Ricknplano

PHEVs and EVs: Plugging into a Lump of Coal

Government incentives to jump start new technologies is an established practice worldwide and, in general, works well. But governments sometimes encourage the wrong technology since by definition it is an area of evolving knowledge. I appreciate the recent broad range of battery grants issued by the DOE to hedge their bets.

When subsidizing industries at the level of customer purchase the government should be equally non-specific. Giving a $7,500 subsidy to buy a pure EV but no subsidy at all to buy a Prius does not accomplish the duel goals of maximizing reduction of gas consumption and maximum reduction of CO2 as John eloquently argues. Giving manufacturers and researchers help to develop products can be good, but then let the market decide what vehicle makes sense without market distortions at the consumer level that direct purchases that do not make economic sense without the incentives.

If the goal of the customer level incentives is instead to maximize the incentive to build better batteries, then the subsidy makes more sense but again can be better accomplished at the research level.

A clear explanation of why any subsidy exists can allow clear debate. John makes an excellent argument for use of lots of small subsidies (lots of Prius) rather than a few large subsidies (Volts) if the goal is energy and CO2 reduction. If the goal is better batteries then probably research grants make sense and no consumer level incentives should exist at all. Let the market decide if the technology is ready for mass adoption.

How Growing HEV Markets Will Impact Battery Manufacturing Revenues

John,

Many thanks for your continuing wisdom in the area of energy storage investment opportunities.

Lead Carbon Batteries: A Game Changer for Alt Energy Storage - Part II

Matt,

I researched the recent MIT report in some detail. While it is excellent news for lithium technology and for us all by extension, it is still lithium (expensive) and so the same arguments versus lead apply. On the margin it might make lithium more reasonable a choice, but in cases where the cost benefits support a low cost battery the LAB will still prevail. Now, if you read something about cutting costs by a factor of a hundred, then we have a story.

Rick

Lead Carbon Batteries: A Game Changer for Alt Energy Storage - Part II

John,

Excellent post. Thank you for going into detail on some to the questions that have concerned me as well as Mr. Smith.

I am looking forward to the next earnings report and conference call. Maybe the company has some insight into the selling pressure on the stock. Could that be related to the Mega-C stockholders?

Why Pure Play Energy Storage Companies Could Double for Investors

John,

I enjoy starting my Monday with a good read courtesy of your active mind and busy fingers. Upcoming earnings conference calls will allow opportunity to ask questions of company officials. Hoepfully we will learn more about specific company plans regarding the stimulus grants.

DOE Report: Lithium-ion Batteries Are Not Ready for Prime Time

John,

Thanks for your article. Some good comments above but the tone of some comments was more argumentative than instructive which serves no one really.

Renzo, my kudos to anyone who uses both apotheosis and Arrhenius equation in the same comment. Also you are right to mention thorium fission as the future of nuclear. Others above are also right to mention the long lead for nuclear plants. Together these two arguments tell me to start now on safer nuclear and also to implement shorter term solutions like smart grids, wind and solar (with storage systems to smooth the supply) and CNG and even coal where necessary.

I will also share a fact I recently learned about natural gas. While it is a clean burning fuel, it is not such a clean fuel to access. Here in the Dallas Ft Worth area we are in the midst of a drilling boom into what is called the Barnett Shale. Recently the EPA announced that the methane and CO2 emissions from the gas wells in the area now exceed the emissions from all the vehicles in this area of over 6 million people. That was news to me for what I thought was a more green alternative to coal and oil. I am not sure if those emissions end once the drilling is completed or if that is an ongoing issue with gas wells. Perhaps other readers can educate me.

All of us want to be green if reasonable and feasible. We will disagree about what exactly is reasonable and feasible, to an extent, but John is right to point out that few of us will be economic martyrs if the cost of lithium is substantially above that of a lead alternative. Axion, CSIRO and Firefly all have good LAB alternatives coming to market that will (probably) find their respective niches regardless of lead content.

Questions about this industry that nag me remind me of Donald Rumsfeld when he said, "We know what we know and we know what we don't know. What worries me are those things we don't know that we don't know". By that I mean there are constant efforts to improve all battery and capacitor technologies. None of the technologies are standing still. There could be an announcement tomorrow that makes my conclusions today obsolete. While the technological changes may not change radically or swiftly, I just do not know what I don't know about this industry. With time I may be more comfortable in my knowledge level. That is one reason I read these postings and one reason I have yet to invest heavily. I want to see sales and performance charts and warranty claims data and profit projections from these new companies with new ideas. As John has so elequently argued, manufacturing and marketing a profitable product is a lot different than a lab report. And while I share much of John's enthusiasm for his former employer, my desire for such proof goes as much for Axion as it does for any lithium manufacturer.

I also wonder about the intellectual property of Axion versus that of Firefly and CSIRO. They seem to be following the same general idea of substituting carbon (the more surface area the better) for lead in the anode of the battery and then trying also to improve the cathode. Improving the cathode seems to be more challenging. To what extent does the IP of Axion, for example, protect it from challenges by its LAB competition, in particular that of CSIRO and its U.S. licensee, East Penn? Could CSIRO have priority IP claims that may stifle Axion at some point? Will Firefly prove to have a better design once they perfect their carbon cathode design?

I have more questions than answers and welcome comments from anyone with insight into these matters.

How to Determine Value of Alternative Energy Stocks

Hi John,

As I read your article I felt I was reading a well reasoned interesting article with caveats about investors using the information only to assist, not to determine, investment selection. I have enjoyed and learned from your articles and I understand your bias towards Axion which is not without merit.

Long ago I wrote a little saying, With people infinite patience is next to infinite wisdom. If it helps, keep that in mind when your get inflammatory criticism. I appreciate your thoughts as do most readers. Please keep it up.

Cleantech: The Sixth Industrial Revolution

John,

Might I add that the stocks that make one money are not always the stocks you expect to make money. Remember, markets can remain irrational longer than you can remain solvent. Since markets are made of individual decisions, some of the persons who regularly post comments should make it clear why markets remain irrational in spite of evidence to the contrary. As you have said, you can explain it for them but you can not understand it for them. Let us hope that the best companies actually do win. Best wishes for the new year.

Rick

Cleantech: The Sixth Industrial Revolution

John (aka Battman),

Yes, your ability to explain yourself has risen remarkably and I think your depth of knowledge has risen as well, as you consider and respond to comments. The comments have improved as well, e.g. Mil Ovan et al.

As always, thanks for sharing your insight.

Rick

Alternative Energy Storage Needs to Take Baby Steps Before It Can Run

John,

Happy holidays and best wishes to you for the new year. Another excellent article. Thank you.

Alternative Energy Storage: Cheap Will Beat Cool

John,

Nice article as usual. Your last article was the best I have seen you write and I appreciate the global overview it gave. You might mention in this and subsequent articles that the storage competitors are not all public companies.

I listened to John Granville on the recent conference call, as I am sure you did as well, and I was pleased to hear how up beat he sounded. I think things are happening nicely there. However, I believe it is still too soon to invest due to the large number of shares outstanding and the need to get a huge buildup in sales before the share value goes up appreciably.

Thanks again for your efforts and your articles.

Rising Tides in Alternative Energy Storage

John,

Do the folks at AXPW consider the new UltraBattery from Csiro in Australia to infringe upon their patents? It seems to be a similar concept with similar cost/benefit and uses but I do not know enough about the design to know if it infringes on the patents.

Alternative Energy Storage and Blood in the Streets

Paul,

Many thanks for the link and for your excellent insight. My fundamental analysis suggested a tough time getting enough income to justify a stock price much above the present level. The large block sales and sudden withdrawal of insider buying, together with the fundamentals, confirm that concern. And now the plan to increase shares. I will keep a link to Axion but will look elsewhere for investments for the next year or two and then revisit the stock. Best wishes to you in this market.

Alternative Energy Storage and Blood in the Streets

John,

I see that Axion has a proposal to increase the authorized shares from 50MM to 100MM at the upcoming annual meeting. Fully diluted the outstanding shares are currently at almost the full 50MM authorized.
This can only mean the company is either actively planning to issue more shares or at least have that option available should cash needs require it.

If another 50MM shares are issued, at whatever price, then the existing holders are diluted. The question is always whether the cash raised is enough to offset that dilution. Looking past that I am trying to see what that means to an investment in Axion stock.

If I wanted to buy Axion today at $1.50 and hopefully roughly triple my investment, a reasonable expectation for a speculative investment, then I would be hoping for earnings sufficient to, at some point in the future, support a $5 stock after the company starts really producing product and revenues. Assuming a conservative market price of about 10 times earnings then we need net earnings of about $0.50 per share to support a $5 stock. If there are potentially 100MM shares outstanding then we will need net earnings of about $50MM. To get $50MM net earnings with a 10% net margin on sales we need sales of $500MM. If our wholesale per unit price is $250 per battery then we need to sell 2M batteries per year or about 8,000 batteries per day. First, is there sufficient market to expect that many sales? But if so, can Axion build that many batteries or even that many PbC electrodes.

If I understand correctly the capacity limit of the current manufacturing facility is 3,000 per day. I suppose earnings can come from licensing agreements but my understanding of the companies objective is to make the PbC electrodes at their facility and ship them to others. Unless additional factories can be bought or built I do not see where there is enough physical capacity to get the sales to make the stock significantly higher than the current price. Where do you see the additional revenues developing? I am open to your explanation, just curious and cautious. I want to understand where the revenues will come from and how we get from here to there.

Thanks.

Energy Storage Opportunities vs. Irrational Expectations

John, I agree completely about the demand curve for lithium trending towards smaller vehicles, tools and devices where the the size and weight versus cost equation is different than that in cars, trucks, trains or non-motive applications where the size and weight are less critical and the cost for lithium becomes excessive versus acceptable alternatives. Also as demand grows for lithium end product so will demand rise for lithium raw materials which will add to cost and slow the cost reduction curve that is expected from new production and technology. Net net is that it may be a while before mass produced all electric cars are competitive with ICE.

On the other hand hybrid cars, trucks and trains are price competitive now and will continue to grow in use as is pointed out in comments above. A good lead acid alternative to lithium is attractive for these uses since the wieght difference may only be 50 or 60 pounds in a car while the price difference should (barring huge technological changes) be well worth the weight penalty. Apparently Axion and Firefly both think they have such lead acid alternatives coming soon.

But comparing only lithium and LAB ignores the other technologies out there including NiMH and others. Efforts are ongoing to reduce the cost and increase the performance of these technologies as well, of course, and the ultimate winners are not clear. What is typically true, as John points out here and in other posts, is that the winner is not always the best technology. First a rising tide lifts all boats and the near term increasing demand may make lots of winners in this field who do not necessarily have the "best" technology. Secondly a technology is one part of a big puzzle. Management is crucial, financing, good sales force, manufacturing capacity, etc. So the long-term winners will likely be more contingent upon the synergy and competence of the entire company rather than the specific technology. Short-term winners, most of the companies in the field. Long-term winners, well financed companies with good management and good production / sales teams. Warren Buffet likes to say he buys managment teams, not companies. For the long-term that is usually the way to go.