53 - Iron air storage with David Hill (Director of Business Development @ Form Energy)

I've heard of flow batteries. I've heard of all sorts of batteries, but never a rust battery.

If we're going to be dealing with these low-cycling problems, we need it to be very, very cheap.

What impact must that have on the spread of prices you've got to capture?

Fundamentally, what we are trying to deal with is how to store huge oversupplies of renewables at certain times.

I was going to ask you about that.

That rusting process, which is the changing of the composition of that iron, frees up that electron. And what you're doing with that electron, that electron wants to go somewhere else. And that is the discharge process, essentially.

I don't know, like, a 19th century science experiment with big glass bulbs and--

what's going on?

We need to understand variability, hour-to-hour, day-to-day, week-to-week, month-to-month, year-to-year, yet things change, right?

Hello, everybody. Quentin here. This week, we've got an interview with David Hill from Form Energy. Now, if you haven't heard of them, they're pretty big in the US.

They've got a new battery chemistry. And they're specifically looking at long-duration stuff. So we go down the rabbit hole of long-duration energy storage, what that means, and how these new technologies can provide it. I really enjoyed this conversation.

I hope you guys do too. And please do hit Like, Subscribe, and let us know what you think in the comments.

[MUSIC PLAYING]

Let's start from the top. On this podcast, we're talking about two new things. We're talking about a new type of battery.

Yeah.

And we're talking about long-duration batteries, both of which are brand new, if you like, to our industry and a big part of what the future might look like. So where should we start? Should we start with the long-duration bit or the Form Energy bit because batteries from rust could be--

well, it's very exciting technology. But I'm not really sure how it works. Let's do the rust thing first. So Form Energy, what is Form Energy?

So yeah, I think it's good to start with Form because, generally, the origin stories of Form were the main reason I joined. It's quite a captivating story because the five founders who came together back in 2017, who all collectively have worked in the lithium ion or short-duration space--

each of them up to a decade--

so there's a huge wealth of experience across technology development and commercialization and operations--

they all were looking to solve essentially the same problem, which was that there was a recognition that lithium is a great technology.

It's a very powerful technology. Me and you know it very well. And most of your listeners know it very well.

And essentially, it has solved that sort of within-day problem and the sort of the issues that arise from the instability of grid, so being able to provide the range of different frequency services. And if you pair that with wind, solar, both offshore, onshore, different types, we can do a lot with just those sort of three technologies, essentially.

We can get to maybe 70%, 80% renewables at a sort of cost-effective level. It is that last 30% to 20% that is really hard. And there is this fundamental technology gap.

So that's the area they wanted to focus on. What would be the type of energy storage that would enable us to provide an around-the-clock, reliable, renewable energy system in a cost effective way?

And they came to a couple of conclusions. Well, essentially, what they were trying to do is build a battery spec. And then work backwards from there and find out what would be the type of chemistry to enable that specification.

So let's just narrow that down for a second. So what we're talking about, what sort of duration is around-the-clock? What does that mean?

Yeah, so I think it's a really good question. And as a new industry, I think, we already suffer from a little bit of a definition problem because long is inherently an imprecise term. So in what we call long is we talk about multi-day storage. So more specifically, we're looking at 100 hours.

That's not seasonal storage. That's a different thing, right?

No. And actually, I think some of the original thesis of the company was, does it need to be seasonal? And that was what we looked at. And essentially, as I said, the beginnings of the company was much more around data modeling and power system modeling, as opposed to getting in the lab.

Figure out what the system needs first, and then get in the lab, and figure out how to make it up. And modeling lots of different power systems around the world--

some more wind dominant, some more solar dominant--

we came to the conclusion that you do need almost at least 100 hours to be able to ride out these lulls in renewable energy patterns, deal with massive oversupply at sort of transmission level, and increasingly, in certain parts of the world, deal with extreme weather events.

And this 100 hours really covers, sort of rides you through most of those occurrences. But they are very infrequent, right? So they happen maybe a couple of times a year. They might not happen for a couple of years. And so the majority of the time, what you find, when we do these optimization problems for different clients around the world is most of the time, you're actually doing more seasonal shifting because you're sort of slowly charging the battery up over sort of a period of months where the system might be net long.

And then you're sort of slowly discharging the battery over a period of time when the system is net short of power. So it has the ability to sort of do both. You can deal with these sort of rare events to discharge the battery at full-rated power for the full 100 hours for the full four days. Or you do this sort of incremental seasonal shifting.

So let's get this frame of reference here, right? So there's lithium ion batteries. There's a load of those already around the world. They're one-, two-, three-, four-hour systems.

DAVID HILL: Mhm.

And then there's this concept of longer, 100 hours-ish--

some people say eight hours is long, right? But 100 hours.

My math isn't great, but I know that's four days of power. And then there's the seasonal storage, which is when it's sunny in the summer--

I'm very much simplifying here--

but sunny in the summer, charge the batteries, not sunny so much in the winter, discharge the batteries, and a lot of other complexities around that.

And so we're saying that Form Energy and the rust battery, which I can't wait to get to--

I've heard of flow batteries. I've heard of all sorts of batteries, but never a rust battery. The Form Energy thing is around the 100 hours, but it's also capable of doing longer as well?

Yes, in the sense that you have 100 hours to discharge at full-rate of capacity. So that means, literally, discharging the battery, full rated, for four days straight. The occurrences of when that is needed in the system--

so again, if you think systematically, when you go through lulls, a lull is sort of, again, something that you have to define of what a lull means below a certain average level at a certain time of year.

Again, that won't be sort of a very low for that whole four days. So rare an event where you find yourself fully discharging that battery over a full four days. So what you might find yourself doing is discharging a little bit for some days, a little bit again another day. And so you are providing that sort of incremental seasonal storage because you could have charged that up sort of a month earlier as the sort of--

again, you might be going through a period of time where there is more wind on the system than is currently needed.

Yeah. But the, I guess, the problem with the seasonal case--

man, there's a lot to talk about today.

DAVID HILL: [LAUGHS]

But one of the seasonal cases is if you're going to charge one season and sell--

you're going to buy power in one season and sell it back in another season. That's not many cycles. So you need a really big spread--

DAVID HILL: Yeah.

--of price spread to make it worth doing very few cycles.

Yes, I think it's actually probably more important to look at the cost. You need it to be really cheap.

Or it needs to be really cheap, yeah.

So this is where the sort of, again, the origin stories of Form comes in, which was when they recognized that it needs to be 100 hours, they also recognized it needs to be an order of magnitude cheaper than anything else on the market at $1 per kilowatt hour--

or sort of pounds per kilowatt hour level to enable this type of optimization problem to happen because if you're not cycling the battery very often because it's predominantly a capacity asset or resource adequacy asset to deal with these rarer events, you need it to be very cheap to be able to sort of compensate for the fact that these are much less cycling assets than, say, lithium ion, which is going one or two times a day.

OK, let's come back to Form. So what is Form Energy? How many people is it? Where is it based? And you said it was founded in 2017.

How much has it grown since then? And what's the vision here?

So the vision is building energy storage for a better world. And it generally is meaning that how we can use the sort of power of energy storage to expedite our sort of pathway to net zero in the most cost-effective way. And that was what really bound a lot of the founders together. And as I said, they didn't want to just get in the lab and look at different chemistry types and then think, oh, that stores energy.

Let's find our application for that. They really wanted to say, no, what is the problem? The problem is we need to be able to store energy for multiple days, and it needs to be cost-effective. So they came together in 2017.

And they didn't actually select iron air as the chemistry first. They sort of had a few different ideas they liked.

Iron air?

DAVID HILL: Yeah, sorry, I should go back to that. But they didn't actually choose the rusting sort of part of the battery initially. They sort of looked at the sort of system and said, what do we need? And then they did a bit of a feasibility study on a bunch of different chemistries.

And essentially, what they needed, they wanted to find out was it needs to be cheap. It needs to be safe.

It needs to be scalable. And it needs to be durable.

And so, fundamentally, the only sort of elements that could provide all of these things was this iron air chemistry. So let's talk a bit about the, I guess, the technology. So the technology is--

and I am not a material scientist. You know that. So I'm going to keep this at a pretty high level. But it is fundamentally a reversible rust battery.

You have a--

Reversible rust.

Reversible rust--

so the ability to rust and then un-rust metal.

And rust, yeah, so we're talking about normal, brown, nasty rust that comes on steel that has been treated?

Yes, and no. But essentially, yes. So you've got an iron anode, right? And the thickness of that iron anode is the duration of our storage.

So you've got a chunk of metal.

DAVID HILL: Yeah.

And the thickness of that metal--

we're going to figure out how this thing works in a minute. But basics, the thickness of the metal--

how much metal is there--

defines how long duration that bit of the battery cell is.

Yes.

OK.

And so what happens is, essentially, that sort of rusting process frees up an electron, and that is the discharge process.

And so as we essentially have a cell, which has what's called this air-breathing cathode, that brings air into the cell, and it mixes with the electrolyte to sort of make the a chemical reaction happen. And that is a discharge process. And we sort of steadily rust that metal throughout the whole discharge process to discharge it full-rate to power.

What does this thing look like? So before we get into any more detail, in my head, it's like--

I don't know--

like a 19th century science experiment with big glass bulbs, and what's going on?

So what a module looks like, which is the sort of individual building block of our systems, so at a system level, it will in some way look very much like a lithium ion sort of insulation, shipping containers with sort of racks of cells.

Oh, I'm comfortable now. I can relax. As long as there's a shipping container in there.

Yeah. Although, when I first went to see our R&D lab, it was pretty cool. There were some bubbling test tubes sort of around the place, which I very much enjoyed. But so you have--

the cells are very different. Our cells are about a meter tall and about 60 centimeters wide.

And the reason is everything we do--

and I will constantly refer back to this--

is around cost-efficiency, how we can continue to bring down the cost of our system, to go back to the problem we said, which is if we're going to be dealing with these low cycling problems, we need it to be very, very cheap.

So given that the duration of our storage is defined by the thickness of the iron anode, we want to essentially maximize that whilst reducing the cost of all the inactive materials. And so that supports our very large cells because that enables us to achieve the chemical reaction the most cost-effective way.

So I'm thinking like an oil drum size. Is that about the right size?

Yeah, so it's funny, right? So my wonderful American colleagues say it's similar to the size a sort of washer and a dryer put together--

is the size of one of our modules. But that's very much an American washer and dryer--

bigger.

Top-loading.

DAVID HILL: Yeah, exactly.

Yeah. So it's about maybe 2 meters by 1 meter, is the size of one of our modules, which is this is the individual building block of one of our systems.

And then you add them all together. And then you get the long duration bit.

DAVID HILL: Yeah, and then you get the long-duration bit. And what's really interesting, in terms of, as I said, the main active materials and what we do are iron air and water, and so that is fundamentally a very, very cheap way of building a sort of electrochemical battery. So that hits the cost part.

And the safety part, there is absolutely no inherent risk of thermal runaway because of the chemical reaction that is involved. And then the scalable part--

and I think the scalable part is really important because reality is--

Well, before we get to scalable--

sorry--

how do you make electricity out of rust? We seem to have skipped a very important bit here. So lots of batteries, they work with--

some generation types, they use heat, or they use steam. Or some batteries, you create a voltage across--

because you've got an anode and a cathode and an electrolyte, you know? I don't understand how rust on iron becomes electricity.

So that process, as I said--

that rusting process, which is the changing of the composition of that iron, frees up that electron. And what you're doing with that electron, that electron wants to go somewhere else. And that is the discharge process, essentially. So that is creating the discharge and the creation of electricity.

The smarts of what we've done--

and by the way, we didn't invent that chemistry. That was invented by NASA in the 1970s.

Yeah.

And that comes back to some of the durability that this type of chemistry has gone through thousands and thousands of cycles. But NASA did it for mobility purposes.

Well, for when I worked in oil and gas, you used to have cathodic protection on steel in offshore platforms, basically a big cathode that you would put on a bit of steel to slow down the effect of rusting. It's the same thing, right? You're either adding electrons or freeing them up, one way or another.

Exactly. And in the charging process, we essentially bring electrical current back into the cell. And that sort of replaces the hydroxide ions back into the iron anode and returns it to its metallic form. And that is the charging process.

So does this iron go--

does it go orange, like rust?

No.

It doesn't.

So you're not going orange and then back to the previous color.

No. Sometimes in some of our collateral, we sort of do that to sort of make people understand it. But this is a different type of rust. We're rusting it for from the inside, essentially.

Rusting it from the inside.

Because rust is--

rust, I know, it's everywhere. And it's safe. It's not going to really hurt anyone. But it makes you think of problems, right?

Rust is a bad thing. Rust on wheel arches on cars or whatever is not a good thing. But in this case, is it fully reversible or does--

because I think of rust as being flaky bits of metal that sort of get kicked off. Not like that?

No, not at all. So again, that's the rust of our imagination. And that's the sort of rust that makes us nervous.

QUENTIN DRAPER-SCRIMSHIRE: The rust of our imagination, wow! Yes.

And that's the rust that makes us nervous of driving over a bridge or something like that.

Yeah, yeah, yeah.

No, it's not like that at all. It is fundamentally sort of breaking down the chemical composition of that sort of piece of iron the way we sort of manufacture that iron anode.

And what does one of these 1 meter by 60 centimeter cells produce--

how many kilowatt hours or watt hours or megawatt hours is one of those things?

So one of those cells is about 10 kilowatt hours.

QUENTIN DRAPER-SCRIMSHIRE: 10?

So yeah, so they are sort of--

and I think this is the--

again, you sort of raise a point, which is as we go through the technology and all its merits, we are fundamentally looking at a different footprint size to a lithium ion. We have a much bigger footprint, in terms of our power density. But we have a much better footprint, in terms of our energy density.

OK. So you need more space, basically?

DAVID HILL: Yes. Yeah.

I'm going to have to keep on comparing to lithium ion because lithium ion is everywhere. So a 40-foot container lithium ion has got 1 to 2 megawatt hours in it, right?

DAVID HILL: Yeah.

Maybe a bit more if you squeeze it in.

40-foot container, which is a normal shipping container of Form Energy rust batteries is what, something in the sort of 100-kilowatt hour world?

Yeah, so I guess the way we sort of talk about it is that we're about 2 to 3 megawatts per acre. 2 to 3 megawatts per acre.

So when you think about lithium ion, it's very different. But then when you sort of convert that to energy, we're about 200 to 300 megawatt hours per acre.

QUENTIN DRAPER-SCRIMSHIRE: OK.

So in that regard, we have a better energy density to solar, for instance. And when you look at the way our installations look at scale, we are much more similar to a solar installation than we are a lithium ion installation.

Oh, OK, OK. You know what, this is probably the fifth time someone's come on this podcast and said the word "acre." And I still, in my head, I can't figure out what an acre is. But I'm not a farmer. I'm a city boy. So we do square foot.

DAVID HILL: Yeah, yeah. No, it's--

well, I think, seemingly, the whole renewable development, it's not just an American sort of love of imperial-metrics.

QUENTIN DRAPER-SCRIMSHIRE: Oh, no, no, no.

Everyone talks in acres.

Let's go back to scalability.

So that's one of the big pluses of the Form Energy system, right? What does that mean?

So what it means is, fundamentally, there is a large amount of investment going on in the whole world of, like, low-carbon firm capacity for us, to enable us to roll out the huge amounts of renewables that we need to do to hit all our decarbonization targets.

I guess one of the challenges is making sure that you--

it's one thing, tapping into sort of a large supply chain and sort of iron, which is very cheap because it's heavily in abundance, but it's another thing that the fact is it's heavily mined. It's one of the largest, most mined commodities in the world. And so therefore, we can tap into an existing supply chain that's already there, which is a sort of building block of the steel supply chain.

That gives us a huge advantage. And it says that we don't have to build up that supply chain as a demand for our product sort of begins to ramp up. We have all of those existing supplies are there. So that means that as the sort of demand for our product picks up, we can keep pace with that.

I can't stop thinking about iron and ion puns.

DAVID HILL: [LAUGHS]

There is something there that you guys have got to use. [LAUGHS]

There is definitely a healthy pun culture within Form Energy.

QUENTIN DRAPER-SCRIMSHIRE: That's good. I'm glad. I'm glad. So how many people is it?

Companies are groups of people, right? So how many people are at Form Energy. Where are they all based? And what do you do there?

So we are growing very fast.

We are, I think, about 400--

I think we're probably over 400 people now. But we're growing rapidly. The business is--

400 people, wow.

DAVID HILL: Yeah.

Wow.

So the business is really rapidly moving. You consider moving out of the lab into high-volume manufacturing to start delivering on our first commercial projects that will go live in the US over the next couple of years.

The bulk of the company is split between two main sites. You've got our site in Boston, which is very much our R&D and subscale cell development.

So a lot of the founding technologists at Form, we've heavily linked to MIT. So a lot of the science was sort of linked to the academics--

Sounds good, doesn't it? It sounds really good saying that.

It does. And so that's actually based in a part of Boston called Somerville. And so as I said, that's where all of our cell development is done. And then all of that testing and performance data is taken from there to our site in Berkeley, California, which is our systems engineering and productization, essentially, take that and--

Also, terrible for talent, that area, as well.

DAVID HILL: Exactly. Well, there is a good reason to it, right, because Boston is great for that sort of scientific academic sort of research, to be able to sort of do all that cell development. And then we've got great systems engineering talent in that part of the world because of all of the amazing companies out of there.

And that's where we take everything that we've learned out of the Boston area and then sort of build up at a production scale and a module scale and sort of build our first enclosures. We then have a site near Pittsburgh, Pennsylvania, which is our sort of pilot manufacturing facility, where we test out manufacturing techniques, think about how we can get to high-volume levels and keep coming down that cost curve.

But I think the most important and really exciting thing for us is over Christmastime, we announced the site of our first high-volume manufacturing facility, which is going to be in a small town called Weirton, West Virginia.

Wow, so made in America.

Yeah, very much so.

And can I ask you--

so we've got 400 people in this company.

There's a lot happening, a lot of R&D, a lot of commercial building stuff. There's a lot of activities.

But that's quite an investment, a financial investment, to get this thing off the ground. So who's backed you guys so far? And who owns the company?

So there's a range of investors.

Some are some big names that we all know, so TPG. ArcelorMittal is one of our sort of major strategic investors. Breakthrough Energy Ventures--

OK.

--a number of sort of big energy transition investors in the sort of California area as well.

And do you guys have systems out there in the world that are currently doing the 100-hour, long-ish--

but not seasonal duration--

100-hour dispatch model?

So we have a--

we've built our first module and sort of put it into a closure in our site in Berkeley. We have not built a full system yet. Our first system will go live with a client in 2024.

And where's that?

So our first sort of--

QUENTIN DRAPER-SCRIMSHIRE: Or is it secret?

No, we have three public projects that are named. So our first one is with the second-biggest utility in Minnesota, called Great River Energy.

DAVID HILL: That's very much sort of what you consider a sort of pilot scale. That's 1.5 megawatt, 150 megawatt hours. And then we have two other--

Whoa, whoa, whoa, whoa--

let's do the math. This is 1.5 megawatts at 150 megawatt hours.

DAVID HILL: Yeah.

You know what, this is--

The scale is kind of crazy. So we have just announced two other projects with a utility called Xcel Energy, which is, again, for two projects, one in Colorado and another one in Minnesota. Both will be 10 megawatts, one gigawatt hour each. And so--

Wow, the numbers really add up fast with long duration, don't they?

DAVID HILL: So this will be--

with those two projects, which will be two gigawatt hours of storage, that in itself, from a storage perspective, is bigger than the total amount storage deployed in the UK market. So the numbers do add up very, very quickly.

But if you're used to the lithium world, where everything is on a pounds-per-megawatt or dollar-megawatt value because everything's one, two, three, four hours, it kind of breaks your head a little bit, right?

DAVID HILL: It does. And I think there are many--

coming out of the lithium world, I've had to sort of rework my head, in terms of looking at these batteries and fundamentally understanding what they're doing.

You're recovering from lithium world. Sounds like you've made a breakthrough, man.

[LAUGHTER]

But yeah, I mean, these assets are fundamentally very different. They are, when you actually look at the type of storage you need to provide that firm capacity when it is needed, by all metrics of what a lithium actually looks like, we're building what could conceivably be a bad battery, right? There are many things that you look at. And it's got a bigger footprint.

Round-trip efficiency is very different compared to lithium ion. But you're fundamentally building a battery that is for a different purpose, that is for these low-cycling sort of resource adequacy needs.

Let's do the top trumps, right? Let's do the top trumps. So we've got lithium, which is you need less space and less footprint, if you like. It comes in 40-foot containers. Pretty cheap, really, in the grand scheme of things. And high power but not as long duration, by any means.

DAVID HILL: Mhm.

But round-trip efficiency, somewhere in the late '80s, early '90s--

Yeah.

QUENTIN DRAPER-SCRIMSHIRE: --percentage terms.

QUENTIN DRAPER-SCRIMSHIRE: For every kilowatt hour you put in, you probably get, let's say--

let's be nice round numbers--

you get 90% of that back.

DAVID HILL: Yeah.

What does that look like for a rust battery? Should I call it--

what's it actually called?

So the chemistry is called iron air.

QUENTIN DRAPER-SCRIMSHIRE: Iron air batteries. What is it like for an iron air battery, or your iron air battery?

Just to go back to your one point there on lithium, it is cheap sort of on a power basis. But if you were to build that out to multiple and multiple hours, then the costs begin to stack up.

So again, it is cheap for the application that it is doing. It is not suitable--

because it would get very, very expensive, very quickly to start going beyond the sort of four or six hours that it's sort of currently doing. We are operating around about the 40% round-trip efficiency mark.

And I think one of the interesting things we found out when you were doing all of this modeling in the early stages before we downselected our chemistry, was to understand, what does this specification need to look like before we go in there? And one of the key things we found out early on was, like, CapEx is a far bigger lever that we need to pull the round-trip efficiency because fundamentally what we are trying to deal with is how to store huge oversupplies of renewables at certain times--

I was going to ask you about that.

It's a bit like the hydrogen storage model. Although, 40%, I think, is much higher than you can do with hydrogen storage. Don't let me go down another hydrogen rabbit hole in this podcast, please.

DAVID HILL: It's fine by me. [LAUGHS]

So 40%, that sounds more reasonable. But yeah, you do have to assume a big overbuild out of renewables for that to make sense, right?

Yes, yes. And I think that's a fairly safe assumption, like in every sort of forecast you look, in different--

whether you're looking at National Grid Future Energy Scenarios or Bloomberg. Every forecast you're looking at, there is a huge overbuild, right? So whatever.

What is the peak demand of UK--

is what? It used to be 60. I think it's like 55 gigs or something like that now. In any sort of story you look, we're building--

we're going to have hundreds of gigawatts of renewable generation in our system to be able to deliver around-the-clock service.

Yeah, I think our peak demand numbers on our long-term model, which we haven't actually released yet and probably shouldn't talk about--

but yeah, we have a long-term model This wasn't a plug. But it is now. Please do check it out when it comes out.

I think we're about 70 gigs of peak demand by 2050.

DAVID HILL: Yeah.

So it's a lot. So the peak demand is going to go up. But buildout is going to go up. And let's hope that we can use systems like Form Energy's to charge batteries long-duration rather than paying wind to switch off, which is just such a bad situation that we have to do that.

Yeah. But it's like, on the system, we've really focused on building out that sort of generation sort of side of the problem. And we've done that really well, comparably to many places in the world.

But yes, we are at a point now, which is fundamentally why I've come to join Form Energy at this moment in time because we are at a point now where even if the demand-supply imbalance is still much more targeted around that intraday problem, we are already seeing huge problems at a transmission level from a sort of curtailment issue and constraint management.

We did a piece of work actually for National Grid here a couple of years ago, where they gave us forecast boundary flows over some of their main congested areas. And we sort of did a bit of a technology evaluation of what would be the different technologies that could help relieve those problems. And I think it was on the B7 boundary or B6--

I forget which one--

I think it was the B7.

The top of England, Scotland area.

DAVID HILL: Yeah, exactly. By 2025, at least 20% of all curtailed energy would be for periods of longer than 100 hours. So this would be--

we are not very far away from seeing these types of events last for a considerable periods of time, which means it is far more cost-effective for us to deploy our technology than it is reinforce the network in certain places.

Yes. Although, that's not the only solution, right? There are a number of solutions. So the iron air battery has got to compete with a load of other potential solutions, ranging from other long-duration solutions like flow batteries, who have got--

they seem to be doing--

flow battery companies seem to be doing pretty well right now in the long-duration space. And then there's the big pumped hydro stuff. That takes a while to build.

DAVID HILL: Mhm.

Then there's the idea that we sort of just keep burning some fossil fuels for those periods. It depends how often that's going to be. So there's a whole thing to play out.

How do we get--

so 40% round-trip efficiency, is it enough? How much overbuild do you have to assume for 40% to make sense? And what impact must that have on the spread of prices you've got to capture?

So again, I'd start from the point of view--

there's a few things you're into there. But starting from the point of view as when we actually did a lot of our modeling, as I said, the most important lever for us was CapEx, how we could continually bring that down.

So most of the people at Form Energy right now are focused on keeping that performance stable whilst thinking about lots of different ways that we can bring down the sort of CapEx cost at a pounds-per-kilowatt hour level. So absolutely, 40% is a round-trip efficiency that we see in loads of different markets around the world, that if we get to our target cost price, will be deployed in large sort of gigawatts in scale.

QUENTIN DRAPER-SCRIMSHIRE: OK.

We actually--

sort of even now--

are looking at models in the UK, whereby we are looking at certain sites that are in heavily congested areas. And by sort of making certain assumptions around being able to charge up the battery with zero marginal cost power, we are already seeing spreads that make this battery look like a sort of investable proposition. So this is now.

Sort of as you move through time, as you bring ScotWind on board, there's like 25 gigs of offshore wind that's going to come on in Scotland over the next 10 years or so. We're going to be in a very, very different place.

Yeah, yeah.

DAVID HILL: And I think--

I always come back to this point of view, like just look at the UK, right? But this is a global issue. We're a global company. The sheer scale of investment that is needed across our entire space, in terms of renewables and storage and network infrastructure, there is a space for lots of our technologies to play.

I don't think there is necessarily a winner takes all.

There is not. No, I agree. So I need to change my thinking, my frame of reference, around round-trip efficiency because I always get hung up on round-trip efficiency.

DAVID HILL: Mhm.

And of course, it's bigger than that. CapEx plays a big part, as you said. And doing lithium ion over 100 hours is just basically nonsensical, right?

DAVID HILL: No.

For a load of different reasons, not just the CapEx. So longer duration, the trade-off is you go longer duration, but you get less round-trip efficiency, generally, it seems, on all of these potential solutions.

DAVID HILL: Mhm.

And so how do I change my frame of reference because you must have done it coming out of the lithium as a reformed, recovering lithium dude.

DAVID HILL: [LAUGHS]

And now you're completely cool with this 40% round-trip efficiency thing. So how do I do--

how do I get there in my head because it must make sense because you've done it. And there's thousands of people working on this kind of stuff.

How do I get there? What should I be thinking?

Firstly, I think you used the word "trade-offs." There's lots of trade-offs in all of these different--

we're constantly looking about trade-offs of how we make the optimal system to enable us to fundamentally get us to that net zero world in the cheapest possible way. But it goes to what I said already.

It is fundamentally built on our ability to charge up the battery using energy that would either be curtailed because fundamentally there's not enough capacity on the network, or we are in a place of massive oversupply, and there's not enough demand on the system to take it. So all of these types of storage technologies are predicated on the fact that we are moving into a world in a relatively short time frame where that is going to happen.

I mean, I remember sort of looking at certain models when I was looking at the lithium world, where we were looking at sort of two-hour revenue models for sort of 10- to 15-year offtake agreements. And sort of within this decade, it was due to--

in some certain forecasts, we will have enough offshore wind to service demand for multiple days on end within this decade.

So that, there, already means you're going to get sort of--

that volatility is going to shift from a within-day problem that will be flat for a couple of days, essentially. So we're not that far away from these types of patterns beginning to emerge. And so that's where--

and I just want to be careful of my words--

and that's where round-trip efficiency becomes less of an issue because, again, you're not cycling the battery as much.

Round-trip efficiency is very important when you're cycling the battery multiple times because you're not losing as much energy. When you're cycling the battery anywhere between five to 10 times a year, properly, round-trip efficiency becomes way less of a problem.

I think I understand now. So the frame of reference and thinking is that we're moving to a world of flatter peaks, so longer duration peaks, longer duration bottoms, if you like, in prices.

DAVID HILL: Yeah.

And those are pretty chunky spreads. And they're sustained for long durations.

DAVID HILL: Yeah. So for instance, when we've done a few models, again, for building out the revenue case in the UK and you look at state of charge profiles throughout time, sort of they get fatter. And they, at that state of charge profile, they'll get longer. And they get fatter.

And they get higher, essentially.

So throughout time, as more and more renewables come online, those cycling, those patterns, become bigger, more protracted, essentially, as those prices--

as the way you said, explained--

they become sort of flatter for periods of time and peak here. And so really, you can see the story being told in the state of charge profile over a period of time. And you do incrementally a bit more cycles, year-on-year, as you grow renewables.

I just can't help but think that interconnect is going to eat up all of those spreads, right? But then every time I think about the future of the energy system--

full stop--

in the UK and Europe, I always come back to this problem of how many interconnectors we're going to have?

And how are they going to connect to all the different countries because whatever model you put together, when you try and model the interconnectors, you just get assumptions upon assumptions, right? It becomes very, very tricky.

It does. And I think, again, I start from the premise that there are many different solutions we need to get there. And again, there's not a one winner takes all.

One thing I do get really excited about Form is we can deliver at scale in a pre-2030 time horizon. So we can get sort of large volumes out there.

And I do think we're in a position now, whereby one of the really interesting things about the benefits--

I'll get to the interconnector thing in a second. But one of the interesting things about the benefits of our technology is when you sort of hit our cost targets that we can achieve, you have a fundamentally different technological make up of the sort of cheapest cost pathway to net zero.

And what I mean by that is you end up not overbuilding renewables as much. You end up not overbuilding networks as much. You're not--

end up overbuilding short-duration. So you get to a cheaper overall system build altogether, which is one of the sort of very nice, exciting things about our technology. And--

That's very cool. That's the big story, right?

It's a really big story. And that's a sort of policy story because that's the sort of why this is important that we need to lay that landscape, that as an energy developer, you're sort of thinking, what are the returns on my asset going to be? But you are kind of interested in the total market size of your particular sort of asset class. And there is potentially impact on how that works.

Why I say that is because the sooner we get doing it, the more those savings are, right? The longer we wait, the more we have to spend. And so there is a sort of--

and so that's one of the things that excite me, that we can deliver at scale when interconnectors, unfortunately, take a very long time to happen. I would also say--

and again, the modeling is super hard here, so I'm not going to be too prophetic--

Oh, by the way, I was not expecting an answer on what was going to happen with interconnectors and prices because, I mean, we're going round this internally.

DAVID HILL: Yeah.

It's weeks and weeks and weeks of work.

It's really hard.

But I would say that, theoretically, they will, at certain times, work with you. And they will, at certain times, work against you because essentially you will get these weather patterns, that you will essentially be experiencing the same weather pattern that the other country will be. Now, they will not directly correlate. And they could be sort of helping you a bit.

But I don't think it will be as simple as, we've got no wind. Get it in from Northern Germany. They've got no wind. Get it in from us. That would be very elegant. But I think there is space for a lot of us.

So what does a--

for Form Energy, what does your ideal market look like, because you're expanding in Europe right now? You've got people on the ground here. And I'm sure we're going to see some Form Energy systems on the ground at some point. So what does a good market for this 100-hour iron air battery look like?

I'm sensing that it's a high-penetration of renewables.

DAVID HILL: Mhm.

What else is key for that market? Can you make some examples?

Yeah, so I think, I mean, it's reality. I've come from the lithium world. And so where you see a buoyant lithium market, in some ways, it's the bellwether for when a long-duration market is going to--

long-duration does follow short-duration. It's just we're seeing that volatility play out for different technology times at different time periods.

So yeah, high penetration of renewables, a policy landscape that is looking to retire certain legacy thermal assets, and, again, UK is--

there's a reason why me and you have been in jobs in the UK. It is an amazing market for energy storage just because of its island nature as well. It brings in play a sort of additional challenge that sort of creates more volatility than are perhaps in other markets that are more interconnected with their sort of neighboring countries.

So those are good markets for us, at a sort of fundamental level. Then what is really interesting, I think, to talk about is our first four projects, which are with--

so there's two with Xcel, one with Great River Energy, and one with Georgia Power. What's interesting there is they are all in parts of America where they have vertically integrated public utilities, so some of the parts of the world which are generation, transmission, distribution, and retail.

The good old days.

DAVID HILL: Yes, exactly.

The good old days. I still say to this day, it makes sense.

DAVID HILL: Yeah, I mean--

QUENTIN DRAPER-SCRIMSHIRE: There are so many ways to cut costs in that model.

I feel a bit disingenuous talking about the CGB. I don't know how old I was when that was operating.

[LAUGHTER]

But fundamentally, there you have got a policy landscape where these people are looking to maintain a level of service reliability when you've got growing renewables, and you've got a policy mandate to retire certain thermal plants. And so a lot of our projects are actually on the sites of ex--

well, which will be former coal plants. And they internalize all of the different parts of the value stack that we know.

And so the value proposition is we are fundamentally helping them model their entire portfolios and helping them look at what's the least cost-build pathway at a portfolio level to a certain carbon emissions objective. And that's how we sort of get really good traction there. In Europe, it's very different.

Yes.

DAVID HILL: It's safe to say. Whereby we have a deregulated market, and it's unbundled. And therefore, you know, I feel a little bit like I did at the beginning of the lithium world, where we are teasing our way out, like looking for what are the different--

what is going to be the different revenue stacks that is going to make this sort of fundamentally a bankable asset class?

And what's clear to me is that as an asset class that--

I think what's clear to me is as you move from a system that is dominated by fuel costs to one that is dominated by the CapEx--

so the upfront costs--

the way you reduce overall system costs, which is good for society, is to reduce the cost of capital. And the way you reduce the cost of capital is to give visibility of long-term revenue dreams.

Now, that can come in many different flavors, right? It can come in firming PPAs. It could come in some sort of strategic reserve or resiliency contracts. It could come in many different flavors.

We are sort of working across the board in lots of different areas. But one area where we see an immediate need--

and as a pre-2030 time horizon--

is the one I was talking about, how we can provide a cost-effective way for transmission support to relieve their growing problem because it is a problem.

You only have to look at the scaling costs of National Grid for curtailment. They have the very same problem in Ireland. They actually have a bigger problem in Ireland, actually. If you look at the costs in Ireland of their wind curtailment, they're kind of almost comparable to the UK. And it's a much smaller market.

Yeah.

DAVID HILL: So those are the areas whereby we're having a lot of interest, in terms of either co-locating with sort of onshore wind farms or sort of looking at sort of pure play storage projects that are looking to work to fundamentally reduce transmission congestion. And we're having those conversations around Europe.

All right, we've got to talk about the IRA for a second. So the Inflation Reduction Act, which is, in simple terms, a huge generation of cash from the US government towards a lot of different things. But a big chunk of that is renewables and smart grid technologies and all the things that we're very excited by.

And so as an American company with a big footprint in the US, and storage is being a key part of that, what does that mean for Form Energy? I mean, I'm sure it's good news, but how good news?

So I think, at this point, it is important to say that everything we are doing, everything I've spoken about in the last half an hour or so, was happening before the Inflation Reduction Act bill. So fundamentally, we had made huge progress, in terms of developing the technology out of the lab and sort of into performing at the level we need it to perform to hit our cost targets and performance targets at a production scale.

We had already secured the capital that we would have needed to build our first high-volume manufacturing plant. I actually came on board at Form before the IRA was announced. So we were already going to be launching in Europe. So I think it's important to say that we had made a lot of progress already.

Now, it is--

OK, I'm hearing loud and clear. You don't need the IRA. I get that message.

We were fixing a problem that needed fixing. And we had a really great product market fit pre the IRA.

It does enable us to go faster and harder, in terms of our manufacturing plans, to sort of ramp up and get down that cost curve as quickly as possible.

All I would say is one sort of interesting thing about our technology is that because it uses a lot of iron, it's very heavy. So we don't like--

we don't want to be shipping it too much.

Oh.

DAVID HILL: So reality is, we will be locating manufacturing in every major continent in the world, in terms of how we will service local sort of markets. And so we will be looking to put manufacturing in Europe in a not too sort of distant time frame to be able to service our European needs. And I think it's also probably worth saying, the IRA has benefited a very broad range of technologies, not just us.

So manufacturing in Europe, that's exciting. Do you know where? Can I push you on where?

DAVID HILL: [LAUGHS]

No.

You didn't hold the Elon Musk gigafactory decision, where I'm going and meeting politicians and shaking hands and figuring out where it makes sense the most?

No, it's too early for us to say that.

OK. So now it's to the last two questions.

The first one is quite a simple one. If you want anything to plug, if you've got a press release or something you think that people need to know about, now's your chance. And then the second one is a bit more complicated. This is, what do you believe--

it's a contrarian view. What do you have to believe about the world or what do you believe that not necessarily everybody else believes, either you, as David, or as Form Energy?

DAVID HILL: Yeah.

QUENTIN DRAPER-SCRIMSHIRE: So is there anything you want to plug?

I think the thing I wanted to plug, I've already made pretty clear, which is it is an incredibly exciting time to be at the company as we sort of ramp up our ability to start commercializing our technology at scale. So the announcement of our big, high-volume manufacturing site is a huge step for us, right?

We will not deliver what we need to do unless we rapidly come down our cost curve to our target cost, which we know, when we do the modeling, there is gigawatts and multiple gigawatts of demand for our product. I was on the site sort of about a month or so ago, in West Virginia, and it's hard not to be inspired about seeing--

bring a huge amount of jobs back to sort of a place where there used to be a steel mill.

So it's a very exciting time, in terms of seeing us go through that process. Contrarian thoughts--

interesting. One area that we do see, and it's something I actually began to recognize in my previous career when I was at Open Energy, was that increasingly, a lot of the world in which we navigate is determined by the forward curves of many different sort of consultancies of how they look at different power systems evolving.

And I think we see that doing things the way we used to do them might need to change, in terms of how we think about future markets because--

I mean, this is more like grid planning infrastructure than it is for, necessarily, revenue modeling because fundamentally, looking at things using simple heuristics, so looking at sort of average weather years, is increasingly getting us into a world which just doesn't make sense when you've got very weather-driven grids.

And I think people--

I 100% agree with this.

I don't think people realize what weather-driven grids mean. We can't look at a typical year. We need to understand variability, hour-to-hour, day-to-day, week-to-week, month-to-month, year-to-year, yet things change, right? I think was it 2020, you had like 14% less wind than 2021. That's materially different amount of capacity that's on our system just going from year to year.

And so we see a bit of a step change needed in how we model our systems because to build out that optimal technological landscape to give us the cheapest pathway, we need to be a bit more cognisant of that variability and look at different weather conditions and how that would impact our sort of optimal technological landscape.

I couldn't agree more. I mean, there's so many of--

it's a bit of a bugbear of mine. But we--

a lot of the industry's modeling, it used to be, does the spark spread make sense, right? And what does the future look like for my generating asset? And now so much of future technologies are dependent on--

well, they make sense in a volatility-led world rather than absolute price world.

DAVID HILL: Mhm.

And that is a different way to look at the modeling problem, full stop. So it's a different way to look at the future grid and energy system completely. And yeah, 100% agree with you. We really do have to approach this differently.

DAVID HILL: Mhm.

And there's a lot of work to do. There's a lot of models to build.

DAVID HILL: Yeah.

And so with that, I'm going to say, thanks for coming on. Great conversation. If you're listening to this, please do hit all the buttons, Like, Subscribe. And if you hit five stars, you do get a goody bag. And see you next time.

Thank you very much.

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