GE Enters the Grid-based Energy Storage Business

John Petersen

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

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

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

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

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

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

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

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

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

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

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

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

John L. Petersen, Esq. is a U.S. lawyer based in Switzerland who works
as a partner in the law firm of Fefer Petersen & Cie and represents
North American, European and Asian clients, principally in the energy
and alternative energy sectors. His international practice is limited
to corporate securities and small company finance, where he focuses on
guiding small growth-oriented companies through the corporate finance
process, beginning with seed stage private placements, continuing
through growth stage private financing and concluding with a reverse
merger or public offering. Mr. Petersen is a 1979 graduate of the Notre
Dame Law School and a 1976 graduate of Arizona State University. He was
admitted to the Texas Bar Association in 1980 and licensed to practice
as a CPA in 1981. From January 2004 through January 2008, he was
securities counsel for and a director of Axion Power International,
Inc. a small public company involved in advanced lead-carbon battery
research and development.

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