By Lewis Krauskopf
July 26 (Reuters) - General Electric Co GE.N wants to be a
"sizable" player in the market for systems that store energy to
manage power volatility, a sector the company expects to
quadruple to $6 billion by 2020, the head of GE's energy storage
business told Reuters.
Demand for industrial battery systems is being driven by
increasing reliance on intermittent energy sources such as wind
and solar power and the potential to add energy to the grid
quickly when power needs spike.
This need has attracted a wide range of companies, including
Elon Musk's Tesla Motors Inc TSLA.O , which said in April it
plans to package batteries for use for utilities as well as
homes and businesses.
"We believe in the space and its ability to grow," Jeff
Wyatt, GE's general manager for energy storage, said in a recent
interview. "We think we can be a sizable player within it, and
that's really what we're intending to do."
GE over the past year has overhauled its approach to the
energy storage market, as it saw weaker demand for the battery
it developed.
Now Fairfield, Connecticut-based GE is repositioning itself
as a one-stop shop for power producers seeking to install energy
storage systems, offering inverters, control systems, software
as well as financing options.
Earlier this year, it scaled back production of its own
Durathon industrial batteries, reducing its manufacturing
workforce from 200 to 50 at the Schenectady, New York plant
where the battery is made. The company is focused on improving
Durathon's longevity, including managing its chemical
degradation.
As part of its new energy storage package, GE is offering
customers the option to install lithium-ion batteries made by
other companies.
DAUNTING COSTS
Despite the allure of battery systems, experts say their
expense is a major factor preventing power operators from using
them more broadly.
American Electric Power Inc AEP.N has not invested in a
significant energy storage installation since 2010, because it
is unclear whether the benefits outweigh the costs, said Tom
Weaver, AEP's distribution planning manager.
"Long term, energy storage is the answer to a lot of issues
that need an answer, but the cost has to come down," said
Weaver.
Since April, GE has struck two deals to supply energy
storage projects with lithium ion batteries in California and
Ontario, Canada, and Wyatt said the company intends to announce
similar agreements this year.
Wyatt is relaunching GE's storage business in a market that
is highly-fragmented, with as many as 20 significant players
vying for deals, including large energy rivals such as Siemens
AG SIEGn.DE , ABB Ltd ABBN.VX and AES Corp AES.N , according
to Cosmin Laslau, senior analyst with Lux Research.
There are also as many as 10 major battery cell
manufacturers not to mention the many startups chasing energy
storage business, Laslau said.
"By no means is GE the only supplier to the industry at this
scale," Laslau said. "But their strategy is much better than it
used to be."
"COMPETITIVE OFFERING"
GE would consider acquisitions to propel its new strategy,
Wyatt said, but GE is well-positioned on its own as it can
utilize its established relationships in the energy industry.
The storage business is part of GE's renewable energy unit
within its roughly $28 billion power and water segment, the
conglomerate's largest industrial division.
"We think we have a competitive offering," Wyatt said. "We
think we can carve out and capture share within it. There are
going to be many players within the space, but we think we are
well-positioned to compete and grow the business."
Retail energy and services company Direct Energy, a unit of
British utility Centrica CNA.L , is running pilot energy
storage projects with business and residential customers and
envisions GE as a potential partner, should GE decide to expand
into such smaller scale projects, said Cory Byzewski, vice
president and general manager of Direct Energy Services.
"It's such an emerging space that it's way too early to
define the winners and losers," Byzewski said.
GE is "a well-known company with a great balance sheet so
they have as much a right to win as anybody," he added.