Merrill: Energy Storage Could Be The Next Big Opportunity In Cleantech

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Merrill Lynch clean tech analyst Steven Milunovich released a short note packed with interesting information this morning.

His primary interest in the note is the tremendous potential for energy storage, “It could be the next large, relatively homogenous sector since efficiency is a bit of a catch-all (metering, lighting, demand response, etc).”

At present though, storage only accounts for 2% of the global market capitalisation of companies. Compare that to wind and solar which have 80%. Though, be warned, investment in storage looks like a better opportunity. Solar companies have a $60 billion market cap, but will only generate revenue of $26 billion. In that light storage looks very promising:

Storage today is a minuscule market with a cap of less than $2 billion. Although storage should take longer to ramp than did solar, the opportunity is substantial. The hybrid/electric automotive battery opportunity alone could be $20 billion or more by 2020E, supporting a market cap of $60 billion at 3x revenue, in our view. And that’s just lithium-ion batteries.

The problem with storage is that it’s the Holy Grail of cleantech. Solid storage technology isn’t really in the offing. But by broadly defining storage, Milunovich thinks there’s opportunity.

He also provides a way to think about it, Kevin Skillern, who runs GE’s venture capital business:

First tier: Can store power for up to 15 seconds, such as flywheels used to limit power plant fluctuations.

Second tier: Can store for 5-30 minutes to keep the grid stable.

Third tier: Can shift power from day to night. GE is concerned that this storage is 5-10x too expensive.

Another approach might be to consider applications by storage technology: (1) chemical (hydrogen), (2) electrochemical (batteries, fuel cells), (3) electrical (supercapacitors), (4) mechanical (compressed air, flywheel), and (5) thermal (molten salt, ice). Either way, eventually storage will be important to investors.

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