General Electric's Impressive Entry into the Grid Based Energy Storage Business 39 comments
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I've been writing about the rapidly evolving market for manufactured energy storage devices in grid-based applications since last August when I published Grid-based Energy Storage: Birth of a Giant. At the time, only a handful of smaller public companies were working on grid-based storage solutions including Maxwell Technologies (MXWL), Beacon Power (BCON), Altair Nanotechnologies (ALTI), Active Power (ACPW) and Axion Power International (AXPW.OB).
Last November, France's Saft Group (SGPEF.PK) announced a partnership with Switzerland's ABB Group (ABB) to develop and commercialize utility scale solutions. As of Tuesday, General Electric (GE) joined the fray when it announced plans to build a $100 million plant for batteries that it will use in hybrid locomotives and grid-based systems.
The new GE plant will make large format batteries based on a sodium sulfur (NaS) chemistry similar to one developed by Japan's NGK Insulators (NGKIF.PK). The aggregate storage capacity of the batteries produced at the GE plant will be on the order of 900 megawatt hours [MWh] annually. At current prices for comparable products, GE's annual revenue from battery sales should be on the order of $400 million. In connection with the announcement, GE's chairman and CEO Jeff Immelt said, “We believe the advanced battery business could be a $1 billion business over the next decade."
As impressive as the GE announcement is, the more impressive fact is that NaS battery systems like the ones GE plans to manufacture can only serve a small fraction of the broader grid-connected energy storage market. In a July 2008 report on its Solar Energy Grid Integration Systems – Energy Storage (SEGIS-ES) program Sandia National Laboratories described the broader market as follows:
Energy storage devices cover a variety of operating conditions, loosely classified as ‘energy applications’ and ‘power applications’. Energy applications discharge the stored energy relatively slowly and over a long duration (i.e., tens of minutes to hours). Power applications discharge the stored energy quickly (i.e., seconds to minutes) at high rates. Devices designed for energy applications are typically batteries of various chemistries. Power devices include certain types of batteries, flywheels, and ECs. A new type of hybrid device, the lead-carbon asymmetric capacitor, is currently being developed and is showing promise as a device that might be able to serve both energy applications and power applications in one package.
It then presented the following chart to illustrate several battery and capacitor technologies in relation to their respective power and energy capabilities. The niche where GE plans to build a $1 billion business is the yellow oval marked Na/S.
Click to enlarge
After discussing the strengths and weaknesses of the technologies that will compete for a portion of the grid-based storage market, the Sandia report went on to summarize the relative costs of the principal energy storage alternatives. The following table separates the Sandia data into power technologies, short duration energy technologies and long duration energy technologies; orders the contenders based on the average of current and 10-year projected cost data reported by Sandia; and identifies the public companies that are focused on each class of storage technology.
| Power | Current Cost ($/kWh) | 10-year Projected Cost ($/kWh) |
| Electrochemical Capacitors Maxwell Technologies (MXWL) | $356/kW | $250/kW |
| High-speed Flywheels (composite) Beacon Power (BCON) | $1,000 | $800 |
| Li-ion Batteries Altair Nanotechnologies (ALTI) Saft Batteries (SGPEF.PK) | $1,333 | $780 |
| Short Duration Energy | Current Cost ($/kWh) | 10-year Projected Cost ($/kWh) |
| Flooded Lead-acid Batteries Exide (XIDE) Enersys (ENS) C&D Technologies (CHP) | $150 | $150 |
| Valve Regulated Lead-acid Batteries Exide (XIDE) Enersys (ENS) C&D Technologies (CHP) | $200 | $200 |
| Low-speed Flywheels (steel) Active Power (ACPW) | $380 | $300 |
| Lead-carbon Asymmetric Capacitors Axion Power (AXPW.OB) Furukawa Battery (FBB.DE) | $500 | $250 |
| Long Duration Energy | Current Cost ($/kWh) | 10-year Projected Cost ($/kWh) |
| Zn/Br Batteries ZBB Energy (ZBB) | $500 | $250/kWh plus $300/kW |
| Na/S Batteries NGK Insulators (NGKIF.PK) General Electric (GE) | $450 | $350 |
I would be remiss if I failed to note that in addition to its plans to directly engage in NaS battery production, GE also has a substantial stake in A123 Systems which is currently testing a Li-ion based frequency regulation system.
The best single document I've found to give investors a basic technical background in grid-based energy storage systems is Sandia's July 2008 report on its Solar Energy Grid Integration Systems – Energy Storage (SEGIS-ES) program. There are also two recent reports from the DOE that I think are "must reads" for investors that want a deeper understanding of how the Smart Grid will develop. The first 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. 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.
In addition to the government reports that focus principally on technological merit rather than investment value, I've written extensively on the companies that are active in the sector. If you want to better understand the potential of energy storage, a rapidly emerging sector that may "dwarf IT to the tune of two orders of magnitude," the following articles can provide a good start.
Grid-based Energy Storage: Birth of a Giant
Alternative Energy Storage: Lithium, Lead or Both?
Alternative Energy Storage: Cheap Will Beat Cool
America Must Rebuild Domestic Battery Manufacturing Infrastructure
Alternative Energy Storage Needs to Take Baby Steps Before It Can Run
Alternative Energy Storage: It's All About Price vs. Performance
Lead-Carbon: A Game Changer for Alternative Energy Storage
Alternative Energy Storage: Cheap Outperforms Cool
Each of my articles includes extensive links to underlying source documents and many have wonderful commentary from readers who have different opinions that are fervently held and eloquently expressed. I have several dogs in this fight and am far from disinterested. But I believe the upside potential for astute investors who position their portfolios early for the coming of cleantech, the sixth industrial revolution, will be handsome.
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 small long positions in Exide (XIDE), Enersys (ENS) Active Power (ACPW) and ZBB Energy (ZBB).
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This article has 39 comments:
Thanks for all the great commentary. I'm following your discussion with interest. I've heard some talk about Niobium as a cheap but effective metal for use in newer rechargeable batteries and as a superconductor in the smart grid. Can you expand?
Thanks,
M.B.
What goes around comes around. In 1966 I did some summer work at Ford (Motor Company) Scientific Laboratories on the alkali metal sulfur, molten salt, storage battery. We looked at all of the alkali metals and concluded that the availability of sodium made it the best choice. Lithium was studied but it was simply not readily available enough to be considered for mass production. As i think about that statement I am amazed that availability was even a consideration, but I think that car company engineering and procurement worked more closely together in those days. To be frank the lack of knowledge of the electrochemistry and reactivity of hot molten salts with container materials was also a big factor. I remember a seminar at the "Sci Lab" in which the director pointed out that the use of NaS batteries for mass transportation was a more practical idea than their use for personal transportation. Lo and behold after only 43 years it may perhaps happen, and I'll bet that in somewhat less than 43 more years a lithium-ion battery for personal ptransportation may well become economcial and safe enough to use. I just don't think that development is going to come out of the bureaucratized operations of budget driven innovation fantasized by the current American government as it supplies its "expertise" in politics to science and engineering.
Great article, by the way. Another definitve overview by you.
Jack Lifton
When I think of sustainability, I think of economic (lowest cost for best performance yielding lowest total cost) justifications, not government incentives.
How much of their $100 million do they expect to get from government funds? And what impact does their support for cap and trade (as a founding member of USCAP) have on this?
Jack, from time to time it's fun to be able to talk about the good things that are happening instead of things that concern me. I've already seen a couple of writers make the heroic leap of saying that NaS may be useful in PHEVs, but that's what happens when people who do not understand the limits of technology insist on writing about it anyway. The thing that excites me most about the developments over the past few months is the change in the class of players. When it was just small battery companies saying "this market is going to be huge" it was easy for the market to be skeptical. Now that we have ABB, Eaton and GE jumping on the bandwagon, the message will reach an entirely different audience and that can be nothing but good for the small companies that can make a credible claim for a meaningful market niche.
Dirk, from what I've been able to gather, GE's been working on NaS for quite a while. There is no question that NaS is a solid technology for larger installations. I have no doubt that GE's timing was impacted by the availability of stimulus money and there were numerous political considerations in their siting decision. But the business was going to happen anyway because it had to happen. We need NaS technology and it is far better economics to buy it from a domestic source than a foreign source. Besides, NGK has enough demand in its own back yard to give the U.S. market the attention it deserves.
ceramictechweekly.org/...
Don Harmon
If I use the numbers in the article, I think the government subsidy is secondary in the GE decision.
John wrote: "..General Electric (GE) joined the fray when it announced plans to build a $100 million plant for batteries.."
and
" GE's annual revenue from battery sales should be on the order of $400 million."
If profit margins are on the order of 10-20%, the payback of the $100 million investment is 16 - 30 months. If your numbers are valid, John, this is an investment that any manufacturer would die for.
John Lounsbury, The NaS battery system that AES tested in cooperation with NGK Insulators had an expected useful life of roughly 2,000 cycles and a capital cost of approximately $2.5 million for system that could store 7 MWh of power and deliver it at a continuous rate of 1 MW. There is a big market for that kind of long-discharge duration storage and I suspect the system might also be very useful for renewables smoothing. With or without stimulus it's a good business for GE. Having GE as the new kid on the block in the storage sector does a lot for establishing the bona fides of a trend I've been talking about for months. It's all good!
I find it interesting that in GE's announcement about the building of a new manufacturing facility they used a lot of forward looking statements including a strong suggestion that they will likely be receiving a significant grant from Uncle Sam, not to mention the other political assistance given them in the building of this facility. Though it is only a preliminary report, EnerSys gave not even an intimation regarding application for any of the ARRA grants. Though I think it's safe to assume EnerSys will be, or already is, an applicant for this money (you may already be aware of their application), I wondered if this issue should have been brought up in yesterday's report, perhaps helping to soften any negative impact from next quarter's weak guidance.
I know different companies have different approaches to their public relations, but do you think this was a faux pas on EnerSys' part, even if the beating their share price is currently taking is only temporary (hopefully)? I was hoping you might discuss this issue for us a bit. Thanks.
Next up, JCI?
About GE... I have heard that they may be readying for a secondary offering. And, I wonder if the new battery plant will build batts for their huge investment in wind power, not only here in the USA, but also with A-Power Generation Systems in China. Seems that would be one logical course of implementation.
Mayascribe, I'm sticking with the pure play battery companies because that's the only place I know to get the pure play. JCI is a fine company, but they really focus on starting, lighting and ignition products from the lead-acid side and Li-ion from the EV side. The problem with JCI is they're so darned big even a nice grant wouldn't make a difference. If you think about using a battery as a power conditioning system to take the spikes out of a group of wind turbines, there is a very natural market in wind farms that use GE turbines. Anything that turns variable into smooth and maximizes facility use is a very good thing for overall economics.
Stationary secondary battery energy storage is very important to wind power and for utility load leveling on the scale mentioned here. Currently, the practical alternatives are pumped hydro, which has limited availability and high capital cost, and thermal storage such as ice for HVAC applications. At $350 per KWh, how does NaS weigh in?
The Sandia chart is very interesting. Since they already did their homework on costs, I wonder why they plotted specific power and specific energy instead of the more useful power and energy cost? For a stationary application, weight and even volume is not that significant.
The physics and economics of GE using regenerative braking in their diesel electric locomotives via battery storage is fascinating. In a weak hybrid configuration, this would undoubtedly raise the fuel efficiency of an already efficent transportation mode. The technology seems like a great fit.
Update: Looks like GE will not be offering a secondary, deducing that as if they were, they would have already jumped into this weeks incredible fund raising party. Buffett's happy as ever.
TinyTim, it's hard to beat the cost of pumped hydro and thermal storage, but they're generally on the right hand tail of the discharge duration curve. GE's primary interest in NaS is focused on hybrid locomotives and distributed utility resources that put the storage precisely where it's needed. Neither need can be filled with some of the cheaper mass storage alternatives.
The specific power and specific energy values are the ones that engineers use to pick solutions. While I agree that costs are more useful for investors, I don't think we're high on Sandia's priority list.
Mayascribe, GE is big enough to bring a healthy dose of credibility to a sector that's been the domain of small-caps till now. As long as the only players in a space are small-caps, the investor types who follow the large-cap world are politely derisive. When a GE makes a credible move into a sector for the first time, folks start looking at where other opportunities may lie.
For reasons I've explored in depth in other articles, I believe the specter of foreign competition in the battery business is errant nonsense. There are about 6 billion people who have recently learned how good the other 500 million of us have it. Every one of them is working overtime to earn his share of the pie. The probability that any country will be a reliable long-term supplier to North American in the face of massive unsatisfied domestic demand is remote beyond reckoning.
When we cut through the fog, energy storage is all about reducing waste to make the pie bigger. But we're going to have to do it on our own.
"It's a very dangerous battery. Just, I'll put that to rest. I mean it's got molten sodium and operates at 650 degrees Fahrenheit, it's a dangerous battery."
So let's not put them *too* far out into the distribution system -- say, no further out than 4kV to 34kV.
AEP's "backyard" energy storage plan is to use lithium ion batteries in the secondary part of distribution at residential service voltages and aggregate them using Advanced Metering Infrastructure into "community storage units". This appears to be the better way to capture distributed generation (customer installed solar equipment).
In other words they need to come off the charger and go into servicve and back on the charger immediately or they get damaged internally.
Maybe GE has some magic new technology that gets around these problems, but they must know what they are doing being that they are General Electric, after all.
www.isea.rwth-aachen.d...
Don Harmon
Don Harmon
seekingalpha.com/artic...
Don Harmon
But I have a question, that to me seems important, that I have not seen addressed. I may have overlooked it. What is the efficiency of the charge and discharge. If I put in 100 KWH, how many KWH will I get out after taking account of losses? How significant is the difference between technologies, and is this an important consideration? What improvements can we hope for in the next few years.
Dangerous molten sodium has GOT to be the ultimate "not in my backyard" issue when we are *literally* talking about people's backyards! NaS at the sub-station level could pass muster, but the liability in backyards would be unbelievable. People would accept Pb in backyards as well, but how much storage can you get with Pb in a 30" by 38" by 40" enclosure? And how much time would they spend replacing cells once thousands of these are installed? AEP is talking NaS at $440/kWh and Li at $500/kWh (in 5 to 7 years). Anyhow, Li has already won the proposal.
Don Harmon
www.comsol.com/shared/...
safariman, the roundtrip efficiencies on batteries are generally pretty good. Tom Konrad has recently published an article that goes into that issue in greater depth and I'll defer to him:
marketquant and Don Harmon, as I noted above, GE is going to make a sodium metal-chloride (zebra) battery rather than NAS. It will have lower operating temperatures than NAS but still be awful hot for anything smaller than a substation. Five to seven years is a long time and winning an initial testing proposal is far different from winning a market. Time and only time will tell.
Old Wizard, you're in a far better position to make those kinds of technical judgments than I am. The thing that excites me about GE's entry into the storage market as a top tier player is the fact that they're GE and they're positioning themselves in a market that was previously the domain of micro-cap and small-cap companies.
Richard, I am also a skeptic when it comes to many of the claims that are floating around in the storage sector, but the fundamental drivers of the cleantech revolution are undeniable and immutable. There is not enough stuff (including energy resources) to go around and unless we want catastrophic global conflict we must minimize waste in all its insidious forms to make more room at the economic table for the 6 billion people who now know how well 500 million of us live. By virtue of the law of large numbers and our profligate past we cannot outspend them. So we either have to make room voluntarily or have it forced on us.
I was worrying about the molten sodium batteries, not the lithium carbonate variety.
Don Harmon
Given that lithium is so rare, and the market for it is increasing almost daily, you’d think that there would be plans to increase recycling capabilities. The growth of lithium batteries should be equal to the ability to recycle them at their end of life a few years hence. That is, for every new lithium battery that comes off the assembly line, there should also be some planned capability to recycle every one of those. That doesn’t seem to be the case. Instead, battery makers seem to be following the usual market economics practice that waits for another party to fill in a need.
As it is, there is only one company, that I know of, that actually recycles lithium-ion batteries, Toxco Incorporated. (“Tox” must have something to do with “toxic.” ) According to the company website, recycling those batteries is not an easy process.
When spent lithium batteries are received at Toxco’s recycling facility in Trail, British Columbia, Canada they are inventoried and stored in earth-covered concrete bunkers. The first step in the recycling process is to remove residual electricity from larger, more reactive batteries. Then the batteries continue recycling following Toxco’s patented cryogenic process and are cooled to minus 325 degrees F (-198 C). ( Lithium, although normally explosively reactive at room temperature, is rendered relatively inert at this low temperature.) Once frozen, the batteries are then safely sheared/shredded and the materials are separated. Metals from the batteries are collected and sold. The lithium components are separated and converted to lithium carbonate for resale. Hazardous electrolytes are neutralized to form stable compounds and residual plastic casings and miscellaneous components are recovered for appropriate recycling or scrapping. If the batteries contain cobalt this is also recovered for reuse.
Don Harmon