We’re going to need a bigger battery

I got my first ever stock pick at Southbank Investment Research wildly wrong.

My first ever piece of work here was given to me by James Allen, editor of Exponential Energy Fortunes, who wanted me to investigate two new battery companies, CellCube and redT.

I was to find out more about them, offer some initial analysis – five reasons to invest, five to avoid kind of thing. I was also to express a preference.

They’re both exceptionally cool companies, looking at energy storage.

Batteries, so familiar in theory, are actually at the forefront of the energy transition. As has been mentioned before in this letter, energy storage is crucial to the energy system of the future, where variable solar and wind power play a much larger role in power supply.

For example, a battery attached to a solar farm can store excess power after a sunny day, and release it overnight or if the next day is cloudy.

Currently, the same lithium-ion batteries which power our phones are being scaled up for use in electric cars, and even larger storage solutions like with solar. Lithium-ion batteries have a number of limitations though.

But first, let’s take a look at what I said back then.

I liked them both, I thought they had really cool technologies that surely had to be successful. On balance, I seem to remember preferring CellCube.

Here is the summary of my research:

CellCube’s technology is very impressive. The use of the metal vanadium gives a variety of material benefits to the customer – longer/better/more stable battery performance.

Energy storage seems likely to be a major industry in the renewable energy-dominated future. It can also be used for smaller projects, and projects in remote areas and developing countries looking to modernise their energy infrastructure.

It can also play a part in the electric vehicle (EV) market, specifically in charging stations.

As a company, its vertical integration is going to be a huge advantage, allowing it to supply its own vanadium producing cost savings and security of supply – though what those are/will be who knows.

With a good product, vertical integration, and beneficial market conditions this could prove to be a real winner, especially at the current low price of $0.15, given it has a proven track record, and a strong array of patents.

My prognosis for redT was almost as optimistic.

And all I can say is thank GOODNESS our Exponential Energy Fortunes subscribers had James making the calls, because he didn’t like either of them, and we went with something else entirely.

Both companies are now about 90% below where they were that week:

Source: Google Finance

redT has entered a complicated merger with a company called Avalon and formed a new entity called Invinity, but you can see its effective performance here all the same:

Source: Google Finance

Why did I think these companies were so great?

Well, they were working on a technology called redox flow batteries.

I am no chemist, by the way. I cannot make that clear enough!

But as I said, lithium-ion batteries have some major limitations. They have limited life cycles. They are susceptible to overheating and fire – remember those Samsung Galaxy Note 7s that kept combusting in people’s pockets, and got banned from all flights?

There is also concern about the supply of lithium, its rising cost, and the ethics surrounding its mining, and disposal.

Anyway, battery technicians across the globe are scrambling to find better battery solutions of all sizes, including utility-scale energy storage – which is what CellCube and redT are doing.

These offer more complete charging cycles than lithium without losing potency – they are safer, and more flexible.

Vanadium in particular offers potentially huge benefits at scale, and hence is touted for a future in grid-supporting batteries, alongside renewable plants and national grid systems.

Hydrogen is also thought of as a strong candidate for large-scale energy storage.

But both systems are a decent distance away from commercial viability, for now, but are worth keeping an eye on.

There are other problems too though.

Sourcing of raw materials for batteries, for one, is a very contentious topic.

Amnesty International has said that until radical change is introduced, battery electric vehicles will always be tainted by human rights abuses.

It particularly highlights the use of child labour in the Democratic Republic of the Congo (DRC) in mining.

Amnesty’s research from 2017 specifically linked major international corporates to the cobalt mined in unsafe conditions by children, and rated their attempts to do something about it:

Source: Amnesty International

Rare earth metals mining and refining also has a patchy record environmentally, and these metals are used in EVs, charging systems, and almost all modern technologies in fact.

Finally, disposal of these batteries, should EVs gain popularity, is a major concern.

Lithium batteries have an expected useful life of ten years (vanadium redox batteries have an expected useful life of 20, by the way). By the mid-2020s, when the piles of batteries start really growing, recycling capacity will need to expand by almost 10x from current levels.

The Financial Times offers a nice simple chart to show this:

Source: The Financial Times

Looks like an example of the capital cycle in action to me! Massive undersupply currently, then increasing demand leading eventually to an over-supply of recycling capacity. There should be some exciting investment options in that particular story…

Companies Northvolt and Norsk Hydro have teamed up to build a battery recycling plant in Norway, for example. Looking at Norway is like looking at our own future – it is so far ahead of us in the EV transition. They offer a potential road map for our own shift.

On recycling, I am optimistic. if we can figure out how to build economically viable EVs and charging infrastructure, battery recycling should arise organically from that – where there is demand, someone will make money be offering supply.

So up and down the value chain for batteries, there could exciting investment opportunities, only if you don’t take my stock advice though it would seem!

Hoping you all have a great weekend,

Best wishes,

Kit Winder
Editor, UK Uncensored

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