Thesis: Companies should invest in R&D for household batteries, as inevitable improvements in renewable energy technologies are on the verge of creating a massive market for such products.
It’s somewhat difficult to be advocating for investments in renewable energy right now – oil prices have been in a pit for almost an entire year now, and with the natural gas industry booming, it seems as if alternative electricity sources are still a ways away from becoming economically viable. But the surplus of cheap energy is bound to end sooner or later, especially since much of it was caused by drillers oversupplying, which has since been corrected. Oil mogul T. Boone Pickens pointed this out in a Wall Street Journal interview, noting that the US had 1,400 natural gas rigs active seven years ago compared to only 250 today. In addition to the supply correction, there is a slingshot effect: the current weak market dissuades producers from taking on new projects as they continue to produce from existing fields, and once those reserves expire, prices will surge upwards. With the inevitable price recovery of fossil fuels, technology and industrial companies should be jumping at the opportunity to beat everyone else to market – the home battery market.
Solar energy technology for household application is rapidly becoming feasible. While fossil fuel-based grid electricity is still king, sitting at around 12¢ per kWh, solar panels in Los Angeles have produced electricity at 19¢ per kWh, reaching costs as low as 11¢ after subsidies (although that won’t matter, since once solar becomes cheaper, governments will no longer have a reason to subsidize). And solar prices have fallen 50% in the past five years, according to data from the Institute for Local Self-Reliance, a trend we can expect to continue (albeit at a slower pace). But the biggest problem facing solar electricity is one of consistency. The panels cannot produce at a sufficient rate all throughout the day, or some days even at all, which is why fossil fuels will continue to dominate the grid for years to come.
ILSR graph showing the convergence of solar and grid electricity prices
Current solar panel owners ‘store’ their electricity with net metering, which is when a utility company credits a homeowner for excess electricity that they feed back into the grid. But recently there has been a movement against net metering, since it essentially provides a subsidy for owners of solar panels and passes on the cost to other non-owners. Other critics have pointed out that those who benefit from net-metering don’t end up paying for grid maintenance despite using it. Because of these issues, many states are taking measures to limit the concept – and thus arises the need for household batteries. Such a product would allow owners of solar panels to minimize their energy expenditure: it would allow them to spend fewer hours feeding from the grid, and avoid peak prices (generally early evening, when solar panels aren’t producing much). One would imagine that with the high capital costs of producing batteries, there are significant economies of scale associated that would reward an early investor. As such, we may soon see a bevy of companies like GE, Samsung, and even Tesla fiercely competing in the household battery market.