Goldman Sachs makes a case for investing in batteries
By Claudia Assis
Published: Oct 20, 2015 9:48 a.m. ET
Albemarle, SolarEdge join Tesla, SolarCity on Goldman’s list
Batteries have long powered gadgets. They now have started to power cars, and pretty soon will be helping to keep the lights on, opening up a “massive” and “untapped” opportunity for investors, Goldman Sachs said.
Energy storage will change the way the power grid operates, the Wall Street firm’s analysts said in a note Monday. The ability to store renewable energy has long been “a holy grail” for clean energy, and large-scale battery storage is gaining momentum
Costs are coming down, technology has improved, the share of renewable power has increased, private and venture-capital funding has grown, and policy support is emerging, among other indicators, they said.
The energy-storage business has the potential to be a $150 billion market within a few years, they estimate.
Goldman highlighted several companies “well positioned” to capitalize on the growth of energy storage, from well-known electric-car maker Tesla Motors Inc. TSLA, -1.38% and solar-power installer SolarCity Corp. SCTY, -3.40% to lesser-known companies such as lithium producer Albemarle Corp. ALB, -1.77%
Producers
Albemarle, the largest upstream lithium producer in the world, as measured by lithium-carbonate equivalent production, and FMC Corp. FMC, -2.98%the third largest, are Goldman’s picks in the raw-materials arena.
Goldman has a buy recommendation on Albemarle, saying the company will be “the obvious supplier” for lithium-ion batteries over the next decade and should become the lowest-cost producer of lithium compounds. (Despite being grouped with rare-earth metals, lithium is relatively abundant in nature. It must be extracted chemically, however.)
The investment bank has a neutral rating on FMC, citing more frequent production disruptions.
Manufacturers
Battery makers highlighted in Goldman’s note include Samsung SDI Co. Ltd. 006400, -4.20% SolarEdge Technologies Inc. SEDG, -4.86% and Panasonic Corp. 6752, -1.89%
Samsung SDI is trying to diversify away from small batteries for mobile products into large-size batteries for cars and for energy storage. The stock gets a hold rating from the Goldman analysts.
SolarEdge is a partner in Tesla’s energy storage products such as the Powerwall and Powerpack, aimed at homes, businesses, and industries. SolarEdge could capture “a significant, if not 100%, share of initial Powerwall volume,” Goldman said. The analysts give the stock a buy rating.
Panasonic is a leading lithium-ion battery supplier for cars, and the growing adoption of electric cars “will be tailwind” to Panasonic’s business, Goldman said. Panasonic, which got a hold rating from Goldman, will contribute 30% to 40% of the investment in Tesla’s $5 billion battery plant being built outside Reno, Nev.
Tesla’s “gigafactory” is expected to begin production next year. The electric-car maker has vowed that by 2020, the factory will produce more lithium-ion batteries annually than the total produced globally in 2013, driving down battery costs in the process.
The factory is also a key component in Tesla’s storage business, and the car maker has said it has received $1 billion worth of Powerpack and Powerwall reservations. The Goldman analysts have a hold rating on Tesla.
Clean-energy provider
SolarCity could be an “early mover” in the electrical-energy storage market, given its strong position in the residential solar market and its relationship with Tesla, Goldman said.
Elon Musk, Tesla’s CEO, is SolarCity’s chairman. SolarCity’s CEO, Lyndon Rive, is Musk’s cousin.
SolarCity is likely to offer solar-plus-storage products to provide backups in case of blackouts and other grid hiccups, Goldman said. The analysts kept their buy rating on SolarCity and said the company remains a “top pick” among U.S. solar-power companies.
