How to invest in battery technology

Combatting climate change is a major global concern, with renewable energy part of the strategy to fight it. Investors concerned about the environment and looking for options to invest, might consider the key to renewables and electric vehicles as reliable and efficient power storage in the form of battery technology.

Innovation in battery technology has made it an essential store of large-scale energy. Batteries are now able to support power generated by intermittent renewable power sources like solar or wind, and to accommodate the growing market for electric vehicles. Today lithium-ion batteries are the most reliable and effective form of large-scale storage which has led many investors to focus on lithium mining companies for exposure to this market. But the battery supply chain extends beyond this. There is also research and development focused on other battery technologies for the future, beyond lithium.

While mining companies are part of the supply chain, it also includes manufacturers of battery storage and storage technology providers. All are potential beneficiaries of the anticipated growth in this industry.

Why renewable energy, electric vehicles and battery technology?

Wind and solar energy are forecast to supply around 48% of world electricity needs by 2050, with battery technology, gas peakers (turbines or engines that burn natural gas) and dynamic demand anticipated to drive market penetration of solar and wind by more than 80% according to BloombergNEF. The same report also suggests the costs of renewable energy will undercut coal and gas in most parts of the world by 2030 – a compelling reason for countries to focus on it.

Further to this, the electric vehicle industry (which currently relies on battery storage for success) is expected to expand substantially in coming years. BloombergNEF predicts sales to rapidly increase from 2.7% of new cars sold, representing 1.7 million cars in 2020, to over half of all passenger vehicles sold by 2040, representing 54 million cars. Even across the COVID-19 pandemic where sales of new cars dropped overall, the UK recorded its best year for electric vehicle sales with more than 108,000 sold.

Three companies in the battery supply chain you may want to know about

While companies like Tesla and Pilbara Minerals might be front of mind when investors consider battery technology, here are a few other companies fueling the chain which you might not know about.

The mining company: Galaxy Resources (ASX: GXY)

Australian company Galaxy Resources is focused on lithium mining, with mines in Australia, Canada and Argentina. Its Argentinean mine has the potential to be the lowest cost producer of lithium in the world through oil brine extraction.

The solar-cell company: SolarEdge Technologies Inc (NASDAQ: SEDQ)

US-based SolarEdge Technologies is a technology manufacturer with a range including power optimisers, solar inverters and monitoring systems for solar cells. It has majority market share in the US, but also has a global customer base.

The battery manufacturer: NGK Insulators (TYO: 5333)

Japanese ceramics company NGK Insulators are responsible for battery systems, insulators and equipment. They were responsible for the world’s first commercialized battery storage system capable of megawatt level electrical power storage, produce lithium-ion rechargeable batteries and are also researching and developing alternatives to lithium-ion batteries.

Ways to invest in battery technology

Investors can invest in battery technology in a range of ways looking across the battery technology value chain. Investors in direct shares could focus on specific components in the battery supply chain such as lithium miners or consider companies with more diversified capabilities beyond battery technology.

Another method may be using managed options, whether this is active funds or ETFs, one example is ETFS Battery Tech & Lithium ETF (ASX Code: ACDC) which offer exposure across the battery technology supply chain globally. Another alternative is the Global X Lithium & Battery Tech ETF (LIT), which trades on the New York Stock Exchange.

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