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Daily Intelligence Briefing |
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Identifying Change-Driven Investment Themes - Five sections, explained here. |
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THEME ALERT: AN ACTIVE MRP THEME |
I. Today's Thematic Investment Idea A deep dive into a market driver with alpha generating potential. |
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Battery Storage Deployment is Booming, Boosting Demand for Lithium and Nickel |
Summary: Battery storage capacity surged through 2020, intensifying in Q4. Many believe increasing deployment will bleed into this year across residential, utility, and vehicle markets. That trend bodes well for producers of key battery metals like lithium and nickel.
Just this week, it was discovered that Tesla is installing utility-scale battery storage in Texas, a state recently whacked by unprecedented winter-storm induced power outtages. That project will compliment Enel's battery storage deployment elsewhere in the state.
Related ETF and Stocks: Amplify Lithium & Battery Technology ETF (BATT), Tesla, Inc. (TSLA), Enel Américas S.A. (ENIA), LG Chem, Ltd. (051910.KS), Albemarle Corporation (ALB) |
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In the aftermath of a massive winter storm that paralyzed energy infrastructure across the Southern United States, deadly and long-lasting power outages in Texas left many wondering what could be done to prevent it from happening again.
As MRP noted at the time, no source of energy was spared. Oil and gas capacity was literally frozen in, along with wind and solar generation. Therefore, the answer may lie in retail and utility-scale battery storage technologies.
As Bloomberg reported, a Tesla subsidiary registered as Gambit Energy Storage LLC is quietly building a more than 100 megawatt (MW) energy storage project in Angleton, Texas, a town roughly 40 miles south of Houston. A battery that size could power about 20,000 homes on a hot summer day when the grid is especially strained.
Tesla Energy, which is already partnered with PG&E to deploy 182.5MW of battery storage in California, could represent up to 30% of the company’s total revenue by the 2030s, up from roughly 6% today, according to analyst Alexander Potter of Piper Sandler. His research has highlighted the potential for Autobidder, a software platform Tesla designed for utilities.
While the Gambit project is a groundbreaking development for the future of Tesla and Texas’ power grid, it’s not the only battery storage project under construction in the state.
Enel Green Power North America has begun construction of a wind-plus-storage hybrid resources project known as the Azure Sky wind + storage project, pairing 350MW of wind power capacity with “approximately 137MW of battery storage” in Throckmorton County, Texas. As Energy Storage News reports, this will be Enel’s first-ever large-scale wind project combined with battery storage and third renewables-plus-storage hybrid in total. All three are being built in Texas.
For all of 2020’s pitfalls, it was a great year for battery installations. Per Wood Mackenzie, more batteries were powered up in the last three months of 2020 than in 2013 through 2019 combined.
“We had, in 2020, a total of about 3,500 megawatt-hours deployed this year as a whole,” WoodMac analyst Chloe Holden said. That’s about the amount of electricity that 329 American homes consume in a year. “In 2021, we expect to see that climb by almost four times.” After that huge spike, which is predicted based on previously announced projects, Wood Mackenzie estimates more gradual growth through 2025.
This year is equally as promising as the US battery energy storage market is set to grow from 1.2 gigawatts (GW) in 2020 to nearly 7.5GW in 2025, driven primarily by large-scale utility procurements.
The Energy Information Administration (EIA) expects the capacity of utility-scale battery storage to more than quadruple in 2021, with 4.3GW of battery power capacity additions slated to come online. The rapid growth of renewables, such as wind and solar, is a major driver in the expansion of battery capacity because battery storage systems are increasingly paired with renewables.
Investment in battery storage has been helped along by tumbling battery prices over the last few years. Last October, the EIA announced that the average cost of utility-scale battery storage in the US decreased by nearly 70% between 2015 and 2018.
“If you look at what’s going on in storage, in about 10 years, 2030, the battery industry will grow about 10 times bigger,” Yi Cui, the director of Stanford University’s Precourt Institute for Energy, has recently predicted. “That’s reaching somewhere about 2 terawatt-hours of the battery capacities,” he added.
Battery storage often works in tandem with green technologies to accelerate a shift to renewable energy. Some research shows that a large-scale buildout of batteries will be absolutely necessary to facilitate the transformation. A report by the University of California, Berkeley, exploring the shift to renewable power suggests the United States would need 150GW of storage to achieve a 90% clean energy grid by 2035.
Tesla and LG Chem currently dominate the US home battery market. Both use the lithium-nickel-manganese-cobalt-oxide (NMC) chemistry favored by the electric vehicle (EV) industry. Each of the companies also play a huge role in the growth of battery-powered EVs.
General Motors (GM) is currently working on plans to build a second battery factory in the US with LG Chem as joint-venture partner. The Wall Street Journal notes that the two companies are building a $2.3 billion battery plant in northeast Ohio that is expected to open next year and eventually supply enough batteries to power hundreds of thousands of vehicles annually. The new plant is likely to be a similar-size investment, some of the people said.
As we noted back in August, there are over 100 battery megafactories planned around the world.
According to Adamas Intelligence, Tesla and its world-renown “gigafactories” deployed more passenger EV battery capacity and battery materials, namely lithium, nickel and graphite, than its four closest competitors combined in 2020. That level of production was great news for LG, since Tesla’s made-in-China Model 3s include high-nickel NCM 811 cells from LG Chem.
Adamas’ report, cited by Mining.com, highlights the fact that nearly 20% of all passenger EV battery capacity deployed onto roads by LG Energy Solution – a spin-off of LG Chem – went into Made in China Tesla Model 3s last year. China currently dominates the market for producing electric-vehicle batteries, producing 79% of the world’s supply, according to BloombergNEF.
The country’s vehicle market, the largest in the world, is increasingly critical when it comes to electrification. EV sales are expected to rise by 40% from a year earlier to 1.8 million units, per the China Association of Automobile Manufacturers (CAAM).
On the last day of 2020, China’s Contemporary Amperex Technology Co. Ltd. (CATL) announced a 39 billion yuan ($5.9 billion) investment into three new battery factories in China.
According to S&P Global Platts' China Battery Metals Outlook for 2021, some 96% of respondents expected China's demand for lithium metals to rise further this year, with stimulus measures expected to boost demand for EVs. 91% and 78% of market participants canvassed thought China's battery grade lithium carbonate and hydroxide prices will be higher this year than last. About 56% believed there will be a big recovery in the battery metals sector this year.
While the lithium supply is always the top focus for battery producers, Tesla is becoming increasingly concerned with nickel. Just last week, the company agreed to partner with a nickel mine in New Caledonia in an effort to secure more of the resource. Not long before inking that deal, Elon Musk, the CEO of Tesla, tweeted "Nickel is our biggest concern for scaling lithium-ion cell production”.
Benchmark nickel prices were trading at a six-year high as recently as last week on expectations surging demand from the electric-vehicle sector would spur a shortage.
Lithium faces similar worries, as MRP noted last month. Per Albemarle Corp, global supplies of lithium used to make most batteries may fall short of projections for demand to more than triple by 2025 if prices do not rebound to fund expansions. We have been sounding the alarm on a potential supply crunch in the lithium market since 2018. |
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THEME ALERT |
In that same vein, MRP launched our LONG Battery Metals theme on August 14, 2020. To track the performance of this theme, we have utilized the Amplify Advanced Battery Metals and Materials ETF (BATT).
BATT provides exposure to Lithium, as well as the other metals critical for battery storage capacity – particularly Cobalt, Nickel, Manganese and Graphite – via publicly-traded stocks. Companies in the portfolio are principally engaged in the business of mining, exploration, production, development, processing or recycling of advanced battery metals and materials.
Since the launch of the theme, BATT has returned 42%, more than tripling an S&P 500 gain of 13% over the same period. |
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Source material for today's market insight... |
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Batteries Utilities Propose $400M Solar-Battery Park In Kenosha County
Wisconsin's largest utility company, WEC Energy Group, is partnering with Madison Gas and Electric on a $400 million solar and battery storage project in Kenosha County. If approved, the project would be the first and largest battery storage project among the state's largest utilities.
The Paris Solar-Battery Park would produce 200 megawatts of solar energy, which is enough to power 60,000 homes. It would also include 110 megawatts of battery storage that would save solar power for use when the sun isn't shining, according to Brendan Conway, spokesperson for WEC Energy Group.
Read the full article from Wisconsin Public Radio + |
Batteries Global EV sales pushed battery metals deployment in H2 2020 – report
In the second half of 2020, global passenger EV registrations grew by 58% year-on-year, a new biannual report by Adamas Intelligence reveals. According to the market analyst, H2-2020 saw 3.53 million units sold versus 2.24 million units in H2-2019.
Global battery capacity deployed in all newly sold passenger EVs combined amounted to 92.5 GWh, 93% more than was deployed in H2-2019.
Read the full article from Mining.com + |
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II. Updates of Themes on MRP's Radar Follow-up analysis of key market drivers monitored by MRP. |
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US Banks LONG: Can banks win in the booming buy-now-pay-later space? |
Digital Payments LONG: What Biden's $2 Trillion Stimulus Package Means for Bitcoin |
Satellites: SpaceX wants to connect its Starlink satellite internet network to moving vehicles |
Renewables: Renewables = 20.6% Of US Electricity In 2020 |
Gene Editing LONG: New clinical trial data from Locus Biosciences shows promise in CRISPR-Cas3 technology |
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IV. Active Thematic Ideas MRP's active long and short themes, with an archive of follow-up reports. |
See Them Here → |
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V. Macroeconomic Indicators Key data releases relevant to MRP's Active Thematic Ideas. |
See Them Here → |
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Select a theme to see when and why we added it. Also included is a link to all recent Market Insight reports we've written about that theme, allowing you to track its progress. |
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US Wholesale Inventories Continue To Rise
Wholesale inventories in the US increased 1.3 percent month-over-month in January of 2021, in line with preliminary figures, and following an upwardly revised 0.6 percent gain in December.
Click here to access the data + |
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Germany Industrial Production Sees Dramatic Decline
Industrial production in Germany sank 2.5 percent month-over-month in January of 2021, compared to forecasts of a 0.2 percent gain.
Click here to access the data + |
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Mexico Consumer Confidence Remains At Highest Level Since March 2020
Consumer confidence in Mexico came in at 38.4 in February of 2021, the same as in the previous month.
Click here to access the data + |
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Switzerland Unemployment Rate Inches Down From January High
The Swiss unemployment rate inched down to a non-seasonally adjusted 3.6 percent in February 2021 from 3.7 percent in the previous month.
Click here to access the data + |
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Japan GDP Falls After Seeing Immense Q3 Growth
GDP Growth Annualized in Japan decreased to 11.70 percent in the fourth quarter of 2020 from 22.70 percent in the third quarter of 2020.
Click here to access the data + |
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MARKET INSIGHT UPDATES: SUMMARIES |
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US Banks Can banks win in the booming buy-now-pay-later space?
Buy-now-pay-later fintechs facilitated $20 billion to $25 billion in transactions in the U.S. last year, according to management consultants Oliver Wyman.
That number is only expected to grow. Consumers will spend an estimated $680 billion globally using point-of-sale installment payments over e-commerce channels by 2025, fintech research firm Kaleido Intelligence found.
U.S. incumbent banks should take note of what the growth of the space says about the next generation of consumers, said John Grund, a managing director in Accenture's payments group.
Read the full article from BankingDive + |
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Digital Payments What Biden's $2 Trillion Stimulus Package Means for Bitcoin
“We believe there is a good chance that at least some of this money will find its way to the flagship cryptocurrency—or perhaps even other altcoins,” said Jason Deane, Bitcoin analyst at Quantum Economics.
One of the major reasons for this line of thinking is Bitcoin's appeal as a hedge against inflation. The decline in value of the US Dollar has been good for Bitcoin's investment case as digital gold, an asset that can't be devalued by a government stepping in to print more of it.
In just the two days since the stimulus package passed, Chinese app maker Meitu and Norwegian multinational Aker ASA have added Bitcoin to their balance sheets, joining US firms such as MicroStrategy and Square.
Read the full article from Decrypt + |
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Internet Technology SpaceX wants to connect its Starlink satellite internet network to moving vehicles
Starlink is designed to deliver high-speed internet to consumers anywhere on the planet. To date SpaceX has launched more than 1,100 satellites for Starlink. In a late January update, SpaceX told the FCC that its Starlink beta now has more than 10,000 users.
The company highlighted the need for “connectivity while on the move” as driving its expansion to mobile internet services. The increasing demand for data from the automotive sector is one area that Morgan Stanley analyst Adam Jonas has highlighted as a target market for Starlink.
Read the full article from CNBC + |
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Renewables Renewables = 20.6% Of US Electricity In 2020
Renewable energy accounted for 20.6% of US electricity generation last year. That was led by wind power, which accounted for 8.3% of US electricity generation, followed by hydropower at 7.2% and solar power at 3.3%.
In 2018, 17.5% of electricity generation came from renewables — 6.5% from wind power, 6.9% from hydropower, and 2.2% from solar power.
The biggest loser from 2018 to 2020 in the electricity sector was coal, which dropped from 27.3% of US electricity to 19.1%. Natural gas saw its share rise from 34.9% to 39.9% and nuclear saw its share rise slightly from 19.2% to 19.5%.
Read the full article from CleanTechnica + |
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Biotechnology & Healthcare |
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Gene Editing New clinical trial data from Locus Biosciences shows promise in CRISPR-Cas3 technology
The startup recently announced promising phase 1b clinical trial results for their use of CRISPR-Cas3-enhanced bacteriophages as a treatment for urinary tract infections caused by escherichia coli. Locus Biosciences launched in 2015 with the goal of using a less popular application of CRISPR technology to address growing antimicrobial resistance.
While this new technology could certainly help treat pathogens and infectious diseases, Locus CEO Paul Garofolo hopes that indications in immunology, oncology and neurology might benefit from it too.
Read the full article from TechCrunch + |
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ABOUT THE DIBS AND MCALINDEN RESEARCH PARTNERS
McAlinden Research Partners (MRP) publishes daily and other periodic reports on the economy and the markets.
MRP focuses on identifying change in the global economy and offering an investment thesis whenever an opportunity arises that has not yet been recognized by the market. The DIBs are MRP's compilation of articles and data from multiple sources on subjects reflecting change that have potential investment implications for an industry or group of securities. We share these with our clients who may already have or may be considering exposure in the industries affected. The subjects change daily and constitute an excellent update on featured topics. |
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The information provided in this Report is not to be reproduced or distributed to any other persons. This report has been prepared solely for informational purposes and is not an offer to buy/sell/endorse or a solicitation of an offer to buy/sell/endorse Interests or any other security or instrument or to participate in any trading or investment strategy. No representation or warranty (express or implied) is made or can be given with respect to the sequence, accuracy, completeness, or timeliness of the information in this Report. Unless otherwise noted, all information is sourced from public data.
McAlinden Research Partners is a division of Catalpa Capital Advisors, LLC (CCA), a Registered Investment Advisor. References to specific securities, asset classes and financial markets discussed herein are for illustrative purposes only and should not be interpreted as recommendations to purchase or sell such securities. CCA, MRP, employees and direct affiliates of the firm may or may not own any of the securities mentioned in the report at the time of publication. |
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