I had my first discussion about electric cars when I was 8-years-old. While my dad was filling up his 1984 Diesel Mercedes at the local gas station, a revelation hit me: why can’t we just plug the cars into the wall, like my remote control car?
“That’s complicated son,” my dad told me as he sat me down on the cracked leather seats. Little did I know that it was to be my first lesson in big business conspiracy. And he laid it on me as matter-of-factly as if he was explaining why Mickey Mouse was able to talk…
“You see, right now oil companies make a lot of money — a whole lot of money. That’s because they sell the gas that goes into our cars. If you could just plug your car into the wall, they wouldn’t make money anymore…”
I was confused. I had never heard of a conspiracy. Why would anyone want to kill off such a great idea?
“They want to kill all the competition. So that’s why we don’t have electric cars.”
Before I could ask any more questions, the conversation segued into a diatribe about how Ralph Nader was the reason my dad had to sell his beloved Corvair.
But that’s a story for another time…
In any case, I always remember being interested in electric cars. In the eyes of a child, it just seemed to make sense. Everything else we have can just be plugged into the wall; Why are the cars on the road so different from my remote control car?
One word: Batteries…
You see, electric cars weren’t simply the victim of a big conspiracy. While big oil did try to kill the electric car, the real reason these electric vehicles had never taken off was a matter of having efficient battery storage. But times have changed, and battery storage has been revolutionized.
Battery storage will be the big investment story of the next decade. But it isn’t only electric car batteries we’re talking about…
Energy storage is projected grow 8% a year, swelling to $50 billion by 2020. Much of this growth will be on the backs of plug-in vehicles. The automotive market could eventually overtake consumer electronics as the biggest market for battery storage.
As you can see, this trend is your friend.
Companies like Tesla Motors (NASDAQ: TSLA) have already reaped massive profits from this trend. In Q4 of last year, Tesla sold 6,892 units of its flagship Model S for $615 million. It expects to ship another 35,000 of them this year, swelling revenue to over $3 billion.
Just have a look at their stock chart over the past two years:
That’s a lot of cash for Tesla founder and billionaire wunderkind Elon Musk — and shrewd investors who put their money in Tesla on the ride up. That kind of growth would not have been possible without its battery energy storage. But Tesla’s new partnership could bring its battery technology into an even bigger market.
The company has begun working its batteries into other forms of energy storage, like harnessing solar power…
Tesla has teamed up with SolarCity (NASDAQ: SCTY) — where Elon Musk is chairman — to provide lithium ion batteries to harness the power from SolarCitys’ panels and infrastructure. This could be another huge revenue stream.
Residential solar integration could be the single best opportunity for energy investors. A new report from Lux Research projects that the integration of solar into energy storage will skyrocket from $0.1 billion to a mind-blowing $1.2 billion by 2020. That’s a whopping 1100%…
For years solar hasn’t been able to compete cost-wise with cheaper utilities that run on fossil fuels. But just as the combustion engine car is slowly ceding way to plug-in hybrids, so too will residential power give way to a combination of alternative energies, all made possible by the breakthroughs in battery storage capacity.
And Tesla hopes that it will lead the way by bundling its cheap batteries to companies like SolarCity, so utilities could “bank” solar energy while the sun is out, and then use that stored energy when the energy demand picks up. SolarCity’s software actually details everything about your energy use and automates the entire process of storing and deploying energy.
By harnessing that stored energy, consumers can efficiently manage their energy use, and no longer be a slave to the utility industry’s rates. Some are calling the merger “a utility company’s worst nightmare”.
They are currently making all the right moves to ensure that nightmare comes true.
“The long-term demand for stationary energy storage is extraordinary,” JB Straubel, Tesla’s chief technical officer, said during their last earnings call. “We’ve done a huge amount of effort there and have talked to major utilities and energy service companies.”
That kind of innovative disruption will make a lot of investors rich in the process… if you know the right way to play it.
Now, you could certainly put some money in Tesla or SolarCity, but both of those stocks have run up like mad. Personally I don’t like buying after monster runups. I think there is still upside to both companies, but with a trend like this, I’d rather get in on some energy storage innovators that have that kind of double-your-money potential.
There are a host of other companies that are doing exciting work in the battery storage space. Here’s a quick rundown of three of the most promising:
NRG Energy (NYSE: NRG)
This New Jersey power and energy company is becoming very involved in the battery storage sector.
Earlier this year it announced the exciting Necker Island Project…
The small Caribbean island is owned by billionaire business mogul Richard Branson. NRG partnered with him to provide a renewable-energy microgrid for the island. The goal is to implement solar and wind and store the energy in batteries. NRG is aiming to reduce fuel consumption by 75%.
If the project is successful, it could be a breakthrough solution for the hundreds of small islands that typically rely on importing expensive diesel fuel.
NRG is also at work on large-scale storage battery. It is supporting Eos Energy Storage, a startup company that is developing a new battery technology called “Zynth”. The new battery is a zinc-hybrid-cathode, one that could give lithium ion batteries a run for their money. Here’s how it’s described on the company’s website:
When combined with solar or other forms of distributed generation, energy storage can enable self-sufficient microgrids that can power homes or neighborhoods for days or even weeks. Think of it as a back-up generator with no emissions that saves you money every day.
LG Chem (KRX: 051910)
LG Chem was recently ranked as the “number one lithium-ion battery vendor in the world”. Because of that distinction, it has partnered with a number of the world’s biggest energy storage companies.
The South Korean company is providing the battery pack for the new Chevy Sonic electric vehicle that is reported to have a massive 200-mile range. That would give Tesla a run for its money.
They are also heavily invested in the Asian electric car market, which is projected to surge:
LG Chem has also built off its automotive battery business and expanded into residential and commercial energy storage as well.
The battery space is indeed the next gold rush in the energy space. But if there was one thing to learn from the actual gold rush, it wasn’t the miners that scored risk-free profits. In fact many a gold miner was sent home with nothing more than a pan of dirt.
But there was one group of entrepreneurs that made money whether the prospectors found gold or not. These were the “pick and shovel” companies.
So we know that production of these batteries will continue to grow. Between electric cars, residential power, and industrial energy storage, the need for battery storage will grow exponentially. And every one of those batteries that is produced will absolutely require one scarce substance.
That’s where we’re putting our money.
Nick Hodge has uncovered the single best — and completely unknown — company that has unearthed the biggest and highest quality supply of this rare substance that the world has ever seen. Companies like Tesla will be begging them for their supply. Once the battery storage space starts rolling into full-on rush mode, this company will make Tesla’s stock rise look puny in comparison.
The upside is that huge… Nick’s Early Advantage readers can check out his latest report unveiling how to profit from this play outsider of Tesla’s stock.
