1603 Babies: Another Year of Life

The so-called “lame duck” Congress has gotten itself into a productive fit over the last couple of weeks, and passed more important legislation than it had done all year long — much of it bipartisan.  In many ways nothing was more surprising than the action that preserved the “1603 Program” this morning.  Widely reported today, the 1603 Program (so-called because it was created as section 1603 of the American Recovery and Reinvestment Act of 2009 — or ARRA) will be extended by a year, allowing the clean and renewable energy industries to continue to be boosted by a 30% subsidy for qualifying projects.   Proponents of the program claim that it has been responsible for the creation of 100,000 jobs.  Here is a take on the news by Pete Danko of EarthTechling: http://www.earthtechling.com/2010/12/clean-energy-grants-get-another-year/.

Fellsmere FL large-scale Petroalgae R&D facility for algae-based fuels

The Treasury had doled out nearly half a billion dollars this year to solar projects alone: http://www.solarindustrymag.com/e107_plugins/content/content_lt.php?content.6920, and the support was very widespread, with 42 out of 50 states getting at least one grant.  Here is a brief summary from WilmerHale of the provisions of the program and related programs: http://www.wilmerhale.com/publications/whPubsDetail.aspx?publication=9682.

What does this mean for the renewables industry?  According to the American Wind Energy Association, the 1603 Program enabled the construction of 10,000 MW of new wind capacity in 2009, along with 10,000 construction jobs and 2,000 permanent jobs.  The solar industry grew by more than a third in 2009 and may grow by more than 50% in 2010 when the numbers are tallied: http://leadenergy.org/2010/12/the-importance-of-extending-the-1603-treasury-grant-program/.

What does that mean to investors?  Well, to begin with, many of the renewable-energy companies had seen their valuations whacked over the last several weeks as doubt mounted about whether 1603 would be extended.  So there may be some bounce-back profits to be made simply from that.  Look at the giants like First Solar (Nasdaq: FSLR; http://www.firstsolar.com/), whose shares have moved up nearly 10% over the last 2 weeks.  But since the trickle-down effect may not be either as fast or as efficient for the smaller companies and the supply chains, you may have more time to take a position.

Biomass

Biomass companies are definitely included in 1603 — and that includes companies that grow their own biomass (jatropha, algae) as well as companies that use decomposing waste to create fuels.  An article from Popular Mechanics talked about 5 of them: http://www.popularmechanics.com/science/energy/biofuel/4333722.  One of those is South San Francisco-based Solazyme (http://www.solazyme.com/company-profile), but the choice is not wide if you are looking for companies that trade on the stock markets.  The largest is Melbourne, FL-based Petroalgae Inc (EBB: PALG; http://www.petroalgae.com/), with a market cap of over $1.1 billion. 

Solar

 

Solar concentrator looking like a ferris wheel

There are as many solar companies as Arabian Nights in the story book, it seems, divided into those that make the gear (photovoltaic cells, thin film, solar concentrating devices, a myriad of different parts and pieces); those that install the gear, and those that generate electric power from the installations.  There seem to be many claimants for the title “Largest Solar Installation in the World,” but one of the most recent is due to be installed in the eastern Mojave desert near the California city of Blythe: http://www.renewable-energy-news.info/worlds-largest-solar-installation-blythe-ca/.  About 2 months earlier, First Solar announced its own “world’s biggest”: http://solarhbj.com/news/worlds-largest-solar-pv-power-plant-now-operating-in-ontario-canada-0989.  But the “dream team” solar project still has to be the electrification of the Sahara desert, even though it has no hope for 1603 funds: http://inhabitat.com/worlds-largest-solar-project-sahara-desert/. 

 

 

 

 

 

And pretty-made turbines all in a row (at sea)

Wind

Perhaps the most controversial renewable is one of the oldest: harnessing the wind.  When I was a kid I was taught that waterwheels and windmills were some of civilized man’s first non-combustible attempts to harness natural energy.  But as the applications have gotten bigger, the windmills and waterwheels have become gigantic — and some folks don’t like them one little bit.  The highest-profile new projects tend to be offshore these days, like the huge project planned for the area around Nantucket Island, described here: http://www.capewind.org/.  Wind farms are probably no larger than solar farms, but they stick up really high, and they create what some people see as visual pollution — “that big white thing with the rotating arms is ruining my view.”  Most of the big vendors are BIG, but there are a few smaller makers who might be good places to place a bet.  One is Irvine CA-based Composite Technology Corp (EBB: CPTC; http://www.compositetechcorp.com), founded in 1980, and with a market cap of about $66 million.  CPTC makes wind turbines for the electric utility industry, and so stands to be a fairly direct beneficiary of 1603.   Or there’s Hamburg-based REpower Systems AG (DAX: RPW; http://www.repower.de/), which just last week announced 51 additional MW for the US to be installed in PA, NY, OH and WA.  RPW is a much larger company, with a market cap in the range of 1.1 billion euros, and in the US there is an ADR, RPWSF.PK.

Hydro

Hydroelectric dam (best not to mention fish around them)

If there’s anything more picturesque than an old windmill (think Mykonos), it’s an old waterwheel, and if there’s anything more gargantuan than a big wind farm, it is the modern descendent of the waterwheel, a huge hydroelectric dam.  But if there is anything that is renewable it is mountain streams and the rivers they power, and from the time that Buffalo was electrified by Niagara Falls, the attempt to harness every fast-flowing river has been universal.  And when there are no fast-flowing rivers, we create artificial lakes to run the turbines.  Most big dams are owned or operated by utilities or groups of utilities, and many small dams are under the authority of the Army Corps of Engineers, with a popular estimate that there are 20,000 small dams in the US alone that do not yet generate any electric power. Thus the growing demand for what is called “small hydro” — miniturbines that can generate smaller amounts of electricity but that can also be installed with a minimum of environmental impact and capital expenditure: http://en.wikipedia.org/wiki/Small_hydro.  Earlier this year Russell Ray had a look at the regulatory and funding environment for small hydro: http://www.renewableenergyworld.com/rea/news/article/2010/04/regulating-small-hydro. 

It’s not easy to find a small hydro smallcap stock, because most of the hydroelectric stocks are big companies like Idacorp (NYSE: IDA) or AECOM Technology Corp (NYSE:ACM).  Smaller utilities in the northeast and northwest can be good places to look, and some very small nonpublic technology companies like Hydroring, a privately held Dutch company with an innovative “fish friendly” small turbine for riverine applications.  Very little data is available on Hydroring, based in The Hague, but there is a website at http://hydroring.nl/.

Storage: the 800-pound gorilla

One of the conundrums of renewables is that although they smile a lot, utilities frequently are not well-disposed toward renewables.  They present a lot of technological and cost problems.  They are frequently remote from the grid and very costly to build long lines to.  Talk to most utilities and you will quickly believe that the key to renewables is a way to store the energy generated until it is needed.  And that means batteries.  Some lithium-ion companies have major smart-grid initiatives underway, but they represent a super-expensive way to store wind-turbine energy.  Regular old lead-acid batteries are a heck of a lot cheaper, but they don’t charge up and charge down fast enough, and they wear out very quickly.  As with other areas of potential 1603 beneficiaries, there are a lot of energy storage companies, so you might look at NYC-based Ener1 Inc (Nasdaq: HEV; http://www.ener1.com/)  , which has a lot of Russian and Japanese lithium-ion technology know-how.  Another option would be Tyngsboro MA-based Beacon Power (Nasdaq: BCON; http://www.beaconpower.com/), which has a flywheel technology.  And the low-cost leader looks to be New Castle PA-based Axion Power International* (EBB: AXPW; http://www.axionpower.com), a company with a battery that is a relative of the lead-acid battery in your car, but turbocharged with nanocarbon to eliminate corrosion and increase the ability to charge/recharge.  It is worth saying that none of the 3 companies has been a mass manufacturer of their products to date, so all require due diligence with regard to their ability to scale up and serve the market.

*client of Allen & Caron, publisher of this blog.

Offshore Wind Energy Projects Generating a Buzz

Wind energy and its potential to power a large swath of the East Coast has generated a surge of news activity in recent weeks. First, in late September, conservation advocacy group Oceana released a study suggesting that offshore wind over the Atlantic Ocean could indeed power much of the East Coast and at the same time be much friendlier to the environment than other energy alternatives including natural gas, coal, oil or nuclear energy. The Oceana study (http://na.oceana.org/en/our-work/climate-energy/clean-energy/offshore-wind-report/report) came on the heels of a U.S. Department of Energy draft plan for creating a offshore wind energy program for the U.S.

Wind Turbines, photo courtesy of Western Wind Energy

Those studies were followed by a blockbuster New York Times piece on October 12 (http://www.nytimes.com/2010/10/12/science/earth/12wind.html?_r=1&scp=1&sq=matthew%20wald&st=cse) reporting that Google and two other companies, one a New York financial firm, have agreed to invest millions of dollars in a 350-mile underwater transmission “spine” cable along the Atlantic coast that would transfer the energy created by offshore wind turbines to what the Wall Street Journal estimated to be 1.9 million households along the East Coast from Virginia to New Jersey. Along with Google, the investment firm Good Energies and Marubeni, a Japanese trading company, have all agreed to invest in what is called the Atlantic Wind Connection.

As now envisioned, the five-phase project would begin in 2013, be completed in 2020 and be constructed 15 to 20 miles offshore, thereby eliminating much of the criticism of visual blight from the turbines that has plagued other high-profile wind turbine projects such as the country’s first offshore wind project called Cape Wind off Cape Cod.  The cable would have a 6,000 megawatt capacity, which The Times says is equal to the output of five large nuclear reactors.

Most experts agree that an offshore transmission line would spur the construction of various offshore wind farms since developers would not need to create their own individual transmission lines, according to the Journal story.

This has to be good news for the burgeoning smallcap companies involved in wind farms and turbines, but just who might capitalize is hard to say at this point. Here is a short list of some of those smallcaps:

Fergus Falls, MN-based Otter Tail Corporation (Nasdaq: OTTR, http://www.ottertail.com) is involved in wind energy transmission but is now focused soley on Minnesota and the Dakotas. The stock price ($21.27 this week) has rallied with the rest of the market since September but is still off its 52-week high of $52.39 set last January. Since wind energy is a small part of its business and its base is in the heartland, not the coast, this could be a stretch.

Vancouver-based Western Wind Energy (CDNX: WND.V, http://www.westernwindenergy.com) is also based far west of the Atlantic. It’s currently trading for about $1.20 but since it doesn’t trade on a U.S. exchange there is little news on progress. The last headline noted that the company had closed a $2 million corporate loan but otherwise there is not much to go on.

London-based Clipper Windpower (OTC: CRPWF.PK, http://www.clipperwind.com) is a pure wind energy play but is another small stock with very little trading. It seems to be sitting at about $0.78 with no recent activity. While it’s based overseas, it does have operations in the Americas.

Geothermal Companies Getting Hotter: Carbon-free is the New Black

Geothermal energy is like a crazy genie who is sometimes helpful and sometimes a weapon of mass destruction.  The natural escape valves of subterranean nature are volcanoes, geysers and bubbling hotsprings, not to mention the massive energy stored in tectonic plates butting into one another, which causes earthquakes.  As a source of useful energy, it has been slow to be harnessed in a big way other than by locals — Iceland, for instance, is powered almost entirely by renewable hydro and geothermal energy.  This article encapsulates the most common ways of using geothermal energy, and is descriptive of the Icelandic exemplar: http://www.energy.rochester.edu/is/reyk/works.htm.  Note the generation of hydrogen, a clean-burning fuel whose only emission is water. 

But in these days when renewable energy is approaching Holy Grail status (for good reason), geothermal companies merit a good look-see.  See this virtually evangelical message from the very persuasive Jigar Shah regarding carbon emissions: http://news.carbonwarroom.com/2010/10/04/creating-wealth-by-reducing-carbon/.  There is a useful survey of geothermal generating companies in this article by Tom Konrad in Seeking Alpha: http://seekingalpha.com/article/229522-8-geothermal-stocks-for-your-consideration.  As he points out, the clear leader as a pure-play geothermal company is Reno-based Ormat Technologies Inc (NYSE: ORA, http://www.ormat.com/), which, at $1.35 billion market cap, is a bit large for this blog — but worth looking at for its relatively complete picture of geothermal potential.

In the United States, federal government incentives can be a powerful impetus toward “clean” renewable energy (keeping in mind that almost every industrial process, no matter how “clean” generates some detritus that can present problems at some point).  As with most such incentives, the big bucks are frequently sucked up by big companies that in some ways don’t need them, but on the other hand may be more likely to create jobs, an unmitigated political good. 

One company to look at is Boise ID-based US Geothermal (NYSE Amex: HTM; http://www.usgeothermal.com/).  Like a lot of semi-development-stage companies, it is pretty short on revenue, long on cash consumption, with revenue of less than $1 million in its latest (June 30) quarter, and a cash balance that dropped from $13 million to $8.7 million in 90 days while the P&L only showed a loss of $1.5 million.  Its projects are all in the Idaho-Oregon-Nevada area, over the hotspots they need to produce their electricity.  Numerous analysts in Canada and the US cover HTM, a list of them being available on the HTM website.  HTM shares are at about half their 52-week high, selling for $0.84 vs the high of $1.74 on average volume of 200,000+ shares per day.  Market cap is about $66 million.

Provo UT-based Raser Technologies (NYSE: RZ; http://www.rasertech.com/)  is not a pure play in geothermal energy, but close enough.  It qualifies on price action as a “fallen angel,” having sold for as much as the mid-teens a couple of years ago (you could hear the champagne corks popping), but today it is a pennystock, trading at about two bits ($0.25) vs a 52-week high of $1.69.  The low price seems to indicate a skepticism on the part of investors about RZ’s ability to achieve power production goals, and a conservative position about what looks like fairly sizeable financing needs in the short and medium terms.  Revenue is moving up (looks like an annual rate of $4.5 million, mas o menos), but the losses are staggeringly large compared to current revenue size, and much of the “game” here is dependent on government grants — which, to give credit where credit is due, RZ has been good at so far.

There are other geothermal plays, several of them mentioned by Tom Konrad in his Seeking Alpha article referenced above: Magma Energy (OTC: MGMXF.PK); Nevada Geothermal Power (OTC: NGLPF); and Ram Power Corp (OTC: RAMPF.PK).

But no serious discussion of renewable energy makes total sense without a discussion of how to USE the energy that is produced.  The part of most renewables is that they are time-and-space-restricted, and geothermal is more so than most.  Geothermal energy can only be generated when there is access to the hot core of the earth, or to the hot water/steam that is generated by the heat of the core.  That’s a relatively uncommon situation: being able to tap into the earth’s molten core.  In most cases the geothermal fields are pretty far out in the middle of BFE, as this picture of US Geothermal’s San Emidio plant aptly demonstrates: 

The practical side of that is that in order to USE the energy that is generated, there are 3 options (and possibly only 3): (1) build power lines to the site, with the cap-ex and ongoing maintenance that implies; (2) convert the power into a power substitute, such as hydrogen, so that it can be transported to a place where it can be used; or (3) store the energy in a battery or by other means, such as a flywheel contraption or as compressed air (which could drive a turbine when released).

It seems sensible at this point in time to just eliminate expensive energy storage technologies, because even with stimulus money, nobody is in a mood to light cigars with $100 bills these days.  That means there are principally 2 or 3 small-cap companies to look at for energy storage.  There is a useful survey of such companies in this article by Swiss expatriate John Petersen, also from Seeking Alpha: http://seekingalpha.com/article/229197-battery-technologies-no-secret-sauce.

Of the companies mentioned by Petersen, there are two that are worth a deeper look: New Castle PA-based Axion Power* (OTC: AXPW; http://www.axionpower.com) and Tyngsboro MA-based Beacon Power (Nasdaq: BCON; http://www.beaconpower.com/).  The similarities and contrasts between the two are worth noting.  In the first  place, AXPW is a battery company with a singular technology that no one else can pursue (PbC batteries) and BCON is a flywheel company with lots of IP.  Their market caps are very similar (today BCON is $63 million and AXPW is $60 million).  Both are lightly traded.  Both companies are the only “pure plays” in their technology niches.  Both companies tend to be treated as footnotes to the lithium-ion industry, which has taken off like a striped-assed ape while AXPW works on a singularly thorny manufacturing issue and BCON labors for acceptance of an old-but-new physics approach to energy storage.  Both companies have had issues with federal support — in AXPW’s case the grant money was given to their partner, Exide Technologies instead of being split with AXPW.  In BCON’s case, the feds, having underwritten earlier BCON work, elected to back out for a second round (http://phx.corporate-ir.net/phoenix.zhtml?c=123367&p=irol-newsArticle&ID=1480786&highlight=). 

Nonetheless, both technologies are potential winners, though both look like dark horses at the moment.  Petersen has some sensible things to say about both companies, as well as numerous other energy storage companies. 

Nothing’s ever as easy as it looks.  You look at Old Faithful and you think, well, that would be relatively easy to harness and make it turn a turbine wheel.  But it just ain’t that simple.

*client of Allen & Caron, publisher of this blog

Lithium: Auto Industry Loves It, Feds Throw $$ At It

Last week  there were (at least) two articles that pointed out some important issues in the increasingly big business of electric vehicles.  Neither was front-page news. 

Sexy Tesla Roadster -- and you own part of it theoretically

One was the announcement that a small but widely heralded company, privately held, San Carlos CA-based Tesla Motors (http://www.teslamotors.com) , has gotten the signature of DOE’s Steve Chu and will harvest a bounty of $465 million in federal loans to throw its EV business plan into high gear: http://green.autoblog.com/2010/01/23/done-deal-tesla-doe-complete-loan-paperwork/.  As AutoBlogGreen’s Sebastian Blanco laconically points out, if you’re a citizen of the United States, “you’re officially an investor in Tesla Motors.”  Of course rumors of a Tesla IPO have floated around for quite a while, so you may be able to invest directly one of these days instead of funneling your cash through DOE.

Bolivia's lithium resources are vast -- and look like another world

And in the same week, a distinctly different type of news was purveyed by The Associated Press: Bolivia, which just re-elected Evo Morales as its leader, is unquestionably the Saudi Arabia of lithium, the prize mineral that Tesla and so many others are staking their futures on.  http://autos.aol.com/article/lithium-resource.  Out of the frying pan of oil and into the fire of scarce lithium deposits under dried-up lakes in the Andes?  Notice the sub-headline on the article: “Toyota secures lithium supply in Argentina.”  Argentina may not be a paragon of stability, but compared to Bolivia, it’s Gibraltar (remember that President Morales’s political party is called MAS: Movement for Socialism).  For a slide show of Bolivia’s lithium resources, go to http://www.nytimes.com/slideshow/2009/02/03/world/0203-LITHIUM_index.html (the photo above is from this slide show).

It was not long ago that Toyota’s ice-breaking Prius was a solo act, and most Americans thought of electric vehicles as glorified golf carts.  Now there is a dizzying array of EVs, HEVs, BEVs, PEVs, etc — and they  come with the brand names of virtually every carmaker in the world.   To some extent Prius is still the act to beat, though: http://www.dailytech.com/Honda+Goes+Back+to+the+Drawing+Board+to+Beat+Toyotas+Prius/article17501.htm

And if you think Tesla is pulling in a big fish, have a look at its archrival, Irvine CA-based Fisker Automotive, which secured $115 million in private equity funding this week, in order to allow it to harvest $528 million from DOE.  Basically that means the federal government is committing $1 billion to two very small companies with very pretty cars and very short track records.  And you, as a US citizen, are part of that bounty.

Sexy Fisker Coupe: Feds Have Put $1 billion into loans for Fisker & Tesla

In addition to your taxpayer-funded pending investment in Fisker, though, there is a way to put some Fisker equity into your portfolio, even though it is, like Tesla, privately held.   Irvine CA-based Quantum Fuel Technologies (Nasdaq: QTWW, http://www.qtww.com) owns a stake in Fisker that was said to be 21.9% in a financing document QTWW filed with the SEC about a year ago.  QTWW shares are trading at $0.89, down about half from its year-high of $1.77, and one assumes that the QTWW stake in Fisker has been further diluted in the meantime, because the Fisker financing mentioned in the previous paragraph was also released as QTWW news last week: http://finance.yahoo.com/news/Quantums-Affiliate-Fisker-prnews-2355193003.html?x=0&.v=1.  Smaller slice, but a much bigger pie.

But the distinctly uncomfortable feeling that comes with lithium’s presence in a series of US-unfriendly locations does not seem to be slowing anyone down.  The government of Taiwan makes it clear why this bandwagon continues to roll: according to their forecasts, sales of EVs will grow to 7.29 million units by 2018, of which 86% (or 6.26 million units) will be powered by lithium-ion batteries.  The line of thought leads directly to an increase in Taiwan’s support for Li-ion technology: http://www.greencarcongress.com/2010/01/moea-20100124.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+greencarcongress%2FTrBK+%28Green+Car+Congress%29.  What would a li-ion-powered EV sell for?  What if it were $30,000 per unit?  That would create a worldwide sales projection of  nearly $188 billion for that 2018 theoretical demand.  Hefty, hefty, hefty.

Please keep in mind that we do not recommend stocks; we simply write about companies that we find interesting.  Do your own diligence.

There are various flavors of lithium batteries, including the somewhat under-wraps “Ferrous battery” that China’s BYD introduced at the Detroit Auto Show.  From what we can tell, a Ferrous battery is a lithium iron phosphate battery, so President Morales can rest easy on that one.

There are many ways to invest in the EV movement, or in the lithium sweepstakes.  Most obviously there are the shares of the 3 leading lithium-ion battery makers in the US.  First to consider is Milwaukee-based Johnson Controls Inc (NYSE: JCI; http://www.johnsoncontrols.com/), but they are way too big for us to look at, and besides, they are very diversified.  In terms of pure plays in Li-ion, the two best-known (and bigtime federal funds recipients) are NYC-based Ener1 Inc (Nasdaq: HEV: http://www.ener1.com/), which has recently been screaming ahead, not only announcing car deals, but working with Japan’s ITOCHU on a series of futuristic li-ion applications involving buses and an advanced smart grid.  HEV shares are trading Monday at $4.76, vs a year-high of $7.90, so there are doubts out there in spite of the federal money fountain spewing dollars at them.  HEV has good volume of nearly 1 million shares per day, and a market cap that flirts with $600 million.

The second name that comes to mind is Watertown MA-based A123 Systems (Nasdaq: AONE; http://www.a123systems.com/), which started out making batteries for power tools and has graduated up and up to transport applications.  Since its IPO last year, the stock has always traded above its initial sale, and is trading today at $17.83, with a market cap of $1.8 billion and daily volume of about 2.5 million shares.  Smokin!

Less well known, but just as interesting is Reno-based Altair Nanotechnologies (Nasdaq: ALTI; http://www.altairnano.com/), which may well have more interesting IP than either of its larger peers, but, like the NY Jets, got knocked out of the SuperBowl, at least for this year.  Thomas Weisel initiated on Altairnano in December with an “overweight” rating, but the stock is sagging at half its year-high price of $1.55, trading today at $0.81, and in some danger of being delisted by Nasdaq as a result.   Market cap is about $85 million, and the shares trade pretty well at 400,000+ per day.  Worth a look.

If you want to place your bets outside of Bolivia, however, your options with regard to transportation are fairly limited.  You could start, however, by looking at a company that has, surprisingly, been marginalized among investors because its heritage is in old-fashioned lead-acid batteries.  That is New Castle PA-based Axion Power Inc* (OTCBB: AXPW; http://www.axionpower.com/.  AXPW owns patents on nanocarbon ultracapacitors used in lead-acid batteries in various ways, and is in partnership with one of the world’s largest batterymakers, Milton GA-based Exide Technologies (Nasdaq: XIDE; http://www.exide.com/).  There is good reason to believe that the AXPW-XIDE team may be a contender in the early hybrid-vehicle business, especially in European markets, where carbon-emission regulations come into play in a matter of months, as opposed to the US, where the timeline is longer (but the pair was named for a federal grant of about $35 million last year, and AXPW has received various other federal and state grants as well).  The name of the battery here is PbC, comprised of the chemical symbols for lead and carbon — and whatever the outcome, these batteries will be the low-cost choice for consumers and carmakers, costing a fraction of the more exotic lithium batteries.  AXPW is trading at $1.34 today, vs a year-high of $2.75, so it is off at a rate similar to many of its battery peers.  Market cap is about $80 million after taking into account its December financing, and the shares trade about 32,000 per day.  AXPW will be presenting at the Piper Jaffray conference the last week of February in NYC.

XIDE is trading at $8.30 on volume of 650,000 shares per day for a market cap of about $630 million.  Year-high on XIDE was $8.87.

Equally interesting in the non-lithium part of the world is San Diego-based Maxwell Technologies (Nasdaq: MXWL: http://www.maxwell.com/) .  MXWL delivered it 1-millionth largecell ultracapacitor this month (http://maxwell.investorroom.com/index.php?s=43&item=107), which gives it more operating muscle than most of its peers, and is on track to do about $100 million in revenue for 2009.  MXWL will also be presenting at the Piper Jaffray conference in NYC the week of Feb 22.  MXWL shares are trading at $16.63 at the moment, vs a 52-week high of $21.81.  Average daily volume is about 220,000 shares, and the market cap is $440 million. 

Clearly there are LOTS of players in this arena — we couldn’t possibly survey them completely.  If you use a news aggregator, you will be amazed at the quantity of news on lithium-ion batteries in particular, and on EV batteries in general. 

*Client of Allen & Caron, publisher of this blog

The LA Auto Show, Hybrids, and a Bit on Micro & Mild Hybrids

What makes this year different from all others at the LA Auto Show, which runs December 4-13?  Well, for starters, there are 49(!) hybrids and alternative-energy models being shown (http://www.laautoshow.com/AlternativeFuelVehicles.aspx).  The Auto Show’s website lists the following automakers as showing such vehicles: Audi, BMW, Cadillac, Chevrolet, Fisker, Ford, GMC, Honda, Lexus, Lincoln, Mercedes-Benz, Mercury, Mitsubishi, Porsche, Subaru, Toyota and Volkswagen.   For once US carmakers were getting a lot of the buzz; people are talking about the Ford Fiesta and the Chevy Volt of course.

Fisker Karma -- being shown at LA Auto Show

And then there is the keynote address, delivered by GM’s Bob Lutz, who said, in part, “At GM, we deeply believe that, in an energy-constrained world marked by dramatic growth in developing markets, it is critical that the global automotive industry – as a business necessity and as an obligation to society – develop alternative sources of propulsion based on diverse sources of energy. … Going forward, the automobile industry simply can no longer rely on oil to supply 98 percent of the world’s automotive energy requirements.” (quoted in AutoBlogGreen’s coverage by Sebastian Blanco: http://green.autoblog.com/2009/12/03/la-2009-bob-lutz-keynote-the-automobile-industry-simply-can-n/).

Bob Lutz -- Keynote Speaker at LA Auto Show

At the same time, GreenCarCongress reports that Pike Research has predicted 10-fold growth in lithium-ion batteries by 2015, up from $878 million to $8 billion annually in that period.  That is in spite of the novelty and relatively untried technology involved.  They quote John Gartner, the senior Pike analyst as saying: “Just as Li-ion batteries are relatively untested in real-world transportation applications, plug-in hybrid and all-electric vehicles are an unknown as a mass consumer offering. ” (http://www.greencarcongress.com/2009/12/pike-liion-20091203.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+greencarcongress%2FTrBK+%28Green+Car+Congress%29)

That constitutes quite a leap of faith, especially when at the same LA Auto Show, the “Green Car of the Year” (as named by a panel of experts and Green Car Journal) is not a hybrid but a diesel: the Audi A3 TDI.  According to Wired Autopia, “The A3 diesel is powered by a 2.0-liter direct-injection turbocharged engine that puts down 140 horsepower. It delivers 30 mpg in the city and 42 on the highway.”  (http://www.wired.com/autopia/2009/12/audi_a3_tdi_green_car_of_the_year/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+wired%2Findex+%28Wired%3A+Index+3+%28Top+Stories+2%29%29)

Green Car of the Year -- Audi A3 TDI

 At the same time, there may be a growing consensus, at least in Europe, that the bridge from oil-powered to electric vehicles (BEV, PEV, EV, whatever you call them) may well be what are called “micro” or “mild” hybrids, rather than what the public knows as Prius-type HEVs.  That would not sit well with the lithium-ion crowd, because it’s unlikely that micro and mild hybrids will be made using li-ion batteries, which do seem to be the current candidate for pure EVs, although as we reported recently, the Nissan Leaf, set for introduction in 2015, will use a more exotic battery with a new-fangled cathode: lithium nickel manganese cobalt oxide, referred to as a Nissan Super Battery.

In fact, most micro and mild hybrids today are using a variation of the traditional lead-acid battery, variously called a VRLA or AGM battery — much less expensive than a comparable NiMH or Li-ion version.  Interestingly the micro and mild hybrids can achieve pretty good improvements on mileage and on carbon emissions, which is the key to the technology.  The EU has carbon limits it will impose, backed by draconian fines on automakers, on 2012 fleets.  Those limits can be reached with full hybrids like those being shown in LA, or with EVs like the US-based privately held Fisker and Tesla vehicles, or the Norwegian Th!nk Electric mini-cars, and a variety of other fairly uncommon passenger vehicles.  The EVs have no carbon emissions at all, so they are a bull’s-eye for carmakers looking to comply with the 2012 bogey.  And, as we reported recently, there are several candidates for no-emission winners among commercial vehicles.

According to some estimates,  10-13 million vehicles will be outfitted as micro hybrids within a couple of years, affording improvements in carbon emission or mpg of up to 15%.  A micro hybrid assembly assists the gas-driven engine only (there is no electric drive train, and they never power the car solo), and some use the friction of regenerative braking to recharge themselves.  On the other hand, they are mostly a drop-in or clip-on technology that is relatively easy for a carmaker to implement.  Mild hybrids, which offer even more efficiency, may follow along behind, but are anticipated to be slower off the block than the micro assemblies.

The sticking point is the energy storage device.  Even “advanced” lead-acid batteries face classic problems: corrosion and sulfation on the poles, slow re-charging, and limited life expectancy.  All the newer, more exotic batteries face cost issues, and some may face safety issues as well.  What is needed is a battery that combines the cost and easy of manufacturing of lead-acid with the better performance characteristics of higher-priced batteries.  The difference may lie with a relatively cheap ultracapacitor: carbon.

Several companies have been developing lead-acid batteries with new, potentially game-changing technologies.  Peoria IL-based privately held Firefly Energy (http://www.fireflyenergy.com) offers its Microcell(TM) foam grid technology.  With a strong scientific background, the Firefly battery is being tested by the US Army and by a small number of others, but does not seem to be in mass production.  Lyon Station PA-based privately held East Penn Manufacturing (http://www.eastpenn-deka.com) , a major supplier of lead acid batteries) is working with Japanese developer Furukawa on an UltraBattery with an enhanced negative electrode that also seems not to be ready for prime time yet.  And New Castle PA-based Axion Power International* (OTCBB: AXPW; http://www.axionpower.com) has introduced its PbC battery technology, being commercialized in a supply agreement with global battery giant, Alpharetta GA-based Exide Technologies (Nasdaq: XIDE, http://www.exide.com/).  The PbC battery may be the closest to the finish line with a multi-patented nanocarbon electrode that maximizes performance and minimizes lead-acid downsides such as corrosion and sulfation, while preserving its price advantage and ease of manufacturing and recycling.   One of these may be the winner of the micro hybrid sweepstakes.

Meanwhile, the King of the Hybrids, Toyota, is showing the 2010 Prius at the LA Auto Show — this time with a Panasonic lithium-ion battery instead of the NiMH batteries of the first two generations of Prius (http://www.greencarcongress.com/2009/12/prius-phv-20091202.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+greencarcongress%2FTrBK+%28Green+Car+Congress%29).  Hyundai is showing the 2011 Sonata hybrid, with its own li-ion battery pack (http://www.greencarcongress.com/2009/12/hyundai-introduces-2011-sonata-at-la-auto-show-with-4cylinder-gdi-engine-gdi-turbo-and-hybrid-powert.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+greencarcongress%2FTrBK+%28Green+Car+Congress%29). 

At the LA Auto Show it is clearly the Year of the Hybrid, and it is clearly the year of the Asian-made li-ion battery, which must be a bit of a trial for the US-based li-ion giants: Johnson Controls/Saft, Ener1 Inc, and A123 Systems.  Go see all the hybrids, see the future of vehicle transportation — and have fun!

Please do your own diligence before buying stocks — we don’t make recommendations; we just write on interesting companies.

* client of Allen & Caron, publisher of this blog.

EVs Anyone? Yup, Where Can I Plug In?

The New York Times ran an article that I suspect few people read, because it was in the middle of section 1 opposite a bunch of desperate retail ads for SALES-SALES-SALES, but it points at the soft spot of the move toward electric vehicles (EVs): how to get them charged when you are not at home (http://www.nytimes.com/2009/12/02/business/energy-environment/02electric.html?_r=2&partner=rss&emc=rss).   Henrik Lund, a professor of energy planning at Aalborg University in Denmark, puts his finger on it: “There is a psychological barrier for consumers when their car is dependent on a battery station.” 

Better Place plug-in -- sleek and easy

In this article, Palo Alto CA-based, privately held Better Place is teaming up with the largest Danish electric utility to put charging stations up across Denmark, and they have $100 million to spend doing it.  Kudos, but it is grid electricity, and it tries the imagination to think of grid plug-ins every few miles on the huge US Interstate Highway system.  Works for Denmark though.

We have relatively few EVs on the road today, and one of the big reasons is just that: how do you get them re-charged?  That is not to say that the EV movement is not taking off — it clearly is, but it is taking off from a different runway, so to speak.  Just to be clear, yes we are aware of Tesla, Fisker, Th!nk Electric, and several other small companies with slick-looking EVs and HEVs, but they are not very common yet.

Ford Transit Connect EV will be shown at the Chicago Auto Show Feb 2010

If you look at the recent announcements from Ford Motor Company (NYSE: F) and Oak Park MI-based Azure Dynamics* (TSX: AZD and Pink Sheets: AZDDF.PK; http://www.azuredynamics.com/), one of the most high-profile EV announcements in recent months relates to delivery vans: the super-successful (in Europe) Ford Transit Connect: http://www.fordvehicles.com/transitconnect/.  Point being that this EV is designed for vans that have routes to drive, especially urban routes with lots of start-and-stop traffic — very little open-road driving, so the mileage to “empty” is not an issue.  There should be thousands of these puppies on the road when they show up in select Ford showrooms in 2010.

In fact, from a non-scientific scan of the market, it appears that most of the pure EV announcements (not all, but most) relate to commercial vehicles.  Look at Kansas City-based Smith Electric Vehicles, whose website says they have led the EV market for 80 years (http://www.smithelectricvehicles.com/) — all the vehicles they show are commercial vans and trucks.  Makes sense, of course, because they all go back to the same place every night and can plug in.  Smith announced at the end of October that they will introduce a postal delivery vehicle: perfect application.

The much-heralded but perhaps under-funded commercial vehicle from Anderson IN-based privately held Bright Automotive is also clearly aimed at a barn-stored commercial user who can bed down vehicles next to a plug every evening.  http://www.brightautomotive.com. 

Same with Torrance, CA-based Enova Systems* (NYSE Amex: ENA; http://www.enovasystems.com), which creates drivetrains for hybrids and pure EVs for some of the largest commercial-vehicle manufacturers in the world (Freightliner, Laidlaw, First Auto Works of China).  The funding — partly because of tax breaks and stimulus money — is in commercial vehicles.

But back to the NYT story.  In order for ME to turn in my one-horse-open-shay for an EV, I have to be able to drive on the open road without worrying about finding a plug for my car to recharge.  I’ve pushed cars that ran out of gas, and it’s no fun, but at least there are gas stations pretty much all over the place.  Without that infrastructure , there is some nail-chewing about driving an EV.

Apparently there are some jurisdictions that are trying to pioneer the infrastructure for EVs.  There has been a fair amount of attention paid to privately held Campbell CA-based Coulomb Technology (http://www.coulombtech.com/), which has been signing deals with a variety of municipalities, most recently Houston, according to their website.  They are conducting demonstrations with stand-alone charging stations, but most of the ones they are installing today seem to be grid-connected — which probably doesn’t cut it for my drive through the Catskills.  There was a demo of interest  in Washington DC this year, where Coulomb worked with San Diego-based privately held Envision Solar (http://envisionsolar.com/) and New Castle PA-based Axion Power International* (OTCBB: AXPW.OB; http://www.axionpower.com).  The product was a pretty slick-looking, no-emissions, solar-powered charging station with inexpensive longlasting PbC batteries to make it work when the sun don’t shine.  Sounds good, looks good, is good — but how many miles of highway would have to be served in order for the Clampetts to get from the Appalchians to Beverly Hills?

This morning there was an announcement that Nissan will introduce an EV with a 200-mile range — in 2015 (http://www.reghardware.co.uk/2009/12/02/nissan_super_battery/ ).  They will use a lithium nickel manganese cobalt oxide cathode (say that five times fast).  But something that’s 5 years out has little effect on people who are considering buying a car today.

Nissan Leaf, due in showrooms in 2015 or so

The big lithium-ion battery companies — Ener1 Inc, A123 Systems, and Johnson Controls/Saft — all seem interested in grid-connected battery applications.  That is, they are interested in storing electricity generated in nonpeak hours for peak distribution (very helpful, by the way, but no help for my car).  But I have not read anyplace of anyone wanting to install lithium-ion batteries in solar car-charging stations out in BFE; they’re too expensive, and they might get wet (which is a no-no for lots of exotic batteries).  Ener1 Inc is Nasdaq: HEV; http://www.ener1.com.  A123 Systems is Nasdaq: AONE; http://www.a123systems.com.  Johnson Controls is NYSE: JCI;  http://www.johnsoncontrols.com/. 

Axion Power’s supply agreement with Alpharetta GA-based Exide Technologies (Nasdaq: XIDE; http://www.exide.com/) looks like a candidate, with the carbon-based PbC technology, to provide an affordable, long-lasting battery for a charging station.  And the Advanced Lead Acid Battery Consortium has a lot of information on souped-up lead-acid batteries that work-better-last-longer, but still have the same killer problems of short life and low rechargeability that makes them dowdy wallflowers at the EV prom.

All told it may be up to the Coulombs, the Better Places, the Envision Solars, the Axion Powers, the Exides to come up with the ideas and demos for charging stations (and they have).  But like the Interstate Highway system itself, a good way to get EVs on the highways would be for the federal government to puts a priority on charging stations.  More stimulus, anyone?

Please do your own diligence before investing in any stock.  We do not recommend stocks — we just write about interesting companies and interesting developments.

*client of Allen & Caron, publisher of this blog.

Heavy Vehicles Trailblazing for EVs: 2nd in a Series

This morning, the widely read website, seekingalpha.com, published an article with an intriguing headline: “Electric Cars Could Dominate Market by 2030.”  The article is based on a study carried out at UC Berkeley, and the proviso is revealing: “provided that consumers don’t have to buy the high-priced batteries themselves and an infrastructure can be built to maintain and manage them.” (http://seekingalpha.com/article/152127-electric-cars-could-dominate-market-by-2030).  There it is: the key to our willingness or ability to switch to electric vehicles is the batteries that power them.  The study is worth looking at (there is a link in the article above), and it figures the cost of an infrastructure to handle batteries at $320+ billion, partially offset by a saving of $205 billion occasioned by reduced healthcare costs due to fewer harmful emissions.  The article also ventures a guess that emissions could be reduced by 62% from 2003 levels, and that 350,000 new jobs could be added to the economy. 

In the first article in this series, we had a brief look at the definitions of two types of hybrids: power-split hybrids and mild hybrids.  We believe that these hybrids will dominate the EV market for the midterm at least, and that the pure EV market will arrive in terms of meaningful numbers several years down the pike.

Before we discuss the battery market, we should note that heavy vehicle operators, makers and conversion specialists may well be leading the way in emission reductions.  Torrance CA-based Enova Systems (Amex: ENA, http://www.enovasystems.com/) is an example of the conversion specialist.  It has had a string of good news recently, including a news bulletin this morning on its work with Smith Electric Vehicles, with vehicles delivered to numerous illustrious (and big) companies like AT&T, Frito-Lay, Coca-Cola, Staples, and PG&E (http://finance.yahoo.com/news/Enova-Systems-Sees-Fleet-bw-2788026103.html?x=0&.v=1).  ENA shares languish, primarily it seems because the audience is small, and the stock is trading at $0.52 vs a 52-week high of $3.45, a market cap of under $11 million, and average volume of only 30,000 (though that is not double-counted).  ENA is reporting losses and probably is due for some dilution from new financings in the future, but its market seems to be growing by leaps and bounds, and the endorsements of big companies can do nothing but good for them.

At the same time, Mississauga ONT-based Azure Dynamics (TSX:  AZD, Pink Sheets:  AZDDF; http://www.azuredynamics.com/), also a pennystock is developing, building and selling hybrid trucks delivery vans for companies like FedEx, and passenger busses for municipal bus lines.  We have written about AZD in the past.

Azure Dynamics Hybrid Delivery Van

AZD shares trade fairly heavily on the TSX, with an average daily volume of nearly 1.5 million shares.  The US Pink Sheets version of the stock trades far less (70,000 shares), but that is the price we will quote because it is in USD: $0.19 vs a 52-week high of $0.27.  AZD is also reporting losses and consuming cash, but it is hard to imagine how a company gearing up to make fleet vans and trucks and city busses could do so without breaking a few eggs.  They announced a supply agreement with Johnson Controls earlier this year.

Another Canadian company,  Reno-based Altair Nanotechnologies (Nasdaq: ALTI, http://www.altairnano.com/) is concentrating in its transportation segment in batteries for heavy-duty vehicles and municipal busses, although we hasten to add that its primary identification is with the storage of energy from renewable sources, and if you go to their website, the first thing you will see is wind turbines.  Altairnano batteries for the transport market are lithium ion powered.  ALTI shares are trading at $1.03 at the moment, vs a 52-week high of $2.94, and the average volume is nearly 700,000 shares, so there is some liquidity.

We did an article on the subject of busses on June 8.  If you put “hybrid bus” into the search engine of this blog, you can get to that article.  There are illustrations of several, including one from privately held, Golden CO-based Proterra, (http://www.proterraonline.com/pdfs/Index-5_Page-1.pdf).

In the next article in this series, we will start to look at batteries, which, as the SeekingAlpha article that began this article says clearly, are the sine qua non of hybrids now and EVs later.

Hybrid Cars: You Can’t Tell the Players without a Scorecard. The first article in a series

AOL Auto ran an article this weekend on hybrid cars, by no means an uncommon subject in any medium these days.  Interestingly, their headline was “Insight Costs Less than Prius” (http://autos.aol.com/gallery/hybrids-under-30?icid=main|htmlws-main|dl6|link3|http%3A%2F%2Fautos.aol.com%2Fgallery%2Fhybrids-under-30 ).   With electric power in cars more common, it is worth looking at what that means — and what investors should be looking for if they find the electric and hybrid car markets interesting. 

For one thing, there are many different types of hybrid vehicles, and the differences are meaningful in HOW they are designed, HOW they save fuel, and HOW they are powered — even to what extent they are dual-powered. 

There are lots of overlapping definitions, but basically the most common range is from “power-split” hybrids to “mild” hybrids.   Although it may not be the snootiest resource, Wikipedia has a useful article on the types of hybrids (http://en.wikipedia.org/wiki/Hybrid_vehicle), and you will have to scroll down through heavy vehicles and other types of transport before you get to autos.   The point being that the two vehicles in the AOL headline are entirely different types of cars, and whether you are shopping for a car or shopping for stocks that might benefit, you need to know the differences.

Power-split hybrids. First of all, in terms of road cars (not golf carts or campus people movers), in today’s world almost all cars that are not strictly dependent on burning fuel (gas, diesel, CNG, ethanol — whatever) are hybrids, not “EVs.”  That means they are capable, in varying ways and degrees, of being powered by BOTH internal combustion engines AND electric-powered motors.  The most common variety of hybrid on the road today (Toyota Prius, Ford Escape, and Lexus Gs450 and LS600) is the “power-split hybrid,” cars in which a standard internal combustion engine is assisted and co-powered by 2 electric motors that can either take over at various times (like when coasting), or help supercharge the car (like during passing).  The gas engine and braking mechanism can help recharge the batteries that power the motors, and you can save gas as a result.  But power-split hybrids carry a lot of “extra” weight from having two complete powertrains, and replacement batteries for the electric motors can be dizzyingly expensive.  Nonetheless, they dominate the public consciousness about “EVs” or “hybrids” and many people assume that the other cars that are called “hybrids” are in some way similar.

Mild hybrids. Because the extra weight in a power-split hybrid cuts into the fuel saving, an alternative variety of hybrid seems, at least in the sort and mid-terms, to be more practical — and popular with car companies.  They are real fuel-savers and predicted by many marketing experts to be the most common such cars in Europe and the US very shortly. They are called “mild” hybrids, and they include 2 Hondas (Civic Hybrid and Insight), Mercedes-Benz S400 BlueHybrid, and BMW 7-series hybrids — so far.  Mild hybrids generally use one compact electric motor to assist the gas engine (which is generally downsized to save fuel), and can run the AC and other peripheral systems, while partially recharging on the fly.  These mild hybrids do not suffer from extra weight penalties, and they do not need the extraordinarily expensive battery packs that power-split hybrids need.  To a large extent they rival the power-split hybrids on fuel efficiency, but cost far less to purchase.

In either case, the batteries that power the electric motors that work alongside the internal combustion engines are a clear segment for the investor interested in the EV industry. 

What does that mean?  From an energy-storage point of view,  if you cast your investment vote for power-split hybrids, you can have your pick of energy storage companies (lithium-ion, NiMH, and a variety of exotic others).  The pioneer power-splits are running, for the most part, on NiMH batteries today — primarily because that’s the road that Toyota chose to take when they introduced the market-share-dominant Prius. 

But if you read the media, whether it is AOL, Green Car Congress, the Wall Street Journal or Earth2Tech, you have to be aware that there is a growing gaggle of lithium-ion battery companies who loudly proclaim that their batteries, not NiMH, are the batteries of the future EV or hybrid.  These include NYC-based Ener1 Inc (Nasdaq: HEV, http://www.ener1.com/), easily the most visible US li-ion car company, followed closely by the privately held (but not for long, apparently) Watertown MA-based A123 Systems (http://www.a123systems.com/company), and truly a bunch of others, like Boston Power, which recently announced that it too will get $100 million in federal stimulus money to build a li-ion plan in MA (http://www.zoomilife.com/2009/06/06/boston-power-gets-100m-in-federal-stimulus-to-build-li-ion-manufacturing-facility/).   The little-talked-about fact of li-ion batteries is that very few real cars are currently being powered by them.  How many people have actually seen a Tesla on the road?  A Fisker?  A Th!nk? Show of hands? I thought so.  Not many. 

And the further fact is that many of the world’s large car and components companies are forming alliances with none of the above or with non-US li-ion manufacturers for their future models of power-split hybrids:   http://seekingalpha.com/article/148248-lithium-ion-batteries-for-hybrid-vehicles or http://www.greencarcongress.com/2008/06/continental-tak.html or http://www.thedeal.com/corporatedealmaker/2009/07/quallion_uses_gov_stimulus_mon.php.

The further complication is that the power-split hybrid is by no means guaranteed to be the winner in the hybrid sweepstakes.  Remember the “mild” hybrid?  The Honda Insight? The next article in this series will have a closer look at that version of hybrid, which may well become standard-issue on many production cars from all over the world while power-split hybrids continue to be a small minority of cars sold.

Hybrid Buses May Be Pioneers When We Look Back in a Few Years

2004: The first GM hybrid delivered to Seattle, looking very much like a traditional bus (http://editorial.autos.msn.com/article.aspx?cp-documentid=435202)

The municipal authorities around the United States — bus systems and school systems most obviously — have been way out in front of the breaking wave of interest in greentech, emissions control, carbon footprints.  The general public is mostly still driving internal combustion-driven vehicles, in spite of the rising sales of hybrid electric vehicles like the market-dominant Toyota Prius.

By early 2008 GM was delivering its 100th GM-Allison hybrid, this one to Las Vegas, and Seattle ordered an additional 500 such buses in May 2007. http://www.autobloggreen.com/2008/01/09/las-vegas-to-the-get-the-1000th-gm-allison-hybrid-bus-this-month/.  In October 2007, New York City announced it would acquire 850 hybrid buses for $435 million.

Of course a lot has happened since the first GM-Allison bus was delivered in 2003.  Now Allison is owned by The Carlyle Group, having been sold by GM for $5.6 billion in the good old days when automobiles were still selling and car companies still looked like they had a chance of being viable.   And, of course, GM sucked up a lot of federal stimulus money and still declared bankruptcy, was dropped from the NYSE, and is now a Pink Sheets small-cap (Pink Sheets: GMGMQ,  http://www.gm.com/),  with a market cap of about $528 million as of the close of the market on Friday, and a stock price of $0.78.  A deal was announced to sell the Saturn division to Penske Automotive Group (NYSE:PAG, http://www.penskeautomotive.com/), itself arguably a small cap with a market cap of only $1.3 billion, and a closing stock price of $14.65 vs a 52-week high of $23.58.

But in the meantime, evolution has been a strong force in municipal buses and school buses, with some small players emerging as interesting companies to watch.

Proterra All-Electric Clean Bus in San Jose

The  all-electric clean bus by Golden, CO-based privately held Proterra (http://www.proterraonline.com/)  , with batteries probably from Reno-based Altair Nanotechnologies (Nasdaq: ALTI, http://www.altairnano.com/), presents one vision of the future, built entirely of composites to minimize weight, and streamlined beyond what the bus designers of yesteryear could have imagined.  ALTI shares are still somewhat down-and-out, closing Friday at $0.94 vs a 52-week high of $2.94, and a market cap a hair under $90 million, but average trading of 500,000 shares, which may make it easier to look at as a stock to be interested in.   Autobloggreen article on the Proterra bus: http://www.autobloggreen.com/2009/02/08/proterra-touring-california-with-fast-charging-electric-bus/.

Given Germany’s reputation as a leader in greentech, it is also worth noting that Puchheim, Germany-based Proton Motor Fuel Cell GmBH (http://www.proton-motor.de/ )  has teamed up with Czech partner, Pilsen-based Skoda Electric, and announced last month a bus on a standard chassis with no internal combustion engine at ALL — just a combination of fuel cells, batteries and ultracapacitors.  http://www.proton-motor.de/fileadmin/documents_pm/press_releases/20090508_TripleHybridBusPreview_EN.pdf

Proton-Skoda Pure Electric Fuel-Cell-battery-Ultracapacitor Bus

Torrance, CA-based Enova Systems (Amex: ENA, http://www.enovasystems.com/)  has teamed up with Navistar’s IC Corporation to build a plug-in hybrid diesel that is now operating at the top of the western hemisphere in Alaska’s Denali National Park.  The bus is claimed to use 70% less fuel than a conventional bus. http://gas2.org/2008/07/30/plug-in-hybrid-bus-at-denali-np-uses-up-to-70-less-fuel/

Enova-IC Corp bus for Denali Natl Park

ENA shares have been largely ignored by the market, closing Friday at $0.83, up $0.08 on a very light 24,000 shares.  The year-high was $4.70, and the market cap is a very low $17 million, but it may well be a diamond in the rough.   It is also the go-to company behind the Hybrid Electric School Bus Project, in which it is partnered with Raleigh, NC-based state-sponsored Advanced Energy, which says it has delivered school buses to Austin, Napa CA, and two school districts in NC. http://www.hybridschoolbus.com/.

We should also point out Oak Park, MI-based Azure Dynamics (TSE: AZD and Pink Sheets: AZDDF, http://www.azuredynamics.com/).  AZD announced this year a 5-year pack with Johnson Controls to supply advanced li-ion batteries for its commercial vehicles and buses, including the Altoona.  AZDDF closed Friday at $0.23 and has an average volume of 115,000 shares.  It was formerly listed on AIM, but is no longer.

Azure Dynamics' Altoona CitiBus

As always we have no recommendations on these companies, nor is this an attempt to equably survey the hybrid bus market, which is also being supplied by very large companies that are completely outside our area of interest.  We write about companies that we find newsworthy.

Batteries Now, Fuel Cells Later?

The news this morning: although we are enthusiastic about today’s battery–powered EVs, the fuel-cell-powered vehicle will be an important part of the mix in the future.  (http://www.greencarcongress.com/2009/04/h2fcv-20090423.html).  

Many in the media seem to accept that EVs will be powered by either the current dominant technology (the Nickel Metal Hydride or NiMH battery), or the myriad variety of Lithium-ion batteries that are being designed and flogged in Asia, Europe, and North America.  But not every early winner finishes a winner.  Ask the Mets or the Cubs about that.

The Lithium-ion industry is grabbing the largest share of battery or batterylike stimulus dollars.  The Watertown, MA-based privately held and venture-backed A123 Systems (http://www.a123systems.com/)  has applied for $1.84 billion in subsidies, and the New York-based but Indianapolis-centered company, Ener1 Inc (Nasdaq:HEV, http://www.ener1.com), has applied for $480 millon, and was recently advanced to the finalist stage by the feds.  That’s all well and good — if the li-ion battery is not a mirage shimmering on the automotive horizon. 

There are some issues with li-ion batteries, and they are no secret.  The most well-known issue is that some of them have exploded, taking transporting aircraft and people’s laps down with them.  EVERY li-ion battery maker says they have fixed that problem.  Nobody wants to drive a car whose powertrain might blow up, after all.  Also li-ion batteries can have problems starting in cold temperatures (which is why li-ion vehicles still have a lead-acid battery for starter purposes). 

But if you look around, there are other technologies that “coulda been a contender” (with apologies to Marlon Brando) — and may yet be.  Perhaps the most obvious is the lineal descendent of the battery in the car you drive now — the “good old” lead-acid battery.  But wait! 

There are several companies that are modernizing the lead-acid battery, many of them working within the auspices of the US-based Advanced Lead-Acid Battery Consortium (http://www.alabc.org/)  .  That would include the R&D-stage Firefly (http://www.fireflyenergy.com/),  and Axion Power* (EBB: AXPW, http://www.axionpower.com) , which recently snared a deal with one of the world’s largest battery companies, Alpharetta, GA-based Exide Technologies (Nasdaq: XIDE, http://www.exide.com).  Both companies use forms of the element carbon to revolutionize and improve the performance of batteries.  It’s hard to tell a lot about Firefly batteries because they haven’t been sold commercially, but Axion batteries, branded as PbC(r) batteries, are the heart and soul of the Exide distribution deal, and are also being used in demonstration projects by widely diverse groups including NYSERDA and an industry consortium designing and building solar-powered charging stations for electric vehicles.  Axion has also been the recipient of DOD and DOE research funds, as well as industry grants to test and develop their proprietary technology, which basically replaces half the lead in a battery with nanocarbon that is analagous to the substance that is in your Brita water filter.

There are other tortoise-like technologies bringing up the rear behind the hare-like li-ion companies.  Some are pretty exotic — steam-powered assists, or devices that pump up gasoline efficiency by adding platinum, or urea, or even hydrogen additives.

Then there are the fuel cells, as mentioned at the top of this article.  The biggest problem with fuel cells is that few of them actually work well enough to be manufactured in quantity.  One assumes that will change.  The second biggest problem with fuel cells is that they are NOT batteries; they actually generate “new” electricity on the spot, rather than regurgitating “old” electricity that they have stored.  Other than that distinction (and it is important), they BEHAVE a lot like batteries.

Toyota Fuel-cell vehicle (today)

For reality’s sake, there ARE fuel-cell vehicles operating today, just not in production quantities.  Read this from carlist.com: http://www.carlist.com/autonews/2004/toyota_fchv.html.   And in this picture you can see how the innards of a fuel-cell-car look (http://www.sfgate.com/cgi-bin/object/article?o=0&f=/c/a/2007/01/02/FUELCELL.TMP):

Mercedes Fuel-cell car cutaway

And lest we be accused of favoritism, there is this from GM and SAIC — both as American as apple pie: http://www.autobloggreen.com/2009/04/21/saic-to-use-gm-fuel-cell-propulsion-system-in-new-experimental-v

GM-SAIC Fuel-cell prototype

The problem to be surmounted is that only one company has ever managed to make portable (as opposed to the gigantic, truck-sized fuel cells that are called “stationary”) fuel cells in production quantities:  Medis Technologies (Nasdaq: MDTL, http://www.medistechnologies.com). Medis pumped out 250,000 of their hand-held fuel cells last fall, and now says it is in the process of upsizing the product and moving its production back to the US from Ireland, no doubt with stimulus funding on its agenda.  They also are eyeing military applications here and abroad (http://www.defencetalk.com/fuel-cell-power-technology-for-the-italian-military-17532/)

This article is already too long to go into the reasons WHY Medis fuel cells can be built in quantity and others can’t.  Suffice it to say here that they use a heretical technology employing sodium borohydride (http://en.wikipedia.org/wiki/Sodium_borohydride), where everyone else uses hydrogen, in most cases generated by breaking down natural gas.  The former works well; the latter is more orthodox and does not work well (and might explode — Remember the Hindenburg!).

As for stationary fuel cells, they seem to be chugging along.  FuelCell Energy Inc (Nasdaq: FCEL, http://www.fuelcellenergy.com) announced a new deal with the USAF: http://finance.yahoo.com/news/FuelCell-Energy-Power-Plant-pz-14856468.html.

*Allen & Caron client