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Investment Opportunities in Large Scale Electricity Storage

The Economist had two great articles last week on two of may favorite themes in renewable energy, which I missed getting to Charles in time for  The Week in Cleantech.  Both deal with modernizing the grid to deal with the vagaries of wind.  The first is an in depth look at electricity transmission via High Voltage DC, a subject I recently wrote about in an article on ABBThe second dealt with compressed air energy storage (CAES) which is the second cheapest way to store electricity, after pumped hydro.  Unfortunately, I have not found good ways for the stock market investor to take advantage of the potential of pumped hydro, or CAES.  

Large Scale Electricity Storage

It is possible to make investments in energy storage, however.  While not as inexpensive as pumped hydropower or CAES, some utility scale batteries have the advantage that they are small and environmentally benign enough to install at substations in densely packed cities.  There has been a recent spate of articles (USA Today, IEEE Spectrum, The News Journal (DE), State Journal (WV)) about utilities installing the already technologically mature Sodium-Sulfur (NaS) batteries [.pdf] at substations to meet peak loads and delay costly substation upgrades.  

Sodium-Sulfur Batteries

Despite the fact that NaS batteries cost as much as coal plants that can supply the same amount of power, they have the gigantic advantage that it's impossible to add new coal plants inside a city, precisely where the power is needed.  This power delivered at the right place and the right time extremely valuable.  Hence utility scale batteries, west- or southwest-facing PV (depending on the local load shape), and demand side management are also extremely valuable resources to urban utilities.  The traditional method of dealing with increased electric demand has historically been to build more power plants and transmission, but increasingly dense urban areas, environmental restrictions, and NIMBYism make this cost prohibitive or outright impossible in some cases.

chart21.gifUtility scale NaS batteries are made by Japanese manufacturer NGK Insulators (TSE:53330, NGKIF), which unfortunately does not have a North American listing or ADR.  However, if you have enough capital for a nearly $30,000 purchase not to unbalance your portfolio, you can buy a round lot on the Tokyo Stock Exchange. I've had a limit order in for a couple of weeks in one of my managed accounts, but the stock has been going bonkers, and I don't like to chase high-flying stocks.

Vanadium Redox Batteries

A more affordable (and riskier) investment option for the North American investor are Vanadium Redox Batteries, which are being commercialized by VRB Power Systems (TSE:VRB.V or VRBPF.PK), which both Charles and I have mentioned before (here, here, and especially here.)  VRB Power's stock price has been depressed recently due to recent stock dilution.  Unlike NGK, they have a single line of business in VRB applications, and are not yet profitable.vrb.png

Vanadium redox batteries (VRB) are flow batteries, with electrolyte separate from the electrode, as opposed to NaS and most batteries we are familiar with in our daily lives, where the electrolyte is bound up with the anode an cathode (NGK assumes their batteries will be good for 2,500 cycles, while VRB expects theirs to last 10,000 cycles before refurbishment.).  This allows VRB batteries to scale up to much larger storage capacities than conventional batteries.  In addition, liquid electrolytes do not have memory, which gives them the potential for a much longer lifetime and per cycle cost than conventional batteries with refurbishment of the electrodes.  VRB batteries are also smaller and lighter (per kWh; in practice they are likely to be larger due to much higher capacity), and have comparable cost per unit power (kW.)   

Comparisons and Applications

NaS batteries have the advantage of extremely quick response time, making them more suitable for power quality applications (smoothing short term spikes in demand).   I believe this, along with their better round trip efficiency, is why NaS batteries currently seem to have the edge with utilities seeking to delay transmission and distribution upgrades.   AEP recently installed a $2.5 million, 7.2 MWh battery ($350 per kWh capacity);  VRB says their systems are usually priced from $350-$600 per kWh, with the lower prices per kWh available for the larger installations.

On the other hand, NaS batteries must be maintained at 300 °C, while VRB systems work at room temperature, and require extremely low maintenance, facts which should give them an edge at remote locations such as wind farms.  This fits with the fact that many of their early sales have been to remote locations such as remote islands, off-grid telecom, and solar powered demonstrations.

The last is an intriguing new application which might allow some of the Net-Zero Energy communities being planned to cut the utility umbilical cord and become truly energy independent.  I mentioned this concept to a developer of a net-zero energy community in Arvada, CO, whom I met at the Western Governor's Association Energy Efficient Homes Conference.  The economics may not work for him, but I doubt it will be long before we hear about the first true Carbon Free Community.

UPDATE: 8/9/07:  The following is from an email I received from VRB Power Systems (I have not been contacted by NGK): The VRB system actually does have a fast response time of <1 ms which we believe is comparable to NaS batteries.  Also, the round trip efficiency (AC-AC) of our system is superior to NaS batteries with an efficiency of between 65-75%. 

DISCLOSURE: Tom Konrad  and/or his clients have positions in these companies mentioned here: VRB.

DISCLAIMER: The information and trades provided here are for informational purposes only and are not a solicitation to buy or sell any of these securities. Investing involves substantial risk and you should evaluate your own risk levels before you make any investment. Past results are not an indication of future performance. Please take the time to read the full disclaimer here.

 



was posted on AltEnergyStocks.com.


       

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Comments

Tom, ACPW is using compressed air in their UPS applications, also for cooling. Their shares just went on a big sale, and I do not think they are going much lower. In fact many shares went on sale last week. I do not see the connection between CPTC and say subprime mortgages, or alt energy in general.. however I will be glad to buy in to my favorites more next week. I think we have done well with cptc so far, despite last week's beatdown. Barron's mention was a pleasant surprise - I did not realize they considered alt energy an investment. It appears that the Shrubster will veto the House's RPS, so there will be time to get into alt energy before real growth stocks are recognized. I would like to crawl under a rock or head offshore until Jan 2008. Even Michael Santoli has been harping on the non recognition of real growth stocks the last few issues. Except of course for Google, which is the best company of all time, past, present and future, without any qualifiers and will dictate as well as control all innovation in the future. I wish I had the money to buy a server farm and download the internet, just so I would never hear or use Google again, but that is just me.

Thanks for the tip on Active Power, Calvino. That's just what I was hoping for. I have not paid much attention to this company for quite a while when I grew frustrated with them in the 2001.

On the general market, the lack of connection between subprimes and AltEnergy does not mean that there will not be any contagion. I believe that there is an excellent chance (but not a certainty) that the subprime meltdown will precipitate a new bear market. Energy will be hurt, too, because people will be avoiding the market in general. I believe that new purchases of energy stocks should be accompanied by a hedge against a general market decline.    [Make sure to read the disclaimer.  This is not intended as individual investment advice.]

Tom, acpw reported their quarter about a week ago with big volume growth and a cut in their eps losses. That took their shares down about 25%, an overreaction to my mind. Their ex CEO stole about 3 million in backdated options, and that was good for about 33% this spring. However unlike Steve Jobs, the most brilliant and innovative engineer of all time, ACPW dumped their ceo for stealing in a 48hr period. But people were expecting more volume this quarter, which acpw said could not be put on the books since the installs were not completed by the quarter end. This company is alone in the space with a superior product.

A bear market will break them and everyone else, so I am buying in stages. Incidentally my opinion is that the our chance to avoid the bear market and worse is by the alt enrgy space - but good luck to us all with the stuffed armadillo in office. I am still reeling and exasperated by the promise to veto the the RPS.

Mr. "Stay the course" is true to form. I don't know why, but it continues to surprise me as well.

Has anyone found any good estimates of the total value of the large-scale electric storage market?
Any links or numbers that size this market would be most appreciated!!!

In terms of the large battery market, it is still tiny, especially outside Japan, where there have been considerable subsidies. This is more a future market than a current one. How big it will get is anyone's guess, and sales this year may have very little to do with sales next year.

Would be interested in NAS battery pricing for a small neighborhood alternative fuel electric system though largely independent of grid we might still be grid connected- solar and or wind.

Thank You,

Dr Stroe

Three words: pumped seaboard storage. What's wrong with a giant water 'battery'?

Seems pretty obvious; applications to desal as well; highly scaleable, long lasting, provides structure for elevated wind turbines, could be placed adjacent to tidal barrage or marine turbines.

What's not to like?

Fran,
Pumped seabed storage is a cool technology, but I know of no current investment opportunities.

Fran,

You and I were cut from the same cloth; in email to Tom yesterday I expressed the exact same idea regarding seaboard storage.

Certain parts of the coasts of Maine and Hawaii are as though pre-made for this: 200 foot cliffs with excellent local wind resources. My idea would be to use the wind turbines mounted at ground level (200' above sea level) to pump seawater into a ground level reservoir that provides a 200' head for turbines installed just above sea level. The turbines could directly drive the pumps, for maximum efficiency. A Chinese company called Dakshidin (DKSC.PK) makes a turbine specifically for this purpose. (A great product... but the stock is not so good, I'm afraid... and getting worse.)

Very interesting article!
But maybe somebody knows more information/reading material about Nas and VRB batteries integration to grid (how system will work, what kind of converter system is used, how “smoothly” is going energy transfer to grid etc.) And also some information about batteries pay-back period?
Is there any good examples using NAS or VRB batteries to storage wind energy and to transfer this energy into grid?

Thank you for a any information or help:)

Kris:
VRB Power recently went bankrupt, and no one else is currently selling that technology.

In terms of general reading material, we've recent brought on a battery expert... here is one recent article he wrote about grid integration.

VRB update: Our company is now selling the VRB-ESS for Prudent Energy, the new owners of the VRB tech. More information is at our website, including examples of wind storage: www.utility-savings.com.

Also, regarding comparison of NAS and VRB, please note that response time for VRB is 10 milliseconds from fully charging to fully discharging, which is why their early application was for smoothing wind. Due to their fast response, they have also been installed for multi-megawatt UPS, and they can over generate 4-5x capacity for several seconds without damage.

As Charles rightly points out, VRB has some notable advantages vs NaS... not only the exceptional response time, but also the lower standby losses and maintenance which occur because NaS batteries need to be kept at very high operating temperatures.

Because of the low maintenance, VRB has shown great promise in off-grid settings, and probably has good potential for customers who want energy storage, but do not have specialized staff to maintain it.

Charles, when you have manufacturing up and running, please send me some prices for VRB-ESS systems.

With todays energy storage problems, having vanadium investments is a way to get into a relatively new green energy market with large potential from vanadium stocks, to eventually trading the actual commodity. Investing in vanadium companies is very important to ensure the future development of vanadium redox fuel cell technology takes off quickly.

www.vanadiumsite.com/canadian-vanadium-investments/

www.vanadiumsite.com/investing-in-vanadium/

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