Great to chat with Justin Scholz Ceo and founder of Phelas, Phelas develops the solution for the energy transition: A modular, mass-produced and cost-effective and safe electricity storage system for utilities, grid operators, industry, renewable energy developer & operators! We discussed liquid air energy storage, energy efficiency, supply chain disruptions, grid interconnection and more!

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James

The unedited podcast transcript is below

James McWalter

Hello today we’re speaking with Justin Scholz Ceo and founder of Phelas welcome to the podcast Justin.

Justin Scholz 

Thank you very much for inviting me. It’s a pleasure.

James McWalter

Great to start with. Could you tell us a little bit about Phelas.

Justin Scholz 

So Phelas is an energy storage company and we are very vision-drive so we started actually with a simple vision. We want to make one hundred percent renewable energy globally and nobrainer and we saw that energy storage is the missing puzzle piece so we are developing both. Software but mainly hardware um a new approach to liquid air energy storage.

James McWalter

And and what drove the initial decision to start Phelas you know, could you walk me through the yeah, the different steps that ended up saying we’re going to start this company. We’re going to solve this problem. Okay.

Justin Scholz 

It it. It was an interesting journey and with a lot of uncertainty in the beginning and still of course I mean in the startup you’re always uncertain about many things. Um I have founded my first company during University Um Education which took away the fear of funding. Of founding and in Germany that is quite widespread people are like oh you’re so bold. You’re so brave. You’re founding a company. Um and that is different depending on the in different like countries so that took away the fear of founding and then after my studies and traveling and working in 2 other startups I was both frustrated with.

Justin Scholz 

Management usually and I was proof reading the master thesis of one of my long-term friends who started energy engineering and he did a master thesis on the technoeconomic analysis of how like how economic are energy storage in Spain that was in 2018 if you account for degradation in batteries and his consensus back then was well. It’s not profitable but we will need a lot of energy storage and we don’t even know technologies that can cover these large amounts and then we started looking into what kind of technical solutions. There could be and what kind of properties they would need. And then we started diving into that deeper and then we based on that we we went ahead and um, started assembling a team and identified liquid air energy storage as a technology that. We we could meaningfully contribute I really think that if if you start something it should be clear how you do something fundamentally different than it has been done before because otherwise do people who have been doing it. Longer are usually better at it so you need to do something very different and we then. Applied for some funding in Germany there’s some some startup incubation programs. You could say we didn’t get in back then but then at some point later we did actually get some initial traction and angel investor money and then we we pretty early on then knew let’s pursue this and see and.

Justin Scholz 

Yeah, we got to where we are now.

James McWalter

And why is energy storage. Um, absolutely why is energy storage important that.

Justin Scholz 

So the the international energy agency in 2020 already announced that renewable energy is the cheapest source of electricity in human history. So. It’s not the cost of renewable energy that is the problem. The problem is rather the intermittency because it cannot switch on the sun like. Can do whatever you want. It’s just going to be dark outside in the night but you still want electricity and it’s similar with wind and the problem really is how can we shift from the time when the sun is shining and the wind is blowing to the time when it’s not and do that most economically sustainably and and also scalably on a global level. And that is why large scale energy storage is so important because it solves this this big problem because it all of a sudden gets us to the status quo where you don’t think about can I switch on my lights can I have my fridge run Twenty four seven yes of course you can and. Maintaining that requires being able to shift from times of generation to times of demand. So from day to night or from wind to no end.

James McWalter

And so there’s a lot of different types of technology um being either in the lab or being deployed at scale around energy storage. Could you walk me through the pros and cons of of those different technologies and why you know how that influenced your approach right.

Justin Scholz 

When we when we started looking at different technologies but also a lot into like the the elephant in the room is always lithium. Um it. It has grown tremendously. It has decreased in cost incredibly but 1 of the big downsides. There is um, that. Like the material resource question of if and when we get enough lithium also nickel and cobalt being in short supply that is the 1 aspect that is always a big question if you want to honestly. Upend or or revolutionize the global energy system because it’s so large you will need a lot of resources whichever technology you choose and then you have the degradation problem where simply by using it. It becomes very quickly a lot worse when we looked at it. We wanted a solution that is sustainable in its core. And easy to scale and uses very easy to scale resources. So our main materials that we use are steel and gravel now steel you can argue might not be the greenness but you can make green steel and it’s. At its core. It’s iron and iron is not in short supply globally so that is something that is inherently scalable and if you think about it in the beginning like when when we looked at most solutions out there. We saw solutions that are targeting large-s scale applications large monoli like building large facilities very often.

Justin Scholz 

And we said actually learning from other technologies like lithium ions. What made them cheap and when you think about it lithium ion batteries got cheap specifically because we build a lot of very small standardized cells. There’s these um 48 um, like there’s these double number pairs of of. 46 10 or something. Um these small cells that look like these double a battery cells that are just produced in the probably billions by now and that makes the technology cheap and we apply the same logic to liquid our energy storage where instead of buying instead of going large we go in large quantity. Because that drives down costs a lot faster. Usually.

James McWalter

Yet so interesting if I think about how solar panel manufacturing was able to leverage the historical you know silicon chip industry and the various industry processes kind of developed for that over the last few decades you know? Yeah as you said like there’s a very similar element for the the mayon. Which piggybacked on the back of basically the mobile phone and you know later other applications like drones and so on um to be able to kind of develop these global supply chains. You know, workflows and all those kind of things and so it sounds like then you are there existing processes or an industry processes that you can kind of leverage your piggyback. Or is it more. You’re starting at this kind of more granular level and going to build it from the ground up right.

Justin Scholz 

That’s and that’s exactly the right way of thinking about it because what? what we can use on a component level is all off the shelf pretty much so we can leverage the existing supply chains on chemical engineering even from the oil and gas industry of compressors expanders heat exchangers. Piping evolves everything like we don’t have to reinvent the wheel we can use these big existing supply chains who are actually looking for new revenue opportunities because there might not be a decrease of all use. But there’s certainly no increase right now there’s not much new investment. So if you want to. Grow and capture new markets. Especially then in the renewable sense that is very interesting to a lot of these suppliers and a lot of times we then get the question. Whatever you use off-the-shelf components where is your innovation and if you think back there you might have heard of processes like the hubbber bosh process or the Linda process these processes. We’re using off-the-shelf components but they were new in the the way they combined the components and that is what we did as well. So we use off-the-shelf components in a new and innovative way. But we can therefore leverage the whole existing industrial base and supply chain on these components to. Not have also issues in in scaling that actually.

James McWalter

Its Super interesting I’d love to and to go through the different elements of the technology then because yeah, I’m pretty familiar with the traditional liium ion and even some of the new battery technologies around iron and so on Um, but. You know, a lot of the have various tradeoffs some are better on Energy. You know efficiency some have higher or lower energy density some have better. You know are more suitable to Intraday life cycles and others for kind of longer stage duration. Um, how I guess those. Liquid Air energy Storage. You know what? what is its kind of perfect use case across those different dimensions and.

Justin Scholz 

It’s it’s very we have as um as as most long duration energy storage technologies those are technologies that focus on a longer duration that usually is considered starting at 6 to 8 hours or more of capacity. Um, because we the. Costs per additional megawatt hours or per additional capacity are way way way lower than the cost per additional power so megawatt and that means then for applications where you have intraday day ahead and also weekwise. Shifting of large amounts of energy rather than very very short peaks of of for example, grid stabilization. It’s it’s really more the perfect use case is really colloccating it with windmills collocating it with so solar pv deployments because they’re. Um, from a commercial point of view these developers and operators they face increasing market pressure because if the wind is blowing on on my windmill. It’s probably also blowing on my neighbor’s windmill. So the market prices are actually depressed. You have very low. Market value of electricity when there’s a lot of renewable generation and being able to then use an energy storage and actually put in a lot of energy and shifting that to a later time is is really the interesting thing when we look at efficiency. So the physical round of efficiency.

Justin Scholz 

That was one of the things we very early on were looking very closely into because we targeted an efficiency of 50 to 60% run-trip and that some people might say that seems low seems low The interesting thing is we found that when you look at the economics when you look at the. The the business case it it is clear that a vastly cheaper system and an ah acceptable efficiency of of roundup efficiency is way better than a super high efficient system at high cost or as I like to say no customer in the energy market will pay me. 4 times more of cost just to have maybe 5 percentage points more of efficiency. But in the chemical industry that is actually not the case in the chemical industry where you have the classic approach to building alicofaction units. They have a different incentive structure and they might actually pay a lot more because for them d d. Profitability calculation is different and that is one of the things you really need if you go into the energy storage space to understand how your customers will actually make money with with your product and that is something that is that. Makes in engineering then interesting because the tradeoffs you do are different than what you classically do in your industry.

James McWalter

Understood and if I think then about let’s say the deployment of a you know battery storage which which has kind of arisen ah particularly in the last couple of years you know so often that’s colocated as you in the similar way to let’s say some solar panels and you often have these. Basically shipping containers with racks of Lithium Ian Batteries um and then and there’s various kind of software controllers that you know, kind of operate on that if you take a typical kind of Lithium Ian you know storage within a shipping container and in terms of the megawatts and megawat hours. Yeah, how does the I guess the energy density compare leaving aside the efficiency you know is the use of liquid air energy storage does that typically take up more kind of space less space for the same amount of energy density. So.

Justin Scholz 

But it would be more. It would be more ah more space simply because electrochemical storages are really energy dense. That’s why you put them in cars because in cars you have both a weight and the volume limitation. Um for station energy storage space.

Justin Scholz 

Makes or is less relevant. It’s still relevant because of the cost of of land but still, it’s not as relevant as in in mobility applications or in phones etc. We are talking about an energy density roughly one third 1 fourthth. Um. On ah on a simple basis. We are also doing a containerized system and um, we also intend to be able to stack them so and that is something that we have not seen done much with lithium simply because it then becomes harder in case of fire hazards.

Justin Scholz 

And other risks so being able to stack the system then reduces effectively the area again that you need or do you can increase the aerial density volumetric wise we are definitely like um one third or one fourth depending on how you count of of lithium.

James McWalter

Honor said and in terms of the process itself. Um, what are the inputs and the outputs right? So minus ending is it’s not pure. Pure Electricity. You also need air as an input and are there any kind of outputs or you know other elements that that kind of come out of the process. So.

Justin Scholz 

The process in itself is the simplest version of the process is as ah as a customer or as someone who wants to deploy the system you need to provide it with the electricity and the air we take from the atmosphere. And at the end of the process you get electricity out again and the outcomes out of the system again. So There’s no byproducts aside from that there’s ah heat as a non-material um byproduct. Um, that is that is being generated. Um the process itself is. We we take in the ambient atmospheric Air. So um, that’s pretty much infinite, free resource for us and we compress that to a high pressure pressure Level. We store a lot of the heat that is being generated to increase efficiency. Our heat storages. We then have our custom air equifaction process and store the liquefied air in something that’s called a cryotank you can think of it as a Thermoscan Um, which is wellinsulated. Um, and then if you want to regenerate the Electricity. You could You can think of it as. Boiling the liquid air Again. So the same way that water Vapor becomes liquid if you cool it down it condenses into liquid water the same happens with air and when you boil the liquid air again. A lot of the pressure increase that is happening there together with the compression Heat. You can then regenerate into electricity electricity with.

Justin Scholz 

Ah, turbine or an expander or something like that with the generator. So.

James McWalter

And I’d love to go and go back then into the you know development of the original prototype or Mvp. So yeah I have a better kind of understanding now the technology it sounds like so really interesting and it it definitely solves some of the issues that we’re seeing with Lithiumyan battery search deployment. So I kind of get that piece. But going from that you know this is like the technology we’re going to hang our hat on to something that is you know a prototype or something that you can demo to potentially users. What was that process like.

Justin Scholz 

So and and in that state we are right now actually last Friday we started operating our our cold section of our first prototype system. It’s ah but as we like to say nowadays. Thank you, it’s as we like to say now it’s ah it’s a room scale system.

James McWalter

So congrats.

Justin Scholz 

Because when I say it’s ah it’s a lab scale system people think of a benchtop but it actually fills a full room of um, like 5 by five meters or something like that. So. It’s it’s a big system and um. Going through the pains of starting from a blank sheet of paper actually around two years ago to designing starting procurement figuring out the exact sizes of building up the supply chain the suppliers and the logistics the integration the assembly um and testing. With a very small team so that was 4 people full-time pretty much for everything in that system and then also the control system being new and the the the whole um approach being new so we have advisors who have who had worked for more than 40 years at Linda in 1 case, um. Being responsible for alic affection systems at Linde. So they know how it’s classically done and it’s actually different so that was quite ah, quite a ride. Um over the last two years also supply chain wise we have some some some close calls there. Um, if I remember of one shipment shipment that was.

Justin Scholz 

Um, it it was a component that we got shipped from China and we actually decided to ship it ah but via train to munich and that was the decision to ship it via train was was done in January this year

Justin Scholz 

And we actually had looked um if the train would go through through Ukraine at at that point it it didn’t but still then we got the notice that it was on the train on February Twenty Eighth now um we were not sure if that train would ever arrive because that train went through Russia, but it did. And then when it arrived the component then in China there were lockdown. So even if it hadn’t arrived. We wouldn’t have been able to get a new component in time. So sometimes like I think you just have to be lucky as well with your supply chain.

James McWalter

It? yeah, it’s the amount of ah supply chain disruptions over the last um two years have been incredible. And yeah, especially if you are trying to go overland um from Asia to to Europe it’s becoming more complex I would say rather than less complex. Um, and outside of that you know. 2 years It’s a lot of things kind of go right? Have to go right? A lot of things I’m sure you know were challenges so anything that was kind of surprising to you going in. You know is there any kind of major aspects either of the technology or the approach or the market that you change your mind on over those kind of 2 years of development.

Justin Scholz 

Um, I Think what? what we increasingly learned is that being able to calculate for our customers how they make money with a system like this and how much and helping them. Um, assessing that is something that we we weren’t aware of how much value that is because we see that so many in the industry in the in the industry from the CustomerS perspective. They know they need energy storage. They want to deploy it. But what is the right size. What is the right Configuration. What is the right technology so we actually help right now. Potential customers. Also we advise them in this case, a Redox flow battery might be a better solution for you because simply because we believe that any storage deployment right? now is is a net positive um and it. Helps people get educated on on how to assess it and it builds up trust in the Industry. So I think that is something that that we learned to more value and um from a supply chain. We see now that um these these suppliers like delays of components. I Didn’t think it would be that bad and that delayed and how much effort a supply chain management is I think that is something that that we have learned now looking looking back of how to improve that in the future.

James McWalter

And you mentioned some of these target customers who who is like an ideal customer for you guys. So.

Justin Scholz 

So ah, we we have we already have a pilot customer who who who’s ah, a wood pilot factory in Germany they produce wood pallets for for heating purposes and they’re an energy intensive industry energy intensive industry in in Europe. Especially as facing incredibly high energy costs and we can help reduce those costs. Um, but the problem there from a startup perspective is that every customer has different needs. So. It’s a very heterogeneous market. The ideal customer also from a scaling point of view is really the renewable energy developer. And the renewable energy operator because at the and once you understand how to put energy storage next to your solar pv field or your wind farm. You can replicate that you can do that in the next project and in the next project and in the next project and that makes it a very scalable case because also you can talk with. You can build trusting relationships with these developers who build project of the project. So those are really the ideal customers and also from the project design if you integrate storage from the very beginning. It takes a lot of risk out of the project of its profitability. Um, and also. Makes it um, easier than to to show the value of the project.

James McWalter

And you’re focusing on Germany that’s where you’re based um and I’m less familiar with the german energy market relative to ah North America and and and Ireland and the Uk as you kind of think through you know, scaling up your go-to-market. How does the. Differing kind of energy markets across countries kind of affect that is the plan to mostly focus on Germany and then potentially expand later or is it something that you’re considering multiple countries from the start. So.

Justin Scholz 

When we started. We had a very unfavorable legal framework in Germany where energy storages were actually taxed twice because you were considered an energy consumer when you charge an energy producer when you discharged and. You cannot really build a business case of 80% of your cost is just overhead of tax and and fees that has gladly changed by now. But um I still see a lot more potential in in Southern Europe and also eastern europe um, and that is still very close. Both geographically speaking but also from and from an ability to to ah execute on these projects. So I I think we focus on the german market um, and on the german speaking market. But ah, we are very closely looking and um also in conversations with.

Justin Scholz 

The European market in general because you see different use cases if if it’s wind in the north If it’s sun and on the Iberian Peninsula there’s There’s great potential there as well.

James McWalter

Yeah, and I guess thinking through the product itself so we talk a lot about kind of hardware aspects. But for the deployment of these you know, kind of any sort of storage ah asset knowing when to discharge and charge um is super important right? because. If you’re playing around with different types of wholesale orelillerary services or rebalancing markets. Um, that becomes like ah like a core element is that you know ability to kind of have software controls is that also something you’re building or you looking at more off-the-shelf tools for that and what’s your kind of general approach to the software piece.

Justin Scholz 

Because we have been building in-house software now for the last two years as well to to assess the business cases for customers. So we run um, usually between 5 to 10000 sometimes more scenarios on a Customers case with historical market data and the the weather data for the location for example and then simulate a storage behavior to understand how much value there is so we have a lot of the building blocks and we really believe that a lot of the value in energy storage is not only in the hardware but also in how you use it. You see that also with Tesla. Releasing the auto bidder software which seems to work quite well and going into the direction of helping our customers use the system more profitably and efficiently providing that software. We have that on ah or on our roadmap. Um, whether it’s going to be available at the very beginning is a different question. Um. But we definitely see a lot of potential and something that we want to in-house incorporate. Um, this critical piece of how to use the storage because then you can also really integrate with the hardware properties if you actually produce both the hardware and the software. And then can actually leverage certain hardware properties that you might have a harder time leveraging if you just use and like an off-the-shelf software. There.

James McWalter

That makes sense and so you know you have this room size ah version that that that’s kind of been developed. What are the kind of aims for the next you know 12 to twenty four months for phalis.

Justin Scholz 

We are now looking forward to scaling up out of the lab. The lab system is in the size of like thirty forty Kilowatt of power and we will scale up now to a megawatt. To like a first commercial scale system that is going to be deployed also in a commercial setting. So um, scaling up the team um with a lot of and new hires on the engineering side then um, doing the scale up design selecting suppliers doing all the and. The engineering work there and achieving a point where we can then in the second half of the twenty four months so in in the year after next year then actually build it. Um is going to be the big steps because we see on on this side. That we want to have the the system deployed in the next two years on a commercial scale and on the commercial side we want to um, gain more customers because we believe that the more customer attraction the more and the firmer. The contracts are the more we can take out. Um. Market risk also from for ourselves but also for our investors because we believe that the the more customers there are. It’s um, always easy then to say well you don’t have to worry if this is a thing that the market wants if you already have customers for it obviously.

James McWalter

I yeah, and and you mentioned investors you know it sounds like you’ve done some pitching you’ve raised some capital. Um I’ve done that myself as well. And first the most recent time I raised some capital. It was kind of surprising to me. Um, what? what people ah wrote the investors. Found interesting about my startup relative to like the narrative that I was going in and so I would like shift my narrative I would shift things you know we would still always be very very core and like you know what we’re trying to achieve but I definitely would take like oh you know I’m not really explaining this part right? or people get very very excited but this part that maybe I had. Kind of underappreciated as you’re kind of going through. You know these kind of investor conversations. Um, what gets people? what’s gets the investors most excited about failis.

Justin Scholz 

What I what I what I’ve found that they most get excited about is a solution that is inherently scalable as we earlier discussed because of mass manufacturing at its core with existing supply chains combined with a new business model. And new flexibility that is really what people find interesting because usually energy storage plays are you’re an oem you sell your system to your customer and then you maybe do some servicing but that’s it that is quite simple but it’s also a bit boring. And we wanted to build sustainability into the core of the company and into the core of the business model and part of sustainability is also to build longer-lasting systems and we early on decided we want to be also financially incentivized to build longer-lasting more sustainable products. And the best way to do that is to profit from it and what we came up with is something we call energy storage as a service and as an intermediate steplicasing because our systems last 20 to 30 years from ah from a component and hardware point of view and our customers might only want them for 5 to 10 and because they are shipping containers and they’re movable and they don’t degrade per use. We can actually ship them to one customer for five or ten years and after that we can ship it to the next customer. So thereby. We get incentivized to actually build a longer-lasting system.

Justin Scholz 

And the barrier to adoption is lowered on the customer side because they don’t have to commit to a large upfront payment and buy the system directly so in that sense both both parties win and you have a new. Idea and interest of of energy storage because you no longer have to bet that at this location in the grid in this configuration you will make money you rather have to bet that somehow there will be demand for energy storage and that is a way easier and less riskier bet.

James McWalter

That That’s so interesting like that ah kind of you know, dynamically moving um storage in that like literally physically moving is such interesting way and I guess does that sometimes kind of help you know, navigate things like interconnection capacity elements on the grid. Because if you also have this ability to literally you know move the shipping at daner maybe to a place that now you know the the grid is very very congested. Um, the value of storage in that particular node on the grid is is lessened over a five-year period and you can shift it so does interconnection kind of play a role there as Well. And.

Justin Scholz 

Interconnection is 1 play if you look at countries like the Netherlands where large parts of the distribution. Grid are totally overwhelmed but also are planned to be built out. It’s exactly one of these areas where you can deploy for a limited amount of time and then shift it. Another aspect is um, the the ability to adjust to a changing market dynamic. We recently talked with an energy developer from chile. Um who we advised and the ability to deploy a system and then five years down the road. I mean I don’t know how the energy market will look like 5 years from now but we enable you then to adjust with higher capacity lower capacity or more or less power and that is something that makes a deployment way easy because you don’t have to do all these bets you just you can deploy and then. See how the market behaves and that is um, a flexibility and ability to adjust um that that you can only really achieve if your system doesn’t have a lot of cost per use. Um and a lot of degradation. Because that is what you usually have to charge a customer for and which we don’t have because the system has so low degradation.

James McWalter

And you mentioned a little bit earlier about the environment from a policy and governmental place was pretty negative on storage and that that’s improved in Germany specifically how else might you know government policy regulations. You know changes in tariffs changes in incentives you know, potentially affect the market because as we’ve seen in the United States the inflation reduction act was passed over the summer that’s had a very very profound effect with a ton of tax credits but based around building you know, clean energy projects in specific places in specific ways. Um, yeah I guess as you kind of look at what’s the outlook from a regulatory or incentives point of view and are there areas that you know governments could improve on. So.

Justin Scholz 

I think it’s it’s region specific if we look on the on the european um landscape there there there is movement in the positive way of energy storage I think it like for the last few years I’ve seen a lot of lobbying and and movement. Hydrogen and I think not enough focus on energy storage because realistically speaking its very hard to have green hydrogen without energy storage because the electroalizers that you need for green hydrogen usually don’t like it. Ah if you expose them to direct solar ah wind feed and because of the intermittency again. So I think there needs to be more awareness of how much and how quickly we need a lot of energy storage but also from an incentive structure I think to to really accelerate the rollout also of new and innovative technologies encouraging existing players um with. Tax incentives and also with with with subsidies to actually take risks with earlyst stage technologies would be really helpful as an as an earlytage startup in a capital intensive industry like. Because anybody who wants to deploy grids scale energy storage will have a lot of capital they need that is some and then ah on the other side someone who’s willing to take that risk reducing that for the other side is is tremendously helpful so incentivizing the the actual.

Justin Scholz 

Building of these experimental sites of of pilots but also of more earlystage commercial systems um is is I think um, good and and needed and it’s already done in parts. Um I’ve increasingly heard for offshore wind an offshore wind when.

Justin Scholz 

Companies are bidding then to get the ability to build it. They need to show Innovative Innovativeness I don’t know if that’s an English word but I think you know what I mean um and encouraging that even further to encourage actually building more storage.

James McWalter

It It is close enough. Good.

Justin Scholz 

Or even enforcing it in some parts where you need it from a grid perspective I think that will be very helpful.

James McWalter

And you also mentioned at the beginning you know you’re as you try to start a startup in Germany the reaction of people. The social reaction is you know surprise or you know you’re so brave and so on. And yeah, I’m from Ireland and you know I’ve upset I think before on the podcast. It probably be. Close to impossible for me to build the startup I’m building in the United States in Ireland just the the kind of cultural structure is so different that you know it’s hard enough to build something and then you have all these other kind of elements that are kind of set against you but I guess one of the things I’m also always looking for is you know, certain places you know. That are outside of yeah traditional silicon valley type startup development often have ah other advantages that are less clear to folks on the outside. So if you were to say what the kind of most positive things are about building you know a startup in Germany and and maybe in you know, Munich specifically. Um, what would those be and.

Justin Scholz 

Quality of life I mean the the quality of life living in Munich is quite high. Um, it’s it’s a very livable city but aside from that as a startup the the deep tech. Environment that we that we have here in munichn that is being increasingly built by especially the t munich but also the l um u and t and general ecosystem in munich it’s a really hardware um and and deep tech focusedcused and environment and. So you’re surrounded by really cool tech and and hardware startups and hardware startups are usually considered as ah, it’s hardware. It’s hard. It’s expensive I don’t it’s not interesting and that combined with with a lot of increasingly investors who understand hardware. Because you’re in this cluster and a supplier network that is local so when I look at the the ability to choose from different suppliers on this um on on the supplier side for integration of components for the integration of piping something industrial like if you. If you want to build something with an industrial base Germany is a great place because we have a great industrial base of manufacturing and know-how and all these small medium-sized companies that are often happy to work with you if you get to the right people and that is something that is very valuable because that.

Justin Scholz 

Takes a lot of the time out and it’s it’s then um, possible to get the right? um contacts advisors but also talent.

James McWalter

Yeah, and I think that’s it’s a great lesson for anybody anywhere around the world listening to this. You know there are always advantages and disadvantages to a specific place when you’re trying to build a company and you know the best startups always sort of figure out how to best leverage those advantages. Um, and you know flip it up. Flip. Things that seem like at its advantage at first into you know the positive that it potentially is um but Justin Scholz  this has been really great really enjoyed chatting before we finish off though is there anything I should have asked you about but did not.

Justin Scholz 

Um, we are I think one of the things that is that is high on my mind. There is what is what is your fundraising story or and or what is your biggest needs and um, there’s there’s 2 points. The one is. We are raising right now a seed round. So if you find interesting what we do, um, please reach out to me as an investor. Um and on the other side if you are interested in working with us if you’re even interested in becoming part of the team. Um, as engineer or also on the sales side on the. Internal side. Um, we will be hiring um a lot of great folks. We have a really great team already. Um, but we will look forward to expanding that next year um with the interesting and really yeah, um, ambitious challenges to to understand. Um. How to scale up the system into a commercial scale because that is that is something that then it becomes even more real going from a lab scale to to ah to a customer scale.

James McWalter

Yeah, and we’ll include those um contact details and so on in the show notes. Thank you so much. Justin Scholz .

Justin Scholz 

Thank you very much.

Title: Liquid Air Energy Storage – E122

Great to chat with Justin Scholz Ceo and founder of Phelas, Phelas develops the solution for the energy transition: A modular, mass-produced and cost-effective and safe electricity storage system for utilities, grid operators, industry, renewable energy developer & operators! We discussed liquid air energy storage, energy efficiency, supply chain disruptions, grid interconnection and more!

https://carbotnic.com/phelas

Download Podcast Here: https://plinkhq.com/i/1518148418

Remember, If you want to support the podcast please rate and review 5 stars on  Apple, Thanks so much! 

James

The unedited podcast transcript is below

James McWalter

Hello today we’re speaking with Justin Scholz Ceo and founder of Phelas welcome to the podcast Justin.

Justin Scholz 

Thank you very much for inviting me. It’s a pleasure.

James McWalter

Great to start with. Could you tell us a little bit about Phelas.

Justin Scholz 

So Phelas is an energy storage company and we are very vision-drive so we started actually with a simple vision. We want to make one hundred percent renewable energy globally and nobrainer and we saw that energy storage is the missing puzzle piece so we are developing both. Software but mainly hardware um a new approach to liquid air energy storage.

James McWalter

And and what drove the initial decision to start Phelas you know, could you walk me through the yeah, the different steps that ended up saying we’re going to start this company. We’re going to solve this problem. Okay.

Justin Scholz 

It it. It was an interesting journey and with a lot of uncertainty in the beginning and still of course I mean in the startup you’re always uncertain about many things. Um I have founded my first company during University Um Education which took away the fear of funding. Of founding and in Germany that is quite widespread people are like oh you’re so bold. You’re so brave. You’re founding a company. Um and that is different depending on the in different like countries so that took away the fear of founding and then after my studies and traveling and working in 2 other startups I was both frustrated with.

Justin Scholz 

Management usually and I was proof reading the master thesis of one of my long-term friends who started energy engineering and he did a master thesis on the technoeconomic analysis of how like how economic are energy storage in Spain that was in 2018 if you account for degradation in batteries and his consensus back then was well. It’s not profitable but we will need a lot of energy storage and we don’t even know technologies that can cover these large amounts and then we started looking into what kind of technical solutions. There could be and what kind of properties they would need. And then we started diving into that deeper and then we based on that we we went ahead and um, started assembling a team and identified liquid air energy storage as a technology that. We we could meaningfully contribute I really think that if if you start something it should be clear how you do something fundamentally different than it has been done before because otherwise do people who have been doing it. Longer are usually better at it so you need to do something very different and we then. Applied for some funding in Germany there’s some some startup incubation programs. You could say we didn’t get in back then but then at some point later we did actually get some initial traction and angel investor money and then we we pretty early on then knew let’s pursue this and see and.

Justin Scholz 

Yeah, we got to where we are now.

James McWalter

And why is energy storage. Um, absolutely why is energy storage important that.

Justin Scholz 

So the the international energy agency in 2020 already announced that renewable energy is the cheapest source of electricity in human history. So. It’s not the cost of renewable energy that is the problem. The problem is rather the intermittency because it cannot switch on the sun like. Can do whatever you want. It’s just going to be dark outside in the night but you still want electricity and it’s similar with wind and the problem really is how can we shift from the time when the sun is shining and the wind is blowing to the time when it’s not and do that most economically sustainably and and also scalably on a global level. And that is why large scale energy storage is so important because it solves this this big problem because it all of a sudden gets us to the status quo where you don’t think about can I switch on my lights can I have my fridge run Twenty four seven yes of course you can and. Maintaining that requires being able to shift from times of generation to times of demand. So from day to night or from wind to no end.

James McWalter

And so there’s a lot of different types of technology um being either in the lab or being deployed at scale around energy storage. Could you walk me through the pros and cons of of those different technologies and why you know how that influenced your approach right.

Justin Scholz 

When we when we started looking at different technologies but also a lot into like the the elephant in the room is always lithium. Um it. It has grown tremendously. It has decreased in cost incredibly but 1 of the big downsides. There is um, that. Like the material resource question of if and when we get enough lithium also nickel and cobalt being in short supply that is the 1 aspect that is always a big question if you want to honestly. Upend or or revolutionize the global energy system because it’s so large you will need a lot of resources whichever technology you choose and then you have the degradation problem where simply by using it. It becomes very quickly a lot worse when we looked at it. We wanted a solution that is sustainable in its core. And easy to scale and uses very easy to scale resources. So our main materials that we use are steel and gravel now steel you can argue might not be the greenness but you can make green steel and it’s. At its core. It’s iron and iron is not in short supply globally so that is something that is inherently scalable and if you think about it in the beginning like when when we looked at most solutions out there. We saw solutions that are targeting large-s scale applications large monoli like building large facilities very often.

Justin Scholz 

And we said actually learning from other technologies like lithium ions. What made them cheap and when you think about it lithium ion batteries got cheap specifically because we build a lot of very small standardized cells. There’s these um 48 um, like there’s these double number pairs of of. 46 10 or something. Um these small cells that look like these double a battery cells that are just produced in the probably billions by now and that makes the technology cheap and we apply the same logic to liquid our energy storage where instead of buying instead of going large we go in large quantity. Because that drives down costs a lot faster. Usually.

James McWalter

Yet so interesting if I think about how solar panel manufacturing was able to leverage the historical you know silicon chip industry and the various industry processes kind of developed for that over the last few decades you know? Yeah as you said like there’s a very similar element for the the mayon. Which piggybacked on the back of basically the mobile phone and you know later other applications like drones and so on um to be able to kind of develop these global supply chains. You know, workflows and all those kind of things and so it sounds like then you are there existing processes or an industry processes that you can kind of leverage your piggyback. Or is it more. You’re starting at this kind of more granular level and going to build it from the ground up right.

Justin Scholz 

That’s and that’s exactly the right way of thinking about it because what? what we can use on a component level is all off the shelf pretty much so we can leverage the existing supply chains on chemical engineering even from the oil and gas industry of compressors expanders heat exchangers. Piping evolves everything like we don’t have to reinvent the wheel we can use these big existing supply chains who are actually looking for new revenue opportunities because there might not be a decrease of all use. But there’s certainly no increase right now there’s not much new investment. So if you want to. Grow and capture new markets. Especially then in the renewable sense that is very interesting to a lot of these suppliers and a lot of times we then get the question. Whatever you use off-the-shelf components where is your innovation and if you think back there you might have heard of processes like the hubbber bosh process or the Linda process these processes. We’re using off-the-shelf components but they were new in the the way they combined the components and that is what we did as well. So we use off-the-shelf components in a new and innovative way. But we can therefore leverage the whole existing industrial base and supply chain on these components to. Not have also issues in in scaling that actually.

James McWalter

Its Super interesting I’d love to and to go through the different elements of the technology then because yeah, I’m pretty familiar with the traditional liium ion and even some of the new battery technologies around iron and so on Um, but. You know, a lot of the have various tradeoffs some are better on Energy. You know efficiency some have higher or lower energy density some have better. You know are more suitable to Intraday life cycles and others for kind of longer stage duration. Um, how I guess those. Liquid Air energy Storage. You know what? what is its kind of perfect use case across those different dimensions and.

Justin Scholz 

It’s it’s very we have as um as as most long duration energy storage technologies those are technologies that focus on a longer duration that usually is considered starting at 6 to 8 hours or more of capacity. Um, because we the. Costs per additional megawatt hours or per additional capacity are way way way lower than the cost per additional power so megawatt and that means then for applications where you have intraday day ahead and also weekwise. Shifting of large amounts of energy rather than very very short peaks of of for example, grid stabilization. It’s it’s really more the perfect use case is really colloccating it with windmills collocating it with so solar pv deployments because they’re. Um, from a commercial point of view these developers and operators they face increasing market pressure because if the wind is blowing on on my windmill. It’s probably also blowing on my neighbor’s windmill. So the market prices are actually depressed. You have very low. Market value of electricity when there’s a lot of renewable generation and being able to then use an energy storage and actually put in a lot of energy and shifting that to a later time is is really the interesting thing when we look at efficiency. So the physical round of efficiency.

Justin Scholz 

That was one of the things we very early on were looking very closely into because we targeted an efficiency of 50 to 60% run-trip and that some people might say that seems low seems low The interesting thing is we found that when you look at the economics when you look at the. The the business case it it is clear that a vastly cheaper system and an ah acceptable efficiency of of roundup efficiency is way better than a super high efficient system at high cost or as I like to say no customer in the energy market will pay me. 4 times more of cost just to have maybe 5 percentage points more of efficiency. But in the chemical industry that is actually not the case in the chemical industry where you have the classic approach to building alicofaction units. They have a different incentive structure and they might actually pay a lot more because for them d d. Profitability calculation is different and that is one of the things you really need if you go into the energy storage space to understand how your customers will actually make money with with your product and that is something that is that. Makes in engineering then interesting because the tradeoffs you do are different than what you classically do in your industry.

James McWalter

Understood and if I think then about let’s say the deployment of a you know battery storage which which has kind of arisen ah particularly in the last couple of years you know so often that’s colocated as you in the similar way to let’s say some solar panels and you often have these. Basically shipping containers with racks of Lithium Ian Batteries um and then and there’s various kind of software controllers that you know, kind of operate on that if you take a typical kind of Lithium Ian you know storage within a shipping container and in terms of the megawatts and megawat hours. Yeah, how does the I guess the energy density compare leaving aside the efficiency you know is the use of liquid air energy storage does that typically take up more kind of space less space for the same amount of energy density. So.

Justin Scholz 

But it would be more. It would be more ah more space simply because electrochemical storages are really energy dense. That’s why you put them in cars because in cars you have both a weight and the volume limitation. Um for station energy storage space.

Justin Scholz 

Makes or is less relevant. It’s still relevant because of the cost of of land but still, it’s not as relevant as in in mobility applications or in phones etc. We are talking about an energy density roughly one third 1 fourthth. Um. On ah on a simple basis. We are also doing a containerized system and um, we also intend to be able to stack them so and that is something that we have not seen done much with lithium simply because it then becomes harder in case of fire hazards.

Justin Scholz 

And other risks so being able to stack the system then reduces effectively the area again that you need or do you can increase the aerial density volumetric wise we are definitely like um one third or one fourth depending on how you count of of lithium.

James McWalter

Honor said and in terms of the process itself. Um, what are the inputs and the outputs right? So minus ending is it’s not pure. Pure Electricity. You also need air as an input and are there any kind of outputs or you know other elements that that kind of come out of the process. So.

Justin Scholz 

The process in itself is the simplest version of the process is as ah as a customer or as someone who wants to deploy the system you need to provide it with the electricity and the air we take from the atmosphere. And at the end of the process you get electricity out again and the outcomes out of the system again. So There’s no byproducts aside from that there’s ah heat as a non-material um byproduct. Um, that is that is being generated. Um the process itself is. We we take in the ambient atmospheric Air. So um, that’s pretty much infinite, free resource for us and we compress that to a high pressure pressure Level. We store a lot of the heat that is being generated to increase efficiency. Our heat storages. We then have our custom air equifaction process and store the liquefied air in something that’s called a cryotank you can think of it as a Thermoscan Um, which is wellinsulated. Um, and then if you want to regenerate the Electricity. You could You can think of it as. Boiling the liquid air Again. So the same way that water Vapor becomes liquid if you cool it down it condenses into liquid water the same happens with air and when you boil the liquid air again. A lot of the pressure increase that is happening there together with the compression Heat. You can then regenerate into electricity electricity with.

Justin Scholz 

Ah, turbine or an expander or something like that with the generator. So.

James McWalter

And I’d love to go and go back then into the you know development of the original prototype or Mvp. So yeah I have a better kind of understanding now the technology it sounds like so really interesting and it it definitely solves some of the issues that we’re seeing with Lithiumyan battery search deployment. So I kind of get that piece. But going from that you know this is like the technology we’re going to hang our hat on to something that is you know a prototype or something that you can demo to potentially users. What was that process like.

Justin Scholz 

So and and in that state we are right now actually last Friday we started operating our our cold section of our first prototype system. It’s ah but as we like to say nowadays. Thank you, it’s as we like to say now it’s ah it’s a room scale system.

James McWalter

So congrats.

Justin Scholz 

Because when I say it’s ah it’s a lab scale system people think of a benchtop but it actually fills a full room of um, like 5 by five meters or something like that. So. It’s it’s a big system and um. Going through the pains of starting from a blank sheet of paper actually around two years ago to designing starting procurement figuring out the exact sizes of building up the supply chain the suppliers and the logistics the integration the assembly um and testing. With a very small team so that was 4 people full-time pretty much for everything in that system and then also the control system being new and the the the whole um approach being new so we have advisors who have who had worked for more than 40 years at Linda in 1 case, um. Being responsible for alic affection systems at Linde. So they know how it’s classically done and it’s actually different so that was quite ah, quite a ride. Um over the last two years also supply chain wise we have some some some close calls there. Um, if I remember of one shipment shipment that was.

Justin Scholz 

Um, it it was a component that we got shipped from China and we actually decided to ship it ah but via train to munich and that was the decision to ship it via train was was done in January this year

Justin Scholz 

And we actually had looked um if the train would go through through Ukraine at at that point it it didn’t but still then we got the notice that it was on the train on February Twenty Eighth now um we were not sure if that train would ever arrive because that train went through Russia, but it did. And then when it arrived the component then in China there were lockdown. So even if it hadn’t arrived. We wouldn’t have been able to get a new component in time. So sometimes like I think you just have to be lucky as well with your supply chain.

James McWalter

It? yeah, it’s the amount of ah supply chain disruptions over the last um two years have been incredible. And yeah, especially if you are trying to go overland um from Asia to to Europe it’s becoming more complex I would say rather than less complex. Um, and outside of that you know. 2 years It’s a lot of things kind of go right? Have to go right? A lot of things I’m sure you know were challenges so anything that was kind of surprising to you going in. You know is there any kind of major aspects either of the technology or the approach or the market that you change your mind on over those kind of 2 years of development.

Justin Scholz 

Um, I Think what? what we increasingly learned is that being able to calculate for our customers how they make money with a system like this and how much and helping them. Um, assessing that is something that we we weren’t aware of how much value that is because we see that so many in the industry in the in the industry from the CustomerS perspective. They know they need energy storage. They want to deploy it. But what is the right size. What is the right Configuration. What is the right technology so we actually help right now. Potential customers. Also we advise them in this case, a Redox flow battery might be a better solution for you because simply because we believe that any storage deployment right? now is is a net positive um and it. Helps people get educated on on how to assess it and it builds up trust in the Industry. So I think that is something that that we learned to more value and um from a supply chain. We see now that um these these suppliers like delays of components. I Didn’t think it would be that bad and that delayed and how much effort a supply chain management is I think that is something that that we have learned now looking looking back of how to improve that in the future.

James McWalter

And you mentioned some of these target customers who who is like an ideal customer for you guys. So.

Justin Scholz 

So ah, we we have we already have a pilot customer who who who’s ah, a wood pilot factory in Germany they produce wood pallets for for heating purposes and they’re an energy intensive industry energy intensive industry in in Europe. Especially as facing incredibly high energy costs and we can help reduce those costs. Um, but the problem there from a startup perspective is that every customer has different needs. So. It’s a very heterogeneous market. The ideal customer also from a scaling point of view is really the renewable energy developer. And the renewable energy operator because at the and once you understand how to put energy storage next to your solar pv field or your wind farm. You can replicate that you can do that in the next project and in the next project and in the next project and that makes it a very scalable case because also you can talk with. You can build trusting relationships with these developers who build project of the project. So those are really the ideal customers and also from the project design if you integrate storage from the very beginning. It takes a lot of risk out of the project of its profitability. Um, and also. Makes it um, easier than to to show the value of the project.

James McWalter

And you’re focusing on Germany that’s where you’re based um and I’m less familiar with the german energy market relative to ah North America and and and Ireland and the Uk as you kind of think through you know, scaling up your go-to-market. How does the. Differing kind of energy markets across countries kind of affect that is the plan to mostly focus on Germany and then potentially expand later or is it something that you’re considering multiple countries from the start. So.

Justin Scholz 

When we started. We had a very unfavorable legal framework in Germany where energy storages were actually taxed twice because you were considered an energy consumer when you charge an energy producer when you discharged and. You cannot really build a business case of 80% of your cost is just overhead of tax and and fees that has gladly changed by now. But um I still see a lot more potential in in Southern Europe and also eastern europe um, and that is still very close. Both geographically speaking but also from and from an ability to to ah execute on these projects. So I I think we focus on the german market um, and on the german speaking market. But ah, we are very closely looking and um also in conversations with.

Justin Scholz 

The European market in general because you see different use cases if if it’s wind in the north If it’s sun and on the Iberian Peninsula there’s There’s great potential there as well.

James McWalter

Yeah, and I guess thinking through the product itself so we talk a lot about kind of hardware aspects. But for the deployment of these you know, kind of any sort of storage ah asset knowing when to discharge and charge um is super important right? because. If you’re playing around with different types of wholesale orelillerary services or rebalancing markets. Um, that becomes like ah like a core element is that you know ability to kind of have software controls is that also something you’re building or you looking at more off-the-shelf tools for that and what’s your kind of general approach to the software piece.

Justin Scholz 

Because we have been building in-house software now for the last two years as well to to assess the business cases for customers. So we run um, usually between 5 to 10000 sometimes more scenarios on a Customers case with historical market data and the the weather data for the location for example and then simulate a storage behavior to understand how much value there is so we have a lot of the building blocks and we really believe that a lot of the value in energy storage is not only in the hardware but also in how you use it. You see that also with Tesla. Releasing the auto bidder software which seems to work quite well and going into the direction of helping our customers use the system more profitably and efficiently providing that software. We have that on ah or on our roadmap. Um, whether it’s going to be available at the very beginning is a different question. Um. But we definitely see a lot of potential and something that we want to in-house incorporate. Um, this critical piece of how to use the storage because then you can also really integrate with the hardware properties if you actually produce both the hardware and the software. And then can actually leverage certain hardware properties that you might have a harder time leveraging if you just use and like an off-the-shelf software. There.

James McWalter

That makes sense and so you know you have this room size ah version that that that’s kind of been developed. What are the kind of aims for the next you know 12 to twenty four months for phalis.

Justin Scholz 

We are now looking forward to scaling up out of the lab. The lab system is in the size of like thirty forty Kilowatt of power and we will scale up now to a megawatt. To like a first commercial scale system that is going to be deployed also in a commercial setting. So um, scaling up the team um with a lot of and new hires on the engineering side then um, doing the scale up design selecting suppliers doing all the and. The engineering work there and achieving a point where we can then in the second half of the twenty four months so in in the year after next year then actually build it. Um is going to be the big steps because we see on on this side. That we want to have the the system deployed in the next two years on a commercial scale and on the commercial side we want to um, gain more customers because we believe that the more customer attraction the more and the firmer. The contracts are the more we can take out. Um. Market risk also from for ourselves but also for our investors because we believe that the the more customers there are. It’s um, always easy then to say well you don’t have to worry if this is a thing that the market wants if you already have customers for it obviously.

James McWalter

I yeah, and and you mentioned investors you know it sounds like you’ve done some pitching you’ve raised some capital. Um I’ve done that myself as well. And first the most recent time I raised some capital. It was kind of surprising to me. Um, what? what people ah wrote the investors. Found interesting about my startup relative to like the narrative that I was going in and so I would like shift my narrative I would shift things you know we would still always be very very core and like you know what we’re trying to achieve but I definitely would take like oh you know I’m not really explaining this part right? or people get very very excited but this part that maybe I had. Kind of underappreciated as you’re kind of going through. You know these kind of investor conversations. Um, what gets people? what’s gets the investors most excited about failis.

Justin Scholz 

What I what I what I’ve found that they most get excited about is a solution that is inherently scalable as we earlier discussed because of mass manufacturing at its core with existing supply chains combined with a new business model. And new flexibility that is really what people find interesting because usually energy storage plays are you’re an oem you sell your system to your customer and then you maybe do some servicing but that’s it that is quite simple but it’s also a bit boring. And we wanted to build sustainability into the core of the company and into the core of the business model and part of sustainability is also to build longer-lasting systems and we early on decided we want to be also financially incentivized to build longer-lasting more sustainable products. And the best way to do that is to profit from it and what we came up with is something we call energy storage as a service and as an intermediate steplicasing because our systems last 20 to 30 years from ah from a component and hardware point of view and our customers might only want them for 5 to 10 and because they are shipping containers and they’re movable and they don’t degrade per use. We can actually ship them to one customer for five or ten years and after that we can ship it to the next customer. So thereby. We get incentivized to actually build a longer-lasting system.

Justin Scholz 

And the barrier to adoption is lowered on the customer side because they don’t have to commit to a large upfront payment and buy the system directly so in that sense both both parties win and you have a new. Idea and interest of of energy storage because you no longer have to bet that at this location in the grid in this configuration you will make money you rather have to bet that somehow there will be demand for energy storage and that is a way easier and less riskier bet.

James McWalter

That That’s so interesting like that ah kind of you know, dynamically moving um storage in that like literally physically moving is such interesting way and I guess does that sometimes kind of help you know, navigate things like interconnection capacity elements on the grid. Because if you also have this ability to literally you know move the shipping at daner maybe to a place that now you know the the grid is very very congested. Um, the value of storage in that particular node on the grid is is lessened over a five-year period and you can shift it so does interconnection kind of play a role there as Well. And.

Justin Scholz 

Interconnection is 1 play if you look at countries like the Netherlands where large parts of the distribution. Grid are totally overwhelmed but also are planned to be built out. It’s exactly one of these areas where you can deploy for a limited amount of time and then shift it. Another aspect is um, the the ability to adjust to a changing market dynamic. We recently talked with an energy developer from chile. Um who we advised and the ability to deploy a system and then five years down the road. I mean I don’t know how the energy market will look like 5 years from now but we enable you then to adjust with higher capacity lower capacity or more or less power and that is something that makes a deployment way easy because you don’t have to do all these bets you just you can deploy and then. See how the market behaves and that is um, a flexibility and ability to adjust um that that you can only really achieve if your system doesn’t have a lot of cost per use. Um and a lot of degradation. Because that is what you usually have to charge a customer for and which we don’t have because the system has so low degradation.

James McWalter

And you mentioned a little bit earlier about the environment from a policy and governmental place was pretty negative on storage and that that’s improved in Germany specifically how else might you know government policy regulations. You know changes in tariffs changes in incentives you know, potentially affect the market because as we’ve seen in the United States the inflation reduction act was passed over the summer that’s had a very very profound effect with a ton of tax credits but based around building you know, clean energy projects in specific places in specific ways. Um, yeah I guess as you kind of look at what’s the outlook from a regulatory or incentives point of view and are there areas that you know governments could improve on. So.

Justin Scholz 

I think it’s it’s region specific if we look on the on the european um landscape there there there is movement in the positive way of energy storage I think it like for the last few years I’ve seen a lot of lobbying and and movement. Hydrogen and I think not enough focus on energy storage because realistically speaking its very hard to have green hydrogen without energy storage because the electroalizers that you need for green hydrogen usually don’t like it. Ah if you expose them to direct solar ah wind feed and because of the intermittency again. So I think there needs to be more awareness of how much and how quickly we need a lot of energy storage but also from an incentive structure I think to to really accelerate the rollout also of new and innovative technologies encouraging existing players um with. Tax incentives and also with with with subsidies to actually take risks with earlyst stage technologies would be really helpful as an as an earlytage startup in a capital intensive industry like. Because anybody who wants to deploy grids scale energy storage will have a lot of capital they need that is some and then ah on the other side someone who’s willing to take that risk reducing that for the other side is is tremendously helpful so incentivizing the the actual.

Justin Scholz 

Building of these experimental sites of of pilots but also of more earlystage commercial systems um is is I think um, good and and needed and it’s already done in parts. Um I’ve increasingly heard for offshore wind an offshore wind when.

Justin Scholz 

Companies are bidding then to get the ability to build it. They need to show Innovative Innovativeness I don’t know if that’s an English word but I think you know what I mean um and encouraging that even further to encourage actually building more storage.

James McWalter

It It is close enough. Good.

Justin Scholz 

Or even enforcing it in some parts where you need it from a grid perspective I think that will be very helpful.

James McWalter

And you also mentioned at the beginning you know you’re as you try to start a startup in Germany the reaction of people. The social reaction is you know surprise or you know you’re so brave and so on. And yeah, I’m from Ireland and you know I’ve upset I think before on the podcast. It probably be. Close to impossible for me to build the startup I’m building in the United States in Ireland just the the kind of cultural structure is so different that you know it’s hard enough to build something and then you have all these other kind of elements that are kind of set against you but I guess one of the things I’m also always looking for is you know, certain places you know. That are outside of yeah traditional silicon valley type startup development often have ah other advantages that are less clear to folks on the outside. So if you were to say what the kind of most positive things are about building you know a startup in Germany and and maybe in you know, Munich specifically. Um, what would those be and.

Justin Scholz 

Quality of life I mean the the quality of life living in Munich is quite high. Um, it’s it’s a very livable city but aside from that as a startup the the deep tech. Environment that we that we have here in munichn that is being increasingly built by especially the t munich but also the l um u and t and general ecosystem in munich it’s a really hardware um and and deep tech focusedcused and environment and. So you’re surrounded by really cool tech and and hardware startups and hardware startups are usually considered as ah, it’s hardware. It’s hard. It’s expensive I don’t it’s not interesting and that combined with with a lot of increasingly investors who understand hardware. Because you’re in this cluster and a supplier network that is local so when I look at the the ability to choose from different suppliers on this um on on the supplier side for integration of components for the integration of piping something industrial like if you. If you want to build something with an industrial base Germany is a great place because we have a great industrial base of manufacturing and know-how and all these small medium-sized companies that are often happy to work with you if you get to the right people and that is something that is very valuable because that.

Justin Scholz 

Takes a lot of the time out and it’s it’s then um, possible to get the right? um contacts advisors but also talent.

James McWalter

Yeah, and I think that’s it’s a great lesson for anybody anywhere around the world listening to this. You know there are always advantages and disadvantages to a specific place when you’re trying to build a company and you know the best startups always sort of figure out how to best leverage those advantages. Um, and you know flip it up. Flip. Things that seem like at its advantage at first into you know the positive that it potentially is um but Justin Scholz  this has been really great really enjoyed chatting before we finish off though is there anything I should have asked you about but did not.

Justin Scholz 

Um, we are I think one of the things that is that is high on my mind. There is what is what is your fundraising story or and or what is your biggest needs and um, there’s there’s 2 points. The one is. We are raising right now a seed round. So if you find interesting what we do, um, please reach out to me as an investor. Um and on the other side if you are interested in working with us if you’re even interested in becoming part of the team. Um, as engineer or also on the sales side on the. Internal side. Um, we will be hiring um a lot of great folks. We have a really great team already. Um, but we will look forward to expanding that next year um with the interesting and really yeah, um, ambitious challenges to to understand. Um. How to scale up the system into a commercial scale because that is that is something that then it becomes even more real going from a lab scale to to ah to a customer scale.

James McWalter

Yeah, and we’ll include those um contact details and so on in the show notes. Thank you so much. Justin Scholz .

Justin Scholz 

Thank you very much.