Leading the charge: five companies driving battery innovation for a Net Zero future
The UK's newly updated Critical Mining Strategy calls for a significantly increased domestic supply of lithium, cobalt, and graphite among other critical metals. There is a clear reason for that - very soon Britain, along with the rest of the world, is going to need a lot more Li-Ion batteries.
Those batteries will be needed to power the electric cars that will be the only type of passenger vehicle sold in the UK after 2030, alongside utility-scale batteries to store energy from renewable sources that will be needed to fully transition to sustainable generation.
That's as well as home batteries to protect from blackouts and store energy from ever cheaper solar panels, and batteries to power the ever increasing number of personal and IOT smart devices in our homes. Batteries are going to play a crucial role in our energy future, just as oil and gas did in the 20th century.
By extension, battery innovation and economies of scale will have a direct correlation to energy prices and the affordability of battery-dependent technologies within a positive feedback loop, roughly equivalent to unlocking ever cheaper methods of oil extraction in the previous century.
We are already seeing the effects of this as the price of Li-Ion batteries has dropped tenfold since 2010, enabling the exponential growth of EVs in developed countries.
In short, we can expect batteries and related development/production chains will collectively comprise the "oil" of the future. From a geopolitical perspective, countries that make the investments in critical metals' extraction, and develop the manufacturing and supply chains to turn it into batteries, will have an advantage similar to that of oil-rich nations of today.
Investors have known this for a while of course, evident in the meteoric rise of certain stocks associated with batteries, most notably Tesla. But there are many others less known players in the space that are very well positioned to benefit from the battery revolution.
We bring your attention to 5 small and mid-cap companies worth following for those interested in the battery sector:
Gelion
() is an Australia-based renewable energy storage company supporting the transition to net zero through its stationary and mobile energy storage solutions. With its first-of-a-kind zinc-bromide battery, Gelion aims to stabilise the grid and support industry and domestic power consumption. Alongside this, the company's Lithium Sulfur and Lithium Silicon Sulfur technologies will support mobile battery applications, particularly crucial as the EV market rapidly expands.
Gelion’s zinc-bromide batteries for stationary storage offer significant advantages that have the potential to shift the market by outcompeting Li-Ion technology. These include long cycle life, low production costs, and deep-discharge capability. The batteries can also survive in harsh climates as their chemistry allows operation in high-temperature environments without a need for cooling or risk of exploding.
For mobile storage, Gelion is working on increasing the safety, longevity, and energy storage capacity of lithium-based batteries for mobile use by developing technologies for sulfur cathodes, electrolytes, and additives. As the EV market continues to expand, there will be a growing need to prioritise energy density, longevity, and safety in battery technology, with Gelion well-positioned to meet this demand.
Currently, Gelion is accelerating the development of its mobile storage batteries, supported by a recent IP acquisition from Johnson Matthey. Alongside, the company is making strides with its zinc-bromide cells, having manufactured approximately 1,200 to date.
On the financial front, the company remains well-funded with cash of £14.4m and a debt-free balance sheet. The company is on target to deliver FY23 results in line with expectations.
Overall, Gelion is poised to transform the energy storage industry, offering cheap, safe and durable alternatives to traditional battery technologies.
Invinity Energy Systems
() is a UK-based manufacturer of vanadium flow batteries for energy storage. Unlike traditional lithium-ion batteries, Invinity's batteries offer longer cycle life, greater reliability, and the ability to fully discharge without incurring damage.
The company’s vanadium batteries are safer, more sustainable, and hold potential for a wide range of applications. In the UK, Invinity's batteries have been used for the Energy Superhub Oxford project, launched in July 2022, to decarbonise Oxford’s power, transport, and heat networks. The project has been lauded as a world first, and a recognised blueprint for other cities to follow as part of their transition to Net Zero.
Across the globe, Invinity’s batteries have been paired with solar arrays to create Australia’s first "dispatchable" solar power plant. Located in rural Australia, the Yadlamalka Energy Project was deployed to provide 10 GWh of solar power a year.
Thanks to strategic partnerships with major corporations and utilities in the UK and internationally, Invinity remains a key player in the energy storage industry. With a £708k grant from the UK government to further develop its technology, Invinity is well-positioned for growth.
Overall, Invinity's vanadium flow batteries offer a promising solution to the growing demand for sustainable energy, and are likely to play an important role in powering the shift toward a net zero future.
Vulcan Industries
(), which seeks to consolidate engineering, manufacturing, and industrial SMEs, recently acquired Forepower Lincoln, a 240 MW lithium-ion battery storage project for an initial consideration of £2.6m.
Forepower Lincoln holds a grid connection contract in the UK with an option to lease a parcel of land for a minimum of 25 years. Following the disposal of its legacy businesses, Vulcan has been working to extend its portfolio of fabrication activities into the renewable energy sector.
Ian Tordoff, Executive Chairman, commented: "We are delighted to be working with the FPL (250) team to develop initially this exciting project and subsequently the pipeline of projects that we have identified. Battery Storage is an important part of the drive for increased renewable energy in the UK and provides significant opportunities for growth in future."
Vulcan recently reported revenues of £938k in its financial results for the three quarters to 31 December 2022, up from nil the year before. The company's pretax loss on continuing activities narrowed to £683k from £1m the year before. As a result of disposals, Vulcan generated a profit of £1.7m on discontinued activities, compared to a loss of £731k the previous year.
Vulcan's new direction positions it well for continued growth in the renewable energy and battery sectors, and we expect to hear about more relevant acquisitions in the coming quarters.
Gore Street Energy Storage Fund
() is London's first listed energy storage fund. The fund invests in a diversified portfolio of utility-scale energy storage projects in Europe and the US, targeting an attractive dividend over the long term. On 9 March 2023, Gore Street Energy announced an interim dividend of 2p/share (currently trading at 100.4p) after its NAV was updated to an estimated 113.5p/share, up 2.16% half-on-half.
Previously, Gore Street Energy had reported a 45% increase in NAV from March to September 2022. During the same period, the fund raised £150m and reported a pipeline of opportunities totalling 1.5 GW. As of January 2023, the fund's portfolio included 26 projects with a total capacity of 973.2MW.
Some notable recent portfolio additions include a 75MW/150MWh energy storage project in Texas with a grid connection scheduled for H1 2024. Gore Street Energy estimated the project to have an unlevered IRR of 10-12%.
More recently in February 2023, Gore Street Energy acquired a 200MW/400MWh energy storage project in California from Avantus in a US$110m deal, representing the fund's largest US acquisition to date. The project will be connected to the CAISO grid, which provides electricity to 80% of California and a small part of Nevada. Grid connection is scheduled for H2 2024, benefiting from a 30% tax credit via the 2022 US Inflation Reduction Act.
Gore Street Energy Fund is diversified across 5 grids with 361.7 MW of projects set to become operational over the next 18 months. While the EV revolution is well underway, utility energy storage is still in its infancy, and Gore Street Energy is one of the early players well-positioned to benefit from its expansion.
AMTE Power
() is a UK developer and manufacturer of batteries. One of few companies making automotive batteries in Britain today, AMTE has plans to scale production capacity to 2 GWh pa in the near term. AMTE is also developing a sodium-ion cell as an alternative to li-ion, branded as its Ultra Safe line.
AMTE’s 43,000 sq ft battery factory in Thurso, Scotland is the second largest cell manufacturing facility in the UK with 0.1 GWh capacity and a c. £35m replacement cost. AMTE works with UKBIC, a publicly-funded battery product development facility in Coventry, part of the Government’s Faraday Battery Challenge.
In August 2022, AMTE announced a planned 0.5 GWh "MegaFactory" in Dundee, Scotland, expected to be ready by Q3 2025. AMTE expects the facility to produce 8 million cells with a revenue stream in excess of £200m.
Additionally, AMTE has a JV with InfraNomics, an Australian infrastructure provider, to manufacture battery cells for use in power storage systems, with initial plans for 2GWh pa production capacity in the "Lithium Valley" Kwinana Industrial zone in Western Australia.
In March 2023, AMTE made news when it delivered its first Ultra Prime cells to a customer for testing. These cells are non-rechargeable with very high energy density and low self-discharge, designed for use in extremely harsh environments.
AMTE's recent half-year results to 31 December 2022 indicated good progress in line with market expectations. AMTE's financial performance reflected continued investment in commercialisation plans, with a turnover of £0.55m, down from £0.82m in 1H22. Its pre-tax loss stood at £3.72m, compared to £2.65m in 1H22 as a result of rapid scale-up. Earlier in March, AMTE agreed a £580k loan from Highlands and Islands Enterprise to support its operations in Thurso, adding to its £1.21m cash equivalent at the end of 1H22.
Like Gore Street Energy, AMTE is positioning itself early for success in the rapidly growing utility storage space. Market estimates suggest grid storage capacity needs to triple by 2030 to accommodate the rise in renewable energy production. The market opportunity is estimated at $262bn of cumulative investment between 2021 and 2030 (BNEF Global Energy Storage Outlook 2021) and $100 trillion by 2050. Bloomberg estimates that energy storage batteries will grow 21% pa from 23GWh pa in 2020 to 155GWh pa in 2030.
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In summary, batteries are a crucial ingredient in the shift toward a sustainable future. With commitments from governments around the globe to net zero decarbonisation programmes, the transition to electrically powered vehicles and renewable energy sources will place battery manufacturers at the centre of a carbon-neutral future.
The rising demand for EVs and renewable energy will require higher battery performance and associated advances in battery technology. The aforementioned companies are well-aligned to meet the needs of the future, as they have shown today how their advancements in battery technology are poised to meet the growing demand for efficient, safe and durable batteries.
Moreover, battery manufacturing and associated industries generate high-paying jobs and underpin economic growth in developing and developed nations alike, all while directly supporting net zero goals. This should make the battery sector appealing to ESG-focused investors.
As battery producers work to meet ever-growing demand, consider following these battery stocks:
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