The Hidden Key to Alternative Energy Success

If you're hoping renewable energy takes a bigger presence in our future energy picture, you may want to pay attention to two unlikely sources for help: batteries and inverters. One of the major drawbacks of solar and wind energy sources is the pesky peaks and valleys of energy they provide. If we could smooth out those peaks and valleys, wind may be a great base load source and solar may be a great peak load source.

As inverters get more specialized for renewables and battery technology improves, we may be seeing a shift in how we look at wind and solar.

The theory for solar in particular goes something like this: Solar power isn't yet competitive as a base load power, but when we compare it with natural-gas-powered peaking plants, it is not only competitive but oftentimes cheaper. But for a utility to rely on solar, the electricity panels needs to be controlled with more precision than they are today.

That's where inverters come in. Inverters are the devices between solar panels and the grid changing the electricity from direct current (DC) power to alternating current (AC) that we can use in our outlets. It is at this point where power regulation would make the most sense for controlling the grid. If the inverter could give some energy storage capacity, we could use solar as a peak power source and avoid gas peaker plants, which are plants used when energy is in high demand.

Taking steps in advanced inverters
Satcon Technology
(Nasdaq: SATC  ) is already working on this with inverters that provide a few minutes of battery storage. If grid storage solutions from battery makers such as A123 Systems (Nasdaq: AONE  ) and Ener1 (Nasdaq: HEV  ) prove to be successful, that could easily be expanded.

American Superconductor (Nasdaq: AMSC  ) is another player to watch with its SolarTie grid interconnection solution built solely for solar plants. The company is a big player in wind as well, and advancing technology for both wind and solar is a top priority for the company.

But the cost is outrageous, isn't it?
Carlos Coe, CEO of power management solutions provider Xtreme Power, thinks this storage could add just $0.005 to $0.02 per kilowatt-hour to the cost of power. That is relatively cheap compared to the gas peaker plants that we should be comparing solar power to. The California Energy Commission says the levelized cost of generation from a simple cycle gas-fired peaker plant is $0.49/kwh. Another slightly dated but very impressive analysis by Lazard gives an estimated levelized cost of energy for gas peakers between $0.23 and $0.34 per kilowatt-hour. Since solar provides power during peak times of the day, it is these costs we should really be comparing solar to, and the comparison becomes pretty favorable. Solar power is now below $0.20/kwh without incentives, so if we add a few cents for power storage, it still compares favorably to gas peakers.

As power plants being built by First Solar (Nasdaq: FSLR  ) and SunPower (Nasdaq: SPWRA  ) and generators like NRG Energy (NYSE: NRG  ) get bigger and more cost-efficient these are solutions we need to develop. First Solar and SunPower have multiple gigawatts of projects in the pipeline, and as they come online the impact on the grid will be more prevalent.

We may be just starting to see innovative solutions coming in the inverter and battery market. As demand for these products increase, I expect to see even more. Satcon and American Superconductor look to be two companies taking steps in the right direction. Now if grid solutions from A123 Systems and Ener1 prove to be successful, we could have a match made in heaven.

Interested in reading more about Satcon Technology? Click here to add it to My Watchlist, and My Watchlist will find all of our Foolish analysis on this stock.

Fool contributor Travis Hoium owns shares of First Solar, SunPower, and American Superconductor. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings or follow his CAPS picks at TMFFlushDraw.

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Read/Post Comments (6) | Recommend This Article (14)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On January 28, 2011, at 8:57 PM, tem01 wrote:

    The only way any of these are profitable is by the guvmint subsidizing them to the level of 50% or better of their expenses. If it were a level playing field neither would be competitive for another 2 decades or more.

  • Report this Comment On January 29, 2011, at 12:51 AM, ET69 wrote:

    Nonsense!

    It is big oil that is subsidized in this country. That is why our gas is about $3 dollars a gallon and most other countries it is $5-6 dollars a gallon. That is not even including the horrible costs they impose on the environment and our health.

  • Report this Comment On January 31, 2011, at 12:10 AM, TMFFlushDraw wrote:

    @tem01

    Actually @ET69 is right. Fossil fuels get a lot more subsidies than anyone would like to admit and if subsidies for ALL energy sources were eliminated alternatives would look even better. (not to mention health and national security)

    As for your "neither would be competitive for another 2 decades" thought... Many solar manufacturers are predicting grid parity in 2012 with subsidies, and in 2014 without subsidies. The days of wind and solar being non-cost competitive are over.

    Travis Hoium

  • Report this Comment On January 31, 2011, at 1:39 AM, NOTvuffett wrote:

    This is total crap.

    I find it comical how people try to come up with all these elaborate ideas on how to store power from excess energy produced from alternative energy sources. Last time I checked, it was the alternative energy that needed to be supplemented.

    Don't get me wrong, I like alternative power where it works. And I am all for funding research to make it better, but solar is not very close to being economical.

    I am so, so, tired of the mantra that oil is heavily subsidized. Gasoline isn't 'inexpensive' in the USA as compared to Europe because it is subsidized, it is because they tax the crap out of it.

  • Report this Comment On February 17, 2011, at 10:47 AM, solarecoyote wrote:

    ARE YOU SERIOUS OR ARE YOU SKEPTICAL? GO TO YOUTUBE VIDEO solarenergyy

  • Report this Comment On February 17, 2011, at 10:49 AM, solarecoyote wrote:

    ARE YOU SERIOUS OR ARE YOU SKEPTICAL? GO TO YOUTUBE VIDEO solarenergyy THEN TAKE THE SOLAR DARE!!!!

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