My first post to Seeking Alpha

On July 17th, a blog entry I wrote was published on Seeking Alpha. Since this was my first foray outside the friendly confines of my own website, I've decided to add a copy to my blog after giving Seeking Alpha a few days of priority. The original entry drew a number of angry responses from people with interests in Ener1 and Altair, but I stand by my conclusions that:

1. Li-ion technology has a long way to go before it is safe enough to use in automobiles because it takes thousands of cells to make a battery pack and one failure can start a catastrophic chain reaction. I've been exposed to a number of trial lawyers over the years and have no doubt that they'll have a field day when catastrophic battery failures start injuring families;

2. Substantially all of the world's lithium currently comes from Argentina and Chile. While China also appears to have significant lithium reserves, I don't believe for a minute that the Chinese will export raw materials to American manufacturing companies when they can export batteries instead; and

3. The market rarely buys the "best available technology" if a suitable alternative is available at a lower cost. For over 20 years, I've paid a premium to work on Macintosh computers. While the Mac OS is and always has been objectively better, 95% of the market has not been willing to pay the price when a cheaper alternative was available elsewhere.

The full text of my Seeking Alpha blog entry follows:

Lithium-Ion Batteries and Centerfolds

They're glamorous, sleek, sexy and hot; the building blocks of pubescent dreams and mid-life crises. But they're expensive, temperamental, potentially dangerous and scarce.

For the last few years, news from the battery sector has been dominated by stories about advances in Li-ion batteries that hype performance while downplaying system costs and safety risks. As a result, U.S. companies operating in the Li-ion space like Ener1 (HEV) and Altair Nanotechnologies (ALTI) have attained nosebleed market capitalizations based on little more than dreams. While some recent articles have noted that global lithium supplies are limited, nobody has come to grips with the fact that it is prohibitively expensive to recycle used Li-ion batteries to a point where you can use the lithium in new batteries. So much like the oil industry, the Li-ion battery industry will have to come to grips with raw material shortages far sooner than anyone imagines.

In comparison, major lead-acid battery manufacturers including Johnson Controls (JCI), Exide (XIDE), Enersys (ENS) and C&D Technologies (CHP) have established product lines and rust-belt market capitalizations. Lead-acid innovators like Axion Power (AXPW.PK) and Firefly Energy are currently manufacturing commercial prototypes of advanced lead-acid batteries that promise huge leaps in performance at modest prices. To top it off, over 98% of used lead-acid batteries in the U.S. are recycled into new batteries; minimizing resource waste and pollution.

Size, weight and energy density are critical in cell phones and laptops, but far less important in transportation and alternative power applications: and despite all the safety talk, catastrophic failure rates of one cell in 10 million, or even one cell in100 million, are not comforting when it takes thousands of cells to make an automotive battery pack and a single failure can start a chain reaction (remember the Pinto).

History shows that two key factors determine whether a technology will be widely adopted: bottom line cost and proven product safety. I believe Li-ion fails on both counts because the technology is neither cheap nor safe.

There is growing consensus that energy storage is the next big investment opportunity because cost-efficient storage can significantly improve the profit potential and reliability of every alternative power technology. Transportation applications are an important part of the picture. But the market potential in transportation pales in comparison to bulk energy storage for wind, solar, and utility applications.

When you get real about issues like cost, safety and materials availability, I believe advanced lead-acid batteries offer an attractive alternative to their sexier but more problem prone cousins. In energy storage as in life, the plain and reliable girl next door is probably a far better bet than the airbrushed centerfold.