by Julian Spector
August 22, 2019

Swiss startup Energy Vault wants to store massive amounts of renewable generation using gravity. Gravity, after all, is the mechanism responsible for 97 percent of U.S. grid storage, but those projects take the form of pumped hydro and are incredibly hard to build these days.

Launched last fall, Energy Vault wants to build 35-story-tall smart cranes that autonomously raise and lower custom-made blocks that weigh 35 metric tons apiece, charging and discharging electricity along the way. The underlying physics are straightforward enough, but nobody has ever pulled off a grid storage plant remotely resembling this.

Indeed, many teams have expounded on the reasonableness of a high-tech update to pumped hydro technology, but none have translated that vision into commercial reality thus far. And Energy Vault has been on the scene for less than a year, publicly. It hasn't completed a full-scale commercial project yet, as far as we know. 

All of which made it surprising to learn last week that billionaire Masayoshi Son’s SoftBank Vision Fund sank $110 million into Energy Vault as the sole contributor to a Series B investment.

This week in Storage Plus, we’ll break down this deal, covering why the investment is so unprecedented and what unanswered questions remain.

Biggest of its kind

In today’s cleantech market, $110 million is a lot of money. Rather than simply observe that one doesn’t often see a cleantech round crack nine figures, I dug into Wood Mackenzie’s energy storage investment database to pull some hard data.

Taking the companies at their word, Energy Vault narrowly edges out Stem’s “nearly $110 million” Series D for ninth-largest energy storage investment round on record. But some additional data-splicing is in order.

All the companies higher on the list build battery cells with a primary focus on the electric vehicle market; they include Farasis Energy, CATL, Sila Nanotechnologies, Boston-Power and the like. Some of them also build cells for grid storage, but their valuations have a lot more to do with the market for EVs, which vastly outpaces the scale of stationary storage adoption.

It's safe to say that Energy Vault’s investment represents the largest funding round recorded for a pure-play stationary storage company. It’s also the largest cash infusion for a non-battery-based technology.

And whereas the other companies built up to nine-figure raises after years of commercial activity, Energy Vault accomplished that feat with a single operating system, a one-seventh-scale pilot in Switzerland completed last year.

How did the deal happen?

The November unveiling of the Energy Vault concept at Energy Storage North America precipitated a flood of inbound inquiries, CEO Robert Piconi told me this week. The interest came not concentrated in any one region, but from around the world.

“It became very clear that there was demand in the market for something that didn’t exist,” he said.

The leadership decided to seek new capital in order to address that market pull more rapidly. Among the options, SoftBank stood out for its experience with large-scale renewables development and its interest in tackling big global challenges.

SoftBank’s energy subsidiary has won gigawatts' worth of contracts in India’s solar auctions, and the Japanese conglomerate was poised to finance a short-lived, too-good-to-be-true 200-gigawatt solar deal in Saudi Arabia.

SoftBank also wielded enough capital to support the round all by itself.

“This is about global scale and also a partner that brings a global network to the table,” Piconi said. “In my experience, less is more, especially when it comes to things like investors in the company.”

Piconi confirmed that the full $110 million is fully committed, rather than predicated on reaching checkpoints in the coming months.

As for how the company could accelerate so quickly from public launch to record-breaking Series B, Piconi stresses that Energy Vault plants draw upon existing equipment from other industries.

"One of the benefits is the scalability: We leverage existing global supply chains that are there today," he said.

Whereas flow battery-makers need to build market confidence around a fundamentally new contraption, Energy Vault taps into the hundreds of millions of dollars of R&D other companies have already invested in cranes and motors.

The company's technology risk lies in its control algorithms to operate the cranes in whatever weather arises and build and unbuild the tower without it tumbling down. It also created IP around low-cost composite materials to fabricate the blocks at each project site, reducing transportation costs. Energy Vault partnered with Mexican concrete giant Cemex on that materials science, and Cemex later signed on as an investor.

Evidently the demonstration system in Switzerland provided sufficient proof for SoftBank that these new technologies work.

What comes next?

Energy Vault previously announced a full-scale 35-megawatt-hour contract with India's Tata Energy to be completed in 2019. That hasn’t changed, but it’s important to emphasize that it is just the first project made public.

“I won’t say that necessarily will be the first one,” Piconi clarified.

The implication is that other deals are already underway that have not been disclosed. The company will also produce a full-size project in Italy before the end of the year to further demonstrate the technology. 

While Energy Vault labors toward its first commercial completions, it will use the Series B to fund a multi-continent build-out. That includes investing in global supply chains for its core components, expanding internal commercial and project management capabilities, and partnering with local engineering and construction firms to build the plants, all while building out a global operations and monitoring hub and continuing to refine the technology.

Juggling initial go-to-market plans alongside global expansion would prove taxing for companies selling much simpler products. Piconi insists that he is aware of this challenge, and that high-quality execution and customer satisfaction remain the top priorities.

"It’s critical at this stage that we do walk before we run," Piconi said. But, he added, "We’ve done a lot of work already in the supply chain ecosystem and how we would go to market and deploy."

Do the economics check out?

Ultimately, SoftBank is betting that Energy Vault delivers dispatchable renewables for less than the price of fossil-fueled power, and that it does so more cheaply than any other storage technology.

The incumbent to beat in this regard is pumped hydro, but that technology offers little contemporary competition. There is a new plant in late-stage development in Montana, as I reported recently, but it took a decade of development to get to this point. If a customer materializes soon, it will still take an estimated four years of construction. A 15-year development cycle does not match the pace at which intermittent renewables are hitting the grid today.

Setting aside project economics, Energy Vault could claim the mantle of "only available option" when it comes to making renewable power available for 24 hours a day. But Piconi argues that the upfront capital expense he can charge today blows the competition out of the water.

Energy Vault can already sell at $200 per kilowatt-hour upfront, he said. That more than halves the price that Wood Mackenzie calculates for utility-scale lithium-ion systems today, which is between $450 and $550 per kilowatt-hour. Of course, those battery systems are unlikely to have more than a few hours of duration, so they don't really fit the asset class.

The technology shines even brighter when you look at levelized cost of energy over a 25-year contract, where Energy Vault can hit 3 to 7 cents per kilowatt-hour, Piconi said. Pair that with solar at 2 to 3 cents per kilowatt-hour, and the case against fossil fuels starts looking very convincing.

That all depends on a set of assumptions: that the blocks do not degrade; that the robot cranes never mess up and send the tower tumbling down; that people respect the 1.25-acre safety perimeter and don't get caught on the wrong side of a rapidly descending monolith.

There's also an open question of whether the global supply chain and construction timelines coalesce as seamlessly as Piconi's vision suggests. These are not mass-produced products like battery packs; the plants have to be constructed in the field, with all the logistical complexities and regional variance that can arise.

Then again, the field of long-duration storage or lithium-ion alternatives has yet to produce an inspirational model. The typical strategy of installing a handful of pilots and waiting for years until customers trust them has not, on the whole, led to to significant uptake.

Energy Vault's product and growth trajectory fly in the face of the last decade of storage industry experience, but maybe that's not such a bad thing.