John Petersen

Obama Announces List of Grant Recipients, Recognizing Significance of Hybrid Markets

Gordon, thanks for the kind words. Like most writers I can only speak from the perspective of the shoes I stand in and many issues and opportunities in this sector can be the source of virulent disagreement. I do recognize my limitations and that's one of the reasons I love an active comment stream. I believe that exposing issues from all perspectives is important for people who are going to be making financial decisions. At the same time, I do like it when everybody keeps the tone civil and the discussion on point.

Obama Announces List of Grant Recipients, Recognizing Significance of Hybrid Markets

Over the last several months commenters have convinced me that the price of lithium is not a primary driver of the price of lithium ion batteries; it's all the other components and materials. They've also convinced me that global lithium resources are probably adequate for expected future demands. What is not adequate is the existing infrastructure to actually produce sufficient quantities of lithium to meet expected demand.

I'll accept the proposition that Galaxy has a lithium deposit that can be profitably exploited as a hard rock mine. But having the deposit is meaningless unless Galaxy has the financial resources to get the permits, buy the equipment, do the development work and actually turn their deposit into a working mine that produces a useful commodity.

I'll accept the proposition that lithium can be extracted from seawater. But the technical feasibility has no bearing on whether anyone on the planet owns and operates a facility that actually does so.

I've spent 30 years working with natural resource companies that have invariably had amazing resources, but lacked the hundreds of millions of dollars in development capital they needed to turn the in-place resources into proved producing reserves.

In R&D, the science is generally the easy part and the industrial engineering to get to a commercial product the costly part. In natural resources the identification of a resource is the easy part and the engineering, permitting and development costs a small (or large) fortune. Until somebody can show me (a) the existence of a resource, and (b) possession of the required permits and capital to develop that resource, I'll worry about supply constraints.

Obama Announces List of Grant Recipients, Recognizing Significance of Hybrid Markets

Mayascribe, the detailed report on what happened prior to the recent unrest in Honduras is terribly informative and serves as a model example of just how wrong the press can get the facts. They blithely accept whatever they're fed without question. If Woodward and Bernstein had taken that approach, RMN might well be honored for his statesmanship instead of vilified for his ex-post-facto participation in a panty raid.

DiggerUK - ;-)

Obama Announces List of Grant Recipients, Recognizing Significance of Hybrid Markets

Speculawyer was looking at a Form 4 from a couple years ago that had a bad date. But it is a stock where a WMA shows a very different picture than an SMA.

Obama Announces List of Grant Recipients, Recognizing Significance of Hybrid Markets

Mayascribe, you may want to take another look at the long-term moving average charts.

Obama Announces List of Grant Recipients, Recognizing Significance of Hybrid Markets

Wizard, I didn't comment on the Buffet investment because he bought BYD at $1.12 per share, which was probably a very good price, and the market price is currently ranging in the high $5s and low $6s. Since the attractiveness of a stock is directly related to your entry price, BYD is not as attractive a buy today as it would have been a year ago.

Mayascribe, your $2 Exide has to be looking pretty good right now.

Advill, I had expected GE to get something and was surprised by the outcome, actually there were several surprises. Unfortunately, I find myself in a position where I can't say much more about the grants without alienating somebody. The Exide "with" Axion grant is perhaps the most curious and it will be fascinating to watch and see how it finally comes together. Hopefully we'll all learn more when Axion has its earnings call next Thursday.

User 432382, as far as I know, Axion has solid strategic alliances with both East Penn and Exide. Management has always tried to avoid becoming to closely aligned with any one producer because over the long term it would like to be able to sell electrodes to all producers, a bit like Intel and the computer manufacturers. My sense is that the DOE is driving the process and it wants to see all of the lead-carbon technologies taken to the next level. So I'm not entirely sure what went on behind the scenes.

Axion's permitted capacity is 3,000 batteries per day and the New Castle plant has three production lines. Two are high volume flooded battery lines and the third is a lower volume AGM battery line. The PbC batteries can only be made on the AGM line. I've never seen the capacity figures broken down on a line-by-line basis. So until Axion decides to upgrade the existing lines, I would peg PbC capacity at under 1,000 per day. New Castle has been a great facility to use as a prototyping lab for industrial engineering, but there are a number of companies with AGM plants that have higher capacities and more automation.

A 90 AH -12 Volt lead-acid battery is 960 wh, or close enough to 1 kWh for estimates. As you remove active lead content, you reduce volumetric energy density proportionally. Given the range of lead-reduction numbers I've seen (20% to 40%), I would expect a final number in the 600 to 800 wh per unit range with great power.

The existing New Castle plant can generate respectable revenues and provide a solid revenue base, but the real performance will come if Axion can successfully implement its platform business model and get to a point where it is manufacturing high value electrode assemblies in volumes for use by other manufacturers.

Obama Announces List of Grant Recipients, Recognizing Significance of Hybrid Markets

engstudent, when the study comes out I would appreciate a copy.

I'd also like you to contact me directly so that we can have an off-line conversation on a couple of issues that tie back to your well-written instablog. The contact information is on my profile page.

seekingalpha.com/autho...

Obama Announces List of Grant Recipients, Recognizing Significance of Hybrid Markets

adamnb, I ran that idea past Tom Konrad and Charles Morand and they agreed that the universe of companies was too small to support an ETF and it would be very difficult to sell the concept to a manager.

Engstudent, I'm not entirely sure what studies you're talking about but the nanomarkets white paper teaser for the full report says:

"As the percent of wind and solar on a grid passes above 10–15 percent instabilities can occur if there is no storage capacity. In fact, Ireland put a moratorium on the connection of new wind power to their national grid due to instabilities as the wind generating capacity exceeded 7% of overall grid capacity."

This is far more consistent with the views I heard at Storage Week.

User 434314, the California Energy Storage Alliance gave a presentation at Storage Week that showed using storage to shift the 12 noon output peak for solar by 4 hours using storage could almost double the IRR. They might well be able to help you with your analysis.

You always have to be careful with terms like "most promising" because without a timeframe the term is meaningless. I love flow batteries for appropriate applications where the need is four to six hours of dependable power. They are less attractive when the application goal is to smooth out brief instabilities and protect against power outages. The short and sweet answer is that utility storage is a monster big tent with plenty of room for a variety of technologies to make an important contribution.

Obama Announces List of Grant Recipients, Recognizing Significance of Hybrid Markets

ginchinchili, I just received a preview copy of a new market research forecast from nanomarkets.net titled, "Batteries and Ultra-Capacitors for the Smart Power Grid: Market Opportunities 2009-2016" and will probably write about some of their key conclusions within a week or two. One of the more striking is a revenue forecast of $7+ billion per year by 2016 for grid connected batteries.

In the interim I have a project I've been working on with Jack Lifton that will take me a step away from storage, but keep me inside the limitations of my knowledge. It should be fun.

Obama Announces List of Grant Recipients, Recognizing Significance of Hybrid Markets

Wizard, it came as a surprise to me that GE didn't make the cut, but I have to admit that yesterday was full of surprises both on and off the grant announcements. As a former oil and gas guy, I think NG is an unfairly maligned resource that's looking a good deal more plentiful than it did just a few short years ago. I'm with Fitz and Lounsbury that there should be a broader focus to energy policy than there is. That being said, policies are what they are until they change and it's easiest for me to work with the rules than try to rewrite them.

Obama Announces List of Grant Recipients, Recognizing Significance of Hybrid Markets

nakedjaybird, I don't disagree at all.

speculawyer, it's good to see you again. It's been a long time since we last snarled at each other. I was wrong in my initial read of the new legislation and my early assessment of the percentage of tier one grants that would go to lithium ion. Nevertheless, an allocation of 2/3 lithium-ion and 1/3 products that can be manufactured today at reasonable prices is still a far sight better than the 100% lithium that some commenters were predicting. So I guess we live and learn. By the way, since it's been a while since you commented, I don't know whether you ever got a chance to read the unpublished "pre-decisional draft" of a DOE report titled National Battery Collaborative (NBC) Roadmap that I received in early June. It certainly seems to be a blueprint for current events in the lithium-ion space and is a must read for anybody who is truly interested in learning about the future development path, timetable and costs. See:

files.me.com/john.pete...

In any event, it looks like we have us a horse race, which is all I've ever wanted. I still think that the PHEV and EV development path will take us to cost-effective vehicles over the next decade or so, I just don't expect it to happen overnight.

Gosh-137, thank you for the heads up! I don't actually write about GM very often and the symbol was inserted by an editor because I put question marks in that particular blank. But I'll pass the word.

Obama Announces List of Grant Recipients, Recognizing Significance of Hybrid Markets

ccm226, because of my prior relationship with Axion I try to stay away from commenting on specifics, but I think their target pricing will be competitive.

jerrydd, I've never seen anything that indicates that either the Furukawa Ultrabattery or the Axion PbC use carbon fibers. In fact I've been in several presentations where Dr. Buiel said Axion is basically using a better grade of the granulated activated carbon used in water filters.

Obama Announces List of Grant Recipients, Recognizing Significance of Hybrid Markets

123andy, it looks like the DOE has done its best to set the stage for a horse race. The most money went to lithium-ion, but NiMH and lead carbon both got respectable levels of funding, so it's hard to accuse anybody of picking winners and losers. It would probably be fairer to say that they just gave a large snowball a substantial shove and started it rolling down the mountain.

Even the companies that didn't get the nod did a tremendous amount of work on their grant applications that won't go to waste. If I'm right that A123's IPO will be the first of a coming avalanche of financing projects in the storage sector, then everybody who did the work and prepared a complete grant application is well positioned to step quickly into the private and public capital markets. I can pretty much guarantee that investment bankers and venture capitalists will be scouring the DOE's public records in their search for the next A123.

Obama Announces List of Grant Recipients, Recognizing Significance of Hybrid Markets

jerrydd, while I'm sure that political power played a role in some of the larger awards, there were a lot of high profile, well regarded and well connected companies that didn't get the nod for their applications. So I suspect the process was much more technology focused than might appear at first blush.

For over a year I've been pounding the table about the A123 IPO being a sea-change event and it will be. To lock down yesterday's grant award they'll have to increase their deal size by $250 million to cover the matching funds; so I have to imagine that the offering total will be well north of $500 million. In other words, A123 is going to be a huge and very important deal.

Now let's set the way back machine to a different era. In August of 1995, there were no public internet companies when Netscape did its IPO. The predicted price was $14, the offering went off at $18 and the stock ran to $75 on the first day. From that day forward the rush was on and every investment banker and venture capitalist in the country was out beating the bushes for the next Netscape. I couldn't even begin to list the number of major companies that made their debuts over the next 18 months. Once the A123 offering goes off, I expect the same thing to happen in the energy storage sector. These things are never isolated events. They always come in waves.

Obama Announces List of Grant Recipients, Recognizing Significance of Hybrid Markets

renim, there are a lot of fine companies that didn't get the nod on their grant applications, including some up and comers that are very well known and have received substantial press attention over the last year. But I have to admit that it feels very good to have the DOE agree that lead-carbon is an important technology for micro and mild hybrids.

I'm personally a real big fan of using both NG and diesel in mild hybrid configurations, but there seems to be a mind set that does not push those alternatives to the top of the pile.