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 ABB. The 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.
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.
Utility 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.
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.
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