John Petersen

I've been writing about the rapidly evolving market for manufactured energy storage devices in grid-based applications since last August when I published Grid-based Energy Storage: Birth of a Giant. At the time, only a handful of smaller public companies were working on grid-based storage solutions including Maxwell Technologies (MXWL), Beacon Power (BCON), Altair Nanotechnologies (ALTI), Active Power (ACPW) and Axion Power International (AXPW.OB). Last November, France's Saft Group (SGPEF.PK) announced a partnership with Switzerland's ABB Group (ABB) to develop and commercialize utility scale solutions. Yesterday, General Electric (GE) joined the fray when it announced plans to build a $100 million plant for batteries that it will use in hybrid locomotives and grid-based systems.

The new GE plant will make large format batteries based on a sodium sulfur (NaS) chemistry similar to one developed by Japan's NGK Insulators (NGKIF.PK). The aggregate storage capacity of the batteries produced at the GE plant will be on the order of 900 megawatt hours (MWh) annually. At current prices for comparable products, GE's annual revenue from battery sales should be on the order of $400 million. In connection with the announcement, GE's chairman and CEO Jeff Immelt said, “We believe the advanced battery business could be a $1 billion business over the next decade."

As impressive as the GE announcement is, the more impressive fact is that NaS battery systems like the ones GE plans to manufacture can only serve a small fraction of the broader grid-connected energy storage market. In a July 2008 report on its Solar Energy Grid Integration Systems – Energy Storage (SEGIS-ES) program Sandia National Laboratories described the broader market as follows:

"Energy storage devices cover a variety of operating conditions, loosely classified as ‘energy applications’ and ‘power applications’. Energy applications discharge the stored energy relatively slowly and over a long duration (i.e., tens of minutes to hours). Power applications discharge the stored energy quickly (i.e., seconds to minutes) at high rates. Devices designed for energy applications are typically batteries of various chemistries. Power devices include certain types of batteries, flywheels, and ECs. A new type of hybrid device, the lead-carbon asymmetric capacitor, is currently being developed and is showing promise as a device that might be able to serve both energy applications and power applications in one package."

It then presented the following chart to illustrate several battery and capacitor technologies in relation to their respective power and energy capabilities. The niche where GE plans to build a $1 billion business is the yellow oval marked Na/S.
 


After discussing the strengths and weaknesses of the technologies that will compete for a portion of the grid-based storage market, the Sandia report went on to summarize the relative costs of the principal energy storage alternatives. The following table separates the Sandia data into power technologies, short duration energy technologies and long duration energy technologies; orders the contenders based on the average of current and 10-year projected cost data reported by Sandia; and identifies the public companies that are focused on each class of storage technology.

Power	Current Cost ($/kWh)	10-year Projected Cost ($/kWh)
Electrochemical Capacitors      Maxwell Technologies (MXWL)	$356/kW	$250/kW
High-speed Flywheels (composite)      Beacon Power (BCON)	$1,000	$800
Li-ion Batteries      Altair Nanotechnologies (ALTI)      Saft Batteries (SGPEF.PK)	$1,333	$780
Short Duration Energy	Current Cost ($/kWh)	10-year Projected Cost ($/kWh)
Flooded Lead-acid Batteries      Exide (XIDE)      Enersys (ENS)      C&D Technologies (CHP)	$150	$150
Valve Regulated Lead-acid Batteries      Exide (XIDE)      Enersys (ENS)      C&D Technologies (CHP)	$200	$200
Low-speed Flywheels (steel)      Active Power (ACPW)	$380	$300
Lead-carbon Asymmetric Capacitors      Axion Power (AXPW.OB)      Furukawa Battery (FBB.DE)	$500	$250
Long Duration Energy	Current Cost ($/kWh)	10-year Projected Cost ($/kWh)
Zn/Br Batteries      ZBB Energy (ZBB)	$500	$250/kWh plus $300/kW
Na/S Batteries      NGK Insulators (NGKIF.PK)      General Electric (GE)	$450	$350

I would be remiss if I failed to note that in addition to its plans to directly engage in NaS battery production, GE also has a substantial stake in A123 Systems which is currently testing a Li-ion based frequency regulation system.

The best single document I've found to give investors a basic technical background in grid-based energy storage systems is Sandia's July 2008 report on its Solar Energy Grid Integration Systems – Energy Storage (SEGIS-ES) program. There are also two recent reports from the DOE that I think are "must reads" for investors that want a deeper understanding of how the Smart Grid will develop. The first report, “Smart Grid: Enabler of the New Energy Economy,” explains how the Smart Grid will use advanced technology to transform the energy production and distribution system. The companion report, “Bottling Electricity: Storage as a Strategic Tool for Managing Variability and Capacity in the Modern Grid,” explains why the evolution of the Smart Grid will depend on cost effective energy storage.

In addition to the government reports that focus principally on technological merit rather than investment value, I've written extensively on the companies that are active in the sector. If you want to better understand the potential of energy storage, a rapidly emerging sector that may "dwarf IT to the tune of two orders of magnitude," the following articles can provide a good start.

Grid-based Energy Storage: Birth of a Giant
Alternative Energy Storage: Lithium, Lead or Both?
Alternative Energy Storage: Cheap Will Beat Cool
America Must Rebuild Domestic Battery Manufacturing Infrastructure
Alternative Energy Storage Needs to Take Baby Steps Before It Can Run
Alternative Energy Storage: It's All About Price vs. Performance
Lead-Carbon: A Game Changer for Alternative Energy Storage
Alternative Energy Storage: Cheap Outperforms Cool

Each of my articles includes extensive links to underlying source documents and many have wonderful commentary from readers who have different opinions that are fervently held and eloquently expressed. I have several dogs in this fight and am far from disinterested. But I believe the upside potential for astute investors who position their portfolios early for the coming of cleantech, the sixth industrial revolution, will be handsome.

Disclosure: Author is a former director and executive officer of Axion Power International (AXPW.OB) and holds a large long position in its stock. He also holds small long positions in Exide (XIDE), Enersys (ENS) Active Power (ACPW) 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-carbon battery research and development.