'ESS Warm Breeze' Arrives Amid 'US Winter Storm'

[Asia Economy Reporter Hwang Junho] The winter storm in the Texas region of the United States has reversed the fortunes of the U.S. stock market. While renewable energy stocks, which had high expectations following the establishment of the Joe Biden administration, declined, stocks related to next-generation energy storage systems (ESS) and fuel cells rose. Meritz Securities released a report analyzing these stock trends on the 20th.

Is Wind Power the Main Cause of the Texas Blackout?

Yeongdeok Wind Power Complex, the first large-scale wind power complex in Korea. Multiple shots taken with a Nikon D5 camera and a 24-70 lens. / Uljin, Gyeongbuk = Photo by Dongju Yoon doso7@

First, the month-to-date (MTD) returns for global leading renewable energy companies compiled by Meritz Securities showed Plug Power (-21.3%), Vestas (-2.3%), and Enphase (-3.0%). Despite the high expectations for renewable energy with the launch of the Joe Biden U.S. administration last month, returns actually declined.

The cause of the decreased returns is attributed to the record blackout in Texas. Texas Governor Greg Abbott pointed to the state's high wind power share (23%) as a major cause of the blackout. On the 16th, appearing on Fox News, he stated, "Wind and solar power plants, which account for 10% of the total power grid, stopped," adding, "This caused a statewide power shortage." Governor Abbott, a Republican, further emphasized, "This is evidence that fossil fuels are necessary," and warned, "The government's Green New Deal policy would be fatal to the country."

However, according to fact checks by local U.S. media, Governor Abbott's statements appear to be only about half correct. It is true that some wind turbines froze and failed to operate normally due to the winter storm. But this problem occurred across all types of power plants. According to the Electric Reliability Council of Texas (ERCOT), which operates the Texas power grid, about 80% of the state's energy during winter is estimated to come from fossil fuels such as natural gas and coal. Additionally, of the 45GW of power lost in the state, 18GW could have been produced by renewable energy like wind, while 28GW was expected from fossil fuels. The proportion of energy produced from fossil fuels is too large to claim that wind power was the main cause of the blackout.

Centralized Power Grid Design is the Cause... Distributed Power Sources Expected to Benefit

Rather, the fundamental cause of the Texas blackout is attributed to the independent power system structure and centralized power grid design. As a result, the blackout has increased the need for distributed power sources that can decentralize the centralized power grid, reduce the system's burden, and serve as emergency power. Essential devices in distributed power sources are energy storage systems (ESS) and fuel cells, which have recently surged based on this analysis. ESS-related stocks such as Star Peak Energy and emergency generator-related stocks like Generac rose 31.0% and 35.8%, respectively, in February.

Mungyungwon, a utility research analyst at Meritz Securities, said, "Domestically, a 'Distributed Energy Activation Roadmap' is scheduled to be announced in April," adding, "Since policies to activate distributed power sources, such as providing differentiated incentives based on the distance between power generation and demand sites, are expected to be announced, attention should be paid to the domestic ESS and fuel cell industries." He also added, "As the importance of transmission and distribution network investment is highlighted, medium-voltage equipment companies are also expected to benefit."