On the topic of nanotechnology, the link I provided did not talk about grinding anything really fine. The economic construction of devices using nano technology including batteries and ultra-capacitors is the big problem. Grinding is a no brainer. The articles that I read talk about growing nanotubes etc not grinding. They mention encasing Lithium in carbon fullerenes, nanotubes etc to prevent expansion and heating problems. They mention the higher electrical conductivity of carbon nanotubes etc to speed charging and discharging. There may have been mostly grinding going on a few years ago, but that was yesterday.
I do not doubt that: << When you look at batteries that are currently being produced, the best anybody is doing is an ultra fine grind. >>. However, things are changing faster and faster every day. This has been a fact of life for over 50 years. Since the advent of cheap computers and then the Internet and WWW investing in yesterday’s technology has been a big problem. I want to know where the companies you post on your charts are pursuing new technology before I invest. There are IPO’s but I would prefer investing in established companies that adopt cutting edge technology and can ramp up production using all of this “Government Money” which is provided by American Taxpayers. McCain and Obama are not talking about supporting and funding current technology.
DOE Secretary Chu Announces Changes to Expedite Economic Recovery Funding
Restructuring will lead to new investments in energy projects within months
www.energy.gov/news200...
One of the saddest things about the change from the original House bill to the final legislation was that the original included $1 billion for pure battery research, which would have been very good for a lot of the companies we read about in the MIT Technology Review. The change came about in a way that evidences a pretty clear Congressional intent to focus on products that are ready for commercialization now.
In the WSJ interview, the Secretary made it clear that he wanted to see business models that worked. So at a minimum I would expect the same kind of proof and analysis that underwriters look for in an IPO candidate. I'd also expect the grants to be reasonable in light of the applicant's current state of development. In connection with the ATVM loan program there were outsized loan requests that were ten times the total capital previously contributed to the applicant (A123) and others that asked for new factories at a time when the applicant has excess factory capacity but no paying customers (HEV). In both cases, the loans seemed to be a bit of a stretch since the rules required a sustainable business model.
We are in for some interesting times and I'll be following developments very closely because any significant funding can make a world of difference to most of the companies I track.