Batteries are used in many of today’s essential products, from cell phones to hybrid cars. Researchers have been working feverishly to increase capacity and longevity of batteries. Imagine the benefit of not having to charge a cell phone for several days to an electric powered car that can travel over Tesla Motors Inc (NASDAQ:TSLA)’s current 300 miles per charge.
The most beneficial application of better battery technology would be utility companies that can generate green electricity at a varying pace while the grid pulls its electricity out of a battery. All of these applications are possible, we just have to invent a battery that can stand up to the test of time – and most importantly, be cost efficient.
Intellectual property race
Apple Inc. (NASDAQ:AAPL) was just awarded a utility patent on curved batteries and Johnson Controls, Inc. (NYSE:JCI)’s joint venture has a patent pending for its graphene-based batteries. These two companies see the importance of having mobile electricity available when and where we need it, as well as the battery being of convenient size and shape. Mobile companies are in a heated battle right now over intellectual property and design, costing billions in legal fees.
Johnson Controls currently has an operating margin of 3.30%, which is half the industry average. It currently pays out 68% of earnings to support its dividend, that currently yields 2.60%. Johnson Controls, Inc. (NYSE:JCI) is competing in an intense industry, supplying parts to automotive manufacturers with an industry average operating margin of 7.20%.
Although these new batteries have the potential to be boons for these stocks, though it is still unclear how large scale manufacturing and costs will factor into the final product. It is also hard to say what new battery technology will be the supreme leader.
Old batteries
General Motors Company (NYSE:GM) is working with the nation’s largest utility, Duke Energy Corp (NYSE:DUK), to complete a project that will both recycle old Volt batteries and deliver a benefit to utility companies nation wide. Renewable energy like wind power is a nightmare for grid operators to manage, as the varying speeds and intensities causes spikes in power generation. Adding a storage device, like a large battery array, can dampen out the strain on the electrical grid. This is a win-win for automakers and utility companies.
Duke Energy Corp (NYSE:DUK) is the largest utility in the U.S. after its merger with Progress Energy. Duke has one of the largest windmill fleets and is looking at how to better manage their power spikes. Hybrid batteries that no longer can provide top performance for autos can still provide up to ten years of service for power companies by reducing the spikes in power generation. This will reduce costs for companies that maintain the grid long-term by increasing the efficiency of their wind projects.
General Motors Company (NYSE:GM) will be announcing later this week that it is looking for the next generation Chevy Volt to drop its current $40,000 price tag by $7,000 to $10,000. This tremendous up front savings will open up access to the Volt to thousands of buyers who couldn’t afford the first round of Volts. With the price of batteries dropping and expanding this platform to other cars, GM is expecting to finally make a profit on the plug-in hybrid platform.
One thing most people forget is that Toyota Motor Corporation (ADR) (NYSE:TM) originally took a financial gamble on the wildly popular Prius. The New York Times even said in 2004, “The original Prius was indeed an expensive experiment, a money-losing demo.” We just have to keep this in perspective before persecuting GM over not making an initial profit. Duke Energy Corp (NYSE:DUK) already has a joint venture with GM to purchase old Volt batteries to install on its wind farms, helping GM keep costs down as the original Volt’s battery packs need to be replaced.
Foolish bottom line
Its nearly impossible to determine whose technology will be used in the next generation electric cars, but betting on the beneficiaries of such batteries is easier to do. The biggest beneficiaries of these new battery technologies will be Electric Utilities in the secondary market that can finally address storage issues of their new wind farms that keep cropping up. With the U.S. set to install three to four gigawatts worth of wind generation this year, utilities will benefit the most from the availability of less expensive hybrid batteries coming into the market.
The article Who Benefits From a Better Battery? originally appeared on Fool.com and is written by Wes Patoka.
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