Alternative energy investing is a strange beast. Investor attention ebbs and flows with amazing speed as folks frantically scurry from one "holy grail" to the next in the hope that they'll be the first to identify the next best solution to the looming fossil fuel crisis. I'm convinced that energy storage will be the next big alternative energy investment sector.
But if I've learned anything over the last five years, it's that there is no holy grail in energy storage because there is such an incredible diversity of current and developing needs. In simple terms, investing in energy storage technology is like investing in shoes. You need to find something that fits well, is priced right and is built for the work that you plan to do. If you don't shop smart, the bad choices can be crippling.
I'm a vocal and unrepentant critic of lithium-ion technology because it's too powerful and too expensive for most large-scale applications. Li-ion is the only sensible choice for portable electronic devices and power tools. A123 System's case for an upgraded PHEV that can travel 40 miles in electric mode before switching to gasoline also seems to have significant merit. But we pass out of the realm of common sense and into a twilight zone of science fiction when battery cost exceeds 20% to 30% of total system cost.
Today, instead of focusing on economics that simply can't work, I'll try to explain why I believe Axion Power International's (NASDAQ:AXPW) PbC[TM] batteries may well be the sensible shoes for the emerging $100 billion energy storage market.
PbC batteries are nothing like the short-lived, shallow-cycle automotive batteries we all grew up with. They are a cross between a sealed lead-acid battery and a supercapacitor; a hybrid that combines the performance advantages of both at an affordable price. By using carbon electrode assemblies from a supercapacitor to replace the negative electrodes in a lead-acid battery, Axion has found a way to eliminate electrolyte loss and sulfation, the two principal causes of lead acid battery failure, and manufacture a low-cost large-format energy storage device that can handle over 1,600 cycles at a 90% depth of discharge with no significant loss of performance. In short, Axion's patented PbC battery is a disruptive innovation that combines two complementary technologies in a workhorse energy storage device that the average guy on the street can afford to buy.
Without getting into the detail provided by Axion's SEC reports and website (www.axionpower.com), the key benefits of its PbC technology include:
- Higher specific power, longer cycle-lives and faster recharge rates;
- Cheap and abundant materials that can be easily recycled into new batteries;
- Designs that use the same cases, covers, positive electrodes, separators and electrolytes as regular lead-acid batteries;
- Manufacturing methods that work in legacy battery plants without installing expensive new equipment or hiring highly trained technical staff; and
- Robust chemistry with an impeccable safety record.
The only shortcomings are that PbC batteries require more space than normal lead-acid batteries and have steeper voltage decline curves. I'm the first to admit that volume is a big issue for something that I plan to carry in my pocket. But it's far less critical in the trunk of a car, the basement of a house or a utility substation where battery volume is just another a design constraint. And while voltage control electronics aren't free, they're not rocket science either.
Axion's current PbC battery production is less than a 100 units per day but new electrode fabrication equipment should boost that figure to 1,000 units per day in the first quarter of 2009. From there things get really interesting.
The die is cast. Estimated utility demand for storage solutions to enable peak shaving, improve power quality and defer infrastructure upgrades is $50 to $60 billion. As wind and solar power decline in price and become more common there will be no grid stability without local energy storage to provide reserve power for the last mile when the sun doesn't shine or the wind doesn't blow. The dominant technology will be the one that does the work for the lowest total cost of ownership, a pair of comfortable sensible shoes.
After leaving quarts of my own blood on the floor, I understand the difference between the leading edge and the bleeding edge of technology. A number of new and emerging technologies are likely to play important roles in the future of energy storage and given the mind-boggling array of possibilities, I couldn't begin to venture a guess about what the dominant technology will be 50 years from now. But in August 2008, I can't identify a single contender that offers the flexibility, dependability and affordability of Axion's PbC batteries. Since I'm 15 years from retirement and less than 45 years from an urn, I'll sacrifice some long-term potential for several years of rapid, predictable growth.
I'm a former Axion director and a big stockholder, so I clearly have a dog in this fight. But I'm also a long-term investor who doesn't have an agenda beyond providing useful information about a low-profile public company with a disruptive technology, established manufacturing facilities, fully-financed short-term growth plans and a current stock price that inspires insider buying. As a practicing attorney, I've had almost 30 years experience working with innovative technologies and the companies that try to develop them. Axion has all of the virtues I look for and none of the weaknesses I've seen in other companies.
Nobody should buy or sell a stock, any stock, based on an opinion blog. But think about the market. Think about the competing technologies. Think about the costs and benefits of each alternative. And while you're at it, think about Axion. Then do you own diligence and make a well-reasoned decision based on business reality instead of PR hype.
We all know the truth of the saying that "Everything Old is New Again." Do you really believe that the cheap, proven and reliable lead-acid battery will be any different?
Disclosure: Author holds a long position in AXPW.OB and is a former director of that company.