truthteller

Energy Storage is Not Needed for Renewables Integration

Only time will tell. However, serious investors can make more informed decisions about energy storage at the department of energy, sandia labs, and John Petersen's articles. Eliaya Goldratt, author of "The Goal" instructs folks to focus on the constraint. If I keep that in mind, while thinking about the smart grid, energy storage is definitely a constraint, maybe the constraint. Any improvements in this area will move us closer to the goal of having a smart grid and investor profits.

It's a little disingenuous to take my comments as meaning, when the wind does/doesn't blow we have to do something with the energy. That's not what I am saying at all, instead power must be regulated as you bring on more varried sources. Specifically, energy needs to be siphoned off and returned to the grid when needed, which they call fast storage like with flywheels. Your argument about cost is the only area where we agree, but admittedly I read it in John's blogs before reading it in yours. Scale goes a long way to solving those issues and the US government has made some significant investments in energy storage.

These blogs ARE about investing and the readership is looking for opportunities to invest. You can bet folks at Merrill Lynch, Department of Energy and Sandia Labs have plenty of experts on staff, including electrical and chemical electric engineers. Plus the folks at Lockheed Martin are pretty savvy too.

None of your sources have actually picked up an energy storage system manufactured by NGK, ZBB, Beacon Power and tested them. However, Sandia has tested and written extensively about those and many others. So, I find them far more reliable, even if they are headed up by a guy with a physics degree. For as much as I care, they could be headed up by the queen of sheeba, as long as she has good people working for her. The European Union also has a report out on energy storage.

I am not necessarily reading your posts as much as putting a word of caution out there for novice investors.


On Dec 19 06:44 PM engstudent wrote:

> truthteller, thanks for the links. I've been reading John's articles
> for over a year now, he's the reason I came to seekingalpha in the
> first place. I respect his analysis. He approaches the subject of
> storage from a financial viewpoint and will be the first to acknowledge
> that he is not a technical expert.
>
> The people I want to be taking guidance from on this subject are
> electrical engineers. You'll note that Imre Gyuk's background is
> in theoretical physics. In the Christian Science article you reference,
> the CS monitor quotes the American Institute of Chemical Engineers'
> report. They also have a quote from a professor of chemical engineering.
> With respect, what would chemical engineers know about electrical
> power systems?
>
> The statement from Arshad Mansoor (electrical engineer) is much more
> reasonable: "Storage will need to be part of our portfolio if going
> to 15 to 20 percent wind at a national level". No one is going to
> argue with that. To reach 20% of wind at a national level would require
> 300GW and the target the DOE have set for that is 2030. The US currently
> has 26GW. That does not suggest an imminent ramp up of storage. You'll
> also notice that David Bradwell says that sodium batteries are currently
> too expensive at $400/kWh.
>
> Furthermore, the head of energy storage at Sandia and chemical engineers
> in general have a vested interest in the future of energy storage
> since many of these storage technologies are chemically intricate.
> Sandia National Labs is a company owned by Lockheed Martin. How long
> would the head of energy storage last if he said the future for storage
> wasn't too rosy?!
>
> There is an excellent article in the current issue of Power and Energy
> magazine. You can read it here: www.ieee-pes.org/image...
>
>
> It was written by 11 people with deep knowledge of electric power
> systems. They included 3 senior NREL analysts, 2 professors of electrical
> engineering, a director of General Electric and the president of
> Renewable Energy Consulting Services. It does a much more thorough
> job of explaining why storage is not needed than I have done here.
>
>
> They state: "The fact that “the wind doesn’t always blow” is often
> used to
> suggest the need for dedicated energy storage to handle fluctuations
> in the generation of wind power. Such viewpoints,however, ignore
> the realities of both grid operation and the performance of a large,
> spatially diverse wind-generation resource."
>
> The type of storage that the CS monitor article suggests - that you
> have dedicated storage for an individual wind turbine/wind site is
> a ridiculous waste of resources.
>
> Regarding your second link, Steven Milunovich's (degree in management)
> opinion about lithium-ion batteries for GEVs may well be accurate,
> but that wasn't what I was discussing here.
>
> If you read the above link, you'll realise that power systems are
> complicated and that they are not subject to superficial analysis
> such as wind=variable, therefore we need storage. I worked in a research
> group last summer run by one of the authors of the above-linked article
> and discussed the issue with PhD students specialising in the area.
> I also participated in a storage conference in November. You can
> find all the presentations here (www.sei.ie/Renewables/...).
> It was evident that investing in storage is a highly complex undertaking
> which involves modelling the future price of energy. Another point
> driven home was that storage destroys its own value. The more storage
> you have on the system, the lower the spread between peak and off-peak
> prices which erases the margin needed to profitably operate storage.
>
>
> Thanks for reading.

Review of Energy Storage Market Forecasts

I'm just not able to follow your logic or reasoning, regarding the importance of energy storage. The report from Greentech Media, titled "Grid Scale Energy Storage: Technologies and Forecasts Through 2015" reaches very different conclusions than those in either of your posts on energy storage.

Probably one of the most striking statements found in the second paragraph emphasizes the importance of energy storage: "One of the major pieces required to make the new smart grid effective is a buffer in the system that can store energy to balance the whole grid system."

In the conclusions section, the very first statement says: "Power-oriented (fast) energy storage will grow quickly in the near to mid term but will be constrained in the long term by a modest total market size."

The future seems to be pretty bright for fast storage, as evidenced in the conclusions: "Production of fast energy storage in 2009 is estimated at 49 MW and is expected to grow to 479 MW or $500 million in 2015. The total market size for fast energy storage is estimated at about 7,137 MW total for the U.S. and about 37,828 MW for the world."

Another statement points to the future of low-cost zinc-bromide, flow batteries, "New flow battery technology, particularly zinc-bromide, has recently become more cost effective than NaS for many implementations and is expected to grow to surpass NaS installations by 2015. "

Another conclusion, points to the future of flow batteries: "In 2009, an estimated 147 MW were produced, but in 2015, 1,321 MW are expected to be produced with revenues of $1,978 million. The total market size is estimated at 85,000 MW in the U.S. and 450,000 MW in the world."

Here's the link to the report: gtmresearch.com/re...

Energy Storage is Not Needed for Renewables Integration

Personally, I would give more weight to the head of energy storage over at Sandia, than ERPI. They have tested energy storage systems, understand the components and importance of reliability, while factoring them into the smart grid. If it deals with the grid, it's going through the department of energy.

Here's an interesting quote from an article in the Christian Science monitor. "But the incident highlighted renewable energy’s Achilles’ heel: Intermittent solar and wind power requires backups. It’s not a big problem today with solar, wind, and other renewable energies supplying less than 3 percent of the energy needs in the United States. Yet it could be a big problem in the not-so-distant future." If you're a believer in renewable energy by default energy storage will be needed. Remember all that stimulus funding for renewable energy? My 6th grade algebra teacher said it best, "whatever ye shall do to one side ye must do to the other." If you are adding more renewables, you need to add more storage to ensure the grid's reliability. The link can be found below.

www.csmonitor.com/Inno...

John Peterson has written extensively about the importance of energy storage. You can find John's articles posted here on seeking alpha and other renewable energy websites. If you are the student, I would say John's the master on the subject of energy storage. He attends the EESAT conferences hosted by the department of energy/Sandia and has been following energy storage for years.

Steven Milunovich, at Bank of America-Merrill Lynch been calling the renewable energy sector for a while now, terming the phrase sixth revolution back in 2008. Recently he said: " Storage today is a miniscule market with a cap of less than $2 billion. Although storage should take longer to ramp than did solar, the opportunity is substantial. The hybrid/electric automotive battery opportunity alone could be $20 billion or more by 2020E, supporting a market cap of $60 billion at 3x revenue, in our view. And that’s just lithium-ion batteries." He put it best: "Either way, eventually storage will be important to investors." The article is pasted below, for your perusal.

www.businessinsider.co...

Also, it's no secret that GE has been ramping up sodium battery production, albeit for hybrid locomotives. Some institutional investors buy clean energy funds with exposure to NGK insulators because they implemented a grid-scale sodium battery solution in 2007.

Battery Investing for Beginners, Part 3

Hi John,

I really enjoy reading your posts and hope you continue to impart your wisdom, or point us in another directon for future posts. I have a couple of questions for you. I am really trying to play the smart grid, intelligently. I don't understand enough to understand, which renewable energy sources will be successful. However, I am certain smart grid solution provider (s) will be a very profitable future, well into the future.

I find myself following the smart money (institutional investors), insider buys, and government contracts. The most promising technologies seem like they will be coming from Active Power, Beacon Power, and ZBB. Do you have any inkling about who the major players will be in that space over the next 3-5 years? Am I on the right track, or way off base? Also, what's the early warning signs that a company, won't be able to deliver the growth into the future?

Bank of New York and Bank of America vs. AIG: No Winner in Sight

Right on the money!


On Oct 13 09:43 PM Tom Armistead wrote:

> I spent a tedious half hour reading the decision. The transactions
> consisted of Master Policies under which individual certificates
> were issued for each loan.
>
> UG was attempting to rescind the Master Policies in their entirety
> but did not have a very good case based on the wording of the policies
> or the conduct of the parties. UG had a right to audit or sample
> the underlying loans before issuing the Master Policies: however,
> they did not do so. So the Master Policies will stand. However, individual
> certificates can still be denied based on fraud.
>
> UG was trying too hard to be "easy to do business with" on these
> bulk transactions and they didn't exercise due diligence. The Master
> Policies had provisions on how to handle fraud by the issuer so it
> was part of the deal.
>
> THis is not going to blow up the MI system. All mortgage insurers
> routinely deny coverage in the event of fraud and that is going to
> continue and will be supported by the courts.
>

Bank of New York and Bank of America vs. AIG: No Winner in Sight

What if and let me be devils advocate for a moment, what if UG's management knew about the risk associated with these loans? And they were too afraid to tell the big banks No for fear of losing business? What if management regularly talked about liar loans, but wanted to keep the business going to get big bonuses? What if businesss unit managers basically lied to senior management about the depth and breadth of an expected downturn to save their own jobs? And finally, what if management fired anyone who dissented or had any knowledge that red flags were being raised inside to management that business units did not fully understand the risk they were insuring? How many people want to be UG's champion now? How many people want to come to the rescue of AIG, yet again?

Why Is It Time to Short BofA?

Good observation and discussion about fundamentals, indeed this bank has a lot of challenges, going forward. However, a lot of smart money says you're wrong about shorting, like Goldman and John Paulson (the guy who predicted this mess).

As reported by reuters:
"Goldman said it favors consumer-focused large banks, such as JPMorgan Chase & Co (JPM.N) and Bank of America Corp (BAC.N) over regional banks such as Western Alliance Bancorp (WAL.N) and Marshall & Ilsley Corp (MI.N), which are heavily focused on real estate." www.reuters.com/articl...

According to filings and reported on CNBC:
"Hedge fund manager John Paulson, who earned a fortune by betting against financial companies after foreseeing the credit crisis, bought a $2.7 billion stake in Bank of America and took stakes in other lenders during the second quarter, according to a regulatory filing."

www.cnbc.com/id/32392887

I think we are in a correction plain and simple, which means it become dicey to short, because the least little piece of good news could cause your options to be worthless!

Banking Sector: Worst Is Yet to Come

Very interesting read. I definitely disagree with your assessment. Little if any of the facts make any sense here. However, I appreciate your honesty about being short financials. You should however acknowledge that, according to disclosures and as reported on CNBC:

"Hedge fund manager John Paulson, who earned a fortune by betting against financial companies after foreseeing the credit crisis, bought a $2.7 billion stake in Bank of America and took stakes in other lenders during the second quarter, according to a regulatory filing."

Here's the link
www.cnbc.com/id/32392887

So why should I trust your judgement, when the guy who predicted this mess says otherwise? You should also talk about the inherent danger in purchasing options, both long and short. If you don't know what you're doing; you can and will lose a lot of money!

Is a Crash Impending?

The author has tried this tack before, without much success. In one post, if I am not mistaken, he posited that we would experience run away inflation and a depression at the same time, which is as far as I know impossible. I see he's peddling much of the same here, without really addressing facts like each recession is different and makes the use of technical indicators unreliable. What worked in one recession, like a technology bubble is very different than overheated housing/debt markets. You can't use a cookie-cutter approach to these two very different recessions and try to draw parallels. It's like comparing apples to oranges.

Sell Off Ahead? 25 Ways to Profit and Protect from a Stock Market Correction

I have learned that jumping in and out of stocks can be very foolish. There's a certain degree of wisdom to removing cash from the market, when you know there's a deep recession on it's way. However, buying on the way down or selling on the way up is a very good way to lose a big chunk of cash. It feels like we're due for a pullback eventually, maybe in September, maybe not. Sometimes, it's best to just ride out small pullbacks and hedge using some short positions or pull out of stocks for major corrections.

Credit Card Receivables: Even Moody's Thinks the Fed's 'Adverse Case' Is a Joke

BTW, this is the short squeeze I talked about back in May. I sincerely hope anyone, who listened to this author and purchased short positions, exited their positions by now. Otherwise, you will be paying a premium for worthless stocks to cover your shorts!

The BofA SEC Flap: Small Potatoes

I am no fan of Ken Lewis, however I feel the man has gotten a terrible wrap. I suspect history will show the man was greedy, gullible and very wreckless with the trust so many placed in him. Also, history will probably show he fell victim to a government scam and a misplaced sense of patriotism. We won't know the entire story until Ken Lewis leaves Bank of America and frankly we may never receive a full accounting because lawyers are very good at crafting confidential agreements. However, I would like to engage in pure speculation. What if the Treasury began shopping Merrill, knowing full well the company was iinsolvent? How could you get someone to take on this enormous amount of risk willingly?

First, I guess you would have to pick a relatively strong financial institution, with some political baggage like the acquisition of Countrywide mortgage. Otherwise, a strong company could put up a heck of a fight and blow the whole deal. Second, you need to convince the CEO that a bidding war was going to erupt over Merrill, but they could pre-empt this by acting quickly. Third, you need to put them in a position to commit without a good look at the company's books. The only way you can accomplish this is by appealing to the person's greed, stroking their ego, sense of patriotism and making verbal assurances not bound by a written contract. The final ingredient needed is: Once they find out the deal was bad, losses are mounting and any reasonable CEO would invoke a MACC (Material Adverse Condition Clause); then threaten to remove the CEO and Board of Directors. Lewis thought he could make a bundle of money and be a good patriot at the same time. However, he soon found out, just how quickly the rulles change, when you make deals with politicians and climb into bed with Uncle Sam.

Bank Earnings: Revenues Falling, Losses Rising

Another interesting read, I am especially impressed you caught onto the Bank of America profit by asset sale. However, I find it amusing to state we are in the midst of the great depression. You probably should be a little honest and let people know that depressions, recessions and recoveries are all always identified using hindsight. Most honest folks will tell you that it's difficult to predict where the economy goes from here. I think it probably will go down a little bit more before it gets better, but I'm not entirely sure about that either. Sometimes, things improve or get worse for no reason at all. I wouldn't take depression off the table, but I wouldn't say we are in one either.

Another, point we agree on is Bernanke is an idiot, who's lying to everybody. I treat most information from him with a grain of salt.

Also, I think you are dead wrong on inflation, at least for the time being. You can't have your cake and eat it too. Either the economy improves, or worse-case scenario stays moribound and inflation returns. The other option is the economy deteriorates, demand for goods/services drops, prices fall and deflation is present. If I remember my economics correctly, stagflation can also occur with no recovery and no inflation.

GE Results Validate Theory: Severe Economic Contraction

Very interesting read. It demonstrates the reasons why stock markets have soooo many sharp ups and downs. I remember comments in December 2007 about how we were headed for a contraction, which will last no longer than 10 months. This commentator speculated that there was no way the financial markets would implode and the economy would certainly rebound quickly.

In constrast, now I hear about how the markets are doomed. The US economy will never rebound. We should expect a prolonged recession, lasting a decade or more. The US will become irrelevant as China asserts itself as the new economic powerhouse. I find the note about firms going bust in large numbers, a la The Next Great Depression 2009 amusing.

The fact is nobody really understands what's going to happen next. We simply don't know or understand the implications of massive liquidity injections, foreign will power to finance increased US debts, confirmed by the fact our government won't sign onto a new stimulus just yet. The only thing certain about the future is that it's uncertain.

However, I feel the government got the first stimulus wrong. It should have focused on three things: 1) Extended unemployment benefits. 2) Various infrastructure projects like roads, bridges, alternative energy investment/smart grid and bringing internet to everyone in the US at a low cost. 3) Job creating tax breaks for small businesses.

Fed Finds a Way to Use Stress Tests to Screw Bank Shareholders One More Time

I am a long-term investor, who buys at attractive prices and holds securities for the long-term. Amazingly, I avoided a big loss in value from this recession with a little fancy footwork and a whole lot of luck. Now, I didn't make any money, but I didn't lose any money by gambling on options. I own BAC in my portfolio because of its future earning power and very attractive price, even with current dilutions and it's primary risk the U.S. Government.

I invested in this stock, probably using many of the same assumptions you used, with an understanding of the real risk, the fed and the U.S. government. I don't agree with the approach the fed is using right now and I take comfort that I am not alone. Even Warrent Buffett discussed the stress tests at Berkshire's recent shareholder meeting and concluded a "one size fits all" approach doesn't make much sense.

The government, using its regulators, wants to punish banks, because they know Congress doesn't have the resolve and/or the stomach to go against powerful banking lobbies. I believe the underlying reason for these actions are to keep the crisis going as long as possible. Think about the administrations message: We are going to fix healthcare, because this will help the economy. Or we will create more regulation, rather than fixing the ones that don't work, because this will the economy. And many more examples, I could go on for awhile.

Now, I voted for the guy, but he's going too far to the left too fast. In the mix, he's hurting the folks, who can restore confidence in the system again, shareholders. Take Bank of America, the company had good intentions, because they were saving Merill and the system, with an expectation the government would make it whole again after the recession. However, they forgot a cardinal rule in business: In God we trust, ALL others MUST SIGN.

BAC just didn't follow-through and get committments in writing. Munger at Berkshire says both the U.S. government and BAC acted correctly, which I mostly agree with him. However, the bank should have gotten assurances in writing and demanded insurance against losses, instead of government investment for the Merrill deal.

I believe these banks, especially Bank of America, known for conservative loss estimates, have over-reserved. The whole reason for BAC to do the deals it done was to take advantage of opportunities to boost earnings. And now they can't even use the boosted earnings to meet, new capital requirements.

I believe the stress tests are requiring them to raise too much capital, which will become apparent in the second half. And the biggest risk to my assumptions about this investment are coming to fruition, government interference/lust to punish the banks. I believe the government is doing this to push its own social agenda, and have a foothold in major banks, so they can break them up later.

They can probably get by with this, just maybe but they won't be able to do it without shareholders. Just look at bondholders at GM & Chrysler, who won't bend to the government's demand to be treated like junior creditors, when the law says they are senior creditors. It is a gratutious play, giving a major contstituency, namely labor unions, a grab for cash, not supported by the corporate bankruptcy laws. Anyways, just my thoughts....