December 6, 2020
My first contact with stored energy was watching people walking around with portable radios on the street in the early 80’s. At that time, I got battery operated toys. Either due to poor battery quality or my extreme enthusiasm playing with them, I was always surprised how fast the batteries ran out. While that is acceptable to me it is not for the electric grid. There is a strong political push for renewable energy sources. Some of these are becoming cheaper than carbon sources of energy. However, the wind and the sun do not always cooperate and it is common for energy demand to exceed what can be produced from renewables at times. To avoid blackouts the world has two options: one, produce and store excess energy from renewable sources to be deployed when the wind and the sun can’t cope with demand; two, rely on carbon emitting sources (like gas-fired plants) to fill the gaps that can’t be filled by renewable sources. Increasingly, the world is choosing to move from the second to the first option. That implies the development of energy storage infrastructure. Dams were the only available energy storage at scale for decades. That is not sufficient though. So the world is developing new technologies like batteries, thermal energy storage, liquid air and gravity storage. The expected growth for the next decade is substantial (see figure).
Sources: Wood Mackenzie; Financial Times
Consumers and society benefit from more energy storage capacity:
- Cheaper Energy: allows to store energy produced by cheaper sources to be deployed at times of peak demand, that today use higher cost marginal production facilities;
- Cleaner Energy: allows a higher proportion of dependency on clean renewable energies whose availability is intermittent;
- Resilient Energy: provides a buffer against disasters and production facility disruptions giving time to restore normal energy production before a costly blackout.
There are many opportunities in this space ranging from proprietary technologies to large infrastructure projects. Somar is following these and will take advantage of mispriced opportunities that arise. We look forward to updating our investors on the opportunities we act on.