How Axion Uses Their Energy Storage Technology To Make Money From PJM

Posted on December 26th, 2011 by

Tom Granville, CEO of Axion Power International, discusses the battery solutions that his company offers to customers and how Axion is taking advantage of a new FERC ruling to generate an additional revenue stream from the the grid.

Full Transcript:

Ben lack: Briefly talk a little bit about the company why you guys are in business and what your typical customer is?
Tom Granville: Axion Power International was formed in Toronto in 2003 and it was formed primarily to obtain license rights to a unique hybrid battery/supercapacitor technology. The long term goal, however, was to purchase the patents and the company from the actual scientists that did the years of research on the carbon and actually came up with the concept and idea for this “hybrid”. We formed Axion in September of 2003. We negotiated a license agreement with the scientists in November 2003 and as part of that license agreement, in order to buy the patents with cash, shares of stock and options, we needed to be a public company according to the inventors. So, we found a clean shell, Tamboril Cigar Company which was a Hunt Brother’s shell.  The shell expired at the end of 2003 and that’s actually  how I spent my new year’s eve in 2003. We closed that 10:30 at night Eastern Time. With a group from Switzerland who had ownership of a public  Hunt Brothers shell and we became a public company at that point in time. The first week in January of 2004, we bought the patents and the following week, we bought the company and moved forward to develop  a product that was commercializeable.We were all great believers in the technology, the potential of the technology but what the scientists had developed  and what was commercially feasible were two different things.In the process of  moving the technology forward, we found an opportunity here in New Castle, Pennsylvania to obtain a full blown laboratory and a battery production company called New Castle Battery Company. A 75,000 sq/ft plant, equipment and inventory was being foreclosed on  by a  bank with a first position. We moved forward, we closed with the bank and bought everything for literally pennies on the dollar. We made the bank whole  and the bank dealt with the other creditors.   We were then able to transition the company down here, so that by the beginning of 2007 the entire operation was here in New Castle, Pennsylvania.The old New Castle Battery Company had been making SLI batteries and other products for decades, literally. So, we inherited the line and some of the key personnel from the old company. We signed a long term lease on the property and began to truly move toward commercialization of  our propriatary lead-carbon product. We continued to make other specialty battery products that New Castle had made for years. Things like the 16v race car battery and collector car batteries for antique cars, but that was a very limited market and still is. We still continue to make those products.

We make other specialty lead acid battery products as well, but our real task here and our real reason for existence is the PbC® battery, our proprietary PbC battery which is comprised of an activated carbon negative electrode, which gives the battery its unique properties. Those unique properties include long cycle life, 3-4 times longer when compared to lead acid batteries; much greater charge acceptance than lead acid batteries, especially in partial state of charge applications, 10-20 times better charge acceptance; and a much less expensive price than lithium-ion or nickel metal hydride –  a third to a quarter of the price of those technologies.  Our product incorporates the lead acid battery structure, in that we use the same case, cover, separator, electrolyte and positive plate. Everything is the same as a lead acid battery except for the proprietary negative electrode that utilizes activated carbon in the construct of the negative plate.

These negative plates can be stacked, and are stacked, in our manufacturing process right on the line, so that  as a battery comes down the line, one of the new activated carbon plates is utilized instead of the traditional lead plate negative. It’s the same form factor. The battery is the same footprint as a standard lead acid battery. In fact, when you weld the cover on, you can’t tell the difference between our battery and a lead acid battery. That is until you actually pick it up and you realize it’s about 30% lighter because we’ve taken the lead out of the negative side.

Ben Lack: Axion is in a unique position to take advantage of current energy storage opportunities because you really play in the States. Talk to us a little bit about the recent FERC regulation that’s allowing small electric providers to supply power to larger power grids and how small businesses are taking advantage. Your company is one of two companies to kind of take advantage of this new ruling. Tell us a little bit about how you found out about the ruling, what the ruling is and why your company has decided to take advantage of it.
Tom Granville: Well, we were actually assembling the PowerCube™, our trademark PowerCube™, in advance of the  FERC discussions. We received a grant from the state to help us develop that PowerCube. The PowerCube™ has wide range application for utility, for wind, for solar and for other storage applications.About a year ago, Veridity, a strategic partner of ours from the other side of the state, (Philadelphia area is where they are headquartered  now –  they were in Valley Forge) ,  approached us and we began  discussions about the anticipated new FERC regulations and how we might be able to participate in conjunction  with PJM in  utility market applications. In addition to that,  Viridity has  been a strategic partner of ours,  and we have submitted several RFPs with them for other applications for that Cube product. Applications such as military bases, replacing gensets that burn diesel fuel , also an oil rig application again doing the work of existing gensets. These applications can be satisfied  using the Cube technology. The specific application  that we’ve entered into with PJM is here at our New Castle plant.  I’m sure you’re familiar with  PJM , they are the largest RTO in the world literally. It’s pretty amazing what they generate. They delivered 682 terawatt-hours of electricity in 2009, for example. They are ahead of the curve on  the opportunity  generated by the FERC ruling that now allows systems smaller than 1/2MW to connect to the grid. PJM was confident this change would happen  and that it would be a first step for them in moving to take advantage of things like community storage, and to take advantage of the opportunity  to work in the demand-response and curtailment markets as well. So, the FERC regulation, for the first time allowed power to come directly on the grid from smaller sources and allowed for the RTOs to take advantage of power systems that were less than a half a megawatt, all the way down to 100kva.  Our Cube is actually a half a megawatt but we’re starting out at lower levels and  building from there.  We’re starting out at 100kva, 100 up and 100 down so literally 200, and building on that until we reach our capacity here on the PJM network. Our battery also has unique properties in that it can respond in milliseconds. The requirement is to respond in three minutes or less,  but our  ability to respond in ~50 milliseconds  is going to be very important to the structure of demand-response beginning in 2012, when the RTOs will begin to “pay for performance”. In other words, the faster you can respond to their signal for curtailment, or frequency regulation, the more they will pay for that service.What we will do, how we will utilize it in the beginning, is we’ll bid to PJM through Viridity’s proprietary electronics. We’ll bid into the PJM system the night before as to what pricing we’ll accept for curtailment or for frequency regulation. We can bid it that way with a specific number, or we can bid at PJM’s suggested value and take what they are offering that day.  So far, we’ve done both.
Ben Lack: What’s been more profitable?
Tom Granville: It’s been more profitable when we price it out. However, we haven’t always been successful in obtaining our bid price. We found that it’s gone for lower pricing.
Ben Lack: What would you say was your success rate?
Tom Granville: It’s very early. We just started this literally 9 days ago. The first day in action was the 28th. We did a trial run on the 22nd, I believe it was, but really the first day was on the 28th. So, it’s very early and we’re still doing some testing, as well with Viridity. We are the first ones to utilize their system  with a PowerCube™ actually. Our Cube will be bi-directional, it will be different than the waterworks project for example, which can’t  provide  energy back to the grid. We can do that. We’re not set up to do that right now but we will be doing that in the next several weeks. Right now, we can do is curtail the power use that we have in the plant, when PJM  requires it or when they ask for it or when we’re the successful bidder and then we run the plant with our Cube batteries until we can come back online. We will recharge the batteries in off-peak time, so that we’re prepared for the next event. Of course we can also accept power from PJM as part of our frequency regulation service and be paid for that. In the future,  we’ll be able to  both curtail power   as well as respond to a need by PJM for more power on the grid, and we’ll accomplish that by feeding our power from the Cube right into the grid.
Ben Lack: In the 9 days that you’ve been testing, has the testing gone smoothly?
Tom Granville: As smoothly as one could expect, I guess. If the truth be known, it’s gone smoother than I thought it was going to because it was so brand new and, you know, we were working 20 hours/day in the days leading up to going on line as we  worked  out the bugs with the utility and with Viridity and since it’s the first time they had  done this , you can imagine the software nightmares that were incurred. Our Axion team deserves all the praise on this end, for bringing this project to fruition. So, I’m very encouraged by the way it’s gone. Certainly it’s not been without pot holes  but it’s gone much more smoothly than  I anticipated,  let alone hoped for.
Ben Lack: In the 9 days that you’ve been testing “inaudible-14:04” initial phases, you mentioned that you are, the night before, putting in your own pricing for what you’ll accept and then there’s also a pricing that PJM recommends. What’s the difference in that range between the pricing you’ll accept and the pricing that PJM is recommending?
Tom Granville: I’d rather not get into that but you’re not talking about 25%, you’re talking about a number much lower than that. Just to give you a range.
Ben Lack: Why are you in this business?
Tom Granville: We are in the business of showing the application for  the Cube and how the Cube can be of service to a utility, or to a plant, or to a wind farm, or a solar farm, or to a number of other applications. We’re going to be able to do, with this Cube, much more than just  demand-response  and frequency regulation.  We’re going to be able to do power smoothing, UPS backup and be able to try our hand at peak shaving. All of the above will be items that can be accomplished through the Cube. The oil rig application, which we see as a big opportunity  going forward. It will give oil well drillers the ability  to shut off ancillary motor generator sets that they just run on idle standby. They run these in the event that they need a quick boost of power if the bit gets locked in the hole or for some other reason they might need fast power. It takes the motor generator set, depending on the manufacturer, between 6-8 minutes to power up completely including the lead time for someone to manually go over and start it assuming that the automatic transfer, for some reason, would fail. We can provide  instantaneous power for them, so they can shut those gensets off and they don’t run idle and they don’t emit all kinds of CO2and NOX emissions and burn literally thousands of gallons of diesel doing nothing.This Cube is the test tower, if you will; it’s our display model. The reason we made it over size, was so that people can get into the Cube and walk around and look at it and see exactly how it operates. This is a 40 foot container that we have here on site. Future containers will only be 20 feet and they’ll be able to contain the same amount of  power. Future electronics will be separate from the Cube. They’re in our Cube right now, but for larger storage projects, we’ll have multiple pods, if you will, all connected to the power module. We’re actually doing testing, in the Cube, for the Norfolk Southern hybrid locomotive application. In that application, we will have large strings of batteries similar to those that are contained in this Cube. It’s important to have the batteries equalized and in  sync, if you will, and this Cube provides us with the opportunity to test that string equalization feature of our proprietary PbC® lead carbon battery.  The batteries, and battery strings, work in  unison in providing uniform discharges resulting in less reliance on our propriatary  battery management system.

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