Newsletter: Form Energy’s long-shot business plan just might work

A few weeks ago, we learned the secret recipe for Form Energy’s potential grid breakthrough, which promises to replace gas plants with clean energy storage.

But the revelation that Form’s technology is basically controlled rust left a crucial question unanswered: How do you actually make money on that?

That got Canary Media editor-at-large David Roberts thinking, and he came back with an investigation into the business case for super long-lasting clean energy storage. 

What’s interesting here is that smart people disagree on this.

Markets today don’t reward the ability to store more than a few hours of energy. Skeptics of Form have a hard time seeing the chain of events that gets us from the world we live in to a place where it makes sense to build a power plant for the rare events when you need 150 hours of electricity discharge.

That’s a fair critique, and plenty of flashy grid startups have failed because they built cool tech without a clear pathway to making money from it.

But David gleaned a few things from his interview with Form CEO Mateo Jaramillo that counteract the skepticism:

1. Form isn’t really selling 100-hour storage, even though it’s advertising that capability. Jaramillo pitches his technology as a competitor to natural gas. Form still has to prove it can get cheap enough to beat gas at its own game. But if it can, it won’t need some radical market redesign — the markets already know how to price the services gas plants provide.
2. The future is already here in certain places. Renewables’ market share is still quite low as a national average, but solar and wind hot spots have much higher local rates of adoption. There are also numerous places where it is illegal or otherwise unfeasible to build new gas plants to serve the grid’s reliability needs. 
3. Form doesn’t need to be viable everywhere. It just needs to find enough foothold markets to prove that it works and the projects can compete. And it seems likely the company can find enough spots like that to keep it busy for the early commercialization period.

There’s another piece that’s hard to predict because it rests on the psychology of the people making decisions at utilities. Utilities are already turning away from coal en masse for both sustainability and financial reasons. For years, gas was the go-to replacement for coal, but its role as heir apparent is becoming less secure by the day, David writes.

It’s one of the most important questions in clean energy right now: whether the shift in U.S. electricity away from natural gas will be slow and steady or whether it will happen the way a Hemingway character famously described going bankrupt: gradually and then suddenly.

It’s easy to say nobody will buy from Form when nobody has ever bought something like this. 

• But if Form starts selling a cost-effective and clean alternative to gas plants, that very fact will initiate more serious conversations about alternatives to gas plants. 
• We don’t know how quickly that change will percolate through the utility industry.

All of this relies on Form hitting its extremely aggressive cost targets and performing as well in the field as it does behind closed doors.

But this strikes me as a perfect instance of the business maxim that the best way to make money is to be right about something everyone else is wrong about. If Form is right, it’ll defend its riches with a moat the size of the English Channel. More importantly, it’ll have a shot at solving a major outstanding challenge of the transition to clean energy.

(Lead photo: James Dibo/Unsplash)

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