Thermal energy storage provider Ice Energy got a cool infusion of cash from private equity this week.
The startup will receive $40 million from Argo Infrastructure Partners to finance the delivery of its residential and commercial thermal storage contracts.
That kind of money is substantial for a small firm in the cleantech sector, but for private equity, it’s unusually diminutive. The goal going forward, said Ice Energy CEO Mike Hopkins, is to scale up to the level of more typical infrastructure investments.
“Certainly Argo’s desire is that, over time, the Ice Energy investment looks like their other investments in scale, so hundreds of millions of dollars instead of tens of millions,” Hopkins said. “They would not have done this deal if they thought that $40 million was it.”
Lithium-ion batteries have captured almost all of the recent storage market, but a few entrepreneurs have staked a claim on a different form of storage. By trapping heat or precooling a block of ice, thermal energy storage devices can reduce or eliminate heating and cooling load during peak hours. That saves money for customers, and helps reduce stress on the broader grid.
Instead of utilizing expensive, high-tech batteries, thermal storage typically uses off-the-shelf components. The basic technology has been around for decades; it just hasn’t caught on in a big way.
Hopkins hopes to change that. Ice Energy already has 15 megawatts deployed and is delivering another 30 megawatts of contracted deals. The company has assembled a 400-megawatt pipeline, he added.
Back in 2017, Ice Energy started work on a 20-year contract with utility Southern California Edison, to provide 25.6 megawatts of peak capacity from 1,800 ice batteries on commercial and industrial buildings.
Since the startup had a limited balance sheet, it partnered with NRG to finance the deployment; NRG would reap the contracted revenue for the duration of the project.
Shortly thereafter, NRG leadership decided to dump its renewable energy assets and focus on the core power production business and commercial energy.
As part of that transition, NRG divested the SCE project, and Ice Energy reacquired it to look for a new partner.
“We were looking not just to fund our current projects, but we also wanted someone who would be a long-term funding partner as we roll out new projects, both in the United States and overseas,” Hopkins said. “We didn’t want to be in the position of having to go project by project looking for funding and structuring.”
Argo has not bought equity in Ice Energy yet. The $40 million deal is focused on project financing for current contracts, with a small amount of corporate financing. The deal also lays out parameters for negotiating financing for future projects.
Ice Energy will go to the equity markets in the summer, Hopkins said.
Storage as infrastructure
Thermal storage units don’t look like traditional infrastructure, but they act like it in aggregate.
“We generate these projects with utilities that have long-term cash flows, that have very low risk over long periods of time,” Hopkins said.
That kind of revenue stream is attractive to investors looking for steady returns and not expecting astronomical growth. To deliver this kind of scale, Ice Energy needs to keep winning fleet-scale contracts.
The company is launching its first major residential deployment this summer. It will install 200 Ice Cub systems in homes on Nantucket to lower peak electricity consumption, mitigating the need for a new transmission line to the island.
The Ice Cub can’t dispatch electricity the way Sunrun’s network of home solar and batteries can, but it still serves the grid as a non-wires alternative by eliminating demand when cooling needs drive peak consumption.
In markets with a surfeit of solar production, the distributed ice storage can soak up that midday surplus, and lower electricity needs for late afternoon or evening cooling.
Limited markets offer products to pay for these kinds of services; it's no accident Ice Energy got started in California. As utilities move toward more time-differentiated rates and get more comfortable with distributed resources serving broader grid needs, Ice Energy will see more opportunities to compete.