Energy storage is poised as the next big energy investment field, according to a new report. Venture capital in the field grew 74% to $709 million in 2007, according to Lux Research.
From the mobile phones carried by 3.3 billion people to the half a million hybrid electric vehicles sold last year, the world runs on energy storage technologies--the batteries, capacitors, and other devices that play a hidden, vital role in the energy economy. But a complex market with many competing technologies will challenge firms that seek simple routes to success, according to the report, titled “Alternative Power and Energy Storage State of the Market Q2 2008: Making Sense of the Next Big Thing.”
“Energy storage is fragmented because it covers a vast range of technologies--from batteries to flywheels to compressed air systems--that play into multiple market segments,” said Ying Wu, Senior Analyst at Lux Research and principal author of the report. “But the prize for companies that succeed is tremendous: The market will grow by 55% over the next five years.”
The report looks at the energy storage field from two perspectives--analyzing seven energy storage markets, like “transportation” and “consumer electronics,” on one hand, and five technology variations--from batteries to energy harvesting devices--on the other.
The following are some of the predictions made in the report:
- The transportation energy storage market will grow from $12.9 billion last year to $19.9 billion in 2012, benefiting companies like Matsushita Electric and LG Chem.
- Fuel cells will "return from the dead." Commercial sales will rise from $92 million in 2007 to $1.8 billion in 2012, driven almost entirely by new applications in residential combined heat and power systems and distributed generation deployments.
- Bulk energy storage for utilities--shifting large amounts of energy from excess production times to peak usage times – presents the biggest potential opportunity of all markets studied: If even 10% of installed wind power plants adopted large-scale energy storage, the market would hit $50 billion. However, utility companies’ risk aversion and long planning cycles will sharply limit market size through 2012 to only $600 million.
- After conquering the consumer electronics market, lithium-ion batteries will make similar inroads in the portable and transportation markets--going from $6.8 billion in 2007 sales to $16.9 billion in 2012. Nickel metal hydride and nickel cadmium technologies will be almost completely wiped out in consumer electronics.
- Expected IPOs from companies like A123Systems will drive venture capital, M&A, and IPO activity further upward in the next two years.
Wu also said flywheels will expand out from datacenter backup power to grid frequency regulation and new batteries made from zinc-bromide and vanadium redox flow, silver-zinc and zinc-air will find valuable niches.