Bill Gates-backed ESS — which makes giant batteries out of iron, salt and water — starts trading
- The battery company ESS went public through a SPAC with Acon S2 Investment Corp. and starts trading on the New York Stock Exchange on Monday under the ticker symbol GWH.
- ESS' battery is made primarily of iron, salt and water, which are readily available and safe resources.
- The battery stores energy for between four and 12 hours, a time frame that pairs well with renewable energy sources such as solar and wind.
ESS is trying to solve a critical problem with renewable energy: How to store energy from wind and solar installations when the wind isn't blowing and the sun isn't shining.
The company's proposed solution is long-duration energy-storage batteries made of iron, salt and water, which are much cheaper and more readily available than the elements used in batteries today, such as lithium and cobalt.
ESS' early momentum attracted $57 million in investments from powerful backers including Bill Gates and Softbank, CEO Eric Dresselhuys told CNBC.
Now it goes public via SPAC to begin trading Monday on the New York Stock Exchange under the ticker symbol GWH. It hopes to raise $308 million through the deal.
"There have been very few solutions for this long duration up until now, and it's largely driven from the fact that we didn't rely on energy storage as a major solution for hardening the system," said Dresselhuys, who became the CEO of ESS this year after decades of energy and technology executive experience.
The company launched in 2011 in the Portland, Oregon, garage of co-founders Craig Evans and Julia Song, who are a married couple as well as business partners. It moved to the Portland State Business Accelerator before expanding to its current 200,000-square-foot headquarters.
The company is backed by Breakthrough Energy Ventures, Gates' clean energy investment firm; SB Energy, a wholly owned subsidiary of SoftBank; and multinational chemical company BASF, among other investors. The SPAC comes through a reverse merger with ACON S2 Acquisition Corp., run out of private equity firm Acon Investments.
ESS has not recorded any revenue yet, according to financial filings dated Sept. 8. Dresselhuys said the company has shipped products to two customers, with several more in the pipeline.
The company lost $245.3 million in the first six months of 2021, but operating losses were only $18.4 million; the remainder was due to losses on reevaluations of warrant and derivative liabilities. Operating losses were $17.4 million for 2021, and the company expects to record its first profit in 2023.
Iron, salt and water: Safe, readily available materials
The big breakthrough for ESS is a long-duration iron flow battery built from readily available materials, said Carmichael Roberts, a co-chair of the investment committee at Breakthrough Energy Ventures.
In a battery, the electrolyte is the chemical medium that connects the two ends of a battery, the anode and the cathode. In ESS' batteries, the electrolyte is made of iron, salt and water.
"The flow battery is cheaper, safer and has better operational life than conventional lithium-ion storage," Roberts said.
Making a battery out of iron, salt and water means "there's no toxicity, the technology we build doesn't start fires or doesn't blow up in fire," said Dresselhuys.
Also, ESS batteries do not have lithium or cobalt, two common elements in batteries that are being impacted by supply chain crunches.
"Both are in potentially short supply globally, and none are produced in the U.S.," said Jesse Jenkins, an assistant professor at Princeton University who specializes in the energy grid.
"Lithium is less of an issue in the long run, as long as we recycle lithium-ion batteries, but there may be some short-run price increases as production ramps up to match battery demand for EVs," Jenkins said.
"Cobalt is a bit trickier and has come under fire for some of the supply chain relying on [so-called] 'artisanal mines' in Africa, which employ forced labor, and child labor in some cases, with people digging out cobalt by hand and very, very harsh conditions," Jenkins said.
ESS also does not use vanadium, a chemical element used in some flow battery technology. While the element is promising, Dresselhuys says, it's too expensive to be meaningful.
"It's one thing to make something work, and that can be very difficult. But it has to work cost effectively to be viable as a system because of the scale we're talking about," he said.
How the battery works: 'The elegance is the simplicity'
Visualize a sandwich, said ESS' business development lead, Hugh McDermott. The ESS battery technology is a stack of carbon plates that has salt water with iron flowing through each layer.
Iron comes out of the salt water solution and sticks to one side of the plates. When the polarity of the plates is changed, the iron dissolves back into the water solution.
From a battery management control system, the flow of the ions can be switched, thereby also switching the flow of electricity onto and off the grid.
The idea of an iron flow battery has been around since the 1970s, Dresselhuys said. But there were technical issues that scientists hadn't solved.
For example, early iterations of the iron flow battery technology would work for a while, but the electrolyte fluid would become imbalanced, build up on the battery, and the battery would become ineffective over time. To fix this, ESS developed a proton pump, which Dresselhuys said "allows the system to keep itself in balance throughout all of those charges and discharges so that the electrolyte is entirely clean."
Early research was funded in part by almost $3 million in grant funding from the Department of Energy's ARPA-E program, as well as individuals and local investment funds.
"The elegance is the simplicity," said Rich Hossfeld, co-CEO at SB Energy and a board member at ESS. SB Energy is an ESS customer as well as an investor.
But it took a lot of research and development to get a simple solution to work. ESS has been working on research and development for a decade. The proton pump was a really key breakthrough for the company, but one of many.
"There's a very large intellectual property moat around the core technology, and that will make it very difficult for other competitors to build a battery that is similar to ESS' battery," Hossfeld told CNBC.
A long-duration battery being developed by Form Energy also uses iron and also is backed by Breakthrough Energy Ventures. Form, however, is developing iron-air batteries, which uses different technology and aims to provide energy storage for multiple days.
ESS batteries can store energy for four to 12 hours, whereas the lithium batteries in cars are typically capped between two and four hours, Dresselhuys said.
To go above four hours of energy storage with lithium-ion batteries requires increasing the number of lithium-ion cells, Hossfeld told CNBC. ESS, on the other hand, can just add more water, iron and salt to a bigger tank of its stack-sandwiches.
"The way to think about ESS cost-wise is they are cost parity with lithium-ion at four hours and about half the cost above that, which we think creates a big advantage for them," Hossfeld told CNBC.
Another key to the ESS iron flow technology is its resilience.
"Capacity stays the same between year one and year 20," Hossfeld said. Anyone who has a cellphone knows that is not the case for lithium-ion batteries. "You open it up, it comes out of the case, right now it will give you 10 hours. We all know it doesn't give you 10 hours in a year, right?"
Energy centers are co-located with a solar or wind farm. A solar farm allows the batteries to charge up during the day when the sun is shining and then discharge in the late afternoon when there is typically a bump in energy demand.
It works similarly on a wind farm. "You can store four, eight, 10 hours of wind plants in the middle of the night and then discharge it during the day as needed," Hossfeld told CNBC. "We look at ESS as a really good complement to that daily cycling between wind and solar."
The Energy Warehouse, the only ESS product that exists so far, is the size of a shipping container, 40 feet long and 8 feet wide.
"That container holds 500 kilowatt hours of energy. That's roughly the energy that you would need to power 20 to 30 homes, depending on where you are in the country," McDermott told CNBC.
ESS is also building a product called Energy Centers intended for utilities and independent power producers — for instance, businesses that own large solar farms who then sell that power to the grid.
For these kinds of larger customers, ESS will use similar battery technology, but the battery modules will be contained together in a building. Customer trials are expected to begin in 2022.
The big challenge: Getting an iron flow battery to scale
While iron-based batteries are a well-known technology, the big challenge has been getting them to scale.
"Iron-based chemistries for flow batteries have a long and storied history, rightfully so because in theory they have some of the lowest theoretical costs possible. On paper these systems scale quite well," said Dan Steingart, associate professor of chemical metallurgy at Columbia University.
But the reality has been quite different.
"We have not seen widespread adoption of this class of batteries and its cousins because of last-mile engineering challenges that have in the past added unacceptable capital and operating costs when compared to other available technologies," Steingart told CNBC.
Flow batteries depend on pumps and membranes that are highly technical. "Think a kidney, writ very large, working 10,000 times harder than it has to, all the time," he said. "It has been very difficult to have these, in practice, operate in a reliable manner without significant ancillary systems (that make the system more expensive upfront) or maintenance calls (which increase running costs)."
Steingart said, however, that ESS has raised "sufficient capital" to find solutions to these challenges.
Also, ESS in September secured a 10-year battery warranty backed by the insurance giant Munich Re, which "is a strong signal of a positive outcome," Steingart told CNBC.
Cost is another concern.
"The iron flow battery technology looks very promising as it is safe, environmentally friendly, uses non-toxic materials that can be sourced in the U.S., and doesn't degrade over time and over multiple cycles," Jan Pepper, the CEO of Peninsula Clean Energy, told CNBC.
Peninsula Clean Energy, a community energy buyer and the official power provider for San Mateo County in California, has not worked with ESS directly, but it's trying to deliver cost-competitive 100% renewable energy on a 24/7 basis by 2025. Pepper said that energy storage will help meet those goals.
"The current challenge with iron flow batteries is the cost," Pepper said. "If companies like ESS can bring the cost down for their technology, then they and others will be able to make a meaningful impact in decarbonization efforts and help organizations like Peninsula Clean Energy meet our ambitious goals."
Steingart told CNBC, "A goal I use is in my lab for long duration energy storage: The battery has to cost about the same price as dog food per pound and last forever with little intervention."
If ESS can do what its investors think it can, "the successful execution of this chemistry would be a significant milestone for grid-scale energy storage," Steingart said.
Correction: This story has been updated to remove inaccurate references to customer shipments.