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SPS directors: ‘We've tripled our pipeline’
Energy storage system manufacturer Storage Power Solutions (SPS) has spotted a big opportunity. The Canadian company – which is headed by co-founders and managing directors Laszlo Lakatos-Hayward and Mike Oreskovic – reckons the North American market for behind-the-meter commercial and industrial (C&I) customers with DC-coupled solar plus storage offers rich pickings. So, now it’s time to scale-up.
- Canadian company undergoing round C financing
- SPS sees growth in behind-the-meter storage for C&I customers
- Company has tripled its pipeline in last three months
Energy storage system manufacturer Storage Power Solutions (SPS) has spotted a big opportunity.
The Canadian company – which is headed by co-founders and managing directors Laszlo Lakatos-Hayward and Mike Oreskovic – reckons the North American market for behind-the-meter commercial and industrial (C&I) customers with DC-coupled solar plus storage offers rich pickings.
So, with the company's pipeline having tripled in the last three months, now it’s time to scale-up.
In an attempt to fuel an ambitious new phase of growth, the business – which employs around 35 people – is undergoing a Round C investment process.
How it works
What is it about what SPS describes as its ‘Cell-to-Cabinet’ (C2C) energy storage technology that the company believes will give it the edge?
Here’s a quick breakdown. SPS energy storage technology is a “single string of large capacity prismatic lithium iron phosphate (LFP) cells” housed in cartridges that are fully integrated with the power conversion system and packaged in a single cabinet.
Energy Storage Report spoke to Lakatos-Hayward (pictured) and Oreskovic to find out how the C2C system benefits customers and what they currently see as the biggest opportunities for the company.
They also discussed the logistical challenges the industry faces, offered insights into their C2C technology, pinpointed the opportunities they see in the behind-the-meter storage market, and highlighted the prospect of more institutional investors targeting the sector.
Why is your Cell-to-Cabinet (C2C) energy storage technology different?
Mike Oreskovic: In the past, we did typical storage installations – stringing [wiring] it for specific voltages and building up the whole system. But C2C is about moving straight through the cells and limiting the amount of infrastructure or ‘balance of systems’ between the cells and the output of the cabinet. This decreases costs while increasing reliability and maintainability.
Think of printer cartridges. In the same printer we have black ink and separate colour ink cartridges to seamlessly serve different customer requirements. The C2C platform is based on this cartridge building block architecture. It future proofs customer investments against cell formats, capacity changes, and regulatory and policy adjustments.
We've got 30 to 40 years of experience in this sector, while many in the industry are relatively new entrants. Back in the eighties, energy storage was about ensuring 100% uptime for critical infrastructure such as telecoms systems and data centres. We borrowed from a lot of the roadmaps of these uninterruptable power supplies, which evolved into a distributed architecture.
We saw this with solar installations. There was a time when all solar installations had one inverter spread across many solar panels. And now we've seen a move to a distributed architecture. Inside our system, you'll find an energy storage system that comes together inside of the cabinet.
Where do you see the biggest opportunities for SPS?
Mike Oreskovic: Our focus is behind-the-meter commercial and industrial (C&I) customers with DC-coupled solar plus storage. C&I customers represent 65% of the load in North America. We do utility work as well, but behind-the-meter is an under-served market. I recently read a report by a Californian think-tank which outlined things that are required to reach net zero. The first one was distributed solar and storage applications, such that every commercial building in the world will eventually have on-site solar and storage.
For people who want 250KW, 500KW, up to a megawatt of behind the meter capacity, that market is very under-served, as most of the people trying to cater for that market have high prices. Looking at a residential system on a dollars per kilowatt hour basis, or a small commercial system on the dollars per kilowatt hour basis, it's quite costly.
Laszlo Lakatos-Hayward: Our key takeaway from the critical infrastructure space is that for 100% uptime, you want to have an ‘N + 1’ system [which means that even if one supply goes down, there will be another available to support the customer]. If you only have the utility supplying your energy, then when the utility has challenges – and many of them do – the customers suffer. Whereas with a local behind-the-meter system, you have resilience.
What have been the most significant recent highlights for SPS?
Laszlo Lakatos-Hayward: In the last three months, we tripled our pipeline, growing it from 1,000MVA, 2+ GWh to 1,500MVA, 5.5GWh, and we see ourselves closing above 15% of that in the next three to four months. The enthusiasm in the market is amazing.
There's a handful of factors driving this. Certainly, inflation is an issue for businesses. If they can save on fixed costs while generating revenue, it’s valuable to them. We're also seeing energy storage accepted more by the market. It’s not a brand-new technology, so you don't have to spend so much time explaining it to customers. Now everybody is talking about EVs, everybody's talking about how to capture solar, and people are finally recognizing energy storage as the glue you need to make your energy system work 24/7, whenever you need it.
What are the main challenges facing SPS, and the North American storage market in general, at the moment?
Laszlo Lakatos-Hayward: Regulation remains an issue. NREL did a study which looked at applications to utilities for approval. Between 65% to 73% of the applications failed, either because there wasn't enough capacity to connect the devices to the grid, or delays caused by the approvals process made the financial model go sideways. Ultimately, policies changed while waiting for approvals.
This is a major challenge because, if only one out of every four projects will make it, that's not a very good set of odds. But one of the interesting parts of that study was that most of the failures occurred for large systems. When you come to the smaller applications, it is easier to put them onto the grid, or in our case, put them behind-the-meter, because you have lower hurdles before you get approval from the utilities. We see that as one area where policy and regulation could significantly improve the uptake of storage.
The challenge here is making sure that utilities and regulators see this as a benefit for them. Time is always money, so if you have a hiccup with the utility when getting approvals, the risk of not actually implementing the project rises. In solar, historically, there was a soft cost upfront for getting all the procedures done, and that used to be 40% of the total project cost. That is now around 12%. Energy storage needs to have a similar reduction in red tape.
What do you think will be the headline emerging trends in energy storage in the coming year?
Laszlo Lakatos-Hayward: Everybody has a problem with logistics right now. It’s a fact of life. Energy storage, solar, wind, buying cars, buying groceries, anything. I think we're going to see that supply loosen up. I trust that the logistics issues that we're all struggling with will also loosen up a bit. And I think that the potential pickup that happened last year and through the first part of this year will probably open up further.
Lithium has taken the lion’s share of the implementation for the last number of years, but supply is lower than demand because of the growth of EVs. I think it opens the door for other chemistries that are more abundant locally. You'll find sodium is abundant pretty much anywhere in the world, same with manganese. In my opinion, we’ll see a lot more investment into mining these other base materials.
And that opens the door for stationary markets to be able to differentiate from EVs. I think we'll see a significant amount of separation between the mobility business versus stationary, which will migrate towards different chemistries better suited for four, six or eight hours’ supply.
Finally, more financing will come into this market. Historically, you had venture capital or private equity, but because of the de-risking that has taken place over several years, we’ll see much more institutional money coming into this market, especially as insurance companies are willing to underwrite it. For us, energy storage is now a mainstream play for asset portfolios.