Archive for the ‘Alternative Power’ Category
Wednesday, February 24th, 2010
Bloom Energy, the previously secretive fuel cell startup, is finally going public with its story, appearing on 60 Minutes last week. In an interview with Lux Research, Bloom’s Stu Aaron told us that the company intends to produce electricity from natural gas at a lower cost to the customer than the grid. Stu claimed the cost of electricity over the fuel cell’s 10-year life is $0.08/kWh to $0.10/kWh (when running as base-load for 24 hours a day), including government incentives and assuming a $7/mmBTU natural gas long-term contract. Stu also confirmed that the 100 kW fuel cell system’s price without incentives is in the range of $700,000 to $800,000.
Although their technologies are different, there are a number of similarities between Bloom Energy and Better Place, which leases electric vehicle (EV) batteries and provides charging infrastructure via a monthly payment plan. Both companies raised hundreds of millions of dollars: Bloom has received over $300 million in investment over its eight-year history, while Better place raised $700 million to date, including $350 million Series B in January 2010.
Both companies are also heavily reliant on subsidies. Bloom’s California customers achieve the quoted electricity costs only because they pay for just half of the system’s capital expense, based on the generous 30% U.S. federal tax credit and the $2,500/kW California rebate (New York and Connecticut also have generous rebate programs for fuel cells, as do many countries around the world). Without incentives, we calculate electricity would cost $0.13/kWh to $0.14/kWh, with about $0.09/kWh from system cost and about $0.05/kWh coming from fuel cost. Note that this is high compared to average retail U.S. electricity costs of roughly $0.11/kWh. In the case of Better Place, without subsidies, a U.S. customer would end up paying some $689/month over eight years, while a conventional gas-powered vehicle would cost only $443/month (see the February 10, 2010 LRPJ – client registration required). But massive government EV incentives could make EVs competitive in specific markets under Better Place’s model – Denmark has offered a tax credit of $40,000 or more per vehicle and Israel has similarly generous subsidies in place – although additionally generous government support is needed to put Better Place’s infrastructure in place.
However, the final similarity between these companies is the most significant one: both sport valuations of over $1 billion (Bloom’s Series F places the company at $1.45 billion, while Better Place’s Series B puts it at $1.25 billion). Niche markets do little to satisfy expectations this high, and both companies have not been shy in claiming that their technologies will eventually find a place in every home. While neither company will live up to its aggressive claims anytime soon, Bloom has a better shot at unsubsidized profitability in the long run. If it can successfully mass produce reliable systems and convince customers to take on the responsibility to produce their own electricity, Bloom should be able to bring down costs through high-volume manufacturing to the point where it will be competitive with electricity from the grid in many areas while providing relief to increasingly overtaxed transmission and distribution systems. While Bloom’s cells running on natural gas are not necessarily greener than combined-cycle gas plants, its economics justify a brighter long-term future than Better Place’s. However, whether it can do so quickly enough to justify its billion-dollar valuation remains to be seen – and will depend heavily on where government subsidies roll out.
Tags: Better Place, Bloom Energy
Posted in Alternative Power |
Friday, February 19th, 2010
According to a recent article in the Wall Street Journal (subscription required), Toyota Tsusho, a supplier to Toyota Motor (which also owns 21.8% of the company), has agreed to invest between $100 million and $120 million for a 25% stake in a lithium (Li) mining project operated in northern Argentina by the Australian-listed company, Orocobre. Toyota Tsusho will also pay for the completion of a feasibility study this year. To help finance the deal, Japan Oils, Gas, and Metals National, a state-owned Japanese corporation, is giving Toyota Tsusho low-cost loans in order to secure a steady supply of Li to Toyota Motor.
This kind of deal will help cement the dominance of Panasonic, Toyota’s partner for electric vehicle batteries. The companies have a JV called Panasonic Electric Vehicle Energy (PEVE). While only 27% of the world’s Li supply goes to batteries today, batteries are the fastest growing use for the alkali metal, and Japanese chemical companies like Mitsubishi Chemical and Sumitomo Chemical, as well as some Chinese buyers, are all interested in acquiring stakes in Li producers. However, while Chinese battery makers like BYD enjoy a significant domestic supply (according to the most recent U.S. Geological Survey, China was the third largest producer of Li in 2008), Japanese companies must move quickly to make sure their supply is not disrupted.
After Chile, Argentina is the largest South American source for the metal; and, unlike Bolivia, which has the greatest reserve base in the world, Argentina’s government is relatively stable. Considering that battery price is already the most significant factor in whether plug-in hybrid vehicles (PHEVs) and all-electric vehicles (EVs) will be successful (see the Lux Research report, “Unplugging the Hype around Electric Vehicles” – client registration required), expect more major automakers to work on securing access to Li, lest they find themselves at the mercy of fluctuating commodity prices. The wild card? Innovative companies like Simbol Mining might find a way to flood the market with low-cost Li, but unless and until they do, expect aggressive attempts to secure Li supply.
Tags: Panasonic, Simbol Mining, Toyota Motor Co.
Posted in Alternative Power |
Friday, January 29th, 2010
Panasonic finally inked its purchase of Sanyo last month. After plans for the takeover became public more than a year ago (see the November 5, 2008 LRPJ – client registration required), the deal was stalled by anti-monopoly regulatory concerns, which forced the pair to sell some nickel-metal hydride (NiMH) battery assets. With those concerns behind it, Panasonic will now be the dominant player in many markets, including large-format NiMH batteries (see the July 1, 2009 LRPJ – client registration required), battery packs for hybrid- and all-electric vehicles (via Panasonic’s JV with Toyota), and Li-ion batteries, where Sanyo and Panasonic were the largest and sixth largest manufacturers, respectively.
The deal means that automotive companies will have fewer options for mass-produced lithium-ion cells for electric vehicles, driving current customers of Panasonic and Sanyo to seek out other qualified battery suppliers – such as LG Chemical’s Compact Power, or Johnson Controls-Saft (JCS) – to maintain multiple sources.
At the same time, however, the acquisition bodes well for Panasonic’s ability to reduce cost in its Li-ion cells, as it can now greatly increase volume. Because of this, the merger of Panasonic and Sanyo will encourage other lithium-ion battery manufacturers to consolidate in order to share similar economies of scale. Clients should expect to see other major tie-ups in the near future as the lithium-ion shakeout comes to fruition (see the December 16, 2009 LRPJ – client registration required).
Further, the acquisition gives Panasonic a strong position in the solar industry, since it now controls Sanyo’s efficiency-leading “heterojunction with intrinsic thin layer” (HIT) cell technology. Sanyo ranks #15 in cell manufacturers by capacity as of Q3 2009 (see the Lux Solar Supply Tracker- client registration required), and its cells top even those of U.S.-based SunPower in the high efficiency segment. Further, Sanyo already has plans in place to aggressively ramp cell capacity to a total of 345 MW by the end of 2010, and to boost ingot and wafer capacity in Oregon, which will total 70 MW when fully ramped in April 2010. All told, the company plans to boost module capacity to a total of 600 MW by the end of this year.
Overall, that puts Panasonic in a very strong position to capitalize on the U.S. residential rooftop market, as well as the high-efficiency panel market in Japan, which is expected to grow in 2010 due to new subsidies. However, a number of competitors, such as Suntech and JA Solar, are making a push into the high-efficiency segment with competing technologies. Although these will likely prove more cost-competitive than Sanyo’s, they’re unlikely to top 20% efficiency. Further, we have recently heard of a Silicon Valley start-up targeting silicon inks for this “selective emitter” technology that is up for sale after exhausting funding; interested clients should contact lr.inquiry@luxresearchinc.com for more details.
Tags: Panasonic, Sanyo
Posted in Alternative Power, Solar |
Thursday, January 28th, 2010
 Click on image to open larger version. The smart-grid market was already formidable in 2009, with revenues of over $4.5 billion due mostly to aggressive adoption in the U.S. Figure in the efforts to build intelligent power grids in countries around the globe, and the smart grid market is on track to grow at an impressive 23% CAGR over the next 5 years, reaching a staggering $15.8 billion in 2015.
Taken from our recently released report “The Smartest Opportunities in the $16 Billion Smart Grid,” this week’s graphic illustrates our breakdown of smart grid opportunities into three market segments – measurement and communication, analysis and services, and local management. These segments break down further into the eleven subsegments shown.
Bottom line: Our analysis shows the measurement and communication segment has the early momentum. Expected to top $5 billion by 2015, smart meters and networking infrastructure technologies enable better management of information across the grid, and therefore better management of electrons.
As information begins to flow across the grid, demand for analysis and services technologies will grow. Led by demand response applications, analysis and services revenues could make up the largest piece of the smart-grid pie by 2015. Currently below $1.4 billion today, companies in this sector will likely see revenues grow at a 30% CAGR, leading to revenue totaling over $6.7 billion by 2015.
Source: Lux Research report ” The Smartest Opportunities in the $16 Billion Smart Grid.” To learn more about this graphic and related intelligence from Lux Research, click here or email Carole Jacques.
Posted in Alternative Power |
Wednesday, December 23rd, 2009
A panel of battery manufacturers at the recent Advanced Battery Value Chain explored opportunities here and abroad, as well as the potential impact of U.S. economic stimulus funding. The panel included representatives from several companies that had recently received stimulus money, including lead-acid battery maker Axion Power, Li-ion battery and electric-vehicle maker Electrovaya, and Li-ion battery and pack developer Compact Power.
In response to a question of what it will take to make electric vehicles happen, Axion’s Edward Buiel replied that he strongly felt legislation is what will make the difference.
Axion’s lead-acid technology targets “start-stop” applications in which batteries merely serve to a hybrid’s acceleration as it begins to roll. Typically aimed at micro-hybrid vehicles, the technology has potential in the European market where new legislation mandates CO2 emissions from vehicles must be under 130 g/km by 2012. Otherwise, car makers face a very stiff penalty of €95/g CO2/km for each vehicle sold that doesn’t meet the standard.
Buiel said that if the U.S. does not institute a similar penalty, all the stimulus money going to battery manufacturing and electric vehicles will be worthless. He added that Axion’s advanced lead-acid batteries can help improve fuel efficiency by up to 30% in higher performance vehicles like BMWs, which currently emit between 150 and 180 g/km of CO2.
Sinking money into building domestic manufacturing capacity alone won’t be enough to overcome the cost hurdles preventing adoption of electric vehicles. Adding carbon prices in the U.S. won’t be enough to move the needle for next-generation plug-in hybrid electric vehicles (PHEVs) and all-electric vehicles (EVs). Imposing the equivalent of $50/ton of CO2 would effectively raise the price per barrel of oil ($/bbl) by only $20.
Based on our research, however, prices need to skyrocket from around $75/bbl today to around $200/bbl before they significantly impact sales of PHEVs and EVs (see Unplugging the Hype around Electric Vehicles: client registration required). Micro-hybrids are another story, and sales of these vehicles may indeed be spurred by a carbon tax.
Stimulus funding and Chinese competition
Needless to say, the topic of U.S.-China competition in battery manufacturing also came up during the discussion. Panel member Sankar Das Gupta, CEO of Electrovaya, argued that Li-ion cells can be cost effectively manufactured in North America through a high degree of automation. The caveat is high production volumes. U.S. stimulus funding can help companies overcome the capital investment hurdle.
Buiel indicated he expects high quality and advanced lead acid batteries will continue to be built in North America for a long time. The reason is because the U.S. traditionally has more advanced production technology and the manufacturing of lead acid batteries requires more highly skilled labor. Consequently, lead-acid players in North America are less threatened by Chinese competitors than their Li-ion counterparts, like Electrovaya.
Firms focusing on lead-acid technology, he added, will likely get a boost from the European market, where micro-hybrids are more popular than PHEVs in the foreseeable future. However, this advantage figures less prominently in the U.S. and Asia, where the focus is squarely on PHEVs and all-electric vehicles powered by Li-ion batteries.
Tags: Axion Power, Compact Power, Electrovaya
Posted in Alternative Power |
Friday, December 11th, 2009
We recently met with Takao Inoue of the newly formed Innovation Network Corporation of Japan (INCJ) in Tokyo. Formed through the support of Japan’s government, INCJ aims to encourage development of emerging technologies, as well as the adoption of an “open innovation” model among Japanese corporations. The vision is to enable industrial giants from Sony to Toyota to develop new products more rapidly by accessing inventions from universities, start-ups or other large corporations. Inoue explained that INCJ has been given 90 billion yen ($1.0 billion) to invest, with commitments for up to 900 billion yen ($10.2 billion) over the next 15 years. The Japanese government committed to providing 90% of the funds, with the balance coming from private firms, such as domestic leaders like Panasonic and Tokyo Electric Power, and overseas player like General Electric. INCJ plans to pursue investments in “environment and energy, life sciences, electronics, machinery and components and advanced materials,” with additional areas possible in the future.
As part of its role, INCJ will serve as an early-stage venture capital (VC) or angel investor. It will provide funds to secure promising intellectual property from universities and government labs, and back start-ups and spin-outs – filling a gap in which traditional Japanese VCs have been unwilling to invest more than small sums. However, Inoue-san noted, INCJ’s mission isn’t limited to early-stage investments. It will also provide larger investments to fill capacity expansions and project finance needs – a role that’s missing in the West as much as Japan. Such projects require larger sums than VCs are willing to offer, or impose too much technological risk to entice traditional private equity investors.
It’s still early days for INCJ. The firm was established in June, and won’t make its first investments until early 2010. But clients should watch to see if it can maintain its political and private support, and succeed in bridging gaps in Japan’s existing financing model, which make the country poorly suited to fund emerging technologies in energy, environment and materials.
Posted in Alternative Power, Biosciences, Nanomaterials, Solar, Water |
Monday, November 23rd, 2009
 - Click on image for larger version
With virtually every major automaker launching a plug-in hybrid electric vehicle (PHEV) or all-electric vehicle (EV) within the next three years, questions abound as to whether these cars will be successful relative to the current generation of hybrid electric vehicles (HEVs) – to say nothing about how they will compare to vehicles driven by internal-combusion engines (ICEs)
The final judge will be consumers, who will be voting with their wallets – and electric vehicle enthusiasts might not like the returns, according to our recent report “Unplugging the Hype around Electric Vehicles (client registration required).”
In preparing the report, Lux Research analysts developed a demand-driven market model that calculates how fuel savings could counterbalance the higher price tags on electric vehicles. It includes projections for how the costs of these vehicles could fall as auto and battery manufacturers scale up production, and figures in the impact of oil prices using three scenarios in which oil reaches $70/bbl, $140/bbl, or $200/bbl through 2020.
All told, the report found that while global electric vehicle sales will total several million units annually under all scenarios, these sales will be never more than 7.8% of the total automotive market in 2020 at the oil prices modeled, and may be as low as 3.1%.
More specifically, the report finds that HEVs will be the only winner if oil prices hold steady at around $70/bbl. But regardless of oil prices, sales of these vehicles should reach roughly 3 million units annually by 2020. PHEVs, by contrast, will require oil prices to increase to $200/bbl to achieve a similar level of success, and EV sales will be a factor of ten smaller, even at that price.
Posted in Alternative Power |
Wednesday, November 11th, 2009
Late last month, the U.S. Department of Energy (DOE) listed 100 utilities that had won matching grants from the $11 billion federal stimulus package, which the U.S. established to modernize the electricity grid (see February 18, 2009 LRPJ — client registration required). The utilities, listed by category and by state, are among the first to receive matching grants.
Unsurprisingly, many of the largest winners had announced spending and partnerships prior to the award distribution (see the April 22, 2009 LRPJ and the August 12, 2009 LRPJ — client registration required). Florida Power and Light (FPL), PECO/Exelon, and Duke Energy received the maximum $200 million in grants. Other utilities that received the maximum award include CenterPoint Energy, Baltimore Gas and Electric/Constellation Energy, and Progress Energy. Each of these six utilities plan to install between 160,000 and 2.6 million smart meters as part of their proposals. Seven more utilities received between $100 million and $200 million. Overall, the awards will affect utilities operating in 49 of the 50 states.
The DOE organized the awards into six different categories:
- Advanced metering infrastructure (AMI)
- Customer systems
- Electric distribution systems
- Electric transmission systems
- Equipment manufacturing, and
- Integrated and/or crosscutting systems
The largest grants were in the first and last categories, demonstrating a strong emphasis on smart metering and meter networks over transmission and distribution. While this is certainly music to the ears of companies like GE (FPL’s metering partner), Silver Spring Networks and Cisco (FPL’s networking partners), and Echelon (Duke Energy’s metering partner), the business models for these AMI deployments are far from proven. While having more information can never hurt, the size of the grants seems disproportionate to the nebulous benefits of these smart meters.
Until utilities demonstrate smart meters improve either energy efficiency or cost savings, government funds might be better spent on upgrading/expanding transmission and distribution infrastructure to prevent costly blackouts, or figuring out ways to increase the proportion of renewable power generation on the grid. Bulk energy storage is another great candidate for government support, which could help it attract buy-in from conservative utilities. Throwing billions of dollars at a solution to issues that seem indirect at best hardly seems prudent in these economic times.
Posted in Alternative Power |
Friday, November 6th, 2009
We recently attended the Rusnanotech 2009 conference in Moscow, a massive forum and exposition put on by Russian state-owned technology investment fund Rusnano.
The event opened with a flourish: Russia’s President Dmitri Medvedev gave an opening address, in which he announced his government’s firm intention to remake the Russian economy more innovative and technology-based. His vision was of a Russia in which emerging technologies in energy, information technology, infrastructure, and medicine played a stronger role. This vision would unfold even as the economic crisis that dealt such a blow to Russia’s resource extraction industries begins to abate.
“Our post-crisis economy must be based on knowledge, on new technology, not on the raw material potential of Russia,” Medvedev declared. Medvedev touted Rusnano’s plans to spend 318 billion rubles ($10.9 billion) through 2015 to help that vision become a reality. Also, the President didn’t shy away from citing what he views as the obstacles to high technology in Russia, including conservatism of incumbent firms — “business has not been proactive enough” — concerns about corruption, and the need for legal frameworks to support entrepreneurship and guarantee a long-term market for new technologies.
Medvedev and Rusnano’s CEO Anatoly Chubais both cited Rusnano’s goal of boosting the output of nano-enabled products in Russia to 900 billion rubles ($31 billion) — by which point we anticipate $2.5 trillion in nano-enabled products worldwide.
However, Rusnano takes a much broader view of its mission than its “nano-focused” brand would imply. Indeed, clients should view Rusnano’s role as supporting emerging technology in Russia in general, not just as what’s usually defined as “nanotechnology.”
Witness, for instance, its investment in polysilicon producer Nitol (see the May 1, 2008 LRSJ and September 10, 2009 LRSJ — client registration required). This will likely prove solid moves given the solar industry’s demand for low-cost polysilicon, and Nitol’s access to cheap electricity that can allow cost-effective production. But it doesn’t qualify as something that we, or most observers, would consider nanotech.
Walking the exhibition floor at the event, we spoke to a diverse range of firms seeking investments from Rusnano. Among them was the solar division of Konti, which offers bifacial crystalline silicon solar cells like those made by Sanyo (see the September 24, 2009 LRSJ — client registration required). Konti is seeking funds to expand from 5 MW of production to 60 MW by 2012.
Another firm seeking Rusnano investment was Russian Superconductor, a project of Atom Invest, the investment arm of Rosatom. The firm was using its parents’ support for work on superconductors for power cables and fault current limiter, much like those pursued by American Superconductor (see the June 3, 2009 LRPJ — client registration required).
All told, Chubais noted, Rusnano has approved €1.2 billion ($1.8 billion) worth of investment in 36 projects, which have pulled in a total of €2.1 billion ($3.1 billion) including other private investments.
There’s clearly some distance to go before Russia becomes a high-tech powerhouse, but its goal of 900 billion rubles of products is certainly achievable, especially under the broader umbrella of technologies Rusnano pursues. On the positive side of the ledger is the vast sums Rusnano deploys. It plans to invest €3 billion ($4.5 billion) through 2015. That has clearly attracted a lot of interest and activity in these technology areas. On the other hand, changing the business culture to a more entrepreneurial one will be a slow process, and excessive bureaucracy continues to gum up the works for innovation in Russia. Even for emerging technology events like Rusnanotech: One invited speaker at the event lamented the need to collect 20 different signatures just to get her travel expenses reimbursed.
Nonetheless, Russia’s commitment to emerging technologies looks real. President Medvedev emphasized, “we can’t just relax and give up on nanotech as global economy recovers, and go back to just supplying energy.” Clients should expect Russia to increasingly become a global player in areas like nanotech, solar, power, and medicine. The question is whether it will be a minor one, or whether it could ultimately rival major movers like the nations of Western Europe.
Posted in Alternative Power, Nanomaterials, Solar |
Friday, October 16th, 2009
When A123Systems went public last month, shares started at $13.50 and topped $20 by the close of the first day of trading. The opening price far exceeded the company’s initial price range estimate of $8 to $9.50 a share, and vindicated the company’s decision to postpone its IPO last year (see October 29, 2008 LRPJ: client registration required).
According to a Reuters article, the 50.9% increase makes the A123Systems IPO the second-most successful American IPO this year (the most successful was OpenTable, an online restaurant reservation company that rose 59.5% in its debut in May).
From the perspective of A123System’s VC and corporate investors, however, its exit does not live up to the hype that led to over $350 million of investments to date. A recent peHUB post (registration required) indicates that at best investors made out with around a 7x multiple (Alliance Bernstein), while suffering returns as low as 3x at the low end (Sequoia Capital and GE) – even assuming the stock price stays high long enough for venture investors to realize those gains (typically six months after IPO). Our sources would call peHub’s analysis into question, indicating that many early investors made out with greater than 10x returns. However, given the capital required to take the company to exit, A123Systems was certainly not a grand slam like the internet and software firms most investors are familiar with, and it represents a continuation of the lack of success that VCs have had in the storage arena. (See the Lux Research State of the Market Report “Alternative Power and Energy Storage Financing: Can VCs’ Good Times Last?” client registration required).
The real question for investors
At this point, the most important question is: What are the prospects for A123Systems going forward?
The company’s cash position should be in good shape for the foreseeable future, thanks to the IPO (the company priced 28.1 million shares, raising $378 million), and a recent $249.1 million grant from the U.S. Department of Energy (DOE). However, while we’re not stock-pickers, it’s hard to escape the impression that the market’s valuation of the company at around $2 billion relies on misplaced optimism about the company’s prospects in the burgeoning electric vehicle market. For starters, A123’s main automotive partner, Chrysler, has well-documented problems and a poor plan for electric vehicles. Moreover, the lithium-ion-powered electric vehicle market will only be a runaway success if oil prices skyrocket, while if oil prices remain constant global lithium-ion sales for passenger vehicles will be barely more than $500 million by 2020. (See the Lux Research State of the Market Report “Unplugging the Hype around Electric Vehicles.” (client registration required)
On the other hand, A123Systems has many viable markets for its high-power lithium iron phosphate cells beyond light electric vehicles. Southern California Edison has applied for a $25 million grant from the DOE for a 32 MWh battery system from A123 to provide backup for 4,500 MW of wind generation in the Tehachapi region.
Elsewhere, AES, a major power producer, placed an order for 68 MW of grid batteries. Additionally, while passenger cars are a long way off, hybrid buses powered by A123’s batteries (in partnership with BAE Systems) are an increasingly common sight on the streets of New York City. And not to be overlooked is A123’s long-time breadwinner – its relationship with Black & Decker for cordless power tool batteries, which has accounted for a good chunk of the company’s nearly $90 million in revenue over the past 12 months.
In short, A123Systems has a winning technology that has found niches in several fast-growing markets – just not the one that most investors seem to be banking on.
Posted in Alternative Power, Nanomaterials |
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