GridStor's Chris Taylor Surveys the Battery Energy Storage Landscape

With the American Clean Power Association’s brand new RECHARGE conference taking place this week in Portland, Oregon, we decided to bring on a guest who is the leader of a battery energy storage company that just so happens to be headquartered in The Rose City.  Chris Taylor, the CEO of GridStor, has been in the renewables industry for a long time, so he joins the show to discuss the origins of GridStor and how the battery sector has grown in recent years. Ahead of his appearance on the "A View From the Top - Energy Storage Leadership Fireside Chat" panel discussion at the RECHARGE conference, Chris also shares his insights about the state of the marketplace and how factors like the Inflation Reduction Act and growth in energy storage procurement among utilities and corporations are driving big interest in batteries.

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Transcript

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

Sean McMahon  00:08

What's up everyone, and welcome to the Renewable Energy Smart pod. I'm your host Sean McMahon, and we've got an exciting week ahead of us. The American Clean Power Association's brand new recharge conference is taking place this week in Portland, Oregon. So we've got not one, but two episodes on tap to discuss all things energy storage. Today, we're going to hear from Chris Taylor, the CEO of GridStor. Chris has been in the renewables game for a long time. So he and I are gonna discuss how things have changed over the years. Chris is also taking part in the energy storage leadership fireside chat at the recharge conference. So he's going to share his insights about the state of the marketplace, and how factors like the Inflation Reduction Act, and growth in energy storage procurement among utilities and corporations are driving big interest in batteries. 

Later this week, we're going to welcome Rob Gramlich back to the show. Rob is the founder and president of Grid Strategies. And it's been a few years since he was on this podcast. But since Rob's a bit of a guru when it comes to the grid. I wanted to chat with him again to get an update on all the news and trends when it comes to energy storage and transmission. 

So I hope you enjoy this week's energy storage double feature. But before we get things going with Chris, just a quick reminder that if you want a daily dose of renewable energy news delivered directly to your inbox, head on over to SmartBrief.com and sign up for the Renewable Energy SmartBrief. Or, to make it easier, you can just click on the link in today's show notes. 

Hello, everyone, and thank you for joining me. My guest today is Chris Taylor, the CEO of GridStor. Chris, how're you doing today?

Chris Taylor  02:10

I'm doing great. Thanks very much for having me, Sean.

Sean McMahon  02:13

Yeah, I'm excited to have you on. We got a lot of ground to cover in our discussion today. But first, I want to learn more about you. Tell our audience a little bit about your background and the renewables industry.

Chris Taylor  02:22

I've been working in the renewable energy business for just about 23 years now. I started in 2002, a little startup wind company called Zylka renewable energy, which was later acquired by Goldman Sachs and became Horizon Wind Energy and is now edpr. And I led development for them originally in the northwest. I'm originally from Portland. And this is where I started and ended up covering the whole western energy market for for them that left there and to start a new wind and solar backed IPP called element power, which was also based here in Portland, where I was Chief Development Officer and co founder and we sold that company and I ultimately ended up working for Google for seven years in their data center team doing both renewable energy purchasing as well as investing. And that's what led me then to GridStor two years ago.

Sean McMahon  03:12

I gotcha. So 23 years. It's sounds like you're a rookie, I guess, right? Yeah. So tell me more about what made you want to start GridStor? Obviously, you started in 2022. So still relatively young, I guess we'd say, but what was your vision behind getting things off the ground?

Chris Taylor  03:28

Yeah, well, as you mentioned, in the intro, energy storage is is a hugely is a rapidly growing space right now. And as someone who's been part of building gigawatts of intermittent renewable energy all over the grid for the last two decades, I'm keenly aware of the fact that we've kind of built a deficit in terms of we've been it we've introduced all this variable generation onto the grid without adding other resources that could that were flexible and could respond to that intermittency. And we all knew that someday, we would need another kind of flexible resource to address that. And now we've hit that inflection point where that's necessary to maintain grid reliability. And hopefully, we also have a technology that's reached a stage of maturity in the form of batteries that is ready and able to address that need. So it seemed like a perfect time in the market. And frankly, it's exciting to me as having been part of the early days of wind and the early days of solar, building out a brand new industry that where the rules of the road are unwritten, and there's a lot of new opportunity and innovation opportunities out there is really exciting to me, and I think battery storage. On a personal level. What motivates me is that, you know, I've built gigawatts of wind and solar, ultimately, because I wanted to see us transition away from dirty sources of energy, and I'm not sure how many dirty sources of energy were curtailed as a result of all that wind and solar that I built, but I'm very confident that the batteries we're building are going to help reduce the amount of carbon that's being emitted because we're basically competing directly with gas fired power plants.

Sean McMahon  04:53

Okay, and so what does your portfolio look like right now? I know like I mentioned a couple years ago, you just got started so you know, early days, but What does it portfolio look like right now?

Chris Taylor  05:01

Yeah. So we got, we were fortunate to launch the company with our financial backer that Goldman Sachs asset management had already acquired the rights to a 60 megawatt project in California near Santa Barbara. That's called galena energy storage. And so we rebuilt that project, we acquired it at a late stage or Goldman did before I was hired. And then we, the team. And I've completed the financing of that project, both the tax equity and the debt, and built that project using Tesla batteries. And that project is up and running has been doing so since January. So we've got some experience upgrading an asset in a market and trading power around it. And we just recently acquired a project in the Houston area called Evelyn, from the developer called balanced rock. And we are about to kick off construction of that project, which is much larger, it's 220 megawatts. And we're very excited to bring that project online in time for next summer, where Texas is expected to face some real capacity needs. 

Sean McMahon  05:58

Okay, and it sounds like you've also kind of getting things off the ground with GridStor, at the same time as a little thing called the inflation Reduction Act has been passed and then implemented and brought to the market. So broad question here. How has that impacted the energy storage market? Let's just start with the most I know, it's impacted in many ways, but give me the two or three things you think have been the biggest impact?

Chris Taylor  06:19

Yeah, I mean, the obvious first order impact is that it dramatically reduces the cost to the end consumer, or the end customer of the services that we can provide with the battery by providing the federal tax credits reduces the overall cost of the project, and therefore makes the services from that battery more affordable to customers, that's probably been the single biggest impact, which has had the effect of driving up demand because you know, at a given price point, you're gonna have more more interest if the price is lower. So that's a that's a huge impact. But it's also complying with those requirements and ensuring that we meet all the requirements, to be able to secure the tax credit has also led to a big push for domestic content and offshoring of manufacturing consistent with the Biden administration's push more broadly, to bring more heavy manufacturing back to the United States. And we're very supportive of that effort, we'd love to have a robust domestic supply chain for our projects, see that job creation all the way across the value chain and insulate us from supply chain shock. So there's a lot of work to do to build all those factories in the United States to be able to produce all that capacity. But that's those are probably the two biggest impacts we've seen.

Sean McMahon  07:24

Okay. And then you mentioned, yeah, a lot of factories are getting built headlines, it seems like every other week, you know, someone's breaking ground somewhere. So as those facilities come online, obviously, it's going to change the have a big impact on whether its supply chain or just kind of business models within the industry. So what kind of ways do you think a fully built out domestic battery supply chain will affect the long term energy prospects for not only renewables, but just, you know, the wider energy industry? 

Chris Taylor  07:55

Yeah, well, I think it's, there'll be a couple of different levels. I mean, I think at the highest level, on a political level, you know, the fact that those that there's going to be many, many jobs created in the production of these of this equipment, here in the United States will deepen support and broaden support for what we're trying to do. Because a whole other group of people will be employed in these projects. And these will be long term stable jobs that are hopefully welcome in the communities where they're going to be located. So we see that is very positive. And then from our perspective, as someone who is a company that's buying this equipment and maintaining it over the long term, having that domestic supply chain, having reliable suppliers who are onshore not subject to potential trade issues, or supply interruptions, or anything of that nature is a huge benefit to us. So we see it as really a positive. I think the challenge is how do you get from where we are today, where there's virtually no domestic cell manufacturing, to the end state that we're talking about, where you have full soup to nuts supply chain on shore, you know, that's not going to happen overnight. And how we manage that transition is probably the biggest challenge in front of us today.

Sean McMahon  09:00

How long do you think that will take?

Chris Taylor  09:02

We think 2026 2027 is probably the first year that we'll see sufficient volume of domestic supply to start to really make it a viable option. There'll be a few projects here and there that are able to capture domestic supply between now and then. But it'll be one off nature. But really, the year 2020 projects that come online in 2027, we would hope to be able to those would be able to meet domestic content readily from from domestic sources, just takes a long time to build factories, unfortunately,

Sean McMahon  09:30

That's okay. I mean, obviously, stuff like that takes a while to stand up. So I want to touch on just kind of the commercial market for energy storage, right, the corporate market for it, I should say. Things are evolving pretty quickly there. I assume with the background you outlined at Google and other places, you kind of have a unique perspective on that and what corporate buyers are looking for and size and you know, how quickly they want to get these projects going. So, so where do you see that segment of the market heading?

Chris Taylor  09:59

Well, I mean, actually going back to the previous topic, the unbelievable explosion of demand, I mean, we're seeing a level of demand growth for electricity that is akin to what you would see in a developing country like large mature industrial economies typically have seen low, low single digit, to zero growth rates because of energy efficiency, and other things which are great for the environment and for consumers. Now, we've with domestic manufacturing, it's not just of batteries, but of everything, you know, you've got a surge in demand for electricity. And a lot of large industrial customers, whether they be data center owners, would be factory owners, or hydrogen producers or other things that require a great deal of energy, are all seeking to get on the grid as quickly as possible. And they're facing unbelievable, lead times to be able to connect to the grid that they've never experienced before. And that's leading them to look for other solutions. And batteries can be deployed quickly at scale, and virtually anywhere. And that's not true, really any other technology that can provide the sort of services that batteries can. So we're seeing a lot of demand and interest from customers who fundamentally there's two big drivers, but by far the biggest driver is they want service they want, you know, 100 or 200 megawatts of firm electric supply at some location where they want to build a facility. And the host utilities are telling them, we're not able to provide that right now. And we're not exactly sure when we can because we have oodles of new applications, and we don't have spare capacity. So we've effectively run out of spare capacity, broadly speaking, in most areas of the United States, and certainly in all of the areas where data centers and other types of customers want to be. And you can see this with the recent announcements of large data center investments in parts of the country that have historically not even been part of the data center landscape like Mississippi, they're going there, because there's capacity there. But we're going to run out of those pretty quickly. So what batteries can offer to the corporate customers. And what we see interest in is a short term capacity solution. Because most of these utilities have enough energy to serve loads most of the time, but they don't want to most of the time solution they want and all of the time solution. And batteries can help bridge that gap in a clean and quick way.

Sean McMahon  12:11

So a lot of the times were heard about companies wanting to have 24/7 carbon free energy. But a lot of times it seems like it's attached is just the big names, you know, Google Amazon, Apple, how long until some of the folks just call it less cash rich companies can kind of get in that game. And it's no longer just a corporate Titans are really kind of gunning for that goal.

Chris Taylor  12:31

That's a great question and very observant one, I was the second part that I forgot to get through of the two drivers. The second driver is what you just said is the biggest consumers electricity, particularly in the tech space, have made very ambitious commitments to 24/7 clean energy. And I was working at Google when they rolled out that goal, which the average non energy geek doesn't fully understand what an ambitious goal that is, I mean, what we're talking about is matching your hourly consumption in the grid with clean resources on a 24/7 bases, which is a very tall order. And so for those companies, they're also interested in batteries as a way to shift the excess renewables that they've already contracted for through solar and wind power purchase agreements, where in this windy or sunny parts of the day, they have more electrons than they're actually consuming. And then in the parts of the day, when the sun isn't shining, and the wind isn't blowing. They're consuming fossil based electrons. And we can store that clean and affordable energy in our battery, and give it back later in the day or early in the morning when other resources aren't available. So there is demand coming from those, that small group of companies that you point out are largely very well capitalized, big companies that are targeting those more ambitious goals. And there is demand from that sector. But to answer your question, when do we think other companies will follow suit? My short answer is once they hit their 100% renewable goal, like Google was already pretty well on the way to hitting 100%, or had already achieved that goal of buying as many megawatt hours from renewable energy every year as they consume. And then they realized that that hadn't resulted in changing the electric grid, like electric grid still had all these existing problems. And that's what led them to this more ambitious goal. So my guess is companies will go through the normal arc of, okay, we'll buy as much green energy as we consume on an annual basis. And then once they've achieved that, then they'll start tackling the harder piece, which is the hourly matching.

Sean McMahon  14:21

So getting back to these first few years of GridStor, I know you obviously bring a wealth of experience to this whole thing. But are there any things that you've come across that have been surprising?

Chris Taylor  14:30

A lot? More things have been surprising than I expected. So yeah, we started I mean, when I started this company, it was just me, I've hired close to 40 employees. Since then, we've really built out the team and our expertise across all the various disciplines that are required to be successful in this business. And there are a lot of them. It's kind of, it's easy to forget all the different pieces that are required to successfully develop, finance, construct and operate one of these projects. So I'd say that the biggest difference is batteries are both a generator and a Load. I knew that going into it. But it's pretty fundamental. And it drives a lot of implications like when a utility studies the impact of your project on the grid, they're not just with a solar project or wind project, they're simply studying the impact of the injection of those electrons at that point in the grid, which they have to study for a battery. But for us, they also have to study what's the impact of when we're charging that battery. So part of the time we looked like a load, and part of the time we look like a generator. And that's a, there's never been another resource besides a battery that looks like that. So it's new for utilities. It's new for the electrical engineering consultants. And it's, you know, it's just a new set of opportunities and challenges that we face. And I think that's probably the most fundamental one. I think another one is just that utilities and corporate customers have never had a tool that's as flexible as a battery. I know, I sound like a salesman here. But batteries really do have capabilities that are beyond anything we've ever had available to us. And I think utilities are still getting their arms around all the different ways that batteries can help solve problems on the grid. And I think that there's just a lot of learning going on of what are the physical, technical characteristics of these batteries? What can they do, for example, you know, there used to be something or something called spinning reserves. And as the name implies, you had a piece of physical equipment spinning, which either meant water spilling over a dam or gas, or some other fossil resource being burned at a low rates, you could quickly ramp it up. Well, batteries can go from just sitting, still not consuming any electricity. to doing that in milliseconds. You don't need to be wasting fossil fuels or water or other precious resources to be able to respond in milliseconds, a battery can do that battery can also adjust the voltage on the line to keep that line at 230,000 volts, a battery can dial that up, dial that down again, within milliseconds without using fossil fuels, we can also adjust the frequency of the grid to keep it at 60 hertz. So there's a lot of things that batteries can do more cleanly more cost effectively and faster than other resources. And I think that the grid operators are still getting their arms around all the things that batteries can do and how to best deploy them. And then just going and seeking permits and approval for something people have never seen or heard of. I was part of building wind farms in places where no one had ever seen a wind farm before. And it's not all that different. It's getting people to understand what is a battery energy storage facility? What does it look like? What does it bring to the community? So it's just a lot of education because of the newness? 

Sean McMahon  17:21

How do those conversations go, because I imagine if you look across the renewables sector, there's a lot of NIMBY stuff for windmills, and even for some of the big major solar utility scale solar projects. But where I'm sitting, it seems like battery storage is just kind of floats under the radar there because people don't know what it is it just kind of looks like a building or it looks like a you know, it's not as much of a political hot potato, am I right to think that,

Chris Taylor  17:45

You'd think that would be accurate. And that's I guess, another assumption that I made, I think it's it's very site specific, even within a given county or given state, you see very different reactions to different projects. So I think the jury's still out on what the long term landscape will look like for this, I think that, you know, the main issue that you hear people asking and worrying about is safety and fire risk and things of that nature. Because there's some well publicized problems, almost all of which, if you dig into the data relate to a early generation chemistries from a handful of companies, and also project design. That's like the recent fire in San Diego County, that was an indoor system, like nobody builds that anymore. Like, we don't have any systems that are seeking to be installed in that way. The best practice is to build them in the open on the ground, not stacked on top of each other not inside of the building. So, you know, I'd say it's generally going well, but it requires a lot of education. We spend a lot of time with fire departments, we have an engineer on staff, who's himself a first responder who spends a lot of his time going to meetings with fire departments, and fire marshals in various places around the country and explaining our safety protocols and what we're doing to make sure we operate these things safely. One of the other things that's different and positive, though, is that when you build a big wind farm in the community, people always ask, well, is this gonna make my power prices go down? Is this going to make you know, the electricity at my house more reliable? And the intellectually honest answer to that question is not directly. But in case of a battery. A lot of times like there are real local reliability benefits to having a battery cited in your community because it's supporting the local grid. So being able to offer that very local, tangible benefit of more reliable electricity, especially given all the power reliability issues we've had with more extreme weather. We're finding that resonates more strongly with people. 

Sean McMahon  19:33

Yeah, everyone wants to know that the whatever is being built in their backyard is gonna keep the power on so yeah,

Chris Taylor  19:37

I mean, you could take for granted for most of my lifetime, that the power was always going to be there when you need it and want it and utilities work really hard and have a really tough job that I respect them very much for but we've seen with climate change and more extreme weather that the grid isn't as failsafe as we thought it thought it was.

Sean McMahon  19:54

So getting back to your conversations with grid operators. I've always been curious. So there's all kinds of hurdles that need to be overcome for new transmission lines to get built, or even rebuilt after there's been some kind of, you know, fire or disaster. So are any of them factoring in battery for that, so they don't even need to build out so much transmission, and which again, also takes years and years and years. And you said yourself, like you guys can show up and relatively quickly just get things up and running. So how are those conversations evolved now that the utilities are getting to know the power of batteries a little bit better?

Chris Taylor  20:27

Yeah, just to put that in context, in terms of the timelines, you can build a utility scale battery project in about nine months, it's pretty incredible how fast these things go in our deleted project, they were putting in one mega pack every two and a half minutes, I think during installation, it's pretty incredible how quickly this can come online, it's really getting the connection to the grid. getting that done is what takes a long time. But once you've got that nailed down, the actual construction and deployment timeline is incredibly fast, faster than really any other technology I've been involved in, or that I'm aware of. So yeah, storage as a transmission solution is something that gets a lot of airtime and conferences, and you see a lot of white papers on it, we don't see that many projects getting deployed yet that really take advantage of that. I very much think that will be a big part of the industry going forward. But the issue there is both the newness of the technology, and what are the what are the solutions it provides. And the people that are used to planning those lines are used to building transmission lines as a solution. So if you're a carpenter and you have a hammer, you're gonna see a lot of nails, I think there's some some of that education that needs to go on. But then the other piece of it is economic is how do you price that? Who pays for that? What buckets of cost recovery does that go into and the utilities, you know, they just they don't have most PCs don't have rules written for how you should think about cost recovery, for a battery that obviates the need for building a transmission line. So I think there's two parts of it. One is a technical piece, and one is a sort of regulatory and economic piece. But the economics are so compelling, and the timelines are so much better. Here in the northwest side, Opower recently made an announcement about Boardman to Hemingway, it took 18 years or 20 years to get to like getting that project built, you know, battery can be built, you know, in a fraction of that. So I think it'll catch up. But it's gonna take a little while.

Sean McMahon  22:18

Do you think some of the good headlines coming out of places like California and Texas where they've avoided blackouts, and a lot of those utilities are saying that batteries played a huge role in that? I imagine you you're hoping and you probably know that other utilities around the country are paying paying attention to headlines like that.

Chris Taylor  22:33

Yeah, I mean, we certainly think that it's been great to see two states that have pretty different energy policies on paper, and have gotten to high levels of wind and solar penetration for very different reasons, right, California, just in a nutshell, as a high level of mandates and regulation driven by climate. And Texas has no such mandates, but they have a very open and very competitive and liquid market. And due to those very different reasons, they both have more wind and solar than anywhere in the country. And the fact that batteries have played a critical role, even as they were just starting to get on the grid in large numbers have already kept the lights on through numerous potential blackouts is great. And that's only going to accelerate because the pace of deployment and people think there could be as much as 20 gigawatts on the grid in Texas by the end of this year, which is hard to fathom. It was a couple of gigawatts two years ago, it's pretty incredible. 

Sean McMahon  23:27

Okay, now I want to pivot back to some of the things we talked about earlier with supply chain, you know, what level of concern do you have about supply chain constraints, and I'm not talking about, you know, it's gonna take 18 to 36 months for that factory to get up and running. But I'm talking about other spots along the supply chain.

Chris Taylor  23:44

I mean, honestly, the longest the lead time around batteries is not as big of a problem as people may think it is like that, you know, you can make an order, like we placed an order pretty recently for the batteries that will be on site in time for 2025 energization in Texas, so less than a year lead time, which is reasonable for you know, multi 100 million dollar High Voltage project. What's really challenging is this the core electrical equipment that's necessary for any kind of electric project, transformers, switch gear breakers, the basic building blocks of energy infrastructure, those things you don't see how many factory announcements if you read about new transformer factories or new breaker factories or switch gear factories? I haven't heard very many. I have a whole theory about why that is, which is probably a bit of a sidebar, but

Sean McMahon  24:32

that No, no, no, no, no, I want to go there because you're not the first person who's been in my ear about breakers specific. Yeah, but I want to hear your your theory here.

Chris Taylor  24:41

So my theory is that who has historically bought the most of that equipment, utilities, utilities own the grid, and they own most of the generation in this country. So historically, to be successful in that business, and I've never been in that business but as an observer my view is the trick is getting yourself on the approved vendor list for as many utilities as possible and utilities They're very picky and, and do a lot of diligence on whose equipment they deem acceptable to be installed on their grid. And it's usually a very short list, sometimes it's only one, party, two, maybe three max. And once you're on that list, you've kind of got guaranteed demand from that utility for the foreseeable future. And so people have focused on making sure they can meet those orders and that they had reliable equipment. Now you've got all these other independent parties like us coming into the mix wanting to buy the same equipment. And they're skeptical of expanding factories to meet that demand, because historically sticking to their knitting has been very profitable for them. So I think that it's it's, it's hard to break into if you're a new entrant and you open a new breaker factory or a new transformer factory, until you get that specific model deemed on the approved list. For all the relevant utilities, you can't really sell much gear. And that's a long process to get yourself passing muster. With a company like mine, we go through a rigorous analysis, but we do that faster. And we're motivated to look at new options on a regular basis. And utilities historically haven't seen that as a priority.

Sean McMahon  26:05

Okay, well, I don't think that was too dark of a theory, 

Chris Taylor  26:10

You know, it's not a conspiracy. But it is, it's kind of strange to me that you haven't seen a supply response in that sector, when there's such a clear mismatch between supply and demand. It's kind of hard to explain, 

Sean McMahon  26:23

Are there any other gaps or inefficiencies that you see that are kind of holding the energy storage sector back from reaching its full potential,

Chris Taylor  26:30

You know, domestic cell manufacturing is the hardest piece like that is of the supply chain for batteries themselves, it's the cells is really the main piece that we need to bring on shore, a lot of the rest of it is already available domestically. And that is the piece that right now there is not a competitive and scalable supply of battery cells. So I'd say cells and high voltage equipment are the two biggest challenges. The other thing we're gonna run into is just workforce, right? Like there's so much electrical infrastructure that needs to get built right now. And a lot of those same types of trades are necessary to build the factories, as well as the data centers, as well as the infrastructure as well as the solar and the batteries. So you've just got a lot of different sectors all looking for skilled trades, people in, you know, in a relatively small labor pool, and there's great opportunities for people to join the trades, and they'll have a bright future ahead of them. But we need more people to get trained up to be able to do this work. 

Sean McMahon  27:24

Yeah, for sure. Well, Chris, I don't know about you. But I read a lot of tech headlines, and anyone who does that in the last year or two hears all about artificial intelligence, and all that computing power is going to be pulling power from somewhere. So what role do you see the whole AI hype? Playing? And what kind of impact is that gonna have for the battery sector?

Chris Taylor  27:45

Yeah, great question. So you know, my perspective on that having both worked at a major tech company, building the AI infrastructure, and now as a battery developers that AI is unquestionably going to lead to significant increases in demand for electricity. And very quickly, like right now, all the major AI companies are looking to double their capacity to be able to provide those services. And that's not going to be easy to do for all the reasons we've talked about. And batteries can help accelerate their time to be able to get a grid connection from the local utility, if we can cite batteries to provide, in most cases, it's a limited number of hours in a year that the utilities are really worried about. And for our battery, in many cases, can can solve most, if not all of that problem. Not always the case, in long duration storage is certainly part of the equation that we need as well. But that that increase in demand from AI is real. And it's massive. And it's today, that said, I heard a very thoughtful interview was one of my former colleagues from Google, mod tech, CA, who talked about the fact that these projections for AI assume that they don't become more energy efficient. And she had a great statistic about how traditional data center compute, if you will, non AI, increased by 100 plus x, while only increasing energy demand by like a double digit percent, because it became steadily more energy efficient. So we're working with relatively early stage technology for AI chips and AI servers. And if that follows the same trajectory as traditional, quote, unquote, traditional data center technology, it will become dramatically more energy efficient. And given the challenges that the companies are having finding hundreds of megawatts of new capacity, they have a very strong motivation to make those processes more energy efficient, it'll save them money, and also allow them to find more places they can build them. But that said, so I guess what I'm trying to say is it will be a massive step function increase in electric demand, but probably not at the high end of the estimates that you're seeing today. Because those high end estimates don't bake in continued improvements in efficiency, which I'm pretty confident the industry will be able to figure out

Sean McMahon  29:52

Yeah, it reminds me so much of Bitcoin from crypto from whatever it was five years ago when I was like, oh Kryptos driving of energy prices everywhere. 

Chris Taylor  30:00

I think AI is a more real and durable source of demand than crypto to be clear, but it does have some similarities. 

Sean McMahon  30:07

Yeah, for sure. You know, I talked earlier about batteries, kind of maybe perhaps replacing the need for new transmission lines and things like that. And I think part of the reason for that is, we hear a lot about transmission queues being so long, are you encountering that same kind of wait for projects to come online? 

Chris Taylor  30:24

Yeah, it's it's hands down the number one challenge that we face. And in preparing for the buy panel at the recharge conference, all the other panelists agreed that it's by far the biggest challenge we face. And just to give people a sense of it, Texas is the bright spot on the map. Texas is roughly three to four years from the time you file for interconnection. And once you have your site and you're ready to go, and you're willing to spend money, you can bring your project online in three or four years, that seems like a long time, to me, given it only takes us nine months to build these things. But when you go outside of Texas, that number quickly jumps up to seven, eight or more years, from the time that you show up, you're willing to post millions of dollars in security, you have your site, you're committed to it, the fact that it's going to take eight plus years, to even get a contract to be able to connect to the grid is a problem that we urgently need to solve as a country not just because, you know, battery developers like me want to build faster, but that's how we're going to keep the economy growing and keep the grid resilient. And this, you know, bears mentioning that eight years, China built the biggest high speed rail network in the world in less time than it's going to take us to connect one battery to the grid. Like that's just not an acceptable outcome. And people should be pushing for change on that. 

Sean McMahon  31:37

So one of the things I like to do on this show is I ask the guests for bold predictions. So now it's your turn. And so I want to hear any bold predictions you might have about where the battery storage sector will be in five years.

Chris Taylor  31:49

Yeah, well, my answer is whatever I would have, if you'd asked me that question a year ago or two years ago, my prediction would have been would have been far too modest relative to what's actually transpired. So the rate at which deployment has accelerated in Texas and California has has exceeded even the rosiest forecasts that I saw. So I would say whatever, whatever we think it's going to be, you know, double, it's probably more realistic to how big it's going to be. So if we're already getting into the 10 gigawatts in California and 15, or 20, in Texas, you know, I think you're gonna see that double again in the next few years. I think the big question is, how quickly do we see adoption take off at similar rates in the rest of the country? Because really, when you look at the installed capacity of batteries in the United States, right now, it's overwhelmingly in those two markets. I think, together Texas in California represents something like 80% of all the installed capacity, I think you're going to continue to see super strong growth in those two markets. But what we're really looking for is when does that start to tip over into additional markets, that really brings this coast to coast and across the whole country. The trick there, I think what the real driver is, is the penetration rate of intermittent renewables. So when you get above 10% 20% 30%, as you as you increment up the share of generation that's coming from intermittent renewables, you eventually hit an inflection point, it depends a little bit about what else is in the grid. Is it all coal? Is it hydro? Is it combined cycle gas, you know, coal is the least flexible gas is probably the most flexible. But once you hit a certain level of renewable energy penetration, you're going to need more of these resources. And you can look across the different energy markets in the US and say, you know, what's their current penetration? What's it going to be in five years. And that's probably the best indicator of where you're gonna see more demand. And I think markets that we see as promising. I should have mentioned yesterday about our portfolio, we have about three gigawatts of projects in our development pipeline. And we're very focused on all the markets west of the Mississippi. So Texas, California, the rest of the West, which is, you know, vertically integrated utilities, they're all going to need this because most states in the West, at least most of the ones that have real electric demand are a sizable amount, have strong climate policies that are going to require the phase out of fossil, and batteries are going to have to be part of that solution. In the broader WAEC. We see SPP, or the Southwest Power Pool is another place not because of mandates, they don't have a lot of climate goals in Oklahoma and Kansas and Nebraska. But they have a lot of wind already. And they've got a lot of solar coming behind it. And they've got a lot of retiring fossil. So when you see a surge in renewable penetration, retirements of fossil assets, and then load growth on top of that, that's sort of the perfect set of conditions to see more demand for or storage. And I think that's what's going to be the driver of more storage spreading to other parts of the country.

Sean McMahon  34:34

Well, that's a fantastic answer. You already have me, racking my brain for which cities and states are going to be you know, following Texas and California on that. So I'm sure you and your team have hit on that you're ready to rock and roll. So well, hey, listen, Chris. This has been a wonderful conversation. I really appreciate your insights and thank you for your time.

Chris Taylor  34:52

Thank you for your interest and appreciate you having me on your show.

Sean McMahon  34:57

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