By Tom Konrad Ph.D., CFA

The market for reliable back-up power in homes and businesses is booming.

With more people working from home and increasing news coverage of power outages due to severe weather events and public safety power shutoffs in California (not to mention domestic terrorism), power reliability seems like it’s destined for a long term boom.

New Competition

A decade ago, if you wanted backup power, a generator was the only option.  Now, there are an increasing number of battery-based alternatives beginning to compete with generators to provide back-up power.  While most battery-based solutions are better than gas or propane generators when it comes to carbon emissions, none of them can yet beat traditional generators in every way most homeowners and businesses consider important.  It’s more of a “horses for courses” type scenario with the best solution depending on price, the amount of power needed, the length of power outage the buyer is preparing for, and convenience. 

Here is a list of options a homeowner might consider and how they stack up.

Natural Gas Generators

Traditional gas generators which run off the utility gas network are a relatively inexpensive solution for a homeowner looking to power their entire home for extended power outages lasting days or weeks.  The main downside for such gas generators is that they won’t work if the weather events or other factors cause a gas outage at the same time as an electrical outage.  For example, during the 2021 Texas Power Crisis, one of the major causes was a cascading problem of cold temperatures shutting down both gas supplies and electric generation.  The resulting lack of electricity caused further problems with gas supply leading to further electric shortfalls, and so on.  All in all, gas supply dropped by approximately 56 percent (and production in Texas dropped by approximately 40 percent) during the crisis.  This means that even people who had home gas generators may not have been able to use them when the power went out.

Liquid Propane Generators

Generac and competitors’ propane generators share the low cost and most of the convenience of gas generators but cost more to run because they rely on propane stored in a tank on the premises, and delivered propane fuel costs far more than pipeline gas.  On the other hand, local storage of the fuel makes them more reliable in an electrical outage that lasts a few days even if the crisis also affects the natural gas supply.  On the downside, the generator will eventually use all the fuel in the tank, and a prolonged crisis may interfere with propane deliveries.

Gasoline and Diesel Generators

Gasoline and Diesel generators are typically smaller than the natural gas and propane generators. They typically do not have the capacity to power a whole home and deliver their power through outlets on the generator itself.  Although they are not a solution for whole home power backup, they can be used to power critical loads like the refrigerator to prevent food from spoiling and charging electronics.

They are also commonly used by building contractors to work on sites that are not yet connected to the grid.  Their relatively low price point (hundreds as opposed to thousands of dollars) appeals to people who want some backup power but find that a whole home generator is too much for their budget.

Home Battery Backup

There are now a number of home energy battery brands in addition to the best known Tesla (TSLA) Powerwall.  These include the PWRcell offering from home generator leader Generac (GNR), as well as offerings from Panasonic (Tokyo:6752 or US ADR:PCRFY), microinverter maker Enphase (ENPH), and solar manufacturer SunPower (SPWR).

Until the recent passage of the Inflation Reduction Act (IRA),  the only way to get 24% the US federal Investment Tax Credit (ITC) for a home battery system was to install it with a solar system in such a way that it charged primarily from the solar.  The IRA both extended and raised the ITC to 30%, and made it applicable to stand-alone battery systems.

Now that home battery systems can be installed independently from solar and still qualify for the ITC, we can expect demand to increase as homes and businesses that are not good candidates for solar suddenly see effective prices fall by 30%.

Batteries vs Generators

Even with the tax credit, however, home battery storage is likely to remain relatively expensive compared with generators for the purpose of maintaining power during an outage. 

If a generator has enough power to supply the electricity need, it can continue to supply that need as long as it is connected to a large enough storage tank or to the gas network.  Because of this, increasing the duration that a generator can protect against a power outage costs very little.  In contrast, doubling the duration that a battery system can protect against a power outage requires doubling the size of the battery, which will nearly double the cost.

Because of this, generators have a significant economic advantage compared to stand-alone batteries when it comes to ensuring long term power supply.  But while secure power supply may be the main attraction for consumers of home battery storage and generators, batteries are far more attractive to grid operators and utilities because of many services they can provide that generators cannot:

• No direct greenhouse gas (GHG) emissions: Electricity from batteries is as clean as the power used to charge them. Small generators, which rely almost exclusively on fossil fuels produce GHG emissions usually far in excess of other electricity on a utility’s grid.  Any reliance on generators makes it harder for a utility to meet its targets for GHG emissions reduction.  While some utilities have voluntary GHG targets, many also are subject to legally binding targets imposed by their regulators and state governments.
• Load shifting and renewable energy integration: Increasing solar and wind penetration on the grid is rapidly changing net usage patterns for electricity.  This trend is particularly pronounced in states that have been early adopters of solar, like California and Hawaii.  Both have now adopted compensation schemes for solar that give homeowners strong incentives to pair solar with battery systems. Since these battery systems also give the homeowners some protection against power outages, this eats into the market for home generators.
• Utility grid upgrade deferral: Batteries can also be used to delay or replace expensive grid upgrades.  Utility power lines and transformers need to be sized to the peak power usage that passes through them, even if this peak only occurs for a few hours per year.  If controlled by the utility, batteries in homes can help with this: by charging when the local line or transformer is operating well below its peak capacity, and supplying that power to meet local demand when it otherwise would be operating at or above peak.  

Green Mountain Power has an interesting pilot program where it leases home battery systems to customers at a subsidized rate in return for the right to use that battery for both utility upgrade deferral and load shifting so long as it keeps enough charge in the battery to assure the customer that they will have protection from a power outage.  Battery system owners can also enroll in the program in exchange for an upfront payment of up to $9,500.  A payment that large could easily influence a homeowner to prefer a battery backup system over a generator.

I expect similar programs to proliferate around the country as utilities and their regulators become more familiar with the benefits batteries can deliver to the grid.

…And It Also Provides Backup Power

An even larger potential disruptor for the generator market is devices that consumers buy for other reasons, but which can also provide power in a blackout.  A prime example of this is the Ford (F) F-150 Lightning: an all-electric pickup truck which can also power your home with the right electrical upgrades.  Electric cars from Nissan and VW are expected to have similar capabilities soon.

The F-150 is only the most prominent example of battery powered vehicles, devices, and appliances that can also deliver backup power.  Many other electric and plug-in hybrid electric vehicles come equipped with standard 120V outlets, while the Kia EV6 has an adapter which turns the charging port into a functional 120V outlet.  Even if an electric or hybrid vehicle does not come with a 120V outlet, an inverter costing $300 or less plugged into the cigarette lighter or attached to the car’s traditional 12 volt battery can serve much the same purpose.  This ability of an electric or hybrid vehicle to power one or more standard outlets is referred to as “Vehicle to Load” while the F-150 Lightning’s ability to replace a home generator is often called “Vehicle to Home.”

While Vehicle to Load cannot replace the utility of a whole home generator, it can easily replace the functionality of smaller gas and diesel generators.  Homeowners who already have electric cars that can power their refrigerator and charge their electronics will also be less likely to spend thousands of dollars on a generator to power their whole home during infrequent outages.

Energy Storage Equipped (ESE) Appliances 

Nor are cars the only devices that can provide incidental power backup.  Owners of Ego battery lawnmowers, snowblowers, and other devices can buy the Ego Nexus Power Station which uses the batteries from those devices to provide all the functionality of a gasoline or diesel generator that can be used indoors.

Photo: The author and other members of the Marbletown Environmental Conservation Commission and Rondout Valley High School Environmental Club with their all electric entry in a holiday parade. The trailer is being towed by a 2012 Toyota RAV4 EV and the lights and music on the trailer are powered by a Ego Nexus Power station.  Other entries trailers in the parade have lights powered by gas or diesel generators.

Another potential development is the including of batteries in home appliances that have not previously had them.  These Energy Storage Equipped (ESE or “Easy”) Appliances also provide incidental power backup.  The main purpose of the batteries is to enable efficient electric appliances like induction stoves and heat pump water heaters to replace their gas counterparts without expensive electrical upgrades.  The batteries allow them to deliver high power performance (like an induction stove’s unmatched ability to boil a large pot of water in minutes) while plugging in to a typical low-power electric outlet.  The extra cost of the battery is offset by lower installation cost and the new investment tax credit for battery storage, effectively delivering a device that not only delivers high performance cooking at no extra cost, but also provides an external outlet which can power your fridge and other critical loads during a power outage.

While neither the Nexus Power Station nor an ESE appliance can deliver the full performance of a home generator, if someone gets one because they need a new stove or snowblower, they will probably be less willing to pay thousands of dollars for a home generator.

Conclusion

While the market for reliable home power is expanding, companies that sell home generators seem  likely to benefit only in the short term.  Longer term, increasingly ubiquitous electric and hybrid electric vehicles with Vehicle to Home and Vehicle to Load capability, along with Energy Storage Equipped (ESE) appliances and utility programs that subsidize (or give away) home battery storage will disrupt the market for generators in a way with which they cannot compete.  

How will a home generator installer persuade a customer to spend many thousands of dollars on a home generator when they already have most of the resiliency benefits it can supply for much lower cost, or even for free as an extra feature of an appliance they would have bought anyway?

A few people still buy high-end digital cameras for the capabilities that a cell phone can’t yet emulate, but those people (and those capabilities) are becoming fewer and fewer.  Ten years from now, we’ll be saying the same things about home generators’ capabilities and home generator buyers..

DISCLOSURE: No positions in companies mentioned in this article.

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 How New Battery Applications Will Disrupt the Home Generator Market appeared first on Alternative Energy Stocks.

by Debra Fiakas, CFA

Last week management of energy storage developer BioSolar, Inc. (BSRC:  OTC/PK) provided an update on the company lithium-ion battery design.  The company’s engineers along with a manufacturing partner are still making changes to the design called the 21700 cell.  Additionally, the company recently decided to take greater control over raw materials supply, potentially sourcing and processing materials in the U.S.  

Engineers at BioSolar have been trying to increase the storage capacity of lithium-ion batteries by improving the anode component.  The plan is to sell ‘super anodes’ to battery manufacturers to make existing lithium-ion batteries work like super batteries.  Prototypes were tested in July 2019, to build a database of performance metrics that will guide the next round of design adjustments.

The BioSolar anode relies on silicon additives to boost energy and power performance.  Indeed, silicon anodes are thought to potentially have a capacity as much as 4,200 milliamp hours per gram (mAh/g), which provides a measure of the amount of charge or electronics per gram of anode material. This compares to the most commonplace anode made from graphite with a capacity of 350 mAh/g.

That tenfold increase in power has some battery manufacturers salivating despite the many negatives associated with silicon anodes.  First, silicon is an expensive material.  Additionally, silicon does not behave well as the battery is charged and then discharges, expanding by as much as 300% in volume.  This can cause the silicon to crack and trap lithium electrolyte in the silicon material.

BioSolar engineers think they have some know-how that could overcome silicon’s worst failings.   They have designed silicon-alloy materials that could have a capacity of 1,500 mAh/g.  Incorporated in a battery of the sort used by Tesla for its all-electric cars, the resulting battery could have a volumetric energy density of 1,000 weight per liter or Wh/L.  This compares to a volumetric energy density of 676 Wh/L for the battery currently used in the Tesla Model S.

It will be a great anode if BioSolar is successful.  No doubt Tesla would be first in line to buy a few.  Nonetheless, the company has a more modest commercial target in batteries for power tools, which is nearly as large a market as vehicle batteries.  Those performance numbers are still goals for BioSolar and not yet accomplishments.  There is still considerable work to be done to bring a silicon anode to the commercial market.

For investors the BioSolar story can be a bit confusing.  While the company has been prolific over the last year in releasing updates and memos on its progress in developing energy storage technology, the annual report published in March 2019, still chatters on about solar energy and the photovoltaic technology that had been the company’s historic business focus.  A patent related to the company’s BioBacksheet for silicon solar modules remains among assets listed on the balance sheet.  Nonetheless, BioSolar’s experience with silicon for solar cells has been a boon to figuring out how to use silicon in battery anodes.

BioSolar’s patent is among just a few assets on the company’s balance sheet.  The company held $73,167 in cash in the bank at the end of June 2019.  Given that it has been using about $60,000 a month in cash to support operations, the cash kitty does not provide much of a cushion against the bumps and bruises of the battery market.  Since the quarter close, the company has raised $53,000 through the issuance of a convertible promissory note with a 10% interest rate.

Should investors take a stake in a tiny company with big dreams?  Perhaps.  However, BioSolar is likely to be palatable only for those with a very long investment horizon and willingness to wait for years to see revenue.  It is noteworthy that in the past few weeks holders of convertible notes totaling $67,645 converted into common stock and accepted additional shares for payment of accrued interest.  Conversion of debt to equity is not only conserving cash that would have otherwise been used for interest payments, it also demonstrates some level of confidence that management is executing according to plan.

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.

This article was first published on the Small Cap Strategist weblog on 8/27/19 as “What Do Investors Get With BioSolar?”.

The post What Do Investors Get With BioSolar? appeared first on Alternative Energy Stocks.

by Debra Fiakas, CFA

Greater energy density or the amount of energy stored is the mission of every battery developer.  The higher the energy density, the longer a battery can serve its owner.  Scientists have been adjusting circulating chemistry, cloaking electrodes in exotic metals, and otherwise tinkering with conventional battery designs.  Debate even spills over into the raw material supply chain as it has recently over the use of expensive and sometimes difficult to source cobalt as an additive to lithium ion battery designs.   Others are trying to tame silicon for use in battery anodes.

Perhaps the most daring developers have abandoned conventional battery design altogether.  New solid state battery technology relies on solid metal electrodes and even solid electrolyte. The chemistry is in general the same as when liquid electrolyte interacts with the electrodes.  However, the new design avoids leakage and corrosion at the electrodes, reducing the risk of fire.  There is also potential for a smaller form factor that means less weight than conventional batteries.  Recent advances also suggest solid state batteries can overcome energy density limitations.

Why do we not hear more about solid state batteries? Or find them in our many electronic devices?  There are still issues to resolve such as which materials are the most efficient and which production techniques yield the lowest cost end-product. Those solid state batteries that have made it to market have been limited to small cells that can compete with established and affordable battery technologies.

Besides resolving the issues of affordability and scale, solid state batteries also have technological challenges.  Solid state batteries are much safer, but there is the matter of dendrites, a build-up of lithium metal crystal in the anodes that form as the battery charges and discharges.  Dendrite build-up reduces the amount of solid electrolyte capacity and thus the stored charge.  Some developers have turned to ceramic ‘barrier’ for solid electrolytes that are lithium-metal proofed and prevent dendrite formation.

With the dendrite problem solved, solid state batteries are expected to offer consumers some enticing performance advantages:  faster charging, higher energy density, longer life cycle and greater safety.  When can consumers expect to get hold of solid state batteries?

The first commercially available solid state batteries are a particular type called thin film batteries.  These nano-sized batteries are composed of layered materials that function as electrodes and electrolyte.  Indeed, thin film solid state batteries resemble in structure conventional rechargeable batteries except they are very thin and flexible.  Besides lighter weight and small size, thin film batteries offer higher energy density for smaller electronic devices such as pacemakers, wireless sensors, smart cards, and radio frequency identification tags.

Front Edge Technology (FET) recently announced an agreement with STMicroelectronics (STM:  NYSE) to bring an ultra-thin rechargeable battery  to market.  Privately-held FET says its NanoEnergy batteries are only 200 microns thick and promise a long cycle life with more than 1,000 cycles at 50% discharge. The partners are hoping to capture a larger part of the thin film battery market that was measured by the industry research firm, iMarc, at $372 million in value in 2018.

There are other markets that are hungry for better batteries.  Privately-held Fisker, Inc. expects to reach the market with its electric car battery by 2022, but Toyota Motor (TM:  NYSE) believes it’s partnership with Panasonic Corp. (6752.T) will bring a solid state car battery to market as early as 2020. Volkswagen Group and BMW Group have been working with QuantumScapeand SolidPower Battery, respectively, but not one of the players has committed to launch dates.

Do not expect solid state batteries for utility-scale energy storage any time soon either.  So far none of the selected developers in the list below has set its sights on solar or wind power customers.  That does not mean those applications will not see a solid state battery come their way.  CleanTech Group estimates investors have committed over $1.7 billion to solid state battery development over the last five years.  Still customers with large scale requirements have yet to see all the fruits of this investment.

More capital may be needed  –  and that may be a good thing for investors who want a stake in this latest battery technology.  The list below provides the names of a few companies to watch for future opportunities.  It is worth noting that several of the privately-held companies have attracted the attention of some significant venture and strategic players in computing and automotive industries, providing strong endorsement of their technologies.  Notably several those that have received strategic investment benefit from a partner that can kick open doors to commercial markets.  Many of these strategic investors are already public companies, offering an early ticket to the solid state battery competition.

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.

This article was first published on the Small Cap Strategist weblog on 6/14/19 as “The Solid State Of Batteries”.

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by Debra Fiakas, CFA

The last post Vanadium Flow Battery Companies, featured several companies bringing vanadium redox flow batteries to the market for large-scale energy storage projects.  These highly efficient and long-lived batteries take advantage of the unique properties of vanadium.  There are other interesting chemical mixes on the battery market that could yield returns for investors.

Sodium-sulfur

There are at least eight different installations of sodium-sulfur or NaS batteries around the world.  One of the largest is the Yerba Buena Energy Storage System owned by Pacific Gas & Electric Company (PCG:  NYSE) in California.  Rated at 4 megawatts or 24 megawatt hours, the system can provide backup electricity either 1 megawatt for a day or four megawatts for six hours as the situation requires.

The NaS battery at Yerba Buena is expected to last at least 15 years.  Besides long-life expectancy the NaS battery also offers long cycle life.  These batteries have high energy density and give prompt response to system changes.   NaS batteries operate on the principle of a reversible reduction-oxidation or redox reaction between sodium and sulfur.  The sodium and sulfur electrodes are molten during operation.  The electrolyte is a solid beta-alumina of sodium-ion conductive ceramic.

The Yerba Buena NaS battery is located at a property controlled by HGST (formerly Hitachi Global Storage Technologies) and was originally intended to serve as a pilot system to prove NaS technology.  The system was also used to demonstrate the coordination of third-party distributed energy from residential or commercial sources.  Subsequently, PG&E integrated Yerba Buena project into the California Independent System Operator that oversees the operation of California’s bulk electric power system.

NGK Insulators Ltd. (NGKIF, 5333.T) provided the batteries for the Yerba Buena system. The company is one of the original developers of NaS technology along with Tokyo Electric Power Company.  Besides sodium-sulfur batteries, the privately-held company supplies ceramics, copper and electronic components to industry.  In the most recently reported fiscal year ending March 2019, NGK reported Yen463,504 million (US$4,284 million) in total sales, providing Yen35,506 million (US$328 million) in profits.  Earnings were down 22.5% year-over-year in part due to weak sales to the U.S. and Europe, particularly in the company’s power segment.

U.S. investors might not be familiar with NGK, but Japan investors know to find the shares on the Tokyo or Nagoya exchanges under the symbol 5333.  The stock is currently trading at 10.7 times trailing earnings.

Zinc Chlorine

Count on California to be first in just about everything related to energy.  The Modesto Irrigation District is the home of a storage project using zinc chlorine redox flow batteries.  Called the 25 megawatt Wind Firming Energy Farm project can supply up to 75 megawatt hours of energy from an array of 250-kilowatt energy pods housed in shipping containers.  The project is helping the Modesto Irrigation District meet California’s Renewable Portfolio Standard that calls for sourcing at least one-third of power from renewable energy sources.  At the end of 2018, Modesto’s renewable portfolio was 20%, putting it on track to reach the state standard.

The zinc chlorine redox flow batteries were supplied by Primus Power Corporation. Reduction-oxidation or redox batteries are distinguished by the separation of power and energy.  The power capability of redox flow batteries is determined by the size of the electrochemical cell stack.  Energy is stored in the electrolyte, which can be increased by larger storage tanks.  Since the flow of electrolyte can be easily stopped, the redox flow battery is less vulnerable to uncontrolled energy release.

However, zinc-chlorine systems are a hybrid redox flow battery.  Only one of the chemicals is plated as a solid in the electrochemical cell during charge. Some energy is stored in the plated metal.  As a consequence complete separation of power and energy is not achieved.  This means to get larger energy storage capacity a larger stack is needed.  This tends to work against the advantage of redox flow batteries over integrated cell types such as the lithium-ion battery.  While that might cause some investors to worry about the long-term potential for zinc-chlorine batteries, these particular redox flow batteries still have the advantage of low cost and high reliability for grid scale energy storage.

Advanced Lead Acid

Most people are familiar with the lead acid batteries resident under the hood of the family car.  Lead acid batteries are relatively low cost and have proven highly reliable even under harsh conditions.  They are highly scalable and capacities can be tailored to a particular project.  Unfortunately, lead acid batteries are heavy and bulky.  They can overheat during charging and cannot be relied upon in situations that require fast charging.

The Advanced Lead Acid Battery Consortium has orchestrated an effort to improve on convention by combining ultracapacitor technology to the conventional lead acid design.  The result is a single battery cell with a common electrolyte.

Several advanced lead acid battery systems were installed by Xtreme Power and others.  The Notrees Wind Energy Storage Project in western Texas next to Duke Energy’s (DUK:  NYSE) 153 megawatt wind farm had 24 megawatts of energy storage capacity with peak instantaneous power output of 36 megawatts hours. Duke Energy had matched a $22 million grant from the U.S. Department of Energy to build the storage project.  However, in 2017 Younicos AG replaced the system with Samsung SDI lithium-ion batteries.  Younicos acquired the assets of Xtreme Power following a bankruptcy action in 2014 and has since replaced most of the Xtreme PowerCell lead-acid installations with lithium-ion technology. Xtreme’s downfall may have been triggered by a fire in 2012 at one of its advanced lead acid battery storage projects in Hawaii.

While the idea of upgrading a workhorse like the lead acid battery has a certain appeal, it does not appear that there are any successful companies working on it today. The lead acid saga does provide investors with a potentially valuable cue to avoid the technology play and invest instead in a technology-agnostic operator. Consider for example, the successor to Xtreme Power and Younicos.

Last year Scotland’s Aggreko Plc. (AGK:  LON) acquired Younicos, tucking its energy storage systems and control software into its microgrid and storage solutions business. Neither the Younicos ‘Y-Cube’ nor Xtreme Power’s ‘PowerCell’ names survived.  The advanced lead acid technology is also left far behind.

Aggreko is an equipment leasing operator, specializing in mobile power, heating and cooling systems.  Its corporate literature boasts of the ability of its engineers to understand the unique requirements of its clients and design an appropriate solution.  The company reported GBP1.76 billion (US$2.2 billion) in the most recently reported twelve months, providing GBP125 million (US$159.3 million) in net income or GBP49.10 per share (US$62.55).

The stock is currently priced at 16 times those trailing earnings. What is more the stock offers a 3.5% forward dividend yield.  Thus a stake in Aggreko could provide an investor a chance to grab some of the growth opportunity afforded by the migration to renewable energy sources through a reliable operator with a seasoned stock that offers value and yield.

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.

This article was first published on the Small Cap Strategist weblog on 6/11/19 as “Battery Chemistry”.

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The recent post “Lithium Technology Dominates Large Energy Storage Projects” featured companies offering utility-scale lithium battery systems. Industry research firm Navigant estimates that lithium-ion technology accounts for almost 30% of non-pumped storage capacity developed since 2011.  This might be due in part to the dramatic decreases in cost for lithium ion batteries.  A study completed by Bloomberg New Energy Finance found that the ‘levelized’ cost of energy for lithium ion batteries has fallen by 76% to $187 per megawatt hour in the first quarter 2019 from $800/MWh in 2012.

Is the story over for utility-scale storage?  Should investors look for lithium ion battery manufacturers and forget all others?  The best answers are probably No! and No!  There are other interesting battery technologies. 

Vanadium Redox Flow

Adroit Market Research has made eye catching predictions for the vanadium redox flow battery market also.  According to Adroit the global vanadium redox flow batteries market could reach $1.1 billion by 2025.  Advocates of this battery technology point to the cost benefit of long life expectancy as a strong selling point for large scale storage.   There are a number of applications where scale is necessary: electric utilities that need to manage loads from intermittent power sources, industrial in remote locations that need microgrids, or commercial operations that need back-up power for mission critical operations.

China has adopted the technology and is expected to be a major source of demand for large scale energy storage projects. That market is served by domestic provider Dalien Rongke Power Co Ltd. that holds over 100 patents on vanadium flow battery technology.  Batteries using reduction-oxidation technology, or ‘redox’ for short, take advantage of vanadium’s unique attribute of existing in four different oxidation states.  The batteries are thus designed with one electro-active element instead of two.   One positive and one negative chamber filled with electrolyte are separated by a proton exchange membrane.  This sequestration contributes to greater safety compared to lithium ion batteries that are prone to thermal runaway.

In flow batteries the electrolyte chambers are connected to storage tanks so that large volumes of electrolyte can be circulated through the cell.  The assembly makes for a large footprint, but the resulting battery provides highly scalable capacity.

UniEnergy Technologies

Closer to U.S. investors is UniEnergy Technologies (UET) based in Washington State.  Its ReFlex system is highly scalable and can be used in smart- or micro-grids or to integrate renewable energy sources such as wind or solar into conventional utility power streams.

UniEnergy Technologies is privately held.  It has been capitalized by at least two rounds of venture capital.  The last reported financing was described as a Series B round that brought $25 million into the bank. Reportedly the Japanese financial services firm Orix Corporation, was a participant in the round.

UET may not need to go back to venture capitalists for future growth capital.  In April 2019, the company announced a partnership with chemical supplier The Chemours Company (CC: NYSE) to promote vanadium redox battery technology.  Chemours will supply the ion exchange membranes used for the recyclable electrolyte in UET’s flow battery.  Chemours is reportedly also making an investment in UET.

Notably, Rongke Power and UET teamed up on an energy storage project in China’s Liaoning Province that is one of the largest projects using vanadium redox technology.  The China National Development and Reform Commission invested in the system that secures 800 megawatt hours of storage using UET’s vanadium flow batteries.  The system is located in Dalian City and is connected to the electricity grid of Liaoning Province to enable peak shaving of capacity and grid stabilization.  Rongke Power and the local utility company are joint venture partners and owners of the system.

Vionx Energy

Privately-held Vionx Energy headquartered in Massachusetts is another emerging player in the vanadium redox flow battery market.  Using technology originally developed by United Technologies Corporation (UTX:  NYSE), the company has designed a proprietary ‘stacked’ system that minimizes footprint to capacity.

The company had an early success in partnering with National Grid Plc (NGG:  NYSE) to install and commission a 3 megawatt hour storage system at a high school in Worcester, Massachusetts.  The school will use the system to store energy from a utility-scale wind turbine on campus as well as other intermittent sources in the immediate community.  National Grid will use data collected from the project to perfect designs in a advanced distributed energy system.  The Vionx system is expected to last twenty years.

United Technologies is a significant shareholder in Vionx, but that does not mean there is no room for additional investors.  In June 2018, Vionx Energy raised $26 million through a private placement with venture capital investors, bringing total capital raised to $114 million (according to Crunchbase).  Reportedly the New York State Energy Research and Development Authority (NYSERDA) was a participant in the last round.  Early investors include Starwood Energy Group and Vantage Point Capital Partners.

Storage Alternatives

Industry analysts have established strong growth trends and health market value for vanadium flow batteries.  The environment bodes well for companies with proven products.  Investments in pure plays in this particular battery type are limited to accredited investors.  However, their larger partners offer a means to participate even if the stocks like UTX, NGG and CC reflect broader business interests.

Next post will be a brief look at yet another battery technology using sodium sulfur chemistry.

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.

This article was first published on the Small Cap Strategist weblog on 6/7/19 as “Big Box Storage”.

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by Debra Fiakas, CFA

Market share for lithium technology has been extended by another 22 megawatts with the selection of lithium-based batteries by Duke Energy (DUK:  NYSE) for three separate of power facilities operated by Duke Energy Florida.  Duke did not specify the source of the lithium-based batteries, but the company seems to have an affinity for Tesla’s (TSLA:  Nasdaq) battery products.  Last year Duke Energy with its partner University of South Florida chose Tesla’s lithium-based batteries for a 100-kilowatt solar project in St. Petersburg, Florida.

Application of lithium-based technology in a relatively small, microgrid application like that in St. Petersburg is no surprise.  Lithium-based batteries offer high energy density and low self-discharge. Modest maintenance requirements are also a plus.  However, the advance of lithium-based batteries for utility-scale power projects is notable given performance limitations lithium technology.  The risk of over-charge or excessive discharge requires extra circuitry to keep lithium-based batteries within safe operating limits.  This increases the cost of lithium batteries that are otherwise already come with a high price tag due to the cost of the lithium electrolyte.

Duke’s plans to ‘go lithium’ will not break any records for lithium technology.  Its power plants in Florida are dwarfed in size by the largest project in the world using lithium-based storage technology, the Hornsdale Power Reserve in Jamestown, South Australia.  With 100 megawatt capacity it has been serving the Hornsdale Wind Farm since November 2018.  Owned by the French renewable energy company Neoen, SA (NEOEN:  EPA), Hornsdale Wind farm has an energy production capacity of 315 megawatts.

Neoen chose Tesla’s Powerpack for its Hornsdale project.  The cost was reportedly $91 million. Neoen management commented that Tesla was chosen because Tesla’s CEO Elon Musk personally guaranteed timely installation.  However, it could be Powerpack performance capabilities that won the order.  Early testing by Neoen showed the Powerpack responding within seconds to changes in frequency on the electrical grid, switching from full-charge to discharge and back again. This represents an improvement over conventional generators that respond in a lagged and stepwise manner to frequency changes.  Based on data from the Australian Energy Market Operator, Neoen estimates it could save as much as AUS$40 million each year from efficiency benefits.

Neoen’s experience and perhaps that of Duke as well may relate more to Tesla’s microgrid design than to the lithium technology that drives the battery chemistry. Tesla’s microgrid solution incorporates the Powerpack with software and controls to manage power and energy flow.  At the heart of the system is the microgrid controller that uses a cost-based optimization algorithm.

For investors who are reluctant to jump on the roller coaster ride that is operated by Elon Musk and Tesla, there are alternative.  Tesla is not the only lithium-based battery or microgrid player.

One alternative for power producers is Saft Batteries owned by Total SA (TOT: NYSE).  Saft was tapped by Kotzebue Electric Association in Alaska to set up energy storage for remotely located wind power plant 30 miles north of the Arctic Circle.  French electric grid operator, RTE also selected Saft’s lithium-ion battery system for backup power at a substation.

Another major player is Samsung SDI (006400:  KS) that supplied 13,000 battery modules for a solar power and storage project operating in Hawaii’s Kauai island. Samsung’s lithium ion batteries reportedly replaced lead acid batteries in the project.

At the opposite end of the spectrum is Powin Energy Corporation (PWON:  OTC/PK). Powin also has a foothold in Hawaii at Adon Renewables’ solar storage project.    The system features both Powin’s battery pack and system management software.  Expect to see the Powin name more frequently.  Powin is also working with San Diego Gas & Electric and Southern California Edison in the U.S.  The company has a partnership with Hecate Energy for six energy storage projects in Canada.  Two of the six projects together total 52.8 megawatts and will be the company’s largest undertaking to date.

PWON is a microcap stock largely because the company has reported a can $19.2 million in sales in the last twelve months accompanied by a loss of $17.2 million.  The company used $6.6 million in cash to support operations during those twelve months, a cash burn rate that did not appear to be  supported by recently reported cash balances.

Battery producers are not the only vehicles to tap the growth and earnings potential in energy storage.  Privately-held Advanced Microgrid Solutions, now called AMS, provides software to manage energy storage assets. Besides changing its name to an acronym, the company has tossed aside its renewable power project development hard hat in favor of a new reputation for artificial intelligence.   AMS recently raised $34 million in a Series B private placement of common stock so it may be a while before investors has chance to get another bite of this promising company.  That said, it is not beyond reason that AMS could come back to the capital market in the future, if not for another private round, then for an initial public offering.

For those investors who want to ‘charge up’ their returns with stakes in battery storage, it appears the choices are limited.  On the one hand there are large, well established players involved, but battery storage is but a small part of their profile. Pure plays can be found, but profits may remain elusive.  Small, private innovators are getting involved, but only qualified investors need apply.

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.

This article was first published on the Small Cap Strategist weblog on 6/6/19 as “Lithium Technology Tapped for Large Energy Storage Projects”.

The post Lithium Technology Dominates Large Energy Storage Projects appeared first on Alternative Energy Stocks.

A list of graphite companies covered in this series can be found here.

Like performance test results, customer relationships are critical stepping stones for graphite developers.  In June 2018, Northern Graphite (NGC: TSX-V) announced a memorandum of understanding with a European trading company to sell 100% of the output from Northern’s Bisset Creek resources in Ontario, Canada.  China-based manufacturers are the intended end-users.  Northern management is using the arrangement as leverage with prospective investors to finance mine infrastructure and processing equipment.  Capital costs are expected to exceed CA$145 million.

Northern claims a proprietary purification technology the company intends to use to upgrade its graphite output.    Its Bissett Creek deposit yields primarily large flake graphite that requires considerable shaping to reach the spherical shape that is best suited for lithium ion batteries.  Northern has so far not been clear on whether the European trading company that has pledged to sell the Bisset Creek production is prepared to sell the high-margin purified material or is aiming for lower end graphite concentrate.

Kibaran Resources (KNL:  ASX) is focused on the Epanko deposit in Tanzania in East Africa.  The company recently raised AU$2.2 million through a AU$1.0 share purchase plan for existing shareholders and a AU$1.2 million private placement.  The capital serves as a strong vote of confidence in the company’s plan to convert the Epanko resource into battery-grade graphite.  Shareholders may have been inspired by recently announced test results from European customers.

Kibaran calls its purification process EcoGraf and claims it can produce a range of high-purity graphite material.  The recent customer tests were completed using spherical graphite produced form Kibaran’s Epanko flake graphite.  Kibaran recently commissioned a new batch plant in Germany to facilitate further customer testing.

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. Crystal Equity Research has a Speculative Buy rating on the shares of Westwater Resources, Inc. (WWR:  Nasdaq) through its CER Reports series.

This article was first published on the Small Cap Strategist weblog on 4/12/19 as part of the post “Graphite Developers Eye Large Growing Market.” 

The post Canadian and Tanzanian Graphite Connections appeared first on Alternative Energy Stocks.

Several graphite developers have made plans to integrate forward into the hottest segment of the market  –  battery-grade graphite.  According to Industrial Minerals, spherical graphite suitable for lithium ion battery anodes is priced in a range of $2,700 to $2,800 per metric ton in China where many battery manufacturers are located.  This compares quite well to the range of about $655 to $790 per metric ton for flake graphite concentrate.

The integration strategy has sent the sector into a frenzy of activity to prove their graphite meets expectations of battery manufacturers.  The only graphite deposit in the U.S. mainland is under development by Westwater Resources (WWR:  Nasdaq).  Historically, known as uranium producers, Westwater made a critical decision to diversify into other energy materials with strategic investments in lithium exploration licenses in Utah and Nevada.  Then in April 2018, Westwater acquired Alabama Graphite with graphite development projects in Coosa and Bama Counties in Alabama.  The graphite deposits are well documented and have a history of exploitation when the U.S. was still in graphite game in the 1940s.

Trying to get back in the game with a competitive battery-grade material, Westwater recently released new data from independent tests.   The company puts low volumes of its natural flake graphite through a series of refinement steps  –  purifying, micronizing, shaped into spheres and then coated with carbon powder.  The most recent tests found Westwater’sCoated Spherical Purified Graphite or ULTRA–CSPG held up better than comparable graphite from Chinese sources in long-term cycling tests.

Although no long-term, high-volume off-take agreement is in place, Westwater has customer interest for one of its basic battery materials  – Purified Micronized Graphite or PMG.  The company’s PMG has also held up well under independent tests that found exceptional results for performance enhancement in lead acid battery cells.  An undisclosed lead acid battery manufacture has declared interest in commercial volumes beginning in 2021, and continues early testing.

A list of graphite companies covered in this series can be found here.

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. Crystal Equity Research has a Speculative Buy rating on the shares of Westwater Resources, Inc. (WWR:  Nasdaq) through its CER Reports series.

This article was first published on the Small Cap Strategist weblog on 4/12/19 as part of the post “Graphite Developers Eye Large Growing Market.” 

The post Yankee Graphite appeared first on Alternative Energy Stocks.

The post “Integrated Graphene Producers” featured several graphene producers with novel business models that marry captive graphite sources to the technology and knowhow to produce graphene.  These are not the only graphite producers.  Although not as elegant as graphene with its svelte single-atom profile, the market for graphite has its appeal as well. Graphite has been a staple in steel industry crucibles, foundry molds and automobile brake linings.  These days graphite has moved into another even more important place in cars  –  lithium ion batteries that make electric vehicles viable as replacements for gas guzzling cars and trucks.

Spherical graphite is especially desirable because the graphite anodes hold up well against the lithium electrolyte in repeated charge and discharge cycles.  Both coated and coated spherical graphite has experienced a surge in demand.

In 2017, the lithium ion battery market consumed 105,000 metric tons of graphite  –  60,000 natural coated spherical purified graphite and 45,000 synthetic graphite.  Investors can expect these numbers to climb dramatically to keep up with the battery market.  MarketResearch, an industry research firm, estimates the lithium ion battery market will grow by 16.5% annually through 2024.  Those big numbers have quite a few miners reaching for picks and axes.  How many will gain a foothold in this big, fast growing graphite market?

The fifteen natural graphite resource developers listed below all have one thing in common  –  no revenue.  Even with the best of graphite resources under their control, management has considerable work ahead to bring the resource to market.  The reality of mineral resource exploitation is marked by high capital costs and pinched operating margins.  Several of the graphite developers have made plans to integrate forward into the hottest segment of the market  –  battery-grade graphite.  According to Industrial Minerals, spherical graphite suitable for lithium ion battery anodes is priced in a range of $2,700 to $2,800 per metric ton in China where many battery manufacturers are located.  This compares quite well to the range of about $655 to $790 per metric ton for flake graphite concentrate.

The next three posts will look at individual stocks from this list.

For those investors who have more of an appetite for revenue and profits, there are a number of graphite producers that have already reached the market.  The next post features these successes and explores valuation for graphite production.

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. Crystal Equity Research has a Speculative Buy rating on the shares of Westwater Resources, Inc. (WWR:  Nasdaq) through its CER Reports series.

This article was first published on the Small Cap Strategist weblog on 4/12/19 as part of the post “Graphite Developers Eye Large Growing Market.” 

The post Graphite Developers Eye Large Growing Market appeared first on Alternative Energy Stocks.

Nemaska Lithium (NMKEF:  OTC/PK, NMX:  TO) is a newcomer to the lithium industry.  The company recently came to the market with battery-grade lithium from spodumene rock carved out of its Whabouchi mine in northern Quebec, Canada and converted in a proprietary electrochemical process to battery-grade lithium material at an in-house facility in Shawinigan to the south.  The company filled its first orders in Summer 2018.

The company expected to produce over 200,000 metric tons of lithium-bearing spodumene concentrate from its Whabouchi mine with an average 6.25% lithium oxide content.  The mine is expected to remain productive for over three decades at that extraction rate.  The processing plant in Shawinigan has the capacity to produce 23,000 metric tons of lithium hydroxide and 11,000 metric tons of lithium carbonate.

It has taken a fair amount of investment to build this capacity.  By the end of June 2018, the Company had raised CA$678.5 million (US$517.3 million) in total equity, of which over CA$300 million (US$228.7 million) has been invested in plant and equipment.  Since the fiscal year end the company finally met all requirements for additional debt financing through the issuance of CA$459.1 million (US$350 million) in bonds.  The bond deal brought cash to an estimated CA$830.0 million by the end of September 2018, before cash used for operations and investments.

Nemaska plans to have its Whabouchi mine operation completed and ready for full commercial production by the third quarter 2019.  Commercial readiness will come along a bit later for the full-scale electrochemical plant.  Construction is underway in the final months of 2018 and will be completed by the middle of 2020.

With adequate financing in place to bring production capacity to full commercial levels, Nemaska can focus on delivering its lithium product to market.  Nemaska has entered into tolling and supply agreements with Johnson Matthey Battery Materials Ltd. and FMC Corporation as well as off-take agreements with LG Chem and Northvolt.  The agreements cover both spodumene concentrate and battery-grade lithium hydroxide.

The strong interest in Nemaska output may be an attractive cost structure. Nemaska estimates its average cost per ton for spodumene concentrate is near CA$334 (US$257 per ton).  It is the final processing steps to reach battery-grade materials are where costs pile on, with lithium hydroxide near CA$3,655 per ton (US$2,800 per ton) and lithium carbonate near CA$4,400 (US$3,400 per ton).  As high as these materials costs might seem, they compare favorably to the rest of the industry.  Industry leader Albemarle reports marginal costs near US$3475 ton for its US-based lithium hydroxide product and for Sociedad Quimica Minera reports costs near US$3,950 per ton from its Chile operations.  Others report even higher costs.  While not the lowest cost producer in terms of lithium carbonate, Nemaska still has a favorable position among the low-cost producers.

Nemaska shares have not tracked the company’s success in developing proprietary technology and securing financing to meet customer commitments.  The shares still trade below a dollar  –  in either US or Canadian terms  –  and trade near the 52-week low price.  True enough the company has taken on new debt and full commercial scale production is still at least a year away.  Every investor under the sun knows high volume production can differ dramatically from pilot plant performance.  Yet the current valuation of 1.0 times book value seems unnecessarily conservative given the time-to-commercial shipments and prime off-take and tolling agreements with lithium battery market leaders.

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.

This article was first published on the Small Cap Strategist weblog on 10/26/18 as “Nemaska Bargain in Lithium Sector.” 

The post Nemaska: A Lithium Bargain appeared first on Alternative Energy Stocks.