EnerSys (ENS)

Company website 2020 Financial Report Stock Analysis Climate Change Policy Report

10000

Customers

EnerSys has 10,000+ customers in over 100 countries

99^%

Battery Recycling

EnerSys recycles 99% of its lead-acid batteries

Market Share

#1 worldwide market share in batteries for electric forklifts and other commercial vehicles

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The Path to Drawdown: Batteries for Electric Vehicles

The first electric vehicle (EV) prototype was built in the early 1800s, but internal combustion engines dominated the automotive and transport landscape ever since because of EVs’ inability to overcome the challenge of building a lightweight, durable battery with adequate range.

Today, that picture is changing. Thanks to supportive policies and declining costs, there are millions of EVs on the road. The difference in their climate impact is remarkable. Compared to internal combustion engine vehicles, emissions drop by 50% if an EV’s power comes from the conventional power grid. If powered by solar energy, emissions are cut by 95%. Once households purchase EVs, costs to operate and maintain those cars are often cheaper than gas-based cars, too.

What used to be an obstacle for EVs -- the question of how far the car can travel on a single charge -- is now much less of a concern. The average range of an EV produced in 2020 is about 217.5 miles, up from 124 miles in 2015.

What’s making this increase in mileage possible is the progress in battery technology and growth in battery production capacity. The cost of batteries is falling fast as a result. The cost of lithium-ion batteries in particular -- the key technology for electrifying transport -- has declined sharply in recent years after having been developed for widespread use in consumer electronics.

But battery production needs to continue scaling massively to keep up with the electrification of transport. According to the IEA:

<::marker> Global manufacturing operations produced 170 GWh of batteries in 2020
<::marker> ~3,000 GWh battery production capacity is needed by 2030 to achieve long-term sustainability goals
<::marker> That’s CAGR of 33.25%

About

EnerSys (stock ticker: ENS) is a stored energy systems and technology provider for industrial applications. They make and distribute reserve power and motive power batteries, battery chargers, power equipment, battery accessories and outdoor equipment enclosure systems to customers worldwide. Headquartered in Reading, Pennsylvania, they provide aftermarket and customer support services to customers from over 100 countries.

ENS's Role in Drawdown

Almost half of EnerSys’ revenue comes from selling energy solutions to transport industries, particularly to industrial forklift, mining and other commercial utility vehicle companies. These solutions include lithium-ion batteries, chargers, monitoring and data analysis systems to enhance productivity.

Beyond energy storage products for these commercial utility vehicles, EnerSys also offers energy storage solutions for grid-interactive systems, off-grid systems, and industrial power and utilities. All of these are important Drawdown solutions that help electrify both the transportation and utility industries. In total, EnerSys’ sales revenue has been growing steadily, increasing by 5.22% annually between 2016 and 2020.

ENS: What We Like

EnerSys has a very diverse customer base (p. 7), with over 10,000 customers in over 100 countries. So they're not overly dependent on any particular end market. No single customer accounts for more than 10% of its revenues. The markets EnerSys serves include telecommunications, UPS, electric utilities, security systems, emergency lighting, services to broadband, renewable and industrial, thermally managed cabinets and enclosures for electronic equipment and batteries. This diversity means that EnerSys’s revenue base is resilient against business cycles and decarbonization.

We also love that EnerSys has a complete battery recycling program. EnerSys personnel pick up spent lead-acid batteries regardless of their size, quantity or manufacturer. This kind of programs ensure that used batteries are not mishandled or improperly disposed of so that they don’t harm the environment. This is the kind of circular economy business model that we want to see other companies adopt.

What We Want to See Improve

Focus More on Drawdown Solutions

A substantial minority of EnerSys’s revenue comes from non-Drawdown solutions, such as sales of products to the telecommunications industry and UPS. While these are important segments, supporting the electrification of transportation and enhancing the power grid are more pressing issues. We would like to see EnerSys massively increase its energy storage products for the EV market and utilities to make it easier to integrate renewable energy.

Set Clear Targets

EnerSys has a climate change policy that was updated in July 2021, in which the company expresses its commitment to reducing its own energy intensity and GHG emissions in its operations. But it stops short of revealing precise emissions metrics or setting concrete emissions reduction targets. EnerSys is in the process (p. 21) of establishing measurements & improvement targets in ESG areas. We urge them to include emissions metrics and targets to reduce them within a specific timeframe.

Enhance Supply Chain Transparency

EnerSys purchases the primary raw materials it uses from a number of suppliers around the world (p. 8). We commend EnerSys for holding its suppliers to the same environmental and climate change policy that it itself adheres to. That said, there is no information on who these suppliers are, what EnerSys’s scope 3 emissions are, and whether they are persuading suppliers to reduce emissions. We urge EnerSys to be explicit about emissions metrics in its supply chain and to push its partners to cut their carbon footprint within the near future.

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Allocated	Company	Description
0.78%	QuantumScape Corporation (QS)	QuantumScape makes solid-state lithium-ion batteries for electric vehicles. Their battery is lighter and charges faster, key to making EVs more attractive
0.30%	Livent Corporation (LTHM)	Livent is one of the largest lithium producers in the world. Lithium is the key metal in making batteries for electric vehicles and energy storage.
0.19%	Stem, Inc. (STEM)	Stem makes energy storage solutions that optimize energy use through the use of AI. Energy storage is the key to integrating more renewables into the grid
0.03%	Eos Energy Enterprises, Inc. (EOSE)	Eos makes stationary batteries and energy storage systems that can make renewable power more reliable and attractive
0.03%	Romeo Power, Inc. (RMO)	Romeo Power makes lithium-ion battery modules and packs for commercial EVs. High-quality batteries are critical for electrifying transportation
0.02%	CBAK Energy Technology, Inc. (CBAT)	CBAK makes lithium-ion battery packs that can be used in many electric vehicles, tools and energy storage applications, a key to electrifying everything
0.02%	Flux Power Holdings, Inc (FLUX)	Flux Power makes batteries for industrial forklifts and other utility vehicles. Electrifying these vehicles is a key component of solving climate change.
0.02%	Kandi Technologies Group Inc. (KNDI)	Kandi Technologies mass produces entry-level EVs for Chinese consumers and quickly swaps EV batteries. Both are critical for making EVs attractive.
0.02%	KULR Technology Group, Inc. (KULR)	KULR sells thermal management technologies that are used in the lithium-ion batteries to ensure they stay within safe operating temperatures.
0.02%	Westwater Resources, Inc. (WWR)	Westwater Resources mines and purified graphite materials, which is a key component in battery construction. They’re helping expand energy storage