Lifestyle

The Battery Market Will Charge Ahead


Driven innovations and demand for cleaner energy, the battery business is expected to grow from $36 billion to more than $50 billion by 2015

The battery market, also known as the storage battery market, is big—and it's only going to get bigger between now and 2015.

Batteries represent about $36 billion in revenues today and are expected to grow to more than $50 billion over the next five or so years, with rechargeable batteries leading the way. The growth will take place worldwide, and my corporate proxy for this is Hitachi (HIT), which says its battery business will show positive top-line growth over each of the next seven years.

These growth projections are impressive, particularly in an uncertain global economy. But, from my perspective, the numbers may well be understated because:

The hybrid vehicle battery, which accounts for 1.7% of the world's rechargeable market, is expected to grow to 4.2% of the market by 2013. This surge is based on conservative assumptions about hybrid car growth.

The ultracapacitor and fuel cell battery growth forecast may also be low, given potential technology/performance breakthroughs in the next few years. I believe that ultracapacitors will prove to be one of the essential engines of the new energy economy. Dependent on the performance of their materials, they store and release more energy faster than conventional batteries, and they have an almost limitless cycle life.

Growth in renewable energy, like solar and wind power, will drive additional demand for storage capacity, especially with increased smart grid electricity deployment all over the world.

Very few storage technologies have actually reached the scalable commercial deployment phase, so we're not fully aware of the portfolio of possibilities—and the market isn't feeling the true impact of these innovations yet. Several companies produce lithium-ion batteries, for example, but utilities have only begun to experiment with them for balancing loads or storing power. And General Electric (GE) just jumped into the market for sodium batteries, computer-sized batteries that can store large amounts of power at wind farms.

Funding From Washington

The real issue, though, is that huge battery market growth—driven by hybrid vehicles and renewable energy—will need to be paced by improved battery performance.

It's also important to note that advanced battery-centric solutions may not be able to deliver on their full promise and potential. So, we also need to look beyond batteries, to a combination of available and efficient next-generation energy storage technologies that can help us reach our commercial and environmental goals.

That's why the federal government, the states, and the private sector are pouring capital into advanced battery and energy storage technology and manufacturing. Most impressive and farsighted is the $2.4 billion in stimulus funds that Washington has allocated for battery sector innovation. If deployed prudently, these funds could provide us with an opportunity to blend the best new technologies and innovations.

I'm also quite positive about the $300 million in tax credits that Michigan is offering for four major battery-manufacturing projects. I particularly like this program because the tax credits are expected to generate an additional $1.7 billion in private-sector battery investments. And the only realistic way we can grow clean-technology sectors such as batteries and energy storage is through vigorous and collaborative public-private partnerships.

Battery Innovation

My friends in the venture capital industry seem to agree with me. And that helps explain the 27 deals and more than $500 million that VCs in this country have invested in batteries since the beginning of 2008.

All of this spending on battery technology and manufacturing is without doubt extremely encouraging news. But what really inspires me is the wide range of advanced battery innovation that's taking place at universities from coast to coast. Scientists at MIT, for instance, have developed a battery technology that may soon allow people to charge their cell phones in several seconds or a drained plug-in car battery in only a few minutes. These next-stage ultrafast charging batteries could also help electric cars accelerate and quickly stabilize the electricity grid, absorbing or releasing power to smooth out supply and demand fluctuations. And, because the MIT technology is based on an existing type of battery, it might be able to reach the commercial marketplace faster than one made of a different material.

Andy Grove, former chairman and CEO of Intel (INTC), has pushed hard for large companies such as Intel and GE to get involved in the rapidly revamping automotive sector. Grove believes that Intel can enter the vehicle business through the manufacture of batteries and that GE can play a different—but equally significant—role by manufacturing the cars themselves.

I agree that a sweeping transportation transformation is under way, and that it must go much further and faster if we are to protect America's national, economic, and environmental security. At the epicenter of this commercial earthquake, however, are cutting edge batteries and energy storage technologies. Without them, we run the risk of remaining stuck in the petroleum era—a dangerous place for a nation that aspires to long-term prosperity in the 21st century.

Michael Butler is chairman and CEO of Seattle-based Cascadia Capital, a national investment banking firm that is financing a wide range of companies in a variety of key sectors.

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