FOMO: Fear of Missing Out. It’s not an acronym I particularly like as a writer and our interviewee here didn’t actually use the term himself, but it aptly describes how Yann Brandt, a self-described member of ‘Team Solar’, came to be the chief financial officer at energy storage company FlexGen.
Brandt began his clean energy career in financing for distributed commercial and industrial (C&I) solar 10 years ago and has remained in various roles at solar industry companies including president for the Americas at utility-scale independent power producer (IPP) Conergy and CEO of Quick Mount PV, a residential solar racking and hardware company. That was until February of this year, when he and FlexGen’s new CEO Kelcy Pegler took up their roles. For several years he has also published a daily newsletter, Solar Wakeup, which tracks Brandt’s picks of solar news as well as his own industry experiences.
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FlexGen meanwhile has become one of the US’ major energy storage system integrators in the last couple of years. From working on microgrids around the world in the early 2010s, FlexGen is now deploying grid-scale standalone battery storage in key renewable energy markets like Texas as well states like Kansas and Indiana that are making their progress away from coal for its customers, which include utilities, developers and independent power producers (IPPs).
In an interview with Energy-Storage.news, Yann Brandt talks us through the logical progression that he has taken from solar into energy storage and how he views the opportunities and challenges ahead.
Through your previous roles and through your own blogging and podcasting, you’ve been part of the solar industry for a while. What took you into energy storage at this point?
I’ve known FlexGen since they started. We overlapped, because we were doing military work together, or trying to do military work together, in 2009. So I've known the founders, as well as some of the investors since the early days, I even did some consulting for them.
I've always been a believer in storage. If you got into solar early, you realise that had you known the single fact that solar was going to get cheaper to the extent that it did and you could time things correctly, you would be a massive success. And the one thing that storage has, on top of that opportunity that solar had, is that we've got the EV market driving the cost of battery manufacturing down. I'm not a scientist or a physicist, but it seems to me that the the leap in innovation, and the speed to actually getting something commercially viable and bankable in energy storage, you could see 5x 10x effect in energy storage technology that we never saw in solar.
I've sort of done everything I've wanted to do in solar. I personally invest in companies in solar. I still talk to solar people all the time. I still love the solar industry. But this is the next iteration of solar, solar-plus, wind-plus, storage is a little bit generation agnostic and it's exciting to see. It was kind of 'hard opportunity' when Kelsey Pegler, our CEO, came and said, “I’m going to take this job, are you going to come with me?”
We had been working on some other private equity investments together. I was like, “I don't know, maybe I know too much about FlexGen, I don't know if it's right for me.”
And he said, “How are you going to feel on Monday when I work at FlexGen — and you don’t?”
That's when I realised it's right. There is a lot of work left to do but also so much exciting stuff ahead of us.
So you can already see the industry going in that direction of massive growth and quickly improving economics? The cost reduction is a clearly observed phenomenon that we’re all seeing but what is it about the value that energy storage brings to the electricity market that can drive the industry forwards as rapidly as you say?
I don't have a great view of the global market on energy storage. But I think like a developer, I think like someone that has led development teams. You need several things in order for a project to get off the ground: you need land, you need an interconnect [to the grid], and you need revenue generation.
With those three things, you can get the capital to build that thing and you get a developer fee. The math is fairly straightforward. Take all of those pieces together, and you've got yourself a pay check.
Energy Storage makes that process so much simpler, because at least in the US, interconnection rights are perpetual, almost all of them are interconnection rights in perpetuity. If you own the land, as long as you maintain that point of interconnection, you never lose that right.
If you have a solar asset in North Carolina, or in PJM, or in ERCOT, there's not much you have to do in order to now add energy storage to it because especially, under the new FERC guidelines, if you already have an inverter there, and you put the energy storage on the inside of the inverter, you don't change the size of the generating source.
Then the better part is that — and this is going to take some time to mature — but [in terms of] revenue, if you look at ERCOT [in Texas], none of the energy storage has real off-take agreements. You don't need to wait for Facebook to sign a power purchase agreement (PPA), you don't need to wait for Walmart to sign a PPA, the way that you do in solar. In solar, you get to make your deal once. You know what it's going to cost to build it and you know the revenue you're going to generate.
With energy storage, you have no idea how much money you're going to make. You have a concept. But you don't know that there's going to be a winter event in Texas where ancillary services will be tens of thousands of dollars a megawatt-hour, or in California, look at [IPP] LS power. They said that their energy storage project in San Diego paid for itself the first week it was it was operating. You've never seen that said about a solar plant.
‘You’re the market maker with energy storage’
I think you might be the first person I’ve spoken to that believes the lack of long-term contracts makes storage simpler in any way than solar. A lot of people struggle with the revenue uncertainties…
When they struggle with the merchant piece, it's because they're thinking about it like a solar asset. The problem is that when solar or wind generates electricity, you don’t know when you're going to generate electricity, and you have no cost to generate. You have to generate when the resources are available. Without storage, you basically have no leverage over the market. So the market says to you, “well, we know you're going to give us the electron regardless, so I'll give you 0.1 cents a kilowatt-hour. The merchant cost analysis doesn't work well, for those assets. With energy storage, you can just wait for the market to say “I need this electron”.
And that's the main difference. Instead of being the market price taker, you're the market maker with energy storage.
One example I was looking at recently is in South Australia, where a 30MW short-duration battery system on the far end of a transmission line pole was installed as a trial to integrate local wind or rooftop solar and also serve as the first virtual synchronous generator in Australia. Nonetheless it made more than double the money back the project had been loaned from the Australian Renewable Energy Agency (ARENA) through frequency response service revenues.
I think there's going to be all sorts of energy storage projects: there's going to be the frequency regulation projects, there's going to be the time shifting. I think every solar farm built over the last 10 years is going to get retrofitted with energy storage and I think the off-takers are largely going to pay some add-ons in order to have the ability to say “this is when we want the electricity”.
It’s not always roses with energy storage, the early PJM frequency regulation market, as soon as a few projects went online, the market tanked five to seven years ago.
[But] energy storage is absolutely going to run the grid. There's the hardware piece of of energy storage that everyone knows about and then there's the software: the software that allows the things to turn on and off, the controls that let you do arbitrage and ancillary services, and then to manage the fleet so they're all working in sync, and also the software that allows you to manage the storage in association with other generation onsite, regardless of what source that generation is.
Then you need to be able to insert your trading algorithm, depending on whatever it is that you're trying to monetise. At the end of the day, that software, that's the key to this whole thing but you have to know the hardware in order to be good at the software.
A Mark Zuckerberg in his dorm room can't come up with an energy storage software, because you have to go through years of compliance, cybersecurity, ISO qualifications, etc and then you have to go into a battery unit onsite and actually put the controls in place.
This isn't going to happen overnight but that's the part that gets me excited, because the complexity is still massively misunderstood.
You mentioned how the PJM market for frequency regulation became over-saturated and we also saw that in Germany’s Primary Control Reserve (PCR) market, where revenues quickly became depressed. Is there a competitive risk of getting stranded assets out there if you’ve got so many batteries going out and doing the same job?
Possibly, but we are so far away from that. I think there's an under-appreciation for how big the grid is and how much electricity we use. I think we're a ways away from having too much storage on the grid but when that does happen, you're absolutely right, there's going to be a value adjustment because if there's 10 people bidding for the same electron, the price will drop and that's good for the market. That's going to make everyone tighten up.
Energy storage assets shouldn't pay for themselves in a week. That isn't what the market needs or wants. It's bad for consumers and it's kind of like ‘feast or famine’ for developers, but having a robust revenue stream with great price signals, that's a real game changer for energy storage.
In the US we had renewable portfolio standards (RPS) in each state. That was sort of the last decade. Now we're going to have clean peak standards. Clean peak standards are RPSs for peak demand, and as consumption shifts, the reality is you can't add more energy storage than the consumption of the EV growth that's going to meet it, especially in the fleet. This stuff is happening so fast, the electrification of everything.