New UniEnergy Investor Bullish on Storage, But Prices Must Drop
UniEnergy Technologies (UET), the grid-scale battery maker based north of Seattle, began 2016 with a fresh $25 million funding round from investors including Orix, a Japanese financial services firm with business lines in renewable energy project development and energy storage.
Last week, Orix executive vice president Yuichi Nishigori (pictured) visited UET and spoke to clean energy advocates gathered to celebrate the investment in the company, which has emerged as a prime example of Washington state’s push to become a leader in energy storage technology development. Key early deployments of its vanadium redox flow batteries last year were backed by the state’s Clean Energy Fund.
Nishigori, who heads Orix’ energy and eco services business, is bullish on the U.S. energy storage market and UET’s specific technology solution. But he says the price of energy storage equipment—both in terms of initial capital costs and long-term operating costs—must come down for the industry to really take off.
“As indicated by the fact that the [Investment Tax Credit] incentive has been renewed, the green energy policy in the United States will be again accelerated,” Nishigori says in an interview with Xconomy. “Like in New York or California, the renewables will be growing, and that means the U.S. will need to reinforce the stability of the grid operations and there are various ways to do it, but to me it seems the U.S. is committed to battery storage, as opposed to oxygen storage or other types of technologies, so the basic fundamental is here to support the growth of the storage business.”
He is undeterred by setbacks to the U.S. clean energy agenda—specifically the Supreme Court’s recent action to block the Clean Power Plan—or the uncertainty cast by the U.S. presidential election.
“There may be some fluctuation or some turbulence maybe, but in the long run, I am very much convinced that macro-wise, the renewables coupled with storage will be a dominant driver for energy policy,” he says.
Orix (NYSE: IX) is engaged in leasing, retail and corporate financial services, lending, real estate, and, since the late 1990s, a range of energy endeavors. Its renewable energy portfolio includes solar, biomass, geothermal, and an off-shore wind farm in development in Japan.
The company has not begun developing large scale “solar plus storage” projects yet, in part because of market conditions in Japan, and, again, the issue of the price of storage.
“In Japan, our growth is capped by the fact of grid limitations,” Nishigori says. “There are serious curtailment issues, which means a utility is reluctant to absorb newly supplied renewable energies.”
Uniting the eastern and western parts of Japan’s national grid could help. “Also, if we have the storage together with renewable energy, part of this issue may fade out,” he says. “But the problem is the cost of batteries is still very expensive and we do need to depend on a government subsidy to make the project economics work. So hopefully there is a long term trend of reducing [cots of] all kinds of battery technologies. We still need to do a substantial decrease in the equipment costs of the batteries.”
He was encouraged after visiting UET’s Mukilteo, WA, headquarters, where the company is collecting data on how each piece of the battery systems it has deployed so far are performing. “That kind of technology will reduce the overall long-term life-cycle cost of the equipment,” Nishigori says.
Likewise, Orix is collecting data from its own energy storage business in Japan, where it leases smaller systems for households and provides an energy management app. Orix and equipment provider NEC together have the leading market share, Nishigori says. This program, too, has been helped by government subsidies that defray the initial costs to consumers, who are largely using it to store power from their solar equipment to sell back to the grid at times when prices are highest, he says.
While the subsidy is coming to an end, Nishigori sees great value in the household power usage data collected through the program.
“We are analyzing these data,” he says. “In the future, we would like to do some more demand side-driven services, like demand response.”
That’s when electricity customers cut their usage to ease the load on the grid at times of peak demand, reducing the need for expensive power plants that are only called upon for these peak periods. In the Pacific Northwest, demand response is one way regional power planners anticipate dealing with growing power demand over the next 20 years.
Orix, with a market cap of about $17.2 billion, represents a strong financial partner for UET, which is playing in the capital-intensive world of utility scale energy storage equipment. While Orix made an equity investment in UET, Nishigori, who joined UET’s board of directors, says his company does not plan to be a passive investor.
“We work closely with UET management, so we can value up the company,” he says. “They have a lot in the U.S., but outside of the U.S., I think there are various areas we can help them in terms of our regional network and maybe some financing capabilities.”
UET is not the first Orix connection to Washington state, as avid Mariners fans know. Nishigori charmed the audience in Seattle with a picture of former Mariners star right fielder Ichiro Suzuki in an Orix Blue Wave baseball uniform. Ichiro played for the corporate-owned Nippon Professional Baseball team, taking them to Japan’s national championship, before making his Major League Baseball debut with the Mariners in 2001.
“Ever since we lost him to Seattle Mariners, we never got to the championship,” Nishigori says.
Someone pointed out later that the Mariners never made it to the World Series either, with or without Ichiro—though things have been decidedly worse since he left the team in 2012. But hope springs eternal. The Mariners play their first game of spring training on Wednesday.