« Portec Rail Products Beats Estimates, Gets Clobbered | Main | Two High-Speed Rail Stocks For The Stimulus Packages »


       

Viva the Cleantech Revolution

It’s official! Cleantech, the sixth industrial revolution, has arrived on time and in the midst of extraordinary crisis. Like every good revolution, blood is flowing in the streets; the guillotine is en route to Wall Street and the mob is so busy plotting retribution for the excesses of the past that most have no time to consider the future. But as yesterday’s dynasties decay, crumble and fall, a new generation of visionaries is already building on the wreckage of the past. These are indeed troubled times that bear an eerie resemblance to the opening sentence from A Tale of Two Cities.

“It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of Light, it was the season of Darkness, it was the spring of hope, it was the winter of despair, we had everything before us, we had nothing before us, we were all going direct to heaven, we were all going direct the other way - in short, the period was so far like the present period, that some of its noisiest authorities insisted on its being received, for good or for evil, in the superlative degree of comparison only.” Charles Dickens (1812 – 1870)

However like all times of trouble, this too shall pass.

In mid-February, President Obama signed an economic stimulus package that included $38 billion in alternative energy spending. A week later, in a memorable address to a joint session of Congress, the President outlined a vision for America’s future that rests on four pillars: energy independence, improved education, reduced healthcare costs and jobs. Last Thursday, he unveiled a 10-year plan that envisions $150 billion in alternative energy subsidies that will be paid for by a carbon cap and trade scheme. After decades as a backwater agency with a modest mandate and budget, the Department of Energy is finally surging to the forefront as the powerful agency it should be. With a little luck we may even see a comprehensive national energy policy and that would be a wonderful thing.

If you believe the press and listen to the politicians, a brave new world of clean renewable energy is just around the corner, but there are a couple of particularly nasty flies in the ointment. Alternative energy is inherently less stable than its conventional counterparts and cost-efficient transmission, distribution and storage systems do not yet exist. While the litany of potential solutions grows longer with each passing day, these solutions are largely unproven and will take years if not decades to implement nationwide. In the interim, our only option is to wake up in the morning, go to work with the toolbox we own, solve our problems to the best of our ability and be ready to embrace newer and better technologies when they are perfected. If we're lucky and sensible, cheap will triumph over cool.

I’m a dilettante when it comes to power generation, transmission and distribution, so I’ll leave those issues to better-informed writers and focus my attention on a narrow sector that I know well, manufactured energy storage devices.

Historically, batteries have been a critical but largely invisible part of daily life. They start our cars and power our cell phones but the only times they merit more than a passing thought are when they need to be recharged or replaced. With the dawn of cleantech, however, rechargeable batteries are no longer mere conveniences. For the first time in history, rechargeable batteries are fundamental enabling technologies that can help smooth the peaks and valleys in renewable power and foster the development of electric vehicles. Unfortunately, the battery industry is not ready for the current challenges, much less the sweeping changes that the cleantech revolution will require.

To understand the current state of battery technology, one must first understand the historical necessities that were the mother of invention. Around 250 BC, a clever Babylonian discovered that a genie could be released from a clay pot containing the right combination of lead and acid. During the 1800s, people began to find ways to make the genie do useful work beyond electro-plating and parlor tricks. Until the 1970s, there were only two primary classes of batteries: rechargeable lead-acid batteries and disposable dry cells. Lead-acid batteries handled the heavy work like starting cars and providing emergency lighting while dry cells were used for flashlights, toys and consumer goods, including the first portable radios and tape players.

In the mid-70s, maintenance free valve regulated lead-acid (VRLA) batteries were introduced and rapidly became the dominant automotive technology. They worked so well in fact that most battery manufacturers cut their R&D budgets to the bone because VRLA batteries performed well and a complacent auto industry saw no reason to pay premium prices to fund further research. While there was some progress on deep-cycle batteries for golf carts, forklifts and industrial systems, R&D in the lead-acid sector essentially took a 25-year siesta as electrochemistry became passé and college students gravitated toward more exciting, glamorous and rewarding careers in electronics, communications and information technology. Over the last few years, rapidly evolving bulk energy storage needs have sparked a new wave of lead-acid research that uses modern materials and manufacturing methods to improve and revitalize an old-line chemistry. The results have been almost magical and an entirely new generation of advanced lead acid and lead carbon batteries is in the final stages of pre-commercial development. These products are not widely available yet, but the new generation of batteries promise extraordinary performance at a lead-acid price, which once again proves the ancient wisdom that with time, everything old is new again.

The late 70s were a time of sweeping change as electronics manufacturers shifted their focus from toys, radios and tape players to productivity tools. The introduction of business tools like electronic calculators and the pagers, computers and telephones that quickly followed, drove the development of compact and light-weight rechargeable battery chemistries including nickel cadmium (Ni-Cd) nickel metal hydride (Ni-MH) and lithium ion (Li-ion). Since buyers of portable electronics invariably viewed run time between charges as a critical performance metric, R&D spending on these technologies soared and continues to this day.

Until recently, rechargeable batteries were not something the average consumer would think of as a discrete product class. Instead, they were relatively inexpensive components in high-end consumer durables like cars and electronics. In automobiles, batteries typically represent less than 1% of total product cost and in electronics it is rare for batteries to represent more than 5% of product cost. This historically low ratio of battery cost to total product cost resulted in a market dynamic where the auto industry could afford to be complacent, while electronics manufacturers were willing to pay huge premiums for modest improvements in battery performance. Both approaches were sensible in an earlier epoch, but neither has any utility in the emerging world of cleantech.

Where batteries were once viewed as low-cost components in expensive products, the pendulum is swinging in the other direction with a vengeance as the ratio of battery cost to total product cost escalates to the point where the batteries represent up to 20% of the cost of an HEV, up to 50% of the cost of an EV and over 90% of the cost of a grid-based system. Unfortunately, most batteries are simply too expensive for the jobs people want them to do. As thought-leaders, policymakers, manufacturers and consumers come to grips with the cruel and inflexible economic realities, cost accountants and industrial engineers will end up making the hard buying decisions and the opinions of futurists, scientists, techno-geeks and bloggers like me will become increasingly irrelevant. In the end, the only thing that will matter is a rigorous and comprehensive cost benefit analysis for each new energy storage application.

A couple days before Christmas, I published “Alternative Energy Storage Needs to Take Baby Steps Before It Can Run,” an article that was selected as an Editor’s Pick at Seeking Alpha and included cost data from a July 2008 Sandia National Laboratories report on its Solar Energy Grid Integration Systems – Energy Storage program. While the Sandia report focused on the current and projected capital costs of energy storage for solar power installations, the basic cost structure applies to the entire spectrum of energy storage applications. Several Li-FePO4 advocates promptly pointed me to Chinese Internet sites to support their arguments that Sandia's cost estimates are wrong, but I've found the Sandia estimates consistent with available industry cost data and believe they provide a reasonable basis for investment decisions. The Sandia capital cost estimates are set forth in the following table:

Technology Current Cost ($/kWh) 10-yr Projected Cost ($/kWh)
Flooded Lead-acid Batteries $150 $150
Sealed Lead-acid Batteries $200 $200
Low-speed Flywheel $380 $300
Na-S Batteries $450 $350
Asymmetric Lead-carbon Hybrid $500 <$250
Zn-Br Batteries $500 $250/kWh + $300/kW
Ni-Cd Batteries $600 $600
Zebra Na-NiCl Batteries $800 $150
Ni-MH Batteries $800 $350
Li-ion Batteries $1,333 $780
Vanadium Redox Batteries 20 kWh=$1,800/kWh
100 kWh =$600/kWh 
25 kWh=$1,200/kWh
100 kWh=$500/kWh
High-speed Flywheel $1,000 $800

With the basic cost structure firmly established from reliable sources, it’s probably worthwhile to revisit some cherished mythologies and incontrovertible realities that I assembled from eight months of reader comments and discussed at length in an article on the importance of rebuilding America’s domestic battery infrastructure.

Cherished Mythology Lead-acid batteries are environmental hazards.

Incontrovertible Reality With recycling rates approaching 99%, lead-acid batteries are the most highly recycled product on the planet and substantially all of the materials recovered through recycling can be used to make new batteries. Neither NiMH nor Li-ion chemistries can even come close to matching the natural resource efficiency and environmental safety of lead-acid batteries.

Cherished Mythology Li-ion batteries are one-quarter of the weight of their lead-acid counterparts.

Incontrovertible Reality The relentless but frequently unsuccessful quest for product safety has doubled the weight of Li-ion batteries. So while the explosive Li-ion chemistries have four times the energy density of lead-acid batteries, the safe Li-ion chemistries only cut the weight in half. In either event it’s silly to fret about battery weight in the context of a 3,000-pound car or a stationary power storage installation.

Cherished Mythology NiMH and Li-ion batteries have more power than lead-acid batteries.

Incontrovertible Reality The recent development of asymmetric lead-carbon hybrids has improved the power profile of advanced lead-acid batteries to competitive levels at a fraction of the cost.

Cherished Mythology NiMH and Li-ion batteries have far longer cycle-lives than lead-acid batteries.

Incontrovertible Reality The recent development of asymmetric lead-carbon hybrids has improved the cycle-life of advanced lead-acid batteries to competitive levels at a fraction of the cost.

Cherished Mythology NiMH and Li-ion batteries will improve as the technology matures.

Incontrovertible Reality NiMH and Li-ion batteries are already fully mature technologies. Substantially all of the recent advances in Li-ion technology are like changing a carrot cake recipe; call it what you will, but it's still a carrot cake when it comes out of the oven. There have been big safety gains from new flavors of Li-ion chemistry, but those gains have always come at the cost of reduced energy density.

Cherished Mythology Li-ion batteries are an ideal solution for most energy storage problems.

Incontrovertible Reality Li-ion batteries are the best solution for small format energy storage needs including cellular phones, power tools and portable computers. They also have significant potential for use in electric bicycles and hybrid scooters. Their cost effectiveness plummets when the battery pack is bigger than a breadbox. Even if Li-ion batteries could be cost effective in power-hungry applications like EVs and stationary applications, sound economics and rational industrial policies will always favor the manufacture and sale of 5,000,000 cell phones or 500,000 laptops over exporting the same batteries to power 1,000 EVs.

Cherished Mythology Plug-in electric vehicles provide a cost-effective path to a clean energy future.

Incontrovertible Reality Plug-in electric vehicles provide dramatic PR sound bites for politicians, car companies and environmentalists, but even the auto executives are quick to acknowledge that pure electric vehicles cannot be paying propositions for the average consumer until gas prices are far higher than they have ever been.

Cherished Mythology NiMH and Li-ion batteries will get cheaper as demand increases.

Incontrovertible Reality Roughly 75% of the cost of any battery is raw materials and NiMH and Li-ion batteries have been mainline industrial products for almost 20 years. The bulk of the potential manufacturing cost savings have already been achieved and the only way battery prices can fall dramatically is if massive new supplies of raw materials become available at bargain basement prices.

At the dawn of the cleantech revolution, the financial sector is in shambles and the Obama administration has thrown down the gauntlet on healthcare spending. While I have every confidence that the banks and insurance companies will heal with time, I also believe that margins in healthcare will be pressured for the foreseeable future. So the only investable long-term trend that I see in the current economic and political environment is alternative energy. In the alternative energy sector, the fundamental enabling technologies are transmission, distribution and storage. Each of these sub-sectors is essential, each is a target rich environment for investors and each will be a major recipient of long-term government support. Since accepted market wisdom holds that you should never fight the Fed, I think the policy clues for investors are crystal clear.

I can identify a dozen pure play public companies that have the potential to make a real difference in America’s energy storage future. Since I’ve made my personal opinions clear in earlier articles, I won’t bother re-plowing that ground today. However I encourage readers to study each of the principal market participants, consider where their existing and proposed products will mesh with the needs of the coming cleantech revolution, and consider who the likely buyers of their existing and proposed products will be. The short list of pure play public companies includes:

Name Trading Symbol Product Class Product Status
Active Power ACPW Low-speed flywheels Manufacturing
Altair Nanotechnologies ALTI Li-titanate batteries Demonstration
Axion Power International AXPW.OB Lead-carbon batteries Demonstration
Beacon Power BCON High-speed flywheels Demonstration
C&D Technologies CHP Lead-acid batteries Manufacturing
Enersys ENS Diversified batteries Manufacturing
Ener1 HEV Li-titanate batteries Demonstration
Maxwell Technologies MXWL Ultracapacitators Manufacturing
Ultralife Batteries ULBI Diversified batteries Manufacturing
Valence Technologies VLNC Li-phosphate batteries Manufacturing
Exide Technologies XIDE Lead-acid batteries Manufacturing
ZBB Energy ZBB  Zinc-bromine batteries Demonstration

As a student I strove for the extreme right hand tail of the bell shaped curve. As a businessman, I’m delighted to sacrifice the extremes on both ends of the curve because the bulk of the revenue will go to the company that best serves the needs of the guys in the middle.

Disclosure: Author holds a large long position in Axion Power International (AXPW.OB) and small long positions in Active Power (ACPW), Exide (XIDE), Enersys (ENS) and ZBB Energy (ZBB).

John L. Petersen, Esq. is a U.S. lawyer based in Switzerland who works as a partner in the law firm of Fefer Petersen & Cie and represents North American, European and Asian clients, principally in the energy and alternative energy sectors. His international practice is limited to corporate securities and small company finance, where he focuses on guiding small growth-oriented companies through the corporate finance process, beginning with seed stage private placements, continuing through growth stage private financing and concluding with a reverse merger or public offering. Mr. Petersen is a 1979 graduate of the Notre Dame Law School and a 1976 graduate of Arizona State University. He was admitted to the Texas Bar Association in 1980 and licensed to practice as a CPA in 1981. From January 2004 through January 2008, he was securities counsel for and a director of Axion Power International, Inc. a small public company involved in advanced lead-acid battery research and development.



was posted on AltEnergyStocks.com.


       

advertise here


Oil and Gas





Comments

There could be no better investment in America than to invest in America becoming energy independent! We need to utilize everything in out power to reduce our dependence on foreign oil including using our own natural resources.Create cheap clean energy, new badly needed green jobs and reduce our dependence on foreign oil.The high cost of fuel this past year seriously damaged our economy and society. The cost of fuel effects every facet of consumer goods from production to shipping costs. After a brief reprieve gas is inching back up.OPEC will continue to cut production until they achieve their desired 80-100. per barrel.If all gasoline cars, trucks, and SUV's instead had plug-in electric drive trainsthe amount of electricity needed to replace gasoline is about equal to the estimated wind energy potential of the state of North Dakota.There is a really good new book out by Jeff Wilson called The Manhattan Project of 2009 Energy Independence Now. http://www.themanhattanprojectof2009.com

John,
I really liked the Mythology / Reality section of this article. One thing that nags me about the last one though is that PbC batteries may be subject to the same economic forces as NiMH and Li+ if adopted in EVs on a large scale.

Currently, most lead for industrial uses comes from recycling, a sourch which cannot be scaled up (since lead is already 99% recycled, as you point out) until there are already more lead based batteries in use. So an expansion of the number of lead based batteries in use is likely to require an expansion of lead mining. While lead is currently cheap, I don't know if lead mining can be increased so substantially without a significant increase in cost.

I don't know the answer to this question, but it deserves looking into.

Tom,

I don't want to turn this into a focus on a particular technology, but (1) the PbC uses only half the lead of a traditional LAB, (2) the US and Canada have substantial lead deposits but no commercial lithium deposits, (3) lead deposits often have ore grades of 20% to 70% with some associated silver where lithium deposits are more on the order of 1% to 5%, and (4) it's far easier to double the production of a major metal like lead than to increase production of a minor metal like lithium by a factor of 10x to 20x. So while any expansion of lead-acid or lead-carbon demand will likely cause material costs to increase, those increases should be more moderate with lead.

If PbC uses only half the Pb of a traditional LAB, is there any barrier to replacing traditional LABs used as car starter batteries with PbC, thereby freeing up half of the lead currently used in such applications? Do PbC batteries offer all of the functionality of LABs?

Tom, the best answer is perhaps. The PbC will likely be twice the price of premium lead-acid, which makes it pretty expensive for SLI. Moreover, until Axion gets to full manufacturing volumes it won't be able to do side by side comparison to answer the functionality part of your question. It looked promising a year ago, but I'll need to see the same kind of rigorous testing that I think other batteries need before rushing to judgment. One of the most dangerous things you can do with batteries is assume "if A then B." Since I spend so much time being critical of that kind of logic, I'll resist the chance to engage in it for now.

The following comes from the 2010 budget proposal for the DOE. For the sake of clarity I've edited the paragraph to use numbered subparagraphs, but made no other changes.

"The Budget provides support for the Office of Electricity Delivery and Energy reliability as part of the President’s investment plan to modernize the Nation’s electric grid. It includes:

(1) energy storage;

(2) cyber-security and investments in research, the development and demonstration of smart grid technologies that will accelerate the transformation of the Nation’s energy transmission and distribution system;

(3) enhancement of security and reliability of energy infrastructure; and

(4) facilitating recovery from disruptions to the energy supply."

Thank you for the information. I'm always curious to know where battery tech is at, and where it's going. Mostly I can not help but selfishly wonder whether I'll still be able to drive a car in my old age when the oil gets scarce. Battery-electric vehicles seem to be the most promising alternative visible at the moment, though still a problematic one. True that they do not make much economic sense "until gas prices are far higher than they have ever been"... but I imagine that will be probably be the case before my car reaches the end of its expected (or hoped-for) life-span, some 15 years from now.

> "it’s silly to fret about battery weight in the context of a 3,000-pound car"

That statement stands out as wrong, verging on ridiculous. I would rather have a 2000-pound car. If in the minds of automotive designers weight were not often worth some extra expense, aluminum engine blocks would not be so common.

The Mini-E, the electric version of the car, weighs nearly 25% more than the gasoline versions. If its battery had half the power density by weight, I imagine it could be more like 40% overweight; and the Mini is not a particularly light-weight car for its size to begin with. In a hybrid car, the battery obviously accounts for much less of the total vehicle weight, but still the utility of its energy storage depends in large part on battery size and weight. For performance and efficiency, weight matters.

In any car powered in whole or in part by battery-stored power, more weight also means less electric range. This range being an important performance limitation seems to imply that weight saving in batteries is perhaps even more important than it already is in general automotive design.

"the safe Li-ion chemistries only cut the weight in half"

From this I guess that you are including all the new lithium-based batteries like those of Altair Nano? Safety is far from the only improvement they've made over the old Li-ion used in my cell phone. Cycle life, self-discharge rate, and recharge rate can also be much improved over the usually-considered Li-FePO4, so I hear, among other things. It would be interesting to know how exactly how lead-carbon and all the vairous Li-ion chemistries compare on all the various performance measures. Even if lead/carbon for example is similar to the best of them all in its other properties, it seems to me that there will still be a place for Li-ion or the like in many automotive applications where half the weight is often well worth twice the price, depending on the particular design situation.

This reality may contribute for a while yet to keeping the new automotive applications of batteries down to rare and expensive PHEV's with limited battery capacity. So yes, perhaps other markets for energy storage will be far more economically important in the short term. Electric vehicles will take over the highways only when batteries can do a lot better or gasoline gets very expensive; I don't know which will happen first, but it would certainly be a lot more pleasant for us if technological advance wins that race. Perhaps there is still time and need for one more "new generation" of batteries after this one. It may be too soon to say what kind of batteries will weigh down the EVs of the future.

shan, thanks for taking the time to write a long and well considered comment. First, you need to understand that I'm a true skeptic when it comes to cars with plugs because people want more than batteries can realistically offer. Things like heating and air conditioning for one are range killers. Even worse, most people talk about wanting a long travel range, even though they don't plan on using it often. Both of these factors, range and creature comforts kill the economics of EVs almost instantly. The fundamental problem is the vehicle weight to passenger weight ratio. Electric works great when the ratio is low and gets incredibly expensive as the ratio increases. Electric bicycles and scooters pay well, as do ultra-light EVs, but when you start talking about thousands of pounds and more than an absolute minimum battery range, the economics just aren't there.

Altair, Ener1 and A123 are all working on batteries that have about 70 Wh/Kg, which is about 2x lead acid. Recent tests out of Sandia show that lead-carbon has a fairly comparable cycle life. So it really does boil down to weight vs cost.

There will always be people who can splash out $75,000 to $100,000 for a Tesla or Phoenix roadster, just like there were people who could splash out for a Delorean. But until we get to a product that an average guy will find acceptable and can afford, vehicles with plugs will be curiosities rather than mass market products. Right now, the DOE does not expect plugs to be on more than about 7% of the new vehicles in 2030. I think we can do better than that but not with the current crop of batteries.

If you're really interested in digging into the data, my article archive on Seeking Alpha and the links in my prior articles are a great place to start.

http://seekingalpha.com/author/john-petersen/articles

Post a comment

(If you haven't left a comment here before, you may need to be approved by the site owner before your comment will appear. Until then, it won't appear on the entry. Thanks for waiting.)

Featured Companies











Oil and Gas


Search This Site


Subscribe to this Blog

Enter your email address:

Delivered by FeedBurner


Subscribe by RSS Feed



Twitter Headlines

Certifications and Site Mentions


New York Times

Wall Street Journal





USA Today

Forbes

The Scientist

USA Today

Seeking Alpha Certified

Twitter Updates