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Experts Only Podcast #97:

Learn About Flow Battery Technology with Eric Dresselhuys

[ CEO, ESS Inc. ]

Listen now:

Transcript

Jon Powers:

Eric, thanks so much for joining me here at Experts Only.

Eric Dresselhuys:

Hey Jon, I appreciate you having me.

Jon Powers:

I know we’re recording today, you’re up in Wisconsin, visiting home or the place you grew up. Tell me about growing up in Wisconsin. You end up going to University of Wisconsin, and then had a couple different career experiences leading you to Procter & Gamble. How did you decide to get into marketing? What was that path for you?

Eric Dresselhuys:

Yeah, I was at the University of Wisconsin, and had been involved in a lot of things at the university, including some student government activities and such. All of the sudden, I was graduating, which shouldn’t have been as much of a surprise to me as it was at the time.

Jon Powers:

Yeah.

Eric Dresselhuys:

So I thought, “Wow, I’ve got to do something now. I’m gonna get a job.” It started to go down probably a pretty typical path of a graduating senior. A friend of mine, a gal that I had worked with in school and had known and been a good friend, had gone to work for Procter & Gamble. And she came back on campus and said, “Hey, I’m here recruiting, and I think you’d really like it here. It’d be great match for you, would you like an interview?” I wish it was a better story than this, but it really was like, “Well I guess I’ve got nothing going at two o’clock tomorrow afternoon. Sure I’ll do it.”

Eric Dresselhuys:

And so I came in, and I interviewed. And I didn’t realize, at the time, getting an on-campus interview for Procter was a big deal. She had been doing me this great favor. People were lining up trying to do this… I just did it. The one thing the Procter, Procter does a lot of things really well, but one thing they do really, really well is recruiting. And they know what they’re looking for and how to move it through a process. So, I had done the first interview, and at the end of it they said, “Hey can you hang around for a few more minutes?” And then I said, “Sure.” All of a sudden, I was doing a second interview.

Eric Dresselhuys:

I think that night… Maybe it was the next morning, I don’t recall exactly, they called and said, “Hey, would you like to come down to Cincinnati and do some interviews there?” And so I did. The next week I was in Cincinnati, learning more about what the company did, and how all of this was going to work. I was not a business major. I was an economics major. I figured I’d go to work for the Fed or something. The next thing I knew, two, three weeks later I signed an offer letter to go and start. So it all went pretty quickly. It turned out to be something that I thought I might do for a year or two, and maybe go back to grad school or something. And I stayed for nearly 10 years.

Jon Powers:

Yeah, that’s amazing. We were talking before… In that experience, you weren’t working in energy or even networks. You were marketing around products, right? So what, in that experience over those 10 years, did you learn that carried forward into what you’re doing today?

Eric Dresselhuys:

Well, I think a ton of things. The first thing I’ll tell you, that was actually part of the transition of how I got into the business, was… I was at that age where I knew how to use a computer.

Jon Powers:

Right.

Eric Dresselhuys:

Which makes me sound like an old guy, but at the time, people hadn’t taken any Comp Sci. People didn’t understand computers. Having a PC was just becoming a thing that people would have. I was given a project to try to figure out how to create a tool to allow people within the company to exploit huge volumes of data that had come from the advent of UPC scanning.

Eric Dresselhuys:

See, UPC scanning had been around for a few years, but there really weren’t practical tools to use it. Today, we’d say, “I had a big data problem.” But of course, nobody called it that then.

Jon Powers:

Right.

Eric Dresselhuys:

I got to work on this and start to really think about how we can better understand consumer behavior, kind of on a store by store, SKEW by SKEW basis. Through that process, I got a chance to meet some of the people who had really been pioneers in that space. People from IBM and from NCR, who developed the first scanners. The first grocery people to put the technology in. The important part of the story was… Originally, when they set out to do it, the business case, the for barcode scanning was pretty simple. They thought it would be faster and more accurate. Those were the two reasons why you needed UPC scanning. But it turns out that old manual, putting a sticker on the side of a box and doing manual checkout, was lightning fast and dead enough accurate. There was no business case for barcode scanning to be done, simply on labor replacement at checkout or for loss reduction.

Eric Dresselhuys:

So fast forward, what we all know today, right, which is… the value of supply chain efficiency and loyalty programs and consumer behavior understanding, and just a million other things, to the point where now we have finally gotten to self checkout, which was even talked about 30 years ago. So that became important because, two years later, I met some folks that were working on some technology that was basically a meter reading system for utilities. And talking to them, they were trying to build this really interesting, pretty sophisticated device, but their business case that they kept coming back to was the cost of displacing meter readers.

Jon Powers:

Right.

Eric Dresselhuys:

And so the light bulb moment that eventually gave birth to a company, Silver Springs Network that I founded that got me out of the soap business, that CleanTech business-

Jon Powers:

Yeah.

Eric Dresselhuys:

The CleanTech business I spent most of my career in was… the light bulb moment was… What the system of the future was going to look like was not replacing meter readers. That was incidental to the business case. What was important was, “Could you create a system that would allow real time, end to end transparency, for everything that generated, distributed, and consumed electricity?” And so, in 2002, we formed Silver Springs to take on that problem.

Jon Powers:

Yeah, so, first of all, I think you’re tapping a really important issue for a lot of entrepreneurs and innovators out there, that they may have a really interesting widget that they’re creating, but if they don’t know and understand and are able to translate the business case to it, or even understand the market impact of it, it’s hard for them to get things like financing to really grow their idea. So talk me through that experience of saying, “Okay, I’m going to leave Procter & Gamble, and jump in and co-found Silver Spring.” Why don’t you, in your own words, talk about the path of Silver Spring because you ended up IPO’ing and getting acquired… that really created a really interesting and important smart network for us.

Eric Dresselhuys:

Yeah, I think you’re exactly right. Sometimes, we have ideas, market ideas, but we don’t know how to pull it off technically. Of course, given some of the challenges in the energy transition, sometimes that’s the case, right? We know that there’s a problem out there, but we can’t find a way to solve it. The more common problem is somebody who comes up with a piece of technology and they think because it’s cool on some level, that’s going to carry the day, all right? It doesn’t. It’s hard to raise money, and it’s hard to get this market to move, particularly if the product or the technology you’re selling is sold to the incumbent utility industry.

Jon Powers:

Right.

Eric Dresselhuys:

That’s harder, and listen, I hear a lot of people, over the last 25, 30 years, moan and groan about these dumb old utility guys, and they can’t make a decision, and they’re out to get the consumer. That has not been my experience. My experience has been that these are very smart, dedicated people for the most part. But we are dealing with a system that has been optimized for a hundred years to work in a certain way.

Jon Powers:

Right.

Eric Dresselhuys:

And using technologies that have had every penny and so they’re super efficient. If you don’t account for that when you’re bringing your technology, whatever your technology is, you’re not likely to put the right plan in place to go get it done. In our case, and I’ll talk about Silver Spring, we had imagined a thing that now we very routinely call smart grid. But, smart grid was not a term that anybody used in 2002. In 2002, IOT was not a term that had come into Vogue for people. What we learned along the way was, we thought this is just so brilliant that of course everybody will see it’s a better.

Jon Powers:

Right.

Eric Dresselhuys:

The world will beat a path to your door, as the line says. We had a very cold bucket of water splashed on us for the first three, four, five years, in two ways. One… what we thought was, let’s call it, minimally viable product, MVP, it’s a very big term in Silicon Valley, right? The bar for MVP in the energy space is really high.

Jon Powers:

Super high.

Eric Dresselhuys:

Right. Because MVP means it works flawlessly for 20 or 30 years.

Jon Powers:

Right.

Eric Dresselhuys:

If you’re building, if you and I, the Jon and Eric Company, decide to go build a consumer app that helps people find the best pizza in town, we can turn of it every week if we need to. And if it crashes and somebody reboots, the early adopters will put up with all of that. That whole dynamic doesn’t exist. The first thing we learned at Silver Spring was that the caliber and the reliability, the durability of the product, was just a lot higher than we imagined. And how to build that product was a lot harder than we imagined it to be.

Jon Powers:

Without actually being able to also test it in real time.

Eric Dresselhuys:

Yeah, you’ve got it right. The second thing we learned was that the business case and how the economics would flow through was really challenging because we were building this really transformative thing that was going to, we thought, create value across all parts of the value chain, right? So, utility operations would certainly get value, but energy procurement, and distribution operations, and planning, and of course consumer benefits were really the biggest part of it, etc. etc. It turns out there’s no one person that represents all those in making a buying decision.

Eric Dresselhuys:

So that’s hard because if your value is spread across all of those groups, the cost still has to be born by one person.

Jon Powers:

Right.

Eric Dresselhuys:

One provider. This isn’t unique to smart grid. You see this in people demand-response programs. You saw a lot of this debate in the early days of distributed rooftop solar, where people would say, “Well, why do I give net-metering full retail rates? That’s not fair.” What’s also not fair is that those assets provide a great service to the grid, and how does that get accounted for if we don’t do it through some sort of a rate-making mechanism?

Jon Powers:

Interesting. You were able to grow and scale over time, and I think you guys hit some really interesting trends with solar and in that process of developing… and having the vision of the grid of the future, is that what stoked your interest in storage? How did you end up really getting excited, to down the road, wanting to become the CEO of ESS?

Eric Dresselhuys:

Yeah, well, it’s a fair question. I remember giving a talk at an conference back in 2004, maybe it was. We were cheerleading that there was a chance that within the next year or so, we could get to five percent solar penetration, or renewable penetration in total, right?

Jon Powers:

Right. Right.

Eric Dresselhuys:

We thought, “Wow that’s really a big deal.” But, even then, because of what we were doing at Silver Spring, we were this glue that connected all of these devices. We saw data from, not just meters, from substations and from distribution automation equipment, and inverters. We had visions of electrical vehicle charging infrastructure, even back then, and how all of this would get connected. So, we tried to think about the whole of the energy transition, and what will the impacts be. One of the things we came to an early conclusion on was that when renewable penetration and distributed resources more broadly became a bigger part of the deal, none of those things were going to happen with the really core dynamic that fossil generation gave us, which was the ability to flip a switch and just turn it on whenever we wanted.

Eric Dresselhuys:

It became very apparent, very early on, 20 years ago or more, that storage was going to be one of the to making this work. So we started looking at storage technologies and tried to be friends with people working on storage. Even when we were still a private company at Silver Spring, we were in a portfolio at Kleiner Perkins and Foundation Capital, they were big investors in a company called Aquion Energy.

Jon Powers:

Yeah.

Eric Dresselhuys:

Aquion, I remember looking at that at the time thinking, “Wow, that’s cool.”

Jon Powers:

Right.

Eric Dresselhuys:

I think what we do is cool, but boy, that’s really cool. Unfortunately, they couldn’t get it all figured out with the right economic models that it was going to take to do. It’s just something that I’ve been super interested in for a long time. Now fast forward a couple of years later, and really the thing that happened at ESS for me that was really serendipitous, and I think there’s often good luck and timing in these stories, was… The first is renewable penetration keeps growing and growing. We’re at low 20 percents now, on our way up, with all of the mandates that are at the state level. Of course, the President’s called for a totally decarbonized system by 2035. We’ve crossed this 20 percent line, which somehow seems to be the time when things change, in terms of grid resiliency and reliability and stability with distributed resources. Crossing that threshold and continuing the march up is a big driver for storage.

Eric Dresselhuys:

The second thing that of course we see is this general acceptance of the need to decarbonize the system, as something that you didn’t… five to ten years ago, there was still more debate about, and it really feels like we’ve turned a corner on that. I don’t have nearly as many discussions with people about, “Is this even a good idea?”

Jon Powers:

Right. Absolutely.

Eric Dresselhuys:

People get it now so that’s important. The third piece that was really critical and really, to my great fortune, was that Craig Evans and Julia Song, the co-founders of ESS, who were really, really smart scientists who had been laboring away at this for a long time, really cracked the code. They’ve created a system that not only works, but it works in an operationally scalable way. Not just building the product, but how the battery itself operates. It’s something that’s really practical, whether it’s for commercial industrial users, or large scale utility IPP users to do, to use it. It’s at an economic point now that it’s really competitive with anything else that’s out there, so if anyone of those three elements wouldn’t be here, it probably would have been harder, but the combination of those three things coming together made it a really, really appealing thing to jump into.

Jon Powers:

Interesting. For folks that don’t know the history of ESS, ESS was actually a firm that got a RPU award in 2012. Could you talk a little bit about the growth of the company itself and to the development of the battery?

Eric Dresselhuys:

Yeah sure. The company was founded about a decade ago, 2011, and Craig and Julia both came from the and generation business. They kind of locked in on long duration storage, something that would go beyond two to three hours, is going to be a key thing to go work on. They actually started, when they first got going, they were actually thinking about Vanadium as the technology path they would go down. They didn’t start with IronFlow. So they spent a little bit of time on that, but very quickly came to the conclusion that it probably wasn’t going to be the answer, simply because the cost of the Vanadium electrolyte was too high.

Eric Dresselhuys:

This is before… the price has gone up more recently, but if you just look at the basic value of where Vanadium was, they’re like, “Geez, we’re never going to get to the point where we can be cost competitive with Lithium.” So, they started looking around with the criteria saying, “What’s the most abundant, low cost thing that we can use?” They came to IronFlow, which of course was Iron, salt, and water. That’s pretty tough, if you’re wondering where the terminus cost of these things could go to, that’s a pretty gray place. Some work that Case Western had done, some of the university academic experiment to that point… They looked at that research, and there was a problem, right?

Eric Dresselhuys:

Keeping the electrolyte balance, PH balance, so they could stay electrically balanced, and that clogged the machine. And dendrites and other problems that Flow batteries have had was the problem. If you didn’t solve that problem, you weren’t going to have a practical thing. That’s what they applied to the RPE funding for, and got a grant, and developed a core part of the ESS technology that solves that problem, which is a thing that we call the proton, which is a really, really clever piece of technology that helps keep the system entirely balanced. It’s a passive part of the system, so you don’t have to have shutdown modes and backwash modes and cleaning modes, or things like that. It just constantly is in the flow of the Flow battery, monitoring and correcting the PH balance system. It uses, to drive that, the output of our chemical reaction, all chemical reactions have an output… We put out Hydrogen, and so we capture that Hydrogen, which is of course protons, and pump them back into the electrolytes. It’s really and incredibly clever piece of technology that they developed and deserve immense credit for.

Jon Powers:

So, people can picture this, this was all done in almost a Conex container, right?

Eric Dresselhuys:

Yeah so it’s a totally sealed system. The smaller versions, it’s a bigger unit, but the smaller versions is in the 40 foot shipping container, and it is entirely self-contained, all of the electrolyte, and the cells themselves, the stacks, the pumps. All of the electronics are in that box so you can take it and drop it in the back of a commercial industrial complex. Maybe it already has solar panels on it, and those people want to go off-grid, or play the economic model of getting into capacity markets, and ancillary services. The battery can do all of those things.

Jon Powers:

Two questions for you. In the Conex container, what scale is that? If you dropped it behind a FedEx warehouse, or an Amazon warehouse, what scale is that? Two, are they modular? Can you just add additional containers or grow the scale?

Eric Dresselhuys:

Yeah, the typical, nominal configuration for one box would be a 75kW… 400, 450 kWh box. Again, we’re talking long duration here, so we typically start thinking about things at four hours but we’re routinely doing eight, ten, twelve hours of storage. For those that maybe haven’t studied Flow batteries, one of the really magic things about a Flow battery is that it separates power from energy, in terms of how it works. So, power is based on the number of battery cells you have, but the energy is based on the amount of electrolyte. You can add more juice to get longer duration without having to separately configure the batteries.

Jon Powers:

Interesting].

Eric Dresselhuys:

If you think about how Lithium works, if someone said, “Could I build an eight hour Lithium battery?”, the short answer is you could. What you would actually just do though is build four sets of two hour batteries, and then use them one right after the other. There’s no efficiency with Lithium, as you go for longer and longer durations. You just have to use one versus the next, and so on.

Jon Powers:

So.

Eric Dresselhuys:

Yes, you can string multiples of these together. We have customers who are doing that, but it also gave birth in our world, to a second product. We call the first product an energy warehouse. We call the second product an energy center, and what energy centers do is it creates even more flexibility with how you do the configurations. The power trains come in 300kW racks, and if you said to me, “Hey, Eric, I’d like to have a three megawatt, 30 megawatt hour,” so a ten hour, three megawatt battery, how would I do that?

Eric Dresselhuys:

I’d say, “Hey, super easy. What we do is, we’re going to take these power trains, you’re going to need ten of them because they’re about 300 kilowatts a piece, so you string ten of those together to get three megawatts. We’re going to size your tank to have ten hours worth of electrolyte in it, and that’ll give you a three megawatt, 30 megawatt hour configuration.” If you wanted to, you could even oversize the tank, so that later, if you said, “Boy, I know I said ten hours Eric, but I really want 12,” you could add more electrolyte and extend that battery without having to change the power currents.

Jon Powers:

Super interesting. Well, I think we could have a whole conversation about the Flow batteries out of this, too. I think people are super excited about where that’s going, but I do want to look out over the next… We now have a pretty relatively friendly administration at a senior level. They are going to, hopefully, add some to the deployment of batteries here… Obviously, the grid transition, overall. How do you see the next 10 years playing out, for one, the market, and two, for ESS.

Eric Dresselhuys:

Yeah sure. Listen, I think that the administration has been largely right, on their support of these things. Whether that’s the president himself, through to the infrastructure build, it’s moving to the Senate… to a lot of the that Secretary Granholm and the Department of Energy, have put out. You feel like batteries must be the most important thing going because it’s talked about every day, every week. I think that in the near term, that attention from the administration, from the DOE, will really help to jumpstart the activity. I actually don’t know that large scale Federal support is an important thing, over the medium to longer term, if I look at that 10 year time horizon. I think the simple economics of combining large scale renewables with the right battery technology for long duration storage is a stand alone, economic case, that will work as long as we stay committed to decarbonization.

Jon Powers:

Right.

Eric Dresselhuys:

I think that that’s going to take over unto itself… The biggest thing that the near term money will do is really force, at a state level, because of course that’s where most of the policy and energy is made in our country is at the state level, not the national level-

Jon Powers:

100 percent.

Eric Dresselhuys:

What I really hope it does is it helps influence how people undertake their capacity planning, as they look in those five year and ten year windows. I’ll give a quick example of that. In California, there’s batteries… it’s been a good battery market, but it’s all short term batteries, that’s what’s been out there to this point. Two hour batteries, a lot of one hour batteries, still, where the primary use is only capacity and ancillary services. That’s really all the batteries are used for, economically.

Eric Dresselhuys:

Fast forward to where we are from a renewable perspective today, and what do you have? Well, you drive down Highway 101 in the Bay area, and you see billboards that say, “Please turn the power off from 4 until 9 P.M. Don’t do laundry. Don’t cook dinner. Don’t charge your electric car. Don’t do any of these things.” That’s not sustainable. All of the sudden now, the state and and others have come out and said, “Hey, wait a minute. I need gigawatts of long duration storage on the system, like now. It’s the only way I’m going to be able to create a 24/7 decarbonized system with reliability and resiliency that we all expect out of the electric system.”

Jon Powers:

Interesting. If you had a message for developers right now, as they’re looking to develop these solutions… One, how should they be looking at selling long duration into their customers, whether it be CNI, the utility is one thing, but the CNI’s face, how do they sell this to their customers? And two, if you are targeting a top three state, what would those be?

Eric Dresselhuys:

I think for anybody, and certainly we can talk about the commercial customers, I’ll give a real example. The economic case is manifold. This is an educational thing that we have to do with our partners and with developers because if you give me your use case, I’ll bet that this kind of storage can do it. We’ve talked to a lot of commercial customers who say, “Hey, solar has been great, but I haven’t been able to reduce my demand chart. Can I use the battery to store energy and reduce my peak demand chargers because that costs me a lot of money?” The answer, of course, is yes. “When the battery is fully charged, can I go into capacity markets, ancillary markets, and all of that?” Of course the answer is yes. “If I run two shifts, can I take my solar… I’ve overbuilt my solar or maybe my micro end, can I use the battery to go really off grid and be independent from the utility all of the time?” And the answer is yes. You can get a great business case with all of those things.

Eric Dresselhuys:

I’ll give you an example from one of our clients who was in the other day, and we’re talking, great business case, and they’re talking about three to four year payback, and they’re very happy with that. As we’re talking, I ask them, have they been subjected to any of the power safety shutoffs? It happened in California and unfortunately now in Oregon and some other places. They said, “Oh yeah, man. We’ve had three last year, we’ve already had one this year. We’re going to have more. It’s terrible. It really is disruptive.” And I said, “What does that cost you? What happens when they turn off the power?” He said, “Well we have to send everybody home because we can’t run the factory without power.”

Eric Dresselhuys:

And I said, “Well, what’s your cost in that?” He said their cost was somewhere in the neighborhood of $150,000 of lost profit per building, per day, and it’s got to be ten buildings in this scenario. Suffice it to say that their payback for just keeping their business running for the whole cost of the battery system turns out to be less than a year. Everything else is gravy.

Jon Powers:

Wow. That’s amazing.

Eric Dresselhuys:

Yeah. That’s what I think. Certainly California, New York, are the two markets that get mentioned the most at this point, but I’d say the simple way to think about the markets that we’re targeting, whether they’re the states in the U.S., or some of the overseas markets like Australia, New Zealand, and parts of Europe, is any place where renewables are growing disproportionately quickly, right? Or where that renewable penetration has crossed the 25 percent mark, all of the sudden those markets turn on a dime, and they need eight to ten hour long duration storage instantly. That’s about as complicated as it is.

Jon Powers:

Interesting. Well, Eric, this is super fascinating. I appreciate all the time and the work, and obviously the vision of what you all are building at ESS, and I definitely want to have a future conversation with you about helping to empower developers, right? To take this message and help T up more and more opportunities for you guys, for Clean Capital, and for others to be able to develop these long term assets that will help stabilize the grid, but also provide real savings to the customers.

Eric Dresselhuys:

Jon, I appreciate you having us. Hey, listen, what you guys are doing and other developers, to drive this business forward, is incredibly important work. All I would say is I think what we can contribute to that is to ensure that we don’t get to the point where people say, “Hey, listen. I just can’t take any more renewables now.”

Jon Powers:

Yeah.

Eric Dresselhuys:

“I’m just saturated”, and whether it’s grid congestion issues or… you hear these stories of grid pricing going negative in the middle of the afternoon in Iowa, right? There’s just no. Somebody told me the other day that California dumped a gigawatt of solar last year because there were just no takers at the time. If we don’t collectively, as a team, as an industry, solve that problem, it’ll come back to bite us.

Jon Powers:

I couldn’t agree more. One final question: if you can go back to yourself in Wisconsin, when your friend came to you and said, “Hey, I’ve got an interview opportunity for you”, and you could sit down and have a beer with yourself, what piece of advice would you give yourself?

Eric Dresselhuys:

Listen, I would’ve said, “Have three beers so you don’t think about it too hard.”

Jon Powers:

There you go.

Eric Dresselhuys:

Take the job because listen, for any young person, any not-so-young people that are out there, if you can find a way to put yourself into interesting industries at interesting times, when you’re prepared to work hard and bring your whole self to it, it’s amazing the experiences you can have. All of the moves that have happened in my career as I look back make perfect sense, but that 21 year old guy back in Madison, Wisconsin, at the time, could never have imagined where it’s gone.

Jon Powers:

That’s awesome. That’s awesome. Well, Eric, thank you so much for the time. Thank you to the team at ESS for helping to set this up. Thanks to our producers, Colleen Young, Carly Battin, as always. You can learn more about ESS at essinc.com. You can always connect with Eric at that website. Eric, thanks so much for joining us.

Eric Dresselhuys:

All right, Jon. Take care.

Jon Powers:

As always, you can get more episodes at cleancaptial.com. I look forward to continuing the conversation.