Lithium-Ion Batteries and Centerfolds, Part II

Last week I published a brief article on Seeking Alpha that drew surprisingly emotional responses from stockholders of Ener1 (HEV) and Altair International (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 (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 (AXPW.OB) PbC electrode technology, Firefly Energy's composite foam technology and EnerSys' (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.

Comments

[Inforthemoney]

HEV, will have a production facility on line ( 5 months) by the end of the year 2008, here in North America. They will begin to fulfill thier agreement w/ TH!NK Global located in Oslo Norway. They will have the ONLY production facility in North America. Todate HEV has the largest contract for Li-Lithium batteries. The facility is located Indianpolis USA. The North American facility will give Ener1 a great stratigic advantage, with superior technology. Please visit the website. You could type in EnerDel in your tool bar and see for yourself the achievements of Ener1 and it's subsidies.

[ghalb]

The only fallacy I see in Mr. Petersen's analysis and comments about the timeline for cost effiicent Li-ion battery market introduction is the complete omission of breakthrough technology that would make Li-ion
highly competitive in the near future. It is really hsard to be truly objective when you are long in a competing technolgy.

[paultaut]

Look to China's ABAT for battery growth for the mundane products from electric bicycles to Coal miners helmets to all electric buses.

They have access to a market that foreigners can only dream about.

[Mayascribe]

You are learning! But you still have quite a ways to go in wrapping your brain around lithium ion batteries.

When you wrote: There are no U. S. manufacturers that are currently producing and sell Li-ion batteries in bulk..." Wait just a darn minute. Please go Google, "Duracell lithium," owned by Procter and Gamble. Or, Google, "Energizer lithium." Both these USA companies are already producing Li-ion batteries in bulk, and have been for years.

Further, you failed to do your global homework. China BAK battery, Inc. (CBAK) is the world's largest producer of Li-ion batteries. Open up your Canon Powershot digital camera and pull out the battery.

That carpenter outside using his cordless drill in "Everywhere America" is Li-ion powered. The Apple laptop you wrote this article with, uses, as you noted, a Li-ion battery. The light on those coal miners plastic hats? Need I say those lights are Li-ion powered?

When you watch the Olympics in China, there will likely be a time when Bob Costas talks about those 200 taxis driving around Bejing...powered by Li-ion batteries.

Johnson Controls/Saft will be putting its Li-ion battery in the 2010 Chevy Volt, that is, if GM is still around.

Much less the $70 million dollar order that Ener1 (HEV) will begin filling later this year with the Think! vehicle in Europe.

On a sidebar note: Did you know that the very first pill to treat depression was a pill made of Lithium? Over the next ten years I will be increasing my stake Lithium-ion related stocks, and I fully expect I will never need that pill!

Yes, lead acid batteries from companies like Exide are still dominant. But the Li-ion battery wave is coming and, in my opinion, the time has already arrived to begin seeding a few bucks in the various Li-ion related companies like Ener1, Altair International, Ultralife Corporation (ULBI), Polypore International, Inc, (PPO) and China BAK Battery, Inc. (CBAK).

Why? Because over the next ten years there will be a an emerging market of a few hundred million new middle class people in India and China. They're are going to need cell phones, laptops, and very soon, electrically powered cars.

One more thing: On your drive home today, please notice how many Toyota Prius' you see.

[StateofConfusion]

Assuming there are adequate sources for Li, the qualities they have are almost required in the auto transportation sector. Electric cars hae not had success until recently (hybrids) because the range was too limited.

There is a place for the new lead acid batteries and that is in the local storage area where power is generated by solar or wind. However, this is too costly for mass generation farms.
Base load infrastructure will need to be increased by use of Nuclear and probably clean coal and geothermal.

69% of oil usage is in transportation and that is the main area that must be addressed. This is where Li batteries will be used and HEV will have a large market. For hybrid cars and large trucks, we can use new engine technology (see AXVC, TTEG, CYPW) that can burn most liquid or gas fuels.

[User 229640]

(1) Large static power storage (ie. to buffer utility-sized wind and solar) will be done by flow batteries, because they scale up so well. Look 'em up.

(2) There is no such thing as "clean coal". It is non-existent technology, nothing but a phrase invented by Big Coal to prevent development of alternatives to filthy coal.

[leh]

There is huge capital investment being poured into large cell lithium development by battery makers across the planet, and I'm very surprised no one here has mentioned some of the largest players chasing this pot of gold, namely Sanyo, Saft, LG Chem, Panasonic EV, Hitachi, the list goes on...

Perhaps the most immediate big lithium pack developments will come out of Agassi's Project Better Place EV pilot program in Israel, Denmark, and Portugal as the project is being pushed at a very aggressive pace and Carlos Ghosn of Renault/Nissan is fully onboard.

Also, the Chevy Volt test mules are already running some early lithium packs from LG Chem and A123 with positive results. Add to this the fact that virtually every big automaker out there has announced plans for PHEVs within 2-3 years and I can't help but think we will see some very exciting developments shortly.

The big wildcard is price, of course, and this could be a stumbling block at first, but I have to think there will be a breakthrough here as well in the form of some kind of subsidies to get this baby launched. Far too much at stake here to stop this train methinks...

[Erich J.Knight]

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[john s.gordon]

if you don't believe in clean coal go to terre haute IN & look @ the destec gasifier/CCGT repowering.
> jack

[StateofConfusion]

For more info on clean coal power generation go to the Dept. of Energy web site at www.fossil.energy.gov/...

An excerpt from their 2008 newsletter:
The FutureGen concept announced in 2003 planned the creation of a near-zero emissions, 275-MW power plant that would produce hydrogen and electricity from coal, and serve as a laboratory
for commercial development.

Hardly a made up term though coal is not an ideal energy source. It will require government regulation to make it happen and we will need it. The use of all alternative energy sources must be pushed.

[fireball]

it may not be clean enough yet but because of supply i think the profit potential will drive the private sector to refine the technology until we have a cost effective cleaner fuel. beacon seems interesting as power storage tech. gbrc is experimenting with a new approach to cleaner coal.

[fireball]

JOHN S GORDON thanx for the earlier info on clean coal. i know you are much more up on it than many. if you see the investment in it you like and are willing to share your insight i will probably follow your lead. i also know you have better comprehension of chemistry than i do.

[inthewings]

john.s.gordon, and if you think clean power plants make for clean coal, go look at mining country, all those black lungs, acidified streams, ...

[VLNCanon]

What rock did you crawl out from under?

Toyota is introducing lithium iron phosphate batteries in their 2009 Prius Hybrid and PHEV in 2010.

[hitech-al]

The energy storage sector has seen massive investment in li-ion in recent years, Chinese manufacturers are selling li-ion batteries in various formats all over the internet and li-ion is clearly the dominant emerging battery technology, endorsed repeatedly by government, scientific institutions and chosen by industry, yet the writer purports to know better. The writer is obviously not cognizant of the changing world around him and his article is nothing more than a defense of an old and dying technology.
Change is particularly hard for some to swallow, especially for those invested in that which is about to be changed.

[sapereaude]

I'll bet our species will find a way to use up every source of energy that can replace human physical effort. It's in our genes. But if we can't eventually find a way to get ALL of our energy from real-time sunlight and its derivatives--wind and hydro--we'll end up in terminal entropy in another few centuries.

[Leslie W.]

The following press release on Lithium Tech Corp. and Enersys was published in the Wall Street Journal, July 10. There's tons of research being done on lithium batteries; even the oil companies have gotten in on it (e.g., XOM).


Lithium Technology Corp. Announces Memo of Understanding With EnerSys
July 10, 2008 8:00 a.m.

PLYMOUTH MEETING, Pa., July 10 /PRNewswire-FirstCall/ -- Lithium Technology Corporation (LTC) (OTC: LTHU) announced today that it has signed a memorandum of understanding (MOU) with EnerSys (NYSE: ENS), one of the world's largest and most reputable battery companies. The MOU calls for the establishment of a close relationship on the advancement of large lithium ion batteries between the parties.

The MOU was signed on July 4, 2008 in Zurich, Switzerland, by Mr. Myles Jones, Director, Aerospace, Defense & Renewable of EnerSys and Dr. Klaus Brandt, President & CTO of LTC. The parties intend to finalize the agreement this summer.

Upon the completion of the agreement, EnerSys will become the exclusive distributor of LTC's product line of GAIA large lithium ion batteries and cells to the defense and military market as well as to the civil aerospace market, utilizing its worldwide network of sales and support offices, and its strong presence in these markets. Additionally, EnerSys will market LTC's products for stationary and renewable applications on a non-exclusive basis. LTC will become the exclusive supplier of large lithium ion cells to EnerSys. The term of the agreement is for three years with an option for extension by mutual consent of the parties.

"LTC is recognized for our unique lithium ion products by peer battery companies as a leading technology company, and this MOU with EnerSys reaffirms that," commented Dr. Brandt. "We are very pleased to partner with EnerSys, a world leader in the industry, with a strong performance in many markets and immaculate reputation for product quality and service. We believe that this partnership will increase the exposure of LTC in the battery market and increase our revenue growth."

"This relationship with Lithium Technology will allow EnerSys to offer our customers additional lithium ion product options to complement our broad line of lead acid and other specialty products to meet our customer's applications and needs. We look forward to finalizing the agreement in the near future," stated John Craig, Chairman, President and Chief Executive Officer of EnerSys.


About Lithium Technology Corporation:
Lithium Technology Corporation (LTC) is a global provider of large format rechargeable power solutions for diverse applications, and offers the largest lithium-ion cells with the highest power of any standard commercial lithium ion cell produced in the western hemisphere. With more than 20 years of experience, LTC leverages its extensive expertise in high power and large battery assemblies to commercialize advanced lithium batteries as a new power source in the military and national security systems, transportation and stationary power markets.

LTC manufactures the GAIA(R) product line of large, high power hermetically sealed rechargeable lithium-ion cells and batteries. The Company's product portfolio includes large cells and batteries from 10 times the capacity of a standard laptop computer battery to 100,000 times greater. LTC manufactures a variety of standard cells that are assembled into custom large batteries complete with electronics (battery management systems) and electronics to communicate with other components of the system for performance monitoring.

LTC headquarters are located in Plymouth Meeting, PA and R&D in Nordhausen, Germany. LTC sales for the U.S. and European markets are managed out of each of the offices. For more information about LTC, its technology and products, please visit www.lithiumtech.com .


About EnerSys:
EnerSys, the world leader in stored energy solutions for industrial applications, manufactures, distributes and services reserve power and motive power batteries, chargers, power equipment, and battery accessories to customers worldwide. Reserve power batteries are used in the telecommunications and utility industries, uninterruptible power suppliers, and numerous applications requiring standby power. Motive power batteries are utilized in electric forklift trucks and other commercial electric powered vehicles. The Company also provides aftermarket and customer support services to its customers from over 100 countries through its sales and manufacturing locations around the world. More information regarding EnerSys can be found at www.enerSys.com .


Safe Harbor for Forward-looking Statements:
The foregoing information contains forward-looking statements, which involve risks and uncertainties relating to such matters as financial performance, technology development, capital raising, business prospects, strategic partnering and similar matters. A variety of factors could cause LTC's actual results and experience to differ materially from anticipated results or other expectations expressed in these forward-looking statements. This notice does not constitute an offer of any securities for sale.


SOURCE Lithium Technology Corporation
/CONTACT: Allyson Curtis, [phone], or [e-mail]...

/Web site: www.lithiumtech.com
/Web site: www.enerSys.com