At a time when the major electric industry players were either unwilling or not nimble enough to develop energy storage systems integration expertise, four growing energy storage players with four distinct technologies took a risk to develop this expertise. Over the last few years, each of these companies failed financially and was subsequently acquired, in some cases more than once. In nearly every case, private equity firms stepped in, seeing an opportunity to invest in a maturing technology company with specialized expertise in the market.
Citing Tesla founder Elon Musk’s determination to build a massive Gigafactory to manufacture batteries for his vehicles, E Source Senior Fellow Jay Stein has argued that company failures like these indicate the shortcomings of the overall market. This is a logical fallacy.
Number of Deployed Systems Market Share by Top 10 System Integrators, Excluding Pumped Storage and CAES, World Markets: 1Q 2015
(Source: Navigant Research)
The chart above is derived from Navigant Research’s Energy Storage Tracker 1Q 15, a global database of energy storage installations that includes 808 projects. This specific graph charts the top 10 systems integrators of energy storage in terms of number of systems deployed globally. Four of the 10 market leaders for systems integration have gone bankrupt and been acquired in the past several years. NEC Energy Solutions, formerly A123 Energy Solutions, was acquired following a bankruptcy filing, and the grid business was subsequently spun off and sold to NEC Corporation for approximately $100 million in 2014. Beacon Power was acquired by a private equity firm following a bankruptcy filing in 2012, and Xtreme Power (now Younicos Inc.) was acquired by Younicos AG in 2014, also after filing for bankruptcy.
All three firms were focused on a core grid storage technology (lithium ion batteries, flywheels, and advanced lead-acid batteries, respectively), but all spent a great deal of resources in the earlier days of the market learning how to integrate complete systems. Ultimately, all three firms developed this expertise, and NEC Energy Solutions and Younicos repositioned themselves as systems integration companies, offering software, controls, and integration expertise as opposed to pure-play battery suppliers. Beacon Power is a market leader in flywheels and flywheel systems integration and has developed a modular flywheel product with built-in power electronics for simpler integration and installation.
Managers, Not Markets
Finally, Coda Energy repositioned itself as an energy storage integration firm in 2013 after filing for bankruptcy. The company rebranded and shifted its product offering to target stationary energy storage using a battery management system, battery thermal management, and a sophisticated power source controller.
Together, these four companies account for 21% of the global market share for the top 10 systems integrators (although part of this market share is attributed to Younicos AG). These companies and others like them are challenging incumbents such as ABB and S&C Electric, demonstrating that their earlier stumbles arose out of flawed management and/or strategy, not failed markets or futile technologies.
Equating a management failure with a market failure ignores the value of the technology. Whether the Gigafactory will be Musk’s Waterloo or Austerlitz has less to do with the technology and much more to do with Tesla’s strategy and execution—and Musk has proven he can accomplish both in the automotive and the financial services worlds.
Tags: Advanced Batteries, Clean Transportation, Energy Storage, Energy Technologies, Finance & Investing
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