Axion Power: Common Sense Solution for Alt. Energy Storage 17 comments
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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 (AXPW.OB) 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.
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This article has 17 comments:
Also do you have any thoughts about the future of Zenn and EEstor? Thanks!
Long ALTI, ENER, CLWR, DSTI
My biggest concern with flywheels is finding an application that cycles frequently enough to fully-utilize the impressive cycling abilities.
As I keep saying, I'm bullish on the entire sector and every company in the sector. I even like the lithium ion companies. I just don't think they'll be able to live up to the current hype in applications that don't cycle.
Ultimately the cost of any storage solution depends on the number of cycles you are going to use per day. A 25,000 cycle flywheel that you are going to cycle once or twice per day has a 50 year useful life and the time value of money kills you on the out-year cycles.
I have visited with a current director of Axion with whom I have a casual relationship (alumi of the same university) who has refrained from expressing much information, insider trading rules and all, but who does have faith in the long term prospects. Interestingly he also said he is partial to flywheels. With that trivia you may know who I am talking about.
Since you are no longer a director I hope you can be more free with your information. How would you compare the potential for the Firefly technology with PbC? How about EEEI?
The Axion wesite suggests tests are ongoing with Hybridyne Power Systems, Inc. How have these tests done - progress reports? The website does not supply followup info and it was not discussed in the recent online conference call. The lack of followup makes me curious whether the tests were disappointing. The website in fact still has the pink sheets as the stock exchange. The lack of updating gives one pause....un-profession...
There were supposed to be tests of Prious and Civic Hybrid battery pack replacements. Any news on those?
Basically I see lots of potential but no progress reports regarding actual users or actual third party tests with good results. Why the lack of good news?
I hope you have opportunity to address these issues for me and others reading your blog. Thanks again for the information. Like you, I hope all these technologies are successful in their appropriate market niches.
occur until a vehicle can range 300+ miles between
refueling and the refueling is quick and readily available
similiar to todays fuel stations. The above comments
were very interesting however. Thanks.
Firefly is working with a new type of current collector (as was the ill-fated PWTC) that is designed to increase energy density and power by making more of the active material available to the electrolyte and reducing the weight of the current collector by replacing a lead core with a foam core. The basic chemistry of the device is still lead-acid chemistry on both the positive and negative sides.
Axion's PbC technology is a true Lead-acid-supercapacit... hybrid that has lead-acid chemistry on the positive electrode and supercapacitor chemistry and physics on the negative. So trying to compare the PbC technology with Firefly's technology would be futile. They're in different classes.
The biggest challenge in the energy storage business is taking a new device from the laboratory to the factory. The landscape is littered with companies that had good laboratory results but couldn't figure out how to manufacture the darned thing. That's where Axion's strategy differs from the rest. It started from the premise that manufacturing is the only thing that really matters.
Most of 2006 was devoted to engineering a PbC device that needed hand crafted carbon electrodes but could otherwise be manufactured on an existing lead-acid line. The goal was to identify the failure mechanisms in the manufactured devices and correct them. The next rounds of changes dealt with improving performance. Now that the team is satisfied with performance of the manufactured device, the work is directed to automating the electrode fabrication process so that large numbers of manufactured PbC batteries can be put into third-party hands for testing. To do it right, each step takes time and technical reports on the intermediate steps are merely interesting because the only performance that matters is the performance of a manufactured device.
I wish the process was faster, but taking something from gee whiz science to a manufactured product in five years is actually pretty remarkable.
Competitors in the storage industry love to publish laboratory results and imply that the industrial engineering will be no big deal. Axion's board is guided by men who understand the immense gulf between creative thought and product sales. The past has been 10 units per day. The immediate future is closer to 100 units per day and in six months they're looking at capacity of 1,000 units per day. These levels will be enough to support third-party testing that is more than a multi-layered science fair project. They should also represent a rapidly growing revenue stream from PbC sales since the NYSERDA project is paying $1 wH for the test batteries.
EEStor is interesting, but the technology is still in the early science fair stage. It could be a game changer or it could never leave the lab. Time will tell.
How environmentally friendly is Axion's technology? I understand the batteries (like most lead-acid) can be recycled, but my concern is that lead is so pollutant, that even a small % that is not properly disposed or recycled can do a lot of harm.
I have been an energy conversion devices investor for a long time (specially for the solar and memory divisions). What is your opinion on NiMH and Cobasys?
Energy Conversion Devices is a fine company and the only reason I've not mentioned them is that they're so diversified.
NiMH has been the leading technology in the HEV market since inception and I think it has significant advantages over Li-ion. The PbC battery may, however, be a dark horse contender in that market. Last year, an Australian Commonwealth Scientific and Industrial Research Agency retrofitted a Honda hybrid with a lead-acid-carbon battery pack and took it for a 100,000 mile test drive that worked fabulously. If you do a Google search for "CSIRO and hybrid" you'll find a number of articles. We think the CSIRO battery may infringe Axion's patents, but that is an entirely separate issue from whether the technology works.
I read the Ener1 earnings call transcript on SeekingAlpha (bottom of page 7) and think you may have drawn a questionable conclusion from an answer that the speaker acknowledged was intentionally evasive.
Recent blogs indicate that Th!nk is planning to sell the Th!nk City without batteries for roughly $25,000 to $35,000 and then lease the battery separately as an option. So wouldn't have a lot of confidence in conclusions drawn from as intentionally vague reference to "half the cost of the vehicle." It could just as easily, and more believably, mean that the battery cost will be roughly equal to the cost of the vehicle without a battery.
A123 is an alternative supplier of batteries for the Th!nk City and their reported manufacturing costs in China were roughly $1.50 per watt-hour during the first quarter of this year. Until Ener1 bites the bullet and discloses its pricing, I wouldn't count on back of the napkin numbers, particularly when those numbers give you a result that represents a 60% discount from the closest competitor's actual production costs.
We are both in the dark on this one until A123 and Ener1 release price lists, but you don't offer immense discounts in a competitive market if a small discount is enough to get the business.
Overall, storage is expected to grow into a $100 billion business. The vehicle market will be an important part of the total, but it will pale in comparison to utility and alternative energy applications.
Have you looked at Lithium Technology Corp. (LTHU.PK)? They make large size Lithium Ion batteries which allow safer operation, since fewer cells are needed, and have high capacity and current draw rates. They entered the Nurburgring 24 hour race with the Apollo super-car hybrid. The car finished on electric power alone; as a mechanical problem put the gas engine out of commission, but demonstrated high potential for hybrid racing applications, as it was able to hold with the leaders until having mechanical problems. They are involved with Volkswagen and EnerSys. They supposedly have a proprietary manufacturing process. I have been unable to get a price per Kwh number from them, though.
Thanks!
Mike