For several decades, clean technology supporters have waited for the day when solar power truly achieved "grid parity."
Everyone understood that this promising renewable form of energy needed to eventually compete with nuclear, oil, coal and gas -- without any government subsidies.
Much faster than anyone expected, we're almost there.
The cost to produce solar panels has dropped so fast, and the energy conversion ratio of solar panels has risen ever higher, that government subsidies are beginning to phase out, which is unlikely to slow down the torrid growth for solar.
Some of the juice created by solar power (and wind, geothermal and micro-turbines) will be fed back into the grid, especially where two-way power meters are installed, but much of the excess power we generate will simply be uncaptured and frittered away.
That's why engineers continue to work hard to develop new ways to store energy, tinkering with virtually every kind of known battery chemistry and coming up with unusual ways to bottle up power for future use.
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How bad is the problem?
When clean energy sources such as solar or wind are producing peak power, they can create too much supply for grid operators, who essentially must give away electricity to shed loads. Storing that excess energy is the clear fix. "If that excess energy could be stored, not only would it not be wasted, but we could also protect the load factor and hence the economics of conventional (power) plants," note analysts at Citigroup, who call energy storage one of the "Top 10 Disruptive Innovations of 2014."
These analysts speculate on a futuristic scenario that is a lot closer than you may think. They envision a home generating solar power, an electric vehicle in the driveway (with its own hefty energy storage device under the hood) and software that manages home loads. Your dishwasher would turn on when the car battery is full, but stay dormant while the battery is not at full charge.
Many other examples of energy efficiency gains deriving from energy storage can be found at Sandia National Labs, including an interesting review of various new battery chemistries that show a great deal of promise in science labs.
Energy storage has historically entailed high costs, but like solar, prices are dropping fast. For example, the cost of lithium-ion batteries has fallen nearly 90% since 2005, according to Citigroup, and they are likely to fall by half again by 2020.
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|Energy storage has historically entailed high costs, but like solar, prices are dropping fast.|
How To Invest
Unfortunately, many of the companies gearing up for large-scale battery production are in Asia and aren't easy to access as investments. Yet a rounded portfolio of U.S.-traded investments could provide comprehensive exposure to this fast-growing clean energy niche. They include:
Global X Lithium ETF (NYSE: LIT), which tracks the underlying price of lithium. This exchange-traded fund (ETF) has fallen from $23 in early 2011 to a recent $13 thanks to an expansion in the supply of mined lithium. But demand for lithium is surging anew as automakers step up their pace of new electric car rollouts.
Maxwell Technologies (Nasdaq: MXWL), which is a provider of ultra-capacitors that can store large amounts of power in transportation systems. This stock is no longer the bargain it was when I profiled it six months ago (here's a full description of this company's technology). I think the company's current $500 million market value still underscores the potential market opportunity for Maxwell by a wide margin.
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ZBB Energy (NYSE: ZBB) sells large battery arrays that utilize a proprietary zinc bromide chemistry. It took many years of sales efforts to convince customers to use the system: Annual sales have yet to reach $10 million, but the company is pursuing a wide range of global programs, which you can read about on the recent earnings call transcript. ZBB is a micro-cap that carries a great deal of risk but is in the midst of rising daily trading volume, signaling greater interest from institutional investors.
Lastly, both the First Trust NASDAQ Clean Edge Green Energy Index (Nasdaq: QCLN) and the First Trust NASDAQ Clean Edge Smart Grid Infrastructure (Nasdaq: GRID) have considerable exposure to companies pursuing energy storage advances, though the QCLN fund gets the clear nod simply because its trading volumes and assets under management are far larger.
Risks to Consider: Key advancements made by large battery makers such as ABB (NYSE: ABB) or Johnson Controls (NYSE: JCI) could quickly upend this market and make life difficult for the smaller upstarts such as Maxwell Technologies and ZBB Energy.
Action to Take --> The rapid progress in the field of energy storage portends radical changes for consumers as well as the power generation industry. You need to track these developments if you own utility stocks, as their business models will need to adjust to technological changes. Maxwell Technologies, ZBB Energy and those ETFs offer a cross-section of investable opportunities in this field.