Wed, 23 Feb 2011
SANYO Forecasts Tripling Of Lithium-ion Market To $44 Billion By 2015

Power Grid Storage And Plug-in/Hybrid Market To Account For $26 Billion Of Forecasted Market According To Deutsche Bank Lead Analyst

67 WALL STREET, New York - February 23, 2011 - The Wall Street Transcript has just published its Alternative Energy Report offering a timely review of the sector to serious investors and industry executives.

In the following brief excerpt from the Alternative Energy Report, expert analysts discuss the outlook for the sector and for investors.

Dan Galves is a member of Deutsche Bank's Global Auto/Auto Parts equity research team. He is the Lead Analyst on vehicle electrification, and an Associate Analyst on DB's U.S. autos coverage. He was recognized in the 2010 Institutional Investor survey as a "Best Up and Comer" for his work. Prior to joining Deutsche Bank, Mr. Galves was a Finance Manager at General Motors. Prior to that, he was Controller for Auto Brokers, a privately held automotive wholesaling company. Mr. Galves holds a master's degree in business administration from the University of South Carolina and a B.A. from the University of North Carolina.

TWST: Which area of the industry do you think has the greatest potential for long-term growth?

Mr. Galves: It's really about applications of the battery technology, and these batteries can be used in hybrid vehicles, plug-in hybrid vehicles, which are essentially a traditional hybrid. That is, the vehicle has a gas engine as well as an electric motor, but with a plug-in hybrid you can actually plug the vehicle into the grid and recharge the battery that way, as well as drive purely on electric power for tens of miles; whereas a traditional hybrid, you can't do that. It charges as you are driving, and pure electric propulsion is very limited. And then you also have pure electric vehicles. That's in the light vehicle sector. And then I think there is also going to be a lot of activity going on with commercial vehicles like buses or other good applications; for example, like a garbage truck. Something that goes fairly short distances, is idling quite a bit, so there are a lot of emissions per mileage driving. There is a lot of emissions in these commercial vehicles. So that's an application that electrification can be very positive for.

Those are kind of the automotive applications that we are looking at, but there is an entire other sector, which is referred to as grid storage or power storage that lithium-ion batteries can be used. They can be used to essentially flatten the supply/demand volatility within the electric grid. If you get a spike in electricity demand, you can have lithium-ion batteries connected to your power generation plant that injects electricity very quickly into the grid to help meet that demand. We are seeing a lot of activity in this application right now, which is called frequency regulation. In the long term, there is also the potential for lithium-ion batteries to be used for bulk energy storage. For example, one of the problems with wind energy is that it can't be stored. If the wind is blowing at night and there is not a lot of demand for electricity at night, you lose that energy. There is a potential for these batteries to store large amounts of this energy so it can be used later when there is more demand.

So I would say that investors are mostly focused on the automotive market and even within that, mostly in passenger car and light duty trucks. It's probably the easiest sector to estimate because you know how many vehicles are produced in the world and you can make an estimate for what the penetration of these different electric vehicles are going to be and come up with an estimate. With the grid and with commercial vehicles, it's more difficult. But I thought there were some really interesting comments by SANYO (6764.TYO) recently. They are the biggest lithium-ion producer right now, mostly for laptops and cell phones. The current lithium-ion battery market is about $13 billion per year, almost all in the consumer products. SANYO believes that will more than triple to $44 billion in 2015, and what's really interesting is the split. They think that the consumer electronics industry will continue to be about a $13 billion market for lithium-ion batteries. Vehicle applications will be another $13 billion, and that this power storage sector that I was just discussing is going to be $18 billion. So I think that's underappreciated by investors, that it's not just electric vehicles that can drive demand for lithium-ion batteries. It's also this power storage area, which a lot of battery experts think will be just as big as automotive.