ESS inks largest-ever US flow battery purchase with…
in sacramento, “you’re only six hours’ drive from [most places in] the state,” McDermott noted.
New glow for flow batteries
Flow batteries have been kicking around in research laboratories for decades without gaining a foothold in the field. As lithium-ion batteries became the dominant form of grid storage over the last decade, flow battery evangelists tried to make the case for why their technology was superior to the front-runner. But storage customers, oblivious or unconvinced, kept picking conventional batteries 99 percent of the time.
ESS is one of the few flow battery companies to survive long enough to see the arguments in favor of flow batteries start to resonate due to global upheavals in the battery supply chain and domestic policy changes in the US
Flow enthusiasts have long praised the technology for its ability to store massive amounts of renewable electricity and discharge it for longer periods of time than is economical with lithium-ion batteries. Few to no utilities were interested in that kind of bulk storage, but as renewables gain considerable market share in certain locations, more governments and power companies are recognizing the need for long-duration storage.
Meanwhile, the familiar criticisms of lithium-ion batteries have taken on new force. After a decade of readily available batteries that were declining in cost each year, the grid storage market hit a wall in the Covid era. Supply-chain hangups created scarcity and drove prices up at the same time that demand surged, thanks to rapid growth in both electric vehicle purchases and grid battery development.
As McDermott alluded to, this scarcity is likely to continue as demand for both electric vehicles and grid storage grows faster than new manufacturing capacity. Companies like ESS use readily available, abundant materials that aren’t spiking in price like the components of lithium-ion batteries are (see this stunning chart, for instance), and they don’t have to compete with demand from the massively larger electric vehicle market, Because flow batteries aren’t used in vehicles.
What’s more, flow batteries, being mostly liquid, don’t catch fire the way lithium-ion batteries sometimes do. Fire risk hasn’t stopped the momentum of battery storage, but incidents continue to generate headlines. On the same day of the ESS announcement, one Tesla unit at PG&E’s Moss Landing battery plant in Northern California burned itself up, forcing road closures around Highway 1 to protect people from potentially hazardous emissions.
ESS also manufactures its products in the US and thereby stands to benefit from energy storage tax credits in the recently passed Inflation Reduction Act. Developers can claim a 30 percent tax credit on battery projects built with prevailing wages, but they can get an additional 10 percent off by using domestic content.
Exceedingly few other storage manufacturers have production lines up and running in the US today, McDermott pointed out, so ESS expects to be one of the only suppliers to qualify for the domestic content credit in the near term.
The company will also be able to claim corporate tax credits based on the capacity of domestically manufactured storage products it ships. That’s valuable for companies that are scaling production to compete with lithium-ion, which enjoys economies of scale from the ramp-up in EV manufacturing.
“It’ll help us to achieve break-even profitability sooner in our scale-up than we were otherwise planning,” McDermott said.
As was pointed out again and again at the clean energy trade show, the details of the new tax credits still need to be written. But the direction of the policy is clear enough for manufacturers like ESS and its customers to get moving on deals.