Investing in Battery Stocks

Earlier this week, Lightspeed Venture Partners, a cleantech venture firm, published a list of 2009 cleantech predictions.

All in all, it contained some good observations. Here are the nuts and bolts of how they see the clean energy market in 2009:

• Cleantech funding will slow significantly, forcing startups to seek alternative growth strategies
• Companies will come under increased pressure to achieve competitive cost economics
• Investor interest in energy storage, especially for automotive and grid-scale applications, to grow strongly
• Government will play larger role in cleantech, as policymakers around the country increase their support
• Cleantech comes of age in China

In this issue, I want to focus on the third bullet: Investor interest in energy storage, especially for automotive and grid-scale applications, to grow strongly.

Put simply, what we’re talking about here is investing in battery stocks.

Types of Energy Storage Opportunities

Here’s what the Lightspeed piece had to say about the matter:

VCs will continue to invest in areas with large market opportunities, significant headroom for innovation, and more capital-efficient expansion models. We expect energy storage to be one of these areas. In the automotive sector, batteries with improved safety, performance, and cost parameters will be crucial to the broader adoption of electric vehicles (EV’s) and plug-in hybrid electric vehicles (PHEV’s). In the utility sector, the dramatic increase in distributed generation expected in the next decade from wind, solar, geothermal, and other sources will continue to adversely impact grid stability. We believe that economical grid-scale storage will be a critical part of the solution.

We can break this opportunity down into two parts.

First, as I’ve said before, we have a plethora of advanced energy-producing technologies in the clean energy sector. You know them well: wind, solar, geothermal, wave.

Since most of these technologies are intermittent–the sun only shines during the day, the wind blows more at night–finding a way to store the energy they produce is critical if they’re ever to be taken seriously as sources of base-load power.

Not only that, but small wind and solar farms are located all over, as opposed to centrally located coal-fired and natural gas plants. So feeding the power from wind and solar energy to the grid from remote locations has proven difficult.

An efficient method of storage renewably-generated electricity is vital for its widespread use and long-term economics.

What we’re talking about here is called grid energy storage. Main types include flywheels, flow batteries, pumped hydro storage, sodium-sulfur batteries, and compressed air energy storage.

Second, there is going to be a lot of investments being made in advanced batteries for electric vehicle applications. Quite frankly, the only thing holding the electric vehicle market back from significant market share is the inadequate range of their vehicles, which is a function of insufficient battery storage.

In this space, I’m looking for companies making batteries that extend the range or improve the operation of electric vehicles. I’m technology agnostic, which means I don’t have a preference for what type of battery a company is pursuing–as long as it works.

Main types of batteries for electric vehicles include lead acid, nickel metal hydride (NiMH), and lithium ion (LiOn), though some exciting new technologies are in the R&D stages.

Investing in Battery Stocks

It is important to note that with so many available technologies and companies, I cannot go over each one individually.

Instead, I’m going to present a list of battery stocks that I currently find attractive, and at what prices. If applicable, I’ll include their area of expertise. Always be sure to do your own due diligence before investing.

Here’s my list of currently attractive energy storage and battery stocks:

• Beacon Power (NASDAQ: BCON), advanced flywheel grid storage, under $0.70
• Altair Nanotechnologies (NASDAQ: ALTI), nanotech components for vehicle batteries, under $1.45
• Ener1, Inc. (AMEX: HEV), lithium ion batteries for electric vehicles, under $7.10
• American Superconductor (NASDAQ: AMSC), high-temperature wires, coils, and other electronic components, under $13.00
• Valence Technology (NASDAQ: VLNC), lithium ion phosphate storage systems, under $1.75
• Energy Conversion Devices (NASDAQ: ENER), NiMH materials and consumer battery technology, under $25.50

Oddly enough, one of the best plays in the battery market isn’t even a publicly traded stock… yet.

A123 Systems, a start-up out of MIT, is quickly becoming the darling of this industry. They’ve filed for IPO, but shelved it once due to less-than-optimal economic conditions. Eventually, they will come to market, so keep an eye out for that.

Lastly, we’ve had such an overwhelming response to our free content that soon we’ll be launching an investment advisory service focusing exclusively on clean energy stocks.

It’ll be a straightforward service, telling you which companies to buy and at what price. I’ll do the research and you make the money. Look for that in early 2009.

For now, check out the previously mentioned battery stocks. I’ll be sure to hit on this immensely popular topic again soon.

To green energy, and green profits,

Chris
Clean Energy Sector