It’s been a jam-packed week since my last column, even with a day off to celebrate the nation’s independence.
We saw a surprise financial collapse, a brewing conflict over the future of energy storage in Massachusetts, global expansion from a recently acquired integrator and significant private equity funding for the sleepy world of thermal storage.
Oh yeah, and PG&E decided to build some of the biggest batteries the world has ever seen in a daring attempt to upstage natural gas as the tool of choice for cost-effective grid reliability.
I’m still waiting for the summer doldrums, when people actually take a break and I can run some playful evergreen content, like “The Five Hottest Solar-Plus-Storage Architectures to Bring to the Beach.”
That’ll stay on the back burner for now, because this week I’m running around Intersolar — that show that’s not SPI, and not ESNA, but has some solar and some storage and conveniently takes place in San Francisco.
I’m appearing on a panel Wednesday at 11:15 a.m. to discuss hot markets for solar-plus-storage, which will be enticing to you if you've read this far.
And if you’re also running around the show, hit me up at [email protected] with all your juiciest industry gossip. Like jammy Sonoma Zinfandel levels of juiciness.
My other assignment will be identifying the company with the loudest, priciest booth display, because they’re going on the bankruptcy watch shortlist. Mercedes-Benz Energy put in memorable appearances on the show circuit last year, and we all know how that went.
JLM layoffs: Future of microstorage in doubt
We learned that California startup JLM Energy ran out of money last week and laid off its staff while it searches for additional funding.
That abrupt halt comes after what had seemed like several months of positive trajectory. The company had been doing deals and shipping product across several states. It secured a project financing fund for commercial deals. It brought in a new CEO just a month ago to “lead our next phase of growth.”
Now that CEO’s LinkedIn lists him as a contractor in the Sacramento area, with the leadership stint capped at the end of June.
It’s rare to find really innovative ideas in the storage space, where almost everyone is using lithium-ion in pretty much the same ways. JLM did something different: It parceled out the batteries into “microstorage” units, small enough to fit underneath a solar module up on a roof or out in the field.
This architecture unlocks the benefits that have made microinverters so successful. It situates more of the integration work at the factory, simplifying installation time in the field and thereby cutting costs for installers and customers. With batteries themselves heading down the ramp of commoditization, innovations that tackle soft costs can really set a company apart from the crowd.
To succeed, JLM had to overcome skepticism over whether putting batteries on the roof makes any sense. That sort of thing requires enough run time in the field to build confidence in the product’s durability.
But the company lacked runway to carry it to the point of mass adoption. JLM was initially self-funded by co-founder Kraig Clark, and that’s a hard way to scale an energy hardware business.
It also took time to settle on a core product. Besides its microstorage, the startup engineered exotic items for very different markets — there was Folderz, a mobile microgrid equipped with a Wi-Fi hotspot and charging kiosk, and Zefr, a micro-scale wind turbine.
Still, I’m getting flashbacks of Aquion: a startup with a fresh take on storage hardware, making headway in its shipments and then going “poof” overnight.
Much has been written about how venture capital doesn’t have the patience for building hardware and taking it to a market that has only just started coming into existence. To their credit, founders Farid Dibachi and Kraig Clark dispensed with that route and put their own money on the line.
That unusual approach ended with a familiar question: Who has the money and time to carry hardware startups to the potential windfall that awaits just a few years down the road?
On a happier note…
California’s 100 percent clean energy bill passed out of committee in a 10-5 vote last Tuesday and now heads to the full Assembly.
If it passes there, California will commit to a 60 percent renewable energy target by 2030 and to carbon-free electricity by 2045.
That alone won’t guarantee a thriving energy storage industry, but if the state procures the required renewable resources, it will generate new demands for exactly the kind of fast-ramping power, power quality and longer-term shifting of renewable generation that storage can provide.
The resulting influx of midday solar power should lend urgency to efforts underway to create a product for absorbing surplus solar to avoid flooding the wires or simply curtailing production.
For background on the political battles that stalled the bill last year, and why this time might be different, see my earlier reporting here.
The Battle for Battery Hill
The Massachusetts-versus-New-York rivalry quietly morphed into a storage space race.
Both states have made an explicit goal of launching a local storage industry. With this newfound political support, the states’ respective energy bureaucracies have mustered the troops to make it happen.
I covered New York’s new road map in my last Storage Plus column, but this week we’ve got some new insights into the Bay State’s situation.
The legislature authorized a new solar incentive program, which regulators are examining now for the final signoff. Governor Charlie Baker’s administration decided this could help out storage too: They included an adder that pays a few cents more per kilowatt-hour for solar generation connected to storage.
The thing is, Massachusetts generally lacks the sophisticated, time-differentiated rate designs that generate price signals for storage to take advantage of. That leaves a minimal operational requirement for storage to participate: It just needs to discharge once a week on average.
Here once again we see how the complexity of changing imperfect market rules forces states to pursue imperfect stopgap measures.
The goal is a world where storage earns a profit while saving Massachusetts ratepayers money on electricity system costs. The policy tool to achieve that — making ratepayers subsidize solar generation connected to batteries that discharge on average once a week — falls short of that ideal, but it’s what the administration considered feasible in the near term.
Now the stage is set for a political battle as the major utilities seek a cut of the spoils, storage developers try to maintain their business opportunity and as much free cash as they can manage, and ratepayer advocates in the middle try to make sure all of the common folks get a good deal in the end.
In the earlier net metering grand bargain, the utilities got dibs on capacity rights for solar installations, and now they want rights to solar-plus-storage plants that receive the SMART benefit. The thing is, they didn’t make any use of those earlier capacity rights, because, by their own admission, they were afraid to bid them into the wholesale market.
Capacity rights for dispatchable energy storage in a competitive wholesale market could actually be valuable, though. For storage developers, financing hinges on control of the asset, so having a utility swoop in and take your capacity rights can essentially kill a project’s business case.
The utility case for ownership of the capacity rights is most dubious for behind-the-meter units, where customers rely on their capacity for backup power or reducing demand charges at key moments; having a utility bid your capacity at the wrong time could totally undo the benefits of installing storage in the first place.
There might be more room to compromise in front-of-the-meter plants that are designed as merchant outfits. If they just exist to play the markets, and don’t have some yeoman farmer family counting on them to keep the lights on in an ice storm, they could probably bargain some revenue to the ratepayers and still make some money.
If and when the parties resolve this debate, we may finally get to see what it looks like when distributed storage gets to play in deregulated capacity markets. That dynamic will ultimately prove more interesting and more lucrative than the short-term subsidy battles that have dominated the industry’s early days.
Greensmith goes globetrotting
Last year’s wave of storage startup acquisitions by European energy companies laid the groundwork for a delightful new parlor game: seeing who delivers first on the promise of global expansion.
Greensmith has been making a compelling bid, punctuated recently by its partnership with Hyundai to develop second-life EV battery products.
I caught up with Greensmith President and CEO John Jung on his way from South Korea to Amsterdam, before another business trip to Japan. He said the company by now has delivered projects in the U.S., Canada, Germany, Hungary, Singapore, Finland, Portugal, Australia and South Korea.
“I expect to have 20 countries covered by the end of next year,” he added.
His new corporate parent, Finnish engine company Wartsila, has provided Jung with the resources and balance sheet of a 20,000-person global industrial giant.
It also opened up a massive cross-sell opportunity with the company’s 67 gigawatts of installed power capacity. Now Greensmith could eventually outfit those fast-ramping power plants with batteries purchased on the cheap from Hyundai.
There’s already a low double-digit cost advantage in procuring used versus new batteries, Jung said, but it’s more complicated to integrate. If companies master that complexity now, the coming flood of used EV batteries is only going to improve the economics.
“We think there is going to be a significant cost advantage to utilizing second-life batteries at some point in the future compared to new batteries,” Jung said.
