Tesla alum aims to build the power company of the future

It is a truth universally acknowledged that an electrical grid in possession of rapidly growing renewable capacity must be in want of energy storage.

Climatetech entrepreneur Ryan Hanley aims to speed up the pace of clean energy development in competitive power markets, and his first goal is to make grid storage easier to finance and build. His new startup Equilibrium Energy has launched in Texas with an offer to pay battery owners for the right to bid their storage capacity into the wholesale markets, which are growing increasingly volatile as renewable generation in The Lone Star state soars. Hanley hopes this style of contract, called a ​“tolling agreement,” propels grid batteries into the mainstream the way power-purchase agreements boosted the young wind and solar industries.

Since launching quietly in 2021, the startup has raised $33 million, hired a staff of 90 and signed its first tolling agreement with a major battery developer, Jupiter Power. But that storage contract is just the first product to go live, Hanley told Canary Media in an exclusive interview about the previously stealthy venture.

“In the near term, we’re providing a critical enabler for the battery industry, providing finance that helps more batteries get built faster, which in turn supports ever-increasing renewables,” said Hanley, a veteran of Tesla​’s grid battery business, among others. ​“In the long term, we believe that we need more companies dedicated solely to climate, and we hope to become a next-generation power company that helps the entire industry move quicker in its fight against climate change.”

In Equilibrium’s first commercial deal, the startup pays Jupiter Power a monthly fee for the next seven years to operate a 100-megawatt battery system in West Texas. Equilibrium currently dispatches that battery for optimal profit in the wholesale markets of Texas grid operator ERCOT. Of course, actually making money in Texas’ rough-and-tumble merchant power markets is never guaranteed. To increase its odds of success, Equilibrium built an AI-enhanced digital trading platform to orchestrate its bids based on analysis of the myriad variables influencing the markets.

“Every power company needs to become an expert in volatility management,” Hanley added. ​“We intend to become just that.”

Lessons from cleantech startups and energy incumbents

Equilibrium’s task is to combine the best qualities of the world’s most innovative companies with the deep expertise of the energy and power-sector incumbents, Hanley said. He can speak convincingly to both, having split his career between agile clean-energy startups and legacy energy giants grappling with the changes afoot.

Hanley spent time at California utility Pacific Gas & Electric, working on distributed energy before hopping to SolarCity, the once-leading rooftop solar company that Tesla later absorbed. In 2017, when Elon Musk wagered he could give South Australia the world’s largest battery in 100 days or it would be free, it fell to Hanley to figure out how to actually operate the battery once it could bid into Australia’s wide-ranging wholesale markets.

That experience enabled him to become chief product officer at AMS, the commercial storage pioneer that pivoted to building software to operate batteries in competitive markets (later acquired by grid battery supplier Fluence). From there, Hanley went to Shell, where he led the effort to construct a single digital platform for coordinating the European oil company’s prolific acquisitions of climatetech startups.

Back in 2019, Shell was buying up serious cleantech startups from around the world, and it had committed to building a billion-dollar clean energy business, in marked contrast to other oil majors that preferred to invest in marketing campaigns about dead-end algae biofuels or whatnot.

“I’m at a big oil and gas company because the problem requires scaled resources and scaled ambitions,” Hanley told me at the time, later adding, ​“At some point, you need the ability to go after the entire value chain to make a real difference.”

Hanley finished the assignment at Shell, then left the company in 2021 after two and a half years. He quickly raised $3 million in seed funding from Breakthrough Energy Ventures, which then led a $30 million Series A for Equilibrium in February 2022. BEV managing director David Danielson, who previously had helped to stand up the Department of Energy’s ARPA-E division, told me he’d been impressed by Hanley’s ​“crystal-clear vision for what it was going to take to enable this low-carbon, cost-effective, reliable grid of the future.”

Hanley’s professional trajectory imparts a certain lesson: Incumbents may have considerable resources to tackle decarbonization, and they may acquire or build some really innovative technologies to serve that goal, but those tools won’t move the needle unless the corporate culture is properly aligned toward climate action.

“We think there is plenty of opportunity to make a better power company for this moment,” Hanley said in July. ​“It comes down to tailor-making a company for the climate challenge at hand. The previous companies were built for different reasons.”

The battery sector is booming, but it could grow faster

How can energy storage want for financing in 2023, when more grid batteries are getting built than ever before?

Grid battery developers still struggle to find the financing they need when they can’t show a long-term revenue commitment, Hanley said. Developers can win a long-term contract with a utility, but that narrows the field to states with regulated utilities that have embraced grid batteries, or been compelled to by state policy. In competitive wholesale markets, batteries are still so new there isn’t much to point to in terms of a track record of earning market returns, and that makes lenders uneasy.

Developers have nonetheless managed to build a record amount of grid storage. To do so, they need to raise enough money to stake their own capital on a project, or find private-equity backers willing to take the risk — hence the flurry of acquisitions of promising storage developers. In Hanley’s view, these routes to financing storage projects don’t match the pace of construction needed for rapid grid decarbonization: The cost of capital is too high, and the number of financiers is too small.

Equilibrium aims to break the impasse by bottling up the risk that a battery plant won’t bring in enough money, freeing battery developers to build without worrying about that. Put another way, Equilibrium’s trading algorithm needs to work well enough to bring in more revenue each month than it pays to rent grid batteries.

Customers signing up with Equilibrium have to trust that the startup itself will stick around long enough to honor the long-term contracts. The company bolstered its case by partnering with Hatch Renewables, which funds letters of credit to serve as collateral for the contracts, Hanley noted.

“We assessed Equilibrium alongside other parties and were impressed by their strong motivation about the storage opportunity and their understanding of battery systems,” said Gian Paul Handal, Jupiter’s VP of origination. He added that the team has been ​“great to work with,” though it’s too early to report much more about how the initial contract is performing.

Investors like Danielson are willing to bet on Equilibrium’s success because Hanley already assembled similar battery trading platforms at Tesla, AMS and Shell. Danielson added that the broader team combines data-science chops with a deep understanding of physical grid infrastructure and power markets.

Energy storage owners have a few options already for software as a service to help them operate their assets more profitably — these include Tesla’s Autobidder and Fluence’s Mosaic, the rebrand of AMS’ technology. In contrast, Equilibrium isn’t selling subscriptions to its software: It uses its algorithm to offer battery owners predictable revenue, then uses its software to generate value for itself.

Ultimately, the best way for Equilibrium to make a case for itself will be to win in the markets. But Equilibrium has already checked off the milestones stipulated in its seed and Series A funding rounds, Danielson noted. That means there could be some more fundraising and new clean energy products on the horizon.