Earnings season crashed through the August calm these last few weeks, and as we round out the last of it, cleantech stocks seem to be doing rather well.
That was not an appreciable trend even a few years ago, when our coverage of publicly traded companies bristled with threats of de-listing, at worst, or simple lukewarm performance at best.
Another positive trend has emerged: large, publicly traded companies in the electric power sector are talking more about energy storage as a business division and a growth opportunity. Some are positively bragging about it.
I dove into a few choice examples of this to highlight how storage has become more central to the executive storytelling at AES, SolarEdge, Sunrun and Vistra. The earnings reports offer a rare glimpse into the hard numbers underpinning these businesses' storage sales, and a chance to benchmark their growth.
AES is a big power business with fingers in many pies (hot goal: get coal burn to below 30 percent of generation by 2022). So, it's telling to see what kind of billing it gives to its storage subsidiary, Fluence, one of the most experienced suppliers of utility-scale battery projects (Fluence being the joint venture that AES spun off with Siemens in 2018).
Indeed, the power producer singled out Fluence's "global leadership" among the top three strategic objectives and accomplishments leading off its financial results. AES appeared eager to bask in the warm glow of Fluence's 1 gigawatt of projects contracted or installed for the "fast-growing" energy storage market.
So far in 2019, AES subsidiaries contracted 262 megawatts of solar-plus-storage in the U.S., along with 100 megawatts of standalone storage. The report also notes Fluence has booked 424 megawatts this year; the delta between that and the previously mentioned figures would correspond to overseas business. Fluence operates in 20 countries.
So, how does an energy storage vendor stack up within a company sporting a market cap of $10.5 billion? AES reports a current backlog of $700 million in awarded storage sales. It's not so niche any more.
The PV inverter manufacturer that's becoming more of a storage company with each passing quarter had a very good earnings day. It reported record revenue, and its share price shot up to the highest point ever. It's now more than twice as valuable as it was on New Year's Day.
SolarEdge now owns South Korean battery manufacturer Kokam, and it's investing in capacity expansion. Kokam's production will grow by between 1 and 1.8 gigawatts thanks to a $50 to $60 million equipment investment over the next 18 to 24 months, founder and CEO Guy Sella said on the investor call.
"Battery production, in terms of cost, is a volume game, so we need more production capacity and with that you can divide your fixed costs over more volume and that eventually drives better economics for your products," said Lior Handelsman, founder and VP of marketing and product strategy. "We aim to be a strong player in the lithium-ion market with this Kokam acquisition, so we need to ramp up production."
Kokam's business drove the bulk of SolarEdge's non-solar revenue, which amounted to $18.3 million compared to $306.7 million from the solar inverter business.
The leading rooftop solar installer keeps delving deeper into storage activity.
Sunrun has now installed 6,000 BrightBox home solar-plus-storage systems, CEO Lynn Jurich confirmed in her investor call. That's an increase of 1,000 in the first half of 2019. For reference, Wood Mackenzie tracked just under 4,000 residential batteries installed in the U.S. in Q1.
The storage product has entered nine state markets as well as Puerto Rico, and now represents 10 percent of Sunrun's direct business (rather than its deals through channel partners). In California, it's 25 percent of direct business.
The leadership's view is that this is still an early market, hobbled by permitting obstacles, limited supply chain, slower installation timelines, and batteries that can still get cheaper and pack more charge. In time, they think storage will take over Sunrun's solar business.
"It is my belief that in a few years the majority of our customers have a battery," Jurich told me. "The cost improvements and value proposition will support that."
When the economomics reach an attractive point, Jurich wants to pitch existing solar customers on storage retrofits. But, she added, "The bigger opportunity is the millions of new customers we are going to acquire."
Once the company expands its installed battery capacity, it can ramp up more grid services contracts in territories that allow that. Elsewhere, the company must put in the regulatory and policy work to muscle open new market structures for aggregated capacity.
Sunrun has calculated that the virtual power plant market opportunity in California alone is as much as 9 gigawatts. For now, the company faces a more humble task: delivering on its initial contracts, like 500 kilowatts on low-income housing in Oakland, and 12.8 megawatts to help Glendale avoid buying a new gas peaker.
RUN stock dropped from around $20 to roughly $18 in after hours trading, even though the earnings metrics were right on target with how much capacity Sunrun expected to install. This has nonetheless been a stellar year for the stock, which started around $10 and has ticked up throughout.
The Texas-based power producer and retailer has faced a rocky road on Wall Street this year. As the executives laid out their vision for why shareholders should stay confident in the company's trajectory, they leaned on storage.
The "corporate and growth highlights" section of the company's earnings release touts Vistra's 20 megawatt/ 80 megawatt-hour battery storage deal in Oakland. The project will swap out a jet fuel burning peaker plant in Jack London Square that Vistra owns via its subsidiary Dynegy.
That's extremely small fries compared to Vistra's overall operating fleet of 40.5 gigawatts, but notable as a new source of revenue.
Elsewhere in the earnings slides, Vistra highlights its much larger Moss Landing battery project, also replacing a Dynegy peaker, as a "value accretive" driver of $45 to $55 million EBITDA increase in 2021.
The storage projects themselves are not materially influencing Vistra's business performance right now. But the company sees a promising route to future value creation via storage, and one that few of its peers have begun to seriously consider.