The ecological transition also involves green investments, and BG Saxo, the joint venture between Banca Generali and Saxo Bank, has tried to analyze the most interesting sectors for savers. Among these there is certainly hydrogen, the new frontier of clean energy on which all the big names in the sector are aiming, including Italian groups such as Snam, to name one in the very forefront. However, there is also the front (and the debate on the "rivalry" with hydrogen is open) of batteries. Peter Garnry, Head of Equity Strategy for BG Saxo, therefore comments a equity themed portfolio with a focus on the battery sector: includes 30 stocks among lithium-ion producers; battery equipment manufacturers; mining companies active in the processing of lithium, nickel and graphite; electric vehicle charging networks and battery recycling. We also consider potential competition from hydrogen as an alternative to energy storage and the performance of the battery sector compared to the MSCI World from December 2015.
"It's a difficult portfolio to create as it is difficult to find "pure" operators, but it is also difficult to understand whether to focus on mining stocks and to what extent", explains the analyst, recalling that among the 30 stocks hypothesized there are "companies that collect lithium, graphite and nickel, producers of batteries (both for electric vehicles, bicycles and consumer electronics), charging networks for electric vehicles and large battery systems for energy storage”. The 30 stocks represent $523 billion in market value, and the broader industry grew 7% in 2020. “Analysts are generally very optimistic about battery-related companies: above all because an action reflects the future and not the problems of the past”. Four very important realities are excluded from the analysis: Tesla, because the energy storage activity is too small to matter; BYD, because the battery business represents only 8% of total revenue; SK Innovation, because the battery business represents only 5% of total turnover; and Akasol, because it is acquired by BorgWarner.
It is expected that the global lithium-ion battery market will reach $92 billion in 2025, driven by the adoption of electric vehicles and to a lesser extent energy storage. As we wrote in our research note in August 2020, Bloomberg New Energy Finance estimates that a lithium-ion battery pack that cost about $156/kWh in 2019 will drop to 94/kWh in 2024 and 62/kWh in 2030. definitively relaunching the adoption of electric vehicles on a large scale. The main bet on the battery sector is a bet on electric vehicles, consumer electronics, electric bicycles and perhaps semi-trailers. For larger and heavier haulage, batteries may not fare well in comparison to hydrogen-powered fuel cells. More generally, for energy storage the debate is open on the question: will it be hydrogen or will the batteries prove successful?
“The rise of renewable energy – explains Garnry – will continue over the next three decades and this will create a challenge for the intermittent generation of energy. This energy must be stored or it goes to waste, and this will create a huge market for energy storage on a much larger scale than batteries used for light transportation or consumer electronics." But in addition to the batteries, hydrogen has also been proposed as an alternative for energy storage. Some studies suggest that the index measuring the amount of energy stored on invested ratio (ESOI) is better for a regenerative hydrogen fuel cell due to lower production costs compared to batteries; but it is also claimed that lithium-ion batteries have better round-trip efficiency and therefore, at the moment, represent the best alternative.
It is therefore possible that both hydrogen and batteries are used for energy storage depending on the application. And it will be a virtuous duel, also as regards investments.
