Flow batteries making their case for market share in the energy storage space
Written By: Stratton Report
October 27, 2016
An interview with Mike Grunow of ViZn Energy Systems
On October 4, ViZn Energy Systems Inc., announced that it is offering an optional 95 percent power guarantee on their large scale non-toxic flow battery energy storage systems for up to 20 years. This guarantee will be available to supplement ViZn’s best-in-class comprehensive warranty which is offered in multiple durations up to 20 years, which according to the firm is twice the industry average. Stratton Report, always interested in anything storage, was fortunate enough to speak with Mike Grunow, Vice President of Marketing for ViZn Energy Systems, Inc. about the value propositions of competing battery chemistries.
Stratton Report: Tell me a little bit about ViZn Energy.
Mike Grunow: ViZn is a nine-year-old flow battery company. We started commercial shipments some 24 months ago. We are partnered with Jabil, the third largest contract manufacturer in the world. They manufacture our batteries at their facility in St. Petersburg, Florida. Several large projects are currently installing our systems, one of which will be the largest flow battery in North America, in Ontario. That will be commissioned in 2017. We’re getting ready to announce four or five more projects which will utilize our flow batteries. The batteries for those systems will ship in the first half of 2017. We believe those deliveries will make us the largest flow battery manufacturer in the world by a factor of two.
SR: What is the value proposition of your batteries?
MG: The value proposition is based on the economics and versatility of our batteries. They are very competitive with lithium ion in terms of the first or installed cost. However, they are much more versatile than a lithium ion system once deployed, because a lithium ion system has to be configured to provide either a long duration energy service, or a short duration high-power service. Our batteries can switch back and forth effortlessly between long-duration energy and short-duration high-power modes. Our batteries can both walk and chew gum, so to speak, while lithium ion batteries can only do one or the other.
SR: Could you give me more detail about the economics of your batteries?
MG: On a dollar per kilowatt hour basis, we’re typically within five to ten percent plus or minus when compared to a tier one lithium system, a Samsung or an LG or a Tessla. So, we’re very close on the first cost. However, because of the flexibility of our batteries, they can perform more applications and generate more revenue, which helps to increase their return on investment. Additionally, our technology enables us to offer a significantly longer warranty than lithium ion battery manufacturers. Our systems last 20 years and have negligible degradation irrespective of duty cycle. We have an optional warranty which guarantees that our batteries will last 20 years and still deliver 95% of their original performance. Whereas, if you look at the tier 1 lithium ion guys, their warranties never go past ten years, and they only guarantee that their battery’s performance will be something like 60 to 70 percent of original capacity by years eight, nine, or ten, depending upon whose warranty you’re looking at.
That forces energy storage developers using lithium ion systems to either oversize their battery capacity from day one so that even after a decade’s degradation they will still meet the project’s design requirements, or they have to plan to go in and replace a lot of cells to keep the energy storage system up to spec. Neither option is free. So when system designers look at a 20-year, unlevered investment rate of return, our advantage is very significant. We believe our systems pencil out significantly better than lithium ion.
SR: Are there any operational limits on your batteries under your warranties?
MG: We allow our customers to do two full discharge and charge cycles a day. We do have some very broad limits in terms of operating temperature. But we have no limits in terms of charge rate or discharge rate. If you compare that to lithium ion systems, which insist on very, very tight temperature windows, and where the warranty is reduced if you exceed a single charge-discharge cycle a day, we feel we offer more degrees of freedom to operators using our system. ViZn’s technology allows our customers to use our batteries and really exercise them.
SR: Given that you guys are a startup, are your batteries bankable? How does the financial community view them?
MG: That’s something every customer and every banker on every deal wants to know, and this is what I tell them. All of our technology has been reviewed by two of the world’s largest and most respected independent engineering companies, TUV in Germany, Black & Veatch in the United States. Both have gone over all of our data, all of our designs, all of our manufacturing, all of our engineering. Both came to the conclusion that our product will work the way we say, it will perform to spec and will go on doing so for 20 years. Our products are manufactured by Jabil, a $17-billion annual revenue company. They manufacture the product in an ISO 9001 facility. And, Jabil works very closely with us on transactions to address any risks that customers may perceive. We’ve partnered with Schneider, a $26-billion annual revenue company, to provide control systems and a power convergence systems for our energy storage installations. Our systems are sold exclusively with Schneider controls and Princeton Power Systems inverters. We also partner with EPCs whose job is to make sure the complete system works and operates on site, the best known of which is Quanta. Quanta is a $7.5 billion dollar EPC contractor that builds everything from pipelines to transmission lines. After six months of due diligence, they now build turnkey Vizn energy storage systems for utilities and others. Between our partners–Quanta, Schneider, Jabil, TUV, and Black & Veatch, we have been successful in obtaining financing for our first five projects.
SR: Is your battery guarantee from ViZn, or do your partners financially participate?
MG: It really varies by deal.
SR: Have you partnered with such large companies to avoid the perception that you’re the new kid on the block?
MG: We’ve pursued partners that allow us to pursue business in specific verticals, where we know that our batteries can create value for a group of end-users. So what we’re doing in South Africa where we partner with Jabil Inala is targeted at a very different segments—mining, agriculture and remote villages–than what we’re doing with Alpha Energy, which is to focus on turnkey energy storage solutions for large behind-the-meter, grid edge, and utility-scale front-of-the-meter applications.
SR: Up until now, batteries have been utilized in a limited range of applications. Given that your flow batteries have different characteristics, are there new energy storage applications you could pursue?
MG: Yes. We believe the high power-short time ancillary services applications for energy storage represent globally something like a $100-billion opportunity. That’s for applications demanding up to about two hours of battery discharge. Whereas, we feel that in the range of two and a half hours to eight hours of energy discharge there’s a $500 to $550 billion opportunity. That kind of capability lets you get into applications like transmission and distribution deferral, which are very large. Some 40 percent of our electrical grid is only used perhaps 10 percent of the time. It’s massively oversized to meet peak demand. There are new transmission lines costing hundreds of millions of dollars are being built, and they’re only being essentially used for 30 to 40 days out of the year when the air conditioning is really blasting. We believe using longer-duration storage in lieu of massively overbuilding infrastructure is a big opportunity. In addition, when you start to look at high penetrations of utility scale solar and wind where the power production peak is off of system demand peak, longer-duration storage can play a large role there as well. The other good thing about longer duration storage, and especially flexible storage that can be used both for longer-duration energy and short-duration power surges, is that it permits whole new business models to work. If a battery can simultaneously meet a three to five hour energy storage need in a market while also providing frequency regulation ancillary services, then no single application has to pay the whole bill. Frequency regulation can pay 40 percent of the bill and the longer duration service can pay the other 60 percent.
SR: I’ve read that many battery technologies, including lithium ion, are likely to drop significantly in cost as they are manufactured in greater volumes. How much room is there to lower manufacturing costs for your battery?
MG: If you look at a ten-megawatt lithium ion module, they are selling for around $285/kWh. That’s the lowest number I’ve heard for delivery next year. And those modules represent roughly 45 to 50 percent of the all-in system cost for a lithium ion energy storage system. So, even if battery manufacturers would cut their costs in half, that’s one half of 45-50 percent. So it’s a 22-25 percent reduction in all-in system costs. The other stuff is labor, containerization, HVAC costs, power convergence and controls. Meanwhile, our batteries are roughly 75 percent of the first cost of our full flow-battery system. And we feel we are going to be able to reduce our battery cost by up to 40 percent over the next three to five years, which would result in a 30% reduction of the cost of our total system.
SR: Does it get tiresome to make all these comparisons to a well-entrenched technology like lithium ion batteries?
MG: We’re not building this business around competing head-on against lithium ion. We’re building this business by working with developers to pursue specific applications where we feel our technology adds value, and explaining to the energy storage community how if they insist on using lithium ion to tackle every application, they’re going to be fighting with one hand tied behind their back. We’ve looked at well over 200 transactions in the past 12 months, and we’re actively juggling about 65 deals. And our exclusive competitor in all of these deals is lithium ion. Frankly, that’s the result of history; system integrators have invested in the engineering to understand how to do design system architectures based on lithium ion solutions. Unfortunately, that leads to a situation where everybody’s running around with a hammer looking for nails. In a lot of situations, its led to people trying to wedge batteries that lack the versatility to do both power services and energy services from one platform into applications that require both.
SR: How large are your energy storage systems. Does their size put limitations on where you can deploy them?
MG: Our smallest system is a 20-foot shipping container. While that’s a bit bulky to fit into a residential garage, it fits nicely into a single parking space in a commercial building’s parking structure. We’re sized pretty well for a commercial industrial setting.
SR: What are ViZn Energy’s goals in the next year?
MG: We are under contract for some very large projects and we anticipate announcing more. I’d say our goal is to get those shipped, installed, commissioned, and operating in the first half of next year. We want to make our customers happy and turn them all into repeat buyers.
SR: On your website, you talk about pursuing C&I, microgrid, solar, wind, military, utility, mining, and public sector projects. Are you active in all of those areas?
MG: With the announcements we’re getting ready to make, we will have covered C&I, utility-scale, public sector and military. So we’re active in four out of the six. Wait, the military project was also a microgrid, so I guess that makes it five. And I’m going to be giving a speech at this mining and energy conference in Toronto coming up. So maybe we’ll get one more.
SR: Is ViZn a venture capital backed company?
MG: There is no venture capital money in this company. We have been fortunate to have had a very patient group of investors. And they have been very supportive and they continue to be very supportive of us.