19 - Business, buses and giving batteries a second life with Steven Meersman (Director and Co-Founder @ Zenobē)

[MUSIC PLAYING]

So Steven, Hello.

Hello, good to see you again.

Thanks for coming on. Yeah, good to see you again. We're in probably the hottest--

it's like hot yoga, but hot podcasting. So for anyone who's watching, please excuse us if we're--

or can hear the sound of sweat dripping from us.

I think, Steven, you ought to explain yourself. Why on Earth is it so warm?

Well we were doing so much to offset climate change outside this room that we felt we had to compensate inside. No, jokes aside, we just had a bit of an HVAC issue the last few days, which is great for some of the business around the corner selling chilled beverages. But in the meanwhile is very much encouraging the hybrid working environment we've had to adopt for the last few years for a bit longer.

Yeah, it's like 30 degrees in here. So I almost took my shoes off earlier. It's like is it weird if I take my shoes off inside of this office? I think it probably would be.

We had some people running around with sort of ties at the top and cargo shorts at the bottom. So this is a safe place, no judging.

Steve, thanks for coming on. I mean, we have wanted to get you on for ages because Zenobe doesn't need much introduction. But one of the things we're going to do today on the podcast--

we've had a lot of feedback from people who've been getting in touch last couple of weeks, which is awesome. If you're listening, please do carry on.

And we've heard that people want to hear the founder story a bit more. So today I'm going to dig into the background of and Zenobe and how you got here.

But before we start, Zenobe almost needs no introduction. So a company that has--

I don't know whether it's right to say has been through some pivots or has expanded into new opportunities, and some really interesting ones from you guys being a battery developer.

Your previous name, which was Bess if I remember correctly--

A few of you guys started small and went very, very big very fast in batteries in the UK, and now to a company that manages, operates, finances, electric bus fleets globally.

So what I want to do today is dig into how did we get here. Let's firstly, let's start with you, Steven. So who are you?

Yeah, well, Steve Meersman, electrical mechanical engineer from Belgium, trying to do an MBA in the states and get into finance, as so many engineers do, but got safe from a career in banking by the financial crisis. So I arrived there in 2008 in the summer, and ended up working with two guys who had a crazy idea of setting up a battery business inside a big utility, AES, which eventually later on became Fluent.

So that was my first foray in batteries. And it took about three more times for that to stick.

What year is this?

STEVEN MEERSMAN: This is 2008. So we did the first few batteries, I think possibly in all the Americas. We had the first battery in California, just outside New York, and then the first in the Atacama Desert in Chile powering a lithium mine of all things.

And that was all quite novel. I mean battery prices were, what was it, $2.3 million a megawatt hour.

We had to register it as a mini coal plant in order to get through all the tick boxes of the various ISOs.

So it was all quite novel.

To me it was a bit niche at the time. So I got lured away to become part of a team at Oliver Wyman that was setting up a small team focused on a commodity infrastructure and that sort of stuff, so oil, gas, power, which is very interesting.

And then as so many consultants do, ended up going into industry working for Trafigura, who had been buying a lot of the midstream assets, terminals, refineries, all the big majors had been selling off and trying to optimize those. So we learned a lot about optimization and managing portfolios, et cetera there.

This is oil and gas we're talking about here?

STEVEN MEERSMAN: Yes, oil and gas.

And then couldn't stay away from batteries. So I had a friend of mine who set up Eos energy storage, the zinc oxide manufactures in New Jersey. So they asked for some help with raising funds.

So there was a second time. I did that on the side.

And then eventually when I left Trafigura, and I was on my garden leave, trying to figure out, well, what do I do next? People kept asking me about batteries in Europe.

What year are we in now?

STEVEN MEERSMAN: This is now 2013 to '15. And then eventually got introduced through the Oliver Wyman network to James, who sold his business to Oliver Wyman, who was consulting private equity business.

That's James Basden?

STEVEN MEERSMAN: James Basden--

One of the founders at Zenobe.

Yeah, he was still at Oliver Wyman at the time. But he introduced me to Nicholas, who had--

QUENTIN SCRIMSHIRE: Nicholas Beatty.

Nicholas Beatty exactly, who had been fighting a wind farm near Milton Keynes, and had a sort of an epiphany moment where he said, well, actually if I build a solar farm, I'll take the capacity out of the wires. And then they can't put up the wind farm. And then eventually that led down to building batteries on the solar farm as well.

So I mean it's possible to do lots of good things for a variety of reasons.

And that's what got him into this sector.

That was with Inesco at the time.

And as many battery developers at that time, sort of 2015, '16, they found challenge that how do you explain this to investors, right? It's very merchant, even though we had two-year contracts now.

It's very novel and it's very small. So they were struggling to get the city to invest in these projects.

So we said, well, we might be interested in buying a few of these projects because then we could get into the market, get cash flows, and then hire a team and grow this into a business based on a few key fundamentals. We're in Ireland.

We're adopting more renewables. Stability is going to be an issue. And that's all going to fall on its face if we don't have batteries.

So at this stage, it's the three of you. It's you, James, and Nicholas.

STEVEN MEERSMAN: Yeah.

And you, between you, have decided you're going to start buying some sites.

Not some sites, some operating batteries, operating batteries.

QUENTIN SCRIMSHIRE: From Inesco?

From Inesco, exactly. So as we did that, we also realized that these battery weren't necessarily very well optimized, because people always went after the low-hanging fruit, firm frequency response at the time, and just throwing darts at a board in terms of what will the price be this month.

Now we started out investing in our data science capabilities. I have a bit of a background in that in the states. So we started building our own modeling tools to be more sophisticated in how we bid in the auctions.

At this at this time, the company is not Zenobe yet, there wasn't--

STEVEN MEERSMAN: No it's called Bess.

It's called Bess.

QUENTIN SCRIMSHIRE: Yeah, Battery Energy Storage Solutions, which does what it says on the tin.

Bess Limited. I remember getting--

I still might have one of Nicholas Beatty's old cards somewhere that says Bess on it.

STEVEN MEERSMAN: Yeah.

So there's three of you in the company now? Or--

STEVEN MEERSMAN: Yeah, we just hired our first employee Ned Ponsonby, who's been with us since day one basically.

QUENTIN SCRIMSHIRE: You in London?

We were hiding out in Costa Coffees, pilfering meeting rooms at our lawyer's offices, et cetera, et cetera, just because we didn't have a stable base, because on one side, we were raising the funds, and on the other side trying to do the transaction the C transaction with an Inesco, which sort of closed around March 2017.

Again we'd had probably every door in the city slammed in our face. So we went to private route. So we got--

it's always good to have friends who are more successful than you. And that help with raising money and starting the business.

This is small amounts, right, compared to where you guys are now. What sort of money were you raising?

STEVEN MEERSMAN: I think our first raise was about 700k to do the diligence, and then another $7 million to buy the first sets of assets, so four megawatts plus.

We're going to talk about much bigger numbers than that later. So that was about four megawatts, you say?

Four megawatts, and then some development rights on a few other sites.

QUENTIN SCRIMSHIRE: All right. And these are BYD systems?

These were BYD systems, some of the first BYD batteries that landed in this country.

OK, so containerized batteries from China, the biggest--

STEVEN MEERSMAN: Sitting in a field on the distribution network, providing, yeah, the low-hanging fruit at the time, which were the few markets that batteries were actually allowed to participate in at that time. And obviously we've seen the market evolve a lot since then. We've gone through sort of--

markets, two-year contracts, very high prices. Then I think late September 2017 sort of had the first crash, going to month contracts, prices dropping to three to six pounds.

But the energy system is like a balloon, right? You squeeze one end, the value moves to the other side. And that's where we realized we have to invest, like I said, in that data science capability to understand the system. Where's the value going to move for flexibility? And then also work with software developers to develop our own dispatch system so we could exert a lot more control over the battery, deliver the same service with putting less energy through the system. So we've got less degradation.

Finer control--

we were the first battery in fast reserve, which--

I remember.

Everyone was like, what?

What was this fast reserve thing? We thought that's for other guys. Thought that was for [INAUDIBLE]

or--

STEVEN MEERSMAN: Hydro, right? Our first contract was an emergency tender, because one of the hydro plants--

I can't remember which one--

went down for a couple of weeks. And we had just passed qualification. So we could just bid into it.

QUENTIN SCRIMSHIRE: So this was--

I don't think fast reserve really happens anymore, just yet. But this is 2017-ish? I remember--

This is September 2017. Or was it early 2018? I can't remember.

QUENTIN SCRIMSHIRE: And I used to buy--

they used to buy season at a time.

STEVEN MEERSMAN: Yeah.

And you got paid--

you had to respond within a minute, was it? I think--

Yeah, but you had to--

duration could be indefinite. So but you could put constraints on your bid. So that nobody had really tested what the value was for a limited-duration technology like a battery.

So we've been engaging with National Grid, also analyzing all the auction. And that's I think what's great about this market is there's so much data flying around. You can see bidding strategies of the various parties, technologies, limitations. And then try and work out where the value is and tweak. And that's, again,

Very similar to the oil industry where they move so many barrels of oil.

And people get excited about an extra penny per barrel because you move a whole lot of barrels. And I think the approach we take to energy storage and to e-mobility or heavy duty mobility is the same. You're doing many miles or you're moving many kilowatt hours. How do you continuously optimize just a tiny bit more?

It's like pro cycling. You take a Watt off your aerodynamics--

and, well, makes no difference to me. But perhaps--

STEVEN MEERSMAN: Yeah.

But coming back to it, right, so it's the year 2017. You guys have got a couple of batteries by then?

Yeah so we had, in 2017, we had about four megawatts operational across four sites.

Did you bid into EFR, by the way?

STEVEN MEERSMAN: No, we didn't.

You didn't. So that was 2016. Didn't bid into EFR.

Can't get them all right. We were like, ah, that's way too low value or what it is. But we also--

it was a strategic choice as well. We didn't believe 30-minute systems were where it's at.

We felt batteries needed to be like Swiss pocket knives. So you want longer duration, the right balance between duration and power to access as many services as possible.

So you are building one-hour systems back then, all BYD?

They will all BYD at the time. We did eventually open it up with--

I think we had the first sizable Tesla system just outside of Leicester.

QUENTIN SCRIMSHIRE: Hill Farms?

Hill Farm, yeah, 2018, we are done, I think.

That's a very, very good-looking battery, actually. It's because it's a Tesla system, which has got a bit of magic dust. And then it's also covered in a sort of barn thing, isn't it?

STEVEN MEERSMAN: Yes, the wondrous world of planning permissions.

So you're building the Tesla system--

we're jumping around, sorry.

So the philosophy was we believe that marginal gains are really important and that we can invest in data science and technology. And you are starting to build a portfolio of grid scale batteries. So by 2017, bear in mind there wasn't much about then.

I mean we look back and we've got a gig and a half now. But back then, it was hard. It was really hard convincing everybody who's never heard of this thing before that A, it exists, and B, it won't blow up, and C, it can make money.

STEVEN MEERSMAN: Yeah.

And so what was the strategy about building more assets? How are you going into that?

Well we felt, I mean, as we said, the comment about pennies on the kilowatt hour, that only works if you've got a lot of kilowatt hours. So we sort of had a plan over a period of time to go to about 120 megawatts. That was the initial strategy. And try and go for maximum optionality so, assets that can provide as many services as possible.

Some of the early ones we got into reactive power trials with [? UKPM ?]

and various other bits but what also had happened is because we'd invested in that dispatch system the link to National Grid has, as it was called then for fast reserve.

QUENTIN SCRIMSHIRE: [INAUDIBLE].

This is really blast from the past.

That's platform for ancillary services? Is that--

STEVEN MEERSMAN: Something like that, yeah.

Because you needed that for store. And you guys instead--

Everybody's like, why is Zenobe doing [? pass? ?]

Because it's got--

surely they're not going to do store. And obviously [INAUDIBLE]--

QUENTIN SCRIMSHIRE: I remember because I was an aggregator. And we were like, what? Zenobe is building their own [? pass ?]

system, what? And you did.

STEVEN MEERSMAN: Yeah.

Because you had to do it for fast reserve, didn't you?

STEVEN MEERSMAN: Yes, exactly, that was the reason. So and since that, we've moved on, because if you look at what we're doing now is--

in fact, the 100 megawatt Capenhurst project, et cetera, we're taking that to the next logical step, which is looking for key points in the grid where there is a choke, point a bottleneck, or extra optionality, so the reactive power, the other National Grid power finders. And then supplement that with the merchant income streams from fast reserve, DC, DR, DM, et cetera, et cetera.

So it's that mix between the two, because I think we added one pillar, right. First we set up sort of the engineering and the financing. We then added the data science.

And now we're leaning back into the engineering piece to really push that to the next level and sweat these assets even more. And I think it's those three pieces coming together that are important to us in everything we do.

So one thing I haven't asked you, I should have done at the start, is, Steven, what is Zenobe?

What is a Zenobe? Or where does the name come from?

No, no, no, actually, let's do the name too. But I think I know what Zenobe is. But what's the company?

What's the company? I mean, we own and operate batteries. And that could take different guises. So we started with grid scale. But if you look at heavy duty mobility, to a large extent, there are batteries on wheels or the batteries are a big part of the cost or a big part where optimization can happen as the energy and transport network merges. And what we are is an owner-operator.

What does heavy duty e-mobility mean to the layman?

STEVEN MEERSMAN: Buses, trucks, boats, last-mile delivery vans, and anything sort of above three tons, I would say.

QUENTIN SCRIMSHIRE: OK, so big, heavy vehicles on the road.

--that do lots of miles.

QUENTIN SCRIMSHIRE: Do lots of mile--

--in our cities. So big impact on air quality and other elements. And we feel that by focusing there, A, we can have the biggest impact in the shortest amount of time, in a positive sense. But also secondly, it works for that earlier strategy that I said, which is looking for optimizing flexibility, because, again, they do lots of miles.

So if you could tweak tiny bits off and help our customers save money, we can make the ecologically sustainable solution also the financially sustainable one.

And that's something that if you go to our big batteries is true as well. It's just that the system there doesn't move. But we are doing the same for large utilities in a sense.

QUENTIN SCRIMSHIRE: So are you seeing large-scale e-mobility--

I think you had a heavy-duty e-mobility--

are you seeing that as a battery on wheels?

It's much more than that. But to an extent, it is. I mean, where do we add the most value? Everything that touches the electrons, right? I mean, if you look at an electrical schematic, you've got a 40-foot container with a grid connection. Or you've got a high-powered charger and an electric bus. When you electrically draw that, it doesn't look that different.

So I think there's a lot of value that we can generate for the transport sector, because if the transport sector goes electric--

they do the most miles, they are in our cities--

can have a very big impact. But to do that, you almost need to start at the end and work backwards. We are reusing the batteries that come out of the vehicles in grid-scale storage.

By doing that, there's less cost that needs to be recuperated in the first life.

So you're making it easier for people to go electric. And that's how you get that sort of snowball event, where buses, trucks, vans, et cetera, can really be the sort of leading the charge or whatever pun you want to use into decarbonizing other sectors. And that's what we get excited about.

OK, so Zenobe as a business, you've got a grid-scale storage business. And you've got a big, heavy, bus, truck, e-mobility business. And all the supporting stuff around that, right, charging stations, and all the--

I want to talk about the complexity of that in a minute.

STEVEN MEERSMAN: Yeah.

And are there bits of--

any other tentacles that Zenobe is working on?

Well, we can't use tentacles, because Octopus very firmly has got all those analogies with them. But I would say we are touching other parts. It's the links between the two.

So from the network infrastructure business, we understand grid connections. We understand how to make money with flexibility or save money with flexibility, which we bring to the heavy-duty side, where that's become an important component, bringing down grid costs, monetizing flexibility when vehicles aren't being used.

But also there's things coming back, which is batteries going into--

old EV batteries going into a second life before they're being recycled, back into the network infrastructure side. So those are the two links.

So to be clear here, this is batteries from buses, for example, being then used in containers as grid-scale solutions.

STEVEN MEERSMAN: Or smaller systems, but yes.

But when they're not--

when they've been degraded too much for a bus, you can still use them elsewhere before you recycle them.

STEVEN MEERSMAN: Yes, exactly, because a 19-ton double-decker bus has got about two or three tons of lithium on it.

And that needs to do 250 miles a day. So at some point it can't do that anymore. And that's when the reason the battery goes off is because it might be too much dead weight or it doesn't have the range.

But coming back to the point we touched on earlier, for batteries right now, their value lies in the difference between--

the ratio between how much power and how much energy they can consume. It's not all about the energy. And that's where we see the opportunity to bring in two industries together, and through doing that, helping decarbonize them both.

OK, I'm going to ask you some quick-fire questions here. So in the grid, stationary storage--

grid-scale, stationary storage industry, we've got a pretty firm idea of CapEx which is--

I'm going to ask you for numbers, don't worry--

but the battery is about half the cost, roughly, of the site, roughly. What's it like for a bus?

STEVEN MEERSMAN: Not that different.

Oh, is it not? OK.

It's maybe a little bit lower, I would say, the ratio. But it's not far from that number. So for around calculation, it's substantial--

particularly if you factor in--

these assets need to live a long time, right? They live the same as a grid-scale source, 15, 20 years. This is critical infrastructure. And a battery might go for five to eight years, or if you cook it, only three.

So you're going to have battery replacements.

So it's a bit like the aircraft industry, where if you look at a Rolls Royce engine on a plane or a GE engine, that needs refurbishing every eight years, which costs about anywhere between 30% and 130% of the initial CapEx outlay, depending on how it was maintained. It's very similar.

The problem is for Rolls Royce and GE and the people who--

licensing those engines, they can make loads of money on the servicing and the blade replacement. But for batteries, there isn't much to service.

STEVEN MEERSMAN: No--

So the commercial case is very different. I'm not saying--

the model is very different.

Yeah, the model is different. And that's where the services piece. And the other bits come. So helping people lower cost on their infrastructure by designing in the future proofing, designing in the fact that [INAUDIBLE]

a timed connection or a flexible connection can bring down those costs. Or putting a stationary storage system in a bus depot like we've done, about one in three of our 27 depots has got a stationary storage device in the depot, again, helps bring down those grid costs.

And then once you've got the battery there, it can take solar off the roof and put it in the buses at night. Or it can generate frequency services by pooling it with the rest of our portfolio. And that's, again, how we bring costs down for the customer and create a role for us.

So operationally, buses are very--

I'm going to stick the buses for a while here.

STEVEN MEERSMAN: It speaks to the imagination, about the double-decker.

Yeah, it does, right, because stationary storage, grid storage, it's available, let's say, 100% of the time. It's available to make money. But buses aren't, because some--

STEVEN MEERSMAN: But they're making money while driving.

QUENTIN SCRIMSHIRE: They made the money--

yeah, so they've got like two operational profiles. They've got making money picking people up and taking them places or delivering stuff. It's a great value proposition. Don't get me wrong.

Taking electricity and turn it into movement for people, brilliant.

STEVEN MEERSMAN: Yeah, it's the highest value application.

Yes, yeah, actually, yeah.

But then at night, unless there are night buses. I don't whether that happens. They're overnight charging, I assume.

It's a big operational change, because before, what would happen, the bus would come in. It would get fueled up, and go through the car wash, and get parked. And you wouldn't have to touch it.

And now suddenly, you have mixed fleets, right? So how do you get the electric vehicles through the car wash as quickly as possible, make sure they're not in that queue, get them to a charger as quickly as possible. Make sure they don't get iced in the depot because there's something in the wrong spot, et cetera. And then making sure they're all parked up in the right order so they can--

the bus that's the most full charge is the one that can go out first in the morning.

And to maximize the--

STEVEN MEERSMAN: Minimize the cost of the charging. So if buses come back at 6:00, you don't want to start charging then.

But also during the night, energy costs fluctuate, which people like to ignore. So we find ways of helping our customers with that, or sharing information, saying, well, actually, on this day and on this route and with this vehicle and with this driver your energy consumption is different.

And the spread is wild.

We've done a comparison. Same vehicle, same temperature, same route, same bus, and we had a 50% difference in energy consumption, just different driver, a different traffic situation. So if we can get feedback on that in a tangible way, we can get less energy to go through the battery.

It's great for the customer to save on energy costs. It's great for us because at the end of the journey, we get a better battery pack that we can use a bit longer in our second life application. And that's why the financing is so important. Because we own it, both our noses--

us, the customer, and the OEM is all pointing in the same direction. We were looking after that asset and trying to maximize value.

QUENTIN SCRIMSHIRE: So who's the customer for Zenobe in the electric bus? Let's just talk about bus fleets to start with, because I think they're the most exciting to me. But I'm a bit of a geek. So you guys do electric buses.

Who's the customer and what's the value proposition to them?

Yeah, the private operators--

I mean you've got the Stagecoaches, the Go-Aheads, the National Expresses, the Newport Transports, et cetera, of this world. Some of them counsel on, some of them private. They operate routes either on a commercial basis or on a contract, say for TFL.

They need to go electric, right? It's been mandated in some areas, low emissions or TFL and other areas saying, look, we're only accepting electric bids.

So they have to do it. So for them, the value of working with somebody like us is that we take the hassle factor out of it, the experience.

And we help bring costs down as they go on this journey so they can focus on their core business, because if you've ever had an opportunity go to a bus depot at night, I'd highly recommend to do it once at least because the amount of effort involved in keeping all these buses running is enormous, getting them repaired, maintained, so that they go out every morning is a fight.

So when you suddenly then switched to a new technology, it's challenging, because the driver, he didn't have a fuel gauge before. And now suddenly, he sees SOC sort of shrinking before his eyes. It's terrifying.

State of charge, yeah?

The CFO of the business sees that he's got the same number of seats or the same number of tickets they can sell and the asset is twice as expensive.

QUENTIN SCRIMSHIRE: CapEx wise--

Yeah. And then the engineer the depot goes from dealing with drives and oil and this and that suddenly to dealing with 800-volt DC systems.

Everyone is, I wouldn't say terrified, but it's a big change. It's probably the biggest change, and in my view, the most exciting change, probably for the last few decades.

So how do they--

so say I'm Stagecoach, or I won't use a name, but one of these bus operating companies. Before now, did I lease diesel buses?

STEVEN MEERSMAN: Yeah.

And so have you had to slot into an existing operating model as Zenobe?

Well similar to the batteries, I mean, when we started with the grid-scale batteries in 2016, the only way we can get the banks to fund it was basically to say, look this is actually--

forget it's a battery. It's a diesel generator. Let's pretend it's a diesel generator. You fund those.

These are revenue streams that are similar. This is a bit different. That is a bit different. But actually the difference is not that big. That's how we started. So obviously, on the bus and the truck and these other segments, we've had to do the same. It's how do we make this look as much as possible like the way you've been running something before?

It's all about user experience in the end. So how do we make this as easy and as smooth as possible and give you the comfort that, yes, this will work.

And if it doesn't work, we'll be on top of it. And we'll let you know what we're doing, et cetera. It's all about that user comfort.

So do you fund these on balance sheet?

STEVEN MEERSMAN: We fund them with our capital. We are an owner-operator. And I think again that's important because we've got--

to use that dreadful expression--

skin in the game.

But we do have banks funding us as well. So we use our own equity as well as bank facilities.

I mean the corporate finance team recently put a press release out we did about $270 million private placement for, on one side, with banks for sort of warehousing facility. On the other side we got pension fund and insurance fund money into the sector, which is longer data, different cost of capital, again bringing costs down.

You can engineer your way out of a problem, bringing the great connection costs down. You can software data science your way out of a problem by looking for efficiencies. We can also finance your way out of a problem by aggregating demand, aggregating different customers who might struggle on their own to get financing and making it part of a pool and syndicating that to lower their perceived risk to the banks.

So again, it's these three bits coming together, same as you would have had in those 100 and 200-megawatt projects were developing.

And I just want to talk about scale for a second, because we probably should have touched on this at the beginning. So if we start with grid-scale batteries and then the e-mobility side, what kind of megawatts or number of buses or number of charges or whatever--

where are you guys at right now? I haven't prepared you for this question.

STEVEN MEERSMAN: Yeah, I'm just trying to think, because the number of changes on almost weekly basis. But I think we're currently at about 180 megawatts operational, another 100 and something in builds--

QUENTIN SCRIMSHIRE: In grid storage?

--in grid storage, and a gigawatt or something in development or more for the next say two to three years.

So let's say over a gig and a half there of stationary storage.

Well, we like to talk about what we've built, not so much what we're going to. Because remember if you were there--

you were there in the early days, the bragger watts, so if everyone had gigawatt pipelines and all. So we moved very much against that. So we talk about what we've done.

On the bus side, I think we've only got about 660 electric buses.

QUENTIN SCRIMSHIRE: 660 buses?

--electric buses operational across UK, Australia, New Zealand.

QUENTIN SCRIMSHIRE: Wow.

So that's about--

if you look at that in megawatts, that's about roughly half a megawatt hour per bus, so between 300 and half. So let's take half is about 300 megawatts on wheels.

So you've got about the same, grid storage and storage on wheels.

I had no idea there was that many. So 6--

and these are--

I'm going to say some things that might wind you up now.

Aren't electric buses maturing technology, but still immature? And does that mean that they're being iterated on with technology and cooling and management and--

so do you have older, legacy buses and newer, more fantastic buses?

Well, I would say a few comments there. I think the first thing is buses and trucks, they need to last for 10, 15 years, or in some places, even longer than that. So it's infrastructure. So there is an amount of inertia in the technology.

And also backwards compatibility, as you can imagine, is a big topic, making sure that you can continue to service what you've had before.

A three pin plug--

Yeah, we've seen technology evolve, I would say, even over the last few years. But the buses that we drive now, in some ways, are still performing a similar function to 100 years ago, right? They are carrying people from A to B and navigating traffic and going through all these challenges.

So I would say there's a lot that happens under the hood, and in some cases, with leaps and bounds still, if you look at chemistry evolution, Because again, there's now so much more data coming off these electric buses than there was perhaps before with diesel vehicles. So you've got a lot more information that people can then take actions on. So I think the iterations of that sort of incremental improvement, the speed of that as increasing as in a lot of other industries as well.

But we shouldn't forget electric buses actually aren't that new, in a weird way, because I think in China they started really going at it in 1992. And in London, the last petroelectric bus, which was sort of a hybrid one, drove in London in 1912, because before that, they were all hybrids. And nothing is truly new, if you want to get philosophical about it.

But I do think there's still a lot of evolution happening in this space because it's not just about a bus. It's also about a coach, it's about community transport, about special educational needs children needing to get to places. And so we're seeing that people are experimenting with the format of a bus. It's not always a double-decker. Sometimes it can be a minibus, in-demand responsive transport, and integrating with the Ubers, et cetera, of this world.

Sometimes the bus can actually be a taxi that somehow integrates into the same smooth multimodal transport network. So there's a lot of innovation happening there. I mean you've got the electric scooters now. How do they fit into the network? TBD.

I mean there's a lot of evolution still happening in the planning, the software, and the scheduling, et cetera. So I think there's a datafication or digitalization happening at the moment that's as exciting, and perhaps not as visible. If you look outside and say, yeah, the bus is still red. It was red yesterday. What's changed?

I want to ask you about--

so who makes these buses?

STEVEN MEERSMAN: A variety of people, I mean, initially, on electric, China very much stole the lead, given that the Paris treaty said thou shalt make electric buses.

I was in China a few years ago, five years, and we just couldn't believe it, how half of everything on the road was electric. And that was five years ago.

It's the only way they were going to get the car industry away from Germany, right?

So I think that was a very strategic, impressioned choice of them. But we are seeing the European and US manufacturers invest a lot in catch up as well, Daimler and Mercedes, Caetano, Van Hool. There's lots of OEMs now have got electric--

Solaris in Poland--

lots of them got electric products.

There are some new entrants coming into the field [INAUDIBLE]

Proterra in the US, all though I guess after 10 years, can I still describe them as new? So yeah, it's exciting. I think that new technology, A, causing innovation with the incumbents, but also bringing new entrants to the party, and people sort of thinking what is a bus, effectively.

QUENTIN SCRIMSHIRE: And can we talk about charging for a moment?

STEVEN MEERSMAN: Sure.

So how fast--

so we're energy bots on this podcast generally. We tend to be battery people. How fast can you charge an electric bus? And what sort of connections do you need?

And that's--

how long is a piece of string? But what's reasonable to expect in a charging station?

I mean I think all our charges, I guess if they were on the public road, would be classified as ultra fast, so they're sort of 120 kilowatts or above, in many cases. But in some cases, it's again, it's horses for horses. If you've got a bus that's got eight hours to charge and a half a megawatt battery, you don't need a 350 kilowatt pentagraph or anything like that.

So again, it's sort of a total cost of ownership optimization. Do I want charge speed?

What's the servicing? What's the CapEx? What's the OpEx?

It's like with the whole debate about electric versus hydrogen. And I won't wade into that. But the one comment I would make is, what's the value of 1,000-kilometer bus if most buses do 250 miles? I mean the incremental kilometer doesn't really add that much more in this particular use case. In order to use cases, it might.

So I think there, this sort of focus on faster, faster, faster, I would go more for more reliable, getting more data out of the inside of the charger, because we're working these things harder. If you look at a public charger, if it has 12 sessions that lasts less than half an hour at 80% of the speed, that's a good charger.

With us, we're talking about four hours, full blast, every night, possibly twice a day. So that's the equivalent of like 20 sessions or whatever. So we are working the technology hard.

Yeah.

Again, coming back to sort of rules of thumb here--

so about half a megawatt hour in a bus. This is a single-decker, normal bus. I say normal, it carries like 50 people.

STEVEN MEERSMAN: Yeah, something like that.

And for reference, a Tesla Model 3, what's that? Like 100 kilowatt hours, something like that? So you have about 5 Tesla Model 3s in a bus.

STEVEN MEERSMAN: Yeah,

And it will do about 250 miles a day, or it's probably do more than that.

STEVEN MEERSMAN: Yeah, I would say between 150 and 250, probably.

And that's enough, for it to do it around and do it around.

I mean, 80%--

of the study of this is pre-COVID by TFL that 80% of the bus routes in London could already be done with a fully-degraded sort of first, second-gen battery.

QUENTIN SCRIMSHIRE: Wow. So I want to ask you two more questions now, one about the future--

one about the future and one about the past? So the one about the past, we'll do that one first.

Zenobe has been through a few iterations. I've been pretty impressed by how you guys have made lots of small bets, and then found the ones that win, and doubled down on them

Is that how it looks from the outside? That's way, way more organized than it might be.

Also, we've chatted for a few years. And I've heard a bit of the inside story. And just for the listeners and people that are watching, how is an organization of Zenobe managed to do that? And what's the thinking and the structure behind the thinking that has meant that you've gone from Bess to Zenobe to Zenobe the e-mobility company, to who knows what next?

Well, I think there's a bit between strategy and overanalyze--

I mean you do need to have analysis to sort of know what the fundamentals of our business are before you get into it, and how that evolves, and how those assumptions change. And we've seen that in the energy storage market in the UK and elsewhere.

But the thing on other side is the pragmatism when you see an opportunity that has a time-limited window, then you can't wait until you've got 100% of the information. You need to act when it's sort of at 75% or 80% of the information, because otherwise the opportunity will be gone. See fast reserve, et cetera.

Did we know when we wanted to get into fast reserve that eventually what we built there would power 600 buses and control the charging in various cities? No. But we were, with every sort of incremental step, we were building more flexibility and optionality.

So like you said, we would have the option of making several small bets where every next step on the staircase gave us more flexibility to then do an evaluation very much in a physical oil trader mentality in the way of saying, look, what's my second best alternative? Oh, this is better than my second best alternative. Let's go for that. Or I've got flexibility here. I don't need to take this to its logical end conclusion because I'm already getting a value from what I'm doing here.

Maybe a can concrete example is here is that software system, because initially, we didn't say we're going to do turnkey buses. We'd worked out that we put a battery in a depot, you can solve the grid constraint. So we started--

So nothing on wheels yet?

STEVEN MEERSMAN: We started with charging as a service. So we put a small battery in--

this was with Stagecoach in Guildford, which was our first project where, through common contacts, we heard they had an issue. They had nine buses they needed to charge. And the grid connection was going to take two, three years, going to cost an absolute fortune. And they knew they had to leave the site potentially in five to seven years because it might be developed as an industrial warehouse or something.

So how do you make the investment in a substation when you might need to move? It's difficult. We worked out, well, actually, in theory, we could put a battery there, connect, as I said, electrically speaking, it's not that different. We connect the chargers to the same software. And we could do that project to help someone.

But then actually, when we got more information, we worked out that actually, that was just a theory thing. We could actually build that. And then actually we could build that, I think, in six weeks, of which two weeks over Christmas--

again a deadline. The engineers have said, I can't promise anymore.

It's always Christmas--

Christmas, Thanksgiving, Easter.

Yeah. And we did that. And then we worked out through that process, there were so many stakeholders involved in these projects. And the customers were sort of crying out for sort of one throat to choke that basically said, look, it's that person's fault. And they're sorting out everything underneath. And then we realized that charging as a service could have a future.

And it's only then again by speaking to the customer, doing this addressing, saying well, what are your issues, listening to the customer, be it a utility or a bus operator. It's pretty much the same. You try to understand what are they saying? Why are they saying what they're saying? And have I really heard what the underlying root causes are?

And we worked out that the second big issue was the ownership of the batteries. And we're like well, hold on, we own and operate batteries. We understand what they can do.

Is there something we can do? And then we started doing the battery on the bus. And then the other bits sort of fell into place after that.

I can't really claim that we had fully expected that perhaps it would move as quick as it did or that we'd move into this turnkey aspects as quickly as we had expected. But we had sown the seeds for that. And we thought, yeah, it can evolve in that direction. But there's a few things that need to go right along the way.

But as an organization, I mean, how many of you are there?

STEVEN MEERSMAN: At that point, we were about--

[MUMBLING]--

about 11 people.

QUENTIN SCRIMSHIRE: But now you're a lot more, right?

We we're about 111 people.

QUENTIN SCRIMSHIRE: I completely underestimated that. So that feeling of, as an organization, you need to have people that are comfortable with uncertainty and just seeing how things go, with all these little pathways and seeing what happens next. And then my question to you is, because I'm interested, we're doing the same at Modo.

We were trying to do optimization. Then we we're the leaderboard company. Then we're sort of turning into the Bloomberg and energy storage. And then who knows what else?

And so the question is, how have you, as an organization, managed to have that culture where people are comfortable with the uncertainty about--

you can't do the Elon Musk, which is, I'm going to do a Roadster. I'm going to do a model--

whatever it is, Model S, Model 3--

that's amazing. But not all businesses can come up with that 10-year plan.

And you guys have just sort of been confident enough to feel your way and say, if there's an opportunity, I'm going to hit it. And how do you get an organization comfortable with that, with 100 people?

I think what's helped with us a lot is that they were three of us from the start with very different backgrounds. I mean, James Basden coming from the sort of consulting utility background, Nicholas coming from corporate finance, myself sort of trading and engineering.

And that mix is something that actually we've kept going all the way through to 110. So you create an environment where different perspectives can get discussed and can make decisions quickly. But you can also spar, which sometimes as the lone founder, is difficult. So I think that's something that helps.

I think the second piece is you need to invest time in that, spend time with the team and not just--

you don't want to micromanage people. You want to sort of say, look, this is why we're doing this. And you can make some predictions.

If you look at--

we did this a while back, which is sort of interesting--

went back to one of our early investor decks. And actually we said we would have what was 120 megawatts by 2019, and we did. It's just a third of it had wheels. So yes, you need to make these small, sometimes tactical, sometimes pragmatic, sometimes strategic decisions to course correct.

But I think the overall direction was always clear. We said, look, we want to own and operate energy storage in its variety of forms. And we want to optimize the system. And that's why we believe that being an owner of the assets is a very important mentality. And those things you can decide on, mentality, attitude, bringing people in with the right sort of view on things, specialists, but can communicate with other people.

Then those things come more naturally than if you try to be too specific about what you want to do, I think.

Yeah.

STEVEN MEERSMAN: It's a bit of a rambly answer, sorry for--

It's hard. It's hard.

It wasn't a rambling answer. But you explained Zenobe's view on it.

And yeah, all credit to you guys for pulling it off. So my next question, my final question is about the future. Where's Zenobe headed?

So you guys have probably hundreds of millions of pounds of assets. I don't know. Have you gone above a billion yet? I don't know.

It depends on the currency you look at, yeah. Probably in that range, yeah.

Many companies would have IPOed by now.

I'm not going to ask you for any non-public information. But it's more exciting about the vision of the company rather than where does the money come from. So where is Zenobe headed?

Well, just speaking on two things, also reflecting on the last question a bit more. The other thing that's been really helpful for us is we've had very supportive shareholders, because I think when you have a market route, like what happened in September 2017, you could have--

a shareholder could jump in and say, oh, no, we're going to take full control of everything. And we probably wouldn't have been able to make these expansions that we've done.

Or like, what the hell are you doing with buses? We want containers. They're green.

Right? You wouldn't have been able to do that without supportive shareholders. And I think initially, we had a large group of private individuals that we knew and had business relationships with. I think that helped a lot.

Tiger, the private equity fund that came in as our first institutional, again, very supportive. And we've been able to keep that going throughout, even up till the last raise with Infracapital, putting in their $150 million. Again, very supportive, but even if they haven't dealt directly with storage or other things, have adjacent businesses, so they really understand and they can think along and provide content or value beyond the money.

I think that was another important ingredient of the past success, and I think also an important ingredient for the future, in terms of where we are wanting to go. I think where we wanting to go is that, well, continue doing what we're doing in an extent, support our OEM customers even more--

our OEM and operator customers even more, grow with them into new geographies.

We had customers from here drag us into Australia and New Zealand. They're now dragging us into two other places.

I mean your addressable market is huge. And you're only just scratching the surface.

STEVEN MEERSMAN: Yeah, continue to grow with that. Focus a lot on execution. That's the most important bit, putting the customer front and center. And then slowly making, again, controlled, small expansions because, well, we've got buses.

They return to depot. What else returns to depot? Last-mile delivery vans, so slowly expanding there in sort of adjacent sectors, but sticking true to the roots, which is we do B2B, storage as a service in various guises.

We like working in electrical islands. Belgium and the Netherlands aren't geographic islands. But they are electrical islands, developing great service markets. So we're sticking true to a few principles and trying to create more value for the customer, the shareholder, the partners on a per-kilowatt hour and moving more of those, because as we grow, you can start looking into things that you can look at before.

When we hire our first analyst to monetize 14 megawatts, he could only go after certain fit or--

well, was a he in this case--

but could only go after certain things. But now we see that actually the opportunities that were too small to look at four or five years ago because we've got a bigger portfolio now. Now it's worth investing in the effort to go after them.

And I think that's what when people talk about platform plays, I think that's what it's really about. And we've sort of become that, I guess, over the years.

And one more cheeky question--

STEVEN MEERSMAN: Sure.

Why on Earth are you guys not doing hydrogen buses? Surely you should be doing hydrogen buses, Steven.

Well, coming back to the principles is where do we add value, right? We started as battery owners and operators. Now hydrogen buses are interesting because there is a big battery on there, because a fuel cell likes to run at a steady pace. You need something to absorb the shocks.

And somewhere at electrolyzer, because that hydrogen better be green if we get involved, there's going to be a battery there as well, because in order to get hydrogen at an economic cost, you need wind, solar, and a big battery to get you to what is it 6,000, 8,000 running hours that you need of production to do it economically.

So there is a role for storage there. And there is a way for us to add value.

But we're not hydrogen fuel chain experts yet.

So we're focusing on the battery. Now we have had some people approach us and say, well, actually, you've got your software, all these insights into transport, et cetera. Can you help us with our hydrogen buses? So I think there are some things we can do on the software side, the data science, and some of our other capabilities. And for existing customers, we'll do that.

But in order to add as much value as we do on the electric bus side, I think there's a few things that would have to change or that we'd need to understand better before we can probably do hydrogen. If I look at, say, the grid services piece, how do you do that with a charging hydrogen bus, not entirely clear. The second life value from the battery coming off the vehicles--

well, the batteries on hydrogen buses are a lot smaller.

So we're finding our way there. I think we've got enough to go after.

It was kind of--

it was a bit of a naughty question, because I was wondering whether Zenobe has pinned its flag to electric buses over hydrogen fuel cells or whether you're not sure yet.

I think the point is we're coming at it from our own perspective. We're a battery owner and operator across these two businesses. And batteries can go across between network infrastructure and fleet.

Hydrogen would be a pure fleet battery. So I think from that perspective, I wouldn't say never. But it's perhaps slightly less obvious.

But like I said, we're now seeing--

I mean the software, which we developed internally, as an internal tool, is now a tool we make available to some of our customers who fitted the infrastructure themselves, bought the buses themselves, said, look, we just want to use our system for running it and have your data science and operational support.

That is much more easily expandable to hydrogen or other technologies than perhaps some other elements of the offering. And then again, builds further optionality into expanding the business later on.

So last thing, anything you want to plug?

STEVEN MEERSMAN: Anything what?

Anything you want to plug? Anything that you want to talk about? Anything exciting that Zenobe is doing that you think our listeners should know about?

I think the second life piece is really cool, what we're doing with reusing old EV batteries to decarbonize construction, the event space, the film space.

I think it's a small part of our business. But I think it's really exciting because we're closing the loop.

And I think it's really important, because we talk a lot about carbon. And everybody talks about net zero. But I think personally, that's getting into the foothills of where we need to get to. The Everest is still there to climb, microplastics, water, drought, all that sort of stuff.

So I think we need to look at the bigger problem and not be daunted by it, but sort of do these small, incremental steps, but still not lose the fact that net zero by 2050 is a pathetic ambition. It needs to be--

we need to do it as quickly as we can so we can start focusing on these other aspects if we want to keep this a livable place.

Awesome. All right, Steven, we've run out of time. And I just want to say thanks for coming on and finding space in your calendar and for hosting us in this sauna.

I mean these plants grow up naturally. I think they grown taller since we've been here.

We've actually got the same ones, the IKEA ones.

Yeah, thanks for coming on. For everyone who's watching, listening, as ever, we've been so pleased the last few weeks. We've had a few people get in touch and give us feedback. Please let us know what you're thinking. Comment, like, share, and we'll see you on the next one. So Thanks very much.

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