Uncertainty breeds opportunity after tough month in grid storage

By Brian Warshay

A battery fire, a Nasdaq delisting and a company bankruptcy this month cloud the future of grid storage. But the announcement of two large-scale projects coming online provide a ray of light in the uncertain and changing climate of this emerging space.

Over a month after an NGK Insulators battery caught fire, the investigation continues. NGK issued a statement advising existing customers to stop using its batteries and then reduced its first quarter 2012 sales forecasts by nearly 6%. This is not the first setback experienced by NGK since it launched its molten salt batteries onto the grid in 2002. In February, 2010, another NGK battery caught fire, and recently, NGK struggled to meet production deadlines on the $4 billion Rubenius project.

NGK was not the only company to struggle in grid storage this month. Lithium-ion battery producer Ener1 was delisted from the Nasdaq Capital Market on October 28, 2011 and flywheel manufacturer Beacon Power declared bankruptcy two days later. Neither of these failures should come as a surprise, given Ener1's struggle to successfully penetrate the electric vehicle market and Beacon Power's exorbitant costs and losses over the years.

But the news in grid storage is not all negative.

The first project partially funded by the American Recovery and Reinvestment Act (ARRA) came online on September 21, 2011 in New Mexico. The project is a 250 kW, 1 megawatt hour advanced lead acid battery installation furnished by UltraBattery. On October 27, 2011, the largest lithium-ion grid storage project in the world, a 32 megawatt, 8 megawatt hour battery bank provided by A123 Systems commenced operation in West Virginia at an AES wind farm.

“The $25 million AES storage project should provide investors and technology developers alike with some hope that grid storage projects have a future, even without direct government funding.” However, it should not be forgotten that A123 Systems was the recipient of a $249 million Department of Energy grant that contributed to the development of its Michigan manufacturing facility.

Though these successes and failures contribute to growing uncertainty in the grid storage space, they should not be taken negatively. All new markets experience countless shakeups before clear leaders emerge. Announcements such as these should inspire industry players to seek valuable IP and partnership opportunities in a market still searching for its rightful place on the grid.

Brian Warshay is a research associate for Lux Research, which provides strategic advice and on-going intelligence for emerging technologies. For more information, visit the Lux Research site.

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