Energy Storage: Is the Sector Gaining Momentum?

May 11, 2010 4:08 PM ETALTI, AONEQ, TM, VLNCQ
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Contributor Since 2010

Energy storage has been called the holy grail, lynchpin and the deciding factor to the cleantech revolution, and for good reason. The transition to a clean and sustainable energy system for our homes, businesses and transport will depend on developing safe, low-cost and reliable energy storage systems. Many companies are now competing to successfully bring to market a host of new generation batteries that will do everything from power a new breed of electric vehicles to large scale systems that will store solar energy for use at night or cloudy days. While the outlook remains strong, and policy and legislation seems poised to strengthen the sector, significant hurdles remain in the industry.

Green Battery - Green Energy StorageKey Companies are Commercializing
Last September, A123Systems (AONE) went public and saw its shares jump over 50% its first few days of trading, indicating to many that energy storage had arrived for investors. Today however, it is off nearly 60% from its high. Other companies are struggling as well – in March Valence Technology (VLNC) received a delisting notice from NASDAQ for its low stock price, and has only recently regained compliance.

At the same time, announcements from these companies indicate that they are moving in the right direction commercially. Warren Buffett announced his interest in the sector by purchasing a 10% share in Chinese battery and electric car company BYD last year. Valence signed a multi-year supply agreement with BJ Technologie, a division of Bénéteau Group, the world’s largest sailing yacht manufacturer to be the exclusive battery supplier for all new Bénéteau Group hybrid-electric vessels. Order estimates by Bénéteau Group forecast up to $9 million in revenue to Valence. And Altair Nanotechnologies (ALTI) announced an $850,000 order for its lithium-ion battery modules for Proterra, Inc. new all electric and hybrid electric transit buses.

Era of the Electric Car in Full Production
With all the major automakers releasing electric or hybrid electric vehicles in the next one to two years, battery technology is about to hit the ground running. The Nissan Leaf, Nissan Leaf - Electric Carwhose price was recently announced at $32,780 before a federal tax credit of $7,500, is due out in December, one month after Chevy’s Volt. Toyota Motor (TM) has surpassed 1 million sales of its Prius. Other companies positioning to capture first place in the move to electric cars include Tesla, Fisker and BYD. In all, Accenture forecasts 1.5 million electric vehicles in the United States by 2015. Over 10 million electric vehicles are easily possible by 2020.

Large Scale Systems and the Smart Grid
Energy storage will be an important factor as the transition to renewable energy sources like wind and solar grow exponentially, because these sources are intermittent in nature (night and cloudy days for solar and calm days for wind) and our grid requires a constant level of energy. The creation of a smart grid, which will be able to handle these requirements is gaining momentum.

Battery companies are turning their technology to applications for grid power. A123Systems installed its first Hybrid Ancillary Power Unit at a power plant owned by AES in Southern California, and Southern California Edison wants A123 to build the world’s biggest lithium-ion grid storage battery.

Political Stars Nearing Alignment
Last year the stimulus package gave a boost to the energy storage sector – with $2 billion put to use for advanced batteries manufacturing, including lithium ion batteries, hybrid electrical systems, component manufacturers and software designers, and up to $25 billion in loans for advanced vehicles, including related energy-storage technologies. Large scale storage received money with $11 billion set aside for the creation of a smart grid.

Additionally, the Obama Administration’s decision to accelerate the effective date of federal economy standards should help to accelerate hybrid vehicle technologies. The new standards call for increased fuel efficiency by 40% over the next 7 years, and the elimination of fleet-wide averaging and the acceleration CAFE (Corporate Average Fuel Economy) standards by 5 years. They require an average mileage standard of 39 miles per gallon for cars and 30 mpg for trucks by 2016 – an increase from the current average for all vehicles of 25 miles per gallon. Car companies are planning to use hybrid and electric technology to help meet these standards.

And while we are still in the midst of crisis mode, the oil spill in the Gulf may mark a political turning point in the coming months. Our increasingly dangerous quest for new oil resources has finally hit us at home. And the costs, while unknown, will certainly be in the billions. Photos of oil-covered birds in Louisiana and negligent oil companies may finally empower politicians to enact serious energy related programs that will move us away from our oil addiction and into green technologies that include energy storage.

Hurdles Still Remain
While this forward movement seems promising for the energy storage sector, significant questions still remain for the industry.

In the technology realm, batteries have not undergone the same type of leaps that other technologies, such as the computing industry, have seen, plugging along at historically 5-10% annual price-performance improvements. And there is no single answer for batteries, as end use applications dictate technology selection. In general though, new users in automotive markets are asking for batteries that are lighter, safer, denser (the ability to hold more power), long lasting and are of course, cheaper.

Another issue facing the sector is the concern over raw material. The rare metals that are being used, especially with Lithium batteries will see price pressure as demand increases over the next few years. 50% of lithium is found in one country – Bolivia, which according to Juan Carlos Zuneta has no strategy for its exploitation.

Disclosure: none

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