The energy storage market is currently estimated at a measly $130 million. By 2019, it's expected to grow 11 times over to a $1.5 billion valuation. Energy stock investors are keen to buy while the getting's good, but not all energy stocks are created equal. Here's what you need to know.
To buy: NextEra Energy Inc
NextEra Energy Inc (NYSE:NEE) is our nation's leading renewables utility, which makes it a natural fit for energy storage. With more than 11,300 MW of wind power capacity and around 800 MW of solar capacity, this company has a keen interest in smoothing its power pull with storage devices. As NextEra's Executive Director of Development Vijay Singh puts it:
...[I]t makes sense for us to be involved in energy storage to optimize what is being generated from our portfolio. At NextEra Energy Resources, we are talking to customers about the value that energy storage can offer, whether in the area of renewable energy, grid reliability or peaking power...Traditionally, there have been peaking fossil power plants used for this purpose. But now, batteries can also accomplish this task efficiently .
While the map above shows NextEra's continental conquering of renewable energy, its most concentrated interest in energy storage may come from its newest acquisition: Hawaiian Electric Industries. NextEra announced the $4.3 billion acquisition in December 2014, and the two companies are collectively planning to triple Hawaii's solar power. That amount of solar power is unprecedented, and both the transmission and storage of that many megawatts present unique and exciting challenges for energy storage.
For energy storage investors looking for a safe and diversified entry into the entire energy storage supply chain, NextEra Energy offers the full package. From sun and wind to powering people's homes, NextEra will be a major supporter and user of energy storage in the years to come.
To hold: Tesla Motors Inc
Tesla Motors (NASDAQ:TSLA) is making a "big announcement" at the end of the month, but few investors believe it to be anything but the automaker's entry into energy storage. Founder and CEO Elon Musk recently revved up rumors with a couple well-worded tweets:
SolarCity just hit a new daily energy record of 5GWh two weeks after reaching 4GWh— Elon Musk (@elonmusk) March 31, 2015
With all that solar power being generated, it almost feels like something is needed to complete the picture ...— Elon Musk (@elonmusk) March 31, 2015
For Tesla Motors Inc, energy storage is about the process as much as the product. The company has made major inroads in both automotive and energy expansion due to its major investment in its battery "Gigafactory." To Tesla, this production facility represents unprecedented manufacturing scale at top-notch quality. By 2020, not only will the Gigafactory help churn out around 500,000 Tesla vehicles per year, but it will also produce around 35,000 MWh of battery power per year -- more than the total global production for 2013. That translates into estimated savings of more than 30% by 2017, when the Gigafactory is expected to begin cell production.
For energy storage investors, current estimates for Tesla Motors' bottom line run rampant. What is clear is that this represents a major diversification for the automaker and an upside expansion for those worried about Tesla Motors' ability to ever deliver on its $26 billion valuation. Knowledge is power, and deliberate energy storage investors should hold their horses until the actual announcement before making an investment decision.
To sell: General Electric Company
General Electric Company (NYSE:GE) is a tried and true industrial giant. Other corporations are currently piling on the energy storage trend, but General Electric has been in the game since 2009. With an initial $100 million investment, GE did what it does best: take its massive institutional knowledge and industrial infrastructure and apply it in new contexts. Its Durathon Battery technology was originally developed for locomotives, but it now serves as battery backups for cell towers and energy storage devices for wind and solar farms.
General Electric Company is not a sexy stock, however, and neither is its energy storage technology. Since cutting the ribbon on a $170 million production factory in 2011, GE has backed down from its previous estimates of $500 million in sales by 2016 and $1 billion by 2020. Instead, the company announced in January that it's reassigning around 400 factory workers, leaving just 50 to man the machines.
For General Electric Company, its energy storage business is back in research mode. With new players pushing the R&D boundaries, GE is dialing back production while it optimizes its product. That means GE is not the stock for energy storage investors who want a pure play, or even a play at all. General Electric stock lovers will have to wait another day to see if this company reenters the energy storage market.