VRB Power is the only public vendor of a flow battery chemistry, the Vanadium Redox Battery. I bought the company when I first realized that in order to get a large proportion of intermittent wind and solar energy onto the grid, long term electricity storage would be essential. Of the available technologies, flow batteries are some of most technically elegant. Since VRB is one of only two publicly traded vendors of large scale batteries, I bought some.
I was not being discriminating. Even with the belief that large scale storage will soon be needed to integrate intermittent resources onto the grid, buying VRB would still have been a mistake. Although flow batteries are an extremely elegant solution, they are a solution that is not ready for market. As Michael DeAngelis, SMUD‘s Manager of Advanced Renewable and Distributed Generation Technologies, told me, "It’s a research project. It’s not price competitive." SMUD has a share of a 20 kW x 9hr VRB system [.pdf 1.83 mb, slide 12].
SMUD invests in research projects because they want to help develop future technologies they may need in the future. Although that may also be a motivation for CleanTech investors, those investors would do better to think of such investments as charitable donations than investments; the results are more likely to be a tax write-offs than a capital gains.
Research projects are the most tempting way for cleantech aficionados to lose money in our investing. In this case, I was seduced by what a speaker at the same conference aptly described as a "pretty toy." Venture capitalists and angel investors can make money by finding a new technology and jumping on it at the right time, although they usually have more losers than winners. For investors in public companies, making money on technology projects is mostly limited to finding a bigger fool to sell the company to. The problem with this is even if you manage to find a bigger fool, you’ve gained something with the money you made… you gained self-confidence.
Self-confidence arising from knowledge of the asset you’re investing in is an asset, but confidence based on your own belief in yourself and your own qualities as an investor is poison. All investors make mistakes. (This series of entries is a showcase of several of mine. Part of the value of writing this series is in maintaining my own humility. A tendency to revel in success and dismiss mistakes will make an investor happier in the short term, but poorer in the long term.)
For the above reasons, I seldom advocate investing in research projects. In the current context of much dearer money, research projects (which often need to return to the capital markets for more money) are even less attractive.
None of this is to say that VRB’s quite interesting technology has no place in the future of our electric grid. I strongly hope it does, because inexpensive, large scale storage will be key to completely decarbonizing our electric grid. Nevertheless, at any future date when VRB flow batteries are widely accepted by utilities, the current shareholders of VRB Power are unlikely to retain any significant ownership of the technology.
Other entries in this series:
- Held: UQM Technologies
- Sold: Carmanah Technologies
- Sold: Pacific Ethanol
- Sold: Dynamotive Energy Systems
- Sold: Nova Biosource Fuels
- Ten stocks to buy at the bottom.
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