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| NGK battery sales may soar as Japan plugs into renewable power |
| 10-DEC-2009 Intellasia | Bloomberg |
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| 10 Dec, 2009 - 7:00:00 AM |
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Japan's plan to use more renewable energy to fight climate change hinges on another technology -- batteries as big as London buses to be hooked up to the power network at a cost of as much as 6 trillion yen ($67.4 billion).
The batteries made by NGK Insulators Ltd and other companies are key to the Ministry of Economy, Trade and Industry's plan because electricity generated from solar and wind power fluctuates according to the weather, not demand. The batteries allow storage of power for release as demand rises.
Japan has said it will more than triple power from renewable sources by 2020 to 10 percent of total supplies. Analysts say NGK, which spent 25 years developing its sodium- sulfur battery with Tokyo Electric Power Co., may be one of the biggest winners. NGK shares have more than doubled this year as it won orders from Abu Dhabi and France's EDF SA.
"Even though it's still quite an expensive way to store energy, we like the company," said Chen Altshuler, head of environmental research at Tel Aviv-based Altshuler Shaham, which manages $3.5 billion of investments including 50,000 NGK shares. "They are getting orders from places that don't care about price right now."
NGK's so-called NAS batteries, which measure five meters by 10 meters by 3 meters, cost 25,000 yen per kilowatt-hour of storage capacity, compared with 100,000 yen for a nickel-hybrid battery produced by rivals such as Kawasaki Heavy Industries Ltd A lithium-ion model by Hitachi Ltd costs between 100,000 and 2 million yen, according to the trade ministry and the New Energy and Industrial Technology Development Organisation.
'Out in Front'
"NGK is out in front, with a product that can meet utilities' needs, while others are playing catch-up with batteries that are still in development stages," said Minoru Sonoyama at Mitsubishi Research Institute Inc. "Batteries are the key to expanding solar and wind power capacity."
NGK's shares have risen 109 percent this year while the benchmark Topix Index has increased 4.4. Kawasaki has risen 29 percent and Hitachi fell 32 percent in the same period.
"NGK shares have the potential to surge further and we are considering buying more," said Katsuhiko Mori, senior portfolio manager at Daiwa SB Investment Ltd in Tokyo, where he helps manage about 4 billion yen in environment funds. Daiwa holds 167,000 shares of NGK, according to Bloomberg data.
Market to Double
NGK expects NAS sales to double to about 35 billion yen in fiscal 2012 from 16.7 billion yen in the year to March 2009, with half sold in Japan. Battery revenue will rise to about 11 percent of the total in fiscal 2012 from about 6 percent in fiscal 2009, according to NGK.
The domestic market for rechargeable batteries used for cars, appliances and industrial equipment will almost double to 540 billion yen in 2013 from 2007, according to research firm Fuji Keisai Group.
"I don't think NAS batteries alone can meet all the demand in Japan," said Katsuya Ishikawa, deputy general manager of the battery division at Kawasaki, which is increasing output of its filing-cabinet-sized Gigacell nickel-hybrid batteries 8-fold to 50 megawatts-hours by 2020. "We are behind NGK, but we're confident we can take a share of the market."
NGK is expanding its NAS factory in Aichi, central Japan, to 150 megawatts annually by October 2010 from 90 megawatts and is considering a further expansion to 210 megawatts, the company said by e-mail.
Tokyo Electric, Asia's largest utility and the co-developer of the NAS, retains the right to market the batteries in the Kanto area, which includes Tokyo, while NGK can sell it everywhere else.
'More Orders'
"NGK has won more orders than the company can deal with," said Katsumi Hosoi, an analyst at Tokai Tokyo Research Centre, who has an 'above average' rating on the shares.
The company this year sold 300 megawatts of NAS units worth 6.5 billion yen to Abu Dhabi's Water & Electricity Authority and made a sale worth 30 billion yen to 40 billion yen over five years to France's EDF SA. "We see demand from all over the world" said spokesman Hironobu Matsunaga.
Japan plans to boost solar capacity forty-fold by 2030 from 1,400 megawatts in 2005, and wind generation six-fold from 1,080 megawatts. Renewable power may increase further with the proposed expansion of the so-called feed-in tariff, by which utilities pay more than the going rate for renewable power.
The shift to renewables will require a grid upgrade at a cost of between 4.61 trillion to 6.7 trillion yen by 2030, including installing batteries and other improvements to regulate voltage, the trade ministry said last month. The ministry is due to release a plan on how to pay for the upgrade in March.
"We hope these costs will be divided fairly," Federation of Electric Power Companies of Japan Chair Shosuke Mori said on November 10. "This is a decision that has to be widely discussed," said Mori, who also heads Kansai Electric Power Co., the nation's second-biggest utility.
http://www.bloomberg.com/apps/news?pid=20601072&sid=avy8FgFAjOIg
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