If we look at the battery storage projects highlighted in today's daily report and in the Exhibit below and then read some of the raw material inflationary concerns around batteries, we conclude that batteries will likely not end up dominating the power storage market. Both hydrogen and hydraulic-based storage are likely to be competitive if the battery costs do not come down. Note that storage batteries can afford to compromise on technology as they do not need leading-edge density – weight is not an issue for something that is not going to move. Even so, with battery demand expected to grow rapidly for EVs, it is not hard to see a scenario where other means of fixed location energy storage are more attractive.
One of the themes that we have focused on in our ESG and Climate work is the lack of realism in the Biden climate plan as it relates to power generation and the same with the plan in California. The more limited reliability factor in renewable power (because of its dependence on cooperation from the weather), means that you have to build a lot more new power capacity than you are replacing and you need to build a storage system for the power – batteries, hydrogen or hydraulic. This gets very expensive and will be more so if the push drives inflation in raw materials – which is already a factor YTD in 2021. Natural gas turbines are a cleaner and reliable source of power and cleaner still if combined with CCS. Politicians in the US are taking a considerable risk by promoting plans that could leave the power grid more vulnerable to some of the issues that we have already seen over the last 12 months (California and Texas). Of course, as the plans call for natural gas phase-outs in 10-12 years, none of those making the decisions today will be in the office to face the consequences!