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Long-term horizon, nano-cap, micro-cap, alternative energy
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Last week I published a brief article on Seeking Alpha that drew surprisingly emotional responses from stockholders of Ener1 (NASDAQ:HEV) and Altair International (NASDAQ:ALTI). Since the article was my first foray outside the friendly confines of SEC reporting and my own website, I was more than a bit shocked. You'd think I'd shot somebody's dog!

For the record, I'm extremely bullish on the entire energy storage sector because I believe our biggest near-term gains in the battle for energy independence will come from more efficient use of available resources. I also draw substantial comfort from the conclusions of firms like Merriman Curhan Ford and Lux Research who foresee 200% to 300% growth in the storage sector over the next 10 years. Over the long-term, I believe emerging power technologies will radically change the way we produce energy and emerging efficiency technologies will radically change the way we use energy. The transition will be painful, but ripe with opportunity for astute investors.

It may come as a surprise to some, but the capital markets are not always rational. While the amount of money flowing into inherently variable power generation technologies like wind and solar is immense, the energy storage sector languishes in the doldrums. The logical disconnect is so severe that industry leaders like First Solar (NASDAQ:FSLR) have higher market capitalizations than the entire storage sector combined. Battery manufacturers are hopeful that an eagerly anticipated initial public offering by A123 Systems will finally draw attention to the storage sector. But whatever the catalyst, I believe it's only a matter of time before the storage surges to prominence because cost efficient storage is an enabling technology that can make most of the emerging alternatives work better.

Lithium-ion is an exciting technology and holds immense promise for transportation applications. But returning to this side of the rainbow, the world's biggest lithium deposits are in Argentina, Chile and that world-renowned raw materials exporter China. There are no U.S. manufacturers that are currently producing and selling Li-ion batteries in bulk and the next generation of PHEVs and EVs are still on the drawing board. So even if the safety, materials availability, cost and product development issues can be resolved, it will take years to build domestic manufacturing capacity.

Last year, US manufacturers made and sold approximately 120 million lead acid batteries. While advanced lead-acid batteries will never compete with Li-ion in terms of size, weight and energy density, recent developments like Axion Power's (NASDAQ:AXPW) PbC electrode technology, Firefly Energy's composite foam technology and EnerSys' (NYSE:ENS) thin pure plate lead technology promise huge gains in both performance and cycle-life and are ready for implementation TODAY rather than SOME DAY. With the performance gains that these new technologies provide at modest cost, it will take a very long time for Li-ion battery prices to fall to a price point where they survive a rigorous cost-benefit analysis.

Lao Tzu is reputed to have said: "A journey of a thousand miles must begin with a single step." In energy storage, the logical first step and the only step we can take today is advanced lead acid batteries. Li-ion may eventually emerge as the best available technology, but I've been a Macintosh user long enough to know that the best available technology is not necessarily the dominant technology.

Disclosure: Author holds a long position in AXPW.OB and is a former director of that company.

Source: Lithium-Ion Batteries and Centerfolds, Part II