09 - Entering the BESS optimisation space with Steffen Schülzchen (Founder @ Entrix)

[MUSIC PLAYING]

Hey, guys. I'm here with Steffen. I got it wrong. [LAUGHS]

It's all right.

Let's just do it. This is casual. It's fine. I'm here with Steffen. We're on a motor podcast.

We are in a hotel room somewhere in London. And we are going to talk about Entrix, which is your new business. And you guys are moving really, really fast.

But before we get to that, let's talk about you. You were a management consultant. I think--

what's your background?

Yes I was a management consultant back in the days.

My background actually is in business administration. So I did that for my studies. Because when I came out of school, I didn't have a clue what I wanted to do. So I thought I'd just follow the money into business administration. I did that for three years in a small village, then broke out of the village.

I went to Munich, which was a bit bigger than the small village. And did a bit of mechanical engineering on the side. Me being German, the mechanical engineers obviously always raised their eyebrows when I tell them that I did one semester of mechanical engineering. In Germany, you're only consider to be a proper engineer when you've at least done a PhD. So that didn't get me very far, but I like the technology bit of it.

And then indeed, I went into management consulting. And that's how I eventually also ended up in the energy sector. But not on purpose, but by accident. And my employer back then forced me to work for an energy project.

The first project is the only one that I couldn't decide what I wanted to do.

I wanted to do automotive, hi-tech, all this kind of stuff. They put me into energy. And back in the days, I thought that would be a conflict of high tech and cracking the hard nuts. But actually, it turned out that it's not.

And so you were with McKinsey?

Yes, exactly.

And a lot of travel?

Yes, quite some traveling. Not as much as some others do. There are some people who basically run at the globe on a weekly basis. Unfortunately, I didn't have to do that. Also it wouldn't be that appropriate anymore these days. But I was primarily working within Germany and did a bit of traveling across Europe into the Middle East.

And so you're now based in--

the team's based in Munich.

Yes.

We're going to talk about Entrix in a second. But firstly, Munich my heart goes out to Munich. Just an incredible place.

It is.

I mean, I can't imagine a better place to live.

Some of those beautiful winters, beautiful architecture, beautiful--

people are pretty laid back.

It is awesome. And where about in Munich is it?

Where about in Munich?

Yeah, we're going there. Because there's a river where people do--

Surfing.

--surfing on the river. Is it near there?

That's near Eisbach. And, well, relatively speaking, we're in London. So I would say relatively speaking, for London standards, our office is close to the Eisbach.

But within the Munich map, it's a bit away. But probably the subway could get you there in 15 minutes or so. But so--

but so far--

I know where you are.

--the team with the surfboard. Close to the Central Station.

And so do you want to tell me what you guys are doing in the energy space?

So basically what we are working on is building and creating a new optimizer. So optimizer, probably your crowd exactly knows what it is. But for the people who are not that deep in that space yet, basically what we try to do with Entrix is tell batteries what to do at which point of time and to maximize the value that you can get out of the battery.

That sounds like capitalism. It is, of course, to a certain extent. But at the same time, that's what I like about the industry. Getting as much value out of the battery highly correlates with also adding the highest possible value to the energy system.

Yeah, of course.

So that's our ambition and our goal that we're working on right now.

And so how many people are there as a team in Munich? And do you have a team that--

you're all based over there?

Yes.

And you're going to be in the UK market?

Yes.

In fact, I want to talk to about the UK market. Because you've been--

you're fresh eyes on the UK electricity market and you've gone through the process--

I'm going to put in brackets here, the pain, of [LAUGHS]

the getting into the BSE, and all of that stuff. And I think you're the first person we've spoken to on the podcast who's done that. So I want to make sure we talk about that in a second. But so Entrix, how long has it been going?

Who's involved? What's the technology?

So we started last summer around mid-year. The idea emerged and we started--

the company was registered in August-September. So has been a bit more than half a year by now.

August-September of 2021?

Yes.

OK, right. So we're fresh. Speaking of fresh.

We're still very fresh. And we started with a group of three people plus one working student. Now we are 12. And next week it will be 15 in April. And hopefully getting towards 20. So it's growing.

And it's--

I love the bunch of people that we're having. Because it's the wide combination of data scientists and people with a bit of an energy background that want to develop or that are working on the algorithms and the technology that we're using. And then on the other hand, we of course, also have some generalists and business people who are responsible for making sure that people have the right commercial model around what we're doing, and build the company, and start forming partnerships and the likes.

But if you guys have only been going for half a year or so, and you've already--

you've had to do a lot of things at the same time concurrently. So you've had to do the market access, the technology, the forecasting all under growing the team. And you did all that in six months. So I mean, first thing is, you guys are moving really, really fast.

For the people watching, what do you do in Entrix?

I'm the managing director and founder of Entrix.

And so what's the vision for the company?

I think overall what we are working towards too--

obviously we don't want to do on the grid-scale battery optimization in the UK. But I think it's rather a question of providing more flexibility to the energy system and using the flexibility to make the energy transition in a--

to make the energy transition happen in a somehow efficient and effective way. That's the broader idea.

And I think that grid-scale battery storage is a great place to start, but it's certainly not the place to end with. And I think overall the system has been there for more than a century.

Of course, it has been modernized throughout the entire time. But I still think that we have to make much more digital, much smarter than it is currently. And that's overall the quest that we are working on.

And for the UK market--

so you've focused on UK market to begin with, but will you be expanding it to other countries?

Yes.

And let's talk about UK or the GB market. How has your experience been understanding the UK market and then getting market access? And what are some interesting things you've learnt along the way?

Now, I think that's exactly the right differentiation that you're drawing there, and the understanding part and then the execution part.

The understanding part, I have to--

I have to admit, that is tricky because there are just so many different bits and pieces. And especially when you haven't been in exactly that space beforehand, it's very hard to understand what you actually have to do. And I've been in energy for a bit, but I certainly never really looked into how to form a balancing circle and these kinds of things. And so that is some very specific domain knowledge that you need to have.

The execution part, I would say, was OK.

Plus I would say that the stakeholders that we have so far been in touch with in the UK, they are all extremely supportive. So shout out actually. I'm not fishing for compliments or so. But really I think the job that Elexon, for example, is doing or that the guys at EPEX are doing, that's actually quite good. They really put an effort into making this understandable. But trying to understand the overall big picture and seeing what exactly you have to do and which avenues you have to take, I think that's the trickiest part.

I mean, there's so many little jobs to do. You've got to integrate with the API of EPEX, and you've got to go through the documentation for--

well, even understanding what Elexon--

how Elexon works. Let alone what you need to do.

And all the other stuff all at once. Plus trying to hire a team and move fast because you are a startup and you've got to move fast. So where's--

where are you with the BSE at the moment? And can you just talk through that process? Because I think people will be interested. [LAUGHS]

So actually, yesterday we registered officially--

or yesterday, we were registered officially as a non-physical trader.

Oh, congratulations.

Thank you.

We should probably put some balloons things on the--

I want to have the head of [INAUDIBLE].. Maybe you can Photoshop it on my head now. [LAUGHS]

And so officially, we were registered yesterday, which you can do a bit in advance of actually being operational.

And to be officially exceeded the BSE--

which I can, of course, remember because I'm from the Rhineland in Germany. And it's like Saint Day. It's the 11th of November, 11-11.

That's typically where our season starts. That's the day that we exceeded the BSE officially. So that's the first step that you do, that you have to become part of the BSE, that you have to sign a couple of documents. And then afterwards--

What does that mean--

what do you get at the end of that?

Not much. Like a tick mark on the website.

[LAUGHTER]

No, but what it officially means is that you are--

the BSE--

I can't give you the printed definition of it. But if I had to put it in my own words, I would say the BSE is the overall system, which the flows in the energy system of the UK are being managed.

This is the balancing assessment code administered by Elexon?

Exactly. Exactly. And what do I mean with flows? I mean the flows both of electricity on the one hand. On the other hand, also the financial flows. So they're administrating both of these and the coupling of the two different "resources," quote, unquote.

We've actually got someone from Elexon coming on very--

in a couple of podcasts on. So we will ask them all of these questions but from--

so from your perspective, you've now done that word that I can't pronounce, ascended--

exceeded--

The accession.

--accession today. I don't even know--

apart from this particular instance in the balancing assessment code--

I don't know if anyone knows any other time we use that word. Neal, do you know?

SPEAKER: Accession?

Accession, yeah.

SPEAKER: Beginning with an A?

Beginning with an A.

SPEAKER: No.

No. It's confirmed. It's confirmed.

[LAUGHTER]

And there's lots of things like that around these codes. But it's words that you've never really seen before. And--

It wasn't the--

Acronyms of acronyms.

STEFFEN SCHULZCHEN: Exactly. [LAUGHS]

So we were chatting offline, you also talked about [INAUDIBLE].

Yeah, exactly. [INAUDIBLE]

[LAUGHTER]

It's tricky. You constantly have a screen up with the Elexon website and trying to go through it. But anyway, I digress. So you're now part of the BSE, and now you can do non-physical trading. What does that mean?

Non-physical trading means that we are now allowed theoretically--

practically, we can't just yet. I'll tell you in a second why.

But that would mean that I'm allowed to trade electricity now without actually being moved physically into a generation, or supply source, or something in between being a battery. So that's what we're allowed to do.

And who's in charge of allowing you to do that?

Elexon. So they do that.

And you basically--

the process is as follows. You have to show interest.

Then you do an interim meeting with them, and they tell you all the different avenues that you can take to become part of the BSE. They explain you a bit what the differences between those avenues are.

And then after all, it's lots of filling out documents and answering some questions of what exactly you intend to do. And I think after all, it's a bit of a sanity check that you're actually knowing what you are getting yourself into. [LAUGHS]

So I think that's what they want to make sure, that this is actually a system that is dealing with real electricity. And that matters. Because otherwise, all these lights, they would be out. And I think that's what they after or want to sanity check.

And so do you have to prove that you have capital, or reserves, or credit cover, or something like that?

STEFFEN SCHULZCHEN: Yeah, a bit. But it's affordable, I would say, at least the Elexon part.

And then once you've exceeded, then the question is, in which role do you want to exceed? You have to tell them beforehand. But then once you exceed and register for those particular roles, then there are a couple of extra tests.

And the non-physical trader one, I would say, is this rather the simple one. But they the key difference is that you have to give them a couple of names of people that they could talk to if something were to happen. So they now have my phone number. Plus what you also to do is that you run a couple of technical tests with which they basically test your system and make sure that the communication flows could work appropriately. And that's basically all you need for the non-physical trader. And now, we have a balancing circle. And they can send us invoices, and so on and so forth.

So you're--

so you're all set up? And then what about the physical side? So do you--

what's your first asset going to be? Do you know that already? And how are you going to control it, and what's the plan?

So after all, that's exactly what we want to do. Because we don't want to do only the trading, but it's--

not the trading within certain contracts, but we want to do an optimization overtime with the asset. So just to be finishing up the Elexon part of what you have to do with--

to not only do the non-physical trading is that you register as a generator, which is 95% the same process. And you don't have to do everything twice. You can just do it once. And then the last step basically is that you register your asset that you run.

And once you've done that, your also generator.

Is there--

I guess the thing to highlight here is that energy storage is not generation. But in the--

because we're using codes that were invented and legal documents that--

I said invented--

Drafted.

--probably--

drafted--

probably negotiated over many, many years. Well, using those old documents that don't really have space for energy storage. And now, the storage--

It's a bit weird.

--oh, we're just going to shoehorn it into this generation thing. It's a bit--

it's messy.

In bits, yes.

So you guys register with generation and you register your assets. And then where do you go? So how it works.

So what we are going to do is that by mid-year at some point, there will indeed be the first asset that we can operate if everything goes well.

Let's see. There are still a few things that we have to master. We have good partners. So I'm quite confident that we'll actually manage.

And then after all, we want to run this thing. And obviously us being so young and still not being a huge team, we rely on partners for some of the more technical aspects. But what we want to focus on ourselves is obviously the entire intelligence part that lies behind the optimization.

So what we are going to do is that we'll be a member of the European Power Exchange. And I have to do a trade exam in the upcoming days and show that I'm a trader. So I can, if needed, make some decisions and--

You need two phones. You need to buy a phone and a cell phone.

[INTERPOSING VOICES]

--to shout a lot and throw papers of you.

Exactly. So that's one thing that will help us to actually do the intraday trading. So buying energy for the, let's say, 3:00 PM contract, doing that at 1:30, and then selling again at 3:00 for the 5:00 PM contract or something like that.

QUENTIN SCRIMSHIRE: This is all EPEX. Yeah.

Exactly. That's all done through EPEX. So we have to register with EPEX as well.

And EPEX is the European Power Exchange.

You have to--

mainly a lot of volume in the Intrade market, for example.

And so you've got access to EPEX--

by the way, are you doing--

you're going to do all your trading through EPEX via API. We're going to go down to a rabbit hole here.

But at Modo, we've been trying to get--

EPEX's API is--

so the security they have for that system, it is so deep.

I think it took us, I don't know, nine months to get in. You have to get into a sandbox, and they have to look at and go through all your stuff, and check to break everything. But that's another conversation. But I guess they have to do that if they are a trading

It's probably a good thing that they make sure that you can't break everything. Again, because if the lights go out, probably all the money of the lights would go out.

So you've got EPEX's access, you've got access to the Elexon, the balancing mechanism by default by being a BSE party, which is great. And then for accessing frequency response services and other things to National Grid, I guess you can do that near the time.

Yes, we will do that nearer the time.

And on this, you then have to be in touch with National Grid, which is like the third party that you have to be in touch with. And that's the part that I meant in the beginning. That's the--

those are the bits and pieces that are difficult to comprehend and understand. Because they are also parties like Ofgem, and so on and so forth. And then there are the DNO's and all these things.

And you understand what their role is, but you don't really know what to do with which of these parties.

But National Grid will be important for then being able to enter the ancillary services.

So especially Dynamic Containment being the key market for grid-scale battery storage. And that is then, of course, also closely linked to the asset.

Because after all, the frequency response mechanisms, they are--

they have much more physical component to it. They need to be able to respond immediately, and so on and so forth. And so those are the checks that will be run by National Grid, making sure that the asset could actually react that quickly and wouldn't break anything in the system.

And are you building optimization algorithms or software in a controlled environment at the moment? Are you testing, backtesting? And what's that process like? And who's involved? You've got a team of people doing that at the moment?

So we've got a team. They are incredibly smart.

It's a good start.

They are proper engineers. We have PhDs in engineering on the team. So they actually know something, which is cool. And so they developed the algorithms and the basic concepts that we want to work with. Of course, we are also working with some advisors, especially from Academia. This greatly helps.

And right now, we can't do anything, but just testing and trying to build things up. But we have access to the most relevant data that we need. And then just the typical approach, I would say, of how you develop algorithms. You start with something and then you just see it in tests that--

how well you would have performed, and you do the backtesting.

And of course, we can also simulate--

you can only simulate that to a certain extent because you can't really see how the market would react to our actions. That's something that it can actually simulate. But we start getting an idea.

I want to ask you about--

I want to go start a chat now. Because you guys--

what have you learned along the way, specifically about all the stuff you've been talking here? But also generally as a company that's--

I guess, you've got some capital behind you, but you're spending money. So you're burning cash.

And lots of us just keep on saying that over and over because you already have it all the way through the night probably reminding you. We have the same.

But, yes. And that process, and that journey, and what you've learned until now, what does that look like?

So maybe on this one part with regards to us burning cash--

and I think I didn't say that in the intro, but it's, of course, important. And we are backed by an investor called Pelion Green Future in Munich. And they are amazing, because they've really helped us up and running quite quickly. And they are also giving us--

they give--

they give us both very operational and very strategic support.

So the fact that we are now the team of 12 largely depends on them, because they've really helped us with the hiring, and just managing the processes, and sparring with us who actually should be on the team, and so on and so forth. And so that's a great support that we're having.

The key learnings, probably I should have reflected more about this actively. I think there's always these subtle changes that you experience day after day or that you have the experience, but they happen implicitly. I'm not sure what your reflection would be on your key learnings of the past couple of months if you could really pinpoint them.

Well, generally, we make a lot of mistakes. And you just--

you just have to be willing to make lots of mistakes and just really fix them fast I guess.

And I think what's actually--

what's the precondition in order to be able to do mistakes is that you actually do something. No, but--

And not just talking about doing it. You have to just constantly do new stuff.

Exactly. But I think that's--

maybe he watches it.

There was a guy at McKinsey who I worked with a lot. And his motto was [GERMAN],, which in German means doing comes from doing. So very simple. And of course, exactly what you want to hear from the McKinsey senior partner.

Just do it now.

But I actually think that he is very right about it. And that's, I think, also how startup life looks like. There's no way how exactly to find out how the registration processes work. You can read all these documents a bazillion of times, but just start--

reach out to Elexon, work with them.

And you do mistakes along the way. But most of the time, there's someone who tells you that you did a mistake. And then you have to be flexible enough to fix it--

to fix it quickly. And I think that's the spirit that we started embracing, I think, fairly quickly. And that's also the part that's a lot of fun. That also only works, from my perspective, in such an environment because in consulting, and especially in the large corporates, there's not maybe that much of the flexibility to quickly adapt or as quick--

to adapt as quickly as you can do in a startup.

To create that environment, you have to--

it's a tricky hiring question, because you have to hire people who are comfortable going to something being--

knowing nothing with a goal of having to deliver something big on it, and just have to upskill, and break things, and break things, and break things, and break things, and go back to zero, and go back to zero, and go back to zero until it happens. And that's a very interesting type of person--

fantastic type of person, but very difficult to spot in hiring processes I think.

You're right. So far, I think--

I think we are aware of the skill being needed. So we're trying to test it a bit during the recruiting process. But of course, you can't be looking someone's head. So in the end, experience shows.

But so far, we have been lucky. So people are being pragmatic. And I think we also have a nice mix of--

I think me personally, I tend to be rather on the extreme side of just saying, OK, yeah, I know enough. Now let's just do it. So I don't like reading too much all these lengthy documents and so on. And then we have some people on the team who say, hold your horses.

Let's do this properly and thoroughly. And--

You need these people.

--let's talk about it. Exactly. But I think--

Otherwise--

--that's a nice balance. And I think that's probably--

I think we probably have the same--

we've got--

we need people to tell me to slow down, I think, sometimes. [LAUGHS]

And so coming back to energy markets.

Well, why did you choose the UK?

Why is the company in Munich? Doing this in the UK.

I get this asked a lot and most of the time in--

That's sounded quite a xenophobic question. [LAUGHS]

No, no, it's all good. It's all good. No, I just have to laugh a bit. Because typically, when people ask me--

ask me that question in our intro class when we look for new people, I always say because the UK is an island.

But it's true. But I think in general, if you look at the global perspective on grid-scale battery storage, the UK is simply the most advanced market. And maybe we are a bit late to the party. I don't--

I don't quite know.

QUENTIN SCRIMSHIRE: I don't think so.

There's still quite some potential, but also the competition is fierce there. There are some players who really know what they're doing, and they are a great source of inspiration. And you guys at Modo, you put this out very transparently on your leaderboard.

But I think after all, it's the it's the biggest, the most advanced market right now. And I think our approach to this is that, first of all, yes, we think that there's still some potential. Plus secondly, from our perspective, it also makes sense to be part of the most advanced market. Because probably, there are quite some lessons that you can learn from the most advanced market that you can then transfer to other geographies later on.

And obviously, all geographies will be different. They come from very different system, from a different regulatory--

from a different regulatory world.

But still, I think the overall challenge that we would see in the markets will be somehow similar. So I would hope that some of the approaches that regulators and stakeholders in the energy markets choose will be somewhat similar. And then it's just cool to be at the forefront.

What's happening in Germany and the energy storage world? Is that a market that is interesting to an optimizer or is it set up differently?

It's set up very differently, I would say. But to be honest, I know more about the UK market than about the German market. So I can't--

It's your job.

Exactly.

But I think it's structured a bit differently. And I think--

in the UK, I think National Grid, over the past two or three years or so, they have done a good job in basically putting out revenue streams or putting out markets and creating markets for goods to get better results that actually allows them to have a business case. I think in Germany, we are lagging a bit behind on this regard.

But then if you just look a bit at the macro perspective, I think there's no array around creating those markets too. Because our new government just decided, if I'm not mistaken, that we want to phase out coal by 2030. Our nuclear power plants, I think we have two left. We shut off six or seven weeks ago.

And you're buying a lot of gas from Eastern Europe.

Exactly. So we are highly reliant on gas, which the development of the past weeks will show how well they will be going in the near future. But all of this is basically leading us in Germany into a direction where we say, we really have to get--

we really have to get renewables up to scale.

And if we see how fast we've been moving so far with the energy transition and what, kind of, roadblocks we typically have, we won't manage just building out renewables and building out the grid because that has gone quite slowly. So what we actually have to do is that we really use all the renewable energy that we can get as efficiently as possible. And I think that's exactly then where grid-scale battery storage comes in.

And for this, you have to build a market. Because otherwise, nobody will come in.

Unless the government is going to start building batteries and own them--

if it's going to be private money, they need to have--

you need to have a return, you need to have a market, you need to stimulate it. And there's a whole lot--

there's a whole lot of steps back.

But I think there's some progress that we can see--

that we can see. So for example, there is a scheme called Innovation Tenders. So I'm not sure if that's the right translation into English. But that is also for renewable sites that are then coupled with storage.

And I think that makes sense, especially when you look at it from the grid congestion perspective. That's not really happening at scale just yet. But in general, I would be confident that Germany is also an attractive market for optimizers and grid-scale battery storage in general in the years to come.

And so my last question to you.

What--

we ask this a lot in the podcast. And I know you do a lot of thinking about these things. Your vision for the Future Energy System, is--

what's--

is there a particular angle on that?

Some people think a lot more about digitization and some people think a lot more about decentralization. Some people think the whole thing is a load of rubbish. Your vision for the Future Energy Systems, what's radical and what excites you about that?

That's the big question to ask.

I tend to agree on the digital and on the decentralization part, but I think these are not the only components. For me, if you would pin it down to one point, I would say, let's do it right and let's do it smart. I think we have so many technologies out there that would really enable us to do the right things.

And the discussions that we're having here at the conference in the past days, for some of these things, just--

you mentioned it. In our regulation, we have supply and demand, but that's not all we are having. We have things in between.

So my idea of it--

and I can't really put it into visionary words. But my idea of it would really be, let's relook at it thoroughly. Let's take a very comprehensive perspective on how we can cooperate things in a smart way and use all the technologies and measures that we have to combine it in a way that it will make societies thrive. Because after all, it's the backbone of where we're heading as a society.

Awesome. So we're going to leave it there. I just to say thanks for coming on. It's been really interesting for me to learn how you're thinking about the UK market from a perspective of outside the UK. And also the fact that you're having to go fast, you're having to push against these systems, which are slow systems, and go faster, and hear your perspective on that. So I just want to say thanks for coming on.

We're going to--

if people want to learn more about you guys, how do they do that? Go to your website. Do you have Twitter?

[LAUGHS]

We have a website and LinkedIn.

I will take that now as the motivation to polish the website a bit.

We basically--

we developed the website the first day that we started with Entrix. And since then, it hasn't really changed. So--

We've got more important things to do.

Yeah, exactly.

So we'll put links in the comments. Please, anybody who's watching this, let us know what you think. And thanks for coming on.

Thanks for having me. It was a pleasure.

Thanks.

[MUSIC PLAYING]