John Petersen

Battery Technology: A Different Set of Rules

Gary, with 70% of li-ion battery costs going for raw materials and the rest going for expensive physical plant and labor, I suspect the glorious economies of scale that everyone talks about are just happy talk. Valence is currently making $30 million a year of Li-FePO4 and A123 is making another $50 million. If economies of scale were likely don't you think we would have seen some of them kick in by now?

Energy Storage Opportunities vs. Irrational Expectations

I'm not a chemist or privy to inside technical information, but I would love to hear an explanation of how ALTI's proposed lithium titanate battery is different from Toshiba's existing lithium titanate battery. See:

www.greencarcongress.c...

Energy Storage Opportunities vs. Irrational Expectations

Many military applications have significant size and weight constraints that make Li-ion the only reasonable choice. So for portable devices that soldiers are expected to carry into battle I agree wholeheartedly.

With respect to naval assets, I'll simply point out that before the advent of small nuclear power plants, every submarine in the fleet ran on lead-acid batteries that were re-charged by diesel engines. When the Navy starts talking about building lighter and more compact battleships, I'll get excited about the perceived advantages of Li-ion. Till then, it's just another earmark.

Energy Storage Opportunities vs. Irrational Expectations

I was in Vietnam a half-dozen times last year and you can't even begin to imagine the work ethic, intelligence, openness and genetic capitalism that I saw. The streets were filled with flocks of scooters that flowed around the occasional car like rocks in a stream. The air quality was terrible.

As important as the American and European markets are, we're talking about 600 million people who want to upgrade the high-end transport they already have vs 3.8 billion people who want to acquire transport, any transport. I think T. Boone Pickens has it right for the U.S. because CNG backed by wind and solar is the most affordable step toward energy independence and improved air quality.

While I think Li-ion is too costly for cars, it makes tremendous sense in scooters and power-assisted bicycles that have a much larger market in economies that desperately need cost-effective solutions.

The market drivers I see are global, not national. There may be a mild crisis in the financial sector because bankers loaned money to folks who couldn't pay it back. But there is an even more powerful crisis in the energy sector where 3.8 billion Asians are demanding two gallons a week and reducing American and European supplies by ten gallons a week. Any way we cut it, the Asians are going to be willing to pay a higher price for two than we are for ten.

I think A123's IPO will be successful because it has to be. The world market demands it. My only problem with the Li-ion business plans is the desire to make a quantum leap from laptops to SUVs. When the producers come to the realization that they've set their targets a bit too high and scale back to smaller batteries for bicycles and scooters, I think their revenue expectations will grow exponentially.

As a point of clarification, Axion's negative electrode is made from porous activated carbon, not hard carbon. The benefit is that the carbon electrode significantly increases power and recharge rates while completely eliminating sulfation. So you end up with a lead-carbon battery that can withstand the stresses of regenerative braking.

Energy Storage Opportunities vs. Irrational Expectations

The tough thing about tracking a sector's performance is you have to choose arbitrary time intervals, present the facts good or bad and then move on. If you try to explain why a particular company did well or poorly, then you'd have to do it for all of them and the overview would be lost in the detail. I agree that a month doesn't mean much. Hopefully the numbers will get more meaningful as time passes.

For those who have not read my entire series, I believe (a) the cost reductions folks generally expect in tech industries are unlikely in the battery industry because it's so materials intensive, (b) there are far too many unanswered questions about the long-term supply of exotic battery materials at a reasonable cost, (c) batteries are the future, and (d) the A123 IPO should give the entire sector a huge boost.

My fundamental point is that until somebody comes up with a hybrid that makes sense to ordinary working people who have to deal with car payments and tight monthly budgets, electric vehicles will remain a rich man's toy rather than a mass market product.

Energy Storage Opportunities vs. Irrational Expectations

I'm hoping the cool new Mercedes Diesel Hybrid will begin to change perceptions in the U.S. After living in Switzerland for the last 10 years I know that diesel really is the only sensible choice in terms of mileage. So I've already decided my next car will be a diesel. But since I only drive 10,000 km per year, it's more cost effective to keep my reliable old Audi a while longer.

Energy Storage Opportunities vs. Irrational Expectations

A quick review of the SEC filings shows that PWTC built and tested a couple batteries and then withdrew its SEC registration. Since the last substantive filing spoke of a breach under the inventor's employment agreement, it looks like they ran out of money. The SEC filings are available at:

www.sec.gov/cgi-bin/br...

Battery Technology: A Different Set of Rules

Jimmi,

You and I are in complete agreement. If an application can use 25,000 charge cycles, then one should buy a 25,000 cycle battery. But if you're only going to use 250 to 300 cycles per year, buying a 25,000 cycle battery is insane.

My mother always told me to buy solid shoes that fit well and matched the the job. So I don't wear my hand made crocodile loafers to garden. The same advice applies to batteries.

Battery Technology: A Different Set of Rules

Someone once said that if you ask an engineer or accountant whether the glass is half-empty or half-full you'll probably get an answer that the glass is too big for the volume of liquid. I couldn't imagine life without Li-ion in my cell phone or laptop. If I still used power tools I'd probably love the technology there too. I just can't buy into the current frenzied thinking that Li-ion will be the holy grail for energy storage because the technology is too powerful and too expensive for the job people want it to do.

Automotive is a prime example. Everything I've read talks about how you need a 50 kWh battery for an EV. Using Li-ion that's a $75,000 battery for a $100,000 sports car (after tax credits). The percentage of the U.S. population that can afford a $100,000 car is miniscule. The percentage that will pay that much for a glorified toy is even smaller.

Since energy storage ultimately boils down to a comparison between the cost of storage and the cost of waste, the market will not buy a battery that can handle 8 cycles per day if the application only needs 1 or 2 cycles and a more cost effective alternative is available.

In a pure EV, everybody talks about either a single cycle per day or perhaps two if you can plug in at work. At two hundred working days per year, somebody who wants a 5-year solution is going to be shopping for a 1,500 to 3,000 cycle battery, not a 10,000 cycle battery.

It's easy for investors to fall in love with cool technologies that have immense capabilities. But when it comes to spending money, the WalMart shoppers have a good deal more sense than many investors. Likewise, utilities that cater to WalMart shoppers have rooms full of engineers and accountants to do the cost-benefit computations that they will ultimately need to justify to a public utilities commission.

If a storage application can take full advantage of the cycling power of Li-ion over a reasonable useful life, that's probably the way to go. Try as I may, I can't make the Li-ion numbers work in the real world for most large-scale applications.

I keep saying that I like the entire sector. I'm not suggesting that Li-ion will fail. I'm only suggesting that it will underperform the less expensive alternatives when the WalMart shoppers start voting.