2014 has largely been a year of missed opportunities for
OM, some unfortunate (e.g. what eventually turned out to be a false sell signal
in the Technical book) but most self-inflicted; predominantly mistakes of
omission than mistakes of commission. This is broadly represented
in a consistent theme that you’ve seen since Our Man started running the book;
a significant level of underinvestment, too often caused by OM waiting for the
perfect price to enter (or add to) a name rather than starting to build a
position at a good price (i.e. with a sufficient margin of safety) and seek to
build it should it decline further. Thus, the big aim for 2015 and 2016,
is to get better at this…
Some things that are interesting OM for 2015, and
beyond…
- International Book - Argentina: This is one of
those positions that falls into the mistakes of omission, since OM has been
waiting to put on a position since Argentina defaulted on its debt over the
summer. On the surface there’s very little good to say about Argentina;
the country is in an acrimonious fight with some bond hold-outs from its last
default resulting in another default, the economy is terrible with high inflation, a weakening currency (which trades
at both official vs. unofficial prices) and high interest rates.
Given that, why Our Man’s interest? Well, everyone knows all of the above
and despite the huge rally in stocks, they’re still cheap by any
definition. However, this is with good reason; high and volatile interest rates, mean banks
only lend short term, which means businesses on focus on the short-term and
eschew investments where the future return may be substantial. Ditto for
investors, who rightly value short-term cashflow or earnings far more heavily
than any future earnings, due to the high discount rate. The opportunity lies in that during 2015, there are ‘events’ that could change this paradigm; (i) it becomes a lot
easier to negotiate with the bond holdouts as the calendar turns to 2015 (due
to the expiration of a clause in the restructured bonds), and more importantly
(ii) the current President cannot seek a third term,
with all 3 major candidates promising a break from the Kirchner's (Cristina
Kirchner has been President since 2007, and her husband was President for the 4
years prior) style and policies. Therein lies the upside potential – the hope of a sensibly governed Argentina (perhaps even with an independent Central Bank), with its limited fiscal deficit and debt,
and having ability to return to international capital markets would lead to a falling in
the risk premium and corporations focusing on maximizing return (including
future growth) rather than just surviving. The downside, is yet more of
what we’ve already seen, which is largely priced into the markets. Given
the lack of a good ETF, OM began investing in a small basket of positions in
Argentina to get exposure during December.
- Equity - Oil/Gas related: The decimation in the
Energy markets has been amazing to watch, with the Russell 2000 Energy losing around half its value in the last 6 months and many individual names suffering far more heavily than that! The sharp fall in oil has also reopened many of the debates
about fracking and how the US Shale boom has been funded.
From a historical analog, there are certain similarities to what
happened in 1985/86, when an influx of new production from the North Sea
increased supply and saw the Saudis choose to maintain market share in a period
of weakish demand, leading to a 60%+ decline in WTI within a 6month period
despite ongoing Middle Eastern tensions;
for 2014, substitute in US Shale (where production increased 1mn barrels per
day in 2013, and likely 1.7mn bpd in 2014) for North Sea. In short, Our
Man thinks there are going to be things to do to in Energy during 2015, but
we’ve yet to see the numerous corporate casualties (other than in their stock prices) that
indicate it will be a better time to look for those that might be
winners. As such, OM’s exposure will continue to remain of the
toe-dipping variety, but don’t be surprised if you start to see some Energy
names in the Equity book next year.
- Equity – Internet: OM loves the Internet and at this point, who
doesn’t? Be it shopping, catching up on the highlights from the big game,
keeping in touch with family and friends or just doing one’s work, the Internet is
pervasive*. OM doubts it’s even an argument whether the Internet is this
generation’s defining contribution and theme**, and like many of the prior
themes it’s not only reshaping our world but is a key force of the deflationary
pressure that we’re seeing globally. The Tech Bubble of the late 90’s was
clearly the very early innings, but it’s hard to say how far into the game we
are currently. While OM loves the Internet, he struggles to buy positions
in a world where valuation is based on Total Addressable Markets (TAMs, or how big a company’s market
“could” be) that can be almost anything and where low rates mean the value of future growth
is vastly more important than the value of any profitability in the near-term
(i.e. $100 at the end of 5years is worth ~$62 today at a 10% discount rate vs.
~$90-$91 today at a 2% discount rate). Thus OM has only really been a
buyer of Internet stocks at times when they’ve been sold aggressively (e.g.
early last year); expect this to continue into 2015. But like this year's Internet exposure, OM hopes that each
time he invests in these sell-offs there will be a name or two that becomes longer-term holdings for the
portfolio (like VIPS and TWTR in 2014).
* Furthermore people have now largely accepted the Faustian bargain
of the Internet; that it is “free” to use and “cheap” to buy things on, BUT in
exchange for all your personal data, whose protection & safety is currently not a priority for anybody be it individuals or corporations.
**OM will leave it historians to argue how it compares to
the Railroad, the industrialization of manufacturing driven by oil/gas, the
Automobile, etc.
Showing posts with label Energy. Show all posts
Showing posts with label Energy. Show all posts
Saturday, December 20
Friday, August 13
Energy Storage – Lead Acid Batteries: Part B
Following on from our introduction to Lead Acid & Lithium-Ion batteries and the overview of how batteries fit into the Energy Storage theme, now is a good time to go into greater depth.
When we’re talking about batteries, for vehicles or energy grid storage, we’re really talking about “battery packs”. In lead-acid world this is typically six cells in the same hard plastic box (think your car battery). For Li-Ion (or NiMH, as used in the Prius) the basic building block is the battery cell that you have in your cellphone or camera. These cells are strung together depending on what you’re powering; 12 or so for a laptop battery pack, 75 for an electric bicycle, 1,000 for a hybrid electric vehicle (HEV) and somewhere around 5,000 for an Electric car. It’s useful to know this as it helps us put into context two things that matter when considering batteries; volume/weight and price.
Volume/Weight
I’ll touch on volume/weight first, since it’s the smaller of the two issues; while lead-acid batteries have been prevalent in our vehicles for a long-time, their volume and weight were the reason they never made it to our handheld devices. In essence, they couldn’t provide the power that was needed in a small and light enough form to be useful in hand held devices. The best estimates suggest that for a full hybrid car, a Li-Ion battery pack would weigh around 75-100lbs and take up about 1 cubic foot less than the necessary Lead-Acid battery pack. While this is a clear advantage, it shouldn’t be a determining factor when deciding which technology to use as a car weighs around 3,000lbs and the boot space (as we Brits call it) is 10-12 cubic feet.
Price
Unlike in existing applications (from cars to cellphones), the price of the battery actually has a material impact on the price of a hybrid car. The proposed fully Electric Vehicles, such as the Nissan Leaf and Chevy Volt are both priced at well over $30K (before any government rebates), in part because their battery packs cost somewhere between $12.5-$18K. More generally, there is a lot of argument over the costs of production given that none of batteries are produced on mass scale. As such, I’ve gone with Sandia National Laboratories who in a July-2008 report for the Department of Energy estimated the current cost of battery packs at $500/KWh for Advanced Lead Acid Batteries and $1,333/KWh for Li-Ion batteries. This would imply the following cost structure:
In the context of the typical $15,000 to $20,000 cost of a regular car these numbers should have some impact, even given the likely dominance of mild/micro hybrids in the coming years.
However, things are not so simple and a major point of contention is that the Li-Ion manufacturers claim that they can reduce the price per KwH “substantially” or “once the batteries are in mass production.”
Unsurprisingly, it’s a fairly big argument over in battery-world and given it’s entirely about forecasts there isn’t yet a right answer. My thoughts are as follows:
- The don’t currently: No US listed public company has managed to get to even get to the mass production stage, and the $1,333 number is a reasonable estimate of their current price (e.g. using A123’s latest 10-K shows its cost of production (excluding all R&D, let alone any profit) was around $1,250/KWh).
- Raw materials: If you speak to the companies (or listen to the calls, read their presentations, etc) there is a clear belief that raw materials won’t be a problem for them on the cost side. Logically, this seems strange. Let’s make some really generous assumptions; over the next 5 years, Li-Ion use in hybrids (like the Prius and assuming no sales of any plug-in vehicles) captures a mere 15% of the US market (and nothing abroad!) and the US car sales stay at c10mn (i.e. no increase from 09-10 numbers). That would be 1.5mn battery packs that would be sold per year; the equivalent of 1.5bn cellphones/year (currently c1.25bn/year sold) or 125mn computers/year (currently 300mn/year sold). Given Lithium mines don’t start overnight, and the growing demand for Lithium in other battery-operated products (like Mrs OM’s shiny new iPad), I would think there would be some price impact from a new industry suddenly stepping in with big demand.
- Physics Envy: This is the most interesting but the least considered problem, largely because it’s behavioural (some might say obtuse) in nature. A core of the argument for Li-Ion’s ability to reduce future manufacturing costs as production increases is because we’ve seen it before. More specifically, our recent experience with technology and computers has shown us that it’s possible to increase production, innovate and reduce price…all at that same time. For example, our computers are far better than they were 1, 3, 5 and 10years ago yet they cost less. This has been Physics’ gift (more specifically Moore’s Law) to the world over the recent decades. Given that most analysts who cover Li-Ion battery companies come from the Technology world, it’s not surprising that there’s acceptance that progress in batteries can be similar to that seen in computing. There is one major flaw in this belief; batteries produce energy through chemical reactions, thus the ability to get more energy from them is likely to follow the laws of chemistry, not physics! These laws most assuredly operate differently, they won’t prevent existing technologies from being improved, or new one’s found, but they likely will prevent small tweaks to existing technologies from creating huge and continuous leaps forward.
- Safety & Lifespan: While these two issues are largely ignored in the discussion over Li-Ion batteries, they are the great unknown. Safety questions over Li-Ion batteries flared up again last year (after causing a fire on a plane) and as anyone who’s ever used an electronic device knows, lifespan is always an issue (think how your cellphone battery loses its ability to charge fully and then imagine that happening to your car battery). Simply put, we just don’t know if a Li-Ion battery pack can attain a 15-year life (and the 1000’s of cycles that entails) that is currently standard for a car battery or whether they will function effectively in various conditions (inclement weather, etc) as required.
As such, you can see some of the reasons for my skepticism that we will see Li-Ion battery packs in our mild/micro hybrids in the immediate future (though I’m sure we’ll see them in expensive ego-cars or gimmicks, which the car companies have more interest in talking about than mass producing).
Advanced Lead-Acid Batteries
The observant amongst you will notice that I didn’t compare the Li-Ion batteries with the traditional Valve-Regulated Lead Acid (VRLA) batteries, but instead with Advanced Lead-Acid (largely Carbon-enhanced Lead-Acid) batteries. While they’re not sexy or cool, like their Li-Ion counterparts, they are a technological jump from existing VRLA batteries that look like they can fulfill our vehicular needs (potentially all the way up the hybrid chain). There are a number of companies working on Advanced Lead Acid Batteries, including Firefly (spun-off from Caterpillar), C&D Technologies, Furukawa/CSIRO and Axion Power. I’m going to focus on the last 2, since I know them the best and their efforts appear the most promising.
Australia’s national science agency, CSIRO, developed the Ultrabattery and has licensed it out to their partner Furakawa (a Japanese Company, who sub-licensed it to East Penn. Manufacturing for the NAFTA area). Interestingly, Furukawa successfully tested prototypes of the Ultrabattery in a Honda Insight hybrid back in 2007/8, confirming the viability of the project. They also submitted the UItrabattery to Sandia, where it was tested alongside other batteries in a DOE Storage Systems Research Program. The key graph is this one:
As you can see the Ultrabattery’s performance was a significant improvement on the VRLA battery and comparable to a Lithium-Ion battery, again suggesting that the technology is viable.
Axion Power began making and testing a Carbon-Enhanced battery (called a PbC battery) back in 2003. One of their early aims was to try and create a technology that could easily be implemented in the existing Lead-Acid battery plants around the globe, with minimal capex required. It’s a project they’ve been working on, at their own lead-acid battery plant in New Castle. They also began testing, initially with a large battery pack (called a Power Cube) at a NYSERDA-funded program to store energy from a solar power system at CUNY College. However, in the last year or so things have progressed quickly and they have also moved to test their battery in vehicles, signed a worldwide supply agreement with Exide (the 2nd largest Lead-Acid battery maker for vehicles) and received a joint DOE-grant with Exide for the production of PbC car batteries.
Next time: While we have 2 interesting new technologies (Li-Ion and Advanced Lead-Acid), and an incumbent technology (VRLA), it all means nothing for an investor without looking at valuation. As such, in what’s probably the final part of this series, we’ll take a peek at how the companies are valued.
When we’re talking about batteries, for vehicles or energy grid storage, we’re really talking about “battery packs”. In lead-acid world this is typically six cells in the same hard plastic box (think your car battery). For Li-Ion (or NiMH, as used in the Prius) the basic building block is the battery cell that you have in your cellphone or camera. These cells are strung together depending on what you’re powering; 12 or so for a laptop battery pack, 75 for an electric bicycle, 1,000 for a hybrid electric vehicle (HEV) and somewhere around 5,000 for an Electric car. It’s useful to know this as it helps us put into context two things that matter when considering batteries; volume/weight and price.
Volume/Weight
I’ll touch on volume/weight first, since it’s the smaller of the two issues; while lead-acid batteries have been prevalent in our vehicles for a long-time, their volume and weight were the reason they never made it to our handheld devices. In essence, they couldn’t provide the power that was needed in a small and light enough form to be useful in hand held devices. The best estimates suggest that for a full hybrid car, a Li-Ion battery pack would weigh around 75-100lbs and take up about 1 cubic foot less than the necessary Lead-Acid battery pack. While this is a clear advantage, it shouldn’t be a determining factor when deciding which technology to use as a car weighs around 3,000lbs and the boot space (as we Brits call it) is 10-12 cubic feet.
Price
Unlike in existing applications (from cars to cellphones), the price of the battery actually has a material impact on the price of a hybrid car. The proposed fully Electric Vehicles, such as the Nissan Leaf and Chevy Volt are both priced at well over $30K (before any government rebates), in part because their battery packs cost somewhere between $12.5-$18K. More generally, there is a lot of argument over the costs of production given that none of batteries are produced on mass scale. As such, I’ve gone with Sandia National Laboratories who in a July-2008 report for the Department of Energy estimated the current cost of battery packs at $500/KWh for Advanced Lead Acid Batteries and $1,333/KWh for Li-Ion batteries. This would imply the following cost structure:
However, things are not so simple and a major point of contention is that the Li-Ion manufacturers claim that they can reduce the price per KwH “substantially” or “once the batteries are in mass production.”
Unsurprisingly, it’s a fairly big argument over in battery-world and given it’s entirely about forecasts there isn’t yet a right answer. My thoughts are as follows:
- The don’t currently: No US listed public company has managed to get to even get to the mass production stage, and the $1,333 number is a reasonable estimate of their current price (e.g. using A123’s latest 10-K shows its cost of production (excluding all R&D, let alone any profit) was around $1,250/KWh).
- Raw materials: If you speak to the companies (or listen to the calls, read their presentations, etc) there is a clear belief that raw materials won’t be a problem for them on the cost side. Logically, this seems strange. Let’s make some really generous assumptions; over the next 5 years, Li-Ion use in hybrids (like the Prius and assuming no sales of any plug-in vehicles) captures a mere 15% of the US market (and nothing abroad!) and the US car sales stay at c10mn (i.e. no increase from 09-10 numbers). That would be 1.5mn battery packs that would be sold per year; the equivalent of 1.5bn cellphones/year (currently c1.25bn/year sold) or 125mn computers/year (currently 300mn/year sold). Given Lithium mines don’t start overnight, and the growing demand for Lithium in other battery-operated products (like Mrs OM’s shiny new iPad), I would think there would be some price impact from a new industry suddenly stepping in with big demand.
- Physics Envy: This is the most interesting but the least considered problem, largely because it’s behavioural (some might say obtuse) in nature. A core of the argument for Li-Ion’s ability to reduce future manufacturing costs as production increases is because we’ve seen it before. More specifically, our recent experience with technology and computers has shown us that it’s possible to increase production, innovate and reduce price…all at that same time. For example, our computers are far better than they were 1, 3, 5 and 10years ago yet they cost less. This has been Physics’ gift (more specifically Moore’s Law) to the world over the recent decades. Given that most analysts who cover Li-Ion battery companies come from the Technology world, it’s not surprising that there’s acceptance that progress in batteries can be similar to that seen in computing. There is one major flaw in this belief; batteries produce energy through chemical reactions, thus the ability to get more energy from them is likely to follow the laws of chemistry, not physics! These laws most assuredly operate differently, they won’t prevent existing technologies from being improved, or new one’s found, but they likely will prevent small tweaks to existing technologies from creating huge and continuous leaps forward.
- Safety & Lifespan: While these two issues are largely ignored in the discussion over Li-Ion batteries, they are the great unknown. Safety questions over Li-Ion batteries flared up again last year (after causing a fire on a plane) and as anyone who’s ever used an electronic device knows, lifespan is always an issue (think how your cellphone battery loses its ability to charge fully and then imagine that happening to your car battery). Simply put, we just don’t know if a Li-Ion battery pack can attain a 15-year life (and the 1000’s of cycles that entails) that is currently standard for a car battery or whether they will function effectively in various conditions (inclement weather, etc) as required.
As such, you can see some of the reasons for my skepticism that we will see Li-Ion battery packs in our mild/micro hybrids in the immediate future (though I’m sure we’ll see them in expensive ego-cars or gimmicks, which the car companies have more interest in talking about than mass producing).
Advanced Lead-Acid Batteries
The observant amongst you will notice that I didn’t compare the Li-Ion batteries with the traditional Valve-Regulated Lead Acid (VRLA) batteries, but instead with Advanced Lead-Acid (largely Carbon-enhanced Lead-Acid) batteries. While they’re not sexy or cool, like their Li-Ion counterparts, they are a technological jump from existing VRLA batteries that look like they can fulfill our vehicular needs (potentially all the way up the hybrid chain). There are a number of companies working on Advanced Lead Acid Batteries, including Firefly (spun-off from Caterpillar), C&D Technologies, Furukawa/CSIRO and Axion Power. I’m going to focus on the last 2, since I know them the best and their efforts appear the most promising.
Australia’s national science agency, CSIRO, developed the Ultrabattery and has licensed it out to their partner Furakawa (a Japanese Company, who sub-licensed it to East Penn. Manufacturing for the NAFTA area). Interestingly, Furukawa successfully tested prototypes of the Ultrabattery in a Honda Insight hybrid back in 2007/8, confirming the viability of the project. They also submitted the UItrabattery to Sandia, where it was tested alongside other batteries in a DOE Storage Systems Research Program. The key graph is this one:
Axion Power began making and testing a Carbon-Enhanced battery (called a PbC battery) back in 2003. One of their early aims was to try and create a technology that could easily be implemented in the existing Lead-Acid battery plants around the globe, with minimal capex required. It’s a project they’ve been working on, at their own lead-acid battery plant in New Castle. They also began testing, initially with a large battery pack (called a Power Cube) at a NYSERDA-funded program to store energy from a solar power system at CUNY College. However, in the last year or so things have progressed quickly and they have also moved to test their battery in vehicles, signed a worldwide supply agreement with Exide (the 2nd largest Lead-Acid battery maker for vehicles) and received a joint DOE-grant with Exide for the production of PbC car batteries.
Next time: While we have 2 interesting new technologies (Li-Ion and Advanced Lead-Acid), and an incumbent technology (VRLA), it all means nothing for an investor without looking at valuation. As such, in what’s probably the final part of this series, we’ll take a peek at how the companies are valued.
Sunday, August 1
Energy Storage Theme: How Lead-Acid Batteries Fit in…
On reflection, Energy Storage as a broader title for this theme is appropriate as it is a better indication of where I see the opportunity in the long-term, with Lead-Acid Batteries likely to be the most effective way to express the theme in the short-to-medium-term.
Energy Storage broadly encompasses all of the ways that we can store energy for future use, for example through batteries, supercapacitors, and flywheels. There are 2 main areas that I think about as the primary uses for Energy Storage;
- Vehicles, where people are looking for a move from an internal combustion engine to a battery as the primary driver of propulsion. This is something I expect to happen using baby steps (i.e. lots of mild/micro-hybrid cars soon) as opposed to a giant leap (Plug-in Electric Vehicles tomorrow). This is one of the reasons that I think the incumbent technology (Lead Acid Batteries) is being under-rated.
- Power Storage (meaning Electricity grid-related storage, and Industrial-related storage). Unlike in vehicles, there are far more storage options in play here and most will find some role in what will be a massive market. As I’ve not talked much about this before, I’m going to spend the rest of this post talking about Energy storage and the power markets.
Why Energy Storage is becoming more important in the power markets
The easiest way to describe is to think through it aloud. First-off, our demand for electricity is pretty variable. Yes, it follows patterns both daily and seasonal, but it is variable around these broad patterns meaning that while an electricity company has a good estimate for the power they’re going to need to deliver in 30mins/60mins/4hrs/etc they don’t know exactly how much. Electricity’s also pretty binary; your TV can’t show half the picture, it’s either on and working or it isn’t! Hence when the electricity company can’t supply enough power, you get black-outs or brown-outs…which are no fun, and pretty unpopular. Thus, in the energy company tries to supply a tiny bit more power than is actually required at any given minute, and needs some easily accessible reserves if there’s a spike in demand.
On the supply side let’s consider that the vast majority of electricity is still being generated from fossil fuel power plants. Again, while the capacity that these plants are running is controllable, either the plants are running (at the desired capacity) or they’re idle. Now compare this to the alternative sources that have started to become more prevalent over the last couple of years, like wind and solar. The power these plants produce is far more variable and less controllable by man; after all is it suitably windy/sunny, how windy or sunny is it, what happens if there’s a cloud or a gust of wind, etc. Given the variability of these production methods, and how poorly electricity travels via the grid, it is clear that there’s a need to be able to store energy efficiently and to be able to supply it quickly and efficiently from this storage. Furthermore, in the case of solar, the electricity is being generated (during the day when it’s sunny) at a time when it’s not generally being consumed (the evening) thus there is additional need for storage.
As such, you can see how Energy Storage is considered by some as being an important part of the broader Clean Technology “revolution” that is underway.
Different Types of Storage/Needs in Power
An important thing to consider when talking about the power grid and energy storage is the need for different types of storage and delivery. This is due to the different time horizons for the power to be stored, and the differing speeds at which it might need to be delivered from the storage to the grid. For example, the storage and delivery periods for something attached to solar power plants might be hours (i.e. the storage device would be required to store the power for hours, the deliver it over a period of hours), whereas for other things the delivery period may be seconds (e.g. to smooth out the power sent to the grid), with everything else in between. This is important as those electricity providers only want to provide a tiny amount more energy than people need in order to maximize their profits. Furthermore, those technologies that are great at storing lots of energy are not so good at delivering it quickly (i.e. batteries can store a lot but don’t providing it quickly, hence there’s an opportunity for multiple technologies to play a role.
Given this there are other types of Energy Storage systems that we might look at in more-depth in the future, such as Flywheels (likely compete with Li-Ion/Lead-Acid batteries), Supercapicitors (likely will dominate the segment that requires power delivery in seconds), Other-type of battery (e.g. molten sulphur batteries, which can store/deliver power over a longer time period that Li-Ion/Lead Acid batteries) and Compressed-Air Energy Storage (which can deliver power over many hours, much longer than Li-Ion/Lead Acid batteries). However, I expect that Li-Ion and/or Lead-Acid Batteries in addition to being the only real players in the Vehicle space and will be amongst the major players here in the Power space. As such, that’s why they’re the logical first step for us to consider an investment.
Energy Storage broadly encompasses all of the ways that we can store energy for future use, for example through batteries, supercapacitors, and flywheels. There are 2 main areas that I think about as the primary uses for Energy Storage;
- Vehicles, where people are looking for a move from an internal combustion engine to a battery as the primary driver of propulsion. This is something I expect to happen using baby steps (i.e. lots of mild/micro-hybrid cars soon) as opposed to a giant leap (Plug-in Electric Vehicles tomorrow). This is one of the reasons that I think the incumbent technology (Lead Acid Batteries) is being under-rated.
- Power Storage (meaning Electricity grid-related storage, and Industrial-related storage). Unlike in vehicles, there are far more storage options in play here and most will find some role in what will be a massive market. As I’ve not talked much about this before, I’m going to spend the rest of this post talking about Energy storage and the power markets.
Why Energy Storage is becoming more important in the power markets
The easiest way to describe is to think through it aloud. First-off, our demand for electricity is pretty variable. Yes, it follows patterns both daily and seasonal, but it is variable around these broad patterns meaning that while an electricity company has a good estimate for the power they’re going to need to deliver in 30mins/60mins/4hrs/etc they don’t know exactly how much. Electricity’s also pretty binary; your TV can’t show half the picture, it’s either on and working or it isn’t! Hence when the electricity company can’t supply enough power, you get black-outs or brown-outs…which are no fun, and pretty unpopular. Thus, in the energy company tries to supply a tiny bit more power than is actually required at any given minute, and needs some easily accessible reserves if there’s a spike in demand.
On the supply side let’s consider that the vast majority of electricity is still being generated from fossil fuel power plants. Again, while the capacity that these plants are running is controllable, either the plants are running (at the desired capacity) or they’re idle. Now compare this to the alternative sources that have started to become more prevalent over the last couple of years, like wind and solar. The power these plants produce is far more variable and less controllable by man; after all is it suitably windy/sunny, how windy or sunny is it, what happens if there’s a cloud or a gust of wind, etc. Given the variability of these production methods, and how poorly electricity travels via the grid, it is clear that there’s a need to be able to store energy efficiently and to be able to supply it quickly and efficiently from this storage. Furthermore, in the case of solar, the electricity is being generated (during the day when it’s sunny) at a time when it’s not generally being consumed (the evening) thus there is additional need for storage.
As such, you can see how Energy Storage is considered by some as being an important part of the broader Clean Technology “revolution” that is underway.
Different Types of Storage/Needs in Power
An important thing to consider when talking about the power grid and energy storage is the need for different types of storage and delivery. This is due to the different time horizons for the power to be stored, and the differing speeds at which it might need to be delivered from the storage to the grid. For example, the storage and delivery periods for something attached to solar power plants might be hours (i.e. the storage device would be required to store the power for hours, the deliver it over a period of hours), whereas for other things the delivery period may be seconds (e.g. to smooth out the power sent to the grid), with everything else in between. This is important as those electricity providers only want to provide a tiny amount more energy than people need in order to maximize their profits. Furthermore, those technologies that are great at storing lots of energy are not so good at delivering it quickly (i.e. batteries can store a lot but don’t providing it quickly, hence there’s an opportunity for multiple technologies to play a role.
Given this there are other types of Energy Storage systems that we might look at in more-depth in the future, such as Flywheels (likely compete with Li-Ion/Lead-Acid batteries), Supercapicitors (likely will dominate the segment that requires power delivery in seconds), Other-type of battery (e.g. molten sulphur batteries, which can store/deliver power over a longer time period that Li-Ion/Lead Acid batteries) and Compressed-Air Energy Storage (which can deliver power over many hours, much longer than Li-Ion/Lead Acid batteries). However, I expect that Li-Ion and/or Lead-Acid Batteries in addition to being the only real players in the Vehicle space and will be amongst the major players here in the Power space. As such, that’s why they’re the logical first step for us to consider an investment.
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