| ESS Tech CEO Eric Dresselhuys leads a tour of the flow battery maker's factory south of Portland, Ore. |
The quest to commercialize a better breed of batteries for the next phase of the global energy transition is underway in a modest 250,000-square-foot factory 15 miles south of Portland, Ore. There, ESS Tech Inc. is producing the latest generation of its iron-based flow batteries on its first fully automated manufacturing line, the energy storage upstart's template for achieving higher volumes and profitability over the next year.
"Imagine that footprint getting replicated all the way down the hallway," CEO Eric Dresselhuys said on a recent factory tour. "We can get to about 2 GWh of annual manufacturing capacity in this building. As we get beyond that, we're going to need to expand out of this building."
ESS is among dozens of entrepreneurs vying to scale up alternatives to lithium-ion batteries for stationary energy storage with competing designs and materials — ranging from iron, zinc and vanadium to sodium, air and water. After collectively amassing billions of dollars of investment in recent years, including through a wave of IPOs, many of them now believe they are on the brink of significant commercial breakthroughs for more sustainable, lower-cost, harder-working and longer-lasting options.
"We're forcing people to reimagine what a battery can do," said Hugh McDermott, ESS' senior vice president of business development and sales. "It's a workhorse battery."
Under development in the laboratory and in the field for more than a decade, the company's flow batteries circulate a liquid electrolyte mixture of Earth-abundant iron, salt and water through pumps, tanks and battery modules to charge and discharge. The approach is designed to deliver at least double the duration of today's mainly four-hour lithium-ion systems in addition to providing greater operating flexibility and longer lifetimes.
Over the past year, ESS has secured a series of strategic agreements to expand its business, culminating in September with what Dresselhuys dubbed an "industry-defining collaboration" with Honeywell International Inc.
The Charlotte, NC-headquartered technology and manufacturing giant agreed to purchase $27.5 million of ESS' NYSE-listed stock and prepaid $15 million on up to $300 million of flow battery purchases. Honeywell, which is ESS' second-largest shareholder at 14%, just ahead of Bill Gates-chaired Breakthrough Energy LLC and behind SoftBank Group Corp., also granted ESS an exclusive license for its own intellectual property related to flow batteries. The companies plan to jointly develop the technology.
"It signals to the broader market that we've reached a certain level of maturity," Dresselhuys said.
However, investors may require a little more convincing. The Honeywell deal did lift ESS' stock market value. But since going public two years ago, its value has plummeted overall along with those of all other listed lithium-ion alternatives, highlighting the still uncertain future of their ventures.
'Market is finally developing'
The Honeywell partnership builds on ESS supply agreements with Germany's Lausitz Energie Verwaltungs Gmbh, Amsterdam's Schiphol airport, Australia-based ESI Asia Pacific Pty Ltd, and several utilities in the US. ESS recently commissioned six flow battery systems for the Sacramento Municipal Utility District in the first phase of an up to 200-MW/2-GWh agreement to help California's capital city reach deeper levels of decarbonization.
"I think we're going to see projects get bigger and more ambitious," Dresselhuys said.
Fellow flow battery developers echoed that assessment.
"From our perspective, it's all about getting through that basic proof of concept phase," said Matt Harper, chief commercial officer of Invinity Energy Systems PLC, a UK-based developer of vanadium flow batteries. "Proving that long-duration storage is going to be beneficial for more renewables integration, proving that vanadium flow batteries are a totally capable alternative, or can stand alongside the capabilities that lithium is already delivering, and then using those proof points to turn into stable, repeatable market-based opportunities."
"The market is finally developing for ... flow technologies to be competitive for long-duration applications," added Mark Higgins, chief commercial officer of Australia's RedFlow Ltd., which makes zinc-bromine flow batteries. That incudes working with utilities, especially those with solar-rich power portfolios pushing "for longer duration storage to actually be valued," Higgins said.
Currently, many US wholesale power markets offer "little economic incentive" for going beyond four hours of duration, the US Energy Department's National Renewable Energy Laboratory (NREL) said in a new report. Markets operated by the California ISO, the Southwest Power Pool, the Midcontinent ISO and the New York ISO, for instance, provide "no additional capacity revenues" for longer durations, it said.
Moving beyond four-hour lithium-ion batteries in the near-term "requires changes to both technology and the value proposition," NREL added.
| An ESS technician puts the final touches on a flow battery system before shipment. Source: S&P Global Commodity Insights. |
Lithium can go longer
For now, many long-duration energy storage projects rely on additional support from state and federal governments.
The US Department of Energy announced in September $325 million for 15 projects as part of its goal to slash the cost of long-duration energy storage 90% by 2030. The agency selected intraday storage assets to provide 10 to 36 hours of discharge, including Invinity and RedFlow systems, and multiday technologies targeting up to 160 hours or more.
Form Energy Inc., a Massachusetts-based storage startup also backed by Breakthrough Energy, is among the latter. It is working with utility Xcel Energy Inc. to deploy two 10-MW 100-hour iron-air battery systems at retiring coal plants in Colorado and Minnesota.
Such public support has been mounting. In August, the DOE offered Eos Energy Enterprises Inc. a nearly $400 million conditional loan commitment to expand a factory in Pennsylvania for its zinc-bromine batteries designed to provide three to 12 hours of storage.
That is the same market segment that ESS, Invinity and RedFlow are targeting, as well as developers of compressed air energy storage and pumped hydroelectric storage. It is also a segment in which lithium-ion can compete. Large-scale eight-hour lithium-ion projects are already under contract in California and Hawaii.
ESS' Dresselhuys is not concerned over the competition. "Demand for solutions is so robust that it's really about us … hitting our cost points and building more manufacturing capacity," he said. "If we do those things, I feel really confident that we're going to have a very eager and ready market to go serve."
'An O&M nightmare'?
"Flow batteries also have significant project pipelines driven mainly by specific long-duration storage procurements in California and similar tenders in Australia and the United Kingdom," Taylor said.
More than 7,000 MWh of flow battery capacity is planned to come online through 2026, compared with about 1,000 MWh operating globally as of October, Commodity Insights data shows.
The biggest challenge for flow battery suppliers "is being able to scale manufacturing and production meaningfully and drive down costs in a reasonable time frame to meet demand," Taylor added. "Flow batteries do not have the same economies of scale and learning curve benefits that [lithium ion] has from the EV industry."
Additionally, flow batteries reliant on vanadium are "at risk of dependency on volatile raw material prices much like lithium," Taylor said, "adding to cost uncertainty longer term."
In terms of up-front capital expenditures, achieving cost parity with lithium-ion is "likely unattainable within this decade," the analyst said.
"However, for longer-duration applications where customers are looking into the future to support growing renewable penetration and shifting large amounts of energy, the cost of flow batteries should ... be able to beat lithium-ion on a levelized cost of storage basis, provided they can be proven reliable at large scale," Taylor said.
ESS CEO Eric Dresselhuys stands in front of an electrolyte |
Some project participants have voiced skepticism that flow batteries will be able to provide such proof, pointing to operation and maintenance as a possible Achilles heel.
"They are an [operations and maintenance] nightmare," said Andy Tang, vice president of energy storage and optimization at Finland-based Wärtsilä Oyj Abp, a globally active lithium-ion system integrator that has collaborated on flow battery pilot projects. "They're very mechanical, right, because the pumps are pumping liquid back and forth, so the O&M actually is very, very, very, very expensive. And the reality is these pumps break and leak all the time, so the systems are down all the time."
But technology developers say their products are evolving.
ESS plans to leverage its new partnership with Honeywell to enhance performance and reduce cost, building on recent work to simplify its plumbing and electrical systems.
The company is also continuing to advance its proprietary "proton pump," which is the "heart" of its iron flow battery because it keeps the system balanced and enables effectively unlimited cycling, according to Dresselhuys.
"We spend a lot of time on quality control," he said.
'Not a niche market'
Wärtsilä is exploring a close cousin of lithium-ion batteries as an alternative: sodium ion.
"I want to be a relatively early adopter," Tang said. "One of the reasons I'd like to be an early adopter is because I am concerned about the long-term supply-demand characteristics for lithium and whether we really have a problem."
Sodium-ion batteries appear to be advancing toward mass production, driven by China's Contemporary Amperex Technology Co. Ltd., the world's largest lithium-ion battery-maker, BYD Co. Ltd. and other companies.
"You have to take a leap of faith that they will be able to mature the chemistry and that the challenges are not fatal," said Tang.
Although sodium-ion batteries lag lithium-ion in terms of energy density and lifecycle, "we expect some adoption" in stationary storage markets if the technology can achieve maturity, said Henrique Ribeiro, a clean energy technology analyst at Commodity Insights.
Like lithium-ion batteries, sodium ion could compete for longer-duration projects, the analyst added. "But probably not [more] than 10 hours for sodium ion and eight hours for lithium ion," Ribeiro said.
In the end, a diversity of energy storage assets with different capabilities will be required to decarbonize the various corners of the global economy, according to Julia Souder, CEO of the Long Duration Energy Storage Council, a coalition of technology providers, investors and customers.
"This is not a niche market," Souder said. "If we want to have 24/7 renewable energy, clean energy, then you have to have long-duration energy storage."
S&P Global Commodity Insights produces content for distribution on S&P Capital IQ Pro.