28 - Storage solutions & flow batteries with Alan Greenshields (Director EMEA @ ESS inc)

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Hello, Alan. Welcome to the podcast. Thanks for coming on, and thanks for coming all the way over to London from Switzerland somewhere this morning to come see us.

Well, Quentin, it's my pleasure. Always nice to meet with you, and always excited to talk about storage.

Of course. So for anyone listening, I'm pretty excited--

we're all pretty excited to have Alan on. He's been around doing battery stuff for, I'd say, certainly over a decade.

Since 2004.

QUENTIN SCRIMSHIRE: Since 2004 you've been a battery bod. And today we're going to talk about your current company where you work is ESS Inc, which is a flow battery company. But we're also going to talk about some of your experience before that working on different battery technologies and some of the big problems that we're trying to solve in our industry.

So firstly, thanks for coming on. We can have a great conversation.

I'm going to jump straight in there and ask about your background. So Alan, where do you come from, and how did you get here?

Well, for those who didn't guess already, I'm originally from Scotland.

And in terms of my background, I started out with engineering. And in the old world order, actually, was paid through University by IBM. Back then, IBM had most of their non-US manufacturing located in Scotland.

And you could tell a story about that, about cycles of development, because electronic manufacturing of that type was the follow-up business from shipbuilding and steel, and now in turn, that's all gone. So that's where my roots are, in Scotland. But I actually finished University in time when IBM had the first crisis, and they said, go and find something interesting to do for a year.

And I applied for and got a fellowship to go to the Harvard Graduate School of Arts and Sciences, which was an eye-opening experience for me because to be honest, I couldn't have told you where Harvard was before that. I met a lot of interesting people, including my future wife.

Oh, congrats. Newlywed.

ALAN GREENSHIELDS: Bumped into some people in that area are from Harvard Business School.

I was at the Graduate School of Arts and Sciences and quickly realized that the business school was much more interesting. And in fact, two HBS graduates who were forming a startup company in Cambridge in England developed a product who were having difficulties with electronic manufacturing and said, well, you know a bit about electronic manufacturing. Let's work together.

In fact, we developed a company in Cambridge called Datapaq, which still exists today. It's actually part of Fluke Process Instrumentation, which was a technology development of going from recording temperature of industrial processes, rather than on little strips of paper with ink pens, to doing it digitally.

So Fluke, they're the guys who do measurement devices for electronics.

They're one of the leading companies in the world for--

QUENTIN SCRIMSHIRE: Metering stuff. Yeah.

Metering and this kind of thing. That business is now with them, but I'm proud of the fact that if I look at the product range, it looks uncannily similar to what we did in the late 1980s.

So that was what introduced me to the world of startup companies. And I was encouraged by the guys who started that to go back to HBS to the MBA program, which I did.

And then subsequent to being interested in manufacturing, decided to go and work in manufacturing in Germany.

And that was an interesting, eye-opening experience because I always wondered, what makes German industry so good? Why are the product quality so high?

And learned a lot in the automotive component industry working for a company called [? Video ?]

making instrumentation about what it takes to make high quality products for the German automotive industry.

Did that for a few years. Again, a very interesting time.

That was when the changeover was also taking place between mechanical instrumentation and electronic instrumentation. And I'd say, if I had to retrospectively draw a thread through what I've done, it's all about technology change.

Hydraulics to electronics. That kind of stuff.

All of these kinds of things, from mechanical to electronic, from hardware to software, these kind of things. So I worked in a few projects subsequent to that, mostly in Germany.

And in 2001, it sold a business, and I had a working theory that Germany, a very innovative place, but very difficult place to start a company, and started looking around for interesting technologies on the assumption, there's a lot of interesting German ideas that don't make it into startup companies because the environment was not very conducive to that.

And in that process, 2004, I'd looked at a number of things and came across a R&D team working in a specific aspect of lithium batteries. And that was long before all of the hype came about storage. But after thinking about it, it occurred to me that, for the energy space, storage was really the missing piece.

And if you look back at the history of batteries, it says a lot about the industry that, even today, 150 years after the lead acid battery was invented, it's still, in megawatt hour terms, one of the biggest technologies, and possibly even still selling more in terms of capacity than lithium batteries. And if you look at the dynamic, you see the over time, new battery technologies in general have not replaced a predecessor technology. But in fact, they're additive.

Yeah.

Because if you find a way of storing energy in a new way, there's lots of useful things you can do with it. And I find that dynamic fascinating because in other things I'd worked in before, it was a replacement. Digital replaces mechanical. Software replaces hardware. All of a sudden, you come to batteries where, in fact, there's first of all, a small number of technologies that have ever reached commercial significance. It's probably less than 10 in 150 years.

Yeah. I remember when I used to work in oil and gas, valve regulated lead acid batteries on offshore platforms will always, always be there. And there is interest, but there's no will to change to anything else. And I think that will happen.

There's probably no need.

Yeah.

It's a good solution, and I think they'll be around. They're still being produced in huge quantities, and people keep predicting that lead acid will get phased out and never happens. The market keeps on growing.

Apart from the hydrogen evolution problem. We're going to geek out in a second. I guess probably, for anyone who's listening, Alan and I both met first time, it was in an office in Kiwi Power. I think it was 2017, 2018.

ALAN GREENSHIELDS: Could be.

And you were working for Innolith at the time. We'll come back to your story in a second. And I think we annoyed everyone in the room because we just geeked out for about half an hour about lithium ion chemistries.

And yeah, so we're going to try not to go too technical today. But it's going to be very tempting. So yeah, 2004, you got into the battery world, and you're excited by this additive technology, lithium ion as a thing. And then what happened?

Well, we basically funded that business properly. Again, it was a typical German story where good idea, good technology, but difficult to fund. It was funded properly, interestingly, with almost none of the funding coming from Germany, coming from outside of--

coming from outside of the country, from the US, from Switzerland.

But the basic concept of what was being done then is that, all of the undesirable properties of lithium ion batteries come from the electrolyte. It's generally known that there are safety concerns with flammability from lithium batteries, and it doesn't come from the lithium. It comes from the electrolyte.

And this was an approach to develop a non-flammable replacement electrolyte, which then wouldn't just do away with the safety risk. It would also do away with most of the aging problems.

And just for a reference here, so in a battery, there's an anode and a cathode, so a positive or a negative. And then there's a separator, which separates them. And some, usually, fluid or something like that, which is an electrolyte. I just wanted to step in just in case, just for the ground rules, because we're going to talk about technology in a second.

And so that company, you're replacing very flammable electrolyte, if I've got this right, with something else that wouldn't have that kind of risk.

That would basically had no fire risk associated with it. That was the goal of the company. And as I say, it often happens with technology companies, it took longer to get the technology developed.

These businesses are always sort of filled with significant ups and downs.

And by the time you get more than seven or eight years into a venture, investors start getting concerned, is this ever going to work? That leads to stress in the company.

And so in fact, we ended up winding up that business, although the technology, in fact, there was a version of the technology which was working. It just hadn't been productized. That IP was then subsequently bought by Alevo.

Alevo. Yes.

And they took this first version of the technology, actually developed a product out of it, and successfully. The product actually worked quite well.

But made the decision--

I actually took two years out because I just needed to do something else for a while. I made a decision to go for large scale production in the US and stumbled on the manufacturing part because, in fact, although the technology worked, to go from small scale Germany to gigantic scale in the United States is a big challenge.

So this new battery technology that had been going from the R&D phase to trying a productionize it for seven or eight years, you're working on. And then that company got wound up, and the technology got bought by Alevo, which for anyone listening, doesn't exist now, but was a big, big player. They made a lot of noise. And in the early days of the lithium ion, well, they were really onto something. And you were there as chief technology officer, right?

ALAN GREENSHIELDS: That's correct.

And what happened at Alevo? It was a US company, right? Was it basically--

No, it's actually a Swiss company.

QUENTIN SCRIMSHIRE: A Swiss company.

With the goal of major manufacturing in the United States.

And this is about 2015, something like that, is it?

Yes.

That's about right.

And so, I would say, the technology transfer of the product worked flawlessly, but they had a lot of difficulties in the scale up of production because batteries, I mean, it's a very unforgiving business. You need to manufacture with high precision. There's all kinds of--

batteries, I think most people are unaware that internally they're fiendishly complicated.

They look really simple, but they're fiendishly complicated because you don't just have mechanical and electrical issues, the electrochemical issues, and you've got to make sure that the whole system works. So that factory did actually produce functioning systems. One of them was very successfully deployed in the PGM grid as a demonstrator of this new version of the technology.

That's in America.

QUENTIN SCRIMSHIRE: In the US.

On the east side of America.

ALAN GREENSHIELDS: Yeah. In the east side of America. But again, with difficulties mounting and getting production volumes up, that also came to an end. And subsequent to that, the company Innolith was formed, which also purchased the intellectual property.

QUENTIN SCRIMSHIRE: So this is the same technology that you've been working on for over a decade before?

ALAN GREENSHIELDS: Yes.

And then went to the company Innolith. That was Swiss, wasn't it?

ALAN GREENSHIELDS: It is also Swiss. And Innolith is still going?

Absolutely. If you look at their website, you'll see that they've announced a very exciting high energy product.

QUENTIN SCRIMSHIRE: Cool.

That was always the goal. The goal was always not just to have a non-flammable product, but go for a high-energy product.

And as I mentioned before, electrochemistry is fiendishly complicated. And if you have a--

solving an issue in chemistry can take a week, or it might take 10 years, because these new types of batteries, you're often working at the edge of what you can even measure with measuring equipment.

So it is a complicated process, which is why I always say to anyone working on batteries, deep respect. They're difficult. And anyone that comes up with a battery technology that functions at all deserves huge respect. So that is--

Words from someone who knows.

ALAN GREENSHIELDS: Well, it's through being through many ups and downs. But the concept of, I was always convinced that non-flammability was a big issue, because lithium ion batteries, they've done fantastic service, but they were originally commercialized by Sony in 1991 for things like camcorders.

And it's interesting to reflect on, why did Sony commercialize lithium ion and not one of the battery producers? And part of the answer is that the battery industry, who were obviously experts in making batteries and experts in chemistry, had never figured out how to make lithium ion batteries, how to respond to things like fire and explosion risk.

And because the move to higher voltages meant the move to these flammable electrolytes and having a system that basically has a fuel and oxygen source and electrical energy inside one package, is something you have to treat with a lot of caution.

But Sony, their masterstroke was to say, well, we're an electronics company. Why don't we just use a mixture of active and passive control mechanisms to keep the lithium ion battery operating in a safe zone? Shutting down--

Original camcorders and that kind of stuff in the early 90s.

Those batteries, there was a tremendous amount of outstanding engineering packed into those with devices who have the function to shut the battery down before it gets into a dangerous state. And that's really the origins of everything you read about BMS, battery management systems, single cell monitoring. Those are all concepts that were introduced back then for these much smaller batteries, and which over time have been expanded to build really huge batteries.

So hats off to Sony for getting us going, I guess, in the lithium ion world.

They were true innovators. And really, without that development, a whole lot of other product categories, like smartphones, would never have happened.

It's funny.

Stop me if I'm here. But there's Toshiba, who have the lithium titenate system out in Japan. But it feels like the battery world is very China and South Korea-centered now. And Japan are, not to say out of it, but they don't have the big presence that they used to have. I guess it's Panasonic.

I'm not really totally up to date on where things are. But I think what you have to bear in mind is that there's three things that always matter of batteries. Cost, cost, cost.

And it's always been all about cost of storage. And that is something, again, which is a little bit counterintuitive because you think, well, if you have a wonderful battery with all of these new properties, then surely people will pay a lot of money for it.

And the answer is no.

You're storing energy, and there is a value to the energy.

But if you want to store a lot of energy, need to have a cost-effective storage mechanism. And I think there were some very wise words said about that when the ARPA-E project was launched in the US many years ago where the message was to say, electricity, by definition, has to be a cheap commodity.

And that is, I'd say, much of the dynamic in the battery space, including why you have such a concentration of production of batteries in China and South Korea. It's driven by the fact, they've got to be cheap.

Yeah.

OK. I just want to come back to what happened to Innolith, and then we're going to talk about flow batteries. I know we can talk about lithium ion forever, but a lot of today's conversation is going to be about ESS and flow batteries. But I just want to finish up. So you're in a for two years.

ALAN GREENSHIELDS: Two years.

Working on the same battery technology.

I would say, it's not the same. It's a continuation.

QUENTIN SCRIMSHIRE: A continuation.

And so that development led to a pathway to high energy systems. But after two years, I was interested to focus, do something new, and left the R&D team and the management team to it, and went on to look at other things. And later on, I worked on a number of projects, which I can't talk about, on batteries.

But also, later on, I came in contact with some people from the investment space who said, we are looking to make an investment into the battery space. How do you navigate the technology area? Because it's difficult. And so I joined the team on that, and we looked into a number of different battery technologies.

And that respect is quite useful to be involved in energy storage for so long, because it's a relatively small world.

And but it's important to understand all of the dimensions of complexity to energy storage to figure out whether a technology is likely to be technically and commercially viable. You've got two hurdles to get over.

It's got to actually function.

And if it functions, it's got to be commercially viable. Those are the two bars to get over.

And so investors approached you relating to the company that is ESS, or is it something else?

No, it was exactly--

it was, in fact, the SPAC team who were considering making an investment and looking for a business combination in the space.

So a bit of a background to ESS. So ESS, we can talk about it in a second. But of the companies that did a SPAC, which is a special way of getting onto the stock market, mainly in America.

And ESS this was one of the first few companies to do in this way.

And you're involved in the team that made that happen. And now you work for ESS full time.

We're now getting back to what you actually do, which is, you're director of EMEA, right?

That's correct. And the background to that was, I worked on this project. It was a very successful IPO last year. And having looked at the technology, I was very impressed with what they were doing to the extent I said, well, I'm interested to then help the company develop. And given that the company is focused in the US, the upshot of that is I'm developing the EMEA business.

QUENTIN SCRIMSHIRE: Great. And so where is it listed?

It's listed on the New York Stock Exchange.

OK. And what's that like, seeing the company from before and now being a listed company? Is that a big, noticeable change?

I mean, the publicly listed companies, they have to be much more disciplined.

There's a lot of rules and regulations that have to be adhered to.

But I'd say that, from my viewpoint, there has been negative comments said about SPACs. I think the SPAC structure is very suitable for what the energy industry needs, because a big part of it is, if you have a technology that works, how do you get to scale?

Because even if you have a technology which is fundamentally better than conventional lithium ion, you're in competition with a technology which has been in commercial production since 1991.

So 30 years of production. You have cumulative scale of making billions of batteries for other purposes. So getting to scale is really important. And getting to scale is something which requires capital.

And I think that this route, which gives companies a strong capital backing, is a very good fit.

Rather than, yeah, if you had to wait till you hit $100 million in revenues before you could even IPO and then raise capital. You haven't got time.

Well, a fundamental issue with all startup companies is you permanently have chicken and egg problems.

You need results to get funding and you need funding to get results. So a significant part of this is, how do you break that cycle? ESS had already broken that cycle. They had done an outstanding job in developing a new technology that works with a very clear development plan, which they started in 2011.

Well, let's talk about ESS for a second. So ESS is a company a battery company based in America. It's a bit different, and it's doing something a little bit different to the lithium ion market. Do you want to just talk a bit about the company, the scale, how many employees, where is it based, that kind of thing?

Well, let's take a little side branch into types of battery.

QUENTIN SCRIMSHIRE: Yeah, let's do it.

So ESS develops and produces flow batteries. And the idea behind a flow battery is that if you're wanting to store energy for a long period of time, if you want to do it with a lithium battery, if you want to double the amount of storage capacity you have, you need to double the number of battery cells, because the amount of energy is defined by the capacity of the cell.

And in the case of a flow battery, you have a different split. You have what you can think of as a little reactor system.

And you have two liquids.

And when the liquids flow through the reactor system in one direction, it stores energy. And when it flows through the reactor system in the opposite direction, they release energy.

So you have a decoupling of power and energy because if you want to store energy for a long period of time, you just need more liquids.

Just a bigger tank.

ALAN GREENSHIELDS: Bigger tank, so to speak. It's not quite that simple, but that's the basic principle. So for decades, people have looked at flow batteries as being a very promising approach if you want to store large amounts of energy for long periods of time. You just have big tanks of reactants that you can use.

They react one way to store energy, the other way to release energy. That is a good way to store energy.

So the concept of a flow battery has been around for a long time.

They'd seen relatively limited uptake in the market. And I come back to what matters in batteries. Cost, cost, and cost. And so the concept which I like tremendously about ESS is that the R&D team, the company founders, they set out to develop a low cost flow battery and said, we've got to work fundamentally with materials that are cheap.

And out of this work, they picked up an R&D direction where the materials used for energy storage are basically iron dissolved in saltwater. So you have materials which are low cost. They're non-toxic. They're non-flammable. They have properties which you like.

And that basically means that you have a good foundation for a system which, at scale, has fundamentally low cost because it's not using gold and platinum, or other stuff that costs a lot of--

nickel and cobalt and other materials that cost a lot of money. And also, we'll talk maybe a little bit later about supply chain, but it's a massive advantage if your principal materials are not used in any other battery technology because you're not in competition with other consumers for all those materials.

Let's just do some quick top [? trumps ?]

for now. So how big is--

how many employees are there in the company?

ALAN GREENSHIELDS: The company now has over 300 employees.

300 employees. Market cap. What sort of numbers are we talking about?

Market cap. I haven't checked today, but it's $600, $700 million. Something like that.

QUENTIN SCRIMSHIRE: OK. And how old is the company? How long has it been doing it?

The company was founded originally 11 years ago in 2011.

OK.

And so flow batteries. We had Ed, who now is actually Ed who works for [? Modo, ?]

was on when we first started this podcast. If anyone's listening, do go back to episode two or three, another flow batch conversation. And Ed, at the time, was with the company called Infinity that was [INAUDIBLE]

that did vanadium flow batteries.

And so ESS is different, right? So instead of using vanadium, there's a different fluid and there's a different kind of reaction happening.

We'll do ESS iron, if you like, technology versus lithium ion in a minute. But how about between the flows? Because there's a few different flow batteries. How ESS' technology different?

You've already said it. We use iron and not vanadium.

The vanadium chemistry is a good chemistry. Electrochemically, it works very well.

But vanadium is a relatively expensive material. And so some of the operating principles are similar, but at the end of the day, for batteries it's a material cost game at scale.

And so this was the reason that the founding team and the development team focused on iron, is because iron is cheap, readily available material.

And so the iron, what do you call it? Iron technology, iron fluid.

We call it IFB, ion flow battery. You can also call it all-iron flow battery because there are some other technologies if you combine iron with something else. But the ESS technology, it's all iron because it uses it uses the same iron compound for both of the two electrolytes.

And so it's iron in water.

ALAN GREENSHIELDS: Saltwater.

Iron in saltwater. And that's it? Nothing else?

In principle, yes. In terms of how it works, yes. Obviously, there are other additives and things which are part of the company's IP and how to make it work. Because like all of these things, how do you make it work? The principle of iron flow batteries have been around for a long time.

And people have not managed to figure out how to make them work. And that's, I would say, the breakthrough that the ESS did.

And so lithium ion batteries, over time, they lose charge. And so with flow batteries and this particular type of flow battery, does it mean that once you store in the tank, it doesn't lose charge until you need it later? It doesn't self-discharge?

Well, you have different operating modes of the flow battery. And what you're describing is you have the option that you charge the battery.

You then pump the system, pump all of the electrolyte out of the reactor system into the tanks. And in that state, it'll stay charged for a long period of time. Basically an indefinite period.

So that is a significant difference. And that's a significant difference compared to other batteries because you have this separatability between the power system, which is the reactor system, and the actual electrolyte. The electrochemical point is that in a lithium battery, you store the energy in the electrodes.

The electrolyte has a function just to allow the lithium ions to move back and forward. In a flow battery, you're basically storing the energy in the electrolyte.

Yeah. It's completely backwards.

It's a very different concept. So there are many different ways you can--

that results in a number of other features. And you often have to explain these, because people haven's the highest level of familiarity with lithium batteries, but they're just one of many different types of battery.

And what about efficiency, roundtrip efficiency? And I'm also going to ask you about, which market segment are you guys are going after? I know you you're very interested in long duration, grid scale stuff. But firstly, efficiency. How does this particular technology compare to other batteries on efficiency?

All flow batteries have a lower electrochemical efficiency compared to lithium. Lithium is hard to beat in that because it's very high.

But you also need to look at the complete package. And one of the things I like a lot about the ESS technology is that it's one of the only chemistries I've seen that is comfortable and, in fact, likes working at elevated temperatures.

Wow. OK.

And that's actually one of the important factors to consider when you're saying talking about use cases. I mean, lithium ion's wonderful chemistry. But in operation, lithium does not like heat. In fact, if lithium batteries are run at elevated temperatures, it's one of the most effective ways of making them degrade really fast.

And so large batteries are air conditioned. And so you need to think not only about the efficiency of the battery, but how much energy are you consuming air conditioning it? So in the ESS system, it doesn't require an HVAC system at all. And that means that if you--

HVAC being cooling, heating, ventilation, and air

ALAN GREENSHIELDS: Yeah, exactly. You don't need a cooling system in it, or air conditioning type cooling system in it. So if you're operating the battery in a warm ambient temperature, that's energy you don't need to waste, or energy you don't need to spend on it.

How big are these things?

I looked on the ESS website and in some of the reports, and it mentioned something called an energy warehouse.

You guys are going to do 50 ish energy warehouses this year.

What is an energy warehouse? And how can we compare that to something else?

An energy warehouse is a 40-foot container, and it is a complete system. So it has the power modules. It has the electrolyte tanks. It has the power electronics. Everything in one unit.

And how much power, how much energy, can be stored in a warehouse in a 40-foot container?

The current version of the product is 400 kilowatt hour.

OK, right. So comparing it to some of the systems we've got installed in the UK, it's just under half on energy density. And so you need just a bit more than twice as much space to match those kind of systems. But it's a different use case, right?

I would say, not necessarily, because you have to bear in mind, you have a system which is non-flammable. And so at the container level, you have a lower energy density.

But you have much more flexibility in how and where you can position the containers. You don't need to leave gaps between them for letting a fire engine through.

So in fact, it depends on the price of the actual use case. And there is a study I saw in Germany, which I hope will be published soon, where they looked at very large locations and concluded that flow batteries potentially are more compact if you take into account that you need much less space between them because you don't need to worry about, if one of them blows up, is it going to set off the one next to it? So again, you need to look at the actual use case.

Talking of use cases. So most grid scale batteries in the UK are capable of doing, I wouldn't say heavy cycling, but they can do, say, a couple of cycles a day at full power.

But they can also do frequency response. They can respond. They can provide that full power, almost a step change in power, in less than a second. Obviously, there's a vamp rate, but we won't talk about that.

So can you do that kind of response with the flow battery? Or is it longer duration, big chunks of power, as opposed to the small variations you need for a frequency response?

It's both.

QUENTIN SCRIMSHIRE: It's both.

I can't speak for all flow batteries, but the iron flow technology has a very high, very fast response time, which means that the battery is equally capable of providing things like ancillary services. It's not the primary use case you'd normally buy it for. But if you have one, it can do that, too.

OK, cool. And do you have to get the fluid--

so you've got the positive side and negative side. And they meet in the middle, right? Do you have to pump them through?

Is the game about moving fluids around? Or is there also a stage process you have to do when they meet to catalyze them, if you like?

The power module you have is a unit where you have a membrane down the middle.

So the two liquids, they flow on either side of the membrane.

And the actual reaction taking place is, as I mentioned before, one direction storing energy and the other--

but it's electrochemistry. But to your question, you basically just have to imagine liquids flowing one way to store energy and flowing the other way to release energy.

And they are inside the module. They don't contact each other directly. You have a membrane, which allows ions to flow between two of them.

But as I say, they're not in direct contact. They're not mixing.

OK. Got that. And then I guess you need to do something to maximize the surface area between them on the membrane? Does it go through lots of--

we're getting technical here. We're not going to go there. I'm going to ask you about the state. So ESS is in America.

And America is now moving so, so fast, particularly ERCOT, California, New York.

There are so many gigawatts being built. I think ERCOT's around two and a half gigawatts at the moment, August 22, and it's going to be best part of eight gigawatts by the end of next year. So lots happening.

How is ESS participating in the American market? And what's happening over there that's changing fast, apart from tons of batteries?

I would say, in the markets, there's definitely a trend to longer duration batteries. It's a natural trend. The first batteries in PGM were half hour, then one hour, then two hour. And then for a long time, there are two hours. And then the jump to four hours.

OK, we're going to do [? Modo ?]

bingo now. Define long duration.

I would say long duration is more than four hours, maybe more than six hours. It's kind of like a flexible term.

But that progression has simply reflected the cost falls, which you've seen in lithium batteries. So this development over about 15 years, lithium ion batteries fell dramatically in price.

And I think what shocked a lot of people is that came to an end last year, where battery prices, depending who you talk to, are between 20% and 30% up for lithium, which was unheard of before. And we can have a separate discussion about that. But a lot of the deployment of batteries was based on the historical observation that the price of lithium batteries only go down. And on that assumption--

QUENTIN SCRIMSHIRE: Because that's what happened with solar, right?

Well, yes, but everything has a limit. And you'll never sell them for less than the material cost. Or you shouldn't, at least, if you want to stay in business.

Yeah.

But I don't even think that's true now. I think there's a lot of battery manufacturers have got to sell below cost to keep everything running. No comment on that.

I think that's--

I mean, there's a lot of discussion about whether pricing from China is market prices, and things like that. But I think if you look at the leading battery producers, they make money.

So you can make money. Even at these very low prices, which you have to achieve, they can make money. They have to be very expert in lithium ion, precision manufacturing and these kind of things.

But the assumption was, if you're living in a world where lithium batteries keep getting cheaper and cheaper and cheaper, you can start using them for longer and longer durations. And so they're stretching that beyond four, maybe to six hours. With prices now going up, I think that development is sort of in question.

And what the market needs is longer durations, because what's happening at the same time is that the proportion of renewable generation is going up. And as the proportion of renewable generation goes up, it's just the fundamental, if everybody has solar on their roof, in a given geography, they all have exactly the same peak generation curve.

So as that becomes a bigger and bigger part of the generation mix, you have this oversupply around peak solar hours becomes more and more severe [? SU. ?]

And that's what's actually happened in California. It's responsible for the famous duck curve where you--

Someone told me--

this is probably the coolest thing I've heard in the last two weeks--

it's now called the Super duck.

Apparently that's the trendy word to describe it because it's so skewed by solar now.

So the middle of the duck's belly, I guess. The duck's belly--

ALAN GREENSHIELDS: The duck's back. Water off the duck's back.

Exactly. The duck's back is even higher now. You heard it here first. Super duck.

It's new for me, except I've heard the word the duck curve so often that I've stopped listening for it. But the phenomenon is basically, as that gets more and more severe, the period of time where you have massive overproduction gets longer and longer. And so you're then in a situation where the power price is not period, or can go to 0, or become negative.

But you need the energy later in the day. So the economics for long duration storage, the need for it has gone up because you've got more energy for a longer period of time, and you need it later. You need it later in the day.

I just love this, as well, because it's the kind of thing you can explain to a non-energy person, which is, too much solar in the day, you need to move that power to later on. All this frequency response, blah, blah. It's very difficult to explain to someone down the pub. But loads of sunshine in the day and no sunshine overnight. It's very easy to understand.

But I think, for the storage industry, there's a more interesting development. If you're to say that the development up to four hours was principally grid stabilization.

Things like voltage control, voltage regulation, and frequency regulation. When you get to these longer durations, you're in the domain of what so far has been handled by gas peaker plants.

See you later.

Sorry?

I'm just saying goodbye to gas peakers.

I mean, but it's a tough--

It's going to happen.

It is going to happen, but it's a tougher nut to crack, because gas has been cheap.

Not cheap anymore, but it has been cheap. And burning it in a gas turbine on demand to give the grid enough energy has been a very effective way of doing it. But if you want to decarbonize, you've got to stop burning gas at some point.

And had we done more in that direction before, had more batteries and less gas peaker plants, the whole energy crisis right now would be much, much easier to handle. So I think that the--

what I think it's important to say, this is not a continuum with storage durations. The dominant contribution of batteries so far has been these stabilization functions.

And peaker plants, it's also a form of stabilization function, but is getting into huge quantities of bulk energy.

So we've done the first frontier, which is batteries disrupting frequency response markets and voltage control, which is great. And then the next bit is the longer duration where we might have a new technology that isn't so reliant. You described it so well earlier, which is, you don't need more cells to get more energy, which is great.

And then how long will this thing go? So at what point does flow battery technology get taken over by something else, whether that's pumped hydro, or something else? [INAUDIBLE]

What's the limit? Because you guys are in the sandwich somewhere between lithium ion and something else.

I would the positioning of long duration storage is between lithium ion and hydrogen.

Hydrogen is often cited as a potential way of storing energy, which it is.

The question is, for what duration? And I think to make hydrogen today and burn it tomorrow, if you actually run the roundtrip efficiency on that, you get maybe 10% or 20% of the energy back out.

Yes.

But was, until recently, the plan in Germany, for example. There was no role for storage. And I think it's very encouraging that the new government, when they wrote their coalition contract, committed to changing the rules to encourage storage in the German grid. Because prior to that, they were heading in the direction of using hydrogen for everything.

So hydrogen has a very important role to play for certain things. I think for heavy industry, for steelmaking, it's probably the only feasible way to do these processes.

And have you seen Michael Liebreich's hydrogen ladder? It's a nail on the head.

ALAN GREENSHIELDS: I think Michael, as always, hit the nail on the head analytically. That's exactly right. So there are things it's good for, and there are things it's less good for. And this piece-in between hydrogen and lithium, where lithium is very good for shorter duration batteries, for fast response, high power.

And where hydrogen in storage can play a role is, if you think to a fully decarbonized world--

and I love how every now and again, German words get picked up. The word dunkelflaute found its way into English.

Periods of dark, windless periods. You need something.

Is that what flaute means?

Flaute is literally windless. It's the old sailing term when they were sitting on the ocean and there's no wind. That's a flaute. And dunkel just means dark.

Overnight, no wind. Big problem.

So you need something for periods. And they don't happen often, but they do happen, where you have two weeks in winter with no wind.

So you need something. And hydrogen is a candidate to be a carbonless replacement for natural gas for the security function, also.

But going back to where it sits, I had the very interesting opportunity to work in the early days of the long duration energy storage council on actually working with McKinsey, who actually did the analysis on this, on, how do these things fit together analytically? And that's actually what comes out of the LDS council's report, which you can download on the internet.

We'll find a link and put it in the comments. So I'm going to find it after this. Sounds like a good read.

Yeah.

It was presented at COP26.

And that's what actually comes out of the numbers that you have.

Between hydrogen and lithium ion, you have an important task.

It was broken down into, basically, two archetypes. One was 8 to 24 hours, and the other was 24 hours to--

it varies a little bit--

100, 150 hours, maybe 200 hours, so--

Yeah, and [INAUDIBLE]

200 hours storing on the anode and cathode, because the materials.

Well, it's cost, cost, cost. It's a cost issue again. But the breakout, I think, is logical because 8 to 24 hours, all energy consumption in the renewable world, certainly solar generation, follows a 24-hour cycle. So shuttling energy around within a 24-hour window is logical. That's something important to do.

And then for a small number of days is basically, you have fluctuations in generation. You have fluctuations in use. You need something to smooth that out, too. So it is intuitively correct. But that's actually the analytical result that came out of the simulations that were run.

Makes sense. So somewhere between the shorter duration, which is where we are at the moment. Most of the batteries in the world, a few hours.

Then there's a medium bit. Actually, a very large medium bit, from eight hours up to a couple hundred hours. And then there's the hydrogen bit on top. Lots of work still to be done on the hydrogen bit.

But we need to get someone on from the hydrogen energy storage world to talk to them at some point in the future. You should--

[INTERPOSING VOICES]

Well, I think hydrogen is important, too.

And if you're interested in making hydrogen, you definitely need long duration batteries because to make green hydrogen, it has to be powered by renewable energy, and renewable energy has fluctuations. And if you built a large electrolyzer system, it's a significant capital investment. And you want it to run 24/7.

But my problem with this is, I get it. But then the power--

the loss is converting--

OK. So, your wind yield. And then by the time you get that power to shore, I don't know, let's say you've lost 10% of what was on the end of the turbine before you've gone through the power conversion system and everything else.

And then you've got to put that through a flow battery, which, let's say it's got a 70%, 80% roundtrip efficiency. I don't know whether it's--

I'm assuming around that number, right? So you lose 30% there. And then you go to hydrogen storage, and you've got roundtrip efficiencies of less than that at the moment. It's so costly.

Well, but that's for storage. I think there are other things, like as a replacement feedstock for the chemical industry. You need hydrogen for producing steel in a carbonless manner. You need hydrogen.

So we're going to need to--

I get that bit.

Yeah. And that was the bit I was meaning. But to put a number on the scale of the task for long duration storage, the LDS council study concluded that for full decarbonization worldwide, you need something between 85 and 140 terawatt hours of energy.

Wow.

It's a huge number.

And we're going to have to--

this is the thing, right? I say all the predictions. A lot of the back of the pack predictions about peak demand for electricity and how much renewables we need to build we need to really overbuild renewables to cover all the efficiency losses from all these technologies, which we're going to require because they're the best we've got.

Plus, the intermittency. So we need to get a lot more renewables than first comes to mind.

Well, I'd say it's not actually because of the losses. I would say the losses of even the worst storage system on the planet are much less than burning gasoline at the 20% efficiency where 80% of the energy is just waste heat. And we often forget that when we're talking about efficiency, that actually all of the internal combustion engines in vehicles, they produce mostly heat. It's a slightly different story in aviation because in the gas turbine for propulsion, the propulsive efficiency is higher.

But we actually come out of a world where we take this incredibly energy-intensive material that nature created for us over hundreds of millions of years and then burn it at 20% efficiency. So I just want to mention that point because people are often expecting our level of perfection from the new technology which is, like, five times better than what the state-of-the-art is for conventional.

Incredibly valid. And I do need to be put in my box sometimes. The thing is that we're all hooked on lithium ion roundtrip efficiency, right?

And 85%, 87% roundtrip efficiency is amazing. But of course, there's almost intangible cost to that of all the materials and everything else to get the scale we need.

I want to ask you about ESS, and we're almost running out of time.

A couple more things. The supply chain mentioned earlier. Supply chain for a flow battery manufacturer.

I imagine there's pumps, there's membranes, there's all sorts.

How do you guys manage that? And is it proving to be difficult in the current climate?

First thing I would say is that in terms of the basic materials for the actual system, they're much more similar to the standard materials used for industrial products for automotive, white goods, these kind of things. So there's no exotic materials in there. But obviously, if you're building a system, you don't just need the raw material. You need the raw material in the shape and in the precision you require.

So there's clearly a supply chain challenge, as you would have with building anything.

But ESS has a supply chain team. They work on that. They have had a lot of challenges because even a lot of standard materials and stuff like polypropylene have been hard to source for times.

Wow. What's happened?

ALAN GREENSHIELDS: I don't know. That's just the disruption. There a sort of COVID-related disruption, and now we have a second round of disruption where effectively the whole hydrocarbon industry is disrupted because of the situation with Russia. So these are things that have to be managed.

But I think it's important to differentiate between the fundamental materials and the conversion of those materials into the specific part you need. In terms of fundamental materials, by design, the ESS system doesn't use anything which is hard to source. But there's still obviously a big task in getting it all going, and getting suppliers to make the parts you need and the quality you need, and these kind of things.

But there's a very professional team dealing with that. They've battled their way through a lot of things.

But as I say, I could say the same story about bringing a new model of a car into production. There's just lots of bits with suppliers, which need to be coordinated to make sure that they're the right shape and size and fit for purpose.

Yeah, it's not specific to ESS. Is ESS focusing on American-made components? Is that part of the strategy?

The company, yes. I mean, it doesn't solely source material in the United States, but I think the whole industry, there's a trend back to economic regions wanting to have reduced their dependency on imported crucial components. That's a general trend, as you see the same in Europe.

And it's understandable, I think, in the current geopolitical situation, that there's no point in replacing a dependency on imported oil in countries that import oil with 100% dependency on imported batteries.

Just sort of to make the point. But certainly, the US is doing a lot. If you look at what's happening in legislation, the current administration, there's a lot of, I'd say, very positive things happening there where the US government is taking measures to encourage production of batteries in country.

There's also a lot happening in the UK and a lot happening in Europe.

And two more questions. I know you've got to head off.

One about ESS, and then one to use specifically as Alan and not the ESS Alan. So the first one is, where next for ESS? What does the road map look like? And the second question I want to ask you is, where do you think our industry is headed?

What are your predictions? You've spent a couple of decades thinking about this now, and we want to know where you think we're headed. But firstly, ESS. What's the road map for ESS?

As I say, one advantage of being a publicly quoted company is that you have access to capital, and you have basically all of these good things. One disadvantage is that any kind of prediction about the future is something which has to be handled in the appropriate manner. So I'd say on that, read the website. And we have to be respectful of these things.

I understand. I understand.

But in terms of where I think the industry is going. I mean, I would just also look at what happened already. 15 years ago people said, oh, we're going to put batteries in the power grids.

There were loads of people standing up saying, it's a joke. It will never happen. Batteries are those little things you buy at the checkout in the supermarket. They're all toys. They're never going to play a role.

Wind turbines, they're just little paper windmills. They have no function. And look what happened.

And I was involved in a HBS think tank on energy and environment in 2010. And we wrote the wish list of what would need to happen.

And everyone, if you look back at that, it's all happened.

And it was totally unthinkable even five years ago that the cost of renewable energy should be cheaper than burning gas. But it is. It's actually happened.

So I think it's important to say what's actually worked really well. The cost of solar generation has plummeted. The cost of wind generation has plummeted. The cost of lithium batteries has plummeted.

And so I don't think we need to ask the question, can you do it? Because if you say, look at what--

the things that people raise now to say why it's not going to happen were already said 15 years ago, and they were totally wrong.

So what needs to happen now is we need to progress on these things.

And I do think the next big thing is long duration storage, simply because to get to full decarbonization, the goal has to be the total replacement of gas burned for electricity generation. It's a huge task to go for.

The generation costs are already low enough to do it. And the storage costs with new technology like ours are also low enough to do it.

Who's going to pay for it, though? This is the thing. Where's the market long duration?

Does the business--

I guess, charging with solar and California in the day and shifting it to the night, I can see how the business case works for that if the capital costs are low enough.

But then, how do you go beyond the 24 hour thing? How do we get to the 200 hours? Who's going to be incentivized to do that for the short time that you need it? Or the long time you need it?

There are all kinds of expert groups looking at that right now. All I can say is say, what's the cost of not doing it?

if we'd done it five years ago, we wouldn't be sitting in a gas or energy crisis right now. We'd be saying, wonderful. It doesn't matter what the price of gas or price of oil is. We don't care.

QUENTIN SCRIMSHIRE: Great.

So we could put a number on what's been the cost of not doing it, and it's astronomical. And if you look at the horror headlines in the UK about how much your average household is going to have to pay, it's absolutely terrible. So I think it's easier to say, what's the cost of not doing it? Because obviously, long duration storage is not the fix for everything, but it's part of the fix for the whole thing.

So I think that it's easier to say, we've got to do it, and here's why.

The other part of it, which is really more of the regulatory challenge, we've got accustomed to not paying for certain things.

When we balance the grid by burning natural gas, we don't put a price on that service. We just burn the gas and we release the CO2, and it goes up into the atmosphere.

So they're implicitly services provided at the moment by the conventional grid, which we don't pay for. And so you have to figure out how to monetize the services the grid needs. But I'm personally convinced, if we do it right, the cost of energy is going to go down and not up.

QUENTIN SCRIMSHIRE: Over a long enough timeline, I guess.

But not even that long. If you have a non-subsidized cost of generation of $0.05 a kilowatt hour and you can combine that with cost-effective storage, why should power prices go up?

Yeah. I would kill for $0.05 a kilowatt hour at home right now.

[INTERPOSING VOICES]

ALAN GREENSHIELDS: I believe that the unsubsidized cost of solar generation in the Middle East is below $0.01 a kilowatt hour.

I don't know how they do it over there less than $0.01. The competitive bidding process is getting well below there.

So the energy, the actual energy production cost, is so cheap now. It's just a question of, how do we make it usable?

And move it around and store it.

Transmission plays a huge role. Storage will play a huge role.

So I think there's unanimous agreement we need it.

There's unanimous agreement we need lots of it. There's a process going on at the moment by regulators and governments to figure out how to make it happen.

Awesome. So TLDR, we're going to make it. It's going to be OK. All right.

Alan, I want to say a massive thank you. No doubt, this episode is going to get lots of comments and feedback.

Thank you for coming on. Thank you for being open and sharing your story and what you think about storage.

If you're listening to this or watching this, please do remember to subscribe and follow. It means a lot to us. And then we can measure what we need to improve and whatever needs to happen next. Until next time, thanks very much.

Thank you. My pleasure. And thank you for giving me the opportunity to talk.

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