In August of last year I wrote an
article titled “Grid-based
Energy Storage: Birth of a Giant.” Over the last 12 months I’ve
written a series of follow-on articles that discuss the principal
classes of manufactured energy storage devices and the companies that
are making or planning to make products for smart grid energy storage
applications. My entire archive of articles on the energy storage
sector is available here.
One of the biggest
problems I’ve encountered over the last year has been a dearth of reliable third
party information that can help investors understand the breadth and depth of
the business opportunity, and sift through the frequently contradictory
claims of energy storage device manufacturers that plan to target the
smart grid as a principal market. Since energy storage investors are generally well-informed
and frequently opinionated, most of my articles have lengthy comment streams that round out my perspective and are usually more interesting than the articles themselves.
Two weeks ago I ran across a story on greentechgrid
that said NanoMarkets LLC,
a leading market research firm from Glenn Allen, Virginia, was
predicting
that the global market for storage batteries and ultracapacitors on the
smart grid would grow from its current level of $326 million to $8.3 billion by 2016. Since the market size and growth rate estimates were very
impressive and I track many of the companies identified
in the greentechgrid story, I contacted NanoMarkets to see if they
would send me a complimentary copy of their report.
A little over a week ago I
received a copy of NanoMarkets 102 page report titled “Batteries
and Ultra-Capacitors for the Smart Power Grid: Market Opportunities
2009-2016.” I’ve been like a kid in a candy store ever since. While
the $2,995 report is a little pricey for individual investors, it’s a must read
for institutions and other large investors that are analyzing opportunities in
the energy storage sector. It’s also a wonderful planning tool for
companies that are developing go to
market strategies for manufactured energy storage devices. Individuals
who want to better understand how the smart-grid market is likely to
develop
and grow over the next several years can gain important insight from a
free June
2009 NanoMarkets white paper titled “Plug In to
Materials Trends for Smart Grid Applications.” NanoMarkets has
agreed to offer a $500 discount on the full report to my readers who
contact Robert Nolan (rob@nanomarkets.net) and mention this article.
Unlike forecasts from storage device manufacturers and stock market
analysts who tend to focus on how a
particular product, technology or company might fit in an emerging
market, NanoMarkets approached the issue of smart grid storage from the
end-user’s perspective; meaning that they identified the customer’s
needs first and then focused on the companies that had cost-effective
solutions for those needs. The principal near-term applications
identified by NanoMarkets are:
- Load leveling and power quality systems to protect commercial and
industrial users from brief power interruptions that cost an estimated
$75 to $200 billion per year in lost time, lost commerce and damage to
equipment; - Peak shaving systems to help commercial and
industrial users manage their electricity costs under variable utility
tariffs and help utilities manage generating assets to minimize waste; - Transmission and distribution support systems to help utilities
reduce grid congestion, defer upgrades and minimize waste; and - Renewables integration systems to help power producers, utilities
and end users cope with the inherent variability of wind and solar
power and better match peak wind and solar output with peak demand.
In evaluating the likely development path for energy storage devices on
the smart grid, NanoMarkets considered a variety of competing
technologies including pumped hydro, compressed air, flywheels,
chemical storage batteries, ultracapacitors and superconducting
magnets. They ultimately concluded that:
- Pumped hydro and compressed air had limited growth potential
because of geographical and geologic constraints; - Flywheels and
superconducting magnets were not likely to be widely used beyond niche
applications because of their cost and complexity; and - Absent a revolutionary breakthrough in cycle life and cost,
lithium-ion batteries will have limited application in the smart grid.
From my perspective one of the most refreshing aspects of the
NanoMarkets report was their belief that storage systems for the smart
grid will be chosen based on fundamental cost-benefit analysis. Equally
important was their conclusion that emerging technologies would
increase the overall demand for storage and result in rapidly
increasing revenue for all product classes. So instead of facing a
situation where an emerging technology takes sales away from an
established technology, each class of technology can expect rapid
sustained growth over the entire forecast period. When the forecasts
for individual product classes are stacked on top of each other, it’s easy to see why I believe the
smart grid storage market will reach explosive growth rates by 2016. The following
graph provides a consolidated summary of NanoMarkets’ forecast for each of
the principal battery classes over the next eight years.
I can’t begin to do the NanoMarkets report justice in the limited
confines of a financial blog. They thoroughly discuss the economic drivers and development
path for each of the principal smart grid markets; carefully review
each of the energy storage technologies that have significant potential in the smart grid market; identify the leading developers of energy storage devices for the smart
grid; and break their sales forecasts down by both
specific applications and geography. If NanoMarkets’ forecast is even
close to being right, the
next decade will be a period of explosive growth for:
- Sodium battery manufacturers like NGK Insulators (NGKIF.PK)
and
General Electric (GE)
that can look for annual revenue in
their sub-sector to grow by $1.3 billion over the next eight years; - Supercapacitor manufacturers like Maxwell Technologies (MXWL)
that can look for annual revenue in their sub-sector to grow by $1 billion over the next eight years; - Lead-acid battery manufacturers like Enersys (ENS),
Exide (XIDE)
and C&D Technologies (CHP) that
can look for annual revenue in their sub-sector to grow by $2.4 billion over the next eight years; - Lead-carbon battery manufacturers like Furukawa Battery (FBB.F),
Axion Power (AXPW.OB)
and Firefly that can look for annual revenue in their sub-sector to grow by $2.75 billion over the next eight years; and - Flow battery manufacturers like ZBB Energy (ZBB)
that can look for annual revenue in their sub-sector to grow by $499 million over the next eight years;
For energy storage investors who truly want to understand where the
smart grid energy storage device market is today and how it is likely
to develop through 2016, the NanoMarkets report could well
prove to be the soundest investment of all.
DISCLOSURE: Author is a former
director Axion Power International (AXPW.OB)
and holds a large long position in its stock. He also holds a small
long positions in Enersys (ENS),
Exide (XIDE)
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.