Q&A – Why Invest in Storelectric

Following the announcement of our recent funding round, we sat down with one of our lead investors Nick Dimmock of green-tech investment firm 350PPM to find out why he chose to invest in Storelectric, and why he thinks others should join us in our current round of investment.

Why did you decide to invest in Storelectric?

I have been involved in the environmental sector since 2007. Hydroelectric power provides the most usable and cost effective energy within the fields of renewables and historically 350 have focused on this, having been involved in circa 2500 MW of development. However, suitable locations are limited and objections from green groups have in the past proved challenging especially when dams are involved.

To date, governments have championed wind. I believe because its modular construction was attractive and it provides cheap power at a levelized cost of generation of between $29 and $40 per MWh primarily dependent on onshore or offshore.  Hence to demonstrate “Green Credentials”, and in the absence of Hydro Electric resources, it’s the clear winner. However, its unpredictable nature causes huge problems for grids around the world as fossil fuel generators cannot be simply switched off when its windy without substantial waste. And without a way to store energy effectively, power just bounces round the grid eventually dissipating as heat and sound.

The wind industry has fed on its own success and propaganda of late. The fallacies that “its always windy somewhere” and “the interconnectors between countries can transmit the power to where it is needed” are simply not true.

Leaving things as they are, with the UK due to reach 30 GW of Wind by 2030 and taking 8 GW of fossil fuel generation offline (which really is the equivalent of 24 GW of wind due to 3 * load factor on coal), we are heading for a working week that will need to mirror when the wind is blowing or face blackouts or brownouts.

And this is what is being reflected in energy prices; looking at 1 hour ahead, lows this year have been -25 GBP/MWh (a windy night) whereas the highs (winter daytime, no wind, no sun) have on occasion peaked at over 1000 GBP/MWh.

However, if wind can be matched with a low cost utility scale energy storage system such as Storelectric’s, then you have a real winner on your hands. Most renewables are intermittent to a point, so if you take the cheapest and add storage, its good night Vienna for fossil fuels.

Now, 63 GW of wind was brought online in 2015 (1 turbine per MW means 63,000 new turbines globally), up 17.03 % on the previous year. To attain the goals of The Paris Agreement, our estimates are that we will (if someone can solve the intermittency problem), have 10.7 TW of Wind Capacity by 2050.

But to make this usable, we’ll need circa 3 TW of energy storage. Wind and PV are really winning the renewable energy race so adding up all the other technologies, we’re looking at about 6 TW of energy storage, with Storelectric providing the most effective solution (in our opinion).

Why should others invest?

Ultimately, it is going to be the profitability of Storelectric’s projects and technology that will fuel the growth of the underlying business.

The projects work by storing electricity when prices are low and letting it back out into the system when prices are higher. This creates a margin less natural losses in efficiency.

The increase in the variance of electricity prices, the more the project make. And as we are busy taking the base-load off line and replacing it with intermittent renewables, the blowout in spreads is only going to increase. This means huge increases in aggregate demand for energy storage systems going forward.

What I personally like about SEL is that if Act 1 is Compressed Air Energy Storage, they are already looking at Act 2 and Act 3.

I am also very keen on the project development angle. This is a lot like Property Development; where you’re taking a greenfield or brownfield site and developing it into an asset that throws off cash. The metrics involved are circa 20 times during development to ready to build, so there is very considerable value creation.

Batteries are already letting the side down in terms of duration and they will never confirm to Moors Law. They can never get near the scale or the cost and there is just not enough Cobalt or Lithium about.

Energy Storage is about where the wind or solar industries were 15 years ago, but their rate of development is going to be so much faster as there is such a demand for their technology.

So investors should consider Storelectric to to be investment of the same ilk.

What is unique about what Storelectric are doing?

Their patented thermal transfer technology is a game changer and improves the efficiency of the plants allowing them to rival pumped storage. In addition they have built a robust technical flexibility into the conceptual design which allows each asset to access multiple revenue streams, this enables Storelectric CAES plants to mitigate regulatory and even long term revenue risk by switching to the most favourable revenue stream on a day to day, week to week or even year to year basis. In simple terms this technical flexibility gives rise to a commercial flexibility, an important advantage in an industry that is becoming more and more merchant.

What is special about the team?

Just sticking to basics because they all have glowing CV’s with bluechip companies, in very simple terms you have:

An Entrepreneur (Jeff, CFO, set up a chain of 70 hat shops in the 90’s and sold them and started a property portfolio)

An Engineer (Tallat, CEO, built a 100m€ turnover business in Alstom /ABB and then specialised in CAES System)

A Scientist, Research and Development guy  (Mark, CTO set up 3 business units for Bombardier)

A Chartered Accountant (Paul is Ex PwC, with specialisation in Project Finance).

Much of the time with young companies, you tend to get experience gaps, which puts pressure on the entrepreneur to have to do everything, and this is the way that many successful start up’s get going. Then other people join over time. It is worth mentioning that none of this happens over night. One of the things we look for in businesses we wish to assist with and raise capital for are those with a vision of how things are going to turn out and those with the resilience, metaphorically speaking to push the large rock up the hill themselves, before we become involved and can send them on their way.

Storelectric were lucky to have 2 founders initially to share the burden, which were then joined by Tallat and subsequently Paul Davies.

What they can’t do themselves, or in cases where it would not be sensible to employ long term, they hire subcontractors to handle the specific jobs. For instance,  Ernst and Young recently to make the applications to the EU for grants and they have now been awarded, Project of Critical Importance Status.

But in short their core business can be handled by the team as is and there are no capability gaps. They also work well as a team, which will serve them well during the striving stage, and as we believe, they become hugely successful.

You can find out more about joining Storelectric as an investor by visiting our business profile on 350PPM. https://350ppm.envestry.com/deals/1678

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