Gates, pritzkers take on musk in $5 billion race for battery storage

NEW YORK -- Professor Donald Sadoway remembers chuckling at an e-mail in August 2009 from a woman claiming to represent Bill Gates. The world’s richest man had taken Sadoway’s Introduction to Solid State Chemistry online, the message explained. Gates wondered if he could meet the guy teaching the popular MIT course the next time the billionaire was in the Boston area, Bloomberg Markets magazine will report in its May issue.

“I thought it was a student prank,” says Sadoway, who’s spent more than a decade melting metals in search of a cheap, long-life battery that might wean the world off dirty energy. He’d almost forgotten the note when Gates’s assistant wrote again to plead for a response.

A month later, Gates and Sadoway were swapping ideas on curbing climate change in the chemist’s second-story office on the Massachusetts Institute of Technology campus. They discussed progress on batteries to help solar and wind compete with fossil fuels. Gates said to call when Sadoway was ready to start a company. “He agreed to be an angel investor,” Sadoway says. “It would have been tough without that support.”

Sadoway is ready. He and a handful of scientists with young companies and big backers say they have a shot at solving a vexing problem: how to store and deliver power around the clock so sustainable energiescan become viable alternatives to fossil fuels.  How these storage projects are allowing utility power customers to defect from the grid is one of the topics for debate this week at the Bloomberg New Energy Finance conference in New York.

Today’s nickel-cadmium and lithium-ion offerings aren’t up to the task. They can’t run a home for more than a few hours or most cars for more than 100 miles (160 kilometers). At about $400 per kilowatt-hour, they’re double the price analysts say will unleash widespread green power. “Developing a storage system beyond lithium-ion is critical to unlocking the value of electric vehicles and renewable energy,” says Andrew Chung, a partner at Menlo Park, California–based venture capital firm Khosla Ventures.

The timing for inventors — and investors — may finally be right. Wind turbines accounted for 45 percent of new U.S. power production last year, while solar made up 34 percent of fresh capacity worldwide. Storing this energy when the sun isn’t shining or a breeze isn’t blowing has remained an expensive hurdle. Battery believers say that’s changing. They’ve invested more than $5 billion in the past decade, racing to get technologies to market. They’re betting new batteries can hold enough clean energy to run a car, home, or campus; store power from wind or solar farms; and make dirty electricity grids greener by replacing generators and reducing the need for more fossil fuel plants. This market for storage capacity will increase almost 10-fold in three years to 2,400 megawatts, equal to six natural gas turbines, Navigant Consulting says.

Gates made good on his pledge to Sadoway with an undisclosed investment in 2011. The money helped form Ambri, a nod to the company’s roots in Cambridge, Massachusetts. (Gates declined to comment for this story.) Billionaire Nick Pritzker and his son Joby are backing Pittsburgh-based Aquion Energy through their Prelude Ventures and Tao Invest funds. At Aquion, a Carnegie Mellon University professor is repurposing a factory that made Volkswagens and Sony TVs to fashion batteries for residences and hotels. Technology from California’s Lawrence Berkeley National Laboratory has support from VC Vinod Khosla. The top three U.S. automakers are testing the lab’s lithium polymer product, which powers cars and homes. Sales are expected next year.

More money will flow to the global, $50 billion-a-year battery industry as the U.S., China, and Germany scramble to cut greenhouse gases. The market includes everything from flashlights and home solar to power sources for islands and storage that can fortify grids. A dozen startups are chasing the pot in a field dominated by Panasonic and LG Electronics, which are advancing their own offerings. “It’s a fantastic time, with some really strong technologies,” says Venkat Srinivasan, who leads storage research at Berkeley Lab.

Sadoway is one of the first out of the gate. This year, he plans to ship six 10-ton prototypes packed with hundreds of liquid metal cells to wind and solar farms in Hawaii, a microgrid in Alaska, and a Consolidated Edison substation in Manhattan. Ambri’s battery will store power Con Ed offloads when demand is low. Then, rather than cranking up another coal- or gas-fired plant, the utility will drain the battery when New Yorkers want more juice

Sadoway, a 65-year-old Canadian, defies the nerdy inventor mold. He’s been known to teach his class in a tuxedo while serving champagne. Yet he’s all science when explaining batteries. He says Ambri can top lithium-ion on price and longevity with tricky chemistry that he and a former student have finally perfected. The battery combines two metals Sadoway won’t disclose that have different weights and melting points. He separates them with a salt layer. Electric currents heat the metals to as much as 700 degrees Celsius (1,292 degrees Fahrenheit) to pass electrons through the molten salt. That helps the metals hold more energy. Unlike the lithium-ion in laptops, which can take about 400 charges and last four years, Sadoway says his batteries can take 10,000 charges and work for at least a decade.

Sony introduced the now-ubiquitous lithium-ion technology in 1991. The batteries, with their flammable liquid electrolyte, never overcame original flaws. They can burst into flames and require toxic solvents with names such as N-methylpyrrolidone. More frustrating for investors, no one so far has come up with a clear route to bringing down prices while ramping up production. Tesla Motors Chief Executive Officer Elon Musk says he can do it. He’s betting $5 billion that a new plant near a lithium mine in Nevada will make his Teslas go more than 200 miles at about $35,000 per car by 2017. That’s about one-third the cost of today’s priciest $100,000 Model S. Analysts estimate Tesla’s batteries cost less than $400 a kilowatt-hour. Musk has said he wants to cut costs by 30 percent with full output. Tesla declined to comment on battery prices. To answer critics who say Teslas lose their green cred by plugging into a grid, Musk offers solar panels for homes and some charging stations.

Silicon Valley venture firm Kleiner Perkins Caufield & Byers jump-started today’s race to beat lithium-ion in 2007. VCs asked one simple question: What should the ideal battery do? The firm, known for spotting future tech icons such as Netscape and Google, gathered analysts and partners at its Menlo Park headquarters. They came up with a list of “impossible demands.” Then they set out to find the technology — hopefully lurking in a chemist’s lab — ready to be refined and eventually brought to market, saysRay Lane, partner emeritus at Kleiner.

Kleiner dispatched Bill Joy, a co-founder of Sun Microsystems who was a partner at the firm, and David Wells, from its greentech division, to Pittsburgh. They visited Jay Whitacre, a lanky cyclist with a Ph.D. in materials science. Whitacre was tinkering with battery chemistries while teaching Engineering the Materials of the Future at Carnegie Mellon. “It’s a very short list that can beat lithium-ion,” says Lane, former president of software giant Oracle who’s now chairman of boards at both Aquion and Carnegie Mellon. “Jay Whitacre was the only one who said he could do it. I didn’t believe him at first.”

Believing him or not, Kleiner took a chance. It gave Whitacre $1.6 million in 2008 to accelerate his research. He built a cell using an updated version of a saltwater battery produced in 1800 by Alessandro Volta, the father of the electric battery. Six months later, Whitacre, now 43, was ready to take his sodium-based battery out of his lab at the university. He called the company Aquion for its aqueous-ion chemistry.

Lane and his partners were so pleased with Whitacre’s early progress they agreed to invest a further $7 million in 2009. The firm has helped Aquionraise more than $172 million, including chunks from Gates and Nick and Joby Pritzker. Nick is a cousin of Hyatt Hotels founder Jay Pritzker, who died in 1999. Aquion hasn’t released individual investments because it’s privately held. CEO Scott Pearson says that may change in the next year. “We’re one round away from an IPO or an equity deal,” he says.

Aquion leases a three-story redbrick house in Pittsburgh’s gritty Lawrence­ville neighborhood. It’s close enough for Whitacre to bike the 2.5 miles from campus. On a bitterly cold February day, with wind blowing off the Allegheny River, Whitacre said he’s developed what will become the cheapest nontoxic and long-lasting battery for a home or a hospital. It provides steady power for eight hours or more, discharging solar energy it gathers during the day. Whitacre shows off the fruit of his labor: a 28.6-kilowatt-hour battery module the size of a clothes dryer. It’s running the staff refrigerator, coffee maker, and water heater.

Aquion’s robots are hard at work 30 miles east. Designed to package chocolate candies, they’re instead plucking pucks of black carbon and manganese powders and placing them in casings to be filled with brine. Nearby, 50 pallets of boxed-up batteries are heading to Hawaii’s big island to power the 8-acre (3-hectare) estate of Earl Bakken, inventor of the external, wearable pacemaker. They’ll store electricity generated by 512 solar panels, replacing propane engines.

Whitacre is gearing up to produce enough batteries every year to store 200 megawatt-hours of power. Initially, he expects to sell to locales with diesel generators. “Islands and microgrids are the first big natural markets,” he says. Eventually, Aquion wants to add four more production lines to the current one. That could reduce cell costs to as little as $100 per kilowatt-hour, CEO Pearson says.

Hany Eitouni, a bespectacled chemical engineer, is also chasing $100 cells with technology he helped develop at Berkeley Lab. Eitouni’s porous material lets electrons flow in a new dry lithium battery that’s a cousin to current models. Khosla Ventures and Samsung Venture Investment bet $17 million on Eitouni’s Seeo, bringing venture funding to more than $42 million since 2007. Eitouni, 37, says his latest rolled packets of lithium polymer cells are the size of a briefcase and hold two to three times the energy per weight of today’s liquid lithium battery. That’s key for electric vehicles to travel more than 200 miles per charge. What’s more, his solid polymer loses less energy in the form of heat, a flaw in current lithium batteries, he says.

As the fog lifts at an East Bay industrial park, Seeo technicians in white coats and safety goggles manipulate harsh chemicals that clean metals in the batteries’ core. Machines roll 40 layers of lithium foil into a cylinder with two polymer layers that are pressed into a pouch. Eitouni boasts of passing grades for his batteries “in the high 90s.” Seeo expects to break under the $100-per-kilowatt-hour mark as it moves its best designs to full production during the next few years, says CEO Hal Zarem. “Seeo can be very cheap as they grow to scale,” says Jeremy Neubauer, senior engineer at the National Renewable Energy Lab’s Center for Transportation Technologies and Systems.

Phil Guidice, the CEO who’s running Sadoway’s Ambri, says new batteries emerging with the help of big backers will finally enable renewables to compete with fossil fuels. “Khosla, Gates, Musk, and the Pritzkers are all excited about changing the world in a better way, and they’re swinging for the fences,” Guidice says. “We’re getting closer every day.”

This story appears in the May 2015 issue of Bloomberg Markets. With assistance from Dana Hull. 

Copyright 2015 Bloomberg

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