Jon Powers: Welcome to Experts Only Podcast sponsored by CleanCapital, you can learn more at cleancapital.com. I’m your host John Powers. Each week we explore the intersection of energy, innovation, and finance with leaders across the industry. Thank you so much for joining us. Jon Powers: Thank you so much for joining us on Experts Only Podcast. We’ve a really interesting conversation today with Kelly Speakes-Bachman, the CEO of the Energy Storage Association. We’ve received a lot of interest from our listeners on energy storage and I think you’re going to hear a series of conversations started with Bill Bush, the CFO of Stem, as we really explore this space. And as we talk about in the podcast today the holy grail has come to nest. Storage is here and how are we going to work at both distributed generation and utility space? How is it going to get financed? What are the technologies and software companies moving ahead? Jon Powers: Kelly represents, as a CEO of the Energy Storage Association, the National Trade Association dedicated to energy storage. They’re working towards a more resilient, efficient, sustainable, and affordable grid. The organization itself represents a diverse group of companies, including independent power producers, IPPs, electric utilities, energy service companies, financiers, manufacturers, all those involved in the storage space. Kelly herself has over 20 years of experience in energy and energy efficiency. She’s covered both the business side of this and the policy side. She served as the Director for Clean Energy at the Maryland Energy Administration help leading their renewable energy portfolio to 20% by 2022. Her rich experience you’ll hear it throughout the conversation I think is really critical in helping to advocate and move forward the energy policies we need to get storage implemented. As she references, storage hit a great one gigawatt hour target in 2017, is going to double that in 2018 and just continue to grow from there. So please enjoy the conversation. Jon Powers: Kelly, thank you so much for joining us on the podcast. Kelly Speakes-Backman: Thank you so much for having me. I’m excited to be here. Jon Powers: So as we were talking off mic here, you we’re born in West Virginia, grew up in Ohio, ended up going to school for mechanical engineering in Boston. Where along that path did you get sort of interested in the clean energy space? Kelly Speakes-Backman: Well I’ve always had an interest in new technology and new innovation. And in fact, I went into engineering not to be an engineer, but actually to follow that up with law school and to be a patent attorney. Jon Powers: Oh, wow. Kelly Speakes-Backman: Because I knew I wasn’t creative enough to be an inventor, but I really, really liked the idea of new technologies. But I ended up not going to law school and instead started off my career doing HVAC design for an engineering firm, and got involved… Actually funny thing is is with a project that did ice storage, and I was doing a life cycle cost estimate for ice storage. The bug bit me on how to use energy more wisely and more efficiently, either in time or in the actual efficiency of the technologies, and how short term upfront investment is so much different than the long term financial health of an organization through their energy use. Jon Powers: So where in that process, as you were going actually designing and sounds like you had a lot of hands on experience, did you begin to get interested in the policy side of it? Kelly Speakes-Backman: Yeah, so that’s interesting. I have to say I’ve had a bit of a long path to get here, but it’s been so exciting and it’s been so varied that I think it’s been important that it’s brought me to this particular place. I first started in the energy world in full with a company called Jenbacher, which was a combined heat and power or landfill to gas reciprocating technology and the manufacturer wanted to start up in the United States. And so my college roommate and I started up Jenbacher in the US, and that was for energy projects that actually cost more upfront, but then would save consumers money. It was commercial industrial. And that’s how I started getting involved in the energy and environment space. Jon Powers: Interesting. Kelly Speakes-Backman: And yeah, so I started off in business. Jon Powers: Is your college roommate still involved in the energy space? Kelly Speakes-Backman: She actually is right now in Beirut doing some really cool- Jon Powers: Oh wow. Kelly Speakes-Backman: Yeah, some really cool investment projects. She’s been in the energy space forever, but she’s an investor now. Jon Powers: Yeah. Kelly Speakes-Backman: In sustainability. So yeah, so I started off on the business side of this in understanding what paybacks mean to consumers, what it can enable them to do. And so I’ve worked across the course of my career in natural gas generation, in solar, in wind, in landfill gas to energy and other biogas technologies, fuel cells I was involved in. So mainly it was sort of along the range of sort of where the market strategy is. I was hired at first for Jenbacher to be a project engineer, but we didn’t have any projects to manage. Jon Powers: Right. Kelly Speakes-Backman: So I had to get into sales. Jon Powers: Right. Kelly Speakes-Backman: With a new company, this small Austrian company, I think they had 800 employees at the time. So with that sort of they’d send over these A4 size papers that were in German English, and you’d have to fix the marketing for that and then you have to find your market. Along all the different functions of what it takes to put… You know how startups go, you have to do pretty much everything. And so I just really fell in love with this space of energy and environment, regardless of what my function was in the job. So I’ve had, along my career, a lot of different opportunities to work on the technical side, on the sales side, on the business strategy side. And all of those areas consistently fell into the idea of policy matters and the rules around which you play this game are so incredibly important in order to get the best results. Which in my mind, and in my passion, is an efficient grid in the electricity space that is environmentally sound and progressive, and that we create a better world for ourselves. Kelly Speakes-Backman: So that’s where I kind of ended up in the policy space was just really out of a need to get to the base of how do you make the playing field fair and open and accessible for technologies that are new and upcoming at a faster and faster pace. And that allow us to get to where we really need to go, which is a cleaner world with energy that helps us to be productive. Jon Powers: So when you got interested and sort of hungry in this space… First of all, I’ve got to say as someone who’s been in the business side makes you that much better of a policy advocate. How did you end up going and getting involved with the Maryland Energy Administration? Kelly Speakes-Backman: Hmm. Actually it was a really great time in Maryland. They had just passed their RPS and they were looking at how to get to the goal of 20% renewable energy by 2022. And so I went in to Malcolm Wolf who’s now over at the- Jon Powers: Advanced Energy Economy, yeah. Kelly Speakes-Backman: Yeah, Advanced Energy Economy. And I said, “I can consult with you and help you figure out which technologies and which opportunities should be exploited in order to get you to this 20% by 2022”. And he said, “It’s a great idea, but I think instead you should come on board. We’re looking for a clean energy director”. And that was it. I fell in love with the public sector. Jon Powers: That works. Kelly Speakes-Backman: Yeah. Jon Powers: Maryland’s done some really interesting stuff. So you went from that and then you went from there to the Alliance to Save Energy? Kelly Speakes-Backman: Well actually I went from Maryland Energy Administration… It was the first year of the Offshore Wind Energy Act. Jon Powers: Right. Kelly Speakes-Backman: Which was a bill put forth by governor Martin O’Malley, and my group and our agency was the technical lead on that first year bill. It took three years to pass, but during that first year I had the wonderful opportunity to work with governor O’Malley and his office. Abby Hopper was in that office. Jon Powers: Yeah. Kelly Speakes-Backman: She’s now the CEO of SEIA. And not quite 11 months after I started at Maryland Energy Administration he had appointed me to the Maryland Public Service Commission where I served until about 2015. So I was a commissioner then during a pretty exciting time from 2011 to 2015 where we underwent issues of reliability and resilience, we underwent issues of mergers of utilities, we underwent issues of actually creating regulations for that Offshore Wind Energy Act that did finally pass. And it was a really exciting time. Jon Powers: Yeah, interesting. Actually, the first time I met Malcolm he came in when I was at the White House and tried to get us to do a long term power purchase agreement to buy that offshore wind. Kelly Speakes-Backman: Yeah. Jon Powers: We just couldn’t convince some of the feds to wrap their heads around it. Kelly Speakes-Backman: We were so hoping. Jon Powers: Yeah, seriously. So I hit on the fact that you worked through Alliance, and we can talk more about that, but I really want to get into the work you’re doing today and talk a little bit about sort of the Energy Storage Association. Before getting into energy storage, so much interest from our listeners into energy storage being a game changing technology. Can you talk a little bit about what the association is and what its role is? Kelly Speakes-Backman: Sure, sure. So Energy Storage Association is the National Trade Association for energy storage. And that’s across actually, a lot of people don’t know this, but it’s across all technologies of storage. If you think of storage as literally just the decoupling of the element of time from generation and demand, it can take many forms. So this is ice storage, it is thermal storage, it is battery storage, it’s mechanical storage. So we represent companies and their policy interests across all those technologies. We also represent- Jon Powers: Does that through the software that it’s managing? Not just- Kelly Speakes-Backman: Absolutely. Jon Powers: Okay. Kelly Speakes-Backman: Absolutely. So we represent a really broad array of stakeholders in that process. We have utilities within our membership, we also have manufacturers, we have system integrators, we have developers and independent power producers, we have consultants and lawyers and all of those kind of side services that go along with it. Which really gives us a very broad perspective of the industry itself and the varying interests, which are not always aligned. Jon Powers: Right, or course. Kelly Speakes-Backman: Because storage itself is a really, really complicated matter. But then if you throw in all of these folks into one particular issue, you can have quite a robust conversation. But it helps us to understand the impact of our decision across the entire landscape. Jon Powers: Interesting. So I want to come back to the policy side of this for sure, because in the energy space policy is so critical and local policy is so key. But I do want to talk a little bit about as we were talking off air, for a long time energy storage was the holy grail but now the holy grail’s here. Kelly Speakes-Backman: Yeah. Jon Powers: So there’s been so much amazing development, both on the software side but also the hardware side. Why today? Why are things starting to really come together in the way that they are for storage, and what are some of the big leaps we’ve seen in the last two to three years that are causing that emergence? Kelly Speakes-Backman: Yeah. So there’s just some really rapid growth going on in the energy storage industry. We just hit the one gigawatt hour level last year and we’re expecting to double that in 2018. Jon Powers: Wow. Kelly Speakes-Backman: So we’re undergoing tremendous growth. And it’s driven very much by the rapidly declining costs and the increasing performance of storage, particularly battery storage. It’s driven by changing consumer demands. We also see the electrification of our economy that is driving demand as well as the technologies, and the insights that we’ve seen in the controls and in the operations of our grid is sort of giving a deeper understanding of shorter term changes in both demand and supply, and an increased request by consumers of flexibility and resilience and reliability. So all of these forces in the marketplace are driving us to really rapid growth. Last year, we at the Energy Storage Association released our 35×25 Vision, and with support of Navigant Research we found a really clear and actionable path to get us to 35 gigawatts of new storage across all technologies by 2025. Jon Powers: Is that available publicly, that report? Kelly Speakes-Backman: Yeah. Yeah, you can get that on our website. It’s www.energystorage.org/vision2025. Jon Powers: Excellent. Kelly Speakes-Backman: Yeah, yeah. So I mean costs are coming down astronomically, they’re just 50% of what they were three to four years ago, specifically for lithium ion batteries. And that trend is expected to continue in the near future. Storage is increasingly competing on the economics alone with conventional generation and infrastructure solutions. It’s a really exciting time. And I just want to add, the coolest part is this is an enabling technology, not necessarily disruptive. Jon Powers: Right. Kelly Speakes-Backman: And what I mean by that is it’s not necessarily just going head to head with certain generation resources, but it enables the resources that are already on the grid to act more efficiently. It enables the grid itself to operate by decoupling that element of time from when you generate and when you use it. You’re able to optimize the operations, which makes it more efficient and less expensive for consumers all across the board. Jon Powers: So before we get to the policy piece because I think it’ll probably take up the majority of the conversation. You’ve got the technology’s grown, the market’s grown. Like solar in 2008, 2009, 2010, the finance was lagging. You had sort of higher cost capital that was coming in because the risk, much like fuel cells were even a few years ago, investors were looking at this technology saying, “Yeah, I’m almost there. I’m ready to go. I need to better understand one, what these projects looks like, what the structures are. And two, will this company who is managing the project even really be here in this emerging market three or four years from now and committing long-term capital”. What are you all seeing on the finance side of this that it may or may not actually help accelerate? Kelly Speakes-Backman: The first thing is as more and more storage is being put on the grid, the operations side of this is getting more and more efficient and it’s also getting less and less expensive. So as we talk about the cost of storage hardware coming down, the installed costs are coming down quite a bit as well. There was a McKinsey report about the installed costs coming down. Oh gosh, I’m sorry I’ll have to look that up, but it was pretty astronomical. Jon Powers: Sure. Kelly Speakes-Backman: The soft costs of storage were coming down pretty quickly. So that’s number one, that we’re learning more, we’re standardizing. Our industry is beginning to really sort of get more toward looking at what can be developed, similar to how the solar industry went through a standardized PPA contract. Jon Powers: Right. Kelly Speakes-Backman: Now there’s interest in standardized contract for storage, but it’s not just a kilowatt hour sort of contract. This is more about the capacity side, it’s more about the ancillary services and how can you get value from, for example, the flexibility that’s required in the way the grid operates today. Which kind of brings us to some of the- Jon Powers: I think a lot of the lawyers would tell you that the standardized PPA is still the holy grail. It’s more of the familiarization of the contracts, right? The familiarization of the industry. I think you hit on the fact that these soft costs are being really, really squashed, which is great because that’ll help bring the economics in line for sure. Kelly Speakes-Backman: Yeah. Yeah. Yeah, and I think it’s more of templates that you can use. Jon Powers: Right. Kelly Speakes-Backman: And especially because of the complicated nature of the values that storage brings to the marketplace, not just energy and capacity. Jon Powers: Right. Kelly Speakes-Backman: Because of that, it really is going to be more of a template menu of things to choose from. And then you use your competitive advantages as a corporation to figure out how to set that contract up. Jon Powers: Yeah, absolutely. One of the interesting things is right now an energy procurer for a Fortune 100, right? That’d be a Walmart, Apple, eBay. They’re literally working in 50 different energy fiefdoms to figure out how to implement their distributed generation strategies, because all these utilities and PUCs they manage it slightly different. You’ve got California doing one thing, New York doing a little bit different, completely different than what you’re seeing in Kentucky or Georgia. So to storage, policy is so key. Before going into the policies themselves, how are you seeing your members engage on policy, and what more, if anything, could they be doing? Kelly Speakes-Backman: Oh my gosh. Although we’re growing quite a bit, we are a pretty small organization. And if we had double our people we could do so much more. But we’re able to rely on our members quite a bit for their advocacy and their work, and what our job at the ESA is is really to sort of make sure that we’re harnessed and we’re available and we are feeding the information that they need and we’re identifying alongside them the sort of issues that are coming up. And the issues we see, it’s a little different than we just need a little money to help us make the project work. That’s not what storage is about. Even at the early stages of its growth. What we’re about is that the regulatory framework never before contemplated a resource like this. Storage is not generation, it can be used to feed into the grid but it also takes off the grid and it can be used for other services. And so because of the sort of nature of it, the regulatory framework just kind of hasn’t contemplated it yet, and so doesn’t necessarily allow the access that’s needed. And that’s a huge thing for us from a policy perspective. Jon Powers: Right. So let’s go with policy. So I want to separate out the federal and state piece for a second. Kelly Speakes-Backman: Yeah. Jon Powers: I think people recognize, probably most of the audience who’s been interested in this space, there’s not a whole lot happening on a federal energy policy perspective on many levels, but it sort of has turned almost into a federal tax policy for energy that drives a lot of it. But overall, what are some of the key federal policies, or you see on the horizon, that could help accelerate things for you all? And then I want to have a similar conversation but really dive into the states a little bit. Kelly Speakes-Backman: Okay, cool. So I’m going to argue your premise there and say that there is, when we talk policy broadly, you can talk like legislative or you can talk the regulatory. Jon Powers: Yep. Kelly Speakes-Backman: And I’ll tell you, we hit a watershed moment in February of this year from a federal policy perspective when it comes to FERC or the Federal Energy Regulatory Commission. They put forth an order, a five to zero order, called FERC order 841 that basically insisted that the independent system operators and the RTOs, or Regional Transmission Operators, find a way to allow for storage to enable multiple uses of storage and allow for the value to be given for that. So what that means is if storage can provide capacity, if it can provide black start capabilities, if it can provide, not to get too wonky, but the regulation and the other ancillary services, then it should get credit for it and it should get the revenues. And that has never been done before. Kelly Speakes-Backman: And so now there’s a lot of work to be done on it, but that was huge for our industry. That’s going to allow us to actually act and be compensated for the difference in how storage acts in the marketplace versus generation or just transmission support or anything like that. So there’s a lot going on on the regulatory side from a federal perspective. From a legislative perspective, yeah storage is given an investment tax credit when it’s coupled with solar. But we think storage while we think it’s important that we enable renewable technologies, not just solar but wind and others as well, we think storage when placed correctly locationally on the grid can and should be compensated as a standalone resource. Jon Powers: Right. Kelly Speakes-Backman: And so there’s a lot of activity and I think there’s some reception that we’ve had on the hill, some good reception on the hill, that storage should be allowed to receive an ITC credit on its own merit, not just when it’s coupled with store with solar. Jon Powers: Interesting. Well, first of all, I appreciate the challenge and there is a lot happening and the FERC piece there’s no doubt about it. I think legislatively definitely not as much. But okay, so let’s take it out of the federal piece. And I think that guidance is going to help drive what we’re seeing outside of just California. But obviously one of the hottest markets for this is California. Why? What policies have come into place that have helped move storage forward so aggressively there, and then are there lessons we can learn from that to take into other areas? Kelly Speakes-Backman: Yeah. So I think one of the most interesting and basic elements of what I think is why California is so forward thinking on storage is because they’re so forward thinking on their environmental policy. And if they’re planning ahead toward a good, strong penetration of solar and wind and other renewable resources in their future, then they’ve got to figure out how to make that grid not just clean, but also flexible. Because solar and wind, when the sun shines and when the wind’s blowing then you have your generation resources. But what if it’s not? And how do you supplement that with something other than more polluting resources? And storage provides that, right? So you just hold up the solar and the wind when you’ve got oversupply and you put it back into the grid when it’s not. And that just sort of simple concept of trying to meet their end goal, which is in many parts of California is about the environmental goals that they have. I think that’s what’s driving it, but it’s not the only driver of course for storage. Jon Powers: Right. Obviously, there’s also the demand driver to this that I think it’s so exciting. Kelly Speakes-Backman: Yeah. Jon Powers: What are your members hearing from their customers that has them I think so excited about where the space is going? Kelly Speakes-Backman: Yeah, so we have some really, really interesting member companies that are providing services to end users in the storage space. There’s Sunrun for example, and they have a fantastic solar plus storage program that they use, and in some cases they put solely storage in. And so that’s allowing customers to not only have solar to offset their costs, but also to have solar stored up in the case that the grid goes down and they can still operate. And that’s a really exciting premise for those customers that choose solar as their resource to get off the grid or to really just simply lower their cost. Then there’s another member that’s really, really cool called Stem. They also do some solar plus storage, but the mainstay in the beginnings of this company was to do storage as not just demand reduction play for their consumers, their commercial and industrial customers, but also they take the other part of their storage and they play into the wholesale market. Jon Powers: Right. Kelly Speakes-Backman: So they have a really interesting business model where they’re helping consumers and they’re helping the grid. That’s one of the things. It can happen in California, this is one of the reasons California is so far ahead of the rest of us when it comes to storage is because they’re already allowing multi-use, not just in the product but across the retail versus the wholesale market. Jon Powers: For those listeners, I think there’s actually an interview with Bill Bush, the CFO of Stem, in a previous episode. And we’re going to be speaking a lot more about storage, because this is such an exciting space. And Kelly, I think we because of the ever changing market and ever changing sort of policy space and the growth of the holy grail come to nest here we’d love to have you back on to talk more about this in the future and keep folks updated in the space. But before I let you go there is a specific question I sort of ask all the folks on the podcast. And if you could go back to yourself coming out of Columbus, Ohio, before you headed off to Boston to study mechanical engineering or even coming out of BU and could sit down and give yourself a piece of advice, what would you say? Kelly Speakes-Backman: Oh my gosh, that’s a good one. I would say, “Keep calm. Change is constant”. Jon Powers: Right. Right. Kelly Speakes-Backman: Our industry has changed so much from the time that we… You can go way back to PURPA even. But if you think about just the electricity industry itself and undergoing restructuring and undergoing new technologies and it always… I’ve been in this industry long enough that every time this kind of thing happens you have folks that are like, “This has never happened before. This is the biggest change we’ve ever undergone”. It happens all the time. And this is a really fun part of this industry is that we’re constantly evolving. Now that said, I’ll also correct myself and say there has never been a time when we have been able to disconnect the element of time from generation and demand. And I think that’s what’s so exciting about storage right now. Jon Powers: Yeah. Kelly Speakes-Backman: And that’s why I’m here. Jon Powers: I love the way you frame it. Kelly Speakes-Backman: Yeah. Jon Powers: Well, thank you so much for joining us. I appreciate it. Kelly Speakes-Backman: Thank you so much for having me. This was a lot of fun. Jon Powers: It was great having Kelly on today, talking about the amazing and emerging market around energy storage. If you have other thoughts on folks we should be interviewing, please go to cleancapital.com and share them with us. You can access Experts Only and other episodes for Experts Only on that website. Also, I just want put a special thanks to our producers, Emily Connor, Lauren Glickman, and our intern Greg Phillips who is heading back to University of Michigan. Greg, thank you for all your support and help. As I mentioned, go to cleancapital.com for more episodes, and we look forward to continuing the conversation. Thanks for listening in today’s conversation. Find more episodes on cleancapital.com, iTunes, or wherever you get your podcasts. If you like what you hear, be sure to subscribe and leave us a five star review. We look forward to continuing our conversation on energy, innovation and finance with you.