Playbook #064: Batteries / Energy Storage
🖼️ The Big Picture
Harnessing energy has been the key to humanity’s rise, from the steam-powered locomotive to the combustion engine. Today, we’ve successfully combined large amounts of power with small devices like phones and laptops. But the next frontier is achieving safe, cost-effective energy storage on a large scale - to not only power devices or homes, but cities, and even trips to Mars.
This emerging high-growth sector could be considered high-risk for a casual investor with no knowledge. But it could also produce outsized gains for anyone with the right Investor DNA.
One thing is obvious — creating better and more efficient energy storage will be a critical focus of human innovation over the next decade.
Energy storage has evolved from humble beginnings with the first battery being invented way back in… and this is kind of hard to believe… 1799! Yep, with just 2 metals and an electrolyte, you can make a battery.
The key to innovation for R&D teams is improving those metals and electrolytes, and we’ve seen many variations over time before arriving at today’s lithium-ion battery, which was introduced in 1991, and it could be the master-formula for the next 10 - 20 years… though startups are playing with other promising metals like zinc.
As you can imagine, the importance of the battery industry has multiplied in recent years as a result of the electric vehicle and the growth of the solar industry. Now, with Tesla’s powerwall, homeowners can store solar energy so that when the grid goes down, your power stays on. Like a backup generator, except it’s charged by the sun and stores energy in advance of the need to use it.
To understand the future of energy storage — and the upside as an investor — you need to know how our current electric grid works.
When you flick the light switch in your house, that electricity is instantly produced and delivered.
It’s “just-in-time,” meaning that there’s zero inventory, and all energy is created and delivered on demand, with the biggest drivers being natural gas, nuclear energy, and coal.
In 2021, 20.1% of energy produced was from renewables like wind, hydro, solar, biomass, and geothermal. But only 12.2% of that energy was consumed. That’s because if you have a sunny day and the solar panels are pumping out energy, you could have more energy being produced than is required by the grid… and the excess energy is wasted because there’s no place to store it.
Why not? Well, it’s very difficult to design a battery system large enough and cost-effective enough to do it. Companies like Tesla, Neoen, and other startups are working on it, but they need a solution 10 - 20x cheaper than current lithium-ion batteries.
If we had batteries that could efficiently store energy and deploy it through the grid as needed, it would be a gamechanger worldwide, and that’s what innovators in this space are working towards.