Alphabet Inc.'s (GOOG 1.31%) (GOOGL 1.25%) secretive moonshot factory, named simply "X," has yet another idea that might just save the world. This one, code-named "Malta," uses barrels of salt and antifreeze to store electricity.
That's right: At the same research lab that invented the Google driverless car -- now part of it's own company, Waymo -- engineers have been hard at work inventing a new way to store generated electricity for future use.
Image source: Getty Images.
This could be a big deal. After all, one of the major indictments against renewable-energy sources is that we often capture the energy from things like wind and solar at inopportune times. Energy storage is the solution to this problem. Is it possible that Alphabet may have cracked the code to a viable method that might also generate profits in the process?
Why does energy storage matter?
In just the first six months of 2017, California missed out more than 300,000-megawatt hours (enough to power tens of thousands of homes) because it had no good place to put the energy. California isn't alone. About 4% of all wind energy from Germany was rejected in 2015. Losses like these occur because you might have wind turbines and solar panels installed, but being able to use the energy they generate is another matter. Malta's team has heard this story countless times and its reminiscent to oil wildcatters flaring off natural gas -- that is until we found a way to capture and make use of it.
The team is excited, in particular, with the potential opportunity to help China with its energy needs. The nation of over a billion people is quickly industrializing and in need of all the energy it can get. Malta's assistance might also mean its parent, Alphabet may have a way into China -- a nation where its Google search engine is banned.
The other benefit to energy storage is the decreased usage of enormous electricity transmission lines. They're huge, expensive, and potentially hazardous. But they're necessary to get electricity across long distances. It's estimated that the U.S. loses about 6% of its electricity -- 2% in transmission and 4% in distribution. Other countries, where infrastructure is not as advanced, such as India, have losses pushing 30%.
Alphabet's solution
Enter X's Malta energy-storage solution. According to Bloomberg, X's engineers say that "Thermal salt-based storage has the potential to be several times cheaper than lithium-ion batteries and other existing grid-scale storage technologies." The Malta system "looks like a miniature power plant with four cylindrical tanks connected via pipes to a heat pump." The salt is heated up, while the cold air does its magic on the antifreeze. The process is similar to how a fridge or AC unit works.
X's rendering of Malta's energy storage process. Image source: X website.
The system takes in electricity (energy) from a solar panel or wind turbine and turns it into different streams of cold and hot air, which "rush toward each other, creating powerful gusts that spin a turbine and spit out electricity when the grid needs it," according to Bloomberg. The basic process itself is not new (just as your high-school thermodynamics teacher), but has historically been inefficient. However, the system now appears viable thanks to the advanced components Malta has designed.
Will it be as profitable as Google's search engine?
The purpose of Alphabet's moonshot factory (termed "Other Bets" in corporate filings) is to place numerous small investments in potentially huge technological leaps. The mission is noble, even if it's unlikely to move the needle on Alphabet's bottom line. Unfortunately, that has historically been the case:
| FY 2014 | FY 2015 | FY 2016 | |
|---|---|---|---|
| Google properties | $45,085 | $52,357 | $63,785 |
| Google Network Members' properties | $14,539 | $15,033 | $15,598 |
| Google advertising revenues | $59,624 | $67,390 | $79,383 |
| Google other revenues | $6050 | $7,154 | $10,080 |
| Google segment revenues | $65,674 | $74,544 | $89,463 |
| Other Bets revenues | $327 | $445 | $809 |
| Consolidated revenues | $66,001 | $74,989 | $90,272 |
Source: Alphabet FY 2016 10-K Filing. Amounts in millions. Table by the Author.
Alphabet reports its results in two segments: Google and Other. Last year, its Google segment, including its flagship search engine, YouTube, Android cell phones, etc.. produced a whopping $89 billion in profits. Its "Other bets" includes projects like Malta, its Nest thermostat, and Fiber internet and TV services.
It's not that projects like Malta can't be the next big thing for Alphabet. The problem is their potential payoff. Energy storage is indeed a laudable initiative. It just doesn't offer the payoff needed to push the company past search ads. Last year, these properties alone brought in $63.79 billion in revenue and $27.89 billion in operating income. Other bets garnered the company $809 million in revenues, and this is after spending $13.95 billion on research and development (15.5% of revenues) in FY 2016 alone.
To get an idea of Malta's potential payoff, let's consider its potential customers. The largest utility in the US and theoretical customer for large energy storage projects like Malta, American Electric Power spent $4.89 billion on ALL capital expenditures last year. This includes new plants and maintenance. X would have to sell AEP a lot of salt to impress Alphabet's shareholders.
Adding insult to injury, X's energy storage system is still in the testing phase and it isn't even the only company using salt for energy storage. German engineering company Siemens is also developing salt-based storage systems for its renewable-energy plants. As is often the case in the tech world, technological advancements are no guarantee of profits.
