Batteries Charge Up Energy Transition Opportunities

Jenna Dagenhart: We're seeing increased interest in sustainability globally, and that demand only seems to be intensifying. Joining us now with more is VanEck renewables analyst, Veronica Zhang. Veronica, to help put this into perspective, could you summarize the speed and magnitude of the energy transition?

Veronica Zhang: Sure, Jenna. So, I would first start with a framework of thinking here that kind of separates what's actually going on with a fundamental change in resources from conventional to renewable, such as the faster adoption of alternative energy, electric vehicles, breakthroughs in farming, manufacturing, and the like, with what's actually being reflected in the markets.

Veronica Zhang: When we look at renewables, for example, for the past decade, cost to build the infrastructure to harness this energy has been coming down drastically, with over a 90% drop in the cost of solar panels, wind blades at half the price, with much higher efficiency and batteries cheap enough today to compete with traditional generation. This shift has been happening quietly for years. The technology has been steadily improving and becoming much more cost competitive, but the markets are still playing catch up in some instances.

Veronica Zhang: We've had five years of double-digit growth in residential solar, yet the market is only 3% penetrated. Ultimately, if you think about the sheer magnitude of the manufacturing, transportation, ag, and power generation sectors, we're talking about 80%-plus of the global economy with only a fraction of that in transition resources. So, we are extremely confident that there is value to be recognized, and the key is to follow the technology closely, because it won't all happen at once.

Jenna Dagenhart: Where do you expect to see more demand for a broader approach to environmental sustainability?

Veronica Zhang: Currently, the area with significant growth potential, combined with competitive economics, is energy storage. In our view, batteries are the most common solution to the problem, with aging grid infrastructure, more renewables on the grid, and higher demand for electricity coming from the shift to electric vehicles.

Veronica Zhang: Our country's electric grid has a D+ rating from the Society of Civil Engineers, and we have been patching and repairing broken parts of the infrastructure for decades, and a complete rehaul is not feasible. So, at this point, grid instability has led to a lot of problems for people. Not to mention, the sources of electricity feeding the grid still include old coal plants, which is now much more expensive than some solar and wind farms.

Veronica Zhang: So you have a cost problem and an infrastructure problem. The remedy to both is in battery storage, which has been a major area of focus for two of the largest industries in the world, industrials and automotive. Costs have been coming down, because that is the key to adoption, and we've been following the evolution of the cell technology for years and think that we can start to see significant demand growth in this area over the next year or two.

Jenna Dagenhart: Well, Veronica, thank you for joining us.

Veronica Zhang: Thank you.

Jenna Dagenhart: And thank you for watching. That was VanEck's Veronica Zhang and I'm Jenna Dagenhart with Asset TV. To receive regular updates from VanEck's experts, please visit vaneck.com/subscribe.

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