15 - Unlocking the potential of batteries with Marek Kubik (Managing Director @ Fluence)

[MUSIC PLAYING]

All right, cool. All right, let's do it. Marek, hello, welcome to the podcast.

Thank you.

Got to talk about that first, you've got a blue thing on your arm.

I can't see, I mean, it's not exactly Fluence branded blue. But they gave me a blue plaster, which is good. What do you want to know about it?

[LAUGHS]

I know, it's pointing at me. How did you get it?

Well, so I've been over in London for a few days of business before coming up here. And I don't normally get to play much sport on my business travels. But a friend invited me to a five-a-side game. I came not properly equipped. I had my running shoes from the gym.

We were playing on a five-a-side field in the rain, very slippery. And I slipped and skinned my arm a little bit. It looks quite gory without the plaster. So the plaster is for the enjoyment of the viewer. So you don't get like a very scary red patch on my arm.

That all looks good from here. So welcome to Modo, firstly, welcome to Birmingham. Thanks for coming up to see us. I guess anyone who's watching this, we've got Marek Kubik from Fluence, wearing all the Fluence gear.

We're going to talk about Fluency's--

well, what does Fluence do? Who backs them? The IPO, and then we're going to go down to the rabbit holes because you've been in energy storage for a long time and you know a lot of stuff.

So let's do it. So firstly, who are you, Marek? For everyone who's listening, or watching.

Who am I? Well, so a existential question. But--

Yeah, let's go with that version.

What really is being? No, maybe take us down the wrong rabbit hole to early.

--up for this conversation. But, yeah.

So would I be. But anyway, so I'm Marek.

I'm currently Managing Director at Fluent. So I lead basically the sales team for UK, Ireland, and Israel, which might be a little bit of a weird pairing conversation. But basically, overseeing everything from origination of energy storage projects.

Filtering through the many hundreds and hundreds of different RFP requests that we have. Finding the ones that we can support and respond to. And then hopefully, converting those into actually energy storage product sales, software sales, and services sales. Or standing behind the systems that we build and deliver for the long haul, 10, 15, 20 plus years.

OK, cool. And you you've been doing energy storage stuff for as long as I can remember, as I've been around. And so what have you been doing?

So brief potted history, I guess of my career in energy storage. So directly in battery energy storage maybe about 10 years. If you count it from the longer--

the longest timeline, since about 2009. So actually more like, would be 13 years, 14 years. So I did a PhD in industry, basically.

But well, before Fluence even existed--

This is before Fluence, yes. So sorry, Fluence--

well, we're working backwards here. So Fluence was founded in 2018. Before that, I worked in AES energy storage, which was one of the predecessor companies that formed--

On your left breast, you've got AES, yeah--

Unless the camera reverses it.

On the right breast, you've got, Siemens.

Thanks for looking at my breasts on camera.

Yeah, so I worked for one half of the joint venture before we were formed in 2018, again, on the technology sales side. So doing something very similar to what I do now at Fluence but within what was then AES Energy Storage. And going back further beyond that, I was actually on the development side.

So I sat in really, the customers side of the table for the first few years of my career after the PhD, developing one of the very first battery projects in Europe. So a 10 megawatt facility at kilowatt group, which is these days not a very impressive size of project. But back then, there hadn't been a single commercial battery storage project.

Was that the one that was like, other power station, the conventional power station. And then the picture of it was always the corner?

Yeah, that's the one.

It was like a perfect 45 degree angle of the corner of the power station. And it said, battery thing on it, or AES thing, is that right?

That's the one.

OK, cool.

Yeah, so it came a year after Leighton Buzzard, which for those who aren't familiar in the industry, Leighton Buzzard, that was probably the first battery storage project that was built at scale. But we say first commercial, because Leighton Buzzard was taxpayer funded predominantly, taxpayer money. The one done by AES was an investment committee approved project on a return investment basis. putting aside an IRR and business case for it.

We're still doing this the wrong way, man. So you were talking about your PhD. So you were--

you're a doctor?

I am.

I'm Dr. Marek, which I don't use very often. But except in my email signatures and formal letters, when I'm complaining to people about stuff.

Yeah, I would use it all the time. But, yeah, OK.

Yeah, so we've--

we've worked backwards from the front. And then I started from the other end. So well, engineer by background, did a master's in that. And then, really actually, in about 2008-2009, I was about to graduate from my engineering master's.

Was going to go into, actually, sustainable building.

So I'm a civil engineer by background, as opposed to energy or electrical as you might think, given the industry I'm now in. But I had to do a pretty early personal career pivot. Because I graduated at the height of the financial crash and the recession. And construction was hit pretty hard.

So the job that I was going to go into, I had a job offer in hand, I was about to start. And they called me up and basically said, yeah, you're fired, before I started. So I had to scrub--

It was not in batteries.

That was not in batteries, no. It was going to be in--

it was at a prestigious engineering consultancy, who shall remain nameless. Although, if you went and looked at my LinkedIn profile, you'd probably figure it out.

And they--

yeah, essentially, it would have been designing cool buildings, hotels, theaters, art galleries, that kind of thing, which was interesting. And I would always like the sustainability angle of it. But--

But this is way better.

The door slammed on me. And it ended up opening a door to something much, much, I think, more impactful and meaningful, and interesting. So that led to the PhD, the engineering doctorate, which I did essentially in a similar field to what I do now. So looking at what are the problems or challenges with renewable energy intermittency, which at that time, you go back 10 years, it wasn't a huge percentage of the energy generation on the power grid.

But there were lots of people saying, oh, you can't go above 10%, it'll crash the power grid. Then 20%, and we just keep going up and up. So looked at the challenges of it. And then really, focused on what are some of the solutions. And the thesis itself that I did wasn't actually so much on energy storage, that was like a side note to it of saying, hey, there are also these things called batteries that could help solve these problems. Largely, it was actually looking at what can you do to make thermal power plants more flexible and more efficient, ramp up and down better, make more room for wind on the grid, that kind of thing.

And then so you went from that straight into AES, was it?

Straight into AES. AES actually sponsored the PhD. So I worked for them for four years doing that research. And then after that, I had an advisory position. I landed pretty fortunately on my feet.

They didn't really know where to put me, I think.

But I had a role reporting directly to the president of what was then AES, UK and Ireland.

Worked on various commercial strategic projects, and things, strategy stuff. But the one that I just had a big break on was, the senior business developer that was leading the battery project at that time left the company. And I was asked, would I step in. And I said, hell, yes.

Sweet, and then here we are. So--

Here we are 10 years later.

So who's Fluence? Who's the company on your t-shirt?

So Fluence is now a listed company. So IPO'd last October. And--

Listed were?

New York Stock Exchange, NASDAQ.

Sorry, I said the wrong thing. NASDAQ, that's different to the New York Stock isn't, it? On the NASDAQ.

Yeah, OK. And so it's a listed company and what does Fluence do?

So we're a technology and energy storage product company. So breaking that down to bits, we have energy storage products. So we basically design and still deliver big scale battery systems for helping integrate renewables to the grid. But we're also--

we have in house, a big software team. So the controls, the integration of those core components and products is part of what we do.

And then also, there's now increasingly, this growing layer of software and the digital piece. So we acquired--

it would be, end of 2020, a company called AMS in the US, that's now become Fluence digital. And it's a very, very fast growing part of the business. It is basically, a software platform that's helping decide, basically, how to dispatch batteries in the most effective way. And not just batteries for Fluence, but third party systems.

Just like an optimizer in the States, but a very big one. And a very technology driven one.

Essentially, yeah. So very much at the sort of AI enabled machine learning end of the spectrum, as opposed to having a trading team, or anything like that. It's not so much a trading desk operation, it's finding markets where there are very, very fast decisions to be made. And the California market and Australian markets are very interesting for that reason. Australia, for instance, five minute settlement periods now.

So there's no human trader that can recalculate everything with all these different parameters of renewables battery constraints and everything in five minutes. So that's a large part of what we do as well, providing essentially, the tools to make better money out of those batteries, which of course, is not a sexy topic. But the more money you make from them, the more investment is going to flow in, and the faster we build more storage to help accelerate the transition to sustainable energy.

OK, and then just for an idea of scale for the people who are listening or watching. So Fluence, how many people are there? How big is it? How many batteries do you have?

Do you install in a year? That kind of thing.

Great.

--trump card at fluent.

Top trump card. So we are actually the market leader in grid scale energy storage. And it's not us saying that, it's independent analyst.

Globally, yeah. So clean horizon IHS Markit, Navigant, which is now Guidehouse Insights, all analysts that look at the sector.

And they generally recognize us as the market leader by megawatts deployed. So we have about 3.6 gigawatts of battery energy storage now, either operational or awarded. So contracts awarded in construction around the world.

So for our reference, that's like two and a half times all the batteries installed in the UK and in Great Britain?

Something like that. And then on the digital side of things, which I was talking about, that's growing very fast as well.

And I think, I don't remember the exact number that is. But I know if you add the two together, it's over eight gigawatts. So if you add up what we're doing on the software and digital side as well as the hardware side, it's eight gigawatts of assets essentially that we're either delivering or managing.

Well, OK, makes sense. And you IPO'd very recently?

Yeah.

That sounds fun, doing an IPO. There's a second company we've spoken to on the podcast about doing an IPO. The first one was Harmony Energy, a very different type of IPO. And then you guys, were you there? Were you in the States? Did you ring the bell?

Because of COVID and the travel restrictions, I wasn't there in person. I was, if you look at the video, I was on video in one of the little squares that we had people join from all over the world to join into the IPO. I didn't go in person. But yeah, it was--

as was described--

I can't who it was, I think, it's Canary Media, described it as a proper old fashioned IPO, not a SPAC.

So quite different in this industry. But obviously, a great way to raise a lot of capital quickly, we raised about a billion from it. And we're putting that to good use to growing the company as fast as possible in all areas to help with this--

the mission that we have, which is to transform the way we power the world.

OK, awesome. So we're know going to move away from Fluence. And well, we can talk about your experience at Fluence. But I want to ask some very targeted questions, because times are hard right now. And I want to talk about supply chains first. So what is going on in supply chains for battery energy storage right now, and we are in March 2022 for anybody listening.

What isn't going on in battery storage supply chains, the most--

I think the word unprecedented is thrown around a lot. But it's pretty unprecedented times.

So I mean, maybe, talk a little bit about what's been going on in the past because the context and history is important. There's been, I guess, a general expectation.

And generally, has been true over the last 10 years that there's just been steady declines in the cost of energy storage technology. So the complete energy storage product is not just the batteries. Batteries, obviously a key component of it. But the software that controls the inverters, the safety systems, cooling systems, integration of everything.

There's more bits to it than just the batteries. But generally, the batteries have been the most expensive part of an overall system. And--

What percentage of an overall system is the--

I'm jumping in here, before you even finish the sentence, sorry. But of an overall energy grid scale, energy storage system that Fluence will install, what percentage of that is cells in cost?

So it's hard--

first of all, it's hard to specifically break down that. Because one, it depends on the duration of the system, the power to energy ratio. The higher the energy ratio, the more duration the batteries have. The more the percentage is going to be.

And the second is, what actually are you measuring as the percentage, because when you say cells, there's cells, there's packs, there's modules, there's racks there's BMS.

What are you including in that number, that's one big variable. And then the other is, what are you comparing as your total cost? Is it the product cost, or is it the turnkey EPC, cost civil works, the electrical grid works, because all of those vary a lot. So I'm sorry for giving a very, it depends answer.

I well--

-- that's useful as a thing. Because our industry--

lots of industries, but specifically our industry because it's maturing, it's got lots of new rules of thumb that get thrown around. And it's good to know that the answers are often more nuanced for good reason.

They are far more nuanced. And one of, I guess, the frustrations we have. And it's a data transparency thing, most customers, unless they pay for access to a very detailed breakdown reports, they'll Google stuff. And they'll go, oh, there's the Bloomberg battery curve. And this is the cost per kilowatt hour per year.

But they don't have a reference of what that cost is for. And it's really driven around EVs. And it's not driven around stationary energy storage. And the two are different. So when they see a benchmark price, they think that that's the benchmark, cell cost that's going into an energy storage system. And it's not, it's an aggregation of many different industries and sectors all of which have different structures, different make ups. And the way that EV packs, or modules, or cells are structured in terms of cost is quite different to the way they're put into a stationary storage system.

So beware, this number goes down graph on cell costs. But let's come back--

I jumped ahead of you, sorry. So you were saying--

I asked you what's happening in supply chains. And you were saying, well, prices have been coming down, but--

Historically, yeah, so they had been. And that's largely been driven by the battery component. There isn't really as much of a cost decline in anything else, if you imagine what the other costs that go into a system. There's inverters, there's maybe some learning rates, learning curves in inverters. But in general, there are more mature technology.

Because we've been using them for years on Solar?

Exactly.

And other stuff.

So there's not really major declines there. And in fact, as you say, we're now getting to a--

well, not getting to, we've reached an inflection point where we've got, again, it's one of those common phrases, the perfect storm. But there's a lot of things that have gone the wrong way quite quickly.

So one, we've had a pandemic for the last few years. That's disrupted supply chains, has had lockdowns for factories, it affects shipping of raw materials.

So a whole bunch of impacts there that then start pushing costs up on supply chain. And then more recently, we've had war in Ukraine, which in the last month, or last couple of months, is really exacerbating that further. Because things like steel, which are produced in Russia is now--

there's a lot more sanctions in place. And you can't get--

A nickel, let's talk nickel for a second. So nickel is used in cell. Are they used in Fluence? The cells that Fluence uses.

So Fluence is technology agnostic. So we're not a battery OEM. And we are not tied to any one single--

chemistry single one supplier. So nickel is used in NMC batteries, nickel, manganese, cobalt of which, there are also many different subtypes. So you have--

in NMC, it's commonly denoted by three numbers.

So there NMC, which is 1-1-1, that means, equal ratio in the cathode of the battery of nickel, cobalt, manganese. But then you have, 8-1-1, which is, 80% of it is nickel, 10% cobalt, 10% manganese. So the ratio--

That sounds expensive, all of those now, yeah.

Yeah, well, now, I mean, those were forward prices. So what you're referencing there with the spike in nickel, were what will it cost to buy me--

buy a nickel in, I don't know exactly when it was, a year from now. So forward prices are volatile and sensitive. And recently, that's been happening not just with nickel but with a lot of things, copper, steel.

So all raw materials, lithium, carbonate has increased like 500% in six months. So all these things are quite volatile. And they're generally going up, which is then impacting energy storage total system and product costs. So as opposed to costs now going down year on year, they've actually inflected and they're going up.

So raw material costs or the bits that go into the battery are going up in price because of lots of reasons. What about actually assembling the batteries and shipping them because we've also got squeezes on those elements, what's happening there? And then, if you wouldn't mind, how does it impact you and your customers, because you've got to sell these things and build these things?

Yeah, no, and that's a really good question as well, how they're manufactured. And where, and how they're shipped. So shipping and logistics was the first thing I mentioned. Because before all these commodity impacts took place--

And again, it's not just commodity impacts, partly we'll get into the positive side of the story, which is actually, I think, a bigger positive than the negative because it outweighs it--

Going to bank that for five minutes' time.

Yeah, we'll come back to it. But it's basically demand. The other reason that this is driving up is that there's only so much energy storage--

battery cell production versus the demand that's out there in stationary storage, in electric vehicles, and consumer electronics, everything we use lithium ion batteries for. And that's the other reason that's going up is, supply-demand dynamics. But put aside that piece.

Which is nuts by the way, because I've heard so many very intellectu--

top product research companies that jump up and down about over production and oversupply of gigafactory. And the fact that we're--

in last few years, maybe the timing has been wrong. But there's certainly a squeeze at the moment. And considering there was supposed to be this battery glut three years ago, people were saying by now, there'll be a battery killer. And it just hasn't happened.

I mean, timing is everything. So the demand maybe has grown faster than the supply expected.

It is expected to be a short term trend. I am not an industry analyst that looks at this day to day in a lot of detail. But there are a lot of gigafactories coming online, they're just not online yet. So in two years maybe, this problem may go away, maybe it's going to be the opposite problem, oversupply again. And things rebalance and go the other way.

But in the short term, it has been a definite squeeze. And so as it comes to what we're doing about that, one of the elements is actually, we aren't vertically integrated. So if you are vertically integrated as an energy stora--

What does that mean, sorry, vertically integrated?

So that basically means that you're building your energy storage system around one specific chemistry, one specific OEM.

And optimizing around that. And there are advantages of that. What sorts of company would you describe as virtually--

virtually and vertically?

Virtually integrated, I mean, so a well-known example and competitor to us would be a company that launches cars into space--

Tesla, OK, so vertically integrated. Because, what does that mean?

So it means that they're building their systems around--

Everyone knows you're not bashing Tesla here. So you go, yeah.

Of course not, Elon, I love you.

We're all rowing in the same direction, put it that way. And competition is healthy.

But, so there's vertical integration building around a specific cell building, modules, battery, container, everything else around it. It means, in general, the technology is more fixed.

You can't switch out for a different battery supplier because of the way that systems are built around a specific form factor.

So we've deliberately taken the opposite route of what we describe as technology agnostic approach, really I would say it's probably battery agnostic.

We're technically not tied to any one chemistry. We can use the same cube that we have like the building block of our product, will take an RFP battery cell, it will take an NMC battery cell.

So either one of them can be used in it. We also have--

if you look forward, there's been announcements, we have no fault as an alliance of Europe's first gigafactory. I have QuantumScape looking further out, solid state batteries. So the idea and philosophy of how we've designed our system is deliberately to be flexible between which batteries we choose, which means we are better insulated against some of those supply chain constraints. Because if supply A can't deliver capacity, we can switch to supply B.

And so if nickels, a bazillion times more now than it was before, then you can switch away from NMC. Is that the kind of thing you can do?

Yeah, that's part of it. And then the other part is even geographical as well. If you look at--

if there are shipping constraints. And shipping remains very expensive from China or from Asia to Europe. Building in Europe, actually then has an advantage because you remove one, that volatility into those costs.

So we are also moving in the direction of regional manufacturing hubs. So we have production facilities, contract manufacturers for the cube product that we build, not just in Asia now. It's coming on stream in Europe, and in the US.

Can I ask you a question. So you guys, Fluence, you've got the cube. Tesla have got the cube thing.

Megapack, there's this new form factors coming out. But most of us are used to seeing batteries in shipping containers.

So 40 foot shipping containers. Isn't it easier to do it in shipping containers because--

and does it make more sense to do it in shipping containers. Because the shipping container--

how many times can I say shipping container in this one monologue, I don't know, let's see.

But in a shipping container, it's very easy to move it around the world because it is designed for shipping, no container on that bit.

And you'd think that you can squash more stuff in there, doesn't that make sense? Why do it differently?

So we've actually been through, now, six different generations of technology through Fluence and its predecessor. So AES actually, if we go right back to the beginning of the origins of the energy storage business as we know it, built the very first grid scale battery anywhere in the world, like first megawatt scale battery connected to electric--

We're going to have to fact check that somewhere. It sounds like it could be true. And it probably is true in some way, I just want to check that that's absolutely true.

Please do.

But it was--

so right, right back in the very beginning. So I can't remember exactly, when it was connected because the very, very origins of AES energy storage were about 2006, 2007. I think, that project was completed in 2008. So we're talking now, 14 plus years ago.

So it's a long time.

QUENTIN SCRIMSHIRE: Stone Age.

But putting that aside, that wasn't really my point. That was--

You focus too much in on this specific--

This gets me excited when these--

Yeah, these things happen. So carry on.

Anyway, so that was generation one. And I can't name all of the generations because actually, when I started working for what was then AES energy storage, now Fluence, we were on the fourth generation of design. Where at that point, we actually had, generally, we were putting energy storage in buildings. And the reason for that, there wasn't really standardization in this shipping form factor, 40 foot containers.

And because batteries were so expensive, actually building buildings around them was a more cost effective solution in terms of how it was set up. And so we had a very different structure with Gen 4. We moved to generation five which was basically, the shipping container structure.

Kit out your shipping container with racks, with some of the initial equipment. But then you would have to ship the shipping containers to site, the battery separately to site.

Assemble it on site, integrate the controls and everything on site. And do a lot of that work in the field. So it sounds like it would be better. But the problem is, with the 45 foot container, you can't ship it with the batteries in, there's too many batteries.

From safety perspective--

[INTERPOSING VOICES]

I thought they all turned up as a one-a. And you just sort of--

and even in the olden days, you had ship them separately. But I think some of the new ones, they're configured in a factory. Just lift them on, and away they go.

From a weight and for safety perspective, you can't carry that many batteries together. So what people are doing--

and this is true whether you build the cube. So our cube is a very modular form factor. It's about--

depends if you prefer feet or meters here, 8 foot, by 8 foot, by 8 foot. About 2.5 meters, I think.

I have an answer to that question. I feel like I should prefer meters. But there's something exotic about feet.

There is, isn't there? So like alienates the non-UK audience. Actually, no, the US likes it.

[INTERPOSING VOICES]

Yeah, we should go back to--

How many furlongs [LAUGHS]

does your battery take in a row?

So anyway--

so we have a block size like that, which is then fully factory built. So because we're dealing with a smaller block size, that the unit size of this cube is small and agile enough that you can forklift it. You don't need a crane to lift it, you can actually lift it with a forklift truck. It's only about eight and a half tons.

And you can put in all your safety features, you're cooling system, your controls, your batteries. Everything in the factory, test it in a factory environment, production line environment. And then that's basically been pre-quality assured before you bring it, then to a site. So when it comes to site, all you've then got to do is plonk these onto the foundations and connect them cube to cube. So the shipping installation, everything else, becomes a lot cheaper. And the commissioning time on site is significantly reduced as well.

QUENTIN SCRIMSHIRE: Best cost, better quality is the argument.

That is basically, the rationale. And you still do ship it to your point in a 40 foot container. So basically, you put the cubes inside there--

just exactly how you describe it, like factory packed. I guess it's pretty similar to when you get an Amazon parcel or whatever to protect the sides and everything. But you ship them 3 to a--

three to a 40 foot container. And deliver them that way.

But the difference is then, you're no longer having to figure out how to install the batteries on site separately. And then also, the things that you have used to have to do on site separately, like the cooling system and integrating that there has already been done. So it just makes things quicker, faster, cheaper.

And from moving from our fifth generation to sixth generation design, there was something like a 30% reduction in the cost of the balance of systems. So the non battery component by doing that. So a lot of people have now copied it, as you might expect.

So we're going to see more non 40 foot container batteries, maybe in the future. All right, I want to--

I'm going to say something highly triggering now. And I'm going to see how you're--

Triggering for you, or triggering for me?

Triggering for you, I think. I'm going to say, lithium-ion is good for short duration batteries. I'm triggered already.

But how on Earth are you going to solve the problem of long duration, because surely that's just flow batteries and other stuff.

There's some nuance to the response to that. But you--

Let's see what happens now.

So what does long-duration mean?

Well, that's a good question.

I don't know, because everyone's got a different answer. I think the answer is anything above four hours is long duration. But I could probably find people to argue three or two, even above two. And then other people to say, oh, it's not seasonal.

The only thing that really matters is seasonal. If you don't build seasonal, the lights are going to go out, which is probably true. But quite upsetting.

Yeah, it is a little bit. And I think the definition that you've used is like, there isn't a standard agreed definition, that's part of the problem. And I have long been saying for two plus years now, please specify what you mean by long duration storage. Because it is often used by essentially, the non lithium-ion lobby. So any other technology, any other company out there will say, yeah, lithium-ion can't do long duration.

Now, if you take the four hour definition, I think, everybody agrees lithium-ion is a great technology for four hours and less. The controversial, if you call it, no man's land, middle zone is at the moment, 4-8 hours. Where there's been an argument that flow, compressed air, pumped hydro thermal storage. There's a lot of different technologies that can play in that space. And they argue that they're more economic in that space.

Yeah, because the argument is they don't have cycle--

the cycle cost is much less because they don't degrade like lithium-ion does. I think that's the argument.

That is one of the arguments. But there is a dichotomy in how that's set out. Because what those companies generally are looking at is then, how does the battery degrade when it's a one or two hour system, or even a four hour system.

The longer the duration, the lower the sea rate, the less the battery actually degrades per cycle. So it gets better actually, as you go to four hours, six hours, eight hours.

Hold on, hold on.

Let's do that math again. So the longer duration, the lower the sea rate. And why does that mean that it degrades less?

Largely because, I don't know if I want to get into the metallurgical point of this. But when you actually test these--

the likes of DMV for instance, do independent testing and rankings of different battery chemistries at different sea rates--

Someone else doing rankings of batteries. I can't imagine it. We should ban them from the mentioned.

You don't have a lab here in the studio.

No, we don't have a lab to do that.

But they stick--

so they put them in a controlled environment, under test conditions, say, 25 degrees or 21 degrees. There are a lot of different--

the challenge of this is, different batteries of different sweet spot, some may operate better at 21. So maybe operating better at 25.

And then how you condition them, how you cycle also is important. A full power charge full power discharge is more degrading to the battery chemistry than the same cycle spread over 24 hours done very gradually. So you have to do it in a compared and controlled way.

So it's about spreading it.

But when you do these cycles, if you take a 2C battery. So that's basically, one that can operate at a very high power to energy ratio. So a 30 minute battery, let's call it that.

It's like a 30 minute battery at 1. So 1 megawatt battery that can do 1 megawatt for 30 hours--

30 minutes.

30 minutes up and 30 minutes down. And then you compare that to a 1 megawatt battery that can do one hour up, one hour down, that would be a 1C. And then two hours up, two hours down, half C, four hours up, four down, 0.25, et cetera.

One cycle for each of those over time, if you map it for 10 years and extrapolate, you'll see a much, much steeper degradation for the high C rate systems and the longer seawater system. So as you go to longer and longer duration--

I'm glad you can remember what we were talking about, because I was enjoying that--

forgot what we were talking Yeah, so as we go to a longer duration.

So that's where--

coming back to long duration, that's where we're getting to. Essentially, as you go to four, six, eight hours, one cycle--

first of all, you can't cycle as much. If you make a four hour battery, put aside that batteries charge slower than they discharge, say it's just four hours up, four hours down.

The maximum you can possibly do in 24 hours is three cycles.

If you go to a six hour battery, the maximum is two cycles. Because six hours up, down, it's 12 times 2. So the longer duration you go--

-- never actually made that connection in my head. But of course, that's true, yeah.

So the longer duration, the less cycling there is. And the better each cycle is in terms of degradation.

So first of all, that argument around the degradation point, it is true batteries do degrade. But much, much less than you might think based on extrapolating from data of shorter duration.

And then the second thing is, I would just actually point to real world data, because we are building four or five, six hour systems around the world. There have been two procurements recently, for very--

what you consider long duration storage, eight hours.

QUENTIN SCRIMSHIRE: It's the case ones, the California ones.

And both of those have selected lithium ion as well. So coming back to what is long duration storage, if it's great in the four hours, then lithium ion is long duration energy storage, already

Boom.

Boom, there you go, mic. I can't drop the mic. The mic's fixed, pen drop.

I want to be interested--

I want to know what the flow battery people have got to say about this. We had Ed on from--

not Fluence, from Invinity before.

He has a very compelling argument. But I can see both sides.

But as you say, we're all going in the same direction. So they shouldn't be these factions. People's front of Judea kind of thing.

Yeah, People's Front of Judea, Judean People's Front.

The battery front of--

I don't know.

So well, we still--

so this is not me knocking at the technologies because we still do need other technologies--

excuse me. Other technologies that give you that--

sorry, the way I actually think about it and differentiate it is, daily storage and longer than daily storage.

So in my view actually, lithium ion is perfect for daily storage. So if you look at diurnal patterns.

And 8 hours is already getting there, humans operate in eight hour shifts, eight hours sleep eight hour work, that's just how it's structured and operate. And we're already at the edges of achieving that now with the first--

there are already operational eight hour batteries in the world as well that I'm aware of.

But certain issues cases.

I know we talked about the near-term supply chain inflection upwards. But actually, the long term trend is still going to be, as more production comes online, these costs keep falling. And so you'll get--

A little wobble.

Yeah, a little wobble. And then 10, 12 hours of batteries will be economical as well. I'm very sure of that. I don't think lithium ion is likely the technology that goes beyond 12 hours.

But that's when you get into the space of actually, we're not talking about daily storage anymore within a day. It's multi-day storage. And flow batteries scale better for that, there's--

same with compressed air thermal like hydrogen, you can pick your technology to solve the long duration needs.

But the long duration need isn't really a problem we need to solve quite yet. Before we worry about multi-day storage, we need to get--

basically, you can get to 80% roughly, renewable penetration with daily storage only. And then, you're dealing with the last 20% at the moment with flexible gas and other things. So we do need to replace that as well. But on the journey to net 0, that's your next wave of things to solve.

It's not the problem today.

Yeah, and every day that it's not now, costs are coming down. And efficiency of lithium ion--

well, the whole lithium ion world is still--

and I'll be careful here, because I don't want to say in its infancy. Because it sounds like the technology is immature. And then it sounds like we shouldn't be investing in it, because who knows what in the future. But actually, there's a long way to go still, I think, in lithium ion.

All right, we talked a moment ago about Ireland. And so a lot of the folk, we're pretty focused on Great Britain. Well, actually we were, until the beginning of this year. And we're doing a lot of work in Ireland now too. Trying to talk a little bit about Ireland, because I know you guys are very active there.

And the Irish market, I think is very cool. Because it's like, their National grid, which is EirGrid, their TSO basically said, when they launched the new services, the Frequency Response Services, let's go space age on this. Let's go as fast as we possibly can. And let's hit this--

they're aiming for like 90% renewables penetration rate, whatever they call it, S&SP.

And that's really exciting. And they know they need loads of batteries. And they know they need batteries to respond really quickly. So what's going on in Ireland?

What's going on--

So Ireland, in some ways very similar to the UK. Ireland electricity system, great renewables penetration, arguably even more isolated electrically. There's limited interconnection to other countries. So it's basically like an extreme version of GB in the sense of volatility on the grid and needing to solve that.

But also because it's quite far ahead at the moment on renewables penetration, at the same time. So at the moment, the Irish grid is about 40% renewable electricity over the year. By 2030, they want to get to 80%, which is a huge uptake.

Absolute legends, aren't they?

It's insane.

Go, Ireland.

But the key takeaway there is 80% on average.

Wind doesn't always blow.

So there's going to be periods where that's low or 0. So to get to an average of 80, you need to have a power system that can basically operate 100% or near 100%. Really, they're looking at a 95%, I guess for practicality purposes, of non-thermal plants.

So that can be batteries and flex. It can be synchronous condensers. It can be interconnectors, different technologies. But basically, you have to switch off the fossil fuel plants. Because fossil fuel plants obviously, emitting carbon when they run.

And they have minimum generations, you can't ramp a gas plant to 0. You can ramp it down to maybe 40%, 50%. And they have to switch it off because otherwise, it's unstable. So you have to find a way to operate the whole power grid without any thermal power plants and to battery stage right.

And so what are the--

what's the process been? I mean, firstly, props to Ireland for doing this. And if I was an Irish person I would be very proud that this is happening. I mean, for government to be that ambitious that fast, makes everybody else look a bit silly really.

But how are they going about it? How are they getting batteries built?

So the main driver for that, it actually does echo the GB system. So UK--

I say GB specifically to separate, because Northern Ireland and Republic of Ireland together are the Irish single electricity market. So this is--

hence why I say GB and Ireland, I'm using shorthand for the SEM.

So GB was first with batteries, first with Kilroot, as I mentioned, although that's technically Northern Ireland. And then with some of these early EFR projects.

So enhanced frequency response in the UK about 2016, when that auction was run. And Ireland basically followed in the same footsteps. But a couple of years later with what's called the DS3 program, which is called--

is shorthand for designing a secure sustainable energy system, which is a bit of a tongue twister. No one ever says, they want us to say DS3 and people are expected to know what you mean now. But it's a bunch of products for frequency regulation.

So automatic algorithms. Basically, if the frequency does this, battery should do this. That's basically what it is. The thing that's quite unique about it is, just how fast they ask the batteries to go, which is the fastest they've been asked to go anywhere in the world. And there's significant payment scales for these revenues, you can get paid a tariff. But if you can respond, instead of within two seconds in 150 milliseconds with a battery, you get paid three times as much.

Well, let's do some comparisons here. So compared to other frequency response services or--

call them products. But that makes it confusing in my head. But I know they are called products. Compared to other frequency response services, how fast is Ireland?

So how fast is the UK versus Ireland? How fast are other countries versus Ireland?

So it depends what you would reference it to. Because for instance, and I would start with FFR. Because FFR in the UK firm frequency response, although it's being phased out, wasn't ever really designed around batteries. It was designed around what thermal plant could do.

So actually the original FFR requirement for response was 10 seconds. So 150 milliseconds to 10 seconds, work out that ratio, it's--

Well, I guess you have to respond something in two seconds, don't you? It's like--

No, it's full power in--

Full power in 10. But you have to do something in two, I think. 2 to 10, so it's like an odd way of describing it.

Yeah, and then it changed as well when they introduced the FR, because that was in a sub one second response. And sub one second has been quite common as a requirement in other markets as well. So it really, we're talking about, was it five or six times faster than a typical frequency response market. The reason that they asked for that--

By the way, this is from 0 to full power. So if you're needed, if the grid needs you, there's a trip somewhere, wind farm trips, or interconnector trips, or something else.

You have to go from 0 to 100% in less than a second.

It's just time a second, one click, two click, you've done 100%, mad. And then, so you're saying they go faster than that.

They go about five or six times faster than that in Ireland. So it comes down, there's a lot of nuance to exactly when do you start measuring like--

What's the start point, is it from an external trigger? Is it internally measured metering?

I'm not an expert on the exact nuance and details of those points. But the general trend is there. It just takes five times just to conservative on it, five times faster than a typical frequency response service. So I don't know what 150 milliseconds is, I don't think I can do it--

No, no.

-- that quick.

And I probably--

probably by clicking into the microphone, I've really--

he's looking at me. I think we may have--

so that probably wasn't very good for the sound. So we've just blown--

We're going to have to edit that out.

-- bring that down. All right, so it's really fast. Why does frequency response need to be fast?

So essentially because it's more than frequency response, it's actually helping with what's called RoCoF, rate of change of frequency. So typically, frequency responses, the frequency drops. And initially, you deal with the drop in frequency with inertia, which comes from thermal mass from spinning engine's rotors machinery on thermal power stations which helps arrest and reduce the rate of change of frequency. A very high rate of change of frequency essentially, can collapse the grid. So that's bad. This is why we need inertia.

This is because all the grids got all these measurement devices, relays around the place that are measuring RoCoF.

They trip cities or substations, if RoCoF goes too fast, because they can't measure actual frequency. So you have to wait for a few cycles in the sine wave, don't you? So instead you measure the angle of the sine wave, which is RoCoF.

Yeah, so that's faster to do. It's like, gory analogy, it's like chopping off your hands to save your arm. If you don't do that and you don't shed load very, very fast to readdress the balance of supply and demand, the whole grid goes down. So maybe that's not the great analogy because you can repower a city with black start or whatever, and switch it back on. I suppose you could resow another hand, but. That's the analogy.

I like the analogy, it's good. So you need it--

you need to go fast because of RoCoF.

And how does it work? Does everybody have to respond that fast, or I believe, there's an incentive process somewhere.

So basically, that scale of payment I talked about is the incentive. The faster you respond, the more you get paid. So although it's a frequency regulation product, the fact that--

basically, the why is 150 milliseconds important is usually, that's--

if you're responding that fast, you're not just helping bring the frequency back up after the inertia has kicked in to save the system in the first milliseconds. And helping recover it, which is what usually frequency regulation is about.

This is actually, if you start adding power before the frequency has finished dropping, you're also helping reduce RoCoF. So that has a lot of value and particularly on a system where there's going to be lower levels of inertia, which Ireland is ahead of the UK on because it's having this very high renewable penetration. And it doesn't have the interconnection and everything else.

Makes sense. So that in British terms, that's a bit like getting paid pounds per megawatt per hour in FFR.

So I get paid FFR. But then National grid says, hey, do FFR.

If you do FFR really, really fast, which is technically very difficult to do, we're going to pay you a bonus. Because responding fast is worth more to us than responding slowly, that's pretty cool.

That's basically it, in a nutshell. Yeah, that's what's happening. So it is basically like--

it's funny because dynamic containment came after DS3. So we've done DS3 first. And there's a lot of questions, because DC is challenging to deliver as a service, very, very high--

that's 20 Hertz polling, very precise envelope of response.

And DS3 is actually, exactly the same except even harder because it's just an even faster response time. So the fact that we've done it in Ireland meant that it was relatively straightforward to do in GB. But I know there was a lot of challenges getting DC on for a lot of storage systems because particularly, if you don't have that software integration controls piece in-house, you're going to have to figure out a patchwork of different providers. And speak to someone who does the EMS instead of the batteries.

And figure it out, or speak to a route to--

What it means is, without going too deep on this. But essentially, if you've got a cell on an inverter, or a battery system and an inverter. And that inverter tells the battery what power to output, or how much voltage to come from the battery.

It has to do that in a feedback loop and measure and control, and measure and control, and measure control so fast. And be able to respond so fast.

It's a control system question more than anything, isn't it?

Because of the feedback loop being so tight. But we're going to go down PID loops and things like that. Although I'd love to one day. That's why this is an energy podcast and not an engineering one.

So last question, actually, the second to last question. Which markets are you excited about? Because Fluence is everywhere. So which geographic markets and maybe any other type of market.

So yeah, you can divide this two ways, you can look at geography, or you can look at market segments and areas that have use cases for batteries, put it that way. So I think actually, probably the use case one is a more interesting one to start on. Because a lot of batteries, and again, this is the oversimplification that you hear, the batteries are short duration and therefore frequency regulation.

I think, that argument has already started to fade away because now there's an acceptance that batteries are also four hours. And that basically does peaking generation roles as well.

So a few years ago, I was saying peaking generation. But I think that's well established now, at least in the US. But we are actually starting to see--

and this is actually a good close off point on Ireland, because Ireland started with the very, very fast response. But so first systems we built in Ireland were 30 minute systems.

But we're now starting to see--

we're building a large fleet for ESB that are all two hour systems over 300 megawatt hours of projects that are all there to do DS3. But also, to do trading and provide capacity. And in the last T minus 4--

T minus 3 auction in Ireland, we started to see the first four hour batteries actually get contracts. So the duration is increasing.

What do you mean by T minus 3 there?

So capacity market.

So basically, the payment for providing a firm amount of capacity in future years, quite similar to the GB market that you came off.

But we're starting to see longer and longer duration batteries get contracts essentially, which is telling you--

it's giving you a signal. And partly, that's coming back to the positive thing right at the beginning whilst commodity costs are increasing.

And that means energy storage systems in the short term going up. The opportunity, the revenue that they can make is also going up as well. So we actually don't see it killing business cases, if anything, we're getting more demand than we've ever had for the storage systems. Because the commodity doesn't just affect storage, it affects gas.

It affects the marginal cost of gas, the bigger the spread the more batteries have an opportunity to--

It's more likely. Yeah, we're talking about general inflation across everything really, aren't we? The commodities, super cycle, and incomes all the buzzwords. OK, so Ireland's really exciting. Any of the markets you want to plug?

So I would say--

as I said, if we divide not by geography but by segment, then the most interesting one I think is what I will aptly describe as electron teleportation devices, which is the TSO segment. So building virtual transmission lines and using batteries to get electrons from point A to point B without either having to build a power line or without having to reinforce a power line.

Sweet, love this. So a bit like--

I don't know why I always talk about the GB system. Because it's the one I know. But everybody knows that between Scotland and England there is a thermal constraint. So the overhead lines cannot carry enough power to meet--

that is required sometimes.

And that's why you see in the newspapers they have to pay wind turbines to switch off in Scotland. Because they can't take all that wind power because the wires cannot take it. And so if I understand you correctly, what you're saying is, put a battery on each end. And take some of that wind power from the top in Scotland.

And instead of sending it through the transmission line, pull battery from the power--

the bottom of the transmission line instead. And so you don't have to put more ugly overhead lines everywhere, you can just put some batteries. Some beautiful pretty batteries at each end.

Exactly. So I mean, that's one of the ways. There are actually a lot of nuanced ways to it. Because a lot of power lines are designed with what's called N minus 1 contingency. So if you see an overhead lines, the three phases. And there's usually three phases on one side, three phases on the other.

One side of that line should be live and carrying power, the other ones probably not. Or there's a line next to it, or somewhere nearby that isn't on. In case one of those fails, you've got a second way to route the power around. So the grid is designed fairly conservatively, which is why fortunately, we don't get too many blackouts these days.

But again same thing, if you put a battery either end of the line with a relay set up, you can actually then say, well, if I then energize the second power line, I can actually carry another--

say one half carries 500 megawatts, the other half can carry another 500.

Oh, sweet, yeah.

-- doubled your energy capacity without having to build anything. And if one of those lines were to fail for any reason, you trip the battery in. And your loss of power is going to be the same as it was had you not used the other line.

So provided the cost of that battery, the battery set up is less than the cost of putting the overhead lines in and all the planning permission and all that stuff. Actually, no, we're talking about existing lines.

No, it could be either. So it could be instead of building a new line, or it could be relieving congestion between two existing points. And cost is one thing, yes, because costs will make a difference. But the second is actually speed, because a power line takes 10 years to get through planning, and impact assessments and everything else to build.

A battery you can build in a year or a year and a half depending on--

That's really neat. So are any countries actually doing this?

Yeah, so quite a few already, we saw early projects of this in the US. But the most interesting European example of this is actually in Eastern Europe. So liquid Lithuania, we built initially, a one megawatt pilot project at one of their substations. And then more recently, it was announced a few months ago that, we're now building 200 megawatts of batteries.

Basically, as virtual transmission to help strengthen the grid. And essentially, allow one more renewables, but to actually also reduce reliance and dependence on, unlike the Baltic ring, which includes Russia. So it's also freedom energy, independence from other--

[INTERPOSING VOICES]

So there's just so many applications for energy storage beyond just will it access frequency response revenues. We are only just getting started.

Yeah, and that's why I find it super exciting. Because I think, frequency regulation very well understood, peaking power probably understood. Renewable integration, build batteries next to solar farms, and to extend wind farms. But it's better matched with solar in terms of energy day to night.

But that's a whole, at the moment, relatively untapped area. I mean, 200 megawatts is a start of what could be tens of gigawatts. Because it is a very different use case. Instead of building power lines, it's the transmission space.

It is not the generator space that--

[INTERPOSING VOICES]

-- stuff. I mean, we had Bridget on, recently from Orsted talking about offshore wind becoming dispatchable. And that as a use case as well, you're looking at gigawatts and gigawatts from that stuff.

Terawatts. I mean this is like the plan, was it--

I think it's Bloomberg who projected this, up to--

I think they increased the forecast. It used to be by 2040, they thought we'd reach a terawatt of energy storage. And now I think it's 2035, or something. So the forecast keeps going up and up.

So to finish, if we all finishing. I'm sorry, doing the job for you, if that's what we're doing now.

No, we're going to wind up now. On a very positive note is, despite short term supply constraint, actually the demand for storage is never larger for all these other reasons. We just need it partly to decarbonize. But partly, it just helps improve the reliability and affordability and accessibility of energy for everyone.

Absolutely, I sometimes wonder whether I do believe this stuff. But then I wonder, do I believe this just because I work in batteries, is it coincidence that I work in this industry. And I'm really bullish on it. And I think we're already just going out--

starting to go down a rabbit hole. And do I live in an echo chamber? Probably, yes, but I'm doubling down on it.

There is--

yeah, I think about the same thing. It's easy to not realize you're in an echo chamber. And you can be, but--

It's like, if you have to ask, are we in a bubble, you probably in a bubble. But yeah, sorry, I cut across you.

No, it's all right. I think I'd more or less finished the point just to say right.

The opportunity and the growth is comebacks of a start. We are busier than we ever have been, we are getting more RFPs than we can physically respond to at the moment, which shows you that despite near-term uncertainty on these things in general, investors, capital flowing into this space are very, very bullish about where energy storage and flexible technologies are going to be.

Awesome. To finish off, how can people find out more about, how do they follow you. Anything you want to plug, now's your chance.

Plug, I wish I had a book to plug. I don't have anything of that nature. So I mean, for me personally, I'm most active on LinkedIn. So you can find me by--

if you're putting show notes out like my name, it's quite an unusual, Marek Kubik, M-A-R-E-K K-U-B-I-K. And you should be able to find me fairly easily.

If you want to learn more about Fluence, fluenceenergy.com and that will take you to where you need to go.

Awesome, well, Marek, thanks for coming on.

Always a pleasure to speak to you. And already looking forward to next time having you on the pod. And for anyone who's watching or listening, thanks for taking the time to listen to us chat. And of course, let us know what you think in the comments. And make sure to follow us. All right, thanks a lot, cheers, bye.

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