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Investing in Energy Storage

What Inelastic Demand Means for You

Written by Nick Hodge
Posted May 1, 2009

You've heard the plans.

We'll double the use of renewables in three years. We'll get 20% of our power from wind by 2020. And so on.

They're lofty goals, and they'll generate serious profits. In fact, fortunes have already been made from the public-facing technologies like wind and solar.

But for the industry to progress as quickly as planned, there are several hurdles that need to be overcome. And that's where the crazy money will be made.

Wind and solar are great. I've made money off them, and I've helped investors profit from those sectors — and I will continue to do so.

But what happens when the wind doesn't blow or the sun doesn't shine? How can these resources provide baseload power if they are intermittent?

The answer is advanced energy storage. . . and it's worth billions.

The Need for Energy Storage

Here's a blurb from the Christian Science Monitor that puts it in perspective:

While the Obama administration presses to expand renewable energy with emphasis on growing wind farms and utility-scale solar, these efforts could vastly increase the need to build new backup power plants — much of which today involves firing up natural-gas turbines when the winds die down. The only way to avoid using fossil fuels is to develop grid storage.

If solar power isn't available at night, for example, it can never become a source of baseload power like coal or natural gas. Large scale energy storage can change all that.

So when the wind is blowing and the sun is shining, some power is delivered to the grid and some is stored for later use — after the sun goes down or when wind speeds decline.

The problem — until now — was that energy storage technology was not advancing as fast as energy production technologies, and costs were not falling as quickly.

That gap is now narrowing, which means profits on both fronts for those in the know.

And the best part is, energy storage is a can't-fail sector. It's critical for the rapid expansion of renewable energy. And Congress is guaranteeing its success.

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Investing in Energy Storage, an Introduction

This sector is so vital that it will soon approach inelastic demand. That means suppliers of energy storage technology will be able to raise prices without reducing demand. . . great news for investors.

And like I said, Congress needs this to happen, or their grandiose plans for renewable energy are moot. They are propelling this industry with billions of dollars of stimulus money and other programs through national laboratories and partnerships.

As a side note, energy storage falls under the broad umbrella of smart grid. So, Federal money for smart grid is also funding for energy storage — also sometimes called grid reliability.

It's a big sector with multiple technologies. So before you take the investment plunge, you should be aware of all the different types of energy storage devices that exist:

  • Lead Acid

  • Nickel Cadmium

  • Nickel Metal Hydride

  • Sodium Sulfur

  • Zinc Bromide

  • Superconducting Magnets

  • Flywheels

  • Fuel Cells

  • Compressed Air

  • Capacitor and Ultricapacitors

  • Lithium-ion

There's a market and a company for each of them. The trick is nailing down the right time to invest in the right sector.

Take lead acid batteries and superconducting magnets, for example. Two companies to watch there are Enersys (NYSE: ENS) and Maxwell Technologies (NASDAQ: MXWL). Look what those two have done recently:

Energy Storage Stocks

I think it's safe to say there is money to be made here. It's estimated that energy storage will morph into a $600 billion industry over the next decade — not to mention it's the missing link to propelling renewable energy from marginal to mainstream.

And yet, it gets much less attention than its solar and wind cousins, giving savvy investors a brief window of opportunity to beat The Street to the punch.

For more on the emerging opportunity of energy storage, including reports and detailed recommendations, you'll want to consider joining Alternative Energy Speculator.

We've already taken one round of smart grid profits and are positioning for the next. Your gains from just one recommendation in this sector will pay your fee for years.

I'll also cover this topic next week right here, when we'll take a look at specific energy storage investment opportunities.

Call it like you see it,

nick hodge

Nick

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