The Common Trend Among the Pentagon, Tesla, President Trump and Total

David Fessler By David Fessler, Energy and Infrastructure Strategist, The Oxford Club

Alternative Energy

What do Tesla (Nasdaq: TSLA), Total SA (NYSE: TOT), the Pentagon and President Trump have in common?

Most folks would never guess… but it’s energy storage. Falling prices and technological advances in energy storage have the attention of all the parties mentioned above.

Energy storage costs dropped a whopping 70% in 2016. It’s why so many key players, including large, independent electric power producers, are eyeing the technology closely.

The subsector is at what I call the “investment tipping point.” In the very near future, retail investors could see massive gains from companies within it.

Electricity is typically used moments after utilities generate it. Electrons travel close to the speed of light from power plants, through transmission lines and transformers, to end uses in homes and businesses.

Utilities and end users never had the ability to store energy cheaply… until now.

Dave’s First Law of Technology, “Technology marches on,” is hard at work in the energy storage subsector. It’s why costs are dropping so rapidly.

As with solar panels, the manufacturing costs of energy storage batteries are becoming cheaper as more batteries are produced.

And energy storage is catching on.

In fact, I can describe what’s happening with the subsector in one word: demand. Energy storage products are now in demand by both homeowners and utilities alike.

Demand drives new standards, more sales and lower costs. Sellers can now push the value of energy storage to customers.

Take Tesla for instance. Tesla’s lithium-ion cells in its car batteries are the same ones it uses in its commercial and home energy storage products.

Tesla spearheaded the modern electric vehicle movement. More importantly, Tesla has bridged the auto and power sectors with its battery technology.

Tesla’s Nevada Gigafactory produces more batteries than every other factory in the world… combined. Its newest home storage product is the Powerwall.

This year, Tesla is pairing its Powerwall storage technology with its new solar roofing shingles. It’s pitching them to customers as an integrated system. This raises consumer awareness of energy storage.

So how does the French oil giant, Total, fit into the energy storage picture?

Like nearly every major oil company, it sees the eventual phaseout of fossil fuels. Tesla’s charge into the EV sector isn’t lost on Total.

Therefore, it jumped headfirst into the energy storage business. Total purchased another French company, battery maker Saft Groupe SA.

With its July 2016 purchase of Saft, Total is well on its way to one of its goals. It wants to become one of the top three companies in the solar sector by 2035.

The Pentagon has a different use for energy storage. It’s combining solar and storage technology to allow troops in the field to easily generate energy.

By adopting the “solar plus storage” model, it’s able to eliminate diesel generators. Soldiers no longer need to transport flammable diesel fuel through war zones.

For large military bases, the Pentagon is deploying solar plus storage in a big way. It’s creating standalone “microgrids.”

This allows bases to operate in the event of a large grid outage.

And what about Donald Trump? What possible interest could he have in energy storage?

Plenty. His infrastructure plan includes energy storage goals as part of his grid modernization plan.

For investors, investing in grid storage technology is somewhat difficult. Few pure-play public energy storage companies exist.

I like pick-and-shovel plays. In the case of battery storage, lithium and cobalt miners are poised to win big.

I’ve covered some of my favorite lithium miners in Energy & Resources Digest a couple times now.

As I’ve mentioned before, four companies supply 89% of the world’s lithium:

  • Tianqi Lithium (a private Chinese company)
  • Sociedad Química y Minera de Chile (NYSE: SQM)
  • Albemarle Corporation (NYSE: ALB)
  • FMC Corporation (NYSE: FMC).

The three public companies are diversified chemical companies. And they’re all seeing a boom in their lithium sales.

And that will only increase.

The current annual demand for lithium is 160,000 metric tons. By 2025 or sooner, demand will triple to 470,000 metric tons.

Energy and resource investors who are looking to be on the profitable side of this investment tipping point should consider adding lithium miners to their portfolios.

Good investing,

Dave