Is Azelio’s abrupt bankruptcy a bad omen for long-duration energy storage?

Many say long-duration storage is the energy transition’s holy grail, but startups in the space are staring down brutally tough market conditions.
By Eric Wesoff

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A white man wearing black clothes kneels next to a mechanical device in a lab facility
Azelio's solutions development lab (Azelio)

Azelio, a Swedish startup that aimed to supply thermal storage technology to long-duration energy storage applications, filed for bankruptcy last month. It’s the most recent sign that the fledgling long-duration energy storage sector is overinvested and early to the party. 

Long-duration energy storage (LDES) has been hailed as the key to smoothing renewable energy delivery during long stretches without sun and wind. Azelio claimed its storage system could provide power for 13 hours, far more than the four hours delivered by the lithium-ion battery technology that’s dominant today.

Redeye Nordic Growth, an investment bank, was caught off-guard by the bankruptcy: We are surprised by the announcement and the swift decision to surrender, as the company during late June was said to have several processes up and running to secure financing.” 

Azelio’s thermal energy storage technology aspired to store energy as heat in an aluminum alloy material, which would then be converted to electricity using a Stirling engine, a known bankruptcy-inducing technology. Azelio intended to use heliostat-based concentrated solar power, another failure magnet for startups, as part of its technology suite. 

Azelio was not able to secure enough financing to complete negotiations with a potential strategic partner, according to a release.

The energy storage company had listed its shares on the Nasdaq First North bourse in 2018 and raised about $21 million from the offering. Its shares were delisted after the bankruptcy announcement. The company had 153 employees as of 2020, according to its annual report from that year.

Azelio executives have not responded to inquiries from Canary Media. 

The crowded thermal energy storage sector

More than 50 startups are hammering away at LDES, and their technologies fall into four broad buckets: thermal, electrochemical, mechanical and geomechanical. Canary Media covered these categories and many of the companies competing within them two years ago, and not a lot has changed since then. The technologies are still difficult to tame and the markets are still undeveloped, but venture capitalists continue to pour money into the sector. 

Thermal storage technology — Azelio’s category — uses excess or curtailed power to charge a thermal battery” made of materials such as molten salt, molten metal or minerals. That stored heat can be used directly or converted to electricity, and in some cases can achieve the 10-hour threshold that’s generally considered long-duration.”

There are still plenty of thermal energy storage aspirants in the fight:

Some of these companies are targeting utilities as customers (as was Azelio), but others are going after large users of process heat such as the paper, cement, textiles and food-processing industries, aiming to serve behind-the-meter applications. This latter group of thermal-storage companies might be able to get to market much faster than those aiming to be grid-connected, because anything involving utilities or public utility commissions is slow-moving.

The long-elusive grail of long-duration energy storage 

LDES could improve the dispatchability of renewables such as solar and wind, accelerate the retirement of fossil-gas peaker plants, and lessen the congestion on overloaded transmission and distribution infrastructure — at least in theory. 

According to conventional wisdom, long-duration energy storage is the missing puzzle piece that solves many of the problems caused by the intermittency of renewables. It’s what’s needed to keep renewable-heavy grids up and running during a Dunkelflaute event, a German term meaning dark doldrums” — extended periods when little wind or solar energy is generated.

But the reality on the ground is nowhere near that simple.

Unlike short-term energy storage, which is a consistent, booming market with real commercial products increasingly being integrated with grids at scale, LDES is still largely mired in the realm of pilot demonstrations. LDES projects just don’t pencil out financially, yet. 

The U.S. Department of Energy’s Loan Programs Office believes that for LDES to achieve commercial liftoff” by 2030 to 2035, improvements are needed in technology, supply-chain development, and market and regulatory mechanisms. A recent report from the Loan Programs Office defines commercial liftoff as the point where the LDES industry becomes a largely self-sustaining market that does not depend on significant levels of public capital and instead attracts private capital with a wide range of risk.”

In order to meet the Biden administration’s electrification and decarbonization targets, the U.S. electrical grid may need 225 to 460 gigawatts of LDES capacity by 2050, amounting to $330 billion in total capital requirements, according to the Loan Programs Office. That colossal amount of LDES could supplant as much as 200 gigawatts of new fossil-gas peaking capacity, per the report.

But in order for the grid to incorporate LDES, deep structural changes are going to have to be made in the way utilities and regulators model the electrical system and how they plan for growth, capacity and transmission. Market mechanisms and regulations will need to be adapted to the economics and behavior of LDES.

Most of the VC-funded startups in the LDES sector will face a similar fate to Azelio in what will be a fraught, decade-long march to a viable LDES market and industry.

Eric Wesoff is the editorial director at Canary Media.