**Editor’s Note Update: Be sure to read Energy and Capital’s up-to-date resource page on energy storage companies.
Warren Buffett’s favorite word from this year’s spelling bee has to be ophelimity, which means economic satisfaction.
As we all know, he loves making money. And he’s good at it.
He also loves the cleantech market for all the ophelimity it brings.
It’s no secret clean energy is big business. I’ve heard more than once that Buffett’s MidAmerican Energy Holdings generates more wind power than any other regulated utility. But it’s hard to tell, since megawatts (and profits) are added every day.
So, it shouldn’t be big news — or surprising news — that The Oracle is interested in other segments of alternative energy. That’s why I was somewhat shocked to see Buffett in the headlines of major news outlets this week as they touted his “new” interest in batteries.
I’ve been telling you the battery market — and energy storage in general — is heating up in a big way. And I’ve known about Buffett’s “new” interest in batteries since 2008.
A Buffett Battery Buffet
In fact, it was last September when MidAmerican took a 10% stake in BYD (Build Your Dreams), a Chinese battery and auto maker. I recommended it to readers of Green Chip International on the December dip, and you can see how we’ve done since then:
Up 188% and running. The Dow’s down about 30% for the same time frame.
Why? Because BYD is doing what American carmakers failed to: focus on efficiency and hybridization early.
Here’s how that worked out:
Any company can make a car. Only a few are successfully making hybrids. And you can see where investors think the future will be.
But really, BYD’s success has more to do with its battery than anything else. The battery is the keystone of the entire hybrid market, and the Achilles heel of the Chevy Volt, among others. It’s easy to form sheet metal into a sedan.
It’s the Battery, Stupid
As it turns out, hybrids are great. But Buffett went after BYD for their batteries because they can not only transform the global auto market (BYD cars will hit Europe next year and the U.S. shortly after), but they also have very profitable implications for the smart grid and energy storage markets, as we learned last week.
Here’s the Christian Science Monitor blurb I referenced a few weeks ago:
While the Obama administration presses to expand renewable energy with emphasis on growing wind farms and utility-scale solar, these efforts could vastly increase the need to build new backup power plants — much of which today involves firing up natural-gas turbines when the winds die down. The only way to avoid using fossil fuels is to develop grid storage.
What we’re talking about is storing some of the power generated by solar and wind to use it when the sun isn’t shining and the wind isn’t blowing. Buffett thinks BYD’s batteries would do that nicely.
MidAmerican is starting the testing process now, building a 2-megawatt storage facility in Portland. And BYD is building a Chinese version as well.
This is all because of how potentially lucrative the energy storage market could be. According to a recent industry report by Piper Jaffray, “The total available market for energy storage will be at least $600 billion over the next 10-12 years even if just 1% of the total worldwide stationary energy generation market adopts some form of energy storage for stationary power.”
What happens when 2% adopt? 3%?
Well, I think it’s safe to say we’ll see more of this:
Those are three stocks from the energy storage arsenal in just the past three months. And readers of Alternative Energy Speculator have played each of them.
But this will be a years-long profit process. Warren Buffett knows it. And now you know it.
All you have to do is take advantage.
Call it like you see it,
Nick
