Last week I discussed the country’s dire need for energy infrastructure improvements and expansion, and how you can use the First Trust Clean Edge Smart Grid Infrastructure ETF (NASDAQ:GRID) to capitalize on that need. Our evolution into hybrid and eventually full electric cars is a major driver of this need for a better grid and is my topic today.
This new energy infrastructure will offer Americans more efficient energy distribution, storage and hopefully cost savings over the long term, not to mention more places for us to fill our cars up with their new fuel (electricity). What I didn’t discuss is the need for super-efficient storage devices to power the cars themselves!
We Need Better Batteries!
A major hurdle for electric carmakers to overcome in addition to the lack of charging stations around the U.S., is the capacity, efficiency and charging time of the batteries used in the cars. Batteries for hybrid and electric cars are still evolving and although they have gotten much more efficient and recyclable (most are made with very toxic chemicals), they still have a ways to go.
Most of us are familiar with the lead-acid batteries common to traditional cars. Nickel-metal hydride is another form of battery used in many of the first-generation hybrid cars. Today’s technology of choice is lithium-ion, which produces 400% more energy than its lead-acid cousin. Even though that sounds impressive, it still needs improvement, and here’s why.
For most Americans, our cars are used predominantly to get us to and from work and to run errands. According to Edmunds, the average American drives about 12,000 miles per year and that number has been increasing year over year on average. If you assume that people drive the same distance each day, that’s about 34 miles per day. Commuting figures are closer to 26 miles round trip per day on average. We all know that those figures vary quite a bit and if there is an accident on the way to work, expect longer drive times and distances if detours are involved, and of course we have to account for those trips to the market or shopping malls.
At 35 miles per day, that means that the “electric” power of the Chevy Volt for example will be depleted, leaving the driver to burn fossil fuel.
The Chevy Volt, which boasts a highly advanced lithium-ion battery system, takes 10-12 hours to charge fully, depending on climate, using the standard 120-volt line, or about four to five hours using a dedicated 240-volt line. Fully charged (four to 12 hours later), the Volt’s battery can take you about 35 miles. That’s much different than the three minutes it takes to stop at your local Exxon for a fill-up.
The good news is that once the battery is drained, there is an onboard gas-powered generator that turns on to make more electricity and allows you to drive another 300 miles or so. Which means you can keep driving while the generator runs and then recharge the battery when you stop using a regular electrical outlet or a charging station designed for any electric car.
I’m not knocking the Chevy Volt or its competitors, the Nissan Leaf or Mitsubishi’s i-MiEV. Actually, I believe that necessity is the mother of invention and if Americans really catch on (which I think they eventually will), the technology will rise to meet that demand.
But the technology is simply not there yet (at a reasonable cost) for a car to be completely battery powered. In fact, batteries have been relatively slow to evolve when compared to the rest of technology. They still take way too long to recharge, are too heavy, and just are not powerful enough. Unlike computers, where we can estimate the evolution and advancement (thanks to Moore’s law), batteries are a real conundrum!
What Do You Do Here?
In the meantime, the manufacturers of the batteries used in these cars will reap some profits from the sale of the cars and the batteries themselves. GM and Nissan both produce and engineer their own lithium-ion batteries, so there is some opportunity there, at least in GM for American investors.
There are alternative ways to invest in the future of battery-powered cars and efficient grid storage. You might want to check out FMC Corporation (NYSE:FMC), which is based in my hometown of Philadelphia. They not only produce lithium, but also other agri-products like insecticides, herbicides and fungicides. If lithium-ion battery usage takes off, FMC could very well reap big rewards, as there are not many who produce the metal needed to manufacture Lithuim-ion batteries.
Invest in Companies That Make Energy Storage More Efficient
Another small company worth mentioning is Altair Nanotechnologies (NASDAQ:ALTID), which is in the business of designing, manufacturing and delivering energy storage systems, with a focus on green technology. They may benefit from a rise in battery usage (and smart-grid expansion) because of their research in improving the overall attributes of lithium-ion batteries by adjusting the battery’s chemical properties (“nano-structured lithium titanate,” if you want to Google it). While this is a stock you may want to own, use caution, as it is a penny stock.
Rest assured that I will keep you on top of developments in this exciting segment!
P.S. My co-editor, Sara Nunnally, has been researching lithium and other metals critical to new battery and clean energy technology. She’s compiled her findings in a free webinar called, “Green Power Metals: How to Cash In on the Clean Energy Future.” Follow this link to watch the free webinar.
Jared Levy is Co-Editor of Smart Investing Daily, a free e-letter dedicated to guiding investors through the world of finance in order to make smart investing decisions. His passion is teaching the public how to successfully trade and invest while keeping risk low. Jared has spent the past 15 years of his career in the finance and options industry, working as a retail money manager, a floor specialist for Fortune 1000 companies, and most recently a senior derivatives strategist. He was one of the Philadelphia Stock Exchange’s youngest-ever members to become a market maker on three major U.S. exchanges.
Article brought to you by Taipan Publishing Group, www.taipanpublishinggroup.com.
First Trust NASDAQ Clean Edge Smart Grid Infrastructure ETF (NYSE:GRID)
Investment Objective/Strategy – This exchange-traded fund seeks investment results that correspond generally to the price and yield, before the Fund’s fees and expenses, of an equity index called the NASDAQ OMX® Clean Edge® Smart Grid Infrastructure IndexSM.
Holdings of the Fund as of 12/2/2010
|Security Name||Ticker or CUSIP||Weighting|
|Schneider Electric S.A.||(SU.FP)||10.17 %|
|Red Electrica Corporacion S.A.||(REE.SM)||7.84 %|
|NGK Insulators, Ltd.||(5333.JP)||7.28 %|
|Quanta Services, Inc.||(PWR)||7.12 %|
|SMA Solar Technology AG||(S92.GR)||6.45 %|
|General Cable Corporation||(BGC)||5.34 %|
|American Superconductor Corporation||(AMSC)||4.65 %|
|ITC Holdings Corporation||(ITC)||3.72 %|
|Prysmian SpA||(PRY.IM)||3.70 %|
|Power-One, Inc.||(PWER)||3.46 %|
|Itron, Inc.||(ITRI)||3.29 %|
|ESCO Technologies Inc.||(ESE)||3.05 %|
|Hubbell Incorporated (Class B)||(HUB/B)||2.31 %|
|Cooper Industries Plc||(CBE)||2.27 %|
|Siemens AG||(SIE.GY)||2.27 %|
|Thomas & Betts Corporation||(TNB)||2.23 %|
|Valmont Industries, Inc.||(VMI)||2.20 %|
|WESCO International, Inc.||(WCC)||2.10 %|
|EnerNOC, Inc.||(ENOC)||2.06 %|
|Wasion Group Holdings Ltd||(3393.HK)||2.03 %|
|General Electric Company||(GE)||1.93 %|
|National Grid Plc||(NG/.LN)||1.87 %|
|ABB Ltd.||(ABBN.VX)||1.80 %|
|AZZ Incorporated||(AZZ)||1.51 %|
|SatCon Technology Corp||(SATC)||1.34 %|
|Echelon Corporation||(ELON)||1.26 %|
|MasTec, Inc.||(MTZ)||1.07 %|
|MYR Group Inc.||(MYRG)||1.07 %|
|Telvent GIT, S.A.||(TLVT)||0.83 %|
|Pike Electric Corp||(PIKE)||0.75 %|
|Ruggedcom, Inc.||(RCM.CN)||0.69 %|
|Comverge Inc.||(COMV)||0.54 %|
|Jinpan International Ltd||(JST)||0.53 %|
|Advanced Energy Industries, Inc.||(AEIS)||0.50 %|
|PowerSecure International Inc||(POWR)||0.50 %|
|Digi International Inc.||(DGII)||0.24 %|