The Energy Storage Landscape - An Interview with Jupiter Power CEO Andy Bowman
The Yale Clean Energy Forum had the opportunity to interview entrepreneur and law professor Andy Bowman to discuss careers in clean energy and the current conversation around energy storage. Andy is the CEO of Jupiter Power, an IPP (independent power producer) with a focus on stand-alone energy storage. Their portfolio includes nine projects, almost 1400 MWh currently operating, in the market every day. While founded in Texas, they’ve expanded across the country and by this summer they’ll have reached roughly 2.5 GWh actively operating across three states.
What does your day-to-day look like? What skills are you using consistently on a regular basis?
This business can vary a lot and so the necessary skills often change. This company started as ideas scratched down on a piece of paper in 2017, and we didn't get it funded until 2019. At the start, we were five people, and now we're nearly 120 employees. I really love how much my role has changed over time. We're lucky to have so many smart people working here: data scientists doing extremely complicated long-term power price forecasts and high-powered math, folks in the procurement and engineering group with incredible chemistry backgrounds that can effectively explain how lithium-ion batteries work, and many more. I also get the chance to work with different stakeholders. We interact with a lot of state and local government policymakers and leaders. When I meet with stakeholders, I need to articulate how our projects fit into their grids and communities and how we can help meet their needs as the grid evolves. That’s what I love about my work, the chance to learn and take on so many different challenges.
Given your knowledge and understanding of the history of renewables, how would you contextualize this current moment in clean energy?
With the first wind projects that I worked on in West Texas, in the late 1990s and early 2000s, we were so excited. We had a line of sight to their completion and seeing them constructed and operated was something special.
As the years went by, wind farms became common in that area. Wind and renewables started to change the grid, and we see that today. In ERCOT, for instance, there is a 15-minute settled nodal pricing and it's a supply and demand calculation. If it's a windy day and not particularly cold or hot, then you often see the power of supply—prices go low, and then eventually become negative. That same dynamic happens with solar. The first solar projects were great, because it showed that solar could deliver peak renewable power on a reliable basis. Then, with more renewables, the duck curve came along. We saw how the maturation of wind and solar in a grid creates some challenges.
One of those challenges is the need for more dispatchable power. Identifying this need for dispatchable resources was really the genesis of Jupiter. The other founders and I come from renewables, and there's nobody working in renewables that doesn’t understand the importance of dispatchable resources. Now, the clean energy business has gotten to the point where energy storage technology has matured. Happily, this maturation occurred at the right time with so much deployment of wind and solar over the past ten years. A lack of storage amounts to a glass ceiling on the amount of renewables that can be built: if we can't solve the challenge of finding a way to shift capacity through time, then there will be periods of negative pricing.
These periods of negative pricing and transmission congestion pose real problems for building financeable projects. In terms of how Jupiter is part of that solution, I think there is both an opportunity to grow, and a chance to show the importance of getting this new technology, batteries, built in a way that is financeable, predictable, and effective.
In Texas, batteries are dominating ancillary services, e.g. regulation up and regulation down. How do batteries fit into capacity, energy, and ancillary markets?
Batteries have come a long way as a new technology. They have become financeable, dependable, and highly dispatchable over the last five years. And what we're seeing is that in each different jurisdiction, they're fitting into those markets in different ways.
In California, the Resource Adequacy (RA) program is the main vehicle for contracted structures (the RA program helps to ensure that the grid has enough capacity to meet peak demand). In Texas, it is the other end of the spectrum. The first six projects that we built were completely merchant, completely on balance sheet. To make revenues, we had to act like a gas plant because there weren't really grid services that were specific for batteries. Luckily, the legislators and policymakers in Texas had foresight to create regulations that allowed IPPs to charge and discharge batteries in the wholesale market. In ERCOT, so far, the revenue story has been ancillaries, but that market is increasingly getting swamped by supply. Ancillary prices have fallen dramatically, and it's become increasingly important to get involved in power transactions, which is a whole different ball game.
For ancillaries, you make your battery available and charge and discharge when the grid tells you. For power transactions, you've got to make decisions to sell in real time, or do you sell in the day ahead market? How do you manage the state of charge? It's a very complicated affair with a lot of risk.
Storage platforms are also starting to differentiate themselves. In places like PJM, you are seeing a real opportunity for batteries to fit into capacity markets. In some markets in the Northeast, you're seeing the release of clean peak products, which are a clever way to recognize the value of storage in markets with a lot of gas. Ultimately, the way that batteries get built is by finding a revenue source that can back an investment case, and those investment cases are turning out to be very different in each market around the country.
What financial innovations or incentives would you like to see for batteries in the future?
When I was first working on wind farms, we would finish development work and then try to enter into a PPA (power purchase agreement). The only other projects back then that signed PPAs were thermal generation power plants. Therefore, there were factors that we had to address in those deals to make them work for wind or solar. For solar it was not too much of a challenge because solar is close to being a dispatchable power source and so solar could pretty much fit into a lot of off-take agreements. Storage is a different animal because you've got a charge, a discharge, you can sell ancillaries, and you've got a limited duration.
A battery project is kind of like a gas plant, but also not at all like it if you're out of charge. You're not going to be available at any time like a thermal dispatchable plant. The challenge with innovating on off-take for batteries is figuring out how a system, built for thermal dispatchable power plants, can accommodate new and needed technologies. In the market, “the laboratory is open” and we're seeing all kinds of different policy ideas.
We're seeing some exciting bilateral discussions between commercial and industrial customers and large standalone storage. For data centers, there are some cases where they are getting new supply really quickly. Finally, there is also a ton of innovation happening right now on the clean peak contract side.
I'm curious about your experience talking to stakeholders. How has that conversation evolved over time? What does it look like to advocate for the kind of projects that you want to see built and getting different stakeholders on board, in particular landowners and utilities?
Once, I remember going out to West Texas and talking to landowners about wind projects, which at the time seemed insane because they didn't exist anywhere then outside of a few places in California. I think a lot of people just didn't really take us seriously because it wasn't a thing. Yet over time some projects were built, and landowners took a leap of faith to lease their land, and we would lease tens of thousands of acres.
Solar then came along, and people also couldn't believe it. Relative to wind farms, solar has a much more compact footprint. With panels you’re paving somebody's property, whereas wind turbines are pinned across a large ranch. So, it's a very different land use configuration. Batteries are different from both of those groups. It's such a small amount of land, 5-50 acres on average, and for Texas that is small.
I think there are a lot of people in parts of West Texas who are happy to find new ways to put land to work to make money. Texas is a very meritocratic place—from an energy point of view they've seen everything under the sun, and it's all proven to be a benefit.
But it's different everywhere. Some projects that we're working on are in urban and suburban areas. That's a different conversation. Everywhere we go we're trying to fit into the community where our project is to be built. We're trying to communicate in ways that make sense to those landowners and to our neighbors.
Storage has so many things to offer from a resilience and stability point of view, and many people have experienced the problems of a not sufficiently resilient grid. Therefore, I think there's a special appreciation for the local grid benefits that storage can provide. On the utility side, there’s a strong need for occasional bursts of highly reliable and instantaneously dispatchable power. Almost everyone acknowledges the importance of this service.
Another important consideration is duration. The first batteries built were a half hour in duration. Getting to two hours took a while and now in some markets, like California, you’re seeing four, eight, and even up to twelve hours. In some ways, it's surprising that you would have a two-hour duration asset and that could be of significant value for 8760 hours in a year. But when you look at most opportunities for power to contribute to the daily needs of the grid, then two hours is a great fit. Two-hour duration is a great fit for most scarcity periods, which is the case in many grids like New England and Texas.
A conversation with an off-taker usually begins with an appreciation for how useful energy storage technology can be, and for the fact that the duration that we can finance, which is often two to four hours—maybe eight, is a really useful duration.
The whole discussion about what duration should be, for my world, is what can we finance? What is the revenue stream that will pay for the equipment and a return on investment? Ultimately, the particulars of the revenue opportunity in the different markets will determine the duration that people can build.
Interconnection queues are notoriously delayed. How do you think of batteries as a solution to interconnection issues?
Interconnection queues are a mess across the country. And it's not clear to me that the various grid reform efforts are helping or hurting. The amount of generation in the queues across the country is so large that it’s mind boggling. From a grid reliability point of view, which is what the ISOs care about, this is a complex challenge. Storage is in the same place as everything else in the queue—it’s a high barrier to entry and we spend years and high levels of expertise putting everything into the right place to interconnect and manage our request all the way through.
Can storage alleviate some of the transmission issues? I think each grid looks at that question differently. In many markets, building new transmission is a new rate base opportunity for the incumbent utilities. This makes things complex; it becomes a political question about how that should best be resolved.
It’s a bit different in markets where storage is maturing and getting built. In grid studies when a new transmission line needs to be built between point A and B, the analysis is based on congestion flows. As more and more storage gets built, batteries can help to alleviate a lot of these congestion flows. Moreover, as these new studies get done, storage starts to influence whether a large transmission investment is worth the cost. This process is happening organically; market opportunities are being drawn to areas of congestion and addressing that congestion. It's an interesting case of whether the market will drive the solution or not, or whether there's a specific policy or market instrument needed. I'm not convinced that there is a need for intervention. There is of course still a real need for large scale transmission projects, but batteries might organically reduce the level of investment needed.
I've heard you say in a previous interview that it is important to frame the energy transition as an infrastructure issue, rather than focusing on emissions targets. How do you feel about using this narrative as a strategy for advocating for clean energy under the current administration?
Under the current administration, we have seen a significant walk back in the energy transition. I'm not sure how much of a shift there will be, but the fundamental drivers haven't changed just because there was an election. For example, NextEra’s most recent quarterly board deck has a slide showing the levelized cost of energy of solar plus storage, wind plus storage, natural gas, and nuclear. It's not even a question. The cheapest thing you can do right now is wind plus batteries or solar plus batteries. Moreover, there will continue to be a very large amount of load. Finally, the only thing that can be built anytime soon from a grid interconnection point of view is renewables and storage. If you look at the pending interconnection queue of the entire United States it is overwhelmingly renewable. So, for the next several years there’s kind of nowhere else to turn. This is all to say that there are durable drivers in the energy transition.
I do stand by my view that we need capital to build these projects that are producing cheaper, cleaner energy, which is going to reduce the incurred costs of climate effects. Every successful project that earns a good return for our investors makes the case that this isn't some exotic technology. We're making the grid stronger, providing cheaper energy, and lessening the financial costs of climate effects.
What is one energy topic or story that you think is under covered in the news?
Last month, ERCOT’s latest Capacity Demand and Reserves (CDR) report was released---every year they issue a report showing generation that's going to be built in relation to load. Part of this report is the reserve margin. Reserve margin is the percentage of excess capacity relative to peak demand. It’s used to ensure that the grid can handle sudden changes in demand and outages. They forecasted this margin out for several years and, due to a change in methodology that reduced credits for renewables, found it goes negative in just two years. It is a major concern showing the need for more generation.
Additionally, there's a lack of general understanding of what's going on with the grid. It's changing so quickly. Renewables are so cheap, and they are interacting with one another in complex ways. There are also other kinds of business models emerging, and people don't understand how much good is happening right now. I think this progress is under covered to a degree—the amount of momentum behind the energy transition and how many benefits there are.
What are you reading? What are you seeing out there that you are really excited about?
Bloomberg New Energy Finance, Wood Mackenzie's Outlook, The Financial Times’ climate coverage and weekly climate graphic, and The Wall Street Journal’s coverage of the new administration.