Battery Investing for Beginners, Part 2 44 comments
-
Font Size:
-
Print
- TweetThis
Last Friday I published "Battery Investing for Beginners" as an introductory piece for investors who don't know much about the energy storage sector but are interested in learning more because of the hugely successful initial public offering by A123 Systems (AONE). Since the article was well received and there seems to be a good deal of reader interest, I've decided to continue the theme with a series of articles where I'll try to build a contextual framework for the industry and show where various types of energy storage devices and their manufacturers fit into that framework. Since I don't want to spend too much time replowing old ground, I'll rely on hyperlinks to my earlier blogs and third party source documents.
I'm a lawyer, not a journalist. My undergraduate degree was in accounting with a solid base of hard science. I've spent the last 30 years working in securities law where most of my work involved small natural resource or technology development companies. I'm not an engineer or scientist, but my chosen field of practice requires me to understand the science well enough to explain it. My foundation in the energy storage sector dates to 2003 when I took on a client named Axion Power International (AXPW.OB) that was organized to develop a novel energy storage device that's half lead-acid battery and half supercapacitor.
I spent the next five years working as Axion's general counsel and served as a member of its board for four of those years. I stepped down from my position as Axion's board chairman in January 2007 and brought in successor legal counsel in early 2008. I still own a substantial long position in its stock. In short, I know the energy storage sector well and understand what the principal players are trying to accomplish, but I come from the lead-acid side of the business and because of my long history with high-tech innovation I'm not as excited by gee-whiz technology as many commenters. I like to think of myself as a cautious optimist who sees the opportunities but never overlooks the challenges.
Everybody understands the basic problem. We passed an inflection point for peak cheap oil in the late '90s and fuels that are expensive today can only become more costly in the future. We've also passed the inflection point for peak cheap electricity. When you factor in concerns over CO2 emissions as a possible cause of climate change, we have a real mess on our hands. The good news is that fundamental economics are finally kicking in and forcing us to attack the issue of energy waste while we search for new ways to generate electricity from non-traditional sources. Merrill Lynch strategist Steven Millunovich believes we are at the dawn a new industrial revolution, the age of cleantech. I believe he's right.
When I started writing this blog, I decided to limit its scope to "pure-play" energy storage device manufacturers that file regular reports with the SEC. The decision resulted in three noteworthy exclusions: Johnson Controls (JCI), which is the largest battery manufacturer in the world but only gets 15% of its revenue from battery sales; SAFT Groupe (SGPEF.PK), a profitable French battery manufacturer that does not file reports with the SEC; and BYD (BYDDY.PK), a Chinese manufacturer of cell phones and automobiles that gets 23% of its revenue from battery sales and does not file reports with the SEC. The decision also left me with a small but reasonably comparable short list of companies that only differ in the nature of their products and the development stage of their businesses. For investors who would rather track an index that includes JCI and BYD, I recommend the Energy Storage and Battery Technology Stocks Index (*BTTRY) published by Tickerspy.
There are two basic classes of energy storage devices: cool devices like lithium-ion batteries, supercapacitors and high-speed flywheels that promise extraordinary performance and are relatively expensive in terms of cost per unit of storage capacity; and cheap devices like lead-acid batteries, flow batteries and low-speed flywheels that offer lower levels of performance but are relatively inexpensive. My favorite source of cost data on energy storage technologies is a July 2008 Sandia National Laboratories report on its Solar Energy Grid Integration Systems – Energy Storage (SEGIS-ES) program. The following table separates the raw Sandia data into short duration power technologies, short duration energy technologies and long duration energy technologies; orders the technological contenders based on the average of current and 10-year projected cost data reported by Sandia; and identifies the American companies I follow that are focused on each storage technology.
| Current Cost | 10-year Projected | |
| Short Duration Power | ($/kWh) | Cost ($/kWh) |
| High-speed Flywheels (composite) | $1,000 | $800 |
| Beacon Power (BCON) | ||
| Lithium-ion Batteries | $1,333 | $780 |
| Altair Nanotechnologies (ALTI) | ||
| A123 Systems (AONE) | ||
| Electrochemical Capacitors | $356/kW | $250/kW |
| Maxwell Technologies (MXWL) | ||
| Current Cost | 10-year Projected | |
| Short Duration Energy | ($/kWh) | Cost ($/kWh) |
| Flooded Lead-acid Batteries | $150 | $150 |
| Exide (XIDE) | ||
| Enersys (ENS) | ||
| C&D Technologies (CHP) | ||
| Valve Regulated Lead-acid Batteries | $200 | $200 |
| Exide (XIDE) | ||
| Enersys (ENS) | ||
| C&D Technologies (CHP) | ||
| Low-speed Flywheels (steel) | $380 | $300 |
| Active Power (ACPW) | ||
| Lead-carbon Asymmetric Capacitors | $500 | <$250 |
| Axion Power (AXPW.OB) | ||
| Lithium-ion Batteries | $1,333 | $780 |
| A123 Systems (AONE) | ||
| Ener1 (HEV) | ||
| Valence Technologies (VLNC) | ||
| Altair Nanotechnologies (ALTI) | ||
| Current Cost | 10-year Projected | |
| Long Duration Energy | ($/kWh) | Cost ($/kWh) |
| Zn/Br Batteries | ||
| ZBB Energy (ZBB) | $500 | $250/kWh |
There are also two basic classes of pure-play energy storage companies: emerging entrepreneurial companies that are developing new technologies; and established manufacturing companies that have solid customer bases and sustainable business models. A fifth and final class is a rapidly expanding group of Chinese battery manufacturers that have listed their shares in the U.S. but are not expected to be major players in the growth of America's domestic battery industry.
To allow for fundamental differences among their technologies and business models, I've segregated my universe of pure play energy storage companies into five classes that I'll briefly describe below and summarize in a series of tables that identify the individual companies and provide summary data on their share prices, market capitalizations and key financial ratios.
Cool Emerging -My cool emerging class consists of thinly-capitalized developers of relatively expensive energy storage technologies. Their annual operating losses are typically large in relation to their total assets and they'll be dependent on additional financing for an indeterminate period of time. Cool emerging companies are typically valued on the basis of the perceived potential of their technology and their expected time to market.
| Name | Symbol | Price | Mkt. Cap. | P/E | P/B | P/S |
| Ener1 Inc | HEV | $7.07 | $826.0 | 9.8 | 37.5 | |
| Valence Technology | VLNC | $1.81 | $229.7 | N/A | 11.6 | |
| Altair Nanotechnologies | ALTI | $1.17 | $123.5 | 2.7 | 33.8 | |
| Beacon Power | BCON | $0.73 | $88.1 | 4.2 | 213.7 |
Cool Sustainable -
My cool sustainable class consists of well-capitalized developers of relatively expensive energy storage technologies that have a substantial customer base. Their annual operating losses are typically smaller in relation to their total assets and their need for additional financing is generally less pressing. Cool sustainable companies are typically valued on the basis of their earnings potential and business development plans.
| Name | Symbol | Price | Mkt. Cap. | P/E | P/B | P/S |
| A123 Systems | AONE | $18.73 | $1,838.9 | 3.6 | 20.5 | |
| Maxwell Technologies | MXWL | $19.27 | $500.5 | 6.2 | 5.4 | |
| Ultralife Corporation | ULBI | $5.90 | $99.8 | 1.3 | 0.5 |
Cheap Emerging -
My cheap emerging class consists of thinly-capitalized developers of relatively cheap energy storage technologies. Their annual operating losses are typically large in relation to their total assets and they'll be dependent on additional financing for an indeterminate period of time. Like their cool counterparts, cheap emerging companies are typically valued on the basis of the perceived potential of their technology and their expected time to market.
| Name | Symbol | Price | Mkt. Cap. | P/E | P/B | P/S |
| Axion Power | AXPW.OB | $2.12 | $75.9 | 18.3 | 62.8 | |
| ZBB Energy | ZBB | $1.24 | $15.4 | 1.9 | 8.7 |
Cheap Sustainable -
My cheap sustainable class consists of well-capitalized manufacturers of relatively cheap energy storage technologies that have a substantial customer base. Like their cool counterparts, cheap sustainable companies are typically valued on the basis of their earnings potential and business development plans.
| Name | Symbol | Price | Mkt. Cap. | P/E | P/B | P/S |
| Enersys | ENS | $21.71 | $1,040.0 | 15.7 | 1.4 | 0.6 |
| Exide Technologies | XIDE | $8.01 | $604.9 | 2.0 | 0.2 | |
| C&D Technologies | CHP | $2.14 | $56.3 | 1.3 | 0.2 | |
| Active Power | ACPW | $0.88 | $58.2 | 3.1 | 1.3 |
Chinese Companies -
My last class consists of Chinese companies that have listed their shares in the U.S., but operate solely in Asia. They're generally profitable and may export products to the U.S., but they're not expected to be key players in America's drive to develop a thriving domestic battery manufacturing industry.
| Name | Symbol | Price | Mkt. Cap. | P/E | P/B | P/S |
| Advanced Battery Technologies | ABAT | $4.09 | $253.1 | 11.8 | 2.1 | 5.3 |
| China BAK Battery | CBAK | $4.19 | $241.7 | 1.5 | 1.1 | |
| China Ritar Power | CRTP | $5.47 | $105.3 | 20.0 | 2.8 | 1.0 |
| Hong Kong Highpower | HPJ | $3.34 | $45.3 | 23.2 | 2.5 | 0.7 |
My fundamental premise is that current conditions in the energy storage sector are a lot like they were in high-school.
There are four publicly held lithium-ion battery developers vying for supremacy in the high profile contest to become the technology superstar for PHEVs and EVs. They're competing against each other, a number of foreign companies and a host of privately held companies for a market that will be a long time coming. While they all trade at prices that would give value investors a nosebleed, the odds that a particular company will make it to the NFL draft are remote at best.
At the other end of the spectrum there are a small number of emerging and sustainable companies that are manufacturing and developing technologies for the more mundane energy storage needs of the average consumer who would be hard-pressed to buy a $22,000 Prius class hybrid, much less a $40,000 Volt class PHEV.
As the newly born excitement over the energy storage sector wanes and fundamental investment analysis gains supremacy, I expect the relative valuations of the cool technology companies to either remain flat or fall while the relative valuations of the cheap technology companies rise to more reasonable levels. On Thursday I'll put together an analysis of how that investment thesis has held up since last November and establish a new set of foundation metrics for future tracking comparisons. I continue to believe cheap will outperform cool for the foreseeable future. Only time will tell whether I'm right or wrong.
DISCLOSURE: Author has a large long position in Axion Power and small long positions in Enersys, Exide, ZBB Energy and Active Power.
Related Articles
|
-
The Seeking Alpha 100
See allThe top 100 stock
market authors
selected for publication
Seeking Alpha 100 » -
Fastest Climbers
Authors with the largestSee all
increase in followers
in the last 7 days
Fastest Climbers » -
Top Commenters
Top commenters,See all
as ranked by their peers
Top Commenters » -
Top Instabloggers
The 100 most active
Instabloggers.-
1
David Fry
-
2
TraderMark
-
3
Don Dion
-
4
Cliff Wachtel
-
5
Mike Havrilla
Top Instabloggers » -
1
-
Top StockTalkers
TopSee all
StockTalkers.
Top StockTalkers »
This article has 44 comments:
By the way, my entire article archive is available here:
seekingalpha.com/autho...
Old Wizard, for the time being, Ford and GM have no choice but to buy their batteries from Asian sources because the US factories won't be built for a couple of years. I have every confidence that once the manufacturing facilities are built, the business will flow home rapidly because a thriving domestic manufacturing infrastructure is viewed as a very high national security priority. To get a feel for what I'm talking about, read the introduction to the unpublished "pre-decisional draft" of a DOE report titled National Battery Collaborative (NBC) Roadmap that you can download from my public folder at me.com:
files.me.com/john.pete...
It's a bit turgid, but fascinating nonetheless.
I don't know if you've covered this before, but it would be interesting to know what the relative $/ Kwh/ weight is for the various technologies. Also, due you have a sense of the relative potential market for various sectors of storage- light transporation / heavy transport/ grid support?
Thanks, Isaac
216.39.100.211/PRNewsw...
It is a Korean company who are producing the battery for the GM Volt. Is it Kokam? If so, despite A123 being based upon an MIT developed technology, I'd be cautious at this stage.
Although you continue to help educate me in the space and I share many of your views, I must say data is changing as fast as R&D in the space is growing. In particular, many of your "cool" categories may turn out to be more than just fluff in a fairly short period of time.
For example, I just checked some prices; retail LiFePO4 cells are currently running at under $900 / kWh (down about 40% in 18 months) - not far from Sandia's 10-year projected price...in about 1 year's time.
For portable electronics that you want to carry in your pocket weight is everything and buyers will pay a huge premium for light. Likewise, if the goal is to have a car with a battery pack that can drive it for 40 or 50 miles, then weight is an ultra-critical metric. If the goal is to provide 1.5 kWh of batteries for a micro, mild, or full hybrid, the maximum weight differential is less than 70 pounds, or about 2% of vehicle weight.
Once you start talking about a stationary application where the weight will be sitting on a concrete pad, the only person who cares about the weight is the concrete contractor.
jarco, I'm aware of Dow Kokam and JCI Saft. Unfortunately neither of those joint ventures is a publicly traded company in its own right and all of the partners other than Saft (a French company) are far too diversified. So there is nothing for me to talk about in my list of pure-play companies.
Alt commuter, there are any number of Chinese sites that offer cells over the internet at prices that are far below the Sandia numbers. Those prices, however, are for cells rather than packs and the lithium scientists that comment regularly on my articles are very concerned about technical specifications like weight tolerances which indicate a high level of variability from cell to cell, which is absolutely deadly for large packs. I'm confident that the lithium-ion producers will push prices down over time, but it won't be anywhere near the Moore's law kind of improvements that people who don't understand the battery industry generally expect.
Had we adopted this recent DOE philosophy a decade ago, when Ovonics was in it's infancy and when LiFePO4 was first invented by Dr. John in Texas, maybe we wouldn't be at this point now? But for Chevron sitting on the NiMh patents for 12 years, and nobody wanting to back the early developers in the U.S. of Lithium Iron Phosphate, we now find ourselves in almost the same position with batteries as we have with oil. Once again, dependent on a foreign source for the technology development and the product itself.
When will America wake up and decide to reclaim it's previous glory as a world class manufacturer? I fear it is already far too late for that to happen. What I see is manufacturing continuing to go off-shore to lower wage markets and the only domestic activity being done here is assembly, quality control, and warranty service.
This will be our lot in life from now on because we just can't support the investment for new factories anymore in America.
On Sep 30 04:03 PM jarco wrote:
> I note the absence in your presentation of Dow Kokam, a joint venture
> between Dow Chemical and the Korean battery company, Kokam. An informative
> summary can be found at:
>
> 216.39.100.211/PRNewsw...
>
> It is a Korean company who are producing the battery for the GM Volt.
> Is it Kokam? If so, despite A123 being based upon an MIT developed
> technology, I'd be cautious at this stage.
MRTTF, thanks for clarifying the LG-GM connection. I stopped after explaining why I didn't talk about the bigger joint ventures. For the record I also ignore LG, Panasonic, Sanyo, Samsung and Sony because they're all too diversified.
When you throw all these in a mixer along with the numerous solar names and different technology what are the chances of picking the long term winners. Remember, once upon a time there were
60 US car manufacturers...
...However, your first sentence is a little out of touch. As in...ever hear of Johnson Controls?
Mayascribe, all of JCI's current manufacturing is in Nersac France as part of the JCI-Saft joint venture. They have big plans to add US capacity (as do many people) but nobody is currently producing lithium-ion batteries in bulk in the US. Ener1 will probably be the first out of the chute with US production, but as far as I know their plant in Indianapolis is still in the start up stage.
And if you like the carnival shell game, check out Microbubble Tech who claim to have an earth shaking cheap nano tube carbon fix for existing production lead acid batteries. But they sold themselves, in a swap of valueless stock, to Ecolocap, (OTC-BB: ECOS) a company with zero sales for the past 2 years. And then Ecolocap sold the rights to market and distribute the mysterious carbon nanotube microbubble battery in all of North America for a paltry $2M to Next-Alternative Inc, (TYN.F) (that's Frankfurt, Germany exchange). Notice that as the shells are shuffled around, none of the companies have any money and there hasn't been a word spoken about manufacturing. It is fascinating to watch, but keep your money in your pocket on this one.
observation. the wind energy association is dead against storage. they would rather continue with no storage to keep the cost down even though energy is wasted and not utilized. many of their studies are incomplete.
two factors will change this in the market. coming states mandate to use more alternate energy. the more alternate evergy is utilized the greater the need for storage. no substitute will be available as now .
if cap and trade becomes reality utilities that are high in c02 emissions will gravitate to alternate energy instead of paying fines to
meet emission shortcomings.
investor patience is required in this industry. have to be on board before events happen. once in motion it is often too late.
May I respectfully remind you that the Ovonic Materials manufacturing plant in Troy, Michigan, is intact, and is now onwed and operated as a specialty alloy production operation by Great Western Technology, Inc., the parent of which, Great Western Minerals Group, is trying to get funding for the development of its rare earth mines in Canada, the Republic of South Africa, and the United States. The business plan of GWMG is to vertically integrate first its rare earth magnet materials prodcution in the UK at its Less Common Metals, Ltd. subsidiary and then its NiMH battery electrode operations at GWTI.
The reason that Ovonic Materials was sold is that COBASYS, Chevron Ovonic Battery Systems, would NOT source NiMH battery electrodes or electrolytes from nearby Ovonic Materials. Instead it got these items from Japan. The reason for that is the fact that rare earth raw materials became unavailable from the US in 2002 when Chevron Mining shut down MolyCorp's Mountain Pass (California) operations after Chinese predatory pricing put MolyCorp out of the rare earth production business.
Energy Conversion Devices, Inc. moved its NiMH battery eelctrode production to China in the late 1980s in order to secure rare earth raw materials for battery component operations. Ovonic Materials, although fully facilitized to "mass produce" NiMH battery components became just an R&D center, and, after ECD decided to concentrate on thin film amorphous solar photovoltaic cellls, became superfluous. With great foresight Great Western bought the Ovonic Materials facility two years ago as part of a long term strategy to become a vertically integrated producer of fabricated rare earth alloys for REE based technologies.
Now if only the people and/or government of the USA had the same amount of foresight we would already be making NiMH batteries domestically from domestic raw materials.
Now, Don, please tell me why I should believe that the US government's policies for "manufacturing" lithium-ion batteries are going to work out differently? Are the policy making geniuses of Washington now funding the development of American lithium or cobalt or nickel mining? Gee, it seems they are fighting those "evils" tooth and nail. Shall I hold my breath while they pat themselves on their asses for devloping a domestic battery industry without bothering to give equal weight to developing the natural resources for manufacture batteries of any kind?
Good luck.
On Sep 30 05:47 PM Don Harmon wrote:
> There is no other choice right now than to buy batteries from Asia
> for U.S. Car companies, and until the proposed plants actually fo
> get built from the ARRA grant money, it will be years before they
> are shipping product here in the U.S.. In the meantime we will be
> paying the going rate for any Lithium-ion vehicle batteries including
> shipping which just makes the costs that much higher.
>
> Had we adopted this recent DOE philosophy a decade ago, when Ovonics
> was in it's infancy and when LiFePO4 was first invented by Dr. John
> in Texas, maybe we wouldn't be at this point now? But for Chevron
> sitting on the NiMh patents for 12 years, and nobody wanting to back
> the early developers in the U.S. of Lithium Iron Phosphate, we now
> find ourselves in almost the same position with batteries as we have
> with oil. Once again, dependent on a foreign source for the technology
> development and the product itself.
>
> When will America wake up and decide to reclaim it's previous glory
> as a world class manufacturer? I fear it is already far too late
> for that to happen. What I see is manufacturing continuing to go
> off-shore to lower wage markets and the only domestic activity being
> done here is assembly, quality control, and warranty service. <br/>
>
> This will be our lot in life from now on because we just can't support
> the investment for new factories anymore in America.
evworld.com/currents.c...
On Oct 01 10:59 AM Don Harmon wrote:
> Jack, thanks for illuminating this as I was not aware of the Great
> Western connection to Ovonics. Regarding your comments on the availablility
> of raw materials I also happen to agree with you on that. It looks
> like a roller coaster ride for lithium for the next decade for sure:
>
> evworld.com/currents.c...
seekingalpha.com/artic...
We've all grown up with the idea that shortage means we'll have to pay more. For a lot of these critical raw materials we're about to learn that the word shortage means not available at any price.
Jack Lifton is absolutely right when he argues that encouraging the domestic production of batteries without encouraging the domestic production of raw materials to make the batteries is a fool's errand that simply exchanges one form of dependence for another.
1) The Grant winners including A123 and JCI/Saft have promised to build factories in Michigan and in Florida respectively for U.S. based Lithium-ion battery cells.
2) While I applaud them for getting this money in order to bring jobs to the U.S. in a terrible economic situation, I also have to think that these "factories" will not be on-line until 2012 if all goes smoothly, and all the environmental issues can be resolved?
3) Given the points that Jack makes and the fact that new mining operations here, and in other parts of the world, cannot be ramped up to meet demand for at least 5 years (if we start today) the prospect of raw material shortages are going to impact these ventures in a way that nobody has really though through yet.
4) The Chinese are already making noises and submitting white papers to the government that indicate they will probably restrict the export of their rare earth metals which means any factories built here will be impacted in ways that are now unforseen.
My conclusion is that the best course for LiFeBATT moving forward is to keep the production of our battery cells off-shore, either in China or Taiwan, and to focus on engineering complete plug & play systems with a dual mode of execution of our business plan. We will continue to import both complete battery packs from our Taiwan assembly plant and also individual cells and components to assemble complete packs here in the U.S. @ our facility in Virginia. This will enable us to best service our customer base without venturing into manufacturing of cells domestically. The more I have been thinking about this the more I am almost glad we didn't get one of these government grants and have to build a manufacturing plant from scratch. I will watch A123 and JCI/SAFT with great interest to see how they accomplish this task and how much support they get from investors?
My gut feeling is that these new "factories" will not be able to compete in price or quality that we can get now from our Asian suppliers given that they have a big headstart and we can ramp up their QC and their cell making technolgy much quicker than these new ventures can build plants from ground zero.
On Oct 01 12:16 AM John Petersen wrote:
> Don, when manufacturing for NiMH and lithium-ion was first established
> in Asia the rationale was simple - they were portable device batteries
> and those devices were all being made in Asia. Until Toyota came
> out with the Prius in 1999, there was no serious thought that these
> lightweight and powerful batteries might be used for much larger
> applications. Under the conditions that existed at the time, the
> production decisions for small cells were rational. Under new conditions,
> the decisions to produce large format cells domestically are also
> rational. I have a high level of confidence that America will return
> to prominence as a manufacturer, but I don't foresee a return to
> the "high-touch" manufacturing of the 1950s. Instead it will be highly
> automated and very capital intensive.
>
> MRTTF, thanks for clarifying the LG-GM connection. I stopped after
> explaining why I didn't talk about the bigger joint ventures. For
> the record I also ignore LG, Panasonic, Sanyo, Samsung and Sony because
> they're all too diversified.
For production at Ovonic Materials there were two 1000 lb capacity continuous operation vacuum induction furnaces, a powder metal production facility (very fine powder in the micron and submicron range), and a Raney nickel reactor for charging nickel-metal hydride alloy powders with hydrogen. The entire operation is in a building designed to safely process with hydrogen, and the powder metal production equipment is in a separated room capable of automated operation under inert atmosphere.
I have known Stan Ovshinsky for 61 years, and I never once knew him to stint on costs by buying second rate equipment.
I am going to guess that duplicating the facility would cost between 10 and 20 million dollars and the skill of the remaining workforce is priceless.
I believe that GWMG picked up the facility (in a leased building) for at most $2 million-it was a steal if it goes back into operation.
Jack
On Oct 01 10:28 AM John Petersen wrote:
> Jack, in Don's defense the fact that Great Western had bought the
> Ovonics facility in Troy slipped by me too. I bought a few Great
> Western shares a while back because you spoke so highly of the company.
> I thought I was simply buying into a mining and reserve play and
> did not understand that the processing capacity was part of the package.
> Now you have me dying of curiosity. I don't know whether you have
> the numbers at hand or not, but I'd love to know what Energy Conversion
> Devices invested in Troy originally and what Great Western bought
> the facility for.
Thanks again for inciting this excellent forum for discussion on various battery (storage) solutions. Your many contributors bring a useful and diverse experiences to the discussion along with many good insights. Having used a number of various battery technologies over many years for small capacity but demanding applications, I appreciate the auto vehicle problems where real costs are a big part of the equation (unlike many research applications). A relevant question is how much will these developments (or lack thereof) affect our economy and future? The question of natural resources is very interesting, but perhaps less than critical because we have often overcome the difficulty of providing for external resource needs. The cold war mentality promoted the concept that we must become self sufficient in everything, but it isn't always necessary for successful production of a product in demand worldwide.
Now that A123 has launched their successful IPO they are trying to bury the lawsuit against them by U.T. and Phostech and I expect they will want to do this very soon. See Bloomberg link below:
www.bloomberg.com/apps...
On Oct 01 11:18 PM John Petersen wrote:
> Old Wizard, I'd never let it be said that I'm a gung ho advocate
> of PHEVs because we both know that I think using batteries to power
> a car at highway speeds is just about the dumbest idea in the world.
> That being said, my criticism is reserved for the senseless waste
> of batteries rather than an inherent flaw in the batteries themselves.
> Asian manufacturing prowess is renowned, but the draft lithium-ion
> battery roadmap I've spoken about at length talks about the need
> to leapfrog Asia by taking the chemistry through three generations
> and the manufacturing process through two generations in the next
> six to eight years. When it comes to inventing new technologies and
> inventing new ways to make technology products, the U.S. has it all
> over Asia because it's people are not as fearful about being wrong,
> or about trying an idea, failing and trying another idea. If it was
> simply a question of preserving the technological status quo, I'd
> give the Asians a big advantage. Since I know the ultimate goal is
> something far better than we currently have, I think the US has the
> advantage. The effort may fail, but you can't win a game you don't
> play.
Your incessant rants against the usage of batteries in PHEVs rather than in HEVs are unnecessary. The market should be able to deal with the allocation of battery production between PHEVs and HEVs because, at least in the US, the current economics of an unsubsidized PHEV purchase is terrible and that of an unsubsidized HEV purchase is marginal. As a side note, these rants are not in your self interest since you should be encouraging the demand for large format batteries, the area where Axion competes. Digression over, let’s put some numbers to HEV vs. ICV and PHEV vs. HEV economics for the US.
First let’s compare the economics of a 50-mpg HEV with a 30-mpg ICV. Assume 12,000 miles per year of driving, $3 per gallon gasoline and a $4,000 price premium for the HEV compared to the ICV. The HEV would consume 240 gallons per year, which is 160 gallons less than the 400 gallons annually consumed by the ICV, for an annual fuel saving of $480. Over a 10-year period (of stagnant gasoline and electricity prices), the savings total $4,800, for an ROI of 3.5% on $4,000 – an ROI well below loan interest rates. However, the ROI is fairly sensitive to the annual mileage that one assumes. For example, at 20,000 miles per year, the fuel savings are $800 annually and $8,000 over ten years for an ROI of 15.1 % on the $4,000 price premium. For less than 10,000 miles of annual driving for 10 years, the ROI is negative.
As mentioned, the current economics of a PHEV are terrible compared to an HEV. The energy savings arise because the 1 kWh of electrical energy required to move a PHEV 5 miles costs 5¢ (assumed off-peak charging rate) and the 1/10 of a gallon of gasoline required to move a HEV the same distance costs 30¢. Therefore, every kWh of battery charge used to propel the PHEV will save 25¢. However, the cost of 1 kWh of battery capacity is about $1,000, with promises of a much lower price, and it would provide about 2,500 charge-discharge cycles – enough for 250 commutes annually or 2,500 commutes over 10 years. Over this ten-year period, the net energy savings per kWh would be $62.50 annually and $625 for ten years, for an ROI on $1,000 of – 7.74 % (yes, minus 7.74 %). At a $500 per kWh battery cost, the ROI on the $500 would still be a less than sterling 4.3 %.
For Europe, the economics are more favorable. Assuming energy costs of 10¢ per kWh and $7 per gallon, and 9,000 miles of annual driving or 250 annual commutes, I get ROIs of 16.4 % for HEV vs. ICV and 8.1 % for PHEV vs. HEV. Throw in the diesel factor (10 % less fuel consumption), and these ROIs become 13.0 % and 5.3 %, respectively.
In summary, there is nothing in these numbers that suggest PHEVs should fly off the showroom floors in the US or Europe, unless heavily subsidized.
What I'm gathering is that more than a few commentators in your columns I've been reading since July '08 are writhing and screaming about how you ignore all the potentials of the future (I was one of them back then). Yet, it is apparent to me, other than the very kind Don Harmon, that no one is putting serious money behind their beefs. If they have, you have more than proven to this investor, that their money is languishing.
Our government, through it's recent generous awarding of billions to the battery sector underscores how important batteries are for national security reasons. But what goes into the batteries (REEs) is far more important. That China controls 97% of all the world's REEs scares the bejesus out of me.
For your pro-lithium readers I suggest they check (AMLM). Possibly, a within-the-USA answer to where lithium will come from. But that mine is still three years out from "possibly" producing lithium for batteries.
(That's the way I'm playing lithium, and (ALML) was one of the very few stocks up in yesterday's market evisceration; up another nickle today)
Great Western Minerals Group Ltd.: Specialty Metals Asset Purchase Complete
Wednesday, 14 December 2005, 12:00 CST
Great Western Minerals Group Ltd. (TSX VENTURE:GWG) (OTCBB:GWMGF) ("GWMG") is very pleased to announce that it has signed, through its wholly-owned subsidiary Great Western Technologies Inc. ("GWTI"), a formal Purchase Agreement with Energy Conversion Devices Inc. ("ECD"), (NASDAQ:ENER) and an affiliate, whereby GWTI is purchasing certain specialty metal production assets located in Troy, Michigan. The production equipment, located in two adjacent plants, is capable of producing nickel metal hydride (NiMH) powder, used in hydrogen storage materials and NiMH rechargeable batteries, and a range of other specialty metals, powders and super alloys. The plants are currently in operation.
The purchase price is US$1.3 million, of which ECD will receive $906,000.00, payable in installments over two years, with ECD and its affiliate each having the option of converting half the purchase price into common shares of GWMG...
Fredrick88, thanks for the reference. I don't have a lot of Great Western but it's done well for me so far.