A Very Smart Plan for Federal Smart Grid Grants

In mid-February President Obama signed the American Recovery and Reinvestment Act of 2009 [ARRA], a massive spending bill that spawned gigabytes of analysis and comment from bloggers like me. Unlike many, I've tried to stay politically agnostic and focus solely on the economic impact of ARRA on companies that manufacture batteries and other energy storage devices. From that limited perspective, everything is wonderful!

The principal energy storage appropriations included in the ARRA were:

• $4,500,000,000 for grants for “Electricity Delivery and Energy Reliability” including activities to modernize the electric grid, include demand response equipment, enhance security and reliability of the energy infrastructure, energy storage research, development, demonstration and deployment, and facilitate recovery from disruptions to the energy supply;
• $2,000,000,000 for grants 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;
• $500,000,000 for research, labor exchange and job training projects that prepare workers for careers in energy efficiency and renewable energy; and
• $300,000,000 to purchase high fuel economy motor vehicles including: hybrid vehicles; neighborhood electric vehicles; electric vehicles; and commercially available, plug-in hybrid vehicles.

In a February 22nd article about why I believed energy storage stocks could easily double as a direct result of ARRA spending, I cautiously speculated that a large number of $100 to $200 million grants seemed more likely than a handful of mega-project grants. In response, many readers expressed concerns that the ARRA funding would be hijacked by the utility industry or wasted. While we've all been eagerly awaiting clarification, I'm very impressed with the direction the Administration's policies seem to be heading.

In his early remarks on ARRA policy objectives, President Obama seemed inclined toward an egalitarian approach that would use ARRA funding for a wide variety of projects in a concerted effort to create new jobs, explore reasonable alternatives and rely on market mechanisms rather than policy-wonks. I was particularly impressed by remarks President Obama made at the Southern California Edison Electric Vehicle Technical Center last month when he said:

Show us that your idea or your company is best-suited to meet America's challenges, and we will give you a chance to prove it. And just because I'm here today doesn't exempt all of you from that challenge - every company that wants a shot at these tax dollars has to prove their worth.

While we all know the opera ain't over 'til the fat lady sings, an April 16th press release from the DOE has spurred my optimism to new heights and given me reason to believe the DOE's plans for smart grid grants will take a very reasonable and pragmatic approach. In discussing their plans for financing smart grid projects, the DOE press release said:

$3.375 billion for Smart Grid Investment Grant Program

DOE’s Smart Grid Investment Grant Program will provide grants ranging from $500,000 to $20 million for smart grid technology deployments. It will also provide grants of $100,000 to $5 million for the deployment of grid monitoring devices. This program provides matching grants of up to 50 percent for investments planned by electric utilities and other entities to deploy smart grid technologies. The program will use a competitive, merit-based process to select qualified projects to receive funding.

Eligible applicants include, but are not limited to, electric utilities, companies that distribute or sell electricity, organizations that coordinate or control grid operations, appliance and equipment manufacturers, and firms that wish to install smart grid technology. There will be a 20-day public comment period on the Notice of Intent; the Department will use feedback to finalize the grant program structure and subsequent solicitation.

$615 million for Smart Grid Demonstration Projects

The draft Funding Opportunity Announcement is for smart grid demonstrations in three areas:

• Smart Grid Regional Demonstrations will quantify smart grid costs and benefits, verify technology viability, and examine new business models.

• Utility-Scale Energy Storage Demonstrations can include technologies such as advanced battery systems, ultra-capacitors, flywheels, and compressed air energy systems, and applications such as wind and photovoltaic integration and grid congestion relief.

• Grid Monitoring Demonstrations will support the installation and networking of multiple high-resolution, time-synchronized grid monitoring devices, called phasor measurement units, that allow transmission system operators to see, and therefore influence, electric flows in real-time.

Each demonstration project must be carried out in collaboration with the electric utility that owns the grid facilities. An integrated team approach that includes, for example, products and services suppliers, end users, and state and municipal governments, is encouraged. The projects require a cost share of at least 50 percent of non-federal funds."

Frankly, the DOE's goals are more ambitious, reasonable and broad-based than I had hoped they would be. Instead of a relatively small number of $100 to $200 million grants that would provide immense boosts to a small number of companies, the DOE is talking about hundreds of more modest grants that will benefit a much larger number of companies and probably be spent more wisely.

If the policy objectives defined by President Obama and clarified by the DOE flow through the entire ARRA grant allocation process, we may be entering a golden age for investors in companies that are developing batteries, energy storage devices and other smart grid technologies; a tidal wave of public and private funding that will lift all boats in the sector rather than a select few.

The overriding policy objectives I've been able to glean from the statements to date are:

• The DOE will spread the wealth across a broad range of technologies and companies; and
• The DOE will not finance technologies or companies that cannot attract the bulk of the required funding from non-government sources.

The result is a true public-private partnership where generous government support is available for companies that the market is willing to support as stand-alone business ventures, but the market holds the ultimate trump card. It's a structure that's simple in its genius and recognizes that the job of government is to enable the market process rather than supplant it.

I've written more than a few unkind words about publicly announced applications under the DOE's Advanced Vehicle Technology Manufacturing Loan Program because many applicants including A123 Systems, Ener1 (HEV), Tesla Motors and Th!nk are underfunded and the amount of the requested loans is disproportionate to the established value of the advanced vehicle technologies they want to manufacture. My basic question has always been "What if they build their proposed factories and nobody wants their products?" That question, in turn, led to the inescapable conclusion that the ATVM loans are a 'heads I win tails you lose' proposition that can be nothing but good for successful applicants and nothing but bad for the government.

We may indeed end up with a wasteful outcome from the ATVM loan program because it takes a lot of money to build manufacturing capacity from the dirt up and the process has been politicized. My sense, however, is that the ARRA grants will be another story altogether. Carefully administered ARRA grants can double the available funding for grid-connected energy storage partnerships like the ones that A123 Systems, Altair Nanotechnologies (ALTI), Axion Power International (AXPW.OB), SAFT Batteries (SGPEF.PK) and ZBB Energy (ZBB) have negotiated with counterparties including AES Corporation (AES), ABB Limited (ABB), Eaton Corporation (ETN) and NYSERDA. If similar policies flow control the ARRA grant policies for advanced battery manufacturing, the impact on the entire energy storage sector can be huge.

I frequently criticize the bloated market capitalizations of Li-ion battery developers, but it's important that readers understand that my criticisms relate to stock market factors rather than an assessment of the underlying technology. We need Li-ion, lead-acid, lead-carbon and flow batteries, and a host of other technologies that haven't even been invented yet if we want to break our addiction to imported oil and pave the way for cleantech, the sixth industrial revolution.

While I've always believed that good things happen in America in spite of government, the evolving policies of the Obama Administration may well change my views. At least for now, I believe the Administration's plans for distributing the ARRA smart grid grants are very smart indeed because they rely on the capital markets and sound business judgment as a counter weight to idealism that frequently drives government action.

Disclosure: Author is a former director and executive officer of Axion Power International (AXPW.OB) and holds a large long position in its stock. He also holds a small long position in ZBB Energy (ZBB).

Comments

[yellowhoard:]

Freya,

Interesting company. I could not find out how much these cars will be priced. Or, when first deliveries will be made.

Apr 21 09:21 AM

[John Petersen:]

Freya, as a Canadian company, Zenn Motors is probably not in the running for any U.S. government subsidies.

Yellowhoard, with a current market capitalization in the $100 million range and only a couple million in sales, I think I'd be cautious.

Apr 21 09:41 AM

[mcadoo3312:]

BCON is at the top of the list to receive the DOE loan guarantees. They should certainly be considered in your analysis, especially as their plans for a NY power station have already received the environmental green light from the administration.

Apr 21 09:44 AM

[John Petersen:]

mcadoo3312, Beacon applied for a guaranteed loan under Title XVII of the Energy Policy Act of 2005 and is working its way through the due diligence process. Since this article focuses on the ARRA incentives, I thought discussing the relative merits of pending loans under another program would be confusing.

Apr 21 09:54 AM

[creativforce:]

Ok, if I am the president of a regional power conglomerate like NIPSCO in northern Indiana (I call him Mr. Burns). I have thousands of workers trained to perform repetitive tasks maintaining coal-fired power plants and analog equipment. The more energy my customers use, the more money I make. My customers are billed monthly. I have no competitors. My customers have no choice but to pay me. The only rights my customers have come through consumer protection groups who lobby the state government when they set my profit margins. As the president of this company I can only make more profit by encouraging consumption. I do this by helping to fund more urban sprawl and by discounting my prices to manufacturers (encouraging their wastefulness.)

What possible motive do I have for buying efficient battery storage for reliable, green, renewable, or digital technology?

I see a "build it and they will come" mentality at work here. The US government can give money to great ideas until it hurts. But just because a much better technology exists doesn't mean it will be purchased and used.

I see great inventions begging for a market, not a market begging for great inventions.

The US could spend nothing and force Mr. Burns to meet certain federally mandated standards (like the state government in CA has done). If Burns can't make money the old way, he will find a new way. In CA, PG&E and other local monopolies are scrambling to buy renewable energy because the law says they must.

Carbon trading could also create a big market for batteries and renewables.

The government could also rewrite laws to make distributed generation profitable for home owners and small businesses. That would be the most efficient, smart, safe and reliable way to solve the energy problem. And eventually it would make Mr. Burns obsolete. 100 million energy producers is better than a few hundred (plus it would create a dramatically more dynamic market for these products).

Large scale energy production and transmission is terribly wasteful. Those enormous smoke stacks and cooling towers aren't just "blowing smoke" they are wasting 25% of the energy they produce. Those crackling transmission lines aren't just making noise, they are wasting 30% of the energy that flows through them.

You can water and fertilize a seed all you want, but it won't grow in the winter. The government needs to change the season and the seeds will grow. Energy storage stocks would be the hottest thing since GOOG, if the government would focus their efforts on developing a market rather than on the financial problems within these wonderful small companies.

Hopefully the EPA's recent decision to regulate CO2 will force Mr. Burns to buy these products. Incentive should lead invention, because in the morning when we Americans have a problem we get to work and fix it. The way it is now, Mr. Burns has no problems.

Apr 21 12:17 PM

[John Petersen:]

Creative, I suspect the Mr. Burns you describe has been dead and gone for a couple of decades and his company is struggling mightily with making the transition from what was to what will be (both of which you described very well). The public utilities are all too aware of the fundamental weaknesses in the power grid and the leaders like AES have all come to the realization that distributed generation and storage are the only way to supply an increasingly power hungry nation and insure that capital investments by NIPSCO actually benefit NIPSCO customers instead of PG&E customers.

Like any industry, the utilities have their leaders and their laggards. But I don't think it's fair to assume that the leaders lead because of legal compulsion. They lead because they want to provide the best possible service for their customers and they know that a failure to evolve will result in the extinction of their species.

I've seen enough unintended consequences over the last 30 years to assure you that you'll never hear me say "there oughtta be a law . . ."

Apr 21 01:09 PM

[creativforce:]

Can you think of another industry where walking door to door to read an analog meter would be considered a valuable use of an employee's time?

Apr 21 01:28 PM

[John Petersen:]

No I can't, but that's why I'm convinced the choice is evolution or extinction.

Apr 21 01:52 PM

[ginchinchili:]

Thanks for the education on energy storage, John. I've learned a lot from your series of articles. As an investor, I've found the current advent of this cleantech revolution both exciting with opportunity and challenging. This article helps to relieve some of that anxiety, at least regarding battery companies, because it looks like our government has just improved the odds for all battery companies.

So much of the diverse cleantech industry is a roll of the dice for investors. As always, DD is necessary, but now with battery companies part of that research should include a company's R&D goals; an idea of the money a company invests in R&D; the feasibility of their projects; and, ideally, some track record of R&D spending and results. I'd appreciate any comments you have regarding this.

I will add that one of the investments decisions I've made in my attempt to invest in clean technology while reducing investment risk is power cable, because nearly every major alternative energy goal in the works involves a lot of power cable, of all kinds. Just a thought. Thanks again.

Apr 21 02:51 PM

[Futurist:]

Creative,
The reason that utility companies need Grren Power is simple. They have Billions invested in transmission lines and power supply. If they can sell the 25% thats wasted they can add every penny to the bottom line. No extra infrasructure. Now if they have to pay for energy storage they will, as long as its less of an expense than building a new power plant. Technology has made this possible. Thats why they are on the bandwagon. Its still more power to sell and profit to be made.
In the 70's during the first oil crisis conservation was the only way to go. We are much better able to solve the problem now. However, you are right in pointing out that the powers that be did not act soon enough to help stem a very foreseeable problem.

Apr 21 03:07 PM

[John Petersen:]

ginchinchili, energy storage in general is rapidly morphing into the most target rich product marketing environments in history and the only thing I can do is keep referring readers back to the Merrill Lynch thematic report that suggests "cleantech markets dwarf IT to the tune of two orders of magnitude." A great example of the diversity of potential applications is a new partnership that Envision Solar and Bright Automotive announced today at a capitol hill press conference. They're planning a nationwide network of solar powered charging stations for PHEVs that will use Axion's batteries for the storage function. It's kinda fun to be a third tier partner that may not get the glory but will get a big share of the revenue.

www.earthtimes.org/art...

Apr 21 03:09 PM

[realist2:]

Not to go too far off topic but this should make Mr. Petersen happy re: E2Ws:

edition.cnn.com/2009/T.../

The article, if I'm reading it right, cites an industry expert and champions cheap electric and power pack applications in low performance electric bicycle and scooter apps in Asia. Indeed, such markets are already robust and a number of low performance electric bicycle and scooter products are readily available in the US in big box stores. This article implies that lead acid could play a useful role in higher performance applications than previously considered (longer range on current marine deep cycle electric ATVs, for example, for the hunting market, such as Doran makes).

Meanwhile, back in the completely different world of existing high performance electric motorcross and supermoto motorcycles, I'll keep Mr. Oronsky's evolving views in mind as I quickly zip home today on my kitted high performance electric Zero X motocross motorcycle.

An inexpensive, improved performance electric motor could kick up all the electric two wheeled performance specs a notch and mean that the current high performance design could chnage its gear ratio for a longer range with the same net performance. We'll see. Expensive vaporware, maybe?

Anyone know anything about the new electric motor technology described in the article?

Apr 21 03:27 PM

[realist2:]

I've been thinking (sorry). A deer rifle has a maximum range of usually not more than four and half miles while an electric ATV can go 35 miles in hard core backcountry (14 mph plenty fast for that rough terrain) to silently, up to 13 miles one way, sneak up on the deer (or Bison, since it can tow 4,000 pounds) and still have enough juice to haul the game back on a ATV trailer to the pickup truck and trailer on the double track off-road. Try that on foot, 13 miles from the nearest dirt road in the back country, with no gas ATVs allowed (fire hazard and noise scares away game).

Apr 21 03:58 PM

[Dave Marsh:]

Thanks John. Another good article that sifts through the things I should research but don't (since you do it for me). I'm now long AXPW (yes, even bought after the pop)Another stock that readers may want to look at is ZAAP.OB. I don't own it right now. They have sold >100,000 EVs; scooters, trucks and cars, primariliy in Asia and some in Europe. Their existing designs use lead-acid, though a "too modern" Li ion car is coming out (style is a little over the top). Anyway, they could benefit from AXPW's PbC since they already sell Pb-acid cars, and the stats on those models once PbC equipped could make them MUCH more capable. When there is no other stimulus, the stock follows oil prices, and peaked over $1 when oil hit $145 last year. Just a heads-up for those looking at all the micro-cap EV makers in the mix already.

Apr 21 06:55 PM

[frflyer:]

A little off topic, but I wonder if anyone else noticed the news from China yesterday. They intend to have 100 GW of wind power by 2020.
All in all, it bodes well for the clean energy sector.
And it should mean more battery demand.

By virtue of sheer dumb luck, I happended to pick up some shares of APWR yesterday, which besides the China wind story, had some good news of it's own today, with a new $75 million contract for cogeneration. The stock was up 18% today.

China wind energy story
uk.reuters.com/article...

"A great example of the diversity of potential applications is a new partnership that Envision Solar and Bright Automotive announced today at a capitol hill press conference. They're planning a nationwide network of solar powered charging stations for PHEVs that will use Axion's batteries for the storage function."

There was also some news about coming up with a common plug design for EVs and PHEVs to connect to 440 volt quick charging stations.

I was just reading an article on Enersys at Zacks. The ENS spokesman said they were interested in aquisitions. Are you at all afraid that an Enersys would try to buy out Axion? Or have they set up lots of barriers to that?

Apr 21 11:04 PM

[John Petersen:]

Freya, I own both ENS and XIDE and while I'm up over 100% on both, I still think they're terribly undervalued compared to the other companies in my tracking list.

Dave Marsh, welcome to the club. Your decoder ring and secret handshake should be arriving shortly. ZAAP has always been an interesting company that is still looking to hit its stride, a problem that most of the EV makers will have to cope with while they look for solutions that work and sell. Today the public seems to view EVs as a sacrifice, a downgrade from what they already have. Sooner or later a developer is going to come up with a must-have product (perhaps the PUMA) that the public views as superior to what they have. Then the game will change completely. In the meantime I think Axion will likely focus on the boring but profitable industrial and commercial markets that use engineers and accountants to make decisions and buy truckloads of batteries at a time.

frflyer, it's a brave new world out there and it certainly looks like the opportunities will be endless for cost-effective energy storage. If Merrill Lynch is right, the reports we are seeing on a daily basis are just a glimmer of things to come. It will be a wild ride.

The biggest barrier to any acquisition is control that's concentrated in a small group of people. While anything can be had for a price, there are a lot of us who have sweat blood for Axion and will not let go easily or cheaply.

Apr 22 12:47 AM

[User 395761:]

John,

some more good news for greentech and I agree: despite old dinosaur industries...

If we assume a solar powered home needs a Axion-like battery:

Did you come up with a calculation about this battery already? I mean how big, heavy, expensive would a 5-10kWh thing be?

Thx


PS: Still not able to change this stupid User xxxx thing :-(

Apr 22 02:55 AM

[John Petersen:]

User 395761, a standard sized deep discharge lead-acid battery typically holds about one kWh of useful energy and costs about $200. The PbC will probably be a little larger because it uses 40% less lead per battery. The DOE pricing estimates have lead-carbon starting in the $500 per kWh range and dropping to about $250 per kWh over time.

Apr 22 03:24 AM

[User 395761:]

So this means with the german tariffs you need ~2600 charge/discharge cycles in the beginning.

Still a little ambitious and again an argument against more expensive batteries...

Apr 22 05:04 AM

[John Petersen:]

In an early article titled seekingalpha.com/artic... I printed a 2004 vintage chart from Sandia that showed the relative value of storage applications from lowest to highest. The highest value applications were transmission and distribution upgrade deferrals and end-user power quality. Diurnal storage for renewables was way down on the list. But even at $500 per kWh, the projected California demand was on the order of 10,000 MW which translates into a national demand of 80,000 MW which in turn translated into $40 billion in battery sales.

Apr 22 06:10 AM

[Brad Smith:]

A few companies that offer carbon information management software and analytic, measurement and metric solutions are listed at greenmarketintelligenc...

Look in the Information Technology, SaaS and Cloud Computing category which begins about 3/4 of the way down the page.


On Apr 21 12:51 PM Freya wrote:

> You have to be able to measure it before you are able to Tax it or
> create a market for it. You will find that the tech to do this isn't
> available on every street corner.
>
> Do you know of any companies providing this service?

Apr 22 09:32 AM

[searcher:]

Are the alternatives "build it and they will come" or "legislate it and it will appear?" Who cares? Trade the enthusiasm as it waxes and wanes.

Apr 22 12:24 PM

[John Petersen:]

searcher, since "legislate it and it will appear" invariably brings the laws of unintended consequences into play, I'd rather let the market sort this one out. There are many who argue that solar panels are still not at grid parity and I don't know enough to agree or disagree. But I spent many summers scorching my buns in the Phoenix and Houston sun and if given a choice, would always pick a store with covered parking over one with open parking.

Apr 22 12:33 PM

[petyaczar:]

IMO I've gpt 3 words fpr you BCON BCON BCON
Beacon Power the smart grid power demand solution,

IMO already responding to the ARRA funding

Apr 22 01:28 PM

[petyaczar:]

ALso pease do not forget the Beacon power California power station currently under construction.

California and New York. The 2 biggest states in the mainland U.S.A. - after texas leaves the union.

Beacon will get the money, and Ca and NY will help them get it IMO


On Apr 21 09:44 AM mcadoo3312 wrote:

> BCON is at the top of the list to receive the DOE loan guarantees.
> They should certainly be considered in your analysis, especially
> as their plans for a NY power station have already received the environmental
> green light from the administration.

Apr 22 01:32 PM

[stockdoc123:]

I believe it BCON too!!! Also see SATC & MAG the make inverters.

Apr 22 02:14 PM

[John Petersen:]

petyaczar, I like Beacon's technology and the fact that it has progressed a long way through the DOE loan process. But I have to say that with $24 million in annual losses and $26 million in stockholders equity, I think Beacon will have a very hard time (a) coming up with enough equity to make a 20% to 50% down-payment on its projects and (b) enough equity or revenue to cover debt service costs and ongoing operating expenses. The individual projects may indeed be cash flow positive, but I don't foresee a profitable company for a long, long time. I've negotiated equity raises for companies in Beacon's position before and it is never a pretty thing for existing shareholders over the short term.

Apr 22 02:45 PM

[Mad Hedge F...:]

Here's another option. 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 05:23 PM

[Road Runner:]

John Peterson said, "But I spent many summers scorching my buns in the Phoenix and Houston sun and if given a choice, would always pick a store with covered parking over one with open parking.".

As a guy that lives in Dallas, I wholehearted agree. Please, bring on the solar panel covered mall parking lots! It's "cruel and unusual punishment" to make a person get into a car that's baked 2 hours in the midday summer sun in one of these cities. I like the free market, but to get parking lots covered with solar panels, I'll turn communist. Bring on the legislation. Long live the workers paradise. ;-)

Apr 22 06:58 PM

[Road Runner:]

John Peterson said, "a standard sized deep discharge lead-acid battery typically holds about one kWh of useful energy and costs about $200. The PbC will probably be a little larger because it uses 40% less lead per battery. The DOE pricing estimates have lead-carbon starting in the $500 per kWh range and dropping to about $250 per kWh over time.".

John, if the price of a lead-carbon is not going to be less per kWh than deep discharge lead-acid, then what is the advantage of lead-carbon? Lasts longer?

Apr 22 07:05 PM

[John Lounsbury:]

Road Runner - - -

Since John P. has not answered your question yet, I believe the main advantage of the lead-carbon batteries is about 10x cycle life over the traditional lead-acid batteries. Thus, with the $500 dropping to $250 vs. $200, you are paying for fewer replacement maintenance events over time.

John P., please correct and add to my comment (if necessary) when you read this.

Apr 23 12:20 AM

[John Petersen:]

Road Runner, Axion's website discloses a 300% to 400% improvement in cycle life; 1,600 cycles for PbC compared to 300 to 500 for deep discharge lead acid. So they're effectively talking about undercutting lead-acid storage costs by 50% to 75%.

I've previously published a chart from Sandia where a similar device known as the Ultrabattery survived over 17,000 cycles at a 10% depth of discharge from a 50% state of charge, which engineers tell me are real torture conditions. See:

seekingalpha.com/artic...

Knowing management's tendency to low-ball forward looking numbers, I would not be surprised to see higher numbers when they start producing a commercial product.

Apr 23 12:25 AM

[John Petersen:]

Great guess John. They're currently talking about a 3x to 5x and the Sandia number for the ultrabattery is closer to 50x. So I'm personally hoping something on the order of 10x is the final number.

If we take a $200 LAB and get 500 cycles, the cost of storing a single kWh for future use is around $.40. If we take a $500 PbC and get 2,500 cycles, the cost of storing a single kWh for future use falls to $.20. If the PbC price comes in closer to $250, the cost of storing a single kWh for future use approaches $.10.

The 2,500 to 3,500 cycle range is a real sweet spot because it equates to a 10 year life in daily use. Anything much longer than that and you have batteries that outlive the devices they're supposed to power which leads to all manner of wild speculation about how the batteries will be re-tasked rather than recycled.

Apr 23 12:35 AM

[Advill:]

Administration of the hugh amounts involved will be a challenge, lot of companies barely surviving in 2-3 million /year plans will be suddenly with 20X that amount, i don t know the approach that ARRA will have but at the distance you can see scams that are under way, specifically in the ethanol industry (which i have more personal contact) there are scams already in place since 2008 waiting for this money.

Perhaps ARRA will behave as a universal VC but, tons of money will be spend with no results other than benefits of the promoted companies shareholders.

In a Biblical point of view only one good result could justify the squandering but many millions of public funds will be lost in the process.
Regards

Apr 23 05:06 AM

[Douglas Hvi...:]

Part of yesterday (4/22) was spent at a sales push for an auto dealership that moved. Many standard and some hybrid cars around the lot, but also two neighborhood electric vehicles at the main entrance, one of which was gone by the time I left. They know about the new solar roofed NEV also, but it was too new to get for the bash. Given our NDak climate, the choice here is for enclosed, and/or open but not in the winter, please, types. Looking forward to the upgrade (hybridization) kits for low mileage vehicles myself. Like peak oil, PV grid parity is close enough to be argued. But PV boosting of vehicle energy is not! Keep us up to date on the PbC batteries, please.

Apr 23 06:30 AM

[John Petersen:]

Advill, one of the beauties of the ARRA plan is that the something for nothing crowd won't stand a snowball's chance in hell.

The DOE may well agree to make $20 million grants available to companies that you or I would not invest in, but unless those companies can come up with matching funds from private sources, the DOE money won't be released. In 30 years of working in small company finance I've seen very few investors that are willing to throw their good money after somebody else's bad money. The grant availability may make the private tranche easier to obtain, but the private sector will almost certainly serve as a counter-balance against DOE optimism.

Unless both the DOE and private money agree, nobody's money will be spent. That kind of public-private check and balance is, in my view, extraordinary.

Apr 23 06:35 AM

[Old Wizard:]

John, Your being encouraged by the latest pronouncement by DOE is a little disconcerting. I see it as the typical approach of an R&D oriented mentality and not one that wants to solve our energy problem with any urgency. The numbers quoted for the Chinese goals relative to windgenerated energy are a case in point. They set the stretch goal, a massive amount of wind energy in 11 years. We talk about being independent of foreign oil by 2030. The approach that says show me your technology is worthy and raise a bunch of money and we'll give you some stimulus money is the typical R&D view with the added downside of no specific goal managed by a government bureacracy. Grid management can't only be done at the end points of a distributed system. Because our national grid is interconnected, control issues are also systemic and the addition of intermittant sources of energy that hopefully are large enough to matter, will require the synthesis of a system wide control logic with very rapid feedback mechanisms. Where is the thinking that recognizes this problem in the energy plan? Just like the natural gas issue, I don't see where this group has thought through any comprehensive energy plan , and while the program can provide gains to the investors who capitalize on the infusion of large amounts of money by the Gov., I fear a golden opportuniity[ perhaps our last opportunity] to solve the serious energy and economic dependency issue is being lost.

Apr 23 08:43 AM

[John Petersen:]

Douglas, I'm having a lot of fun right now talking about issues that are broader than a single company and technology, but you can rest assured that I won't forget my first love in the process.

Old Wizard, the bulk of the ARRA money is for technology deployment and demonstration, not R&D. The DOE is taking about providing matching funds for smart meters, demand response equipment, storage, improved transmission and distribution and distributed generation. Those asset in turn are supposed to make a profit for the sponsoring entities who have to believe the project is important enough to come up with half the cash themselves.

There will undoubtedly be some projects that may not prove to be cost-effective and might therefore be classified as advanced development, but ultimately it will take a private party that is willing to share the risks with the government.

I suspect one of the biggest problems in formulating a comprehensive energy plan is the lack of concrete performance data on the vast majority of the solutions that people are currently developing. If you put enough money on the table to adequately deploy and evaluate the principal contenders on a relevant scale, then a far more rational choice can be made with respect to the second through seventh steps. I agree that we have an immense and highly interconnected problem, but if we don't know what part various technologies can contribute to a solution, we'll never find a solution that does not involve starting over at dirt level.

Apr 23 09:04 AM

[Old Wizard:]

Lack of quantitative data is most likely a problem for many of the possibilities for alternate energy sources. I believe that this administration has already made up its mind that near term solutions which have the most quantitative data , proven technologies and carry the least risk to practical operation will be ruled out[like natural gas transportation] and is driving the country to renewal non-carbon emitting solutions. For these like wind,solar and biofuels the energy dept and administration are not addressing the whole problem which needs an appollo type focus. The problem for near term step increases for wind power generation ,e.g.first needs a near term stretch goal, a total plan that includes removal of political and legal impediments, the development of control equations, logic and software, adequate interim energy storage mechanisms, delivery transport lines with higher efficiency and sufficient funding to match the goals. Projects which support significant development, installation and initial operation of sizeable facilities and their insertion into the power grid need to be defined and funded by the government. If a 100b of the stimulus funds were dedeicated to enabling several such projects in 5 years then I believe real progress would be made. As it stands what oil import reduction does the administration believe or for that matter what do you estimate will result in 5 years? Without establishing significantly important goals that get the country to problem solution in 5 and 10 years, we will be squandering money we don't have and borrow from the Arabs and Chinese on a lot of projects while others like the Chinese make real and near term progress.

Apr 23 07:19 PM

[John Petersen:]

Old Wizard, I share many of your reservations and think domestic natural gas needs to be a much bigger part of the solution than it has been to date. I'm also a bit of a skeptic when it comes to wind and PV solar without cheap ultra-large scale backup which doesn't really exist. There seems to be an increasing focus on thermal solar and geothermal, which is a good thing because both are far more stable. We are also seeing cracks appear in the PHEV wall that I'll be writing about shortly.

Overall, the ARRA smart grid seems to be focusing much more on intelligence, demand response, transmission and distribution, all of which are good things. In any event, we need a coordinated approach that has been sorely lacking in the past.

Apr 23 10:25 PM

[Avooch:]

The grid isn't going to need increased capacity upgrades. Power demand is down worldwide.

The Guys who stand the most from Grid build are AMSC and ABB - here is some in depth analysis of both companies:

gudovac1941.blogspot.c...

Jul 24 11:08 AM

[John Petersen:]

Avooch, I know ABB very well since it's a Swiss based company and is largely responsible for the incredibly stable power grid I enjoy every day. I'm also fairly familiar with AMSC. The reason I don't discuss either company is that I don't have any particular expertise in either generation or distribution technologies. The only sector that I can claim to know in depth is storage. If I ever find myself with a client engagement that requires me to learn those sectors like I've had to learn storage, I'll be delighted to comment, but I learned years ago that knowing your limitations is more important than knowing your strengths.

Jul 24 12:01 PM

[Avooch:]

John,

Thanks for the response.

Storage is a certainly a big issue. We could solve a lot of T&D issues with better investment in storage.

I have never been able to get my arms around why storage is such a niche factor.

Jul 27 05:57 PM

[John Petersen:]

Avooch, it's not so much a niche factor as an idea whose time has come. Historically, it's been cheaper to waste excess electricity than store it. Between rising fuel costs and an increasingly overburdened grid, that dynamic is changing rapidly. Utilities are finally coming to grips with the idea that storing power during off-peak periods is cheaper than building and operating new on-peak resources. They're also seeing that even a little distributed storage can sometimes defer massive investments to upgrade transmission and distribution resources for several years. When you add renewables to the mix the economic argument for storage becomes compelling. At Storage Week, the California Energy Storage Alliance did a presentation that showed how adding enough $500 kWh storage to push PV solar by a maximum of 4 hours could increase the IRR on the entire system by about 50%. Those numbers are not easily overlooked.

Jul 28 01:23 AM

[Freya:]

John, any comments on ENS?

Apr 21 06:03 PM

[Freya:]

You have to be able to measure it before you are able to Tax it or create a market for it. You will find that the tech to do this isn't available on every street corner.

Do you know of any companies providing this service?

Apr 21 12:51 PM

[Freya:]

John: AXPW has months to go before anything is finalized. A MOU isn't a contract.

Apr 21 10:18 AM

[Freya:]

The local version with only a 35 mile range and 4 hr. charge from a 120 volt line are being priced around $11K, if you include a 10% tax credit , you have a $10K EV.

You have to visit the website for dealerships but I believe there is one in Orland Park.

Apr 21 10:15 AM

[Freya:]

I hope you are right. My baby needs a new pair of shoes. ZNNMF is making the right gurgling noises to attract that sort of attention.

Apr 21 09:02 AM