Renewable Energy SmartPod

Iron Flow Batteries On The Rise

November 15, 2022 Season 2 Episode 13
Iron Flow Batteries On The Rise
Renewable Energy SmartPod
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Renewable Energy SmartPod
Iron Flow Batteries On The Rise
Nov 15, 2022 Season 2 Episode 13

When most people think of batteries these days, they probably think of lithium-ion batteries. But serious questions are starting to be asked about lithium-ion batteries; questions safety, sustainability, performance and the supply of the rare earth materials that go into those batteries. 

So with all those battery questions swirling, today's show features Hugh McDermott, the senior vice president of business development and sales at ESS. The team at ESS has pioneered a different kind of battery: iron flow batteries. Hugh shares some of the basics about iron flow batteries and how they stack up when it comes safety, sustainability and performance.  Hugh details how the Inflation Reduction Act is a game-changer for the battery sector and how batteries from ESS are already … yes already … playing a role in the long-duration energy storage market.

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Show Notes Transcript Chapter Markers

When most people think of batteries these days, they probably think of lithium-ion batteries. But serious questions are starting to be asked about lithium-ion batteries; questions safety, sustainability, performance and the supply of the rare earth materials that go into those batteries. 

So with all those battery questions swirling, today's show features Hugh McDermott, the senior vice president of business development and sales at ESS. The team at ESS has pioneered a different kind of battery: iron flow batteries. Hugh shares some of the basics about iron flow batteries and how they stack up when it comes safety, sustainability and performance.  Hugh details how the Inflation Reduction Act is a game-changer for the battery sector and how batteries from ESS are already … yes already … playing a role in the long-duration energy storage market.

ABS Quality Evaluations
Global leader in business assurance services

Disclaimer: This post contains affiliate links. If you make a purchase, I may receive a commission at no extra cost to you.

Sign up for the Renewable Energy SmartBrief

Follow the show on Twitter @RenewablesPod

(Note: This transcript was created using artificial intelligence. It ahs not been edited verbatim.)

Sean McMahon  00:00

Hey what's up everyone and welcome to another episode of the Renewable Energy SmartPod. I'm your host Sean McMahon, and today, we're gonna be talking all about batteries. Now, when most people think of batteries these days, they probably think of lithium ion batteries. But lots of questions are starting to be asked about lithium ion batteries, questions about safety, sustainability, and the supply of the rare earth materials that go into those batteries. Plus, in a world that seems full of geopolitical instability, business leaders and policymakers are facing tough challenges related to securing supply chains that deliver all those materials that are needed to make lithium ion batteries. 

So with all those battery questions swirling, I'm excited to be joined in a few minutes by Hugh McDermott from ESS. The team at ESS has pioneered a different kind of battery, iron flow batteries. Hugh is going to share some of the basics about iron flow battery technology. We're going to talk safety, sustainability and performance. And Hugh will explain how batteries from ESS are already Yes, already playing a role in the long duration energy storage market. 

But before you and I start our conversation, here's a quick word from the sponsor of today's episode. ABS Quality Evaluations

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Sean McMahon  02:03

Hello, everyone, and thank you for joining me for today's show. I'm pleased to be joined by Hugh McDermott, who is the Senior Vice President of Business Development and Sales at ESS. Hugh, how you doing today?

Hugh McDermott  02:15

Awesome. Great to be here. Thanks for having me, Sean.

Sean McMahon  02:18

Yeah, I'm excited to talk to you, I want to hear you about some of the latest in battery storage technology and ESS. You guys are all about iron flow. So why don't you give our listeners some of them know a lot about the battery space, some of you might not. So what are the basics of iron flow batteries?

Hugh McDermott  02:31

Sure. So for your listeners, a flow batteries a different kind of battery, where the electrolyte that's commonly part of an electrochemical battery is kind of like the circulatory system of a body. In our case, the blood is iron, saturated and saltwater. And so is it circulating through our batteries. What's physically happening during the charge cycle is iron is coming out of the solution. And it's collecting in a layer on the carbon plates, the cathode. And so as we build up that layer that constitutes energy storage. And then when it comes time to discharge that battery, when we want to put energy back into the grid, or to feed a customer's operating plant and so forth, we just reverse the polarity, we're not reversing the flow, or the pumps or anything like that, we just reverse the polarity and the iron dissolves back into the solution. And that's the the basics without getting too technical about it. It's got a lot of unique attributes. Being water based battery, obviously, it's not flammable, it's not going to blow up being saltwater and iron. Can't think of anything. It could be any safer for people or the planet in terms of a battery of we're gonna see lots and lots more of in society around the world.

Sean McMahon  03:41

I mean, these batteries aren't gonna explode, that what you're trying to say,

Hugh McDermott  03:45

Well, not only that, but anybody can work on it, right? You don't need specialized expertise. You don't need to wear what we euphemistically call the bunny suits to be able to handle it. It's just standard basic industrial maintenance. There's nothing exotic about it.

Sean McMahon  04:00

Right now, most people are familiar with lithium ion batteries. So how do these batteries that your team is working with? How do they compare when it comes to cost versus lithium ion or performance or even sustainability? How do the two compare and contrast?

Hugh McDermott  04:12

Sure, well, lithium ion batteries are great at where you need high power in small formats, and they were good for the grid. In the past number of years when renewable energy penetration was kind of in the single digit low single digit realms, you could put a half hour battery or one hour battery, which is inherently where lithium ion technology kind of takes you out to about two hours. Can you stretch them and make them into a four hour battery? Of course you can you can just double up the batteries and you can double them again and make them an eight hour battery but the cost and economics of that start to tail off pretty dramatically as compared to our battery hours is a long duration battery and we define long duration as being more than four hours in less than 24 hours. Of course there's even longer duration batteries which could go out for even days. But we play in that daily cycling space, if you will, in the battery spectrum, in that eight to sort of 12 hour sweet spot, which is where the industry has shifted in the last two years, and where it's concentrated. Now, in terms of long duration storage, we feel we have a compelling economic advantage over lithium ion in two regards one we're at or below the capital costs of those lithium ion batteries in that range today, we also have the advantage of our batteries are designed to last for decades, the design life on a product that we're shipping today is 25 years, a typical lithium ion battery has a three to five, three to seven year life, and it gets replaced. And so when you see these projects that people announced coming out for 1015 20 year lithium ion batteries, of course, they're making them last that long, but they're in the yard every month to replace the batteries in the modules that are worn out and fatigued and so forth. So we don't have that type of issue. So we have, we have an advantage in terms of that Oh, NM, we believe as well. So bottom line, when you're measuring in the utility space, or you're a large energy user, you want the lowest cost per unit of energy coming through your energy storage, and we believe we have a substantial advantage over lithium ion battery in that category. 

Sean McMahon  06:17

So is that what you think makes this a game changer, the low maintenance, you know, long lasting life of these batteries?

Hugh McDermott  06:23

For sure. Game Changer not only in terms of lower costs. But if you think about sustainability, you think about supply chain risk, the geopolitical risk around rare earth minerals, those aspects, we have a great story to tell, because we have more than 90% of our vendors that supply our products are US based. And when we look at sort of secondary sourcing, we're well above, we're probably the most domestic source, battery manufacturer available in the US today. So you don't have any of those risks as well. So we don't have the price volatility and commodity risk associated with some of the other chemistries like lithium, like vanadium. So we can give customers more certainty around what the price is going to look like in the future. And they can make their decisions in a more in a higher confidence approach.

Sean McMahon  07:13

Yeah, it seems like especially now with all the supply chain, and like you said, rare materials being such high demand. And, you know, even worried that there'll be an impossible to get any price really seems like a peace of mind to be able to plug one of these in and not have to worry about it for 20 years. 

Hugh McDermott  07:27

Right, for sure. And I know we're going to talk about at some point, the inflation Reduction Act, and we have a compelling advantage in that regard as well, because that domestic content.

Sean McMahon  07:36

Okay, yeah, I definitely want to get to the IRA in a little bit. But I just have a couple of questions for you first. So you mentioned how these batteries are a smart play in a long duration energy storage field, how does it stack up against other solutions that are kind of being hyped these days? I mean, I've done a couple episodes about green hydrogen and things like that, you know, where do you see those from a competitive landscape?

Hugh McDermott  07:54

Green hydrogen is an interesting one, because most of the hydrogen technologies out there, the ones you know, what we know about them, is that the technologies don't like to be starting stuff, they like to be baseload to sort of hit the economics. And so being able to operate one of those around the clock with clean energy is an important part of how you get a clean energy, a green hydrogen output that's economic, you need to do that you need a long duration battery, and a battery that can go for many years, if not decades, to make it economic. So green hydrogen is actually a segment that we think is very complementary to our technology. In fact, we help we believe enable green hydrogen, to a large degree because of the duration of our batteries and the longevity of our assets. So we don't see it as a necessarily as a direct competition. To what we're doing. We see it as a fellow traveler and a potentially very interesting segment for us to go serve.

Sean McMahon  08:52

Okay, that's interesting. So getting back to like users for these products, right, which commercial industries are the best fit for these kind of batteries that ESS is producing? 

Hugh McDermott  09:03

It's probably easier to say which ones and I'm struggling to think you know, who would not be a good fit for this kind of technology. So any customer that where energy, energy costs are a factor in their overall business that drives some of the cost of their product, or Secondly, where energy resiliency is important to them. You can think data centers, you can think hospitals, you could think refining operations, petrochemical, energy resiliency is everything to those types of customers. You can extend that into the utility world very readily. Were keeping the lights on keeping the grid energized resiliency, you know, we saw like Texas freeze two years ago, we see wildfires, and once in a century events seemingly happening every other week in the news. And also if you're in the business of where energy is important to how you operate and resiliency, a long duration battery like ours, one that you can cycle without turnover degradation is part of that equation.

Sean McMahon  10:03

Yeah, I feel you on that. It definitely seems like we've had more than our fair share of the once in 100 year storms and things like that, 

Hugh McDermott  10:10

You know, funny, are they a week seems to go by where we don't read some new record setting storm. Yesterday, I was reading about two hurricanes in the Atlantic this late in the season has been, I don't know, there was record setting, but it was definitely abnormal. And this morning's climate news are talking about Arctic wildfires becoming a thing that could up end, the decarbonisation efforts with climate change. So all of these are putting climate change these weather events, they put huge stress on the grid on an already aging grid. So it really puts a premium on resiliency, for energy supply and the society that we live in today. 

Sean McMahon  10:48

Yeah, so speaking of resiliency, and you mentioned the freeze in Texas, so. So if I'm a hospital, if I'm running a hospital down in Dallas somewhere, and I gotta worry about having, you know, backup power generation for the next of many 100 year storms, as we've been saying, what does that look like? I mean, how many of these batteries? Am I going to call ESS? And say I need because you said there is a certain hour limit on it. But those folks are out of power for for multiple days? How do they stack up? 

Hugh McDermott  11:13

Sure. Well, every customer's needs are going to be unique to them themselves. We basically have taken an approach to kind of standardize the product we have product we're shipping today is primarily targeting the commercial and industrial community. microgrids can be used by utilities, there's no limits on who could use it. But it's, it's sized and designed primarily to be a drop in place, plug in add water battery. And so depending on your needs, you can add one to 10 of these type of batteries, depending on what your project requirements would be. Now, when we talk about large utility scale, we've taken the exact same technology, we're repackaging it in a different format, that gives us even more capability. So think about a tractor trailer sized container. That's the basic building block, if you will, for the first one I spoke of, in the second case, we're going really large, we stack those. And we can, we can get more than a megawatt hour in a in the footprint of a single container. And so that's really the building block for how you go big with this technology. Depending on what the project requirements are.

Sean McMahon

We'll be right back

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Sean McMahon  13:16

And now back to our conversation. So you mentioned here there Yeah, I want to talk about the Inflation Reduction Act. So what kind of impact do you think the IRA will have on the wider battery market? I mean, we're hearing a lot about tax incentives and things like that,

Hugh McDermott  13:27

Ya know, it's it's the single most defining event of this century, perhaps for the US energy sector to not understate it. The provisions in that act, start with in terms of where we fit in the energy spectrum. There's a domestic content. So one of the intents of the act was to try to drive domestic investment in energy technologies, particularly around batteries for EVs and batteries for the grid. And so batteries that meet the domestic content, which is the 40% domestic content threshold can qualify for a 40% investment tax credit. And so almost right out of the box, the cost of our technology, for example, because we meet that domestic content threshold is almost half off straightaway. So anyone who was looking at long duration storage, considering our technology and had maybe a marginal business case, prior to the IRA is now suddenly knocking on our door. It gets even better depending on the site and the type of customer that ITC if you're a nonprofit, such as a municipal utility or a co op utility SMUD, the partner that we just announced a partnership with Sacramento Municipal Utility District, few weeks back is one of those types of players. That EITC gets to be converted as a cash cheque back to SMUD. When they put that unit into service, so if you had $100 million project and you had a 40% it See, the day after it went into service, you get a you submit and you get a $40 million check back from Uncle Sam under the IRA profoundly changes the game for that category of customers. And then ITC is also available to private sector companies just has a different way of being monetized. But then you have projects that are cited, for example, in where power plants were closed down, coal fired in particular, since 2009, and more recently, coal mines that may have been closed down. As we shift away from coal fired generation, locating those as part of an economic development driver can boost those, those ITC incentives to above 50, all the way as much as 70%, depending on the circumstances. So you can imagine the massive amount of investment that's required, and now you're looking at a 40 to 70% discount on that. So it's a complete game changer for this industry. And the smarter folks are already lining up, it's starting to have the look and feel of a gold rush kind of landscape out there in the energy storage realm.

Sean McMahon  16:04

Yeah, now ESS is one of the few players that's actually up and running in mass production and things like that. I guess I'll ask you a tongue in cheek question is the IRA like a problem, you're gonna have too much business and too much, too much of a good thing, if you will.

Hugh McDermott  16:19

It's not a problem. In that sense. It's our number one challenge in it was our challenge before the IRA came along with scale, the demand was always there. This just sort of turbocharged that demand. And so for us, and I think this would be for all of your listeners, the game has changed in the sense that the demand is so great, that there's going to be this massive imbalance between the demand and what's available for the next several years least through the end of this decade is our estimation, doesn't matter what technology you're looking at lithium ion, any of the newcomers etc. And so really, what customers are starting to figure out is that this is a global arms race. And that's not just here in the US. If you look at what's going on in Europe, you've got the Ukraine war, which in January, nobody saw coming happen. Suddenly, it's upended the entire calculus of your energy security situation for all of Europe. And so what were previously 2050, decarbonisation plans and goals, they're accelerated, in some cases, all the way to 2030. And so you've got that competing demand for renewable energy and energy storage, US IRA, investment, that's going to be massively flowing into the sector. And then you've got places like Australia, that are hugely accelerating their plans with shutting down of coal. So it's, it's happening around the world, so that the supply demand imbalance is going to be there. And it's like a strategic arms race, in a sense. And so for us, it's not a bad problem to have, obviously, but it bows for, I'd say the symbiosis that we're seeking is to work with partners who realize that's going to be there for some time and want to place ever larger orders get in line now, and gives us the visibility and ability to plan our capital investment for manufacturing expansion. We're going as fast as we can, regardless, but we can go a lot more confidently, we can talk to our finance ears with a lot more surety when we have long term supply agreements in place. And so that's kind of the big change that's fundamentally happened at a commercial level, if you will, since IRA.

Sean McMahon  18:27

Yeah, I was just having some fun with you there. It sounds like it's a good problem to have, you know, too many customers queuing up to get your product. One quick question on emergency response type stuff, and how long does it take for one of these batteries? Once you drop it in place to come online and asset from a perspective of like, you know, Hurricane wipes out a power structure or something like that, like, these things are about the size of a shipping container? I mean, can you just drop those in? And you know, What's the timeframe look like?

Hugh McDermott  18:52

Yeah, they're not really particularly well suited for that type of mobile application. If I understand your question, Shawn, they'd be more of a case where you'd have it already pre installed already plugged into the grid. And let's say you want to you anticipate or you foresee, through weather forecasts that there could be an issue and you want to plan for. And so I'll take one of our customers right now, in Southern California. They've installed a micro grid for several megawatt hours. And the primary motivation for doing this was to keep the lights on when the grid goes down. They're prone to these wildfire risks during hot, dry, windy conditions, they'll shut off the lines to avoid the risk of sparking potential wildfire in the back country. And in Southern California. When that happens, the communities that are at the end of that line can go for hours days. It's even gone for a couple of weeks in some instances. And so you can imagine how disruptive that would be to everyone from families to businesses. The micro grid here is that insurance policy where it's solar plus our batteries, they show is our batteries for two reasons, one as the fact that it's not going to be a potential cause of a fire on a lithium ion battery. And second, if a fire, were ever to reach that for any reason, it's not going to blow up in a fire because it's just water and salt and iron. So that was kind of like a fundamental attribute. But the fact that the battery can cycle without degradation for years and years means that the whole rest of the year they can be providing sales of energy into the grid, earning some revenue on that they can be providing services to give better quality power to the end of the line out there, if you will, providing frequency response and voltage support and so forth. All Knowing that I'm not compromising my primary reason why I here I'm here in the first place, which is to be there when the grid goes down. And so that's something you can't do with a lithium ion battery very readily, because every time you cycle that battery, you're taking a little bit off of its life. And every decision you make today is going to affect the decision of how you use that battery tomorrow, because of the constraints inherent within the technology. We don't have any of those constraints. And so the resiliency aspect, you know, could you be there for the next hurricane, could you be there, people are actually in this business and trying to support reliability are actually designing projects around that, that that get multiple use cases out of that. And that's how our battery size sort of differentiate from a lithium ion battery in particular.

Sean McMahon  21:24

Okay, now, you mentioned that customer in Southern California. And we also talked about Sacramento earlier. So, you know, I was doing some research, you guys have announced some big deals also in Australia. So So what can you share with us the details of those projects and how these batteries are being put to use in real world scenarios?

Hugh McDermott  21:40

Sure, well, Sacramento, the most recent one, is a partnership with Sacramento Municipal Utility District. And they had laid out their plan for achieving zero carbon business by 2030. They identified in their plan some gaps, they identified some risks. We reviewed their plan, we had a discussion with Smite about how we thought we could help de risk their plan, we can help fill some of those gaps. And they were concerned not only about addressing those aspects, but also what's this industry is the industry going to be able to serve their needs terms of a supply side because of this demand that's building in the industry. And so the partnership was basically premised on giving them some certainty of supply up to 200 megawatts was the minimum we would guarantee of our manufacturing over the next several years. Second, giving them some visibility to the pricing. And confirming we'd give pricing out to those years without being subjected to commodity variables and variable pricing. And then third, we've got a little bit less attention is given what's happening in this industry, it's going to be a it's a people short industry today, it's going to be even more so in the future. We have a workforce development and capacity building element to this partnership. So we're going to be working with local universities and the local business community to develop the vocational skills, the technical workforce to support not only Sacramento but we think will become a center of excellence for ESS and the battery community in general for certainly all of California and possibly the West. And so it's really those were the aspects of the Sacramento that really got us excited. In Queensland, that's a little bit different. The market they're in in Australia, it's a long ways away from here, economics suggests Why would we ship steel to our plan to assemble it and then ship steel all the way to Queensland, maybe that's not the right way to go. So the partnership there is with a with a local entity that's going to be setting up assembly of our products in Queensland. And so we will be building the battery modules in our Wilsonville facility in Oregon. We'll be shipping the battery modules and some other bits and bobs, as I say, down there and they will do the assembly of the of the whole product to support the Australia New Zealand market. And so it's an assembly and they've pre purchased a considerable volume of our components that we're going to have to be supplying down here. It's a very large market for us. We're couldn't be more excited about what's going on in Australia.

Sean McMahon  24:15

That's incredible. This is this is great. I really appreciate you kind of educating me and our listeners about what's going on in the long duration energy storage battery market. Before we get out here, I do want to ask you I mean, you guys are headquartered here in Oregon. That's where I'm at. Recently, Energy Secretary Granholm came through with not one but both of Oregon senators in tow and the governor and there was quite a delegation that paid a visit to your headquarters. What was that like? Seems like you had a lot of VIPs all at once.

Hugh McDermott  24:40

Now it was great to get the recognition. We are super appreciative of US Department of Energy. It gets kind of lost in the annals of our our storytelling but doe rightfully could be considered a co developer our technology very early on. They helped sponsor a lot of our initial research and already De they helped sponsor some of the prototype development, they helped sponsor some of our early pilots. So I like to give a shout out to DOD whenever I have the opportunity to and of course, Senator Wyden, I think this, we sort of represent a lot of what he's worked for for more than a decade as a thought leader in energy policy. So for us, it was super exciting, and they got a tour through the plant, the whole plant was excited. We're still a little bit on a high after that.

Sean McMahon  25:27

That's great. It's great to hear you had another good story coming out of some of the Energy Department's, you know, support. So. Well, thank you. Thank you very much again, I appreciate your time. This has been wonderful. I hope you have a great day. Yeah,

Hugh McDermott  25:38

Thank you, Sean. Thank you for your listeners.

Sean McMahon  25:43

That's our show for today. But before we get out of here, I want to say one final thank you to our sponsor, ABS Quality Evaluations. 

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How Iron Flow Batteries Compare to Lithium Ion
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Commercial Industries Ripe For Iron Flow
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Why the Inflation Reduction Act is "the most defining event of this century, perhaps, for the US energy sector."
A Good Problem to Have
Policymakers Pay a Visit to ESS