17 - The technology behind battery optimisation with Jacob Monroe (CCO @ Arenko Group)

[MUSIC PLAYING]

So I mean, let's start with who are you?

Jake Monroe. It feels like a deep question.

Yeah, yeah, we can go with name and then--

You're giving me an existential crisis right now. [LAUGHS]

It's a good way to open, isn't it? It's a good way to start. It's all going to get better from here.

Yeah I've got it.

So and so what do you do, Jacob and for whom?

I am chief commercial officer at a s group, which is an optimization technology company in London. And I've been there about a year and a half.

Oh, very cool, but it doesn't sound like you're from London. I mean it's really rude of me to say.

This accent.

Yes,

I'm not. I'm originally from the Northwest of the United States and most recently, in California.

I think it's fantastic. Cool and so, I guess Chief Commercial Officer can vary a little bit. So what do you see your day to day being? And what's your mandate at Arenko?

Yeah, so I'm responsible for sales in the UK and our expansion internationally. So when I joined about a year and a half ago, the company was just starting to expand in the UK.

And now we've got a great product. We've got great customer traction, and so we're cruising here in the UK, and I'm responsible for making us go elsewhere.

Yeah, amazing. OK, cool, and so a lot of people watching this will know Arenko. Arenko is almost like a household name in battery energy storage in Great Britain, which is obviously,

Love to hear that.

Yeah and I guess, known for a few key things. But for me, when I think about Arenko, I think about the first player in the balancing mechanism, and the person who bought Bloxwich and was the first person willing to take risks in the balancing mechanism. But I'm sure it's way bigger than that.

We'll go into more detail, I'm sure, when we talk about everything international and the greater vision for Arenko.

What should we all know about Arenko? What are the key players? What's part of the Arenko game?

Yeah, great question. So the company started back in 2014.

Originally, the CEO, who was the founder and is still the CEO, he started the company originally as a developer of energy storage and with the intent of being an owner operator. And they built out the team at the time, built out a nice pipeline of energy storage and ultimately, brought a 41-megawatt battery online in the UK.

And along the way, the team was looking for someone to trade that asset. Someone to figure out how to make money with it, or what we know as an optimizer. And the team looked around the industry and saw a lot of folks who could participate in frequency-response services or could trade it like it was a big gas asset, sort of using the traditional methods, and the team said, we think we can do something better.

And so they started building a technology platform, in 2016, to optimize energy storage for their own use. In 2019, we went live in the balancing mechanism. So it was an automated algorithmic trading in the balancing mechanism with--

TIM OVERTON: Was it really? Was it like because--

Absolutely, yeah.

That was kind of the point in the battery energy storage, where everyone--

Absolutely.

So I think I can say this, so when Modo first started, that was kind of our initial, very initial, vision for Modo. So when we started Modo, we were going to be doing, yeah, automated dispatch in the balancing mechanism.

JACOB MONROE: Oh, really? I didn't know that.

Yeah, I know.

Oh wow.

We don't kind of scream and shout about it, but--

[LAUGHS]

yeah, at the time, everyone was talking about, we've got this algorithm and it's all about having an algo these days. Human traders are the old.

[LAUGHS]

That's old news. But there was always, I guess, for me, this isn't to talk down to anyone, a little bit of suspicion around how much of that is actually algo and how much of that is actually someone's up there pushing buttons as quickly as they possibly can.

Yeah, a great question. Yeah, it was and is largely automated, largely algorithmic.

Humans do--

and I'm skipping ahead a little bit, but humans do put constraints on the optimization. So whether those are physical constraints, based on what the battery is capable of doing, commercial constraints like a warranty.

Or a trader who sees a unique opportunity in the market or unique risk in the market can say, actually, I think we should go out after this bigger opportunity, or I think we should steer this way and avoid that major risk. So humans do control the optimization make sure things work well, but you could just leave it running for as long as you'd like, and it will participate in--

[INTERPOSING VOICES]

--mechanism. Yeah, and essentially, it reoptimizes every five minutes and it takes into account all the real time data and says, what's next?

TIM OVERTON: Cool.

Yeah and yeah, we'll come back maybe to what we do now, but back in January 2019, we went live in the balancing mechanism. And the team actually realized, shortly thereafter, that there was a lot more value in the technology that we were building to optimize batteries than there was in being, for us, for the team, in being a developer owner operator.

There are folks like, previous guest, Ben Guest, who are experts at that and have really low cost capital, et cetera, and we felt like we could help them. And so around the time I joined, in 2020, the decision was made to focus on being a software company.

And we have an in-house trading desk that uses our optimization software today. And that software has grown in a lot of different ways, in the past few years. So what we do now is, we automate all markets, so automated delivery of all markets, so it's ancillary services, wholesale markets, balancing mechanism all that is automatically delivered and dispatched.

And we have algorithmic trading in wholesale intraday, the balancing mechanism, and that is, essentially, done with the goal of taking the day to day manual burden of trading and dispatching batteries off the trader, so we automate connections with the markets, for example.

So what the battery is capable of is communicated in real time to National Grid. It's, of course, communicating in real time to the users of the platform. And in the event that something goes wrong with the battery, our software can detect it and notify anyone who needs to be aware of that.

OK, oh, very cool.

Yeah.

And then, obviously, the asset that was owned by Arenko was sold to Gresham House. And so, yeah, now there's kind of the development side, the asset holding side of the business is--

It's no longer. It's no longer, so the company sold that asset, sold the rest of the development pipeline just to focus on being a technology company. And we sold that 41-megawatt-hour asset to Gresham House. We still optimize it to this day. So when we sold it, we retained a contract to optimize it and still do.

Yeah, OK, super exciting, and let's talk about, I guess, it'd be interesting to talk about the juxtaposition and the difference between being an optimizer and being an optimization tool or an optimization software.

I'd be interested to know because you're still making huge headway in GB. Most people, probably would have seen the announcement about Gresham House and the contract. Be really cool to talk about how on Earth you managed to sign such a huge contract.

Yeah, congratulations. I think that's pretty exciting.

But, yeah, how do you see that alongside the being a tool rather than being a service?

Yeah, absolutely. So we have 1.5 gigawatts of capacity under contract to come online over the next several years within our optimization service, but the best way that we can provide good service, which is maximizing revenue, minimizing risk, for our service customers, is to build great technology.

Yeah.

And so we do that. We have, as I said, an in-house trading desk that uses that technology every day, but we also license that technology that our traders use to other trading desks. So other participants in the market can use the same automation algorithmic-trading capability, asset-management capability of that platform on a completely separate trading desk with different traders, different assets that we have no oversight or control over.

OK, cool, and on those two, do you see a future where Arenko is just one, and we hear a lot, the profit-sharing mechanisms around these assets and the fact that people are building up huge portfolios, the likes of Gresham Houses.

If they're in a profit-sharing mechanism, the bigger that portfolio, the more cash they're leaving to someone else. What do you see the future being for Arenko?

I think there's two key reasons that it makes sense for us to provide the optimization service now. So one of those is, it's kind of the market paradigm.

If you have a couple of batteries in the market, you look for an optimizer. It doesn't necessarily make financial sense for you to in-house, to hire your own traders, hire your own finance people, et cetera.

So there's a big segment of the market today, as the market grows, that has really no--

it wouldn't make sense for them to do anything but contract it out.

Which is great. We think that's super important. The other reason that we continue to provide the optimization service, is it provides us a great in-house customer.

We have experienced traders on our trading desk who are providing excellent feedback about the product itself. So as I said, there they are the users.

As people say in tech, we're eating our own dog food.

So they log in every day and optimize batteries using that software, and then they share their opinions about it and their feedback about it to our engineering team. And so those are the two real key reasons to continue providing the service. Yeah, it's going well.

I think the other thing about being a technology company, is we do hope to--

and your question about what does the future hold, we don't have any plans to stop trading assets ourselves. But we continue to think about ourselves as a software company because as those customers grow, and they do decide to bring some of these things in-house, we can be the end-to-end platform that provides forecasting, optimization, automated dispatch, reporting, settlement, all those things. We can be that software platform for them, as they grow.

And we think it would be great for asset owners to decide to bring it in house, and we definitely think technology is a necessary component.

Yeah.

And automation technology, specifically, is a necessary component of trading batteries, especially once you get to large portfolios.

Yeah, yeah, and while we're on that, we hear a lot about the kind of GB space, but I think probably what people are starting to talk about now is spaces further afield. I guess one of the potential reasons that Arenko would have bought you in is that--

With this accident?

Yeah, yeah, yeah, it's just so charming. It's just--

Stop it. [LAUGHS]

We're both redheads. We're going to blush too much.

[LAUGHTER]

But, yeah the kind of step from providing a service in Great Britain, particularly if you're looking at--

I guess a lot of the Arenko value proposition revolves around market understanding, and the understanding of the local market. GB system is, obviously, relatively far ahead of other places in the world that are deploying battery energy storage, in terms of market structures.

But less about Arenko but more, yeah, how do you see the battery energy storage space right now, in terms of commercialization and the complexities around the commercialization of battery energy storage? Do you see a big problem in stepping outside of GB?

So the UK is a great place for energy storage, just to be super clear. The three things that are really necessary for us to think about entering a new market are depth of market, so what's the total energy capacity in a particular market? What's the total energy storage projected in that market?

Complexity, so how many services can a battery today participate in? And how quickly are participants required to bid into those services to switch between those services? So that kind of complexity benefits automation technology.

And then a business case today for batteries.

The UK has all those things.

It's a big market. It's very complex, and there is absolutely a business case coming from multiple services, here in the UK. So it's a great market from that perspective.

And you may see our CTO, Roger Hollie's likes to post on LinkedIn. And his posts get a lot of views. There are days where a single battery under our care, is participating in every single market that a battery is allowed to participate in in the UK in a 24-hour period.

I won't list them all out, but you know what they are.

Super exciting.

Yeah, it is super exciting. And fundamentally, we want to enable users, traders to be able to do that, to benefit from that automation technology, so that as their portfolios of energy storage grow, they can think strategically about what to do with a battery.

And so when you think about where to go internationally, and how to look beyond Great Britain, it's the same physics. So at the end of the day, you've got to balance the system. You've got to make sure the frequency is in line.

Every electricity market has, really if you boil it down, the same problems. It's just different market mechanisms for dealing with those problems. And so we have really smart people who understand the first principles view of what it takes to run an energy system.

And so they're looking at those other markets and saying, OK, does it check all those three boxes depth, complexity, and a business case today?

And if it does, then it probably makes sense for us to go there. And we can learn. That's where you guys are startup or a startup, your job, as a startup, is to learn.

And I think it excites everyone that we would go into another market and learn the details of it. And, of course, there's also the option and likelihood of hiring people who already have that knowledge, folks who've been in those markets, et cetera.

Yeah, yeah, so without making any promises or anything, where would you see Arenko going into next? Are you going to be in Texas?

JACOB MONROE: [LAUGHS]

As our CEO says, you can't just walk in to Texas with your cowboy boots on. So we want to take it as seriously as we need to. But we're looking to--

did you want to add something?

Well, I guess more about--

it'd be interesting to know. I've got very little understanding, myself, of the differences between--

other than the commercial side, because it'd be interesting to talk about that next. But yeah, in terms of the market side, what do you see as being the key differences between somewhere like Texas to here?

Yeah, it's a great question. I think there are potentially a lot of differences.

One thing that's great about the UK, is that there are services that really take full advantage of what energy storage can do the speed, the flexibility, the extremely granular data you can pull from a battery. The UK is just great at incentivizing those things using market mechanisms to exist.

And so we look at markets and say, OK, do some of those services exist? So we're looking at the US right now. It definitely checks, or markets within the US, definitely check the depth box.

And then we look at, OK, well, is there complexity? And if you look at a market like Texas, for example, like you said, there's ancillary services that batteries participate in with fairly short auction windows. There is a wholesale market to participate in. And they have a lot of the same problems we have,

They have increasing renewables penetration that's going to drive those challenges and that complexity even further. And other markets in the US, have their own challenges and their own mechanisms to deal with those. So we think it's a really exciting market.

One thing that's pretty different about the US, is they have a nodal pricing structure, so it's for a few reasons but helps deal with constraints. We don't have that here in the UK. I think some people are talking about it. But--

We did a piece recently, actually. Everyone, check it out.

How dare I not have seen it. I should have read that.

So that is a big difference. And that's something we'll really have to get our mind around. And we're already starting to do that. We're doing market and product discovery in a couple of markets in the US today. And our engineering team is excited to sink their teeth into that.

Yeah, yeah, no that makes sense. So I guess the next thing is, one thing that we find really exciting is, yeah, the idea of a completely different, not just market environment, but completely different commercial environment, I think.

The expansion of a business case, particularly a tech company, like both of ours, is that global expansion can seem like an easy thing to say. Like the software we just--

Does that sound easy to you?

Well, in the sense that anyone could open software anywhere. It's not like we've got to ship a battery somewhere? And so it's like, well, yeah, well, why not go to Texas today and just start selling?

But how in terms of, as CCO, are you going to be if when Arenko steps outside of the UK, are you going to be flying around? How do you see implementation of a business on a global scale?

Yeah,

But on tales, I guess.

Yeah.

it's a good question. So I am flying around now a little bit.

But ideally, we hire a team that knows the market. That's local to the market. That has relationships there. That can leverage those relationships fairly quickly, has market knowledge and sounds like, from day one, they know exactly what they're talking about in that market.

And so those are some boxes we have to check on a team that we hire there, but first, we have to build a great product for that market, or have a great vision for a product for the market. And so today we're having, as you do at the beginning of any startup or entering any market, we're having a ton of conversations.

We're doing a ton of research about the market, and scoping out a product we think is going to be market leading that we can have a ton of success in the States, as we've had in the UK, and hand that to a person who knows the market, has those relationships to go out and sell it.

Because we would be doing. someone a disservice to hand them anything less.

Yeah, yeah no, for sure, definitely. Well, that's really exciting, Minor point, but you mentioned UK. Are you in Ireland, Northern Ireland?

JACOB MONROE: We're not.

No, OK, that's fine.

It's really the depth question.

Yeah, Yeah, at Modo, we're starting to look at our global expansion, which is really exciting. And actually, we are starting to step into Ireland, Northern Ireland and the Republic, partly just as a testbed, yeah, .

How's the test going?

Well, we're only just starting, but so far, yeah, I think the main thing is it's just really exciting. I think it's just really good fun.

Are you flying over there?

Yeah, it' quite a very different flight than to anywhere else, which is, again, the reason, I think, the thought of having to--

another market that we think is really exciting is Australia. The Australian market--

We agree.

--is going to be a really great place to be, but the idea of not being able to get somewhere within 12 hours and step into a conversation face to face, I think it's manageable, but it's a lot easier when you know you can just from Birmingham to Dublin within 40 minutes.

JACOB MONROE: For sure.

So yeah, no, it's really exciting. And Australia, again, the thought of operating 12 hours out from a team who were out there, like--

yeah, I imagine you do a lot of--

But they work while you sleep. It's perfect.

Yeah.

Yeah.

Yeah, yeah, maybe I'll just have a control issue. [LAUGHS]

Do we need to work through? [LAUGHS]

We can do the therapy off screen. But, yeah, on commercials, they're--

can we talk about the Gresham deal? Obviously, no spicy details, but I guess up until recently, we've been seeing a lot of the big owners, to a certain extent, diversifying their partners and having an asset here an asset there.

And it's interesting seeing Gresham make a deal like that. It's very impressive seeing Arenko being able to make a deal like that, but what do you see the benefit being? How do you see Gresham House justifying putting all of its eggs into the Arenko basket, or to anyone else's basket?

First of all, I'd say it's a huge compliment.

Gresham House is the top tier.

You guys heard Ben [? Guest ?]

speak last time.

There's a level of sophistication in Gresham House that is just incredibly impressive. And so for them to award us those contracts was a big deal and kind of a humbling moment for us.

But I would say a couple of things. One is, they've had a lot of optimizers, and we've had a chance to try out.

We've been working with them for a while now, since 2020.

So they've had an opportunity to see how we work.

We've had a lot of conversations about the philosophy of how to optimize batteries and what technology is required to do that. And I think they, hopefully, it seems, see the world in a similar way that we do in terms of what kind of technology is required for that.

The other thing I'll say is, the scale that they're talking about is huge. We're still one player in a large group. So super humbling, super exciting and I think it just speaks to our shared view of the world.

Yeah, it's interesting because I mean a lot of our--

Not to speak for you, Ben.

[LAUGHTER]

Yeah, a lot of people listening to this, I guess, will be in organizations who are looking at partnerships and looking at--

sometimes, it's to a certain extent, it's then it's becoming a commoditized market. And I think that's an--

Excuse me.

--exaggeration, but there's a lot of people coming into the space. And so being able to understand how people should be looking at forming those partnerships, is really interesting because we get asked all the time, who's the best? And to be honest, I don't think there's a clear-cut answer. I don't think there is an answer as to who's the best.

I'm sure--

I could not disagree with you more, our first conflict.

We can work through it.

But I think it's just interesting to see--

a shared view on the world, what do you mean, I guess, by Gresham House and Arenko having a share, view? And why do you think that plays into a partnership like that working? Because maybe that will help some people listening to this work out how they can form those partnerships.

I would say, first of all, I don't speak for Gresham here. So I'll talk--

or Ben--

so I'll talk about what we're doing, and how we view the world, and we think there is huge amount of complexity with batteries. There is incredibly granular and specific data coming out of these assets.

They can move very fast if you have the right technology.

And you basically have to, as a limited-duration asset, you're constantly assessing the physical characteristics and constraints of the asset. What's the state of charge right now? What's it going to be later in the day or tomorrow? What is this battery capable of right here right now with these real time conditions?

And so we think we can--

well, we have built a product that serves users, who are traders, to, as I said, eliminate the manual burden. Take away the communication with grid operators. Take away concern about whether the asset is operating properly by putting in place alerting tools.

Automate as much of the manual burden of trading a battery as possible, so that they can focus on the big money events. And that partnership, that marriage, of humans overseeing this automation technology and algorithmic trading for the smaller money events, we think, is what the future looks like.

And we want to continue to push the boundaries of what algorithmic trading is capable of and also what automation is capable of, and what we can automate in the process.

We're going to continue to push those boundaries. And so that's our view of the world. And we think it's super exciting, and I think our customers like that.

At the end of the day, they'll get their check in the mail, but it is a question of remaining at the forefront of new markets, which we've done, being able to deliver all the markets in rapid succession, like we've done using that technology.

Yeah, OK, that's really cool. The other thing that it will be interesting to talk about, historically, the commercialization of battery energy storage has been almost fixed month out, or even further, historically, it was years out. You had [INAUDIBLE]

contract. You sign it. And then the long-term firm-frequency response, and then there was month long--

everyone tried a week, forgot about that.

And then we're talking about everything coming almost down to half hour.

To what extent do you see the asset owner being able to maintain the fluid and appropriate strategic decision with their partners, who are kind of hands on. I guess my point maybe comes down to reporting. To what level do you think reporting is critical for battery energy storage readiness?

OK, I think there's a couple of questions in there. I think--

I'm sorry.

No, no, no, it's good. It's good. I love it. We think reporting is incredibly critical.

And we have a data portal where we can produce or automatically deliver all of the data associated with an asset, market, trading decisions, et cetera. Customers are able to look at that data, and it's a highly transparent process for us.

And so, I think the first question about what is that relationship like? You develop trust by being transparent and, of course, delivering results. The check in the mail is sufficiently large, and when you drill down into the reasons why and how we got there, hopefully, it makes them happy.

Yeah and it makes sense.

That's how we think about it.

On checks in the mail and surprises in the mail, and again, this might be something that we end up cutting.

Oh, all right. Finally.

Exactly, you're getting to--

The exciting stuff.

Dynamic containment, there was--

I think, again, probably most people are aware that for a long time National Grid wasn't necessarily communicating the penalties associated with inadequate performance.

Of non-delivery and--

Yeah, yeah, and then all of a sudden, everyone got told, oh, by the way, just in case you were wondering, here's how much you failed and the cost of that failure. I don't want to ask whether that was a problem for you, but was it a problem for you?

No, we looked at--

actually, continue and I'll answer the question.

So I guess the question was about, how it's possible to automate, essentially what seems to be a very manual relationship with the system operator?

JACOB MONROE: Interesting.

Building a tech company is one thing, but it feels at the moment, like there's so much of it that is manual, in terms of that relationship, that I guess on the being a tool side, how much of that can you take off people's plates? Is it whether or not it's Arenko who's taking it off with a digital solution or whatever, how much of it can be digitized?

Talk about the first point, really quick. So we did an analysis, after the fact, I can't speak for anyone else.

We did an analysis, after the fact, and our worst performing asset, we were about 99.6% delivered--

Embarrassing.

--compliant. Right, I know.

And we're very proud of that. we think it was a very high level of delivery, and we think that's a result of having a strong understanding of the asset.

So as I said, we started as a developer owner operator of batteries. We've developed our own assets. We've worked closely with integrators to understand what an asset is capable of, and how to communicate with it. And, as I've said a couple of times, we get a really granular amount of data from these assets. And so that's a technology challenge, that's a technology advantage, to be able to look at that data in detail and say, OK, how are we Doing?

Yeah.

Why are we doing well or poorly in terms of delivering a service like dynamic containment? And we, ultimately, think that transparency, again, is what's going to build trust. Us coming out and saying, well, this is how we did in this service, as a result of our technology, we think is freeing for asset owners who then don't have the burden of wondering whether--

or who already know that two providers, both delivering dynamic containment, are not necessarily made equal.

And so then they say, OK, well let's look at your performance and how that compares. So we think transparency in that space is really important, really valuable, for asset owners to make good decisions about who they choose as a technology partner or an optimizer.

And we've invested in the technology to be able to deliver at a really high level.

Yeah, and I guess how much--

to what extent can technology take that risk off the table? Do you feel like you have a duty of--

I don't know. Like a duty of care over making sure that those traders [? can. ?]

Or the people who are using Arenko as a tool to enable their own trading teams.

But how much of it is your responsibility to make sure that they don't breach their contracts?

It's our responsibility to deliver a tool, and we'll prove out in the marketplace, whether it's the best tool, that meets the standards of any trading desk. When they're delivering a service to their customers, whether that's our internal trading desk or one of our licensed, platform customers, when they are delivering a service to their customers, they have a high level of service delivery.

And at the end of the day, the service, the requirement to deliver 20 Hertz data or 20 data points a second to National Grid, can only be a technology solution.

Because I know a lot of it is about data. The 20 Hertz thing is key, right? But it felt like there was also potentially the ability to operate your asset, even if you had 20-Hertz data outside of--

The bounds of the requirements.

--the bounds of the requirements. In the essentially--

yeah, sometimes things can respond too quickly, even if you're looking at 20-Hertz data, and it can look like you defaulted, or you or you didn't perform when you did.

And I guess, yeah, to what extent does a big red alarm appear on their Arenko system when somebody tries to do something like that?

That's a good question.

And whether that is even--

should that be Arenko's responsibility? Or because a bit of the performance penalties under ancillary services--

this is probably something I definitely shouldn't say, but to a certain extent feel like a commercial decision, like a risk--

like you could say, you know what, I'm willing to take the risk of performance penalties. You go as hard as you want.

And so to what extent is--

Technology play a role--

Yeah, can technology mitigate those and should it mitigate those. Is it appropriate?

Well I guess I would break it down into three things. One is, delivery of the service. And do you have technology that can deliver the service within the required bounds?

Two is, are users made aware when there's a risk that it won't, or the reality that it already is not operating within those bounds? And those are both very important things that only technology can provide.

Yeah, OK.

Well, I suppose a user or a trader could sit there and make sure that they're within those bounds all day, but that doesn't sound like a ton of fun. And then the third thing, is reporting. And as we talked about, operational metering at 20--

providing that 20-Hertz data to National Grid, is another technical challenge all of its own, all on its own.

And I think that's why a lot of folks had trouble getting into the market was the operational metering side of things. To the question about risk, that is what traders do all day, make calculated risks.

Yeah yeah.

We think it's a good thing. The National Grid is now going to penalize for non-delivery. Because our performance was good, but also because it incentivizes the right behavior and puts a price on taking a risk.

Yeah, yeah.

So you can make a decision, OK, do I want to take this risk or not? And so there's an underlying point, which may be maybe non-delivery is good in some situations, but that's ultimately up to--

Sure National Grid won't like, but, yeah, no.

I should probably, well, sorry.

No, no, I brought it up and I suggested it, but yeah, there's rules of the game, and there's penalties. And I think, to a certain extent, yeah sometimes, you've got to play the game, it feels like, which is why, hopefully, National Grid will forgive us--

Getting back to the core of the question, though, about the technology. All those things can be delivered by technology. And ultimately, it is--

I guess my point is, ultimately, it is in the trader's hands to decide whether to go outside those bounds or not.

Based on the numbers, I said earlier, about our performance, we think we think delivery is very important. A high level of integrity around delivery is very important. And we think having those penalties in place is a good thing, and we ultimately hope that more and more transparency comes to the space, so that asset owners can look and say, who can deliver this service?

Yes, yeah, yeah. yeah because up until that point, it was a--

until those penalties came around, it was a really almost muddy picture as to how is this happening. The tool, can you talk a little bit about how the business model for that tool?

For example, is it a monthly subscription? Or is it another revenue share model, or how does it work?

No, so, again, we provide this algorithmic-trading, automation technology and auditing and reporting capability, at a fixed fee. And ultimately, we think it increases revenue and reduces the cost of operating a trading desk, especially when we start to get critical mass of batteries on trading desks.

But we charge a fixed fee because ultimately, again, it's up to the trader. Well, let's back up. It's up to the developer and the asset owner to decide what warranty we're going to have on this battery, to decide how big is the cooling system on this battery? What are the capabilities of the asset?

There's a lot of technical things about a battery that we can't control from day one. And then, once you're actually operating that asset, it's a question of what kind of risk does the trader want to take to get to the last point. So we could create a tool that just is absolutely perfect, but if a trader decides that he or she wants to take a particular risk, or not take risks, and be incredibly conservative, they can do that.

And so we think a fixed fee model is the way to go. And let those other trading desks take the upside.

Yeah, yeah.

We just want to be a software platform that enables them.

Yeah, and how do you see--

so the one thing at Modo that we find is fairly critical to us as a business, and as soon as it starts to falter, it's almost tangible within the office space, is focus. So the very much kind of as soon as you start to spread, you need to be very sure that your resources cover that, and that your business can communicate and narrate the focus of the business.

How have you found juggling, I guess, creating a technology and selling that technology, and then also selling the use of that technology? Firstly, has it been a challenge. And if so, how have you gone and managed it.

Yeah, so I would say, just to over-simplify, we're a company that has two products. We have the software platform that we've built, that enables traders that we license out. That's product number one, and then we have a trading desk to serve, as I said, really what the paradigm of the market is today, which is hiring an optimizer.

We believe as long as we continue to hire great people to use the platform internally, we'll provide a great service, but ultimately, we're a software company that's developing a tool for traders, whether they are internal or whether they're external, whether they're a licensed customer or on our trading desk.

Yeah, no, that makes sense. I guess the follow up question is then, how, when you have more than one product, and it seems like there is one of those, which is the flagship, let's call it, is there a poin--

I know you mentioned earlier, that you didn't see any immediate future where any products were removed from the Arenko suite of products, as it were.

As Arenko moves globally, is the play going to stay the same? Is it going to be a two-product play? Or are you going with just one tool. And it's going to be the flagship. And where necessary, you'll bring in your own internal product too? Or will it be, wherever you can, we bring it in?

So we're planning on licensing the software globally. So we're not planning on starting trading desks in any other markets.

Yeah. yeah.

That's the view of things right now.

OK, and is that because of any market dynamics?

Is that because of the differences that we spoke about there being between [INAUDIBLE]

and GB?

Or was it just because--

is it just the focus issue? Or you can just say, no comment.

No, no, I would never say no comment. [LAUGHS]

I think the number one reason for that, is really, our ability to make the biggest impact. So one thing that's wonderful about working Arenko, is that everyone is aligned to the mission of enabling zero-carbon assets, to maximize their value.

And it does take away from focus to start a trading desk. It also costs a lot of money to start a trading desk. It's not a small amount of money. It's also not a small administrative task or regulatory task. And so for us to be able to go into other markets and say, we're just going to be a software player.

We're going to make as much difference as we can, and we're going to get on as many assets as we can by being on as many trading desks as we can. We think it's the best way to move fast and make the biggest difference.

Makes a lot of sense. And how, in terms of--

you mentioned something interesting there, which I wasn't really aware of, the--

Actually, can I say one more thing on that?

You can, yeah.

It also is we started by providing an optimization service.

And so we know how to do that in the UK. We went through all those steps and bore all that costs in the UK.

But it also is a different business. It is a very, very different business.

And ultimately, trying to be in two different businesses in multiple markets is tough. It's not what the investors like to hear about, either. so I think that's--

Yeah, yeah, that makes sense. So the point I was going to touch on was, that I associate Arenko very tightly with battery energy storage and literally those three words. How do you see other energy storage tech, including like vanadium flow, pumped hydro?

And also, looking at other geographies, like in the US and in Australia, where co-location is already a lot larger of a concept. I think it's probably fair to say that the business case for co-location in GB isn't in the same place as it is in Australia or in the US. But how, do you see the translation of a tool, specifically the battery energy storage, to apply on something like, yeah, a huge co-located solar storage in the US?

Yeah, no I think it's a good question.

Well, and am I right? Is it the case that--

because in my understanding, in the US, most large assets are co-located. Is that fair or--

Yeah, that's my understanding. So there are some tax incentives over there that make it more cost effective to build co-located assets. A lot of what's in the pipeline over there at [? Solar Volt ?]

[? Storage. ?]

In terms of the first part of your question about--

Just being battery energy storage.

--just being about our energy storage, we are not married to battery energy storage, first of all. So every battery has its own sort of unique operating characteristics. Every lithium ion battery, whatever, you want to look at in that regard.

And so if we look at a flow battery, for example, maybe it's longer duration, slightly different ramp rate, we've built a platform that is flexible enough to handle all that. Those key differences between, for example, battery energy storage and whatever, pumped hydro. We could do that.

In terms of co-located assets, I would separate this into two different categories. One is, we just manage the battery at a co-located site, or we manage the whole package. And those are two very different value props, so I'll talk about the former first.

We actually just went live on our first wind plus storage asset. We're just controlling the battery, but that involves PYC--

[INAUDIBLE]

--batteries it's a form of FR battery, thank you. And it's a really interesting challenge.

Operating a standalone energy storage is a specific challenge. Operating it in conjunction behind a shared-grid connection, has its own challenges.

You have to be able to look at what is the forecast for the co-located renewables. You have to look at what's the real-time production of those renewables, as it compares to the forecast, and make decisions and take smart risks, within the constraints of both of those things.

So in order to operate an energy stor--

what I'm saying is, in order to operate an energy storage asset at a co-located site, you really have to be in deep with the renewables there.

Yeah, yeah.

And to your point about it not being the same kind of value prop here, most of the value of a co-located asset here, is shared-grid connection. You just reduce that burden and cost.

And so oftentimes, co-located assets are limited in their ability to export. So both a wind farm or solar farm and a battery couldn't export full capacity at the same time. So that's what you're optimizing around.

So then if you think about, OK, let me optimize the renewables. We think there's some interesting things we can do with renewables. So, again, it's another kind of asset. It's a one-sided battery that only discharges.

But it can be ramped down.

You could feather the blades on the wind farm, and turn it down. And ultimately, you're responding to price signals to do that, which is what we do today with batteries. So our roadmap absolutely--

as I said, we just went live in our first co-located battery.

Our roadmap, absolutely includes optimizing the renewables, as well. I think that's a couple of years off.

But, hopefully, you can invite me back when I'm doing that.

Yeah. no, years, by then, we'll be hosting this from the US or something.

Oh, don't say that. Stay true to your roots, come on.

I'm actually never leaving Birmingham.

[LAUGHS]

So talking about the future, what do you see on a--

do you have any like strong passions for the future, whether they're Arenko or not.

What do you see as the future for battery energy storage for the kind of future energy system in GB? Do you have any big--

are you a hydrogen man? Do you like--

Wow, here's the conflict. You're just easing into it.

It's just it's just interesting. Yeah, just on a personal level do you have, I, yeah. Have you done?

I [BLEEP]

love batteries.

yeah yeah.

Yeah, like--

what's that?

They're going to take over the world.

They're just amazing, right. It's just crazy to me. Electricity is the only thing in our modern day, that is not stored. That is not inventoried, generally speaking.

Obviously, you've got dams and pumped hydro and stuff. But historically, we just don't store it.

And how many people grow up having any clue how electricity is delivered to their home?

I didn't until I was in the industry.

And it's horrible pun, it was a light-bulb moment, to be like, wow, we don't store electricity at all. And so it's--

I don't have to tell anybody who's listening to this podcast, that it's literally world changing.

Yeah.

And the reason I got into energy storage, is because when I was in University. I was an economics major. I wrote a paper about, basically, comparing price curves of an exhaustable resource versus a renewable one. And the key assumption in that paper, was that they are direct substitutes.

And they're not. Electricity is not a direct substitute for fossil fuels because you can't store it. Or it's very, very expensive to store. And I was like, OK, well, I love renewables, absolutely love renewables.

I'm glad you said that.

[LAUGHTER]

I very much love renewables.

But energy storage is the key to making them direct substitutes so that renewably-produced electricity is truly a direct substitute for fossil-fuel-generated electricity or cars driving around on fossil fuels. Essentially, now they're direct substitutes. And that extends to EVs. That extends to anything where you're making sustainably produced electricity a direct substitute.

Yeah, yeah, that makes sense.

I'm always touching on it.

How do you see EVs playing into, let's say the Arenko solution?

Do you think it's even applicable? Is what's--

Yeah.

whether or not it's in the plan, like.

I mean, it's just a big battery.

And you can, in theory, make one or many vehicles respond to a price signal and charge or discharge. And it could be a one-sided. It could just be charge faster or charge slower, could be discharge and charge. We'll see how it all plays out.

Ultimately, I m that is a more commercial question than it is a technology question.

Yeah, I think makes sense.

One thing I thought about earlier, but didn't quite get my lips around, was onboarding of assets. So you mentioned that all the technology is very different, and you're right, every batteries has its nuances, even the same system built by the same people. If it's a year out, it's probably different.

So, how--

one thing that we think a lot about at Modo, is onboarding and user experience. And how you can, yeah, basically, give people the smoothest, quickest experience of your products, as possible. But when you've got such a complex interface, that's different for every project.

How does the onboarding of the Arenko technology work? How are you managing it?

So we put a little bit of our hardware at site, a box we call Iris.

That's nice.

Yeah, I know, it's got a name.

And when our team installs that, a ton of information about the asset is automatically sent to our engineering team.

And today, there are some aspects of the onboarding that are manual that we do. Over time, we will productize those things, to use kind of an annoying word.

We will make it easy for a user of the platform to take all those things into account and to set up the platform with their specific assets based on that information. So it's one of those things that--

they say in startups do things that don't scale.

Yeah, yeah, definitely.

And then you can, over time, build tools, automation, products that allow them to scale. And that's part of our--

it's a great question because it's something we think about every day, is the number of assets we're onboarding is rapidly increasing. And it's not a great use of engineering resources to spend all that time if it can be made into a great product.

I mean it's--

you're so right. It's such a, even a question that we get asked a lot, as a software as a service business, is there's one bit of the business that doesn't feel like it scales in the same way. Because everyone talks about technology businesses, software businesses, the marginal costs of a new customer being like trending to zero.

And then you employ six customer-success people to match it.

[LAUGHS]

It's a journey to zero, right?

Yeah, I think it's one thing that, yeah, we're definitely believers in doing things for us that don't scale. And I think, to be honest, there's some things that scale differently. And onboarding has always got to be one of those things that, to be honest, I think you kind of have to forgive it being and almost celebrate it being--

there being a manual element if it means that you can get the customer experience and the user experience that you need.

And learn, right? The only way we could possibly automate the onboarding experience, is to do it manually a few times.

Yeah, yeah.

We really have to underst--

What, you don't do automation first?

Yeah, [LAUGHS]

It's one of Modo's principles, automate first.

I always tell the engineering team, you guys should automate first, but they never listen to me. No, I really think that's a big part of the journey to automation. And it's also part of our sort of philosophy on the trading side, as well, is we want to take away the biggest burdens to our customers first, to the traders first.

Things that don't add value, but take a lot of time, that is tip top. That goes first. And then you can work your way down that curve of things that--

well, you know what that curve would look like?

Yeah, yeah.

You working your way down that curve?

I'm constantly working going down that curve.

Yeah, exactly. That is the life of a technology company. That's the life of a software company.

Yeah, yeah, for sure. And another thing that's popped into my head. Is Arenko going to be on mobile?

Oh, wow.

We are just talking. Also, is it like a web app?

Well, it is a web app. Yeah, it's a cloud-based platform. So our traders just log into their browser, two-factor authentication, of course, and they can optimize those batteries.

Yeah, but are you going to do mobile?

I think--

I actually don't know if this is true, so I'm just going to say, I think you could just log in on your phone today.

Oh, really? OK.

I wouldn't say--

These guys are totally responsive.

--it's optimized for mobile, as they say.

That's true. You can go on your mobile on anything, can't you?

Yeah.

Yeah, yeah.

That's right.

The future's here.

So, yeah, I don't know if that's the experience we will be focused on, but it's a good question.

Yeah, it just popped into my head.

Is Modo on mobile?

Semi, as with all things, we try and be as lean as possible. So rather than making in one full foul sweep, the whole platform mobile friendly. What we decided to do was to make a section of the platform mobile friendly, and essentially, hide everything else, which if you ask any developer, they'd be like, that is horrible practice.

Not the way to do it.

Never do that.

[LAUGHS]

But as part of producing something that it doesn't necessarily scale, there are things that we have to work around because of the fact that we've done that. But it enables us to test does anyone even want Modo on their mobile?

Well and that's the thing is, how many people are trading very expensive batteries on their phone? I don't think very many.

No, no, but maybe if they had a mobile--

That's the future. Wow, there's my vision for the future everyone trading batteries on their phone.

Yeah, just casually at the dinner table.

Actually, I will say, you have a residential battery at home?

Yeah.

That's a mobile experience, right?

It is. You're right. Yeah, anyway.

I think we're getting out of our lane here. [LAUGHS]

Anything software is in the lane, but you're right. You're right. Cool, unless there's anything else you want, there's nothing else that I've got to ask.

Oh, great. This is a lot of fun. Thanks for having me.

Thank you so much for being here.

Yeah, it's a pleasure.

Jacob, everyone. Say hi. Cool, see you soon.

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