Flat battery not enough to shake EV sector

Another company backed by the US government headed to the bankruptcy court last week. Ener1 – whose subsidiary unit received $US118 million from the US Energy Department to make electric car batteries – filed for Chapter 11 bankruptcy.

Competing battery developers from China and South Korea that benefit from lower costs of labour and raw materials impacted the company, interim chief executive Alex Sorokin said in the petition. Besides, lower-than-expected demand for lithium-ion batteries and the loss of Think Global as a major customer also added to the strains. Ener1's largest unsecured creditors include Liberty Harbor Special Investments of New York and Tokyo's Itochu Corporation.

The company – which was delisted from the Nasdaq Stock Market in October – had assets of $US73.9 million and debt of $US90.5 million on December 31, 2011. Bzinfin, a holding and investment company based in Russia, is the largest shareholder, owning about 49 per cent of Ener1's stock.

The bankruptcy is likely to raise more questions about the support extended by the US government to renewable energy companies in loan guarantees and grants as part of the 2009 economic stimulus package. A Congressional committee is already looking into the high-profile bankruptcy of solar panel maker Solyndra, which received $US535 million in loan guarantees. An auction of its assets – piecemeal – is slated for next month. The assets of another government backed company – Beacon Power – are set to go under the hammer in February.

There was brighter news, however, elsewhere in the electric vehicle market. Israel got ready to welcome the first set of electric cars and battery charging stations from partners Renault and Better Place respectively. Similar infrastructure would be available for use in Denmark within weeks and in Australia later this year. The tipping point for electric vehicles could in fact come as early as 2015, Better Place chairman Idan Ofer said in Davos last week. The company expects to go public in the next two years.

China is targeting one million electric cars on the road by 2015. The US is aiming to have a similar number by the same date. The California Air Resources Board adopted new rules last week that would require automakers to sell millions of zero-emission vehicles, setting standards which are typically followed by states from New York to Oregon. Plug-in hybrids and all-electric vehicles have the potential to make up 9 per cent of auto sales in 2020, according to Bloomberg New Energy Finance. That could rise to 22 per cent of sales by 2030, or 4 million vehicles.

The uptake of electric vehicles is likely to have positive spin-offs in the broader energy storage market. Most grid-scale lithium-ion battery projects currently cost more than $US1,000/kWh. Bloomberg New Energy Finance is forecasting significant price drops in the next 36 months to about $US600/kWh.

Meanwhile, here is what 2012 is looking like for renewable energy. Our estimates show flat-to-down solar installations this year compared to last year's 28GW, which was a huge jump over 2010 installations of 18.2GW. China looks set to be the bright spark this year with installations of much as 5GW predicted by Trina Solar's chief executive Jifan Gao. Suntech Power's chief projected a more modest addition of 4GW by the nation. Solar installations in 2011 totalled 2.2GW. Bloomberg New Energy Finance has projected solar installations of 3GW this year in China.

The polysilicon price cycle may be reversing, with the third consecutive price rise recorded last week. The average spot price of the material increased to $US28.62 per kilogram, according to our estimates.

In the wind sector, about 46GW could be installed. Last year's installations totalled 43GW, of which 20GW addition was in China alone.

It will also be another strong year for mergers and acquisitions with the drivers being consolidation for the existing players and diversification for the newer ones.

Reproduced with the permission of Bloomberg New Energy Finance. For further information, see www.newenergyfinance.com