ESS Tech, Inc. ($GWH)

[indiscernible] ESS Tech and we're very excited to hear from him. Before we -- I get to that, I'd like to go over a few very quick webinar logistics. [Operator Instructions] We're going to put a speaker bio for Drew Buckley in the chat pretty soon. And a final note, our most frequently asked question, yes, this webinar is being recorded. We'll send you a copy of the webinar recording and a link to a PDF of the webinar slide either today or tomorrow, and we'll also be posting these materials on Clean Energy Group's website, cleanegroup.org/ webinars. And we'd love to hear any feedback that you have for us about this webinar in our post webinar survey or via e-mail. So with that, I'm happy to pass it over now to my colleague, Seth Mullendor. Seth is the President and Executive Director of Clean Energy Group, and he will be moderating our webinar today.

Great. Thank you, Sam, and thanks, everyone, for joining us today. We have a lot of folks register, so we're going to have probably a great -- great Q&A at the end here. I'm going to start off with just a brief introduction to Clean Energy Group. We are a nonprofit organization working across the country with the vision of enabling affordable, reliable, clean energy for all. Clean Energy Group. We provide innovative technical economic and policy solutions to enable communities to participate equitably in the clean energy transition. We get a lot of information out there in webinars like this, and we have a lot of different initiatives that you can learn more about on our website across several areas, although we do specialize a lot on distributed energy, solar and energy storage as well as accelerating the transition away from fossil fuel infrastructure. So Sam, if you can go to the next slide, please. We're really excited to have you all here today for the second installment of our Beyond Lithium webinar series. This, we trying to every other month, every 2 months, have another installment. This is, as I said, the second one, we are really excited to have Drew Buckley with us today. He's the CEO of ESS Tech, and he's going to tell us all about their iron flow battery. Our first installment was with Hydro store, talking about compressed air energy storage. And our next one in August is going to be with Form Energy, talking about iron air batteries. So next slide, please. This -- I should say this series is meant to highlight technologies, nonlithium technologies. Lithium ion batteries are great. for a lot of things, but there are some things they're not as good at, and we are highlighting technologies that offer alternatives that meet some of the challenges that today's lithium ion are not as well positioned to meet. So as I mentioned today, we are talking with Drew Buckley at ESS Tech. So with that, I'm going to stop talking and turn things over to Drew. I'll be back for question and answer to moderate those. Please do enter your questions as they come to mind as we go along. And we'll get back to it at the end. Thanks. All right, Drew. Over to you.

Thanks, Seth. I appreciate it. First of all, I just want to say thanks for everyone and thanks to everyone for joining thanks to Seth and Sam and the entire Clean Energy Group for having us on. It's an honor to be here, some other very cool technologies that we get to shared this webinar series with. So I'm excited, and I'm excited to hear your questions and give you a view of where ESS Tech is today and where we're going in the future. So I have some slides, and I'll walk through those and then, of course, save time for questions. But maybe first, I can give everyone a little bit of background on myself, Drew Buckley, CEO of ESS Tech. We trade on the New York Stock Exchange under the ticker GWH. And then just a bit about myself. I think it's important as it sort of shapes how I think about the future of ESS and where we want to go. So I spent 17 years on the buy side as an investor at a company called William Blair. I was a partner there, and I covered small-cap technology. I spent my career underwriting business models in the tech space, forecasting the uptake of new technologies. And then I joined ESS full time in January of this year, and I came here because I think there's a big gap in the market for nonlithium storage solutions. And for us, for all of us to solve the energy transition over the next decade, we're going to need more commercially and economically viable solutions than just lithium battery. So great place for us on the Beyond Lithium webinar series to talk about that. Let me pull my slides up here for a second. Give me 1 sec. Should I do this right. Okay. Hopefully, everyone can see that. If you can't, I'm sure Seth or Sam will let me know. But just to give you guys a bit of background on us, ESS is the leading manufacturer of long-duration iron flow energy storage. In plain terms, this means that we build batteries out of iron, salt and water that are focused on longer duration discharge. Think about 10 to 20 hours or even 30 to 40 hours. Today, I'm going to cover the market that's pulling us forward. Why we see long duration as the fastest growing gap in storage. I'll talk about our technology, of course, and then where we are commercially and talk a bit about flagship customers that we've signed over the past 9 to 12 months, like Salt River Project. For those of you who may not know, that's the largest utility company in the Phoenix, Arizona area. Google, and then the U.S. Air Force. And then, of course, happy to take any of your questions. This is a slide that gives you kind of the entire company in 1 slide. We make long-duration iron flow systems. Our main product right now is called the energy base. It's a 10- to 24-hour system. 24/7 renewable power, where lithium is too costly, too unsafe or too inefficient. The chemistry that we use is iron, salt and water. It's very safe. It's very durable. And one of the main things is it can be domestically and easily sourced within the United States. The architecture we use is open and noncontainerized which lets us decouple energy from power. I'll come back to that a little bit and why that matters. And we've got about 100 megawatts of scaled manufacturing capacity in place today and the Tier 1 pipeline, as I talked about already. And that's about 3 contracts, about total contract value of $50 million expected to deliver between 2026 and 2028. So this isn't a science project. It's a commercial company. We've got real contracts converting that we're expecting to deliver over the next couple of years. To give some background on the company time line and how things have progressed for ESS since 2011. So in the first 10 years, this is very much a founder-led R&D story. They wanted to prove that iron flow worked and that this could actually be -- this technology or this chemistry could actually be turned into a battery. And then 2021 is when things really hit the accelerator button. If any of you remember, this was coming out of the COVID when doors started to reopen. There's a lot going on in the energy space, and it was a bit easier time to raise money, and the company decided to go IPO via SPAC in 2021. As we look back on that, it might not have been the perfect time to do so, but a very smart and rational decision to make -- to take that at the time because it allowed the company to get well capitalized and really improve the technology beyond just an R&D experiment and to think about commercial viability. What happened over that next 4-year period was a lot of pressure of being a public company as I know from my experience, it's very difficult. There's a lot of pressure from the investors to hit the milestones that you talk about hit the revenue targets that you put out there in order to maintain your valuation and your market cap. And so what the company was doing at that time is they had done a great job of going to prove that the technology actually worked, but we hadn't made that transition from technology working inside the R&D lab to showing that we had a commercially viable product. So because of the pressures at the time from the investors and the big targets that have been put out in 2021 to raise capital on top of that, the company was effectively trying to put product into the market at the same time they were taking that final step towards commercial viability. So over that 4 years, it was a lot of that -- exactly that. Trying to figure out exactly where the product fit trying to figure out how we could sell that and then continuing to improve it as you shift product out. It's a very difficult position for a company to be in, especially a new company having to ship commercial product as well as trying to fix some things while the airplane is in flight effectively to make the commercial product viable. It all kind of came to a head in 2025 or sort of at the end of 2024 when the company had used up most of the capital that they had raised at the IPO and it was time for a strategic reset. The strategic reset actually came at a very good time because I think the lessons that the company learned both on how to make the product and then how to make it commercially viable were really helpful. And as we know from other examples, technology like this, especially in the energy space, it takes a long time to bring it to market. There's a lot of different regulatory aspects. Customers are very cautious to adding new things into the grid because they don't want to create instability. And so taking all of those lessons learned that we had over the past 14 years is really important to look at the market in 2025 and say, where does this technology actually fit. And that's the energy-based product, which we came up with. And the reason it fits very well is the original idea for our iron phone battery was to put it inside of a shipping container. And why did we do that in the beginning is because we wanted to put the iron flow battery in the exact same specification that lithium comes in and be able to compete head-to-head with lithium. What we found out over time as we learn more about the technology and we learned what the customers were looking for, 2 things happen. We realized that actually, our technology doesn't work really well inside of a shipping container. You've got pumps. You've got flow going on in terms of water and electrolyte and iron. And all these things, you need to service pretty regularly and make sure everything is operable. And especially when the product is new, you want to be able to get to and service that stuff very easily. Also, the reaction in the chemicals creates a lot of heat. So having electronics inside of that shipping container was very difficult. You'd have to really control the temperature event well, et cetera, et cetera. So the original genesis of thinking, let's put it inside of a shipping container and compete with lithium, which also comes in a box effectively was a novel one. But what we found is the product didn't really like to be in a box very much. And then the second thing is that the price of lithium just came way down. And I think lithium is an amazing product and what they've done and how we've been able to as in the world, be able to build up huge scale in terms of producing lithium and bring the cost down very quickly. That wasn't super evident when the product was being developed in the mid-2010s, now very clear for us right now. So instead, as you look at 2025 and you look at the reboot of the company and thinking how we can go forward, we leaned really on the strengths of what iron flow does, and we thought where do we compete from a cost perspective, where can we offer something that lithium, the main battery technology that out there cannot really offer and then where does our technology fit the best. And we put all of those 3 things together, and that's where we delivered -- that's where we brought out our new product and the product we sell now, which is the energy base. And I think the true proof of that is in the pudding and that we've signed some very serious contracts with some very serious counterparties. When we talk about SRP and Google, when we talk about the Air Force. These are real contracts with real counterparties that we're really excited about. And to be able to do that with this solution that we have, I think, is a bit of the proof in the pudding that there is a market fit for this, and we can offer something that's a bit different than lithium. And so what is on the horizon for us over the next 2 years. This year, in 2026, it's really about completing the design work and using all those lessons that we've learned over the last 14 years, 15 years to develop the product and make a very strong commercially viable product and then deliver it to our customers. And as we do that, we think that the market for a long-duration battery continues to open up. Now maybe I'll take a step back now and talk a little bit about how we see the energy markets at ESS. It's really important and things are really changing under the hood. I think everybody on the call probably feels a lot of this, but let me just give you my view on things. So if we step back to 2005, 2010 time period, for the next 10 years from that, so from, call it, 2008 to 2018, electricity demand was essentially flat. You had a lot of efficiency gains coming into the market, whether it was LED lighting, better appliances. Overall, things were more efficient, and that offset the growth that was coming in, in terms of people putting more -- needing more electricity in their homes, et cetera. That era is now over. The EIA now projects U.S. power demand to hit record highs, rising to over -- about $4.2 billion -- or 4.2 billion kilowatt hours in 2025 and even more in 2026. Those are both record numbers over about 4.1 billion kilowatt hours in 2024. That reverse sale of a decade of flat demand is the single biggest structural change we have going on in our market. What is driving that? It's artificial intelligence. Electricity demand from data centers has jumped 17% in 2025, and AI-focused data center demand grew even faster, outpacing global electricity. The AI-specific data center consumption surged about 50% in 2025 alone. And that's not a blip. Data center electricity consumption is set to double by 2030. And with AI-focused power, use is poised to triple. To put capital behind that perspective, the large -- the 5 largest tech companies exceeded $400 billion in capital spending in 2025 and is expected to jump another 75% in 2026. Capital spending from the big guys like Google, Meta, et cetera, Microsoft is going to be larger than global investment in oil and gas production next year. And that's -- this is the part I really want to land is how different the generation mix is versus 20 years ago. Two decades ago, baseload was coal and gas and you match supply to a predictable demand curve. Today, that picture is totally inverted. Coal fleets are being retired. Coal capacity is expected to fall over the next couple of years. And what's replacing it isn't more coal. It isn't more very clear, very firm baseload power. It's going to be solar and it's going to be wind power. And so simultaneously, you're losing something that's very firm on the baseload and adding a lot more enormous intermittent power that's coming on. And that's the exact moment that demand is going up. So you've got demand going up, you've got some very firm power coming out of the system, and you've got much more intermittent power coming into the system. And that creates a real problem that didn't exist 20 years ago. You have a grid that's increasingly on the intermittent side, demand is running 24 hours a day. So if you thought 20 years ago, most of the power was being used during the day. AI workloads don't stop. They actually work through the night. So power demand and the demand curve is totally different and changing. And something has to bridge that gap reliably, and it has to happen for many hours at a time. And that, to me, is long-duration storage. 20 years ago, you might have built a gas peaker plant. And today, increasingly, you can't do that. You need a clean firm alternative that can discharge power for 10, 15, even 20 hours to match it with solar and wind. And that total opportunity to me is enormous. Global energy storage demand is projected to exceed 3 terawatt hours and over $200 billion of cumulative system value by the early 2030s. And that's driven by renewable penetration, electrification and rising power demand overall. As we move on to another slide here. And so this is a slide you can see kind of where we fit and where we think that we can offer our energy-based solution can offer something into the market. And that's in the 24-hour a day problem. Long-duration batteries are what support that baseload when the wind isn't blowing or when the sun isn't shining. And if you think about it as a spectrum of demand, lithium-ion batteries are really strong at an under 10-hour space, as you can see in that middle chart on the left side. And there's no reason -- lithium is an amazing technology at an amazing price point. It's very bankable we understand how it works very well, especially utility companies and hyperscalers understand how it works very well. So that's a very easy thing that they can put in the under 10 hours. And it's going to be very difficult, I think, for another technology in the near future to really compete at scale versus lithium. Maybe something like sodium ion can be in that area as well. and there's some advantages to it. But for now, lithium is truly one of the only battery games in town and where it works best is under 10 hours. As you look out a little further into the 10- to 20- and 20-plus hour band, that's multi-day. That's where utilities are now looking and thinking about what they can do because they know that just having a 4-hour battery or stacking 4-hour lithium batteries on top of each other might not be as cost-effective as other solutions. And also, there's a huge CapEx investment. There's a huge lithium investment and critical minerals. Most of lithium production is ex U.S. So they're looking for other solutions in this 10 to 20, 20-plus hour space, not only because it can be capital effective, but also because there might be a more resilient supply chain out here that we can think about. This slide just gives you a quick overview of the long-duration total addressable market by customer. I'm not going to go -- I'll go through it very quickly. But it's a $3.5 billion market in 2025, growing to about $8.7 billion in 2034. It's a 10.6% CAGR. I actually think that this is probably underestimating the potential demand from long duration energy storage. If you look at a lot of the forecasts from really smart people who have done work on this like Wood Mackenzie, Bloomberg, they all have long duration market at about 8% of total energy storage. And I think the main reason for that is because we haven't yet seen a product that can really deliver at scale in the long duration market, ourselves included, and that's what we're working towards. But once we're able to show a 10, 16, 20, 24-hour battery that the customer can use and can deliver and put in at scale, I think that you're going to see that demand curve changing a little bit and you're going to have a lot bigger growth in that 8%. So I think the market is really just waiting for the technology. There's been a lot of failures and a lot of promises that haven't been delivered in this area of long-duration energy storage. So I think a lot of the forecasters out there are wary that something can be delivered there. But I do think that when it happens, it's going to be really positive for the market overall and probably for ourselves and companies like Form, et cetera, there's just going to be a lot of opportunity there because we know that the customers need this, going back a couple of slides to the demand picture that I was talking about. Okay. Let me talk a little bit about our product now, switch it down to the micro level and talk about ESS and our product. There's 3 core pieces of our product. It's the battery module or the stacks, that's the high complexity component that stores and discharges electricity. Actually, let me -- yes. That's the next slide. Yes. Let me talk about this slide and then maybe I'll come back to the last one. So this gives you the 3 core pieces of what we're doing, as you can see on the right side. We've got the battery module or the stacks. That's the high complexity part that stores and discharges the electricity. On the proton pump side, it's a moderate complexity. These are what enable reliable daily cycling and then the electrolyte. That's a very important part. That's essentially just a mixture of iron, salt and water with some additives. There's no lithium. There's no cobalt. There's no exotic supply chain. So it truly is iron, salt and water. All of these materials are very abundant on earth. All of these materials can be sourced here within the U.S.A. And that's why this product, we think, has a really nice place in the market outside of the cost perspective and outside of the window where we think it operates really well, is that it's a very easy the supply chain here is very simple and a lot of it can be sourced here within the United States. This is all protected by this, but by us with over 100-plus patents creates a meaningful IP moat for us. And again, the simplicity of the electrolyte and how we're able to craft that we think, because of a strategic competitive advantage in sourcing. Maybe I'll move just to talk a bit about real-world validation because these are a couple of customers who have recently put out reports or have commissioned some of their projects. And I think it's important because it just tells -- it leans to that story more that our technology is less about a science experiment, and it's really at that almost critical stage where we go to commercialization, and that's what we're working on right now. These are independent real-world deployments that validate the iron flow chemistry underpinning our energy base. Their demonstration products. First, the APPA and Burbank Water and Power was a 21-month utility demonstration under APPA's DEEP program, it was third-party validated. The system was installed energized and ran for 21 months, colocated with solar and the final report from the APPA concluded that iron flow works and has a real place in utility storage -- in a utility storage strategy. Second is a Turlock integration district on the right. Two systems were commissioned in California Central Valley in an innovative solar over canal configuration. That also reduces evaporation from those irrigation canals. That's another example of iron flow proving itself in a reliably critical infrastructure setting. So both of these things are ones that we're very proud of, very excited to talk about because these are real-world validated programs backed by APPA with a report out there that anyone can read what they want. So maybe just to talk about lithium versus iron flow. I've kind of touched on a few of these things already, but this is kind of to bring it all together, is that for iron flow, as you can see on the right, the cost and technology advantages increase with duration. So for lithium, as you want to create a longer duration, if you want to go from 4 to 8 hours, 8 to 12 hours, you effectively have to stack another block of lithium on top of the other or next to the other. So you can think of scaling for duration with lithium as scaling on a linear basis. If you want it before, it's 1 block. If you want to go to 8, it's 2, if you want to go to 12, and that's just an example of the course. But just to think about how the scaling effect happens with lithium. It's effectively like that. For us, it's very different. And it's a little bit about that decoupling of energy and power. So what creates the power for us is that stack that I was talking about, which sits in the middle. But the energy is created, but the energy comes from the electrolyte in a sort of governed by how much electrolyte you have. So if you think about it as the power block unit is in the middle, and that's how you store and that's how you charge and discharge power within, the actual thing that stores the energy is the electrolyte. So in order to make your duration longer, you just add more electrolyte to the system. So instead of scaling linearly, there's actually a cost advantage as you go to a longer duration for our product. There is a theoretical maximum. You can't just scale infinitely with electrolyte and have it be 100 or 200 or 500 hour battery. For us in our testing, we think that the scaling effect stops and the maximum that you can do with iron flow is probably around 50 hours, 48 hours. But the core principle is the same, is that if you want a 10-hour battery, it's this, it's X amount of electrolyte with the same stack. If you want a 20-hour battery, it's just 2x the amount of lacolite with the same stack in it. So the longer duration that you go towards the more effective the product or the more cost effective the product is, and I'll show you a little bit of that on this next slide. This is a levelized cost of storage comparison from iron flow and lithium, as you can see. And the blue parts are iron flow at scale, not where we are right now, but when we're at a full-scale system or when we're at full scale production. And you can see that as we go up further on the curve as you go towards the right, the iron flow battery just becomes a lot more cost effective. And to us, we think that the real sweet spot of competition is in the 12 to 24-hour space. We think that's where utilities really want us to be, and that's where their peak demand is going to be as you pair us against solar and wind. And that's also where we think we're very cost-effective. So at 8 hours at scale, we can be slightly more cost effective, depends on where the lithium price goes. And as you go up that duration, we should be more effective. And again, 12 to 24 hours is really where we see the sweet spot for our technology. Okay. Let me go to the next slide here Yes. Perfect. I want to spend some good time on this slide because I think it's the heart of how we make money and cost control. And I think it's something that we haven't communicated well to the market so far. But the model is pretty -- is split quite well between what we build and what we supers. So the core technology, as you can see on the left, is ours. And that's what we protect with intellectual property. That's where all of our intellectual property and patents are. And this is what we think of as the high-value area of the technology. The battery stacks, the iron enclosure, proton pumps, the electrolyte and then, of course, the design specs for the entire system. And we make these at our factory on a prefab modular basis. Our production capacity is up to 1 gigawatt currently on line 1 with our next-generation Line 2 coming in over the next 12 to 18 months, and we can scale quickly from there. So the real core of our technology is understanding that power unit in the middle, knowing how the electrolyte works and then specifying how the entire system works. The other half is what we call balance of plant and systems. This is electrolyte tanks, plumbing, mechanical, standard site equipment, and that's not stuff we make. We use qualified EPCs and development partners for that. There's a long -- there's a very strong ecosystem around this area of balance of system. You can think the plumbing and mechanical stuff is very similar to the oil and gas industry in refining. It's just moving liquid around. Tanks are very -- there's a well-worn path in terms of tanks, if you want. Plastics, steel, steel line plastic, there's a lot around that. So that's nothing that we have as a core competency and then, of course, enclosures as well. So making the core technology ourselves and then balancing that with the noncore parts coming from well-worn paths of players who can make it at a very good cost and EPC developers who know how to put this in. And this is -- here's why I matter strategically and I'd really like to emphasize this again, which is that ESS' iron fold project looks a lot like a simple industrial processing plant. And that's not a coincidence. That's a design choice for us. It means we don't need to have a very specialized exotic installed base. We can leverage the existing infrastructure that's out there in oil and gas, in EPC. There's a very mature and deep pool of contractors in this country in the U.S. who build exactly this kind of stuff day in and day out. So we can get them to do that part, which they're very good at and know how to do it at the good cost and scale, and we can just focus on the core technology of us. And that way, if you think about speed to commercialization, if you think about speed to install of new product, both of those things should be better because of how we're splitting the work up. Maybe I'll do one more slide just to talk about the SRP-Google project, and then we can start in with questions. So this is -- I would call this like our flagship proof point of the new energy-based technology. It's a contract that we signed last year with Salt River Projects. Google is going to be the offtaker of this power. It's down in Florence, Arizona. So we're going to build our batteries and there's going to be a solar array next to it, and we're going to deliver to Google, hopefully, 24/7 baseload power overall. It's really exciting because it's the biggest project that we've done so far. If you look over the years of 2021 to 2025 when we were a public company, overall revenues was about $10 million over that 4 years and this project is going to be multiple times bigger than that. And if we do a good job, there's also follow-on opportunities that are potentially there for us as well. So we look at this as like a really important validation point for our technology. We're really excited about it. And it's all about execution for us. So if we can get here and hit this, then we think all those things fall into places I was talking about before. The utility customer sees the product in action, and they have a proven validation point that the technology works. And then that 8% that's focused on LDES in terms of growth forecast for how big the market is going to be, that just expands because I think utilities, once they know that there's a product out there that works, they're going to be much more open to thinking about their own needs and how they can use long-duration energy storage and especially iron full batteries in there. So I'll stop there and happy to open it up for questions.

Great. Thank you, Drew. And we do have a lot of questions. Some of them are very specific. jump around a bit. Well, actually, I'll start at the top, though. The question came in early on, you had the graph showing the cost comparison to lithium [indiscernible], LFP. Can you talk at all about where you compare with other long duration, specifically folks mentioned iron air, compressed air and pumped hydro?

Yes. That's a great question. And unfortunately, I'm not going to give you a great answer for it only because we don't have the information on those other technologies. What I would say is first of all, on iron air, I think it's a really cool technology and everyone's probably seen Form signed a big deal with Google in, I think, Minnesota. That technology, the way I would think about it is it's not specifically -- let me go back to maybe this slide. Yes. That's not specifically competitive with us. And the reason for that is duration. So what Forum is focused on is 100-plus hours of duration. And so they -- for them, like what they say is noncompetitive to them or whether technology doesn't work well from a cost basis is 100 hours and under. So for us, we're saying 10 hours and under, we're not really competitive with lithium, which is the giant in the room and they can do that really well. And Form is saying that there are 100 and unders not really that space. So hard for me to give you a great cost figure relative to all the other technologies out there. And the main reason is that a lot of them we don't really know. I don't have good detail on hydro store or form. And believe me, we tried to look and they want to protect their information as much as we do. But I would just say from a competitive standpoint, I think the problem that they're solving is very real and very important, but it may be a different problem than what we're trying to solve in the 10 to 24, 10 to 30 hour space.

Yes. Yes. And I'll say the other ones mentioned like the pumped hydro, of course, there's a lot of geographic constraints on that. A lot of the compressed air as well. There are some more modular ones. But in that note, there was a question just about what does the footprint look like? This one was said, could you do something on 22 acres in an urban area, but like what does the standard project look like? Like what is the capacity per acre or some metrics that people can get a vision of the kind of energy density there?

Yes, sure. 22 acres would be great. We could definitely do a project on 22 acres. I'd say our 200 kilowatt we're building inside of our factory plant headquarters in Wilsonville, Oregon. We're building a 200-kilowatt, 10-hour battery that is probably -- I want to say it's probably the size of like half of -- like, call it, 3/4 of a basketball court, if you would, to give sort of a frame of reference for people. So the energy density to answer that question as well, you can say we're probably around 100 megawatt hours per acre. So it's definitely not dense. You will never get to the density of lithium. Again, that's a great product, if you want energy density. But our product is definitely you can make it in a much more modular way. So we could do a 200 kilowatt, we could even go smaller in terms of the systems. I think the containerized solution that we made when we made it in a shipping container was somewhere in the 40-kilowatt range. So think of it as we can go as small as we want or as big as we want, and that's kind of the cool part of using iron flow is there's millions of different size pumps. There's millions of different sized tanks. And then one stack for us, I think, is 12.5 kilowatts. So we can go as low as that with one stack. But then you can scale it up to be as big as you want, 500-megawatt hours, 500 megawatts at a 10-hour battery, we'll be 5 gig. So -- but the energy density part is about 1 acre to 100-megawatt hours of energy.

Great. There's a multiple part questions here. I'm just going to start with the first part of it, though, and maybe we can come back. What's the biggest challenge now for energy base to be commercially successful? Is it technical design, manufacturing limitations, integration or others. They also want to know specifically how you're going about addressing the challenges to commercialization?

Yes, sure. So I'd say it's a little bit of everything, but the main thing, I think, for us is ensuring around technical design. And so let's call it this is -- the most important part for us is taking all the lessons we learned, and we actually bought a company in February called Old Storage who did iron flow batteries. They were based in Munich. Company went into receivership in Munich, unfortunate for them, great opportunity for us because there's not many companies out there doing iron flow batteries. So it was really neat for us because it gives you an opportunity to see how somebody else was attacking the problem over the last 5 years. And they really thought about it very differently than us. So integrating those 2 technologies together and taking the best of both is something that we're working on right now. For me, I think what we -- what's really taking on the lessons learned and what we -- how we thought about it before. So the biggest hurdle for us right now is just completing the technical design and commercial viability from that path. I can't remember, you said technical design and there was one other part, and I was going to comment on both.

Technical design, manufacturing limitation.

Yes, technical design, I think, is the biggest part. And it's when you take it out of the box and you want to build a bigger system, you want to make sure that it's extremely, extremely reliable. And one of the things that we learned when you hand over a product to the utility customer is -- everybody knows this, but you don't control how they're going to use the product. So there are certain things that we probably need to -- that we learn from that perhaps we're running the battery at too high of a current density, and we can back off of the current density part because one of the original genesis of the product putting in a container was to say we want to compete with the lithium container. In order to do that, you want to have high current density so you can get as much power out of that little container as you can. What we found is that when you run it kind of at that cuff and corner, it's difficult, right? Because if you're running at a super high current density, any little wobble in the system can create a catastrophic failure or something very difficult. And so while it works really well for us in the lab with people and in our warehouse with people who know exactly how to run it, when you hand it over to the customer, it's not exactly the same, and you can build as much software as you want and as many controls as you want around it. But that doesn't mean that the customer is going to operate the same. They don't have the same paradigm as us when they think about it. So stepping into that customer lens and really designing the product for the customers use, I think, I would call that technological because it's important for us to think about the product in that way. So when you remove the container and you go to a bigger system, it's just those final design elements. How do you want to size certain components? How do you want to stack them? Do you want to have a bunch of 200-kilowatt systems next to each other? Or can you scale it even more exponentially than that with a much bigger tank? What kind of tank to use? So all of these key questions, I think we have a lot of the know-how and knowledge to push against, but we just have to keep going and continue and make sure we have a system that is the highest quality, which means it's available as much as the uptime is super high, the downtime for cleaning is super low and that opportunity for catastrophic failure is really, really low, so that you don't kill your system because of the operational parameters that you're using. On the manufacturing side, I actually think we're really strong. We've built a lot of stacks. We built a lot of different configurations over the last 5 or 6 years. The nice thing about the sort of capital that we had and trying to make the product work is the manufacturing team was trying a bunch of different things, and the engineering design team was doing the same. So I think we -- on the manufacturing side, we really understand well how to make a reliable quality product. So really, it's that earlier step of just making sure that the design fits and the way we want the customer to operate the battery has a lot of -- has a decent amount of wiggle room so that the system can operate within their parameters, not ours.

Great. But great, somebody actually asked about the Bolt Storage acquisition, so to address that as well. On the manufacturing side, you had mentioned the price point at full-scale production. So what is that level of production for you? And where do you -- where are you growing your manufacturing capacity, too, like what are your targets?

Yes, sure. I think that -- to me, it's -- I think if we had -- if we were fully utilized and we were doing the 100 megawatts that we talked about of power in our current system we are in our current manufacturing capability, we would be able to deliver what I said or what you saw in terms of the cost chart. I think another part of it, too, is what I call like the road to 50 megawatts. So like the first 50 megawatts that we make are going to be the most expensive because we have to -- we're going to -- there's going to be mistakes, learnings, changes that we need to do et cetera, et cetera. So to me, it's 2 parts, right? It's getting to full -- that would be full capacity within our factory where you hit those all cost numbers because that's when we can produce at that price point. And then the other part is just we need to do, whether it's 25 or 50 megawatts of power through our factory to really kind of understand the production, make sure that the system is fully locked like that first SRP deployment next year. I'm certain that there will be things that we're going to want to change for version 1.1, if you will. So I think about it kind of in 2 parts as we've got to get to -- we've got to put enough -- we have to put enough stacks through our manufacturing system and our design system to really have that full knowledge of how we want to do things. And then if we fill up our current 100 megawatts, we could definitely hit those cost numbers. And then on the second part, in terms of growing our manufacturing capacity, another nice thing about having a lot of money over the last 4 years is there's -- there were plans to really grow and really grow and build more capacity into the future so that we could really scale up and hit some of those targets. So I think we've got -- we're probably 80% of the way through some of that capital spending to bring on, call it, 3 to 4x more manufacturing capacity with better automation. We haven't done the last 20% because we want to make sure that we're scaling this up in the right way from a financial perspective, even though we spent a lot, there's still changes going on with our products. So if we hold off on that last 20%, there's still tweaks we can make to the fully automated line before we bring it on to ourselves. And so we're just waiting to really finish that technological development. And once we do that, then we'll start to really lean into scaling. I think the company in the history kind of did it a little backwards. And again, it was a lot because of the pressures of the market and the money and where the technology was at the time and where they wanted to compete with the product, but they pushed the scaling up maybe a little bit before the technological completeness was there. And so we're just flipping that and trying to finish the technological completeness and then worry about scale up.

Great. So I would say based on the information we have is our ear batteries eligible for federal tax credits, the ITC?

Yes, which is great. If you put the PTC and the ITC together, it's something around slightly over 50%. One of the really nice things for battery manufacturers, unfortunate for solar and other green energy is if you -- if you look back, batteries with the One Big Beautiful Bill, batteries kind of avoided getting hit with a lot of the tax credit reductions that some of those other things did. My personal view on that is twofold. One, I think that the recognition from the U.S. government as to how much we need batteries and how there really is this gap in the market besides lithium, like lithium is the 8 million-pound gorilla in the room, but there's a big gap in there between lithium and everything else. So I think -- I can't speak for anyone, but I think they recognize that there is that gap and so they want to support battery production in the U.S. And there's also something where if we look solar, was a technology that was really pioneered in the U.S. and then now has gone to China, and most is produced in China because they can do it at scale, at quality, at price. And lithium is kind of the same way, right? So it's in China at scale, at cost, at price. They even own the critical mineral behind it. So you can thank 95-plus percent of lithium is China-based and maybe even more given that they control the critical minerals. So anyway, the answer -- I know I'm answering your question in a long way, but the point I'm trying to say is, I think the recognition that batteries are important there. And yes, if you combine the production tax credit and the ITC, it's somewhere in the 50% plus range. And then so that's sort of the total credit to the customer, if you will.

A couple of electrolyte questions. One, is there any freezing issues with the liquid electrolyte?

Yes. So it's a much better question for one of our engineers. But yes, the electrolyte does freeze at a certain temperature. I'm going to I'm going to say a number, but I'm probably going to misquote it. But I think the electrolyte, it has a wide operating range. I'm not even going to say a number because I feel like I'm going to misquote it, and I don't want to do that. But I'm happy to publish it again or you can look on our website, and I'm happy to update it there. But yes, the electrolyte, there's a couple of ways that you can think about electrolyte, right? So the more salt and iron you can put into the water, the better the electrolyte will operate, the less resistance you have, the more energy you can bring into it, et cetera. And so there's this trade-off between electrolyte and what I would call, current density in electrolyte, right? So in that -- and in the end, that depends on also like where are you going to use the battery. Like if you're going to use it in Arizona -- in the south of Arizona, where it's odd all the time, the electrolyte actually likes to live at a very hot temperature. It's better for those things I said, resistance and you can pack more salt into it if it's hotter, which means you get better energy into the system. In a cold place like Alaska, you might want a different electrolyte configuration because if you use the same one that you're using in Arizona, you'd likely have to heat it or use some kind of heater in order to make sure that it doesn't freeze or what you get is the salts actually coming out of the water at certain temperatures, so they like separates. So the point I would make is electrolyte is one of those variables that is truly variable. It will change the current density, but you can change it relative to the environment that you're in. And the second thing I'll say is the reaction itself, the chemical reaction itself produces a lot of heat. So another thing to think about is, depending on how much you run the battery, we'll also tell you what kind of electrolyte you can use. So we have a couple of different formulations we use. And I think in the future, the idea is going to be like you have to really be thoughtful about where you're operating, how much you're operating, like ambient temperature, how much you're operating, and that can kind of tell you what current density you can get. And it will change a lot of those factors like round trip efficiency, energy density per acre, et cetera.

Yes. That leads into another question about round trip efficiency. I mean is there a an average round trip proficiency that you have for your batteries?

Yes. We -- there's a wide range that we tested in the lab, but I'd say in the high 60s is where we think about our roundtrip proficiency for the energy base that we're trying to -- that we're hoping to send to customers in -- or that we're working towards sending to customers in late 2027. So high 60s round trip efficiency, I think theoretically, we can go into the low 70s. But everything in our research says that high 60s is the right -- is -- that's where we think we are right now, and we think there is some efficiency gains that we can do with that. And that's, again, another factor that leads to why you want longer duration for our battery.

Okay. So you mentioned that your current projects will take approximately 2 years to complete. The question is, why so long? What are the reasons for that? Is the -- if you could just talk about that.

Yes, of course. It's a great question, and it's deliberate on my part, the Board's part, the executive team's part. So the team of people who are making these decisions it's deliberate, right? Look, we think we have this really great opportunity right now where the market, the investors aren't -- we're in a point in our company where the expectations are super low. And where we have a decent capital position that we can focus on completing that technology over the next 6 to 9 months, and we can do all the design and technology work that we think we need and maybe was skipped over or is new because we've got -- we've taken it out of the box. So for all these reasons, we don't want to sell batteries really until 2027 because we want to take this time. We have this little window of time, which we're very fortunate for to be able to just focus on bringing the technology to a commercial scale. And so if we can just do that and stay focused on that, super that's a great time for us to do, and then we can start to scale up from there. So it's completing some of that technological road map. The other thing I would say is that SRP, they want delivery towards the end of next year. And I do think that there is -- there are other customers along the way between today and the end of 2028. So it's not do nothing and then SRP shows up in end of 2027. I think there are other customers and opportunities on a smaller scale that we can slot in over the next -- towards the beginning of 2027, that will sort of help us build that road map to 5 megawatts, 50-megawatt hours. So to go from sort of nothing on the energy base to go to 5, 50 at that time point. That's a big jump, right? So what we're thinking about now is what do we want to do inside of our own factory to prove that the technology works to give customers more excitement that they can actually purchase stuff from us and get on our road map of delivery. And then there are some other customers in there where we think they would be interested. We've seen some interest in smaller systems, which we think we can bring in towards the end of this year, early next year, I'd say, early 2027.

Okay. So there's a very technical question I ask that, but I'm partly asking because I don't think we got into just the estimated period of like the life cycle of the system. This one is ask to be willing to speak to the limitations of stacked lifetime due to membrane failure rates. And if membrane failure occurs, how do you maintain electrolyte integrity. So that's very specific to the membrane failure. So if you can speak to that, but also just the full estimated lifetime of the system or replacement over years of certain parts?

Yes, sure. Look, I think I'll probably not answer that membrane question as best as I can, but I'll do my best since somebody asked it and always happy to give it a try. Look, I think you have to minimize stack failure as much as you possibly can. And there's a lot of reasons the stack can fail and a lot of reasons our stacks have failed over the last 15 years. Dendrite formation is one, running at too high BDC leaks. So to me, it kind of goes back to that current density question, and what we really need to be doing and what we spent a lot of time talking about and thinking about is what is the right operating paradigm for our system. So you don't -- like I would consider a stack failure like a catastrophic failure because then like the question asker is saying, how do you preserve the electrolyte, how do you replace a stack, how do you do all these really expensive things while maintaining the integrity of the system. All very great questions, which we can talk for hours about how you do certain things. But I guess the point I would like to make is we need to make sure that we're not killing stacks. And the most important thing is to create an operating paradigm for the chemistry and the technology that is least likely to create catastrophic failure. I think if you go back, the real mentality of the was to try because you're operating within a box was to try and get the most out of the stack, you possibly could push it right to the limit where you would start to see catastrophic failure and then try and run the system right below that. I think that from a what we found is that's super catastrophic and super expensive. So if you can back off of that, and make some other adjustments along the way, perhaps you don't operate the system at 99% where it can go. But if you're operating at 80% or 85% or 86%, I'm just giving numbers, then you allow the health of the system to stay much higher to avoid catastrophic failures. So to me, the idea, the mentality that we have at ESS now that we're trying to continue to push is avoid catastrophic failure and let's run the system where the chemistry and everything works really well, and you're getting the most out of it but not pushing it past that point.

Great. We're getting towards the end here. I'm going to ask one more question that came up in a number of different forms on here. Just related to environmental, safety, potential health impact. So what other ways I know you talked some about the lower risk than lithium-ion. But are there fire risks? If there is a failure of some kind, are there hazardous materials or potential contaminants? And what's been your experience working with emergency managers, local authorities and first responders?

Yes. Look, I think one of the things that we really like to lean on, and I probably didn't do a good enough job in the presentation, but happy to address it now. So thank you to whoever asked or whomever asked these questions. It's a very safe system. So there's no fire risk. I mean it's not a system where it gets that hot where you can light it on fire and it's very much -- the materials are very nonflammable water, iron salt. These aren't things that are high fire risk. So one of the things that you have with lithium is you've got a ton of thermal runway. And you have to put cooling systems around it and everything like that. It's actually the opposite for us, like we like to use the heat that comes off of the reaction to keep the electrolyte warm because it runs better at that level. So you don't have that same fire risk that you would from a lithium system. Again, nothing against lithium. That's just part of the chemistry. It's an amazing chemistry, and it works quite well. But one of the things we try and lean on is not -- easier supply chain, much safer. You don't have the same sort of -- you can pack the energy and as dense as you possibly can, whereas lithium has rules about where you can put it. So we don't have that. But yes, the salt itself is quite corrosive and the iron salt water mixture, it stains everything, and it's quite corrosive. So if you come to our plant, like we spend so much time just trying to keep things clean and it's hard. The best thing to say is it's -- we put it inside of an enclosure. And so if you do have sort of a -- and I don't mean like a box, but more like there's a wall around it. so that if you do have some leakage or in the unlikely event of catastrophic failure in a big league and electrolyte spilling everywhere that it's contained in one area. So it's one of the -- it's the electrolyte dissolves iron. So it's very corrosive to any metal. So everything around it is plastic. But yes, so what I would say is it's a very safe technology though. And if you get it on your hands or you're close, like it's not that big of a deal. But you wouldn't want it sort of spilling all the way into the environment. It's not -- there's not a huge risk there, but we do maintain an enclosure around it for that. And then I was going to ask there was one question I think I forgot to ask from your last question was on lifetime. We think about it 20,000 cycles or 15 to 20 years, if you that's the longevity of the product, if you're doing sort of daily cycling, you get 15 to 20 years, all the parts around it are rated for that. So it's not a thing we're like 8 years in, you got to replace all the pumps or like all the joints on the plastic are welded, everything is there, so that it maintains a full enclosure. And that's another selling point relative to lithium and a good place maybe to end this -- your question is there's no degradation over time because the nature of the system is you're adding electricity and then the iron plates inside of the stack and then you're taking electricity away in a deep plate. So it's very much like a just a very fluid reaction. The system itself is closed. So you don't have a lot of escape there and you should be able to get -- if you run the system correctly, you should be able to get 15- to 20-year life without having to replace anything. So we use 15-year pumps. We use all the things that you would think at an industrial grade. And again, like the last thing I'll say, because I know we're out of time is it's a very well-worn path for a lot of the parts that we use around it. Outside of the stack, this is pipes and pumps and the ratings on these things and the understanding that comes from the oil and gas industry like it's all very, very -- it's a well-worn path, which is really nice. For us, it's about making sure that we're setting up the system right and making the stacks correctly.

Excellent. Thank you so much, Drew. This has been extremely informative. I really appreciate your through responses to the questions that came up. Thanks, everybody. You attended today and for putting your questions. I hope you found it as informative and helpful as I did. So we're going to end it there. We do have another one coming up in August, where we'll be talking to Form Energy about iron air, different technology, marketing and targeting a different space than ESS. So I hope you'll join us for that one, too. Again, thank you, Drew. I really appreciate it.

Thanks, Seth. And that then see you on the form one. I'm excited to hear that one, too. So I really appreciate you guys putting on the series. So thanks again for all your help.

Excellent. Thanks, everyone.