In 1800, Alessandro Volta invented the first true battery, which consisted of pairs of copper and zinc discs piled on top of each other, separated by a layer of cloth or cardboard soaked in brine. This “voltaic pile” was not strong enough to generate a spark though it provided a framework for how electricity could be stored. Over the course of the next two centuries battery technology has come far and in many different forms, from lead-acid to nickel-iron to today’s lithium-ion batteries.

The drive to create a more effective battery is about more than just smaller, longer lasting smart phones and electric cars that travel further between charges (though those are both important!). It’s about increasing the efficiency of renewable energy power generation, thereby lowering the world’s dependency on fossil fuels. Over a 24-hour period the sun doesn’t shine at night and wind speed is inconsistent. Over a year there are seasonal variations in solar output (shorter days) and wind output (weather patterns). While production costs for wind and solar power are now below coal and natural gas, they are not yet available upon demand and must be paired with conventional fossil fuel generation.

Source: Energy Information Administration (EIA), Solar Energy Industries Association (SEIA)

California epitomizes the conundrum. The state generates so much solar power during peak generation that it has to pay other states to take its excess electricity. Later in the day when the sun’s heat declines the state has to buy electricity to meet demand. There is a similar issue with wind power in that at times the facilities are generating more than demand requires and other times they’re not generating enough. So, the critical question is how can we store this clean, inexpensive energy for later use, thereby reducing the demand for fossil fuels? The good news is there are many ways to achieve this end.

Source: KQED

Elon Musk has generated significant buzz lately by promising to announce technological advancements on September 22nd during Tesla’s Battery Day. Like most breakthroughs in society, it all comes down to costs. Bloomberg New Energy Finance estimates the costs of battery packs (4-hour storage) has come down dramatically over the last ten years. It is our view the battery tech advancements need to drop the levelized cost of energy (LCOE) so that “solar plus battery” or “wind plus battery” is equivalent to the LCOE of fossil fuels on a stand-alone basis. This will not occur overnight, nor does it have to. Our point is merely that when this inevitably occurs there will be a dramatic decline in fossil fuel consumption, as less natural gas power plants are needed to make up for inconsistent renewable power and less petroleum products (i.e., gasoline, diesel) are needed as vehicles evolve away from the combustion engine.

Source: Bloomberg New Energy Finance (BNEF)

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Michael Cerasoli, CFA

Michael leads the Renewables effort at Eagle Global Advisors, including the development of active and passive strategies, and portfolio management. He is also the Co-Head of the Energy Infrastructure team and Co-Chair of the Energy Infrastructure Investment Committee.  He shares Portfolio Manager responsibilities for the firm’s four separate Energy Infrastructure strategies. Prior to joining Eagle in May 2014 Michael was employed by Goldman, Sachs & Co. for ten years where he covered Midstream for seven years and small/mid cap Oil Services for three.  Prior to Goldman, Michael worked for three years as a sell-side equity trader at various Wall Street firms. He earned bachelor’s degrees in Economics and History from Union College, and an MBA from the Hagan School of Business at Iona College. Michael holds the Chartered Financial Analyst designation.

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Curt Pabst

Curt Pabst

Curt is a Managing Director in the Energy Infrastructure Business, a member of the Energy Infrastructure Investment Committee, and co-head of the Renewable Energy Business at Eagle Global. Prior to joining Eagle, Curt held a similar position at an Midstream Energy-dedicated asset management firm in Dallas, Texas. He has 39 years of investment experience. He has served as a partner/principal in both a hedge fund of funds and a venture capital fund. Curt earned his BA in Economics from Grinnell College and a professional certification in Energy Innovation and Emerging Technologies from Stanford University.

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