ViZn Energy Sets Sights on Microgrid Market

Editor’s Note: The microgrid market is poised to experience significant growth over the next few years, provided one of the key enablers can be realized: cost-effective energy storage. Safe, reliable, and economic storage on a megawatt scale is still seen as a missing piece in a viable and replicable model for microgrid systems. One company working to address this is ViZn Energy Systems, makers of a redox flow battery. We recently interviewed Craig Wilkins, the company’s Chief Executive Officer, on the future of the energy storage market and the microgrid sector in general.

What was your objective in starting ViZn Energy? 

When we started four years ago, we saw a gap in the market. Large-scale storage was going to be a significant opportunity, but the current technologies that were deployed had significant problems. One was cost and the second was the inability to scale up cost-effectively and safely. Safety wasn’t as big of a concern five years ago. However, going forward, safety will be a primary driver in the operation and acceptance of a battery. 

How did your strategy evolve? 

Initially we were like every other battery company in that we believed if we build it, they will come. However, over the last three years there has been a lot of strides made in the energy storage market, and people understand more about how storage will play on the grid. The problem is that the regulatory environment and the compensation structure around grid-scale storage have not sufficiently matured at this point. In places like the United States, where storage is needed, we still haven’t figured out how to adequately compensate for storage. 

So we began changing the way we operate our batteries. We started focusing on obtaining power services from the battery in order to make it economically viable – that is, power regulation and fast-ramp capabilities needed for the microgrid market. We had to get the power level of our battery up to where it needed to be for a power services source, and that’s where we started to work with variable power output. 

We knew the battery theoretically could do 400% of the nominal power output, but when we started testing we found that it could push out 300% of the nominal output at any given time, and also do this almost over the full state of charge for the battery. That is, instead of power peaking for 10 or 15 seconds, we could do it for up to two hours. That created an entirely different economic solution for our battery which differentiates us in the marketplace. We find we can provide most of the power services, and we have the additional capacity to meet the demands and needs of the microgrid market. 

How have you refined the flow battery specifically for the microgrid market? 

We did a lot of financial modeling and eventually ended up with our Z-20 product, which is anywhere between 50 kw and 80 kw of power output for a 2 to 2-1/2 hour discharge time at max power. So as we looked at the raw economics it became pretty compelling that our battery was the best solution. But what we hadn’t realized before was the limitation on duty cycles of other batteries. 

Typically if you work a battery too hard it runs into thermal management problems and starts overheating. With our battery we were putting it under pretty rigorous duty cycles in our testing – much more rigorous than other companies have – and we were able to maintain acceptable heat, mainly because we have a large amount of electrolyte that takes heat away from the cells. Which means you’d have to run our battery at max power for a long time before you run into any heating problems. So this kind of battery can work a lot harder in a microgrid environment than a battery that can only do one discharge cycle per day, or one discharge cycle plus regulation support. We realized a battery couldn’t be discharged just once per day and make any money – it had to be a lot more flexible, a lot more robust. Our battery is designed to be a workhorse, and that is what’s driving a good portion of our economics. 

How critical is energy storage to the future of the microgrid market? 

Storage is the enabling technology for microgrids, plain and simple. Microgrids will not become a long-term financially viable option if energy storage is not a key component. Without a battery to handle the variability of say solar or wind, you’re only going to see about a 15-20% penetration of those renewables in that system.

There are various technologies being used to address this (for example, Li-Ion and lead acid), but at 20-25 cents/kwh delivered. At 12 cents however it changes the margins completely from an economic standpoint. My target is that if we can get our battery down to 10 cents kwh delivered, it will completely change the way people see these distributed grids. 

How close is ViZn to achieving this? 

We are at 14 cents / kwh as we go out with our first demonstration units today – that is, entry level production levels. We intend to go down to 6 cents when we reach full production in 2016. No other technologies will achieve that level in the foreseeable future. It’s easy for all of us to hypothesize what our batteries will do in 2020, but when we start getting to that cost point, we become the bridge technology that moves microgrids into the larger grid-tied utility installations. 

Could size of the system be viewed as a drawback to your solution? 

Flow batteries are big, and VizN’s footprint is bigger than we’d like it. But size allows these systems to run at capacity and not encounter thermal problems. While footprint is a limitation, it’s also an advantage. There is a lot of electrolyte in the system which also basically functions as a coolant, thereby allowing the battery to run at capacity for significant amounts of time without overheating. 

How about the possible objection of “too many moving parts”? 

We have two pumps per container that are in process all the time; and while there are these pumps, we are limiting the amount of mechanical connections and electrochemical connections compared to a diffusion battery. Other technologies are constrained in different ways: for example, 170,000 cells need to go into a 1 MW Lithium battery system; with ours there are basically 72 cells. Also, when you look at life cycle, a flow battery is going to be a lot lower cost. Consider swapping out lead acid batteries every 3-5 years, versus replacing just the pumps within our system during the same time period (which would be a worst case scenario). The costs are much lower overall. 

What projects do you have in deployment presently? 

We have a 1MW demonstration project in the works in Germany, which will go live in the summer of 2014. The single z20 demo will be delivered in January, and we will scale it up to 1MW. We’re also speaking with utilities in U.S. who are beginning to see benefits of grid-tied microgrids, such as Dominion and NextEra. We see significant opportunities emerging in Africa, as well as in South America, Australia, and China. We can build a strong economic case for three-quarters of the world today – the rest would need to have regulatory reform first. 

Including the U.S.? 

In the current compensation structure the true value of what storage brings isn’t being recognized. Currently batteries are viewed as a generator – they’ll pay for the services you provide when you’re kicking out electrons. But a battery has the opportunity to act as a load as well as a generator. The Cal ISO Ramp UP program pays when the battery ramps up as well as ramps down – that’s the kind of flexibility a battery can provide, and the market should look for ways to compensate that.

So PJM and California are leading in this? 

They are. PJM has a pretty aggressive compensation structure around regulation services, and while that’s good news, I still don’t think it’s a very broad market – doing just regulation services. The ability to use the battery for ramp services and reserve capacity and all the other services it can provide – you really need to be able to bundle those services, and the problem you have right now is that most utilities don’t have a good understanding of how to compensate ancillary services. 

Taking a look at the energy storage market overall, are we still in the early stages? 

Yes, for the utility market it’s still at its early stages. If we can start designing systems that aren’t always just one-off engineering projects, and start standardizing everything from the battery and the generation components to the software, inverters, and everything that gets packaged together – once we can come together with a good solution that is modular and configurable and has the same basic components – then I think the microgrid market will explode. 

How far away from this kind of standardization are we? 

I think we’re really close. If you can find a compelling economic battery, which is the key enabling technology, I think all the rest of the pieces are there – they just need to come together. But it’s like a lot of industries: a reluctance to share technology because companies feel it’s absolutely critical to their business. Nevertheless there will be a standard platform for all the software and individual components, and I don’t think we’re more than one or two years out from this. 

So how should utilities be thinking about microgrids at this point?

A lot of utilities see this train coming, and they need to be on the train or they will be under it, to some extent. When you look at reliability and dependability of the grid, the trend is moving away from a centralized infrastructure and toward a more distributed solution. For example, Japan is moving toward microgrids for this reason. Incidents like Fukushima and Hurricane Sandy are a pretty clear reasons for why you’re seeing even more of the conservative utilities start to put some of their focus – if not all of their focus – on the microgrid strategy.