SoftBank’s renewables developer just made the biggest flow battery purchase ever

The huge order is a boon for SPAC-bound manufacturer ESS and a vote of confidence in its lithium-ion alternative.

ESS will need more automated manufacturing lines like this one at its Oregon factory in order to fulfill the 2 gigawatt-hour by SB Energy. (ESS)
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The renewable developer subsidiary of SoftBank Group is making a big bet on an unorthodox grid storage technology: iron flow batteries.

SB Energy signed a deal to buy 2 gigawatt-hours of iron flow energy storage over the next five years from ESS, an Oregon-based startup. The products will be used in large solar projects SB Energy is developing in California and Texas, to store electricity and deliver it to the grid at more lucrative times.

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That’s an unheard-of sales volume for flow batteries, a long-simmering alternative to the dominant lithium-ion battery for storing large amounts of clean electricity. 

Flow batteries, which store energy using a liquid electrolyte rather than stacks of battery cells, have been kicking around in laboratories for decades; more recently, they’ve popped up in several venture-backed startups. They promise better fire safety and more longevity than lithium-ion. But they so far have been unable to achieve much scale in the grid storage marketplace. ESS’ most recent sales announcement, made just last week, was shipping 8.5 megawatt-hours to Enel Green Power España — orders of magnitude smaller than the SB Energy deal.

The growth prospects for flow batteries as an asset class remain uncertain, but SB Energy and parent company SoftBank have a history of taking risks on obscure storage technologies. 

In 2019, one of SoftBank’s funds invested a record $110 million in Energy Vault, an early-stage company building cranes that store energy by stacking and unstacking heavy blocks. And SB Energy is no stranger to ESS: It co-led a $30 million Series C investment in ESS in 2019. Both Energy Vault and ESS have since decided to go public via merger with a special-purpose acquisition company (SPAC), each targeting valuations of more than $1 billion.

Of course, the 2 gigawatt-hour flow battery purchase hasn’t actually happened yet. Only one of ESS’ Energy Warehouses, a 90-kilowatt/450-kilowatt-hour unit, has been delivered to an SB Energy site in Davis, California. 

Energy Warehouses outside the ESS factory in Oregon (Julian Spector)

The deal is not a strict take-or-pay” agreement, which would put SB Energy on the hook whether or not it ends up needing all 2 gigawatt-hours, ESS CEO Eric Dresselhuys told Canary Media. Instead, the contract allows some flexibility. As SB Energy finalizes its projects, the companies will lock in a firm delivery schedule. The two companies estimate the total value of the deal at around $300 million, but ESS will get paid bit by bit as it delivers shipments. 

It’s a competitive advantage for them to know that they’ve got the supply queued up to go,” Dresselhuys said. 

Look what I just bought”

The announcement is part of a recent trend — recent as of this week! — of clean energy companies choosing to broadcast that they’ve placed orders for large amounts of storage. 

Arevon, an owner of large battery projects including the one that beat a proposed gas plant in Oxnard, California, said this week it had agreed to buy 2 gigawatts of battery capacity from Tesla. 

Storage integrator Fluence filed this week to go public via a good old-fashioned IPO. In its filing, the company said it had ordered approximately 20 gigawatt-hours of battery supply through 2024

Battery developer and owner Key Capture Energy announced Thursday that it struck a deal with solar inverter manufacturer Sungrow to buy fully integrated two-hour battery systems” totaling 390 megawatts, for projects under construction this year and next. Key Capture recently was acquired by South Korean firm SK E&S, which committed $1 billion to building out its storage development pipeline.

Now SB Energy is touting its storage supply chain, but with flow batteries instead of lithium-ion.

In the past, energy companies didn’t make a habit of bragging about acquiring the basic building blocks they need to do their jobs. But the propulsive growth in demand for grid storage outstripped supply this year, as Canary Media reported previously, so now companies want to broadcast that they’ve secured the batteries they need. Arevon referenced this market dynamic in its press release, with COO Justin Johnson stating, This agreement ensures that Arevon can deliver near-term storage solutions to our customers, mitigating the risk of supply shortages and project delays.”

Vote of confidence in flow batteries

For ESS, the value of the announcement comes in signaling that serious renewables developers are buying its products, as the company prepares for an imminent SPAC listing. Enel, the buyer announced last week, and SB Energy both develop gigawatts’ worth of renewables. It’s unusual for such companies to venture away from the lithium-ion batteries that make up nearly 100 percent of grid storage sales today.

Once people see the validation come from some of these really big players who don’t just place a purchase order and hope for the best…that gives other folks in the market a lot of comfort,” Dresselhuys said. 

SB Energy’s willingness to go big on iron flow follows years of due diligence it conducted as an investor in ESS. The former doubled down with a commitment to buy more shares as part of the SPAC transaction. If news of the big purchase encourages investors to buy more ESS stock once it’s listed, both ESS and SB Energy stand to benefit.

Then ESS has to actually deliver on the commitment, which wildly exceeds the scale it has produced previously. Its factory outside of Portland currently produces 250 megawatt-hours per year, Dresselhuys said. But ESS is adding a new generation of high-speed manufacturing equipment that should bump up the capacity to 2 gigawatt-hours annually, with completion on the overhaul expected sometime next year. 

That would let ESS fulfill its obligation to SB Energy while having production capacity to spare for other customers. 

Julian Spector is an editor at Canary Media and reports on the rise of clean energy. He worked at Greentech Media for nearly five years, and before that he reported for CityLab at The Atlantic.