Energy storage, transmission, and Demand Response cost comparison chart by Tom Konrad

It’s almost a cliché that there’s a “friendly debate” pitting utilities against renewable energy. But concerns on the utility side of the table are real: intermittency, potential destabilization at the feeder level, non-baseload, and peaks in generation that don’t necessarily match demand peaks. Today’s power infrastructure involves unpredictability in both supply and demand that is extremely difficult to manage. The choice comes down to two options: over-generate so as to not undersupply, or find ways to better match up supply and demand.

“To balance the grid and keep it in a stable condition, you’re going to need energy storage,” said Doug Staker, VP of business development for Demand Energy. “Every customer interaction, every presentation, one question I’m getting now: what can you do to help me with storage?” He said there’s a “huge lack of information and education” about whether energy storage is ready and in what form (e.g. which technology to use, and whether it’s centralized vs. distributed) “People really want to understand how to integrate energy storage into a variety of applications.”

As more renewable energy comes into the power mix, “high-response energy storage seems to be the way,” added Chris Wheaton, CFO of Energ2. “We think storage is an equivalent leg of the chair” alongside solar and wind energy generation.

“In general energy storage is a good thing  except that it is not cost-effective for bulk energy storage,” counters Mahesh Morjaria, VP of PV technology applications at First Solar. If the goal is to manage variable energy generation, Morjaria suggests, then the whole grid can act as energy storage, if managed properly. “When part of the resource is not available or generating, other resources are able to provide the load,” Morjaria said. “That’s the beauty of it, in a more cost-effective manner.” Storage too can provide grid flexibility, agreed Morjaria, but it’s simply not yet cost-effective enough.

What’s It For?

Discussing large-scale energy storage depends on what problems are being solved. “People forget what energy storage is: an enabler,” explained Erick Petersen, VP of marketing at Demand Energy. It’s not that grid-scale energy storage *can’t* be deployed  it’s a question of what do you want do with it, whether it’s achieve true grid stability, or flatten loads to reduce peak congestion, or provide ancillary services. “The benefits stack up the highest as you move the edge of the grid,” he said. “People get lost in the debate whether it should be grid-scale, which battery is right  the answer is, ‘All of it,’ depending on the problem you’re trying to solve.”

Reliability and Flexibility

Germany is widely accepted as having a much more robust incorporation and management of renewable energy generation. But even there, many believe the nation’s energy overhaul means storage is a matter of not if but when. Wheaton thinks “the jury’s still out whether Germany will have an energy storage program.” Rick Luebbe, CEO of Energy2, points to a Sandia Labs calculation that problems start emerging at a 20 percent renewables mix at which point storage has to enter the discussion.

Germany has been able to accommodate roughly 22 percent of a renewables mix, mostly variable wind and solar  and they’re doing it by leveraging flexibility in their grid “without going out and acquiring a whole bunch of storage,” Morjaria points out. Similarly, California’s 33 percent renewables target won’t rely on building massive amounts of bulk energy storage. In both cases, “they’re figuring out other ways to achieve grid flexibility,” he said.

In California the difference between trough and peak load on a summer day can be 20 gigawatts, Staker pointed out. “People talk about the [grid] having flexibility and capability to absorb excess generation  and that’s true,” he said. “But more system saturation becomes more problematic,” once you have to start doing things like firming up wind power with gas peakers that by definition want to run in a steady-state condition and not vary up and down to plug intermittent gaps.

Demand Response

“Demand response has been the cure-all for all kinds of system challenges,” Staker said. He recalled an effort from Baltimore Gas & Electric with a demand/response plan to reimburse customers for turning off their air conditioners for a few hours during critical peak events. But the system was one-way and radio-based, and closed-loop  no way to really know who responded. So an urban secret spread: wrap your AC in tinfoil to block the signals, and cash in the reimbursement. That, he said, illustrates a problem with demand/response: “at the end of the day, customers can just opt out.”

If response time is the target, hydro and possibly compressed air make sense, balancing on a 24-hour cycle, says Luebbe. But either of those options are selective based on geography. For shorter-timeframe needs, electrochemical storage comes into play, with multiple technologies to choose from (lead/acid, lithium-ion, flow, molten, ultracapacitors, hybrid configurations). For balancing solar power into a facility or a grid, lead-acid batteries “will probably be just fine,” he said, while flow and molten batteries will emerge at point-of-use to balance intermittent power from a local grid (e.g. cell-phone towers).

Still, Morjaria thinks the costs for energy storage still aren’t low enough to make it feasible for this time-shifting. Even if there’s a significant difference in the cost of every kilowatt-hour that can be fed into and pulled out of the grid, adding costs associated with energy storage eliminates those potential gains. “In California they’re talking about PPAs on the order of $85/MWh [$0.08/kWh]. That’s what they expect from solar energy,” he points out. (Note that a recent deal in New Mexico was for less than six cents/kWh, and ironically for a First Solar [FSLR] project.) Storing energy and pumping it out adds to that cost  Morjaria ballparks it at $0.20/kWh  which quickly snuffs out any price arbitrage.

Frequency Regulation

Morjaria did acknowledge one area where energy storage is indeed viable: frequency regulation. Constantly adjusting power input to offset increased/decreased demand and keep frequency constant, responding very fast with charging and deploying energy in very short cycles  “that’s where energy storage has an interesting role to play,” Morjaria said. A123 and Beacon Power have explored that in NY ISO and other places, FERC has tweaked regulation to support it, and “it seems to be making some sense,” Morjaria noted. But that isn’t necessarily a practice that depends on variable generation from renewables.

Frequency response can stretch out some power output at the expense of some quality, but power coming from renewable sources “is simply not high enough for most independent power producers and transmission to handle,” said Chris Wheaton, CFO of Energ2.

What It Cos
ts

The big question in energy storage, Wheaton says, boils down simply: what does it cost to build more generation (to oversupply), vs. how to store and manage energy? Today it’s more “economically rational” to build more generation, whether it’s solar or wind or even coal, he noted. As energy storage technology costs come down  and as there is better understanding and calculation of externalized costs, such as societal impacts  “we will see those lines cross, and more utilities will go to energy storage as a more economical means to serve the grid.”

Fundamentally, economics determines the decision of over-generation vs. energy storage; right now “either energy storage is not cheaper, or the payback is not enough to shift over,” noted Luebbe. As the cost (dollars per kilowatt-hour) come down and energy storage costs intersect with those in over-generation, “then everyone will do it because it’s economically the logical thing to do.”

Part of that economic determination, Luebbe says, has to define, manage and regulate the externality of emissions. That will play out differently in different countries and economies, he noted  how will many countries hit the Kyoto Protocol targets without big changes to grid infrastructures, and how is oxygen interpreted as contributing to emissions calculations. Even the presence of some pilot stage energy storage projects “tells me we’re pretty close” to that cost intersection, Luebbe said.

Jim Montgomery is Associate Editor for RenewableEnergyWorld.com, covering the solar and wind beats. He previously was news editor for Solid State Technology and Photovoltaics World, and has covered semiconductor manufacturing and related industries, renewable energy and industrial lasers since 2003. His work has earned both internal awards and an Azbee Award from the American Society of Business Press Editors. Jim has 15 years of experience in producing websites and e-Newsletters in various technology.

This article was first published on RenewableEnergyWorld.com, and is reprinted with permission.

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Doug Young

A123 Systems battery cell products (Source: A123)

After a stormy 2012 that saw growing trade friction between China and the US, I’m happy to see that 2013 is getting off to a better start with Washington’s approval of a potentially sensitive sale of a bankruptcy US technology firm to a Chinese buyer. Many readers will know that I’m talking about the case of A123 Systems (AONEQ), a former high-flying US battery maker that fell on hard times as new energy industries worldwide experienced a broader downturn in demand for their products.

In this case, Chinese buyer Wanxiang Group had won an auction for most of A123’s assets in a US bankruptcy court, which should have been the final step for closure of the deal. But then some US politicians, prodded by one or more companies that lost in the bidding process, started pressuring the Obama administration to kill the deal, since it involved cutting-edge technologies used in lithium ion batteries.

In this case, I’m glad to report that the Obama administration has seen the light of reason, and the agency that reviews deals for national security concerns has just approved the sale, according to foreign media reports citing Wanxiang. (English article) The deal still requires one more government approval to close, but presumably it will receive such a green light after getting this first important approval.

I’ve been saying all along that this deal should get approved, as Wanxiang looked like it was in a good position to develop some of A123’s technologies that otherwise may have been wasted if a suitable buyer couldn’t be found. I’m also hopeful that this is a sign that cooler heads will prevail in Washington now that the US presidential election is in the past and politicians can get back to the business of governing rather than looking for opportunities to curry public favor by opposing China acquisitions on national security grounds.

Readers will recall that 2012 was a particularly bruising year for US-China trade relations, as US politicians took just about any opportunity to oppose any Chinese purchases of US companies based on national security concerns. Washington spent much of the year crafting a package of punitive tariffs against China’s embattled solar panel sector, citing Beijing’s unfair subsidies for the industry that put other global rivals at a disadvantage.

That dispute wasn’t really related to national security, but still had plenty of anti-China overtones. The anti-China rhetoric reached a crescendo in October, just a month before the election, when the US government said that Chinese telecoms equipment makers Huawei and ZTE (HKEx: 763; Shenzhen: 000063) should be blocked from selling their products in the US due to national security concerns.  (previous post) Washington said that equipment from both companies presented a risk because Beijing could potentially use networks built by both Huawei and ZTE for spying.

Despite the heated rhetoric, reason did prevail to the north in Canada, where the government in December approved the sale of oil exploration giant Nexen to China’s CNOOC (HKEx: 883; NYSE: CEO) after months of foot dragging. (previous post) But the government added that it might not approve similar deals in the future, again highlighting the sensitivity of such transactions.

Yet another sensitive deal is still pending, which has a Chinese group in negotiations to buy ILFC, the biggest US aircraft leasing company, from insurance giant AIG (NYSE: AIG). It’s not clear if the Chinese buyer in that case will ultimately reach a deal to buy ILFC, which would then require US government approval. But now that the US election is behind us, I’m hopeful that the US will get back to the business of more governing and do less politicking with these cross-border acquisitions. If that happens, look for an uptick in cross-border M&A, with rhetoric from both Washington and Beijing fading as both sides get back to the business of promoting economic growth.

Bottom line: The US approval of the sale of a battery maker to a Chinese buyer could mark the beginning of a toning down in US-China trade friction in 2013.

Doug Young has lived and worked in China for 15 years, much of that as a journalist for Reuters, writing about publicly listed Chinese companies. He currently lives in Shanghai where he teaches financial journalism at a leading local university. He also writes daily on his blog, Young’s China Business Blog, commenting on the latest developments at Chinese companies listed in the US, China and Hong Kong. He is also the author of an upcoming book about the media in China, The Party Line: How The Media Dictates Public Opinion in Modern China .

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Jeff Siegel

December 10: 47,500 Electric Cars

• Electric Car Sales Soar. . .Again

  In case you missed it, Todd Woody over at Forbes reported last week that electric car sales reached a record in November for the fourth consecutive month. Total sales of electric cars for 2012 are now up to 47,500.

  You can read the entire piece here.

• Chinese Win Bid for US Battery Maker

  Well, we thought Johnson Controls (NYSE:JCI) was going to take the lead on this one. We were wrong. Wanxiang America Corporation has just picked up nearly all of A123’s assets for $256.6 million. A bargain if we’ve ever seen one. The only thing Wanxiang didn’t get were military contracts, which have been acquired by U.S.-based Navitas Systems for $2.25 million. You can read more here.

• 100 Megawatts of South African Solar

  Suntech (NYSE:STP) and Siemens (NYSE:SI) are getting ready to supply about 100 megawatts of solar panels for two projects being developed in South Africa. The systems are expected to produce about 180 gigawatt-hours of electricity, or enough to power about 15,000 homes.

December 11: Solar Installations Booming

• According to a new report, 684 megawatts of solar panels were installed in the US during the third quarter. This is 44 percent more than Q3 of last year. And solar installations in the current quarter may nearly double from Q3 to 1,200 megawatts. This would represent the most installations ever in a three-month period. The U.S. Now has more than 6.4 gigawatts of installed solar electric capacity, or enough to power more than one million average American households. You can read more here.

• Shell Goes Solar

  Royal Dutch Shell, along with three venture capital firms, is pumping $26 million into GlassPoint Solar – a California solar startup that uses the sun to heat water and create steam for enhanced oil recovery. Most of these operations burn natural gas to create steam, but GlassPoint claims its technology is cheaper. You can read more about that here.

12-12-12: Is 99% Renewable Energy Possible?

• 99% Renewable Energy

  According to a new study by the University of Delaware and Delaware Technical Community College, a well-designed combination of wind, solar, storage and fuel cells could nearly exceed electricity demands while keeping costs low.

  You can check on the details here.

• Electric, Natural Gas Fleets Mandated in Indianapolis

  By 2025, Indianapolis Mayor Greg Ballard hopes to transition the city’s entire fleet of vehicles to electric and natural-gas powered vehicles. The Mayor says this transition should save taxpayers $1,200 a year per car. You can read more here.

December 13: Is China’s Solar Industry Getting Desperate?

• Another Billion Dollars for Chinese Solar

  Well it looks like the Chinese government is jumping in again to save its struggling solar industry. The Middle Kingdom’s finance minister recently reported that China will raise its subsidies for its solar sector by $1.1 billion this year. As well, the nation will continue to integrate more solar domestically in an effort to work through excess inventory.

• Nissan Ready to Ramp-Up Production of Electric Car

  Nissan announced this week the launch of the United States’ largest lithium-ion automotive battery plant in Smyrna, TN. The facility, which is making battery components for the ramp-up of production of the all-electric Nissan LEAF early next year, is one of three of its kind operated by a major automaker. Check out the video below. . .

DISCLOSURE: No positions

Jeff Siegel is Editor of Energy and Capital, where his notes were first published.

The post Solar Installations Booming, EV Sales Soar: The Week In Cleantech, 12-15-2012 appeared first on Alternative Energy Stocks.

Doug Young

A123 Systems battery cell products (Source: A123)

In writing this blog, I generally try to keep my own views muted and focus instead on the latest news and what it means for the companies involved. But I’m making one of my occasional exceptions to that rule today to say that the US really should go ahead and approve the sale of bankrupt battery maker A123 Systems (OTC:AONEQ) to a Chinese company, since this deal seems to have few if any national security implications and blocking it would send a bad signal about Washington’s commitment to fair trade.

Rather than bow to opponents of the deal, who appear to have their own agenda that’s unrelated to national security, the US should follow the lead of Canada, which last week approved another controversial sale of energy exploration company Nexen (Toronto: NXY) to Chinese oil major CNOOC (HKEx: 883; NYSE: CEO). (previous post) Approval of that sale took a lot of courage from the administration of Canadian Prime Minister Stephen Harper, and now the US Obama administration should show similar determination to let the A123 purchase go forward.

Let’s look at the latest reports on A123, which is making headlines that are far bigger than the deal would otherwise get due to the fact that the buyer of the company is Chinese auto parts seller Wanxiang Group. According to the reports, a US bankruptcy judge has formally approved Wanxiang’s bid for most of of the assets of A123, which makes batteries used in alternate energy vehicles. (English article)

The judge in the case was unusually frank in his comments after approving the deal, saying he was concerned that another potential bidder, Johnson Controls (NYSE:JCI), might be working behind the scenes to kill the sale by asking Washington to block it on national security and other grounds. The deal is sensitive for 2 reasons. One of those is actually related to national security, since A123 sells some of its batteries to the US Defense Department. The other reason is more political, since A123 previously received a $250 million US government grant to develop lithium ion batteries.

Wanxiang has addressed the defense-related concerns by only bidding for the portion of A123’s business that does not include the Defense Department contracts. As to the $250 million government grant, this point looks like a non-issue to me. Governments frequently subsidize companies that ultimately fail, and the reason for providing such subsidies is often because such companies can’t get similar funding from commercial sources.

The fact that a Chinese buyer is acquiring the failed company’s assets is irrelevant, and is simply the result of an auction driven by market forces. If Johnson Controls really wanted A123, it should have submitted a more competitive bid rather than trying to use this kind of tactic to get a bargain.

The US has already sent negative signals in its use of the national security excuse with its recent decision to block construction of a wind farm in the state of Oregon being built by a Chinese company, and its blocking of Chinese telecoms equipment makers from selling into the US. Both of those moves did seem to have real implications for national security, but this latest deal doesn’t seem to meet that standard. Accordingly, Washington should stand aside and let the deal proceed, showing it will let commercial forces run the market except for in a handful of cases that truly do pose a risk to national security.

Bottom line: The US should approve the sale of bankrupt battery maker A123 to a Chinese buyer, to demonstrate it is committed to fair trade when national security isn’t at risk.

Doug Young has lived and worked in China for 15 years, much of that as a journalist for Reuters, writing about publicly listed Chinese companies. He currently lives in Shanghai where he teaches financial journalism at a leading local university. He also writes daily on his blog, Young’s China Business Blog, commenting on the latest developments at Chinese companies listed in the US, China and Hong Kong. He is also the author of an upcoming book about the media in China, The Party Line: How The Media Dictates Public Opinion in Modern China .

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Debra Fiakas

Alliance photo via BigStock

 Exide Technologies (XIDE:  Nasdaq) is one of the largest transportation and industrial battery suppliers in the U.S., vying for market share with Johnson Controls (JCI:  NYSE) and EnerSys (ENS:  NYSE) among others.  Batteries are a competitive business, even as the automotive sector has attempted a recovery from the 2008 free fall in new car sales.  Electric vehicle and renewable energy storage applications have helped expand addressable market.  However, for a conventional battery producer capturing a share of these markets requires new technology.

A long-time lead-acid battery supplier, Exide makes a show of its research and development effort, but fails to disclose the amount the company spends on R&D.  It could be hidden away in Selling, General and Administrative expenses.  Exide reports SG&A near 14% of sales over the past four years.  If this expense category includes the company’s R&D effort, it is less than impressive.

Of course, internal development programs are not the only way to build a technology base.  In late 2008, Exide acquired Mountain Power, a privately-held developmental-stage company that had a proprietary battery management system with additional monitoring features for proven lithium-ion cell technologies.  This appears to be Exide’s first foray into lithium technologies and represented a big leap from the company’s lead-acid history.

Then in early 2009, Exide entered into a technology development agreement with privately held NanoTerra, a developer that claims particular expertise in the design of nano-materials and their application to surfaces and bulk materials.  It is not clear whether Exide has deployed NanoTerra’s findings in any of Exide batteries.

In the same year, Exide signed a memorandum of understanding with Axion Power Technologies (AXPW:  Nasdaq) for the future purchase of Axion’s PbC batteries and the license of Axion’s lead-carbon electrode technologies.  Exide never got around to formalizing the relationship or ordering Axion batteries, but a few months after the MOU was signed the affiliation made good reading in Exide’s application for Recovery Act funds from the Department of Energy.  The application named Axion as a partner and promised to increase manufacturing capacity at its Columbus and Bristol facilities where Exide was to produce Absorbed Glass Mat (AGM) batteries “using lead-carbon electrodes for micro-hybrid applications.”  In recent discussions Exide has begun referring to the ARRA-funded capacity augmentation in terms of batteries “with or without” lead-carbon technologies  –  enhancements that Axion was ostensibly to bring to the party.

Exide was busy making friends in 2009.  The company also entered into a cooperative research and development agreement with Savannah River National Laboratory and the University of Idaho.  The troika was set up to study the benefits of hollow glass microspheres in lead-acid batteries.  Researchers in Idaho have found that among other benefits the use of these glass microspheres could reduce battery weight, a big plus for the large battery systems needed for electric vehicles and renewable energy storage solutions.

More recently Exide has entered into a “strategic alliance” with Maxwell Technologies (MXWL:  Nasdaq).  The two have pledged to work together on integrating Maxwell’s ultra-capacitor technology with Exide’s batteries for use in storage applications.  It seems like a tall order as the two technologies could not be more diverse.  Ultra-capacitors store energy in an electric field while batteries produce and store energy by means of a chemical reaction.  Like the Axion relationship, there is nothing binding on either Maxwell or Exide.  The press release is probably longer than the ‘alliance’ paperwork, so if any new technologies arise from the collaboration, the two will have to work out who owns what.

Exide is not the first manufacturer to rely on third-party relationships for research and development.  However, if Johnson Controls is successful in acquiring the automotive assets of bankrupt A123 Systems’ (AONEQ:  OTC/BB), Exide may be under more competitive pressure.  The deal would involve the transfer of supporting technologies and could give Johnson Controls an edge over Exide in the transportation market that appears to be centering on lithium ion technologies.  That means Exide will need to do more than bootstrap its reputation as an innovator with press releases and MOUs.
 
Debra Fiakas is the Managing Director of Crystal Equity Research, an alternative research resource on small capitalization companies in selected industries.

Neither the author of the Small Cap Strategist web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein. 

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by Debra Fiakas CFA

For better or worse various government agencies in the United States have provided significant financial support for advanced battery development and production.  The federal government has a goal of deploying one million plug-in hybrid electric vehicles by the year 2015.  The replacement of gas-burning cars and trucks is expected to reduce economic dependence upon foreign oil and reduce carbon emissions that threaten our health and climate.  We all understand this line of reasoning.

Public funds for battery development have been channeled through a mix of contracts for products and services, research grants, loan guarantees and indirectly through tax credits.  Indeed several of the companies mentioned in my last few posts on advanced battery developers have supplemented shareholders’ capital with proceeds from government contracts, grants and loans  –  A123 Systems (AONE:  OTC/BB), Valence Technologies (VLNCQ:  OTC/PK), Johnson Controls (JCI:  NYSE).

A special report published in August 2012 by the U.S. General Accounting Office found six public agencies involved in advanced battery development in thirty-nine different programs.  In the fiscal years 2009 through 2012, these agencies invested just over $1.3 billion dollars in the battery sector.  A significant portion of public support appears to have been focused on lithium-ion technologies for electric vehicles.   There were also awards for stationary power storage, air space and under-water vehicles.  Government agencies have also supported a range of storage ideas, including flywheels and capacitors.

Source: Fiscal Year 2011 Annual Progress Report for Energy Storage R&D, January 2012, GAO

Additionally, beginning in 2009 the DOE invested $1.5 billion in twenty projects for advanced battery manufacturing and battery recycling.  These funds were made available through the 2009 American Recovery and Reinvestment Act (ARRA).  The $2.8 billion provided by the 39 agencies and the ARRA represented approximately 0.03% of federal spending in the last three fiscal years.  To put that in perspective that would be equal to $15.42 out of the pocket of an individual making the U.S. median income of $51,413 (beginning of 2012).

As a middle-income taxpayer, as an investor what would you expect for $15.42?

As usual the GAO has been looking out for tax payers to determine if their money is being invested wisely.  In preparing its last annual report on funding for advanced battery development, the GAO paid particular attention to whether disbursements by the six agencies and thirty-nine programs were duplicative.  The GAO found plenty of overlap in terms of technology areas and applications.  However, each project appeared to have fulfilled agency-specific requirements, bringing to an end any concerns for duplication and waste.  Like investments in space travel, computer networking and geo-positioning, much of the resulting technology is expected to eventually end up in the private sector.

Taxpayers want to know more than just whether government agencies duplicate each other’s efforts.  They also want to know if the monies actually accomplished policy objectives.  This takes us to yet another GAO report about the twenty programs funded by the 2009 ARRA called the Fiscal Year 2011 Annual Progress Report for Energy Storage R&D published in January 2012.

It turns out all projects were initiated for battery and materials manufacturing facilities funded by the ARRA.  As hoped for, production was launched at several facilities by the end of 2011.

•     General Motors (GM:  NYSE) pack assembly facilities in Brownstown, MI
•     A123 Systems (AONE:  OTC/PK) systems cell and pack assembly in Livonia, MI
•     Johnson Controls (JCI:  NYSE) cell and pack assembly in Holland, MI
•     Saft Group (SGPEF:  OTC/PK) cell and pack assembly in Jacksonville, FL
•     EnerDel (private) cell and pack assembly in Indianapolis, IN
•     East Penn Manufacturing (private) advanced lead-acid battery plant in Lyon Station, PA
•     Celgard separator material production at Charlotte, NC
•     Toda America (cathode production plant in Battle Creek, MI
•     Pyrotek anode production plant in Sanborn, NY

There were also some technology and performance achievements among the development programs receiving public funding.

•     K2 Energy Solutions reached energy density targets with 45-Ah energy cells based on LiFePO4.
•     LG/CPI demonstrated prototype lithium-ion cells using advanced magnesium-rich composite cathode materials, resulting in increased cell density over LG Chem’s previous baseline.
•     Johnson Controls (JCI:NYSE) developed a new plug-in hybrid electric vehicle prismatic cell system that offers twice the all-electric vehicle range.
•     Quallion achieved 30% higher specific power with a hybrid battery with separate high power and high energy modules.
•     SK Innovation achieved exceptional cycle life with a production-ready 25-Ah high-energy electric vehicle cells.
•     Maxwell Technologies (MXWL:  Nasdaq) developed an asymmetric capacitor with greatly increased energy density with proprietary dry process electrodes.

There is a much longer list of technology achievements in the GAO report, which in sum provides a bit of solace for two constituencies.  Taxpayers can rest assured their hard earned tax dollars have nudged our country a bit closer to an economically independent nation with a healthier, cleaner environment.  Perhaps these accomplishments are not enough, but ‘something’ has been accomplished and ‘something’ represents a positive return on invested tax payer dollars.

Investors are the other constituency that should be ‘all over’ the GAO report.  It provides insight into key sources of demand for advanced batteries.  More importantly the report sheds some light on a few companies with technologies that are heads above products on the market today.    
Debra Fiakas is the Managing Director of Crystal Equity Research, an alternative research resource on small capitalization companies in selected industries.

Neither the author of the Small Cap Strategist web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein. 

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Jeff Siegel and Tom Konrad

October 14: Is a Heating Oil Crisis Coming?

Heating Oil Furnace.  Photo by Tom Konrad

“People still use heating oil?”

Those were the words said to me by a friend of mine who’s spent 41 of his 45 years on earth in Southern California.

To be honest, I’m not sure he’s ever even seen an oil delivery truck.

But here in the Northeast, there are still plenty of folks that rely on heating oil. Particularly those living in older homes in the cities, and of course up in some of the more remote rural areas of Pennsylvania, Vermont and New York, where you still can’t access a natural gas line.

In any event, those who do still rely on heating oil are certainly hoping for a mild winter this year. Because according to the Energy Information Administration, a crisis could be coming.

Check out this excerpt that was recently published in the industry publication, This Week in Petroleum. . .

For the week ending October 5, distillate inventories in the U.S. Northeast (PADDs 1A and 1B) were 28.3 million barrels, about 21.5 million barrels (43 percent) below their five-year average level (Figure 1). Distillate inventories have historically been used to meet normal winter heating demand but are also an important source of supply when demand surges as a result of unexpected or extreme cold spells. The low distillate inventories could contribute to heating oil price volatility this winter. In addition, outages at several major refineries, notably Petroleos de Venezuela’s Amuay Refinery, Shell Oil’s Pernis Refinery in the Netherlands, and Irving Oil’s Saint John Refinery in Canada, have added to the fundamental market pressures in the Atlantic Basin.

Translation. . .

If you’re relying on heating oil to keep your home warm this winter, you definitely should consider topping off the tank before winter kicks in, and maybe get used to wearing a light sweater.

And for more long-term planning. . .

If you can access a natural gas line, I strongly recommend making the investment. Although natural gas prices are going to start heading back up next year, there’s still going to be a lot more volatility in heating oil pricing going forward.

Interestingly, up in some of the more rural areas of New York and Vermont, where heating oil is quite common, solar is quickly becoming very popular. Particularly for farmers who use solar to supplement their power generation.

One gentleman I met last week during a trip to Essex, NY installed a solar array two years ago. Since then, he’s been able to offset his heating oil usage by more than 40 percent. And at the Essex Farm, owners use a sizable solar array to power their small, but profitable operation.

Not bad.

I suspect that as solar prices continue to fall while oil prices continue to rise and remain volatile, we’ll see more and more solar in some of these rural areas where family farms still exist, and natural gas is not on its way.

October 16: Will Bankrupt Solyndra Get Another $1.6 Billion?

As Bright as a Beijing Sky

While taxpayers get screwed on the Solyndra deal, Solyndra owners may now be able to walk away with another $150 million.

I’m serious! Turns out the IRS has suggested Solyndra’s bankruptcy plan was essentially a way for owners to use an empty shell corporation to avoid paying taxes.

As stated by the IRS, the only reason for the shell corporation to exist post-confirmation is to enable its owners to exploit tax attributes, which would be lost in liquidation.

Tax expert and Forbes’ contributor Robert Wood recently wrote: “Is it a good deal for creditors to get $7 or $8 million out of the Solyndra mess? Maybe, but the IRS claims the outsize tax benefits Solyndra’s smiling owners will reap are more like $150 million.”

If this all adds up, I think the real conspirators here are the folks that facilitated this entire Solyndra fiasco.

At least the Chinese have a market for their product…

Of course, China’s dominance in the solar space won’t last forever. The Middle Kingdom’s heavily-subsidized and heavily-manipulated solar industry will eventually crumble, because over-investment always leads to failure.

Nouriel Roubini pointed this out last summer, using the Soviet Union in the 1960s and 1970s, and East Asia before the 1997 financial crisis as examples of over-investment scenarios that have gone wrong.

Rest assured global solar demand will only continue to grow by leaps and bounds. And this is why the big dogs like GE (NYSE: GE) and Siemens (NYSE: SI) are watching and waiting patiently, ready to pounce when the future of China’s solar industry inevitably becomes as bright as a Beijing sky during rush hour.

If you’re unfamiliar with that reference, here’s a visual:

Some view, huh?

October 15: Is A123 Systems (NASDAQ:AONE) Going to Zero?

There was so much enthusiasm when high-performance battery manufacturer A123 Systems (NASDAQ:AONE) came on the scene.

The promise of an advanced battery manufacturing facility pumping out batteries for next-generation electric cars while providing jobs for US workers was a bold one, and one that a lot of folks cheered. But certain realities rapidly turned that promise into what now looks like another bankruptcy in the alternative energy space.

Yesterday A123 put out the following statement. . .

“The company may not have sufficient cash to fund operations and may need to seek the protections provided under the U.S. Bankruptcy Code. No assurance can be given that the company will be able to avoid restructuring, reorganization, or a bankruptcy filing.”

Now despite the fact that we never wished anything but success for the company, we’ve been warning investors all year about this one, even when a handful of analysts got all giddy when the stock popped back in June.

Here’s what I wrote back then. . .

Yesterday, A123 Systems (NASDAQ:AONE) shot up more than 50 percent after announcing it had developed an improved lithium-ion cell that can cut costs of electric cars.

While I’ve always been a big supporter of this company (wishing them the best), as an investor, I can’t help but to wonder what happened yesterday.

Just a couple of months ago, the company began replacing defective battery packs at a cost of $51.6 million. This helped the company report a record loss of $125 million for Q1, 2012. The company even had to issue a “going concern” statement.

Last month, when shares closed below $0.90 the company had long-term debt of $161 million compared to a market valuation of $129.3 million. To put that in perspective, when the company went public, it debuted at $13.50.

Now don’t get me wrong. The company’s announcement of its technological breakthrough should not go unnoticed. But neither should the fact that this company is still dealing with $51 million in battery
replacements, foreign competitors that continue to maintain a significant manufacturing cost advantage, and of course, bankruptcy concerns.

Sure, technological breakthroughs are great. They’re important, and they’ve been produced by plenty of other companies that no longer exist today. That’s the reality. Personally, I do hope A123 comes out on top when all is said and done. But it’s going to be a long, tough ride. And I just don’t see any rational justification for a 50% pop on an announcement of a technological breakthrough from a company that’s barely treading water right now. In fact, I honestly wouldn’t be surprised if the company went belly up by the end of the year. I hope I’m wrong on that, but it doesn’t look good.

Unfortunately, I may not have been wrong when I wrote those words.

And what really makes this sting is that A123 landed a $249 million federal grant to build a U.S. factory back in 2009. Rest assured, you’ll be hearing plenty about that over the next few days. And rightly so. After all, these are your tax dollars we’re talking about here. And you have every right to know how they’ve been spent.

Of course, you’ll probably be hearing all about it tonight during the second presidential debate, too. Romney campaign strategists must be doing back flips right now.

I just hope the analysis following the debate doesn’t mutate into yet another attack on electric cars. Which, as I’ve said a thousand times before, serve as one of the many tools we can use to end our reliance on OPEC.

But I’m sure it will. Because nowadays, it’s more important to dive into the pool of partisan buffoonery than it is to embrace positive contributions to our national security, our environment and our nation’s long-term economic sustainability.

And so it goes. . .

October 17: First Solar (FSLR) Lands Huge Deal

TK: First Solar (NASDAQ:FSLR) has signed a memorandum of understanding with PT. Pembangkitan Jawa Bali Services to collaborate on and deliver 100 megawatts of utility-scale solar power plants in Indonesia.

“We are excited by the opportunity to collaborate with a world leader in solar energy for the development of utility-scale PV power plants in Indonesia. Solar PV electricity can help Indonesia meet its fast-growing power needs while reducing its dependence on fossil fuels,” said PJB Services president Bernadus Sudarmanta in a press release. …

Full article at Wall St. Cheat Sheet.

October 17: Satcon (SATC) Files for Bankruptcy

TK: Details at Renewable Energy World.

DISCLOSURE: No positions

Jeff Siegel is Editor of Energy and Capital, where his notes were first published.

Tom Konrad, CFA is Editor of AltEnergyStocks.com.

The post Bankruptcies (A123,Satcon) and Life After (Solyndra): The Week In Cleantech, 10-19-2012 appeared first on Alternative Energy Stocks.

John Petersen

On Wednesday A123 Systems (AONE) announced the execution of a Non-binding Memorandum of Understanding with the Wanxiang Group that will, if successfully implemented, restore A123 to a sound financial footing. Since the basic deal terms are a good deal more complex than the reports one reads in the mainstream media, I think a drill down into the detail may be helpful for investors who want to understand what a restructured A123 will look like. The critical document for this analysis is the MOU included as Exhibit 99.2 to A123’s recent report on Form 8-K.

The basic business deal has three distinct structural elements:

• A $75 million senior secured bridge loan facility with associated warrants;
• A $200 million senior secured convertible note financing; and
• A block of warrants that will, if exercised, generate up to $175 million of additional equity.

The bridge loan facility will be secured by substantially all of A123’s assets and has been separated into two tranches. The first $25 million, which includes $15 million in cash and a $10 million letter of credit, will be immediately available to A123 upon execution of definitive agreements. The $50 million balance will be funded when certain first tier conditions are satisfied, including:

• receipt of a favorable determination from the Committee on Foreign Investment in the United States;
• receipt of Chinese government approvals;
• retention of the R&D and engineering teams; and
• other usual and customary conditions.

Barring a mass exodus of the R&D and engineering teams, I think there’s a high probability that the entire $75 million bridge loan facility will become available to A123 over the next couple months; Wanxiang will obtain a reasonable level of de facto control; and A123 will get enough breathing room to finish a more comprehensive restructuring.

The senior secured convertible note financing will be more complicated and time consuming. Wanxiang’s commitment to buy $200 million in notes is subject to several second tier conditions, including:

• reasonable assurances that A123’s government grants and tax credits will remain available;
• stockholder approval of the restructuring transaction;
• conversion or repurchase of at least 90% of $143.8 million in convertible notes that were issued in April 2011;
• conversion or redemption of the $50 million in convertible notes that were issued in May 2012;
• an increase of the number of directors from seven to nine and the election of four directors designated by Wanxiang;
• compliance with Hart-Scott-Rodino and other antitrust laws; and
• continued listing of the Common Stock on Nasdaq.

It’s clear from the MOU that the retention of A123’s government grants and tax credits is a critical valuation issue. If the grants and credits remain in place, the exercise price of the bridge financing warrants will be $0.425, but the exercise price will be reduced to $0.17 if the grants and tax credits are lost. Similarly, the conversion price of the senior secured notes and the exercise price of the related warrants will be $0.60 per share if the grants and tax credits remain in place, but they’ll both be reduced to $0.24 if the grants and tax credits are lost.

Under the circumstances, I think A123 will probably get the necessary government assurances and approvals. It should also be able to negotiate the redemption or repurchase of its outstanding debt on reasonable terms. While investors may grumble, particularly if the proxy statement for the required stockholder approvals includes a reverse split to solidify A123’s Nasdaq listing, there really isn’t an alternative so they’ll eventually go along.

While the series of transactions have been described as a $450 million rescue in media reports, the only funds Wanxiang will be required to invest are $75 million for the bridge loan facility and $200 million for the senior secured convertible notes. If one assumes that no additional shares will be issued in connection with A123’s outstanding convertible debt, the bridge loan warrants will give Wanxiang the power to obtain 51% voting control by tendering that debt in payment of the exercise price. While conversion of the notes would increase Wanxiang’s voting control to 75% if it chose to exercise its rights, a reasonable risk manager could conclude that voting control coupled with $200 million in secured debt was a more advantageous position for Wanxiang given the uncertainties of A123’s business.

I’ve always believed that prudent investing begins with a worst case analysis. In the A123 – Wanxiang transaction I believe the worst case is a $75 million equity infusion that will increase A123’s book value to $188.8 million, or $0.544 per share, and give Wanxiang voting control. While the $200 million senior secured convertible note financing will increase A123’s liquidity, a substantial portion of the cash will be used to redeem or repurchase A123’s other debt securities.

I believe it’s safe to assume that the holders of the $143.8 million in convertible unsecured subordinated notes that A123 issued in April 2011 will be willing to accept a haircut in connection with an early redemption. I don’t, however, have any basis to predict what the haircut might be. While holders of the $50 million in convertible unsecured senior notes that A123 issued in May 2012 might also be willing to accept a haircut in connection with an early repayment of the $39.6 million balance, I’d expect their negotiating position to be more aggressive. In a worst case scenario, the bulk of the $200 million in proceeds from Wanxiang’s senior secured convertible note financing will be used to retire junior debt.

On balance I believe the Wanxiang transaction is a positive development for A123’s stockholders because it will stop the issuance of additional common shares under the 2012 notes and help alleviate the intense selling pressure that’s resulted from the issuance of 23.4 million new shares since June 26th. It will also restore A123’s stockholders equity to a more reasonable level and give the company time to restructure its affairs. The transaction is not, however, a permanent solution to A123’s problems and any number of uncertainties are yet to be resolved.

While I don’t see anything in the deal structure that would justify a rush to the exits. I believe investors who decide to hold or buy A123’s stock must pay careful attention to future releases that quantify the current uncertainties. This is not a good time for irrational exuberance.

Disclosure: None.

The post The Wanxiang Transaction Is Not Necessarily A Permanent Solution For A123’s Problems appeared first on Alternative Energy Stocks.

by Debra Fiakas CFA

In my last post Paper Power I outlined the attempt to develop a battery using carbon nanotubes and paper.   The materials seemed a bit unbelievable and it sent me into the history books to look at the battery.  In the mid-1700s Ben Franklin may have been the one who first coined the term battery to describe the capacitors had strung together for his experiments.  We all know about the scientist, turned politician.  What is less well known is that the ancients may have also attempted a battery-like instrument now called the “Baghdad Battery.”

The so-called battery was found in a village near Baghdad, Iraq and is dated roughly between 250 BC to 224 AD.  It is a simple terracotta pot in a cylindrical shape.  Inside is a copper tube made from a rolled up copper sheet wrapped around a single iron rod something like a nail.  Now we know copper and iron form an electrochemical pairing.  If an electrolyte is introduced, potentially an electrical voltage can be produced.  There is speculation that the Baghdad Battery contained wine or lemon juice that served as an acidic electrolyte.  The design has been tested and found to produce modest electrical charge.

Archeologists have suggested that the instrument may have been used for electroplating gold onto silver objects something like a galvanic cell.  Lending credence to this idea is the existence of very fine silver objects in ancient Iraq that were plated with very thin layers of gold.  Others argue strongly against the electroplating theory since it appears Iraq ancient silver smiths may have been using conventional fire-gilding with mercury instead.  Acupuncture and electro-stimulation for religious experience was two alternatives.

It is less clear whether the Baghdad instrument successfully served its intended purpose.  Perhaps those inventors were as frustrated as the developers as A123 Systems, Inc. (AONE:  Nasdaq), claims an important breakthrough in lithium ion battery technology using nanophosphate chemistries to render batteries safe even at high temperatures.  Thermal runaway has plagued A123 Systems and other developers chasing electric car and communications markets, both of which require large battery installations that must work under high temperatures.

The news could not come any too soon for shareholders of AONE.  The stock has languished and is trading closer to its 52-week low than the high to the period.  A123 has consistently grown sales, which reached $159 million in the year 2011.  However, costs have been experiencing their own “thermal runaway” and the company’s losses have grown even faster.

Most investors following the company focus their attention on A123’s technology, but I think it is time to consider the reality of the balance sheet and whether the company still has the juice to support its scientific pursuits.

A123 has also been working its way through a cash hoard.  At the end of March 2012, there was $116.2 million left.  This might be considered a hefty sum by others but will not last the year if A123 does not trim its cash burn.  In the year 2011, the company used approximately $21 million in cash per month to support operations.  In the first quarter the burn rate had been reduced to about $15.5 million per month.  Even at that much lower rate, current cash in the bank will only support operations for another six months.

We do not know much about the Baghdad Battery, but one thing is clear, people have been focused on power for a long time.  The jars may not have delivered anything close to what its inventors intended.  With a dwindling bank account, A123 Systems may be less sanguine about the success in bringing their nanophosphate chemistry off the design bench and putting it into stores.

Debra Fiakas is the Managing Director of Crystal Equity Research, an alternative research resource on small capitalization companies in selected industries.

Neither the author of the Small Cap Strategist web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein.

The post Will A123’s Batteries Make the Great Leap from Design Bench to Store Shelf? appeared first on Alternative Energy Stocks.

Tom Konrad CFA

A123 Systems battery cell products (Source: A123)

A123 Systems′ (NASD:AONE) announcement of a new battery technology able to operate at both extremely high and low temperatures has the  headline writers dreaming of cheaper electric cars.

Electric cars may be dreamy, but they are just one application of the technology.  There are at least two more, with significant near term potential.

1. Is it really about electric vehicles (EVs)?

Sure, it would be nice to be able to trim $600 of the price tag of a Tesla (NASD:TSLA) Model S or a Nissan Leaf (NASD:NSANY), but how much difference would that make on a $58,000 or $36,000 car?  It’s nothing compared to the federal $7,500 tax credit, and (surprise!) as EVs get cheaper, governments will become a lot less generous supporting them.  Or such subsidies will be cut before the cars get cheaper, a real possibility in these budget-cutting times. We’ve seen it happen time and time again with solar and wind subsidies.  Why should EVs be different?

In short, A123′s new technology (which applies tweaks to the electrodes and electrolyte of lithium-iron phosphate batteries), may give it an advantage over other battery makers in the electric car market, but investors should be much more excited about the other markets it opens up.

Two of those markets are replacements for lead-acid starter batteries, and remote back-up power.

2. Start-Stop

The engine compartment of a typical car is much too hot for conventional lithium ion batteries, which is part of the reason (the other is price) we’re still using lead acid batteries to start our cars.  But the drive for better fuel efficiency is driving automakers to look at inexpensive stop-start technology, which turns off a car’s engine when it would otherwise be idling at a stoplight or at a drive-through window.  Conventional lead acid batteries are simply not durable enough for the quick, repeated charging cycles stop-start requires.  Automakers are looking at a number of more advanced options, including lithium-ion batteries, battery-ultracapacitor hybrids from Maxwell Technologies (NASD:MXWL) and collaborators, and lead carbon batteries from Axion Power (OTC:AXPW).

Lithium-ion batteries are the most expensive of these options, but they also have the advantage of lighter weight and a quicker charging rate.  Ultracapacitor-battery hybrids are only now seeing their first commercial applications, and while lead carbon batteries have shown great performance in testing, they are not yet being used commercially.   A lithium ion battery able to withstand the heat of the engine compartment might appeal to auto manufacturers looking to add stop-start technology to existing models with minimal redesign using a more familiar technology.

Early stop-start vehicles using advanced lead acid batteries work well in the beginning, but get worse mileage as the batteries degrade in a matter of months.  A drop-in replacement based on high temperature lithium ion batteries would be a quick fix for any of these vehicles already on the road.

3. Back Up Power

Most exciting to me is the possibility of using these new batteries as backup power in cell towers or areas without reliable power supply from the grid.  The problem with using lead acid batteries in these applications is that lead acid batteries charge slowly, meaning that diesel generators must run for a long time to charge them.  In places like India with unreliable grid power, lithium ion batteries might allow the diesel generator to be dispensed with altogether, while in remote power situations, it could be run for shorter periods of time.

Removing the diesel generator from a back-up power system would likely require far fewer lithium ion batteries than removing the gas engine from a car, and so the equivalent barrels of oil saved would be much higher for every kWh of lithium ion batteries.  The economics would likely be much more compelling than the economics of electric vehicles as well.

Conclusion

It’s worth getting charged up about the potential of these new batteries from A123.  If the technology works as well as the company says it does, they will enable significant savings of both money and fuel.  But most of those savings won’t be found on  the affordable electric vehicle superhighway.

The chances of real fuel savings aren’t as remote as the chances of a cheap electric car. Stop that thought, and start thinking about anti-idling technology and cell phone towers.  The back up power opportunity may be in remote markets, but its chances aren’t remote at all.

Disclosure: Long MXWL, AXPW

This article was first published on the author’s Forbes.com blog, Green Stocks.

DISCLAIMER: Past performance is not a guarantee or a reliable indicator of future results.  This article contains the current opinions of the author and such opinions are subject to change without notice.  This article has been distributed for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product.  Information contained herein has been obtained from sources believed to be reliable, but not guaranteed.

The post One, Two, Three Uses for A123’s New Batteries appeared first on Alternative Energy Stocks.