Flow batteries scale up to GW production
Originally published in the September 2019 edition of PV Magazine
By Benedict O’Donnell
A new cavern of wonders is rising from the sands of Saudi Arabia. A century after transforming the global energy sector with cheap, abundant oil, the Kingdom is now building the first gigawatt-scale factory for redox flow batteries, a technology that proponents argue will slash the price of storing solar energy.
Since the basic patent protecting redox flow batteries expired just over a decade ago, dozens of tech firms have raced to develop the technology and drive down its cost. In many respects, they have succeeded. Matt Harper, president of Avalon Battery, says that prices offered by leading manufacturers have come down 80% in less than five years. Lazard, an asset manager, calculates that the levelized cost of storing electricity in some redox flow projects now overlaps with that of lithium-ion batteries, the main competition. This year, sales of vanadium-flow batteries, the most established redox flow technology on the market, have grown from double digits to just over 200 MWh of installed storage capacity.
In spite of these achievements, Alex Eller, an analyst at Navigant, points out that redox flow batteries have yet to dent the energy market. He says that most of the 7,000 MWh of grid scale storage coming online this year will be met by lithium-ion batteries, followed by pumped hydro and other established storage technologies, with flow batteries trailing behind.
“Flow battery projects have so far been relatively small scale,” said Eller. “We are only just starting to see large-scale commercial projects in the works.” While he sees many hurdles still facing the emerging redox flow industry, Eller is also convinced of the technology’s potential to reduce the cost of storing renewable energy.
Zero degradation
Undercutting the record-low prices set by lithium-ion batteries will be no small challenge. In recent years, global electronics brands including Samsung, LG and Panasonic have streamlined assembly lines capable of producing gigawatt-hours of lithium-ion batteries each year. Prices have come down faster than expected and sluggish demand for electric vehicles has led to a glut of cells now being sold at cutthroat prices to store power on the grid.
Fierce as this competition may be, flow batteries have an ace up their sleeve. Unlike the lithium-ion batteries they compete with, their electrolytes do not degrade. According to Richard Wills at the University of Southampton, what sets the technology apart is its architecture. Rather than distribute electrolytes within each cell, a flow battery separates electrolytes into external tanks and pumps the liquid through active elements that store and deliver energy. At first glance, the device looks more like a chemical treatment plant than an AA battery.
Redox flow technology raises new challenges. To function, these batteries require pumps and aqueous electrolytes that suffer from comparatively low energy densities. They also reduce the efficiency of the energy conversion process, they are unwieldy for most forms of transport, and they increase the floor space needed to house components.
But Wills says that redox flow technology can also charge and discharge batteries without degrading their performance. “The reactions undergone in redox flow batteries are surface electron transfers which are less susceptible to degrade electrodes and current collectors,” said Wills, adding that the large volume of aqueous electrolyte pumped through the cell stack also helps dissipate heat, a key burden on materials and notorious fire hazard in lithium-ion batteries. Cooler operation leads to higher safety margins, longer equipment lifetime and lower maintenance costs. On paper, this makes flow batteries safer than Li-ion technology and cheaper over the duration of a storage project.
“We have run a vanadium flow battery through 24,000 hours of very aggressive cycles and still cannot measure any degradation on the battery’s performance,” said Alex Au, CTO of Nextracker. Three years ago, the U.S. tracker supplier added energy storage solutions to its catalogue Au tested more than 40 technologies in-house to select products compatible with lifelike fluctuations in demand on electricity grids. The vanadium flow batteries made by Avalon Battery made the cut. “They even boast less degradation and a better warranty than any solar module on the market today,” said Au.
Vanadium rental shop
Back at Navigant, Alex Eller says that the extended lifetime and dependability of flow batteries should in principle recommend the technology for secluded electricity generation assets, in particular solar arrays, keen on storing vast volumes of electricity for several hours until its value peaks on the wholesale market. But the limited track record of large-scale flow battery projects has so far limited their deployment.
“Flow batteries face a severe trust issue,” said Eller. He explains that the main companies buying batteries today are risk-averse project developers. These procurement teams want to make sure that the manufacturer of the battery they select still exists in ten years’ time in case they need to replace faulty purchases. As a result, they favor working with reputable lithium-ion behemoths, rather than upstart redox flow pioneers, regardless of the long-term cost projections of the project.
In a similar display of conservatism, no established lithium-ion manufacturer has so far ventured into the redox flow battery business. Eller ventures that their reluctance is caused by market uncertainty. It remains unclear which variant of redox flow technology will come out on top. “Flow batteries using vanadium electrolytes are very good, but vanadium is expensive,” he says. The cost of the raw material already inflates capital expenditure for vanadium flow projects by over 30% and investors fear that fluctuations in commodity prices could strangle supply chains.
Matt Harper at Avalon Battery claims that creative financing and vanadium leasing schemes are making vanadium flow projects more bankable. To reassure jittery buyers, manufacturers have started securing warranties from third parties. Insurers like New Energy Risk in the United States will cover falls in battery performance over the 20-year lifespan of a redox flow project, even if the battery manufacturer goes out of business. These contracts effectively guarantee returns from an energy storage project so that its developer can trust the insurer, even if they are still growing familiar with the manufacturer.
Likewise, business solutions are dampening the risk of vanadium supply chains by allowing clients and battery manufacturers to lease their electrolyte. Vanadium producers including Glencore and Bushveld Energy are prepared to rent out the metal and recycle it, shouldering part of the capital expense of the project. “The vanadium electrolyte does not degrade and can be fully recovered at the end of the battery’s life,” said Mikhail Nikoramov, CEO of Bushveld Energy.
Harper claims that these advances have brought the vanadium flow industry to the same inflection point that geared up lithium-ion manufacturers in the 1990s when consumer electronics entered mass production. So far, redox flow batteries have filled niche applications, typically where fire safety is of particular importance. But as its price verges on that of lithium-ion batteries, Harper expects redox flow technology to storm the stationary storage market. He calculates that this growth could reduce Avalon Battery’s prices below $40/MWh, turning solar into “a truly dispatchable asset, capable of displacing all other sources of electricity on the grid.” In his view, the key to cutting costs is a mature supply chain and standardization.
Saudi Qualität
This is good news for the 70,000-square meter factory taking shape in Saudi Arabia. Its opening in 2020 will deliver over 1 GWh of redox flow storage capacity to the market each year, bringing unprecedented economies of scale to an industry that has so far had to make do with tailor-made solutions as it contends with mass-produced competition.
The Saudi plant will churn out vanadium flow batteries developed by Schmid, a German PV equipment supplier with 150 years of experience in industrial engineering. The family business branched out into redox flow batteries in 2011, commercialized its first vanadium flow battery in 2014, and set out in search of partners to scale up production.
Schmid struck a deal this year with RIWAQ, a Saudi construction firm, and Nusaned Investment, a subsidiary of Saudi petrochemicals giant Sabic, which finances technologies supporting policies set out by Saudi authorities. In 2016, the Kingdom announced its Vision 2030 plan to reduce national dependence on oil revenues, notably through massive investment in renewables. The venture brings together some of the most venerable veterans in the flow battery industry with exceptionally deep pocketed investors.
“The new Schmid deal in Saudi Arabia is very exciting,” said Maria Skyllas-Kazacos, who invented redox flow technology in the 1980s. She adds that the plant “will definitely help to provide the production scale needed to further reduce costs.”
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New Energy Risk Welcomes Strategic Hires to Drive Growth & Streamline Client Experience
SAN FRANCISCO, Sept. 26, 2019 /PRNewswire/ -- New Energy Risk, an affiliate of global insurer AXA XL, announced the appointments of Dr. Matt Lucas as Managing Director, Business Development and Dvorit Mausner as Director of Execution. The strategic additions of Dr. Lucas and Ms. Mausner come at an exciting time in New Energy Risk's evolution, as the company surpassed $1.99B in aggregate transactional value supported by its technology performance insurance solutions.
Tom Dickson, CEO of New Energy Risk, remarked that "as we look toward the future, New Energy Risk seeks to expand its business and associated benefits to novel technologies across new sectors and geographies, and provide support for a greater variety and size of projects. Matt and Dvorit joining our team is a pivotal moment for New Energy Risk as we expand into new technology sectors.
"As the renewable energy sector continues to explode, technology providers are increasingly looking to New Energy Risk to help take revolutionary technologies from development to deployment and commercial scale," Mr. Dickson added. "By bringing on Matt to lead business development and Dvorit to streamline operations, we expect to better serve an increasing number of clients with a more efficient process."
In his new role, Dr. Lucas will lead New Energy Risk's expansion into new technology sectors, geographies, and products. He brings both technical and commercial experience at large corporates and startups to New Energy Risk. He was previously a technology scout for a large corporation, then had operating experience in multiple hardtech university spinoffs, and exposure to public policy advising in the nonprofit sector. Dr. Lucas received his PhD from UC Berkeley in Mechanical Engineering.
Ms. Mausner will support the streamlining and management of the entire client experience. She brings experience scaling six previous operations across the for-profit, academic, and non-profit sectors. She has previously directed engagement for international fundraising and behavior-change campaigns and revitalized a 6,000 sq ft science makerspace. Ms. Mausner is also co-founder and partner of Temescal Brewing in Oakland. Most recently, she designed a pre-seed carbontech startup accelerator. Ms. Mausner studied at the University of Pennsylvania, where she earned a business certification from the Wharton School, a Master's in Philanthropy and Social Justice, and a Bachelor's in the Biological Basis of Behavior.
New Energy Risk has also promoted other personnel. Sherry Huang is now Chief Actuary, and Brentan Alexander assumes the role of Chief Commercial Officer in addition to his existing role of Chief Science Officer.
Visit the www.newenergyrisk.com/team to learn more about Dr. Lucas and Ms. Mausner, and to connect with New Energy Risk via [email protected].
About New Energy Risk
New Energy Risk is a leading provider of performance risk solutions for breakthrough energy technologies and a pioneer in the development of large-scale technology performance insurance. The company was founded in 2010 to provide complex risk assessment and serve as a bridge between technology innovators and insurers. Since then, New Energy Risk has supported project finance transactions in aggregate value of over $1.99 billion for renewable energy and new technology deployments. New Energy Risk is an affiliate company of AXA XL. To learn more, visit www.newenergyrisk.com.
About AXA XL
AXA XL provides insurance and risk management products and services for mid-sized companies through to large multinationals, and reinsurance solutions to insurance companies globally. We partner with those who move the world forward. To learn more, visit www.axaxl.com
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New Energy Risk Backs $260M Plastics-to-Fuel Plant with Innovative Insurance Solution
New Energy Risk Backs $260M Plastics-to-Fuel Plant with Innovative Insurance Solution
SAN FRANCISCO — April 22, 2019 — New Energy Risk, the leader in customized insurance solutions for renewable technology projects, has provided RES Polyflow, a leading plastics-to-fuel technology company, with a performance insurance program for its ground-breaking Ashley, Indiana plant. The project will be the United States’ first commercial-scale plastics-to-fuel project. Once completed, the facility will convert 100,000 tons of plastic into 18 million gallons of fuel and six million gallons of wax annually. By working with New Energy Risk (NER), RES Polyflow has reduced the overall cost of project capital, increased the certainty of execution, and made the bond offering more attractive to investors.
To finance this deployment, RES Polyflow and its parent development company, Brightmark Energy, raised an aggregate amount of $260 million, including $185 million in Indiana green bonds, underwritten by Goldman Sachs & Co. To streamline the financing, the companies approached NER, an affiliate of the global reinsurance group AXA XL, a division of AXA, to design a custom performance insurance policy that would mitigate technology risk for financiers interested in investing in this revolutionary project. NER used a systematic, data-driven approach to extensively assess the company’s technology, then developed an insurance product that covers the overall waste conversion process of the plant.
RES Polyflow’s plastics-to-fuel pyrolysis process sustainably recycles waste that has reached the end of its useful life — including items that cannot readily be recycled, like plastic film, flexible packing, Styrofoam, and children’s toys. The Indiana plant superheats and then converts plastic into ultra-low sulfur diesel and naphtha blend stocks, as well as commercial grade wax. In the future, the output could be turned back into plastic, creating the world’s first circular technology for plastics.
“New Energy Risk’s technology insurance solution was a critical factor in completing the financing for this project,” said Jay Schabel, President of Brightmark Energy’s plastics division and of RES Polyflow. “We have worked closely with New Energy Risk to assess the technical aspects of our project and design an innovative insurance solution. NER’s involvement successfully lowered our capital cost and served to raise bondholder interest in the project.”
“We’re proud to have supported Brightmark and RES Polyflow in their capital raise and are excited to see their leading plastics-to-fuel technology convert plastic waste into millions of gallons of low-carbon fuels,” said Tom Dickson, CEO of New Energy Risk. “Brightmark is leading the way in providing a technology solution to the world’s plastic waste problem, while replacing traditional fossil fuels in the process. We look forward to continue supporting their work in the years to come.”
This project is the latest in a string of industrial renewable projects New Energy Risk has supported. In total, NER has now supported $1.6B in renewable project financing, which will lead to over 500,000 tons of waste processed into 50M gallons of biofuel every year.
About New Energy Risk New Energy Risk is a provider of performance risk solutions for breakthrough energy technologies and pioneer in the development of large-scale technology performance insurance. The company was founded in 2010 to provide complex risk assessment and serve as an effective bridge between technology innovators and insurers. Since then, New Energy Risk has helped its customers gain over $1.6 billion in financing for renewable energy and new technology deployments. To learn more, visit www.newenergyrisk.com.
About AXA XL
AXA XL, a division of AXA, provides insurance and risk management products and services for mid-sized companies through to large multinationals, and reinsurance solutions to insurance companies globally. We partner with those who move the world forward. To learn more, visit www.axaxl.com.
New Innovative Insurance Instruments Will Accelerate Project Development And Deployment For TRI Biorefineries
BALTIMORE, Jan. 29, 2019 /PRNewswire/ — ThermoChem Recovery International, Inc. (TRI), the Baltimore-based gasification technology company at the forefront of commercializing biorefineries, is pleased to announce that it has signed a memorandum of understanding (MOU) with New Energy Risk (NER) that can help accelerate project development, increase profitability, and provide certainty of execution.
After completing due diligence on TRI’s suite of biorefinery-enabling technologies, NER, a leading provider of performance risk solutions for breakthrough technologies and affiliate of global insurance company, AXA XL, is prepared to provide various insurance solutions to biorefinery owners and projects which utilize TRI’s equipment and technology.
TRI has named New Energy Risk and AXA XL as its preferred supplier of technology performance insurance for TRI customers and projects.
“With NER taking the lead on providing solid insurance options to owners using our technology, we have eliminated a key obstacle to making commercial-scale biorefineries profitable and replicable,” said Dan Burciaga, President and CEO of TRI. “NER studied TRI’s 20-year track record of accomplishments and recognized a great opportunity to help make our projects more bankable. This is a great development for us, and for the whole industry.”
TRI is a leading provider of steam reforming gasification systems suitable for Municipal Solid Waste (MSW), woody biomass, agricultural residues and other waste feedstocks. Its systems have been selected for and deployed on various commercial North American projects including the Fulcrum Bioenergy Project Sierra Biorefinery in Nevada and Norampac black liquor gasification, a division of Cascades Paper. Additionally, TRI’s multi-feedstock, fully-integrated biorefinery in Durham, North Carolina has run for over 13,000 hours, successfully producing syngas that is particularly well-suited to generating Fischer-Tropsch liquids and upgrading to ASTM-certified fuels.
Burciaga said, “New Energy Risk understands this sector, and they understand our technology. What’s more, they know the types and levels of risk mitigation our project owners and investors need in order to get these projects over the finish line and to get steel into the ground.”
“Our business is in backing technologies with demonstrated reliability,” said Jon Cozens, Chief Commercial Officer at New Energy Risk. “We find the rigor to which TRI has developed and proven its technology to be one of the most thorough we’ve found, and over the last several years TRI has been associated with many of the highest quality projects New Energy Risk vetted. We look forward to accelerating the deployment of the TRI technology and providing assurance to owners and investors that the TRI technology will perform.”
About TRI
Founded in 1996 and headquartered in Baltimore, Maryland, TRI is a global leader in steam reforming, an ultra-clean and high-efficiency gasification technology well-suited to a range of biorefinery and power generation applications. TRI’s proprietary process converts cellulosic feedstocks (including post-sorted Municipal Solid Waste (MSW), bark, forest residuals, agricultural waste, energy crops and low rank coals) into a synthesis gas (“syngas”) which can be converted into biofuels, biochemicals and power. TRI partners with world-class technology and EPC providers and licenses its proprietary technologies — including feeder, gasification and gas clean-up systems — as well as provides specialized equipment and engineering services to the global renewable energy sector.
About steam reforming gasification Steam-reforming gasification is the first stage in the biomass-to-liquids process that converts woody biomass and other solid feedstocks into premium fuels. Gasifiers convert carbon-containing materials into carbon monoxide, hydrogen and carbon dioxide. This is achieved by reacting the material at medium temperatures (>700 °C), without combustion, with a controlled amount of oxygen and/or steam. The syngas is then cleaned and the carbon monoxide to hydrogen ratio adjusted if necessary to meet the specifications needed for input to chemical catalytic reactors, for example the Fischer-Tropsch (FT) process.
http://tri-inc.net/steam-reforming-gasification/
About New Energy Risk
New Energy Risk is a provider of performance risk solutions for breakthrough technologies and pioneer in the development of large-scale technology performance insurance. The company was founded in 2010 to provide complex risk assessment and serve as an effective bridge between technology innovators and insurers. Since then, New Energy Risk has helped its customers gain over $1 billion in financing for renewable energy and new technology deployments. To learn more, visit www.newenergyrisk.com.
About AXA XL
AXA XL provides insurance and risk management products and services for mid-sized companies through to large multinationals, and reinsurance solutions to insurance companies globally. We partner with those who move the world forward. To learn more, visit www.axaxl.com
Source provided by: ThermoChem Recovery International, Inc. (TRI) Jan 29, 2019, 07:00 ET
More Money Flows to Flow Batteries: ESS Nabs $13 Million Funding Round
More Money Flows to Flow Batteries: ESS Nabs $13 Million Funding Round
The company wants to expand its annual iron flow battery production to 900 megawatt-hours.
Iron flow battery maker ESS raised $13 million in a Series B round, expanding the pool of cash available to upstart alternative storage companies.
The money will go to automate and expand the manufacturing facilities where the Oregon company makes its containerized long-duration storage product, the Energy Warehouse. If all goes according to plan, the improvements will raise the six-year-old company’s annual output to 900 megawatt-hours.
That’s significant for the small field of long-duration contenders challenging lithium-ion’s dominance in the energy industry today.
Flow battery makers like ESS tout the relative safety of their ingredients compared to lithium-ion, with its flammability and rare earth metals. The alternative chemistries also provide long-duration storage, maintaining high levels of discharge well beyond the 4-hour mark typical of lithium-ion systems today.
The challenge is that little market opportunity exists for 8 hours of storage, and customers and investors tend to be leery of a technology that’s even newer and more exotic than the mainstream batteries.
The new round of funding suggests that at least some investors are changing their minds.
The Series B brought back original investors, including Pangaea Ventures. But it also welcomed new investors global chemical company BASF, Cycle Capital Management, Presidio Partners Investment Management and InfraPartners Management.
“After conducting extensive research across a range of battery technologies, designs and developers, we’ve concluded that ESS offers a superior combination of low-cost, clean, safe and long-life chemistry; scalable architecture, and management experience,” BASF Venture Capital Managing Director Markus Solibieda said in a statement.
ESS closed its Series A in October 2015, raising $3.2 million from Pangaea Ventures, Element 8 and other angel investors. At that time, the company had also been awarded roughly $4.5 million in grants from ARPA-E, the Oregon Nanoscience and Microtechnologies Institute, and Oregon Best.
This summer, VP of Business Development Bill Sproull told GTM that the near-term strategy is to use demonstration projects to raise awareness about the technology, and to work with EPCs and project developers to get units in the field around the world.
But, Sproull said, ESS is already getting revenue from its demo projects. “We have not had to donate systems to anyone,” he said.
Flow batteries more broadly have made some headway over the past several months.
NEXTracker, a leading solar tracker vendor, recently relaunched its flow battery product and confirmed that it had deployed some units, without saying how much capacity.
Vanadium redox flow battery maker Vionx launched a third-party performance insurance product backed by New Energy Risk. This offering reduces the trust barrier for customers — instead of relying on a young company with a miniscule balance sheet to back a 20-year product, the burden shifts to an established insurer. ViZn Energy similarly developed a third-party insurance product.
Flow battery contender Primus Power secured a $32 million equity raise in April to fund global expansion to Europe, China and South Africa. That brought total equity funding to $94 million, plus another $20 million in government grants.
Originally published at www.greentechmedia.com.
Turning Garbage to Jet Fuel
Insurance solution provides performance coverage for the output of Fulcrum’s garbage-to-fuels plant
New Energy Risk Designs Innovative Performance Insurance Program for Fulcrum BioEnergy, as Company Raises $150M for Landmark Waste-to-Fuel Project
Menlo Park, Calif., Dec. 12, 2017 /PRNewswire/ — New Energy Risk, a provider of customized insurance technology solutions for renewable energy projects, has provided Fulcrum BioEnergy, Inc., a company that turns municipal solid waste (MSW) into renewable transportation fuels, with a technology performance insurance solution for Fulcrum’s Sierra BioFuels Plant. The project, currently under construction outside of Reno, Nevada will have the capacity to process 175,000 tons of municipal solid waste into more than 10 million gallons of low-carbon synthetic crude oil on an annual basis, beginning in early 2020. The synthetic crude oil is then processed into transportation fuels. By turning municipal waste into fuel, Fulcrum is reducing greenhouse gas emissions by more than 80 percent, and providing a cleaner fuel alternative for airlines, the military, and other customers.
Fulcrum recently raised $150 million in bond financing for the Sierra BioFuels project, and turned to New Energy Risk, an affiliate of global insurance giant XL Catlin, to provide a performance insurance product to support the financing. The insurance complemented Fulcrum’s patented technology, industry-leading development team and process, as well as feedstock and off-take strategies, in order to increase project attractiveness to investors. Fulcrum’s existing investors include US Renewables Group, Rustic Canyon Partners, United Airlines, Waste Management, BP, and Cathay Pacific.
New Energy Risk is a specialty insurance technology company that acts as an effective bridge between new technology innovators, insurers and lenders. The company used a proprietary techno-economic model that synthesizes scientific understanding, engineering analysis, as well as actuarial and financial expertise to assess the performance of Fulcrum’s technology and potential output of the Sierra BioFuels Plant. After its extensive assessment of the MSW-to-fuels technology and process, New Energy Risk developed a custom solution, backed and provided by XL Catlin, to insure the performance of Fulcrum’s plant. The insurance program provides a significant technology risk mitigant for Sierra BioFuels Plant bondholders who have invested in this revolutionary project.
“The New Energy Risk technology performance insurance solution further strengthened our business model for the Sierra BioFuels Plant, and was an important factor in financing this project,” said Eric Pryor, Vice President and Chief Financial Officer of Fulcrum BioEnergy. “The New Energy Risk team worked closely with our engineering and technology teams to assess the technical aspects for our innovative project and were successful in creating an impactful and customized insurance product that provides significant risk mitigation for Fulcrum’s bondholders.”
“We’re proud to have supported Fulcrum in their capital raise and are excited to see their leading-edge technology and process grow in both scope and impact – taking a true waste product and converting it into millions of gallons of clean transportation fuels, and creating hundreds of jobs in the process,” said Tom Dickson, CEO of New Energy Risk. “Fulcrum is showing what is possible in the waste-to-fuel space, and doing it at unprecedented scale. We look forward to working with them on more projects in the years to come.”
About New Energy Risk
New Energy Risk is a provider of innovative data analytics and technology performance risk transfer solutions to the new and renewable energy industry worldwide, and pioneered the development of large scale technology performance insurance. It was founded in 2010 to provide complex risk assessment and serve as an effective bridge between clean-energy innovators and insurers, and is part of XL Innovate, an insurance technology venture firm. Since then, New Energy Risk has helped its customers gain over $1 billion in financing for renewable energy and new technology deployments. To learn more, please visit www.newenergyrisk.com.
About XL Catlin
XL Catlin is the global brand used by XL Group Ltd.’s (NYSE: XL) insurance and reinsurance companies which provide property, casualty, professional and specialty products to industrial, commercial and professional firms, insurance companies and other enterprises throughout the world. Clients look to XL Catlin for answers to their most complex risks and to help move their world forward. To learn more, visit xlcatlin.com.
About Fulcrum BioEnergy
Based in Pleasanton, California, Fulcrum is leading the development of a reliable and efficient process for transforming municipal solid waste – or household garbage – into transportation fuels, including jet fuel and diesel. The company’s plants will provide customers with low-cost, low-carbon drop-in fuel that is competitively priced with traditional petroleum fuel. Fulcrum, a privately held company, has aligned itself with strategic feedstock, technology and fuel offtake partners to further strengthen and accelerate the company’s innovative approach to commercially producing large volumes of renewable fuel from municipal solid waste. For more information, please visit www.fulcrum-bioenergy.com.
SOURCE XL Catlin
I Don’t Like Losses, Sport
We have news you can use today on the subject of the most powerful, inevitable, fearsome, mysterious, taboo, and untouchable four-letter word in the advanced bioeconomy lexicon.
Risk.
The problem of Investor risk is ridiculously easy to understand and ridiculously hard to solve. If you think back to your own 401(k) or IRA for a second, you’ll understand risk tolerance among financial investors in a jiffy.
Financial investors will tolerate very short-term cases of marginally sub-par returns and they have no tolerance at all of losses.
As Michael Douglas, in his Oscar-winning turn as Gordon Gekko in Wall Street, elegantly explained it:
“I don’t like losses, sport. Nothing ruins my day more than losses. Now you do good, you get perks, lots and lots of perks.”
The poor distribution of technology risk is a market failure, especially corrosive in the bioeconomy because risk concentrates like a hurricane and blows down those least able to bear it, like a bully picking out a mark on the playground.
And risk induces panic and suffocation long before it induces death, which is one reason why the Valley of Death is so unimaginably painful to ventures and the people in them. Chilling early-stage venture investing far more effectively and absolutely than the absence of good deal flow.
What’s to protect the bondholders? The technology risk insurance program.
The remedy
Recently, Fulcrum BioEnergy raised $150 million in bond financing for its Sierra BioFuels project, which will convert up to 175,000 tons of municipal solid waste per year into more than 10 million gallons of low-carbon synthetic crude oil, beginning in early 2020. More on Fulcrum’s progress here — and our most recent Multi-Slide Guide is here.
Fulcrum’s existing investors include US Renewables Group, Rustic Canyon Partners, United Airlines, Waste Management, BP, and Cathay Pacific. Their strategic equity capital is at risk — as it should be.
“There’s a lot that’s special about the Fulcrum project,” New Energy Rick CEO Tom Dickson told The Digest. “They have Abengoa as an EPC, and despite what has happened to the corporate paren, Abengoa’s core US EPC unit is strong. They have offtake, great management, irreplaceable equity partners. But it’s not GE standing behind a technology with a performance agreement. There’s a perceived technology risk.
So, who’s measuring that risk in order to efficiently spread it. Turns out, not many.
“Each party has a focus on the risk they have a mandate to assume,” Dickson noted. “Lenders have a mandate to take credit risk, and some market risk. But they are not really into assuming technology risk. Because of that, when it comes to the technology process risk, they are not trying to understand that, and someone has to do that to get first commercials financed, and put capital behind that assessment.”
How’d that “first of kind” project get done? For one thing, Fulcrum brought in New Energy Risk, an affiliate of global insurance giant XL Catlin.
New Energy Risk is a specialty insurance technology company that acts as an effective bridge between new technology innovators, insurers and lenders. It was founded in 2010 to provide complex risk assessment and is part of XL Innovate, an insurance technology venture firm. It’s not a small potatoes thing. The firm has helped its customers gain over $1 billion in financing for renewable energy and new technology deployments.
In this case, New Energy Risk developed a custom solution, backed and provided by XL Catlin (the global brand used by XL Group Ltd’s insurance and reinsurance companies which provide property, casualty, professional and specialty products around the world).
What happened?
“We start with the engineering data,” explained NER’s Jon Cozens, “ and we end up with actuarial output. From the engineering data we are creating a model and looking at failure modes, and the impact on financing and the risk position. In the event of a failure, we ask, how long will it take to alleviate, is the capital there to handle it, and could the timelines impact loan covenants.
“We step in when there is underperformance,” Dickson added, “when the project has run out of alternative means — warranties, it’s own cash — and the failure is due to the technology. Not because of a hurricane, but because of the science; you turn it on, it doesn’t work or at a low percentage of nameplate and because of that , in default of a loan covenant. We alleviate that shortfall.”
Every financing is different
Sometimes the risk freak-out factor focuses on long-term performance, sometimes around start-up and commissioning.
To complicate matters, every project is so darn different. It’s not as simple as: here’s a wind turbine, here’s the standard power purchase agreement, here are the wind curves. The feedstocks are different, the molecules vary, the technologies are unique, the offtake agreements are one-offs, the lenders are not the same, some bonds are rated and others are not, the loan periods don’t line up, the covenants change with every deal.
Dickson explains, “it depends on the policy. if it is short term and responding to risk around completion and commissioning, for us we’re looking really at moving stuff through the pipes, and what are the failure modes, and how do you recover from those. Does it mean adding a unit or redesigning — and does the project have enough time to fix it?”
“In a 10 year policy where we are looking at failure at any time during amortization when it falls below X. By then, the pipes have been figured out, and it is about long-term science, and becomes more about reliability than the expected efficiency. Also, we do work, actively with the USDA loan guarantee program. 9003 loan guarantees require an EPC wrap, and while a lot of EPCs do will wrap completion and delay, it’s been tough relating to the technology itself. Some are successful, some get there some do not. We’ve been working in that area as well.”
So, it’s complex and time consuming.
“It can take 3–4 months for our work,” Dickson noted. “But we’re never the long pole in the tent when it comes to timelines.”
The best projects survive
“If we can structure around the risk,” Cozens told the Digest. “There are going to be fewer failures and more successes. But we want to help the strong projects and keep the projects not yet ready on the back burner. Even if we structured our way out of a loss [from a single project], we all need to grow the capital base, and that means not just doing projects for the sake of it and making money for ourselves, but identifying and supporting the best projects.”
And Fulcrum fits that mould. As Dickson eplained, “Fulcrum is showing what is possible in the waste-to-fuel space, and doing it at unprecedented scale. We look forward to working with them on more projects in the years to come.”
Best of breed, multiple projects. Terms that were in the “future milestones” part of a corporate slide desk, say, five years ago. Today, we’re seeing the survivors from a culled flock beginning the breakout from the Valley of Death.
As Cozens noted, “The winners in the market are survivors and for a reason,”
Originally published at www.biofuelsdigest.com on December 11, 2017.
Vionx Secures Insurance Product for Its Flow Batteries
Vionx Secures Insurance Product for Its Flow Batteries
The product adds a bigger balance sheet to the performance guarantee, potentially de-risking investments in vanadium redox flow batteries.
Flow battery maker Vionx took a step toward easier sales by releasing an insurance product for its technology.
The Massachusetts company teamed up with New Energy Risk to create a performance insurance policy that covers energy, power, round-trip efficiency and availability of the vanadium redox flow systems. This could open a new chapter in the bankability of insurgent battery technologies challenging lithium-ion’s dominance.
Flow battery makers argue that their long-duration systems can cycle for years without degradation, making them ultimately cheaper to own than lithium-ion batteries, which fade over time. The lifetime cost of ownership argument, though, requires the customer to believe the company’s claims about its new technology, even though it hasn’t been operating for more than a few years.
Having an outside entity vet the technology changes the dynamic of trust. Vionx asserts that this is the first insurance product for a utility-scale flow battery.
“It takes Vionx from, ‘We can compete on price; trust us,’ to ‘We can compete on price, but you don’t have to trust us, because it’s guaranteed by an insurance company,'” said Daniel Finn-Foley, an energy storage analyst at GTM Research.
Besides confidence in the technology, the end customer needs to feel secure that if something does go wrong, someone’s on the hook to fix it.
Performance guarantees have become standard for long-term lithium-ion storage contracts with major utilities, Finn-Foley noted. Recent utility-scale projects in California included 20-year performance warranties, which means the developer will absorb the cost of replacing batteries and inverters as they give out.
That’s a credible commitment from a company like AES, which has been building storage systems for a decade and has a market cap of $7.3 billion.
It’s a lot harder to convince customers when a company has only been around for a few years and has delivered just a few small pilot-scale projects. The insurance offering shifts the ultimate burden of accountability from Vionx to New Energy Risk, an affiliate of global insurance company XL Catlin.
The customer for the policy would be the engineering, procurement and construction contractor that purchases Vionx batteries as part of an energy storage project. If any issues arise with a deployed system, Vionx still has the affirmative obligation to repair or replace according to warranty. The insurance covers the scenario in which there’s a performance shortfall and Vionx can’t fulfill the warranty.
“Vionx is a small company, but you have this financial support if anything does go wrong,” said Alan Dash, a member of the Vionx board.
Phrased differently, this means that New Energy Risk (NER) has sufficient confidence in Vionx’s flow systems to put its name and money behind them.
Under the arrangement, NER is offering an initial tranche of $50 million of coverage for Vionx’s current pipeline.
“We are prepared to provide additional capacity as Vionx grows and customer adoption increases in the marketplace,” said NER CEO Tom Dickson.
The insurer’s confidence stems from a nearly 20-month vetting process. The NER analysts took a deeply technical approach, crunching through raw performance data from field units and accelerated lifetime testing, said Chief Commercial Officer Jon Cozens.
The company specializes in seeking out promising emerging energy technologies from companies with limited balance sheets, and offering them creditworthy support, Cozens said.
“In the energy finance construct, a lot of times lenders require balance-sheet support to finance the deal,” Cozens said. “Our business is fundamentally around enabling project finance.”
This boost comes at a pivotal time for Vionx, which is looking to expand from its first few demos to broader commercial production.
The company has two systems operating today in Massachusetts: a 160-kilowatt, 4-hour system at an Army Reserve base at Fort Devens, and a 500-kilowatt, 6-hour system at Holy Name High School in Worcester. Vionx has built partnerships with other veteran companies to help move the product, including UTC, Siemens and 3M.
I was able to track down one other flow battery insurance product. ViZn Energy has developed an insurance product that it is actively sharing with specific customers in three-way meetings with insurance providers, VP of Marketing Mike Grunow confirmed in an email.
In fairness to Vionx, ViZn has not broadcast this information, and insurance has not been needed on its announced bookings so far. The trophy for first flow battery insurance sold, then, remains up for grabs.
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$500M in Renewable Energy Projects
Insurtech company hires Chief Science Officer to deepen scientific expertise of emerging energy-related technologies
MENLO PARK CALIF – “Today, New Energy Risk, a global pioneer in creating insurance policies for renewable, high-efficiency energy developers and new technology producers, announced that its customers have secured a total of $500M in financing to support such energy projects.
Since its founding, New Energy Risk has underwritten production insurance for over $250 million in financing for fuel cell and waste-to-energy projects, including a 65MW Bloom Energy deployment. An additional $250 million is set to deploy this year, ranging from biomass to solar to energy storage. Using its modeling technology, New Energy Risk is fundamentally improving the economics behind alternative energy deployments, making them more cost competitive and providing certainty of output for customers, owners, and financiers.
Transitioning a new technology from science (proving the fundamentals) to engineering (implementing it in the field) can be expensive, time consuming, and complicated. This transition comes with high technical risk, and such risks have made it difficult for renewable energy projects to gain access to favorable financing terms. However, an insurance policy that guarantees output would significantly reduce the risk for buyers and funders, who otherwise want to adopt and support sustainable practices. Such policies did not exist, until now.
New Energy Risk offers customized insurance solutions for large-scale energy projects by accurately quantifying the risks and uncertainty associated with renewable energy projects for the very first time. This allows insurers to underwrite such projects, unlocking lower interest rates and energy costs over the long term. New Energy Risk’s unique offering lies in its algorithmic approach: a techno-economic risk model that combines analytics around scientific validity, engineering feasibility, project financials, and actuarial science.
New Energy Risk is led by experts in actuarial science, energy technologies, engineering, and financial modeling. In order to continue deepening its scientific understanding of new renewable energy technologies, the company has added Dr. Brentan Alexander, an expert in waste-to-energy processes, thermochemistry, and electrochemistry, as the firm’s Chief Science Officer. Dr. Alexander is a graduate of MIT and Stanford, serial entrepreneur, and leading researcher in the field of the clean conversion of carbon-based fuels. New Energy Risk has also promoted Jon Cozens, its Managing Director, to Chief Commercial Officer, to add focus on the company’s business development, partnerships, and transaction execution.
“We are thrilled to be working with incredible partners such as XL Catlin and a panel of leading global reinsurers, as well as cutting-edge renewable energy companies from around the world. Together, we have promoted over $500 million worth of large-scale energy deployments and we are experiencing unprecedented interest from customers seeking to deploy new forms of clean energy. In response, we have grown our team, both in size and expertise, with the addition of Dr. Alexander as Chief Science Officer and the expansion of Jon Cozens’ role as Chief Commercial Officer,” said Tom Dickson, CEO of New Energy Risk.
“New Energy Risk is the only dedicated, reliable source of performance analysis and underwriting for renewable energy and industrial biomass projects,” said John May, Managing Director at leading investment firm, Stern Brothers & Co., and Co-Head of the its Cleantech Energy and Infrastructure Group. “Their expertise and capacity for performance insurance is a key ingredient in successfully financing large deployments around the world. We look forward to continue working with them to accelerate the adoption of these new energy technologies.”
About New Energy Risk
New Energy Risk is a provider of innovative data analytics and financial risk transfer solutions to the renewable energy industry worldwide. It was founded in 2011 to serve as a risk assessor and intermediary between clean-energy innovators and insurers.
XL Innovate Acquires New Energy Risk
DUBLIN, IRELAND – September 21, 2015 - XL Group plc (“XL” or the “Company”) (NYSE: XL) announced today that XL Innovate, the venture capital initiative sponsored by the Company, has acquired all of the shares of New Energy Risk, Inc..
Tom Hutton, Managing Partner of XL Innovate, said: “New Energy Risk has developed and delivered to the market unique performance warranty products which enable clean technology companies to obtain the project financing they need in order to grow. We look forward to the continued expansion of New Energy Risk under the leadership of CEO Tom Dickson who has a respected track record of leading companies that respond to market opportunities with creative solutions grounded in high quality analytics, underwriting and risk assessment. New Energy Risk is a great example of the kinds of businesses XL Innovate looks to grow. It develops and applies innovative insurance solutions based on engineering analytics, addressing new risks and underserved markets, and providing particularly high impact value for its clients.”
Mr. Dickson has more than 25 years of experience in the insurance and reinsurance industry, including executive and underwriting leadership positions. He founded and ran Meetinghouse LLC, a private firm specializing in investment management for insurance, reinsurance and structured credit markets. Mr. Dickson previously served as CEO and Chief Underwriting Officer of the Centre Group,an innovative international insurance and reinsurance group.
Commenting on his new role, Mr. Dickson said: “I’m excited to be back in an underwriting role, and particularly excited by the opportunity to address such high value client relationships throughout the world. At New Energy Risk, we collaborate closely with customers, brokers, financiers and other intermediaries in developing customized policies to encourage customer acceptance and support financing of renewable and clean energy technologies.” In 2013, New Energy Risk launched an innovative technology performance insurance product for the cleantech industry, which has been used by companies like Bloom Energy, a Silicon Valley based fuel cell company. Over the past three years, New Energy Risk has worked with XL and Munich Re to insure the performance of Bloom Energy’s technology, improving the financing in support of the installation of nearly 65 megawatts of clean, reliable electricity.
About XL Innovate
XL Innovate is an XL sponsored venture capital initiative focused on making investments in companies with businesses that address the world’s most complex risk and ensuring the relevancy of the insurance industry today and into the future. XL Innovate will seek to invest in companies that strive to create opportunities outside of the traditional underwriting space by finding ways to underwrite currently uninsured risks. To learn more, visit www.xlinnovate.com
About New Energy Risk
New Energy Risk is a provider of innovative data analytics, strategic consulting and financial risk transfer solutions to the renewable energy industry worldwide. It was founded by Tom Hutton in 2011 to serve as a risk assessor and intermediary between clean-energy innovators and insurers. For more information, visit www.newenergyrisk.com.
About Bloom Energy
Bloom Energy is a provider of breakthrough solid oxide fuel cell technology generating clean, highly-efficient on-site power from multiple fuel sources. The company was founded in 2001 with a mission to make clean, reliable energy affordable for everyone in the world. Bloom Energy Servers are currently producing power for several Fortune 500 companies including Google, Walmart, AT&T, eBay, Staples, The Coca-Cola Company, as well as notable non-profit organizations such as Caltech and Kaiser Permanente. For more information, visit www.bloomenergy.com.
About XL Group plc
XL Group plc (NYSE:XL), through its subsidiaries and under the XL Catlin brand, is a global insurance and reinsurance company providing property, casualty and specialty products to industrial, commercial and professional firms, insurance companies and other enterprises throughout the world. Clients look to XL Catlin for answers to their most complex risks and to help move their world forward. To learn more, visit www.xlcatlin.com.