Element Energy raises $28M for grid storage powered by used EV batteries

Lithium-ion batteries are reshaping the automotive and grid industries, but fire risk continues to stymie widespread adoption. Automakers have resorted to billion-dollar recalls to deal with batches of defective batteries, while fires periodically shut down grid battery plants. Even fires limited to a single container can disrupt surrounding communities.

Neither wholesale recalls nor fire containment are attractive or scalable responses to the risks that come with energy-dense lithium-ion batteries. A company called Element Energy has come up with a better idea: It says it can safely isolate and control problematic cells within larger battery packs using a combination of battery-management hardware and proprietary software.

“What we want to do is prevent fires as much as possible,” said Tony Stratakos, the co-founder and CEO.

Element hasn’t spent much time trumpeting its ambitions to the media. Instead, the company has honed its technology behind the scenes, revealing Wednesday that it had raised $28 million from marquee names in venture capital in the first close of its Series B funding round.

The company pitches its product as a far more granular set of battery controls than the current industry-standard approach. This has implications far beyond fire safety.

By customizing the charge and discharge rates of individual battery cells, Element Energy can prolong the useful life of the battery pack, getting more energy throughput over more years than would be possible with conventional controls. And the company believes it can extend the life of used electric-vehicle batteries for so-called ​“second-life applications,” by tracking the different degradation patterns and accounting for them.

To prove the point, Element is deploying its technology in what will be the biggest grid storage plant made up of used EV batteries.

Smart controls for lithium-ion batteries

Over the last decade, batteries have plunged in cost and surged in potency, but the control systems that govern all the battery cells that make up a battery pack haven’t changed much.

“Battery management system architectures have been effectively unchanged since the early days of lithium-ion batteries,” explained Stratakos, who earned a doctorate in electrical engineering from the University of California, Berkeley in the late 1990s. ​“The charge/​discharge controller treats every battery in the pack as if they were identical.”

The problem is, all those cells wear down at different rates. After years of heavy use propelling an electric car through the streets or injecting power into the grid every day, some cells stay healthier while others degrade faster.

The worst-case scenario happens when a defective cell gets pushed to the point it catches fire. But short of that dramatic failure, conventional battery controls mean customers often don’t get the full capabilities out of their batteries.

“The weakest cell in the pack will constrain the amount of energy that can be delivered into or out of the pack,” Stratakos said.

Element Energy takes a different approach: Control your batteries at a more granular level, like the cell or the cluster of cells known as a module. Charge weaker cells at the level they can handle safely, and charge stronger cells faster. It’s a similar concept to the distributed power electronics that have come to dominate rooftop-solar installations, generating fortunes for Enphase and SolarEdge along the way.

In the course of building this tech, Stratakos said, the team realized that granular controls allowed for running experiments: You can isolate different cells, send them different signals and study how they respond. Doing this led the company to develop diagnostics for batteries, such that they can detect signs of weakness from cells long before any danger appears and flag those cells for monitoring and special treatment.

For instance, Element can direct a battery pack to limit the charge rate for a particular weak cell, eking out more useful life from it without pushing it to the point that it malfunctions, Stratakos said. When it reaches the limits of safe use, the company can discharge the defective cell, rendering it harmless, while operating the rest of the system normally.

Path to market through used-battery power plants

Exciting science is all well and good, but how do you get it out into the world? Element chose arguably the toughest assignment for a newcomer battery-management system: second-life batteries, which Stratakos likened to ​“bruised fruit.”

When packs get pulled out of electric vehicles, they typically have a good deal of life left in them, but the cells have all degraded in different ways that are difficult to measure. And if developers hope to combine used batteries from different cars and different manufacturers into one system, they need to manage all that heterogeneity. Messing this up could lead to batteries dying sooner than expected or even cause fires.

Element Energy chose to make its first push to market with used EV batteries. The company set up two small-scale pilot projects, and next year it will supply a 50-megawatt-hour second-life battery project. The U.S. Department of Energy awarded $7.9 million to support the project, attached to a West Texas wind farm owned by renewables juggernaut NextEra Energy Resources.

That’s far bigger than any grid-scale energy storage plant made of used batteries that Canary Media is aware of. The largest we’ve covered is B2U Storage Solutions’ project in Lancaster, California, which now stores 21 megawatt-hours and sells power into California’s wholesale power market.

But Element’s 50 MWh foray is just an appetizer. The company has stockpiled some 2.5 gigawatt-hours of second-life battery capacity, which it plans to deploy in late 2023 and 2024. Stratakos declined to name which automakers these batteries came from but said they were ​“lightly used,” retaining at least 90 percent of their original capacity. And they offer ​“substantial” savings on upfront cost compared to brand-new lithium-ion batteries.

A large volume of cheap batteries is more attractive than ever because the storage market is struggling with high demand and limited supply of new lithium-ion batteries. After a decade of regular declines, costs rose this year, according to BloombergNEF.

So far, storage plant developers have been loath to take the risk on used batteries. But the extreme supply-chain circumstances could inspire newfound curiosity.

“The demand for batteries is super high,” said Tim Woodward, who led Prelude Ventures’ investment in Element. ​“Because of that demand, there’s a willingness to try something. […] If they try it and it works, it opens up the whole opportunity for us.”

Serial founder strikes again 

Element Energy moved quickly from its launch in 2019, in part because its technology benefited from years of R&D work at Stratakos’ previous startup, Volterra Semiconductor. That company, which handled efficient charge and discharge for computers and servers, went public in 2004 and was later acquired by Maxim Integrated in 2013.

But second-life battery controls weren’t a core business interest for Maxim; Stratakos got to spin the concept out as a standalone company in 2019, with a $15 million Series A raise. Now Element is pursuing a business model that combines hardware sales of its battery controls with cloud-based software services to compute the data.

The first close of the Series B round was led by Cohort Ventures, a firm led by military veterans, and an unnamed ​“leading renewables developer and asset owner,” a phrase that aptly describes NextEra. Other investors include LG Technology Ventures, Edison International, Prelude Ventures and Radar Partners.

Radar Partners founder Kevin Compton made the first investment in Element, two decades after he was the investor at Kleiner Perkins who sent the first check to Stratakos’ startup Volterra.

“You don’t have to worry about the team or the talent or the integrity of the guy — you know the person,” Compton said.

Compton envisions a future where batteries across the grid and vehicle sectors use more sophisticated, data-rich controls to reduce fire risk and extend their useful life. That market is ​“Tony’s to win or lose,” he said.

“I really follow all the other battery-management systems,” Compton said. ​“I haven’t seen anybody even close.”