What You Haven't Heard about the New Battery Boom

By Nick Hodge

10.13.09

One of the most glaring — and accurate — criticisms of solar energy is the simple fact that there's no sunlight at night.

In most cases then, solar is an intermittent source of power. It's a reliable power source during the day, but requires some sort of back-up or reserve power source once the sun sets. . . usually natural gas.

Solving the problem of solar energy for nighttime hours has been the cleantech industry's white whale. But a recent advancement by a Japanese firm may hold the key to a solution.

And the availability of solar energy at night will be the development that takes the industry to the next level, cranking up sales and stock prices alike.

Making the Sun Shine at Night

Last week at the Cutting-edge IT & Electronics Comprehensive Exhibition (CEATEC), Panasonic (NYSE: PC) unveiled a 1.5 kWh battery made by binding together standard lithium-ion battery cells.

This is big news for several reasons.

First, it marks the first time a global electronics stalwart has focused exclusively on advanced batteries for the cleantech industry.

This brings validity to a business that has been marginalized at every turn — labeled as "tree-hugging," "non-profitable," and "government-supported."

Until now, batteries of this kind have been pursued largely by specialized start-ups or cleantech-focused companies.

The entrance of global conglomerates —focused more on profits than altruism— is a strong signal of the level of business maturity cleantech has reached.

Second, the availability of these batteries at the retail level will spur demand for residential cleantech products, like solar panels and small-scale wind turbines. As I said, being able to use solar power when the sun isn't shining is one of the last remaining hurdles before widespread adoption is possible.

For green investors, an onslaught of affordable energy storage would be a boon not just to battery stocks, but to the smart grid, solar, and auto markets, as well. In fact, Panasonic has already been selected to provide batteries for Tesla's upcoming sedan.

Going Bonkers for Batteries

As you can probably tell, batteries are going to be big business, generating hundreds of billions in revenue. In fact, it's been estimated that even if only 1% of energy storage demand is met in the next decade. . . the industry will be worth at least $600 billion.

So it's no surprise that behemoths like Sony, Samsung, and LG have already thrown their hats into this ring.

Uncle Sam knows the importance of batteries, too. . .

$2.4 billion from the stimulus has already gone to fund advanced battery and electric drive projects, including:

·         $45.1 million to UQM Technologies (AMEX: UQM)

·         $34.3 million to Exide Technologies (NASDAQ: XIDE)

·         $118.5 million to Ener1 (NASDAQ: HEV)

·         $299.2 million to Johnson Controls (NYSE: JCI)

And the recently IPOed A123 Systems (NASDAQ: AONE) was awarded $249.1 million.

Even Warren Buffett has embraced batteries, turning a $1 billion profit in less than a year on an investment in Chinese battery maker BYD (1211.HK).

The Coming Battery Boom

If recent activity is any indication, batteries are in for a long and sustained bull run. Take a look at the performance of this group of battery stocks over the past few months:

And all this is happening before the market is even fully developed. Panasonic's home storage battery, for example, is four years away from hitting shelves.

The 50-200% surge evidenced above was largely hype-driven. I expect gains much higher than that once products are fully developed and sold.

Using dips to get into these stocks now should be an integral part of any cleantech investment strategy.

Call it like you see it,

Nick

P.S. No matter how you slice it, battery development is a key piece of the developing smart grid. The American Society of Civil Engineers estimates $2 trillion will be spent on this endeavor in the next two decades. And in addition to the battery stocks above, I've already generated a few triple-digit winners from this booming sector. This report reveals how to turn billions in smart grid spending into personal profits.