Energy Storage Technologies
When Peak Oil Strikes, All Energy Wins
**Editor's Note Update: Be sure to read Energy and Capital's up-to-date resource page on energy storage companies and technologies.
I've come across two fascinating articles this week about the future of energy.
The first is an interview of Weeden & Co. senior energy analyst Charles Maxwell on Forbes, sent to me by publisher Brian Hicks. It's a dire warning that the plateau and peak of oil production are looming.
Maxwell says the “peak in production will actually occur in the period 2015 to 2020.”
“Around 2012,” he says, “we will hit a near-plateau of production around the world, and we will hold it for maybe four or five years. On the other side of that plateau, production will begin slowly moving down. By 2020, we should be headed in a downward direction for oil output in the world each year instead of an upward direction, as we are today.”
By that time, “we'll have to raise prices enough to stop some people from using that oil because it is actually not available.”
High oil prices, high energy profits
This is an energy investor's dream scenario.
According to Maxwell: “We're going to have to make a switch from using oil to using more coal or more natural gas or more nuclear or other alternatives.”
You can invest in oil and win. You can invest in coal and natural gas and win. You can invest in nuclear and win. And you can invest in alternatives and win.
Maxwell suggests Suncor (NYSE: SU) and Cenovus (NYSE: CVE), noting the Athabasca is “the second largest single reserve base in the world.”
I agree, but I'll save that story for Keith Kohl to cover.
I'll focus instead on what I know best — alternatives — which will be equally important to our energy future, and equally as lucrative.
Harnessing all feasible energy sources
The second article I found was written by Anas Alhajji, chief economist at NGP Energy Capital Management.
He argues that OPEC will not be able to meet our future energy needs.
He concludes, as a college writing professor always urged me to do, with a penultimate sentence:
Indeed, given the expected growth in energy demand in the next two decades, and the possible — even likely — shortfall in OPEC supply relative to the projected ‘call on OPEC', the term ‘alternative energy' will lose its meaning. The only ‘alternative' to harnessing all feasible energy sources will be a slow-growth world of permanent shortages and increasing misery.
That means wind, solar, geothermal, marine, and any other renewable resource we can harness.
But as you know, there's a problem with this...
Unlike oil, which can be shipped and piped and distributed where it's needed; unlike coal and natural gas plants, which can be built where they're needed and turned on and off at will... Renewables must be exploited where and when the resource is strongest — wind at night near mountains and plains; solar during the day in desert locations.
The problem is the best resources aren't located near where the energy is needed. Or, in the case of wind, that the best resource is at night when the power isn't needed.
So yes, there's no alternative to harnessing all feasible energy sources. But there's only one way to make some resources feasible...
As I've said before, energy storage makes the sun shine at night. It makes the wind blow where the air is still.
It does this by storing energy — from wind energy at night, from solar in the desert — and delivering it when and where it's needed.
A recent report from Pike Research showed revenues from installed energy storage systems will grow from $1.5 billion in 2010 to $35.3 billion by 2020. Needless to say, companies are searching for innovative ways to store renewable energy.
The Guardian just reported a Cambridge-led team has designed a giant battery that can store energy using two silos filled with crushed rock. Wind energy is used to heat a gas that passes between the two silos, storing the energy as temperature difference.
When electricity is needed, the heated gas transfers silos and is cooled, driving a turbine in the process.
The company behind it, called Isentropic, says its system can store as much energy as pumped hydro in less space with fewer costs. It's also claiming 80% efficiency and a system cost of between $10 and $55 per kilowatt-hour.
Another promising energy storage technology is molten salt. Solar thermal companies are using tanks of molten salt to store the heat their units produce.
And a new approach by Tyco Flow Control is using molten salt as a heat transfer fluid; pipes of molten salt sit above mirrors in the desert, storing the heat to later be used later for electricity generation.
I know it's a bit technical, but this is the future.
Energy storage will allow us to exploit renewable resources in a way never before possible: mid-day Death Valley solar powering Los Angeles at night... rural Iowa wind powering St. Louis on a calm day...
It's a long-term trend you can play numerous ways. ETFdb.com suggests either the First Trust NASDAQ Clean Edge Smart Grid Infrastructure Fund (NASDAQ: QGRID) or the Global X Lithium ETF (NYSE: LIT).
Each holds a variety of energy storage stocks ranging from different types of batteries to metal miners to flywheels and ultracapacitors.
It's the best way to capture the future growth of renewables because storage is source agnostic.
No matter which source is used — solar, wind, marine — energy storage will be part of this mix.
Strongly consider making it a portion of your portfolio and look for more ideas to profit from this space in the future.
Call it like you see it,
P.S. As all feasible energy sources are exploited, nuclear will also play a major role. If you haven't yet seen my new video about how to profit from that angle, you should watch it now. It's about a tiny company on the verge of two breakthroughs in the industry.