The $8.5 Million Disaster Igniting a Boom in Energy Storage
On October 23, 2015, the U.S. energy industry took a turn for the better... in a very unlikely way
That day, there was a devastating natural gas leak at Southern California Gas’ Aliso Canyon site.
It took four full months to plug the leak, by which time an estimated 97,100 tonnes of methane and 7,300 tonnes of ethane had been released.
Clearly this isn’t an event the energy industry wants to brag about today.
Based on environmental damage alone, it was the worst natural gas leak in U.S. history. The well remains shut to this day... at least until the cause of the leak is discovered.
And yet, the results of this catastrophe haven’t been all bad...
Certainly you’ve heard the phrase, “If it ain’t broke, don’t fix it.”
Well, sometimes it’s more profitable to break it...
“The Invisible Catastrophe”
Even though the Aliso Canyon gas leak has been an $8.5 million debacle (that was the amount Southern California was forced to pay), it turns out that it also has given a boost to a very undervalued sector: energy storage.
See, it wasn’t just the health effects that were an issue during and after the leak.
All that natural gas would have been powering homes and businesses in the area, and specifically during peak demand times throughout the day.
It wasn’t until January of 2016 that the problem really came to light. California Governor Jerry Brown declared a state of emergency and really got the ball rolling.
New projects were immediately designed to replace lost energy and prevent future blackouts.
The state’s Public Utilities Commission approved nearly 100 megawatts of energy storage installations by May, and construction was underway before the end of the year.
One of these installations we’ve already discussed: Tesla’s 80-megawatt storage project, which came online early this year. Southern California Edison contracted the Mira Loma storage facility to cover peak demand and is already looking to expand the system’s capacity.
Other projects by Tesla, AES, and Greensmith Energy were completed and brought online in January, adding another 70 megawatts to California’s energy storage capacity.
But that’s not even the half of the success story we’re seeing in the energy storage space today.
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A Year for the Record Books
2016 was a breakout year for utility-scale energy storage, and the momentum will only build going forward.
As one of the most aggressive states investing in renewable energy and battery storage, California has cemented its clean energy reputation.
Thing is, we’re starting to see more of these storage facilities pop up all over the place.
Approximately 230 megawatt-hours of storage capacity were brought online during the fourth quarter of 2016.
Here’s where the report estimates the market will be heading next:
Keep in mind that this is just newly installed capacity.
Total capacity will be growing at a clip (as you can see above), and the majority of that growth will be from utility storage.
It’s not even the sheer size of these installations that’s most impressive, but the speed at which the industry transitioned from one of small-scale applications to long-term storage solutions.
It won’t even be just renewables keeping this growth up.
Batteries will increasingly cover peak demand times, even for traditional fossil fuel plants.
And the Winner Is...
For obvious reasons, lithium is going to be the star of this show.
But even though the metal is abundant, I believe there’s a massive supply crunch on the horizon, which could send prices screaming higher.
More importantly, the lithium revolution will have a spillover effect in other critical energy metals like graphite and cobalt, our "goblin metal," both of which are booming.
In other words, you’ve got your pick of how you want to profit on the energy storage boom, and every one of them is offering first-rate returns.
Until next time,
A true insider in the energy markets, Keith is one of few financial reporters to have visited the Alberta oil sands. His research has helped thousands of investors capitalize from the rapidly changing face of energy. Keith connects with hundreds of thousands of readers as the Managing Editor of Energy & Capital as well as Investment Director of Angel Publishing's Energy Investor. For years, Keith has been providing in-depth coverage of the Bakken, the Haynesville Shale, and the Marcellus natural gas formations — all ahead of the mainstream media. For more on Keith, go to his editor's page.
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