Long Duration Storage - Iron Flow Batteries with Hugh McDermott, ESS | EP173

Where we like to compete or where we expect we're going to do better than lithium ion is going to be in those longer duration, higher energy requirements. Resiliency is going to play a role cycling flexibility, where we can do multiple cycles in a day not worry about wearing out the battery prematurely or where we don't have to have any trade off decisions to be made. If I use a battery heavily today can doesn't mean I have to use it less tomorrow I take. I used it two cycles today. Is it one less cycle this year that I get to use my battery under my warranty? Those are typical trade off decisions that lithium ion battery owners have to make every day?

Are you speeding the energy transition? Here at the Clean Power Hour, our hosts, Tim Montague and John Weaver bring you the best in solar batteries and clean technologies every week, I want to go deeper into decarbonisation. We do too. We're here to help you understand and command the commercial, residential and utility, solar, wind and storage industries. So let's get to it. Together, we can speed the energy transition.

Today on the Clean Power, hour long duration energy storage. My guest today is Hugh McDermott. He's the senior vice president of sales and business development for ESS Inc. Welcome to the show, Hugh.

Thank you, Tim. Great to be here. Good to reconnect again.

Yeah, you know, I met you on a panel for Reuters this summer talking about this very subject. And I am, you know, me and my listeners are very interested in storage, especially longer duration storage. I mean, it seems like the two to four hour problem has been solved with lithium ion for the moment. And there's lots of that happening. But ESS makes an iron flow battery? I'd love for you to explain to us in lay people's terms as much as possible how an iron flow battery works. It's not. It's not really new technology. It's been developed over decades, right. So that's, that's one of the cool things about batteries is they are very old, we've had batteries for well over 100 years. It's just that they're now bursting onto the scene with new applications for electrification. So anyway, here, tell us a little bit about yourself. And then we'll dive into the technology. And then what's going on with ESS because you have a lot of exciting news.

Yeah, thank you. Well, I won't spend too much time on myself. But my background has been in the energy transition for the entirety of my career. For a third of it was really around technology planning and commercialization of technology, mostly in advising companies. middle third was doing infrastructure development for conventional power, technologies, transmission, power generation, most of that around the world and kind of the spinal Third, if you will, my career has been really on the cutting edge of technology, working in the Eevee transportation space working in smart grid, smart city. And more recently, solving what I think and a lot of folks in our industry consider to be the Holy Grail, which is storage. Electricity, as we've known, is not something that has been able to be stored for forever, it's got to be grids got to be balanced in real time. Now you're bringing on all the renewable energy and you have all that intermittency and storage is really the the panacea, the shock absorber that makes all that possible. And there's a real reason why we exist. And I'll be happy to expand on ESS know the long duration part of it. And it really comes down to the fact that we've got increasing electrification due to transportation, primarily putting larger loads and strain on the grid. We've got zero carbon policies and and decarbonizing of the grid that's driving renewable energy adoption, both behind the meter and in front of the meter, massive adoption going on around the world. And what we've seen, this is pretty much true, every grid as you get above 20 to 25% of renewable energy on a grid. Now that you mentioned earlier, the two to four hour kind of battery storage no longer cuts it you need longer duration storage and and so we play in this space and more than four hours less than 24 hours and our really our sweet spots is in that kind of eight to 12 hour type use cases.

So what exactly is an iron flow battery? People may have heard more about vanadium flow. And and there's, you know, one of the cool things I think about being alive and in the clean energy transition today in the 2020s is that there, there's this emerging emerging plethora of technologies, some of which have been around bound, and been developed for decades, and some of which are new and emerging. But I would say iron flow is one of those technologies that is is pretty storied. It's been around. It's just now breaking out, so to speak into the mainstream, but what is iron flow storage? And why is it now that we're starting to hear about it?

The original concept or the original, say, research on iron storage, you're correct, it's been around for decades, the fundamental problem that the early researchers were running into, was being able to charge and discharge multiple cycles, within literally a few cycles of a battery, the corrosion would take place, the carbon electrodes would dissolve, everything would just basically go kaput. The problem we've we've fundamentally solved first, this was a thesis going back almost a decade and a half ago now was to essentially inert that process. And so in, in our battery, an iron flow battery is a saltwater battery, with iron saturated in the salt into the salt water. And during the charge cycle, were electroplating, where basically, the iron will come out of the solution and just create a an even plating onto the carbon electrode, which is a flat plate. And we're just building up the thickness of pure iron on that. And during the discharge cycle, we're just reversing the polarity of the battery, we're not changing flow directions or anything of that nature. And what happens is, the iron will dissolve back into the solution. What we solve fundamentally is to make that process repeatable for 10s of 1000s of cycles without any loss of performance in the battery. That was the fundamental breakthrough. To make it from a parlor trick kind of we can show voltage for a few cycles to actually maybe have the beginnings of a product. The second thing we had to solve was, every time you do that charge cycle, there's also side reactions that take place in the electrolyte. And what we saw was a way to reverse those side reactions in situ. So in a closed loop fashion, as those side reactions are happening, we're reversing them downstream after the battery, so the electrolyte travels in a closed loop throughout the battery. And when it's inside the battery modules, we're able to charge or discharge and then we're, we're separately processing the electrolyte to reversal side reactions. And that, in a nutshell, is what the technology is about. And what distinguishes it from most other battery technologies is that ability to cycle it, you can charge and discharge for 10s of 1000s of cycles without wearing out the battery. And you don't have limitations, then in terms of when I want to start and stop what use case I might want to apply it, I can be I can use it for virtually any use case that I might deem to apply the battery. The fact that it's a saltwater base battery and iron to the most widely available ingredients on planet Earth. It's super sustainable, it's a safe battery, it's not toxic to the environment, not toxic to humans. So that's another major plus point. So safety, ease of permitting, it's not going to start fires not going to blow up in a fire. Those are all other attributes, of course have a water base battery.

And are you suggesting that truly there are no supply chain issues with the materials that go into your batteries.

We don't we're not subjected to the same kind of challenges that say lithium ion, all of our core components, we make all our batteries right here in the US over 90% of the parts that go into our battery source from us vendors. So there's no rare earth minerals. There's no exotic materials that go into it. The plumbing is very simple. It's PVC, piping, tanks, or fiberglass tanks, because just saltwater, essentially that we're restoring in us. And everything else that goes into the making of our products, a couple of pumps, and you've got some motor drives, those are standard off the shelf kind of items, and everything fits into a 40 foot shipping container.

And the electrolyte flow batteries have different tech, you know, using different technologies require the electrolyte to be replaced. At a certain point, what is the lifespan of the electrolyte?

That's another part of our story. Thank you for touching on that. We don't have any the battery and the electrolyte and the plumbing that unit that system that literally can last for decades. It doesn't need to be replaced. We don't replenish it. We don't augment it in any way. So once the system has been commissioned and put into service, we never have to touch the electrolyte again.

Wow, that's cool. So let's talk about some use cases for iron flow technology. And then we'll get into some of the news. So you have a new partnership with Honeywell. And you're you're getting real projects in the ground now, though. So what are at face value? When you look at the grid and the built environment? Where is it that ESS plugs in and attacks a problem? And what is that problem.

So we kind of probably would divide the world into two broad segments behind the meter, which is typically going to be micro grids and your commercial and industrial customers. And then in the front of the meter, which is typically going to be your utilities and your IPPs and associated infrastructure that they may own or operate. In the behind the meter, typical use cases, micro grids, our customers are most commonly seeking the benefits of lowering their energy costs by pairing solar plus storage to meet some of their peak demand and lower their bill. But additionally, resiliency, as we've seen with weather changes, climate change, and outages in the West, we have wildfire conditions, where utilities can cut off power for days at a time. In East you got thunderstorms and kind of outages, both in the summer and the winter. Those outages are a real cost to doing business, send employees home loss, production, and so forth. Being able to have right through capability, that resiliency, long duration storage gives you that right because you've got additional capacity to not only carry your renewable energy that you may be producing during the day through the night, maintain your operations, but have energy in reserve for when those outages occur, that you can ride through and minimize the disruption on your business. That's a very typical use case that we're seeing today. And where we're getting a lot of traction. And those would be from the direct customers themselves. The developers of those projects, even utilities are, are now getting into that space where they will be the owners of those and operate them on behalf of their customers to provide those benefits. We have some utilities that are that are experimenting with those use cases on the front of the front of the meter type segment, if you will, it see utilities who have large renewable mandates they've got to achieve. They're operating in grids with a lot of intermittency due to the renewable penetration that's already there, they're starting to see curtailments starting to see even negative pricing happening because of overproduction and they can't absorb. Those are the kind of classic use cases that utilities are increasingly looking for long duration, energy storage and our products.

And if I am a let's talk a little more about front of the meter first, if I'm a utility, I'm in the process of phasing out my fossil technology, coal, natural gas, replacing that with wind, solar, and batteries. And this could include very large coal and gas facilities, you know, gigawatt scale power plants, or it could include smaller peaker plants, those are on the order of, you know, several megawatts up to maybe 50 megawatts, or 100 megawatts, but much smaller than, than the, than the big, big dog, so to speak. But so, if I'm a utility, and I'm and I'm doing this process, and I'm and I'm weighing the pros and cons of different technologies and different durations of storage, right, because, you know, you have Moss Landing, where they're doing a large scale lithium ion battery deployment as part of this process, where does Where does iron flow fit in? And and are you truly now disrupting, so to speak the lithium technology?

Well, I don't want to be so bold to say We're disrupting the lithium, it's that it's got a massive head start. Right, they've been building out manufacturing capacity innovating for for three, four decades around that technology. So they've got massive supply chain and production capability. And that's what's allowed them to drive the price down to the point where it started to make sense for storage. And we see, you know, across the spectrum of all the technologies out there, lithium ion for the foreseeable future, is going to continue to dominate. It's just that big a market and they've got that much of a head start. Where we're, we're we're going to be concentrating and where we think we'll have more than enough opportunity for ourselves is in the longer duration space, which is going to make up the forecasts that we've seen McKinsey did one year ago, something on the order of 140 terawatt hours of long duration energy storage Globally over the next 20 years, it's going to be required. That's a massive market for us. And that's still only maybe one, one, it's maybe less than 10% of the total storage market. That's going to be required when we look across all the duration, legs, lithium and, and otherwise, where we where we like to compete, or where we expect we're going to do better than lithium ion is going to be in those longer duration, higher energy requirements. Resiliency is going to play a role cycling flexibility, where we can do multiple cycles in a day not worry about wearing out the battery prematurely or where we don't have to have any trade off decisions to be made. If I use a battery heavily today can does that mean I have to use it less tomorrow do I take I used it two cycles today is it one less cycle this year that I get to use my battery under my warranty, those are typical trade off decisions that lithium ion battery owners have to make every day. In our in our case, that operational flexibility where we could use the battery for multiple business cases, multiple use cases, in the same installation, I'll give you an example. We have a micro grid project, where we have a customer deployed a battery on behalf of utility customer deployed a battery on behalf of a customer. The first use case was to help that customer reduce its energy bill during the summer months when there's peak demand. Half of the energy in that battery is going to be reserved year round, however. And that's for resiliency, because that customer happens to be on the end of the utility line where power outages and power quality tend to be a problem. And it's prohibitively expensive to go and upgrade that line. So that resiliency is the second use case, the third use case is in outside those summer months, when there's not a peak demand tariff, the utility is going to be using that battery and dispatching half of its capability for the utility use. So the utilities got a use case on it to provide support for that end of that line. distribution line, they've got a energy savings benefit for the customer during the summer months, and they've got a resiliency benefit for both utility and customer. In the event there was ever any outage, they can keep critical equipment running for up to a day three use cases on the same battery. Now, if you ever have a lithium ion battery in there, each one of those comes at a cost. If I use a cycle, if I happen to use two cycles or three cycles now, because of resiliency event, that's three cycles, I probably can't use under my warranty in that calendar year for anything else. So that there's flexibility around those kinds of things. Or if I happen to use my battery heavily and then it because there was some kind of grid requirement. And suddenly there's an outage, I might not be able to have that reserve or be able to use that battery right away, because I may have to rest it because of operational and safety constraints. So there's a lot there's it opens up a new regime, I guess is what I would say about flow battery in our battery is that we think we're kind of creating new uses that previously had not been thought of before, because the whole world had been kind of trained to think about how you use energy storage around the constraints of how you could use lithium ion.

Well, let's talk about the Sacramento Municipal Utility District, otherwise known as SMUD, I think Correct. smod is trying to clean its grid. But what's what's going on in Sacramento.

So SMUD has a an aspiration, a goal a plan to be zero carbon as a utility by 2030. It's one of the most aggressive plans in the country. And they laid out their vision of how they're going to get there. And part of achieving that vision. They assessed that they're going to need some long duration energy storage to get there. So we're helping to fill a a an identified gap that they have in meeting their zero carbon goals by bringing long duration energy storage. The partnership that we announced with them last year, late last year, was to deliver two gigawatt hours of energy storage, iron flow battery over the next six, seven years to SMUD. It's a multi phase program. And we're in the middle of the first phase of that. And very recently, we just commissioned the first project under phase one, one of two, and that's a half megawatt project. It's intended to be a replication of behind the meter or distributed energy resource application it's going to be put into commercial service later this year. And what they'll be testing is different dispatch regimes different operating protocols gathering information off of that. Next year, we install a four megawatt project for them that will be intended to replicate the front of the meter. type operation again, through the learnings on how it will get integrated into their distribution operations, their their energy dispatch, and grid optimization. We'll use all those to feed into the design and they roll out a phase two, which will be somewhere between 50 and 75 megawatts. That that's planned.

Very cool. Yeah, I mean, I'm reading a little bit here about smart, it's the sixth largest community owned, not for profit electric service provider. And D, you know, offhand, you know, when when, when this project comes to full fruition, so to speak, you know, what is it that smod is phasing out as they phase in the ESS product.

So they've still purchase some fossil fire energy, some of it imported from Arizona sun comes into the grid. So they're going to be phasing out some of their thermal generation, they're going to be installing or, or contracting with some significant amounts of solar, to be added to their grid over the next several years. And so they foresee the need for a significant amount of energy storage to be able to essentially turn that renewable energy into baseload energy.

Yeah. And as you know, many of my listeners know, solar generates an amazing peak in the middle of a day, right? Well, that's not necessarily the peak load on the grid. And so you want to take that peak, and shift it to the shoulders, either to the afternoon or to the morning or both. And that's why long duration storage is so important. I mean, it's a both and we need short, medium, and long duration. And so it's now happening, right, we now have the technology, we just need to get it out there in the wild. Before we switch to the story about Honeywell. Are there other use cases or case studies that you'd like to highlight for our listeners? Well, I'll

give you another example of a use case that nobody had thought of, you know, before an iron flow battery kind of came to market. We're doing a project for the Amsterdam airport, Schiphol Airport Skald. And they are, they are the lead airport for the European Union to demonstrate how to decarbonize airport operations. And so are we have a battery that was shipped earlier this year, the commissioning of that battery starts next week in Amsterdam, and the use case there is to remove the fossil fired generators that they use to power the Jets when they're on the jet Stan. So every time you were I get on a get on a plane, and we walk down the jetway to board the plane, that planes not running its engines at that time. So it has no self generation, they've got a little portable cart that's sitting somewhere under the plane plugged in. And that's where the AC and the laser coming from. Those are typically fossil fired devices, they're going to be replacing those devices with electric carts. And those electric carts are going to be charged off of our battery. And so what they're going to be looking at and the pilot is less around does the technology work or not? It's going to be more around the learnings of how do we optimize the design of how many carts we need, how the battery gets charged and the charge management so that we can be charging multiple carts, in short, short times of you know, 30 to 60 minute kind of charge cycles, but all throughout the day, and managing and figuring out how then they would roll that out for the entire airport. And then subsequently across all of Europe as the lead it lead entity. So that's a use case that lithium ion batteries would never be considered for. They would not put the lithium ion batteries on or near airport operations and thrive Jeff, and so forth for safety considerations. And nobody had ever thought of that type of application until a technology like ours came along to sort of say, hey, that's, that's different. How might we differently use a battery that could do the kinds of things we can do?

Yeah, we're starting to see electrification of all kinds of heavy equipment. This is equipment that moves for example, shipping containers, these big trucks that pick up and then move shipping containers. I had a very long conversation over the last two days ago about this. And so you're you're installing shipping container size batteries that then have charging infrastructure right for these big electric vehicles. And and you know this is important because it all So reduces the need to upgrade the infrastructure at those facilities, when you think about all the electricity needed to charge the batteries, so to speak, if if that has to come, like in real time from the grid, then you then you have to really upgrade the panel infrastructure. That's right. But having a big battery that can trickle charge, so to speak overnight, for example, when there's no airplanes flying around, and then it's ready to roll in the morning. First thing, that kind of thing. So we're, you know, we're really just on the on the verge of a massive deployment of electrification of all kinds of heavy equipment. So that's, that's very exciting. All right. Well, let's talk about Honeywell. What I mean, everyone knows the brand. Honeywell, you're a big industrial company. But what what is the partnership with Honeywell?

Well, we're excited about it naturally. It's a for us, it's really a validation of a lot of the work that we've been doing. And in the form of, you know, Honeywell, saying, Hey, we see long duration, storage being a part of the future for all the energy services and offerings that they take to their customers globally. And they've made their choice, they want to use ESS iron flow battery as their technology of choice for long duration energy storage applications. So that's probably the most exciting thing for us about it is that just validating that, you know, it's here, it's now it's commercially available, and you've got now a fortune 100 company that is going to be deploying terms of what actually constituted made up the agreement, they've, they've invested directly into ESS. So they want to participate in our growth. They placed their initial order already. And so we have a an order, we're now waiting for details on where that equipment is going to go what project they want to deploy it on. And then more broadly, they've set a goal to purchase at least $300 million worth of products from us over the next several years. And so that creates a tremendous opportunity for us, obviously, we see Honeywell as a as a global channel partner, what they what they specialize in, is providing turnkey solutions to their customers, building automation, energy efficiency services around the world. And so we're really very, very pleased and excited that we get to be one of the key components in providing those solutions to their customers around the world. So it's a it's a win win for us both.

And so they're agreeing to buy a certain amount of product is that the bottom line here?

They have they've set an initial target of$300 million of the purchase of our product over the next bunch of years. That's right.

Very cool. It says here, the current global energy storage market is estimated to be $50 billion per year and is forecast to grow significantly with a cumulative investment of up to 3 trillion by 2040. And that's according to the LDS Council, and McKinsey and McKinsey. So well, what else should our listeners know you about ESS Inc. I mean, I do have to say you've, you've done a great job, you know, carving your way into our awareness that we energy professionals are definitely aware of ESS. And, and you know that space is getting more and more crowded, of course as the as the days go on here. But but if you're an energy developer, what what would I guess? Let's say you're a community solar developer, or a community scale micro grid developer. What should you know about ESS compared to other options that they have in the marketplace?

Well, I think for that type of customer, well, a lot of customers but especially those who are in sort of community scale developments and in communities, probably the first and foremost slot and you see this in the news, increasing regularity. People are worried about safety, right, putting a battery in the backyard, a lithium ion battery, even the smallest incident leads to shelter in place or worse evacuations because of toxicity, air plumes and so forth. We don't have that issue. Set so we don't have any of the stakeholder concerns. It's a safe battery. That translates not only into easier permitting and less stakeholder resistance, or or none, but also faster to deploy faster to develop, because your permitting is that much easier. We don't require fire suppression. You don't require any of those kind of offsets and safety reviews that would typically be required for lithium ion batteries. So we can de risk your project. In other words in multiple dimensions just simply by the inherent characteristics of the technology, not that we do anything better or different. It's just the inherent nature of our technology versus lithium ion. Yeah.

And I'm a I mean, that is a very compelling argument, I have to say, Okay, I love that on a cost basis, what is the delta? And, you know, and you're not just competing with lithium ion, honestly, right? You're, you're competing with other flow technologies. But but how does it How does it pencil

depends on the use case, everything is very specific to the project. There's a lot of variables that go into that, I would say that we're on par with lithium ion battery and the use cases that we target. Today, we think that story only gets better over time. Because we're still very, relatively speaking compared to lithium ion, we're just a fraction of their installed base a fraction of their installed production capacity. So we don't have the volumes yet to get there. Our our business strategy and how we drive down costs is predominantly driven by ability to scale the manufacturing capacity and get our suppliers to come with us on that. And so we're near parity, I would say with lithium ion today, we think that story only gets better over time, as we get to scale our costs go down. The second aspect is that longer durations to move from A to 10, or eight to 12 hours, and certain use cases are starting to emerge where that's kind of the minimum expectation, you take hydrogen, for example, green hydrogen wants 12 to 16 hours of duration. Our our economics become even more compelling, because for us, we're essentially all we're adding is more electrolyte, battery models, we can design those, you build them once, and they can be from eight to eight to 16 hours in the future years to realize that full value of that module is just a matter of adding more salt water and, and dissolved iron. So the incremental cost or the marginal cost of longer and longer duration is massively in our favor in that regard.

And from a manufacturing perspective, you're you're you're building batteries in Oregon today. Is that where your main production facility is?

That's right. We do everything we're made in America design in America, almost all the sourcing is in in the US. We do have a partnership that we announced previously in Australia. And that partner will be doing the assembly of our products in Australia that's targeted to come online sometime in 25. We have some interesting customers down there who are looking at that use case of replacing baseload coal that you talked about earlier. With standalone large scale energy storage. Just last week, the premier of Queensland Government announced the commitment to do 150 megawatt standalone battery using ion flow battery technology in Queensland.

And what is the how does your capacity ramp in the next five years say what do you what are you able to produce in megawatts or gigawatts today? And and how does that How do you anticipate that ramping in the coming years?

Yep, so we're just we're a little bit less than a gigawatt hour of manufacturing capacity at our Oregon facility today. We're not operating at that capacity yet. But that's the nameplate capacity of the equipment that we've installed the automated line that we were going through the shakedown on currently, we reckon we have space to probably put four to six more of those lines here, under this existing roof for battery manufacturing capacity that could take us to somewhere two and a half, maybe as much as three gigawatt hours total. Under this facility. Before we would outgrow this facility, we do know we will be looking for additional facility space in the coming year or so for the integration of the product. So making battery modules would stay here. But we will need additional space to continue to grow the full product integration. So build battery modules and then the containers and the testing of the batteries. That space will be growing into in sometime in the next 1218 months.

Excellent. Well, please check out all of our content at cleanpowerhour.com Give us a rating and a review on Apple and Spotify. Subscribe to our YouTube channel and reach out to me on LinkedIn. I love hearing from my listeners connect with me. You can also contact me via the website cleanpowerhour.com. With that I want to say thank you so much Hugh McDermott with ESS Inc. coming on the show. How can our listeners find you?

They can find us at Essinc.com. And my email address is hugh.mcdermott@essinc.com.

Excellent. I'm Tim Montague. Let's grow solar and storage. Thanks so much. Hey, listen There's, this is Tim, I want to give a shout out to all of you, I do this for you twice a week. Thank you for being here. Thank you for giving us your time. I really appreciate you and what you're all about. You are part and parcel of the energy transition, whether you're an energy professional today, or an aspiring energy professional. So thank you. I want to let you know that the Clean Power Hour has launched a listener survey. And it would mean so much to me. If you would go to cleanpowerhour.com. Click on the About Us link right there on the main navigation that takes you to the about page, and you'll see a big graphic listener survey, just click on that graphic, and it takes just a couple of minutes. If you fill out the survey, I will send you a lovely baseball cap with our logo on it. The other thing I want our listeners to know is that this podcast is made possible by corporate sponsors. We have chint power systems, the leading three phase string inverter manufacturer in North America. So check out CPS America. But we are very actively looking for additional support to make this show work. And you see here our media kit. With all the sponsor benefits and statistics about the show. You know we're dropping two episodes a week. We have now over 320,000 downloads on YouTube. And we're getting about 45,000 downloads per month. So this is a great way to bring your brand to our listeners and our listeners are decision makers in clean energy. This includes projects executives, engineers, finance, project management, and many other professionals who are making decisions about and developing, designing, installing and making possible clean energy projects. So check out cleanpowerhour.com both our listener survey on the about us and our media kit and become a sponsor today. Thank you so much. Let's go solar and storage