International scientists this month warned that urgent action is needed within a decade in order to avoid a global warming catastrophe, putting renewed pressure on climate tech companies to rapidly develop and deploy their solutions.
Oregon battery manufacturer ESS Inc. is one of those companies.
The long-duration energy storage company founded 12 years ago has raised $350 million from venture capital firms and through its IPO two years ago. It has support from noteworthy backers including Bill Gates’ Breakthrough Energy Ventures, SoftBank Group and BlackRock. In the past year it announced deals with multiple U.S. utilities and business partnerships abroad.
But like many climate firms, ESS has stumbled along the way while also showing promise, demonstrating the challenges and patience required for a clean energy manufacturer to hit its stride.
ESS fell short of its delivery targets last year and continues working to cut costs, the company reported this month. After going public via a special purpose acquisition company (SPAC), ESS is trading at a little more than $1 a share, down from a high of nearly $19 in November 2021. In January, a shareholder filed a class action suit in U.S. District Court, alleging ESS had misrepresented a business deal; the company calls the claim “meritless.”
Despite the struggles, there are significant tailwinds propelling ESS. The company’s iron-flow battery technology uses earth-abundant materials, as opposed to lithium and other metals that have been in short supply. ESS will benefit from the Inflation Reduction Act (IRA), which pumps billions in cash and tax credits into clean energy efforts. And in the final months of last year, the company finished installing a fully automated manufacturing line at its Wilsonville, Ore., factory, increasing its production capacity.
“We’re planning for success and preparing to ramp up,” said ESS CEO Eric Dresselhuys in a recent interview with GeekWire.
Seeking to scale
But there are still logistical hurdles.
The startup is graduating from suppliers who were a fit for building prototypes to those who can handle large-scale production. “We’re at that classic stage of launch,” said Dresselhuys.
ESS has focused on domestic vendors but the U.S. supply chain isn’t as robust as needed, which the company says has contributed to missed production goals.
“People are starting to realize whether it’s batteries or solar panels, we don’t have the underlying support infrastructure in the country,” Dresselhuys said, including skilled manufacturing roles such as tool and die makers who produce equipment parts.
ESS has been successful in finding workers to assemble battery products, something others have struggled with. The company hired people with manufacturing skills from other fields and trained them for specific roles, Dresselhuys said.
Waiting on IRA
The Biden administration’s passage of the IRA in August contained billions of dollars for climate tech. But the sector has been waiting for the U.S. Department of Treasury to finish issuing specifics on how that plays out.
“The details of the implementation of the rules matters — and it matters a lot,” Dresselhuys said.
The battery sector, for example, will benefit from an Investment Tax Credit (ITC). But the credits vary depending on multiple factors such as whether the batteries are domestically produced — which raises questions about how to quantify and verify domestic sources — and if they’re deployed in areas with economic challenges, including those that were formerly home to coal plants.
The government has provided some guidance, but additional key regulations are still coming out — with some expected any day. “It’s unclear at this point if there will be a comment period or they’ll publish the rules and say, ‘that’s it, folks,’” Dresselhuys said.
ESS should be well-positioned to meet domestic requirements, Dresselhuys said, as the company was built primarily on suppliers from the U.S.
IRA’s ripple effect
Dresselhuys is pleased to see that the U.S. legislation has sparked similar incentive programs internationally to accelerate the implementation of clean energy. “IRA is a force multiplier for decarbonization,” he said.
ESS itself is branching out globally, announcing in August a project in Australia and sharing news in January about a deal in Amsterdam.
While it motivated other nations to step up their climate efforts, the act has also tweaked European and other allies who object to aspects of the bill that preferentially benefit U.S. manufacturers. International leaders have been meeting to resolve the trade tensions.
