Can you tell me about ESS Inc and what it does and some background about yourself
I've worked for both large corporates and startup companies, always in the technology space. I’ve been working in energy storage technology development since 2004. Even back then, before the current wave of green jobs, it seemed important that you need new technology to move things on in the energy space. The difference now is that these things have come through to fruition. So if you look at the history of energy storage, just bear in mind that in the last 150 years there’s been less than 10 battery chemistries that have been commercially relevant. It’s not been for lack of trying, it’s just that it’s fiendishly difficult. Batteries are very complicated and that’s very underappreciated.
The second thing to mention is that, again, if you look over the past 150 years, new technology is almost never displaced. They are additive, so that today the lead-acid battery, which is really the first chemistry, the first highly relevant commercial battery system, is sold in bigger quantities than ever. So I think that the model is that if you can store it, if you can store electricity in a battery, and you can have new batteries with new properties, there are lots of interesting things you can do with it. I think that’s at a very high level. It’s really the batteries that made smartphones possible. There’s lots of things without an energy source. You couldn’t do any of it [without batteries] and the key component for electric cars, batteries, to get to full decarbonisation.
I’ve been working in this space for a long time and became interested in ESS and was fortunate enough to be at the inaugural event of ARPA-E (ESS began trading publicly on the New York Stock Exchange on October 11, 2021.) ESS’ batteries provide a new tool for decarbonising the grid and further ARPA-E's mission of changing what's possible in how we generate, use, and store energy. (For a look back at ESS’ time as an ARPA-E project, check out the original blog and watch the video recorded with them in 2017.) Dr Isik Kizilyalli, who was the head of that made a very wise statement. He got up and said that it’s all about cost. He said that he was talking to the venture capital community, saying that it’s great to have people wanting to develop new technology and to bear in mind the energy space. The special thing is that differentiated technology is needed to get the cost down. Nobody is going to earn premium differentiated margins because by definition, electricity has to be a cheap commodity and that’s because it’s a basic enabler for much of what we do (this is in part due to the need for the energy markets to be split, no one is going to make renewable energy if it is not profitable).
And the second part of that I would say is that fossil fuels are an unbelievable gift, because the planet has spent millions of years concentrating lots of solar energy into an incredibly concentrated form so competing with that is difficult because you have all of this natural concentration into highly concentrated energy form but the astonishing thing is, in the case of both wind and solar generation, it actually happens and price points got down to levels that, even five years ago, people said were pipe dreams. And so you now have the situation where the lowest source of electrons in the right geography is solar or wind energy, so the remaining piece for decarbonisation of the grid is you have to make it dispatchable and have a mechanism for matching supply with demand, and that basically means you need storage. You can't do it without storage. It's not the only tool but I would say, it’s really the missing piece.
So as increasing amounts of Renewables are coming onto the grid and grids are struggling to adapt to some extent, how vital is getting more energy storage available as quickly as possible?
I think it's essential but I think it's also important to note you've really got a break point. Up to something like about 30 percent renewable penetration, the primary function of grid storage is really stabilisation. The heavy lifting on matching supply and demand even in places like California has done with gas. They've got 30 percent renewable and 60 percent gas. In the UK you have a different mix but you still have a very large role played by gas to provide the bulk energy you need to match supply and demand. So to get much beyond 30 percent renewable penetration, the batteries actually have a different function. It's no longer the function of things like frequency and voltage regulation, or matching supply and demand for a few hours, it's basically making bulk energy available over a longer period of time. This is really what's driving the interest in long-duration energy storage. It's not to try and replace lithium, it's for a different function. It’s to replace gas at the end of the day. I think actually you'll do your readership and everybody a tremendous service if you explain that. A lot of people are not clear about this – that there's really different functions within the grid and the lithium has done great service, but for a different function from what we need, to go to very high levels of renewable, penetration.
What is/are the main energy storage technologies that ESS is offering and what/who are your main markets?
Well, a little bit about ESS. It's a ten year old company. It started in 2011, and Craig Evans and Julia song who started the company were technologists who'd worked previously in fuel cells, but also in Vanadium flow batteries. So they were very familiar with flow batteries. A couple of sentences on why flow batteries are of interest, if you want to store large amounts of energy and get to a low cost point, the interesting thing about a flow battery is that basically you separate power from energy. You have like a reactor system, where, when the reactants go through it one way it stores energy and then it goes through the other way, it releases energy. And if you feed that system with a cheap electrolyte, then basically it massively, improves the economics of storing energy for 8, 10, 12 hours, because if you need more storage, you just flow more electrolyte through the system.
So, this is why this class of batteries, flow batteries, have been of interest. If you get beyond about four hours, you get to a situation where a flow battery offers a cheaper solution, because with lithium batteries, you store the energy in the electrodes. So the amount of energy stored is really related to the number of kilograms of anode and cathode collectively in the battery, so if you need to double the energy capacity need to double the number of cells. And so that means that it gets prohibitively expensive for longer durations.
And long duration, to get back to the point, it has to be cheap. That's why people talk about the levelised cost of storage because for a long duration, you're getting paid for just the energy, whereas, with a shorter duration batteries, you may be getting paid for frequency regulation services, balancing mechanism services or some other kind of grid service. So this is a different application, flow batteries fit that well and the product that they developed is exactly what they started out to develop. They said we need to have a flow battery where the electrolyte is made of safe and very cheap materials and they picked up a development path using iron-based systems which had been developed, looked at previously by people at Case Western University, and had a lot of interest because of its cheapness because the electrolyte is basically iron dissolved in salt water so there's no acid and there's nothing toxic in there. But the technology previously had not been commercially viable because it had limitations on cycle life and they set about it with some very deep science to understand what the mechanisms were that were causing that. Then in 2012 they got to accelerate things an Arpa-e grant, so they are actually one of the early Arpa-e, recipients, and I think possibly the first actually to be commercial in the market now, and the purpose of that was to really understand the fundamentals of how iron flow batteries work and what you need to give good cycle life.
They cracked that. They understood the science of it and then they developed a technically very clever fix with a device which they call the proton pump. The best way of thinking of that is that they established that there are conditions inside the battery operating conditions, where if you maintain those, it'll cycle forever with no electrochemical losses. What the proton pump does, it’s basically another side point. What limits the cycle life of most batteries are unwanted side reactions. What's going on, that you don't want to, which is happening at some very low level rate, is where you're either changing the chemistry with every cycle or you're losing active material because it’s going down an irreversible reaction path. So, that's really the generic thing for all batteries and they figured out what the unwanted side reactions are in this system and the proton pump reverses it. So it's not that the chemistry is fundamentally perfect - chemistry is never perfect, it's always has some tolerancing on it, but they figured out what the unwanted side reaction was and developed a device which is in circuit in the flow battery, because you're flowing electrolyte and continuously keeps the electrolyte in its pristine State.
So they set out to develop an iron flow battery and that's exactly what they did. I think that's also something that caught my eye because very often you see with battery technology companies is that they've taken like a shotgun approach, trying everything they could think of over a long period of time and trying lots of different things, whereas ESS is more of a rifle shot. They took aim at iron and have never strayed from working on this approach, that is to say iron has the most desirable properties in terms of cost and low toxicity. Therefore it's worth just focusing on nothing else but getting iron going and that's exactly what they did. So they completed the R&D in 2012, they built the first prototype systems for deployment in 2015 and 2016 and put those into the hands of sophisticated users and figured it out. They got a lot of built, based on that field experience, they then developed a much improved version, very much bigger version of the system.
This was developed in 2019 and then they worked through the process of not just how to have a good product, but how to make it cheaply, because all the good product is manufactured in the US in Oregon, and the Wilsonville operation and started production in 2021, that is end of 2021, with a robotized, assembly plant in Oregon. Right now that plant is going through a massive scale up. I think it's also worth mentioning that one advantage of flow batteries from a manufacturing point of view is that this is a robotised assembly of plastic and metal parts. This is not even closely similar to the challenges we have of making lithium-ion batteries. You don't need clean rooms, you don't need dry rooms and you don't need to be a master of coating 2 metre wide, thin, 0.7 micron foil at 80 metres a minute.
This is often underestimated by people that are big part of the know-how in lithium ion is in the process side of it, because to get to these low-cost points it has been done over a long period of time with massive volumes, originally consumer electronic batteries and laptop cells. A lot of it is just productivity and scale and mastery of these very challenging coating and assembly processes. So if you're not a master of the process, it doesn't matter how good your chemistry is, you will not be able to compete. Batteries are not like that, they're much more like a washing machine, but are lithium ion batteries, because you’ve got plastic bits, and some pipes, and sensors, and motors, and pumps and stuff.
So the flow battery that you’re offering, is that available now?
We've been shipping product since the end of 2021. So it's been a sort of a slow start up product. Most of it, in fact all of it so far, has gone to American clients. The first batteries will be coming to Europe this year, but I am limited to talk about the project because there’s already been a public announcement but there's a public announcement about a very interesting project with San Diego, Gas and Electric south of San Diego, where the battery is being combined with a 875 kilowatt solar farm at the end of a transmission line that goes through a fire zone and it's a very interesting application because what the system does is, if the transmission line is operating it buffers solar energy but also participates in the Californian ISO intuitive service markets and if the power goes off, the whole thing switches to become a micro grid, to provide essential energy to the local community. There’s an article that’s been published in the San Diego Union Tribune which has all the information on that.
We’ve also announced that Enel has placed an order for 17 of our energy warehouse containers to be used in a solar firming project. The battery is very interesting for solar because alongside its cheapness and low toxicity, one feature, which I particularly like, is you don't need to cool it. This is a hidden cost. If you're putting a lithium-ion battery in a hot place the lithium chemistry is very sensitive to heat, so the batteries typically have an air conditioning system which cools the battery to something like 23 Celsius. If you're doing that in Scotland where I'm from that doesn't consume much energy but if you're doing it in the Californian desert then you need a lot of energy in the heat of day and if you look at the images on the project dimension the containers sit out in the sun. I think you'll you will see a significant number of projects where the battery is combined with solar energy because that's a good fit but also in the future it's for bulk storage. It also applies to wind energy and you’ll see the combination of solar plus storage, wind plus storage, utility and C&I commercial and industrial. They are really the use cases which are growing tremendously at the moment.
I've heard in the past that flow batteries are usually most useful with big wind farms and solar farms. Is that the case? If so, who were your main customers?
The advantage of a flow battery is that if you want more energy, you just need more electrolytes. That’s where the fit comes from. I would go back the cases we've cited already, although I wouldn’t like to mention anything more, we have solar plus storage projects in California and other parts of the US and the first announced project in Europe is solar plus storage, being put up Enel.
How affordable would you say your solutions are and how do you expect them to improve energy prices for end users and consumers?
I would again like to side branch into how the flow batteries work and in a lithium battery you have a cost per cell and the cost of the battery is the cost per sale multiplied by the number of cells. In a flow battery you have a fixed cost for the balance of plant, the actual power system, and then there is a variable cost, the cost of the electrolyte. So the interesting thing about the iron flow system is that at massive scale, and I'll come back to the word scale, the theoretical cost of an iron electrolyte is only twenty dollars a kilowatt hour. So that's not the cost of the battery by any means but the marginal variable cost per additional kilowatt hour at scale is really low. Getting the total battery costs down is really driven by what kind of cost reduction you can achieve over time on the balance of plant. The balance of plant is a sort of reactor system, so that is also a very skill-driven business. The way I would formulate it is the chemistry has a very attractive underlying achievable cost position, but compared to lithium ion it has a massive scale disadvantage, because lithium ion has been in production for decades and ? has driven the cost down to very, very low values.
So ESS, long-term, it can really get to these very attractive cost positions, but the biggest lever on that is simply production scale. That's why the company right now is increasing its production capacity in the US factor 8 from approximately 2 gigawatt hours per year, which is an absolute drop in the bucket compared to what lithium people are already doing. The company now, we’re right at the point where scale matters and we’re getting to scale. The reason I mention that is because there are other technologies where the marginal cost is not low. In fact, it’s high, and scale doesn’t help you if that’s the problem you have.
Finally, what would you say your main targets are going forward?
Our main target is just to have massive customer interest, scaling production to meet demand. We’re laser-focused on scaling production because there is tremendous interest in the product for the reasons I mentioned and scale is the key to success in the US.
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