nVent Electric plc (NVT) Earnings Call Transcript & Summary

Appreciate your patience. We are recording today's webinar. Because we are recording today's webinar, please understand that you can go back and look at those webinars at a later time. At nVent, we believe that safer systems ensure a more secure world. We connect and protect our customers with inventive electrical solutions. We are a publicly traded company on the New York Stock Exchange with the symbol NVT. We have several different divisions, focusing on data solutions, e-mobility, commercial, energy transitions, power, utilities and energy storage, which is our topic for today.

My name is Dave Dong. I'm the Director of Vertical Growth for North America. I cover the renewables vertical, energy storage, e-mobility applications. And I've been with the power connection and business for the past decade.

Hello. My name is John Turner. I'm the vertical growth leader for energy storage, and I'm responsible for covering North America and Europe, working alongside with Jasmin and I've been with nVent for just about 7 years now and transition of our energy storage about 2 years ago. So very excited about the industry and where it is going.

Hello. My name is Jasmin. I am one of a marketing leader at nVent. And I've been with the company for over 10 years, always on the Enclosures side of things, working in a lot of different industries from energy storage, test and measurement, [indiscernible]. So very excited to have you -- to be here today and to speak about energy storage.

Thank you all very much for those nice introductions.

Today, if we're looking at this topic, I'd like to ask a few questions. We'd like you to ask questions as well. So please type your questions into the question pane. And if they are appropriate during the course of the webinar, we'll answer them during the course of the webinar. And if they're appropriate to be answered individually offline, we'll do it after the webinar via e-mail. So our first question here -- and this one here is for John. John, what are the mega trends you're currently seeing driving the energy storage industry?

Yes. So in the energy storage industry. There's a lot of big momentum that's really driven by our goal to be more sustainable and also electrification of everything. As we get more and more electricity demands coming online, coming from hyperscale AI, electric vehicles, and just general consumption. Our need to match that supply with the demand can't quite keep up on our current electrical grid. Our current grid really works office supply and demand function. When the demand increases, we turn up a knob to have that volume of supply to match the demand. What we're running into those is that maximum demand peak cannot be met with our current rate capacity. So as we move forward, being more sustainable, we're putting on renewable energy, such as solar and wind to help increase that demand. But part of that issue is that time of generation doesn't meet the time of demand. So energy storage systems really help decouple that time of use of generation and then the time of use from the demand what allows us to do is better utilize and maximize our renewable assets such as solar and wind by taking their peak generation and storing it for later use. We're also utilizing our existing assets such as fossil fuel to run power, generate power when the demand is less and those assets are cheaper to run. They can be stored and use it later. Also digitalization, as we become smarter and the grid becomes more connected, we're having more distributed assets. So as those assets are being located, microgrids with solar field, wind and then co-locate with battery and drew storage, we're seeing a need to how we utilize energy that for distributed in a smarter way. And energy storage systems really allow that connection on site to better utilize the energy when it's needed, once again by starting it to match that supply and demand curve. And then infrastructure investments. The Inflation Reduction Act in North America a lot of strategy and trends are happening in the EU by the government as well to push local manufacturing and integration of renewable assets and energy storage is being supported by that. The Inflation Reduction Act specifically in North America really drove a lot of initiatives to manufacture in North America and also ability to achieve those domestic tax credits is driving a lot of localized manufacturing for localized use and then Europe, we're seeing some trends that go in the same direction and primarily a lot of things are coming out of APAC is now. So no matter where you look in the global, energy storage is a huge infrastructure investment, getting to support that rollout of the grid to be smarter and more sustainable and more efficient.

Very good. Very good. What's the biggest shift you've seen in the most recent years in the energy storage industry? And any of you can take that?

Yes, I'll take that. So if you about the past, let's say, century, we've primarily been on the centralized model. So let's characteristic large power plants filled by fossil fields where you transmit electricity over the long distances to the consumers. So what this brought was an economy of scales and also brought different vulnerabilities. So you got climate impacts, you've got great disruptions that have been going on. And over the recent, I would say, past I don't know, several years now, we've seen this paradigm shift, and that's been driven by different advancements of renewable energy. They've been driven by falling costs. So for example, batteries, are 85% lower in cost than it was 10 years ago, solar PV arrays are much lower in cost. And so that's driving that change. And then you have this growing awareness of more sustainability, more resilient energy systems. So we're that's really accelerated this transition to this distributed energy storage model, where you have different technologies. So for example, solar rooftops that are connected with energy systems, the microgrid, which is essentially disconnected from the main grid. And what that does, it actually solves a few of these problems where you reduce transmission losses, you improve energy efficiency and then you have this potential for consumer choice and control. But with that it presents some other challenges. So you have things like the need for more grid modernization, the potential for greater development of more regulatory frameworks that surrounds that. And I think in the future, with this uptick with microgrids in the past year, it's going to be a big part of our future going forward.

Yes. I'll add another trend as well, and that's really a transition from NCM to LFP. That's happened over the last 2, 3 years, and that's really due to around battery safety. So they've been a great chemistry within the LFP, so lithium iron phosphate modules that are a bit safer, a little less energy dense, but they're making progress to move those back up. And that's really the next trend. That's one that's impacting manufacturers a lot is the increased thermal load from these battery modules. So as these battery modules get higher capacity and energy density, the energy and the heat load is increasing as well. and they're also putting more and more of these in the smaller space. If you look 3 years ago, 5 years ago, you might have a 40-foot container that had 1 megawatt hour of energy storage in it today -- per unit. Today, if you look at a 20 book container, they're putting 5 to 6-megawatt hours. So we've greatly improved the energy density within these systems, but that has came at a challenge to how do you manage all that concentrated heat. And that's really causing troubles to the customers.

And to second what Dave mentioned about the decentralization. So what we see that also some of the energy storage applications are moving closer to the consumers. So -- and that you can see now that you have a lot of installations in place or new products coming out, where it's a more flexible and modular energy storage system. So instead of having large installation centralized even on the energy storage side, you have a more modular smaller systems that then you can connect with each other. So you see that more and more. So you can easily scale, you can start smaller. You have lower investments. So that's certainly one of the shifts we've seen in recent -- I would even say in the recent months.

Yes. I think that's an interesting one, too, because that also changes the footprint of how those batteries are stored and how you dissipate that energy in different sizes. So scalability around the solutions going from a more cubic [ 8 foot by 8 foot by 8 foot ] style, so that 20-foot container for that 40-foot container, how do you provide scalable solutions that can be implemented quickly and reliably in the field is a big trend we're seeing?

So Jasmin, can you tell me a little bit more about second-life battery concepts?

Yes, sure. So we see there's a lot in the European market that we have. You have -- 2 types of energy storage OEMs want focus on second life and the others focusing on first life batteries. So with first life batteries, there's a trend that cost goes down but you still have challenges to access the batteries every once in a while, so you are sourcing challenges as a manufacturer. So an alternative is going to second life batteries, that have been used in the EV market, so for electric vehicles. And while for the electrical, they're not good enough anymore. They're certainly still good enough for energy storage. So you have these -- two types of applications. One is first life and then one is second life and that has a lot of implementations of how to cool, what the closure type would be, et cetera.

That's great. Thank you very much. I like recycling. So okay. Another question. What impact are you seeing from these trends? Where are you seeing it affect customers?

Yes. I think one of the bigger trends, again, is going back to the government regulations and how that's really localizing domestic manufacturing. If you look historically, China has really led the industry within technology development and manufacturing. And as we progress and start making this more localized, local manufacturers are having to figure out how to do it on their own as well. And it's also transitioning the trend from where we used to have this battery module manufacturers of [indiscernible] system integrators. A lot of these companies are becoming their own full system integrator. So the supply and value chain is transitioning from a battery module manufacturer based or from a system integrator versus the OEM, they're all really condensing into one. So it's consolidating the market. So it's really making it challenging for new people coming on board is how do you consolidate all that technology quickly how you make a system that can be reliable and scalable and field as fast as possible while you're dealing with all setting up the whole manufacturing as well.

So you're bringing all the pieces together?

Correct. Yes, the integration. So when you look at a battery OEM specifically, that's making their system to go into the field. There's a lot of components and how do you simplify which components go together from the mechanical, from the HVAC, from the fire suppression and then into the EBOS and also your batteries and our conversion system. How do you simplify that design process, the manufacturing, the installation and service is now all being done locally. And the integration of -- the installation is always done local, obviously, capacity, but the manufacturing is now transitioning local as well.

Okay.

Yes. And on top of that, so turnkey solutions, when you look across the entire value chain, right? So we're talking about the system integrators, but we're looking at turning solutions [indiscernible].

Looks like we lost Dave. Jasmin, do you want to...

Yes, let me just jump in for a second. So one of the effects we see for customers on the trends, like when you thought about what Chung said about having new government investments that also comes often with new regulations. So -- and those regulations are sometimes not so clean, especially when it comes to safety requirements. So around what our customers are mentioning to us that every year, they're getting new requirements in terms of safety and sometimes it's not so clean and clear what that means. There's no really industrial standard yet, especially when it comes to the enclosure side. You have -- so on the enclosure side, when you think about an enclosure, you often think about the battery module and closure, and those really are built to be explosion proofing closures. There you have some type of standards, but then if you look at the complete infrastructure, you have fire suppression systems, you have sensors, you have walls. You have a lot of different components implemented and then all of that goes again into either a container or an outdoor cabinet. And there, really, you don't have a lot of standards to tell you how that needs to look like. So you really rely on a partner that has that industry knowledge or at least can convert from another industry, like, for example, the waiver industry, you can convert that knowledge into energy storage because engineers in that area, just know what does it mean to be when -- [indiscernible] proof? What does it mean to have IP rating, et cetera? So you don't have that book that will really tell you why today that in energy storage like for an outdoor cabinet or for container, this is what you need to look for. You have to another industry. I think it will come eventually, but this is kind of a challenge you see in the market today.

And it's interesting, too, because there are a lot of standards out there on said they're very complex to understand when you look at fire suppression specifically, right NFPA855,NFP68 and 69 and those are changing rapidly. So not only is there a complex system we're trying to bring all these different standards around to make the UL9540 work, UL9540, but they're also rapidly evolving. And then as you get into the AHJ so authority having jurisdiction, they might have specific requirements as well. So to your point, having a partner that understands its work in those environments and applications before, and is able to translate from other piece applications makes a huge value.

All right. So what are some of the greatest challenges, battery energy storage manufacturers and installers face today?

Jasmin, do you want to take that first, while Dave is just trying to figure it out?

Yes, let's do that. So let's start with the enclosures -- on the enclosures level for, obviously, a lot of challenges with every single component, but we are more of an expert like on my side, especially more in the enclosure. So I'm going to start with that. And one challenge that we see for best manufacturers is the weight and the weight of the actually battery models, so especially going into new cooling technologies that John will talk a little bit about liquid cooling, you add an additional wage aspect. And that really brings a challenge on the enclosure side. There's very little standards where you can just go ahead and you go on a web shop and buy bigger enclosures that can have those heavy weights, those go into 50 tons, I'm sorry, the European measurement here. And yes, so you need special reinforcement, you need special frames, you need testing for that rate and that is within the application, but then also when it comes to the transportation. So how do you deal with the transportation of the enclosures. What is the best approach? Do you want to build up everything in your own manufacturing site? You want to do all the installation, the cabling as much as possible, but that adds a lot of rate that you possibly then have with [indiscernible] put in a container ship it to the site? Or are you going to do the installation on site? So there are a lot of calculations going on, what to do, what's the best approach. What we've seen in our recent -- with recent customers we talk to, that the approach is more of doing as much as installation as possible on their own manufacturing sites. So having smaller scale, but really easy expandable and closures is key for them at this point. So they can do most of the installation at least when it comes to the battery, the BMS, the cooling already on site.

And I think the trend will be interesting to see if DC blocks or DC and AC turnkey solutions kind of take over. It seems to be a lot more DC blocks showing up in the market, and that just helps because you can use a centralized inverter from multiple DC blocks, but it creates more work for the EPC and the integrators, so I'm curious to see where that trend kind of goes in the future.

Yes.

But adding on to your comments around the enclosure really being the scaffolding as well. Not only do we have the weight requirements very much themselves and on transportation, but you have to integrate all other critical functions such as your gas evacuation system, your liquid cooling system, your air conditioners, your fire suppression depuration. So making sure early on in the design process that you have mounting provisions and the right holes and putouts and the right locations inside the enclosure is a critical step because as you start integrating in the bigger components such as the battery modules and power conversion system, that's going to start affecting where you can place that. And if you haven't designed that in early enough, you run into constraints on, "okay, have a clearance for my fire suppression system. Does my gas evacuation system actually suck all that air out is there something right in front of the [ levers ], in the air conditioner controlling, the climate, the electronics can actually push that air around." So making sure you're laying out all the group performance earlier on. And that's where we've seen a lot of customers struggle is how do I make sure everything works cohesively and how we bring that into an early design stage.

And hopefully, is my audio working now?

Yes.

Connection [indiscernible] are done. So Dave a question that I've asked the other two here. What are the greatest challenges battery energy storage manufacturers and installer space today in your opinion?

Yes. So I look at things from a perspective from the system integrator and society. And if I think about -- I think one of the biggest challenges, there's high capital costs that associated with making these systems. We're still very early in this energy storage growth that's. So there's a lot of cost there. And we're talking about the cost to make it, the cost of deployed in the field. there's a lot of technical complexity to it, too. So you have different technology, different companies have just power requirements that are tailored to different sites. And you also have interconnection issues, regulatory issues and keeping up to date with that. Grid stability concerns is as your upgrading their equipment and the tie into advanced communication controls. And then in the long term, the maintenance and operations of the entire system. So we've got battery degradation to lithium ion batteries is the dominant technology that's being deployed today. And the lithium-ion battery semi-cycle life. So you have that asset where the battery goes down to 85% capacity and there's this augmentation process where the installer goes out there and has to put another module inand to get it back to 100% capacity. So there's that aspect. But also because of the -- well, a lot of these energy star sites and locations need to have at least 20, 25 years of protection or the systems need to last that long. So would you have the increase of environmental factors such as more lightning strikes and you have more earthquakes that are happening. You have to take into consideration some of the best practices when you're looking at your grounding system -- for the system. So there's a lot of different challenges that we're chasing in the energy storage sites. And yes, I mean -- yes. When you're looking at it for technologies, too, you have benefits of the newer technologies, batteries with their benefits, so you have it's drawback where it takes up more size and constraints there. So there's definitely a lot of those type of challenges.

Yes. I think one interesting one there, you mentioned is augmentation, right? So those batteries degrade, how do you plan your documentation earlier on and build that into the overall product financing and not only from that but how do you interconnect it properly. So you design the site upfront to make sure you have the correct documentation later on and the interconnections are easy. That one is a very interesting problem. And one more kind of from the site integration, at least what customers really care about too is the auxillary load. So how do we reduce that auxiliary load on the overall system because that's one of the highest operating costs. So really looking at efficient cooling systems of how you manage that battery temperature efficiently. And then also in the augmentation world, how do you make sure those batteries last longer. So proper thermal management that can adapt to the load of those battery modules to keep them at the right temperature to make sure they have the longest longevity to hopefully reduce that augmentation timing. And then also reliability of that large components. So how do you maintain or they reduce that operating and maintenance costs based after our initial forecast really comes out of the early stage design work and selection.

That's great. That's really informative here. So here's another question. Can you explain a bit more about how invent is building solutions to support the growing energy transition and mitigate the challenges that you've been talking about?

Yes. So Nvent as a whole, we've got a lot of core technologies that we utilize in different spaces such as industrial manufacturing, data solutions, automotive and roughly use a lot of those components and bring them over to energy storage. What we're really focusing on is how do you provide reliability and system site safety through the enclosures and then a focus on advanced cooling. So it creates smarter systems that have kind of predictive analytics to say, okay, well, where is my load going to be? What is my battery temperature? How do I adjust properly to really ensure they being maintain at the proper set point. And then electrical distribution. So how do we utilize the space most effectively. So as systems get smaller and smaller, how do you handle this higher capacity systems or 1,500 volts with the electrical system inside. So really focusing on space maximization and utilization and then safety on site with the grounding and new bus bar systems to make the system electrically protected on the site. And what we're really doing is those are our three core technology areas, but how we bring them together in system approach. When you look at the battery start OEM, they're experts on the batteries and the power conversion systems, the technology around the electrical side, primarily power generation and creation and conversion. Where we have our strength is that protection in the structure and staffing and electrical distribution for EBOS inside of that system. So how we create a solution that brings all the mechanical, the HVAC, EBOS into a standardized solution that can be modified and configured, really reducing that upfront customer design and manufacturing time while so utilizing and leaning on our really strong core strengths that provide their liability, longevity moments in the field.

Yes. So we have. So there's a lot of research mentioned going into new technologies and that comes with some drawbacks like real estate and how much space that you have. There's also we mentioned climate change, more lightning strike and earthquakes and all that stuff that's going on. So we are part of a lot of different projects. So we -- Nvent participated in the national electrical grounding and research project from 1992 to 2007, which is essentially an observation of garden behavior with different [indiscernible] components. We contribute to the [indiscernible] A-37 for gaming connectors and actually 98 landing protection for substations. And then also seismic will participate in [indiscernible] console. So we want to take our learnings from that and really though about education in the market. example would be where some of these micro grids for example are installed on in locations where soil is more corrosive in other parts of the country. So Central Valley, California, New Mexico, some areas of Texas, Colorado, things like that. So the different types of grounding practices that you're going to use there are going to be different than grounding practice in a site that's not as corrosive. So we want to take some of the things that we've learned in add education. We're launching continuous education courses for professional engineers, where partnering with companies to look at site assessments and things like that. Also, we're talking about the investments in innovative solutions. So understanding the biggest pain points in the industry building what John was talking about system solutions, turnkey solution from end-to-end. As these systems get bigger, technologies change, I think size of the [indiscernible] to always be a concern. So we're finding ways to develop system solutions on the power distribution side. And those are definitely some things. So some samples, FlexPlus and the product we're coming out with in Q1 in 2025, and that's meant to -- that's meant to simplify the interconnection method between the energy storage system and the voltage transformer, for example, it's about reducing the number of cables. We're looking at lending protection grinding solutions, as I mentioned, with different sales [indiscernible] working on.

And some thoughts we're working on, especially on the Enclosures side as to go help customers with system integration. So we will come out with like a more of a standard platform approach because you have all these challenges with the weight and the transportation, you need, obviously, weather proofing and coachings depending where earthquake potential earthquake proof cabinets and enclosures to house all of those components. And so we want to make it easier for best manufacturers to be able to source that and instead of having every time to either a custom project or having to build up their own manufacturing sites and really integrate to say, okay, here, a set of standard housings that you can choose from, and those are already partly integrated. And those are set up in a way that you can easily integrate a thermal management you need, you can integrate some cabling and that was all tested. In addition, I think how we support customers today is really that we have a really supportive engineering team. So in terms of bringing all these components together, customers can send us their CAD files or STEP files of those different components of what they need. And then we make sure that everything works and everyone wants you put everything together that will work, and it's checked by our own mechanical engineers and everything will work out once you go into the prototyping and the serious production phase.

And one thing to add on to that the integration portion too, we're seeing a lot of customers really value the ability to have the enclosure plus the liquid cooling, cluster, HVAC and AC already preinstalled on there, along with the electrical distribution components. So things that can be designed and installed at our site going into yours to simplify the design time. We're seeing a lot of value created there. And then adding on again to Jasmin's comment on the engineering services. One thing we get a lot of quest from are how do you make sure you have the proper fluid flow going through your system to each module. So how do you get a balanced flow coming from the chiller into all the different modules. And we've been the leader in the data solutions, liquid cooling space, protecting hyperscale solutions for over 10 years now to really utilize that past experience and skill set and bring it over in the energy storage space and provide that engineered service all the way from the chiller right to the battery module with a liquid pool solution that fits into the enclosure paired with the battery module of manufacturer. Now what we're seeing there is that simplifies two of the big connection steps and brings that manufacturing of one supply chain, really simplifying the supply chain management job and then providing faster manufacturing deployment. And then, Dave, do you want to touch base a little bit more, too, on your engineering services that you have along especially FlexPlus and power connections, they're a pretty complex system if you don't know where to start?

Yes. So like I mentioned, some of the biggest challenges today is how do you route power from one location to another, battery cells out and off to the transformer. So we do have a team of engineers globally, when we have engineers in Ohio that can help look at some of the design of your energy storage systems. We can talk through different ideas. There's a lot of different ways to solve this problem. And I said we have a lot of different solutions to doing this. So our team is generally look at -- I mean, I would say every system that we were a part of is different. And I think we're here to help customers -- give them the path for that distribution be efficient with it, we consider things like how do you like kidding these flexible [ bus ] parts together in a way so that when you start to scale up an energy storage systems, you can install it with ease, right? If you think about that compared to cable and lines, there's a lot of labor that can be connected with that. But if you look at like flexible bus bar and customize that to the energy storage design from the main bus bar up to the battery cells, also the interconnection to that. There's definitely a lot of engineering work. So we do have resources in Ohio to support that. We have resources in Europe that can support that. We have resources in APAC that can support that. So we're a global company with those. That's really focused on that.

So if I understand you correctly, you're saying that the -- that the energy grid overall is an older energy grid, and we're having more AI use that is causing more demand. We're seeing more EV charging stations for cars, that's causing more demand. And the electrification of everything is something that we have to embrace as a company and as a society, so where do you see the industry going in the next 5 years, the next 10 years, throw it out to 20 years. What can you say people can do to stay ahead?

There's going to be more diversification of technology. That's not the -- I mean today, we're dominated by the MIM batteries. I think 10, 20 years from now, as you continue this development there's just going to be a lot of different types of technologies that are out there. I think that there's definitely more integration with the [indiscernible] than AI with this boom in AI over the past couple of years, I mean, data centers has been a big part of it, that's going to continue to grow and that ow to me energy storage type applications, EV charging as we get more cars, you need to cars out into the public and our population growth, there's going to be heavy demand there. So I think that there's going to be more increased policy, regulatory policy around it. There's going to be a continuous increase on grade monetization as we've been talking about. And I think probably one of the best things to do if you're trying to get ahead of it, the trend is partner with companies that are investing into this, the future and partner with companies to have the resource that are doing it. I mean this team here, we have -- it's not limited to this thing. We've got other folks in verticals are. And it's our job to really stay ahead of the trends and partner with companies that are doing it. So I would say, partner developed with these customers that are really investing into this area.

I would say, giving a bit of a European outlook here that there will be a lot of more regulations to make it easier to install energy storage especially on the European grid. So you have your European targets, but then the grid is connected. So how do you deal with that? So I think there will be a new lot of modernization and regulations like we're looking really into 10, 20 years. Obviously, there will be different technologies in terms of batteries. There will be batteries that are more for short duration storage that will be battery types for more long-duration storage, so really depending what the use case is. I don't think there will be one -- just one battery type that will survive. I think there will be several ones living next to each other, depending on the application. And then really, it's about economy of scale. So we are really still -- really in the early stage of energy storage, I would say, especially when it comes to economy of scale, unless competition all around the globe, competition coming in from APAC. So -- but I believe as soon as we are able to have more scale, that will also drive cost down no matter where you manufacture and one thing, how bigger company solve this right now, it's really by going more vertical integration. So owning more of the supply chain.

Yes. I completely agree with Dave and Jasmin's comments on the chemistry change and one thing you can look out to as well as the different types of batteries that change now functions and battery storage with lithium ion really only has about 6-hour, 8-hour duration potential. So we start moving on the longer duration 1 to 2 days. So be interesting to see what our technology to really capture that space, such as iron flow or hydroelectric. So there's different things that are coming into that space for a longer duration. But if we're talking specifically about battery energy storage, one thing that tends to be critical no matter what is that whatever is installed today is going to be to be able to provide 10 and 15 years. So it's really critical for people now to make sure looking at which companies can service them in their install location in those time frames out. These systems have components that do fail that will give you pate accessory at a certain point in time. So what is your service look like and do you have the ability to source those components locally and install and maintain those components locally. The operation and maintenance costs can add up, especially if you don't have that. And then any liquidated damages if you got those in your contract and you can't find equipment that can really create applications in the field. And really no matter what type of technology is, those components will be similar. So making sure you're working with partners that can really be with you for 5, 10, 15 years in the future is going to be critical for customers of ours to keep up in the market space and make sure they're reaching a high into the goals.

All right. Thank you all very much. I really appreciate that. I think this has been very informative. If we have an opportunity to go to question and answer, while I've got you on the screen here, I've got some questions that have come in. One of the questions is, and I think I'm going to have both John and Dave, Jasmin address this here. Who holds the final decision where and when battery storage will be implemented within a geographical area? Are there private equity firms that are involved strategically placing these units? Is it the electrical utility making the determination? Is it the government in that particular area? What do you think that is?

Yes, I can take a stab at that one. So the location of these sites is really dictated by the owner operator and the ISO interconnection service operator and regional transmission operators, so when you have a site coming online, you need to first have a location that makes sense and then how do you connect that into the grid. Most energy storage applications that are at least going into the grid, they have to go through the ISO and the RTO set up to make sure that they can actually use those resources when they're needed. But the ultimate decision could come down to the owner operator because they're the ones that are in the finance and practice. And there are PE firms and there's equity investors and tax equity investors that are helping really drive that initial investment, but ultimately, the owner operator needs to make sure it's sufficient. So when you're talking about co-location, obviously, you're going to need some solar wind around it. But when you talk about just single stand-alone energy storage, that can be right on the traditional grid or closer to the use case. But again, it comes down to who the owner operator is and what's the use case. And there's really two ways to look at your offtake agreements, which is a contractual obligation to say I would take this much power at this price point. And then as your merchant operations, which essentially you're doing frequency like regulation, peak shaving, boat shifting and it's really based on that market demand. So it's a little bit different economics. But again, it's based off of that owner operator and what their financial plans are and where they can actually interconnect into the main grid.

Okay. Yes. Just to give a comment on that. I'm just -- I think this is really especially around the bigger utility space, where you have private equity firms coming in and investment in my -- in other markets in Europe, Germany, for example, you have a lot of like a call behind the grid application. So it's really more companies that actually decide to have a small energy storage application installed to have their machines warning, for example, when they have peak times of energy cost, they would rather have the machine running on energy storage and to have better like cost benefits of that. So you also see those type of applications. But yes, the bigger market is definitely more on the utility side, where you have a lot of private equity firms.

That's a very critical distension, to my answer is much more tailored more towards the utility side. But adding on the Jasmin, we do see a lot of commercial industrial application really support to uncritical infrastructure. So you look at data solutions, hospitals, financial institutions, they're investing heavily in these battery backup systems that are actually quite large to make sure they don't have any downtime or also energy arbitrage and what merchant opportunity, where you can utilize the traditional grid at lower costs. And then utilize that energy from your system when you need to. And that's, again, going to be very dependent on the site location of the manufacturer or the end user. But then you also have communal energy store where maybe one system is providing multiple and was similar to a power purchase agreement, but again, more considered an offtake in the energy storage space.

Thank you. I do have another question here. Where is the design container made? And that can be a general question or a specific question. So where are those containers made?

Yes. So nVent has a lot of manufacturing locations. We've got some in Northern Minnesota, Downer North of Mexico. We've got a lot over in Europe, we can talk to. So really where your end customer closure is made. It's best done where the batteries are being manufactured and you can install them and ship that solution versus a ship to different components. But again, we're seeing a lot of customers that might be in selling their batteries in the field. So fortunately, nVent has a lot of manufacturing areas where we can make the enclosures that they're more geographically constrained to end-use to really simplify that supply and ship time. And now talking about the big 20, 40 book containers that we don't quite do but are investigating research acquisition of [ property ] to see if we can play in that space. And that's primarily coming out of our Texas facility in West Virginia and Wisconsin, where we have an opportunity to see if we can utilize that locally for North America to achieve the IRA domestic content from the closure perspective.

Thank you. Appreciate that. Another question, actually, two questions I'm going to roll into one. What cooling systems does invent supply for battery racks? And what's the ideal temperature for a lithium battery life?

Yes. So I'll take that one, too. primarily have two systems. You've got your liquid cooling system that's the battery module specifically. And again, to use that, we have to have a lipid battery module design, but that's what the industry has really transitioned to because it allows you to better remove the heat from those higher concentrated heat loads in a very effective and efficient way using liquid over air. So the primary method is you have a chiller, they'll be mounted on the door or inside your system, and that routes fluid through a fluid distribution system that is connected each rack at the battery module is going in. And the real trick there is to make sure you got balanced flow going to every module. So you have pressure on your flow rates are similar in each individual module to exhaust effectively, and then your pressure throughout the entire system is balanced. The target temperature, this is ideal based off [indiscernible] is 25 degrees C, plus or minus 2 degrees C for your tolerance range. You can come in with a lot of slightly cooler fluid around 23. And as the batteries start to offload, you can go to 25, 26, 27. We really want to maintain within that window, but that's really going to be battery manufacturer specific on what they want to use but most warranties around 25 degrees C right now. And then in addition to the liquid cooling for the modules themselves, we see a lot of customers that are putting an air conditioner on the overall system to really manage the climate temperature for all the other electronics and also humidity in that system. So from providing an air cool solution that can cool the container in the critical electronics, while also sort humidity and make sure all the other good components that are working with the batteries stay in their critical operating range as well.

All right. Thank you very much. I don't see any more questions that are coming in that aren't specific so that we'll be answering them with an e-mail. So before we go here, any closing comments John, Dave, Jasmin, any closing comments for our audience today?

Yes. I mean we're really excited. This is [indiscernible] scenario that we put a lot of time into. We will be -- if you guys are meeting at least to John and I, we will be exhibiting REs in several weeks, we do plan on attending. We'll be at that view to get E10008. And so there is -- but yes, I think as mentioned, we're open to discussion. We want to be able to partner with folks that are developing in this area. So again, this is a very exciting space to be and we're all very excited to be here.

Yes. Also from my side, thank you for everyone, for joining today, like Dave said, excited to be in that. And if there any further questions, just get in touch. Go to the show, this is a great show to meet John and David and see also solutions in place, and we also have a few next year, again, a few show down in Europe. So yes, excited about that.

Yes. Overall, I was very excited for where this industry is going. And as Dave mentioned, come to us early and often. We'd like to work with customers as early as we can to help really design all those critical aspects together earlier on in the design stage and you can help use our resources to make life a little bit easier. So reach out any questions, comments, concerns we'd love to hear from you guys. We're always looking for ways to really innovate in the future to become a leader in the space on overall system reliability and longevity, and we're excited to see where this market goes.

Thank you very much. So I'd just like to say we will be following up with key contacts for all the people that have listened today. Please understand that we did record this webinar. If you want to access that reporting, just go back into your original link. And for those who were unable to join us today. They can still go and look at the reporting through that original link. We'll see you at RE plus Anaheim sometime between September 9 and 12 in 2024 and both E10008? And with that, I'd like to say thank you very much, and we're going to end the webinar at this time.

Thank you.

Thank you.

Thanks.