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After A123, Battery Makers Take Stock

NEW YORK ( TheStreet) -- The failure of A123 Systems (AONE), reported at Nature , may seem like a political scandal, or proof that green technology does not work. However, for those who follow the business, it's nothing of the kind.

Brian Warshay, an analyst with Lux Research in Boston, told me this week the Chapter 11 filing actually facilitated the company's sale to Johnson Controls (JCI - Get Report), a larger company that will now have the time to make its electric car technology work.

"The technology is good," he said. "They made significant strides. The problem was the cost of production was too high for the current market, except in small niches."

The energy density of lithium-ion batteries, like those at A123, remains one-tenth that of gasoline, notes Warshay, and that's why electric cars are not making the kind of market headway that hybrids like the Toyota Prius are. But there is work being done on higher-density battery technologies, and on cheap low-cost, low-density battery materials that can store solar and wind power for later use on the electric grid.

There are successful start-ups in both areas:
  • In energy density, Infinite Power Solutions uses ceramics to create batteries competitive with lithium-ion in electronics, while B.E.S.S. Technologies uses silicon nanostructures to create battery parts that last longer and charge faster.
  • In the area of low-cost grid storage, Aquion Energy uses a system based on sodium and salt water to store energy for the electric grid. Prudent Energy uses vanadium oxide molecules as the storage medium.

An Energy Department press release, issued after the A123 bankruptcy, notes that the cost of a battery that can take a car 100 miles on a charge was $33,000 a few years ago and will be down to $10,000 by 2015. The new grid energy back-ups, by contrast, are made with recycling in mind, dealing with an objection John Petersen raised here recently.

It's only the speed at which these solutions scale, and their competition with one another in the face of continuing breakthroughs that's at issue, Warshay says. And breakthroughs seem to occur every day, like the control method for lithium-ion discharge recently found at the University of California-San Diego and described by .

As Petersen wrote at Seeking Alpha on Monday , there are many ways to invest in the space. Beside JCI, there are Altair Nanotechnologies (ALT), which is working toward demonstration projects along similar lines as A123, along with Enersys (ENS), Exide Technologies (XIDE), and Axion Power International (AXPW.OB), not to mention ZBB Energy (ZBB).

The battery race turns out to be like any other new technology niche. A lot of concepts, and a lot of companies, leapfrog one another in the race toward market success; Today's winner could be replaced by something better before it achieves market traction.
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