Clean Energy's Linchpin: Storage

Written By Nick Hodge

Posted April 22, 2011

On this 41st Earth Day, the business of environmentalism has a very different persona than it did in 1970.

Peace signs and patchouli have been replaced by board members and backroom deals.

And there’s really one reason for it: It’s worth so much damn money.

New investment in clean energy soared to $243 billion in 2010. That figure was 30% greater than 2009, 100% greater than 2006, and 400% greater than 2004.

Clean Energy Investment 2004-2010

And smart investors — from you and me to Goldman Sachs — are using that stair-step progress to climb to the top of the investment game.

We Pause for This Realization

But for all the record investment — Q1 was off to a good start with another $31.1 billion invested — a few problems have begun to emerge…

I’ll defer to Michael Liebreich, a brilliant mind and CEO of Bloomberg New Energy Finance, which is responsible for compiling those bird’s-eye numbers:

Solar power is being squeezed by an anticipated slowdown in feed-in tariffs and other government subsidies in big European markets such as Germany, Italy and the Czech Republic.

U.S. wind power projects have been hit hard by falling prices for natural gas, which hit lows not seen since 2002. Natural gas turbines are direct competitors with wind power projects, and new shale gas extraction projects, (which could have some environmental issues) have also promised to add huge new stores to the U.S.’s stocks of the fossil fuel.

And the answer to these problems (as you’ll soon see) comes down to one technology: energy storage.

Without energy storage, technologies like solar, wind, and electric cars will never be able to grab a real foothold in the market.

That’s because utilities can make money from coal, natural gas, and nuclear anytime they choose. All they have to do is flip a switch, and they’ve got constant, baseload power from turbines or reactors.

But that’s not the case with wind and solar. You can only produce energy from those when the resource is available.

Until wind and solar can produce constant energy, they simply won’t be universally adopted.

Energy storage technologies change that.

Big Boys Do My Bidding

I won’t sit here and give a dry explanation of energy return on investment or various energy storage technologies; what I will do is let some recent activity illustrate my point.

In March, the Advanced Research Projects Agency-Energy (ARPA-E) — energy’s DARPA, which is responsible for bringing you the Internet — announced several multi-million dollar initiatives to further battery research, calling it a national security issue.

Fifty million dollars will go to the Navy to “develop hybrid energy storage that can rapidly charge and discharge and can be used in a variety of settings, from bases to outposts to ships.”

An undisclosed amount will go to Grid-Scale Rampable Intermittent Dispatchable Storage (GRIDS).

Last week, ultracapacitor maker loxus raised $21 million to ramp up manufacturing in Oneonta, New York. GE, NRG Energy, ConocoPhillips, Alstom, and Schneider all put cash into the deal so they could reap the benefits down the road.

On Monday, Goldman Sachs upgraded shares of A123 Systems (NASDAQ: AONE), a battery maker spun out of MIT, to Buy with a $9.00 price target. That’s about a 60% premium on the current price.

When discussing the battery market and the company’s potential, Goldman analyst Mark Wienkes said, “We think the market is now discounting just the current chapter of the story.”

He added there will be “specific catalysts” in the next two to six months that will show the larger picture.

And on Wednesday, Deutsche Bank lead analyst Dan Galves was out touting the lithium-ion market, saying it would reach $44 billion per year by 2015. It’s at about $13 billion right now.

It’s easy to see how all signs are pointing to energy storage…

Batteries, ultracapacitors, flywheels and more are becoming the linchpin of several industries.

Solar, wind, and electric vehicles will not succeed without them.

So by investing in energy storage, you’re getting access to the entire $243 billion clean energy industry.

And if that chart above is any indication, that’s exactly where you’ll want to be for years to come.

Call it like you see it,

Nick Hodge

Nick Hodge
Editor, Wealth Daily

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