Two More Energy Storage Plays in Massachusetts

Last month the Massachusetts Department of Energy Resources set a new target for 200 megawatts of energy storage capacity by the year 2020.  The state is following through with its Energy Storage Initiative with a $10 million funding commitment to support energy storage companies.  A total of $4.7 million in funding has already been award to nine projects, of which five have objectives related to energy storage.  The last article “Energy Storage in the Bay State” on July 11, 2017, discussed two projects demonstrating peak demand technology solutions in Massachusetts communities.  The state is also thinking ‘big’ with grid-scale energy storage.

Holyoke Gas and Electric is receiving $475,000 from the Massachusetts Department of Energy Resources.  Holyoke will install a grid-scale lithium ion battery at one of its substations.  The battery will fit in a 40-foot storage container at one of the utilities sites.  The utility is teaming up with the University of Massachusetts at Amherst for analytics to evaluate the battery performance. 

Utilities spend the most on electricity purchases, transmission and distribution during the peak hours of energy usage.  Bringing new efficiency and supplementing capacity can help reduce those costs, making it possible to keep electricity rates down and boost profits for utilities.  Storage capacity is one of those efficiency solutions, as it allows the utility to buy lower cost energy during off-peak hours and store it until later in the day when demand rises.

As interesting as this storage project might sound, investors will need to wait for adoption by other utilities to get a taste of ‘storage enhanced earnings’.  Holyoke Gas and Electric is a municipally-owned utility company.  Founded in 1902, the utility is very much a product of the Holyoke community, one of the first cities in the U.S. to be a planned industrial community.

The second grid-scale project yields a more ‘investable’ company  -  Tesla, Inc. (TSLA:  NYSE).  The company has been granted $996,455 to demonstrate an aggregated energy storage project for peak demand reduction in areas served by National Grid.  Tesla is more than just an electric car developer.  To make its electric cars affordable the company had to become involved in battery storage technology as well as solar power production.  Tesla designs distributed energy storage solutions for electrical grids. 

The company has several large utility projects to its credit.  For example, Tesla supports Pacific Gas and Electric (PGE:  NYSE) with distribution capacity and voltage management and is demonstrating smart energy homes with Southern California Edison (SCE-PX:  NYSE).  One of Tesla’s current projects is a distributed grid network in Vermont could provide valuable experience for its work in Massachusetts. Tesla’s Powerwall battery packs for residential applications will be integrated into Vermont utility, Green Mountain Power.  The utility will capitalize on power storage in the Powerpacks to get an extra boost to available power during peak demand usage.

Shares of Tesla are influenced primarily by the financial results from the sale of its electric cars rather than the company’s forays into energy storage.  Nonetheless, Tesla stock is clearly a ‘green’ investment.  Of course, Tesla has not reported positive net income and trades as a negative price-earnings multiple.   Likewise operations are burning up cash resources rather than generating cash for future investments.  Thus it is a stock with some element of risk that does not seem to be recognized by the investment community that appears to prize TSLA shares enough to drive the stock to new highs each year. 

Neither the author of the Small Cap Strategist web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein.