Catalyst with Shayle Kann - What’s next for the battery storage boom? [partner content]

Episode Date: April 23, 2025

The U.S. storage market is experiencing hockey-stick growth, with multiple gigawatts being installed quarterly. But new policy uncertainties around tariffs and the Inflation Reduction Act are threatening this momentum. But Jeff Waters, the CEO of Powin, remains optimistic. "This industry will figure out a way to work with it," says Waters, who brings decades of experience from the semiconductor and solar industries. "What we're doing is important." Powin is a leading storage integrator that designs, commissions, and services some of the largest utility-scale batteries in the world. As Waters puts it, "If you are a utility or if you are an IPP, if you want to integrate storage and own and operate a storage asset, we are that one throat to choke." In this episode, produced in partnership with Powin, Stephen Lacey talks with Jeff about why he's still optimistic about the market despite significant headwinds. Drawing from his experience in semiconductors, Waters makes a case for how America should approach domestic battery manufacturing. "When I hear people talk about storage and say, 'We don't want Chinese companies investing or getting taxpayer money to build plants,' I think it's a ridiculous notion," Waters explains. "The only way we're going to get anywhere in the U.S. market with storage is by partnering with the Chinese." They discuss the extraordinary scaling of project sizes, the surge in electricity demand from data centers, technology trends beyond lithium-iron phosphate batteries, diverse deployment models, regional market opportunities, and the remarkable resilience of an industry used to navigating policy volatility. This is a partner episode, brought to you by Powin. Powin is pushing the frontiers of energy storage. To learn more about Powin's integrated energy storage systems and to read case studies of how the company is executing projects, go to powin.com.

This is a branded podcast from Latitude Studios. Jeff Waters started his career in the semiconductor industry in the late 1980s, right when the industry was going through a major shift. You know, at the time, the U.S. was the dominant player in semis. The Japanese, however, were making significant gains. Japan was a dominant force in consumer electronics, but it wanted to control the entire supply chain. And that meant bringing semiconductor manufacturing to the country.

And they went to the semiconductor companies and said, if you want to sell into our market, we're going to tariff you up, or if you come in and join, set up JVs with Japanese companies and do production here within Japan, will give you better access and entry into the market. The policy had many dimensions, tariffs, incentives for manufacturers, and university programs to build a skilled workforce. They created a whole infrastructure to build up a wealth of knowledge of semiconductors. And within about a decade's time, you now saw Japan as a player in semis.

Later, you saw Taiwan do the same approach. You saw Korea do a similar type of approach, and you're seeing China do the same kind of thing. Later, Jeff went to work in solar manufacturing. Today, he's the CEO of Powan, a leading energy storage integrator. And after seeing the centers of power for semiconductors shift, he watched China execute the exact same playbook for solar and batteries. And as he told Stephen Lacey, America needs to learn from it. What does that tell you about what we need to do today to own in America more of the battery storage supply chain. When I hear people talk about storage and just say, well, you know, we don't want,

you know, Chinese companies investing or getting taxpayer money to build plants, I think it's a ridiculous notion. The only way we're going to get anywhere in the U.S. market with storage is by partnering with the Chinese. And it can be with their technology, licensing the technology. It can be helping them build plants within the United States. And not just that, I think we need to do the other pieces to the puzzle, right? The other point. parts of the playbook, get universities investing into creating students that will have that kind of capability, allowing employees to come in from overseas to help train us up on how to get it done and all the equipment that goes along with it. If you do that and you partner it up with

building the infrastructure like the Japanese did for semis, you can result, you know, in five to ten years from now with the U.S. having that same capability. Let's piggyback on what's been done. and make the U.S. a strong player within storage. In the last five years, the storage market has seen hockey stick growth. In the U.S., batteries were the second biggest source of new capacity on the grid last year. But uncertainty around domestic incentives and tariffs is challenging growth. And there are conflicting views on how best to support manufacturing. In this episode, produced in partnership with Powan,

Stephen Lacey talks with Jeff Waters, the CEO of Powan, about the state of the U.S. storage market. He explains why he's still optimistic, even with policy headwinds. Nearly two years ago, Jeff took the home at Powan, a leading storage integrator that designs commissions and services some of the biggest utility scale batteries in the world. So the way we like to think about it is if you are a utility or if you're an IPP, if you want to integrate storage and own and operate a storage asset, we are that one throat to choke. After decades in semiconductors and solar, Jeff turned his attention.

attention to batteries. I saw storage as a good place for the U.S., for my home country to kind of reestablish itself and create an important technology that would help with renewables, but also grow its stability. Jeff has a unique view of the battery storage market, which is seeing immense growth and also emerging uncertainty in the U.S. He recently sat down with Stephen Lacey to take stock of the market. They talked about project sizing, technology trends, policy shifts, and why batteries are so critical for meeting surging electricity demand. The U.S. storage market is booming. Right now, on a quarterly basis, we're seeing multiple gigawatts installed. Just in Q2 of last year, we saw a 74% increase in deployments.

So if you look at the different factors that are driving this acceleration, what stands out to you? Yeah, I would say it all kind of gets back to electrification. I think that drove the big boom, going back, let's say, four or five years ago, now what you see is data centers. And, you know, with the strong surge in data centers, and Michigan's a good example of that, but you're seeing it in Virginia and all across the country, just the amount of demand that's putting on the grid is just really upping the stakes on growth. And that's why you're seeing, even the projections for, you know, five percent year growth for power demand in the U.S., that's double what people were projecting probably a year or two ago. And when you talk with the industry market pundits, they'll tell you that that's probably

even too low based on where data centers are heading in the deep pockets that exist within that industry. If you want to think about how you address that surge, there's a lot of talk right now about SMRs, right, small modular reactors. The challenge there is that between permitting and technology development that needs to happen, you're probably talking about, you know, mid-2030s before you see that become a real play. Another would be natural gas. There's a lot of talk about natural gas. You know, turbines today for natural gas, you know, if you place an order today, you're not going to see that until, let's say, 2030. So you've got this long latency here where you're going to see this big surge in demand for energy, how you're going to address it.

And that's why you're seeing such a push towards storage. You know, Illinois has set a 15 gigawatt energy storage target to help reduce their costs and help meet the demand. Virginia is 10 gigawatt by 2045. Michigan has their two and a half gigawatts by 2030. It's expected, just to give you a broad number, by 2033, the market is projected in the U.S. to hit about 170 gigawatts of storage. You can look at it as something that is kind of a hot trend that people are talking about today,

but there's really a long-term need for this. Given the flexibility, given the small footprint, given the fact that the technology is here, and then on top of it, that there's been such a, I would say a large supply chain around it that you've seen costs come down very significantly as well.

Let's talk about sizing and deployment models. You and I talked previously, and you said around 18 months ago, your average project size was in the 100 to 300 megawatt hour range, and then 300 megawatt hours became the average, and now you're seeing projects well over 500 megawatt hours.

What is behind this astonishing scaling of project sizes? Yeah, I think part of it is cost. So the cost for, you know, LFP batteries have come down nearly 50% over the course of the last year or two. That contributes, makes the economics easier. The other is just the interconnection piece. When you have an interconnection, you want to capitalize on it as much as you can. And that's one of the other reasons why I think we're seeing people saying, hey, given the value of that interconnect, if it's already permitted, ready to go, let's maximize it to the full extent that we can. And then I think it's also just the demand.

You know, seeing that surge, seeing the off-takers expressing the need for even more demand than maybe what was even originally cited when they first sat down and had the conversations on putting in storage, all that's contributing. When we see a 500 megawatt hour project now, it is by far the rarity. I mean, typically now we're seeing one gigawatt hour, two-gigawatt-hour project. What about actual deployment models? There are three different categories. You've got market trading. You have co-location with renewables, and then you've got standalone storage that harness existing grid connections. Which of these applications dominates Powan's deployment and what's growing the fastest right now? You know, if you'd ask me this question maybe two years ago, we probably would have said that the standalone storage for trading was probably one of the biggest growth areas that we saw. I think now it's really around co-located storage.

Given all the renewables that you have out there, even in the state of Michigan, how do you really monetize them in the best way that you can and help serve the grid? Stand-alone is still, I would say, something that we're seeing. And it really gets to situations where you've got grids that are maybe imbalanced. And so I would say we still see a fair amount of growth there. The market trading piece has softened a little bit just because those markets have been reasonably saturated, both in Irkott and Kays. so, but right now, I would say it's really the co-located piece. I want to get your thoughts on where the most attractive markets are. So California, Arizona, Texas, those are really hot markets.

What kind of activity do you see there? And beyond the established markets, do you see anything emerging for upcoming significant growth? Yeah, I would say just generically speaking, you know, you're looking at markets that have high renewable penetration, ones that have strong mandates around retiring fossil assets and more broadly, just aggressive clean energy mandates. And that's where you're going to see most of the growth. And, you know, right now, I would say, you know, New York, PJM, MISO, those are all regions where we expect to see a lot more growth

than we've seen historically. You know, I would say the traditional markets are still going to keep growing. I mean, California will still keep cranking along. It's at, you know, whatever it is, 19, I think the target right now for them is 19 gigawatts by 2035. But I would say where you're going to see more of the growth are relative to what you've seen historically will be your PJM, MISO. So battery system prices have continued to decline. Over the last year, we've seen them decline by about a third. Where do you see battery pricing headed and balance of systems pricing headed? Well, I'd say let's set aside tariffs for a moment. I think if you, if you, just look at battery pricing, I think for as much as the costs of LFPs have come down,

I think, you know, people are thinking that there's going to be a bit of a saturation on it. Kind of from what we're hearing from the supply chain is if you go out over the next couple of years, there's a decent likelihood we'll continue to see pricing go down. You know, I've heard some claims that you could see it go down as far as, you know, from $50 down to even $25 over the course of the next couple of years. I think it's realistic to think about that. I mean, the supply chains for LFPs have been largely within China. You're seeing that now spread more broadly.

So Indonesia, Morocco, or all areas now where you're seeing a lot more investment going into it. So you see an expansion of the supply chain. I think for the rest of the balance of system, you know, I would expect that to track as well. Having lived through solar, you know, we continue to hit points in solar where we thought, you know, between panels, and everything that goes into panels that you would hit some kind of a saturation point. You know, the reality of it, it keeps grinding down. I mean, even what's happened in the last two years with solar

astounds me, given the volume that you're going to have with storage, the attractiveness of the growth, a lot of money is going to flow into that and people investing in a way where profit margin isn't going to be the priority. It's going to be more around growth. You mentioned tariffs, and I want to talk about tariffs. How will those impact the battery supply chain specifically, how much heartburn are you getting from the prospect of tariffs?

And what else is giving you heartburn right now in the market? Yeah, I would say within the U.S. market, now we're a global player. So we do a lot in Australia. We do a lot in Europe and increasingly Southeast Asia. But when you look at the U.S. market, it has been rough. I mean, it's been rough for about the last year. I think as soon as there was anticipation about the upcoming election and the impact that that could have on tariffs,

and also on the IRA, it has really put things into a bit of a state of suspended animation. You know, right now, I was at a show a couple weeks ago, the Solar and Wind Show, and we're talking with various developers. And you're hearing that. Right now, it's effectively, the market is waiting to see what happens once we get through reconciliation. I think people are thinking that could be as late as Q3, Q4 of this year. They're waiting for tariffs to stabilize. And effectively, what's happening now is you're seeing a bit of a push from off takers to try and push more of the tariff risk onto developers and developers trying to push it more onto, you know, guys like us, like the integrators and the cell suppliers. And the challenge is that the risk is just

far too high for anybody to take on. And that's why you see the delays. But regardless, you do have a number of utilities that need. to build out, they're really going to hit a point where they're not going to have much of a choice. And so then what you'll see is anything around tariffs or IRA incentives getting cut will likely get passed on to the ratepayers. That's my best guess from what I'm seeing. One thing that we have learned over the decades is that the renewables industry and now the battery storage industry, the energy storage development sector, is very resilient. This has been an industry that has been characterized by stops and starts and policies, really extreme volatility.

What does that tell you about the industry's ability to get through this really uncertain moment? And what kind of policy consistency would you like to see? Well, I think resilience is the key word. It's a word I use all the time, you know, going back to when I first started in solar. It almost, to be honest, it almost doesn't matter what the clarity is. If it's higher tariffs than we currently have, if it's a reduction, the IRA incentives, this industry will figure out a way to work with it. They'll come up with a balance of kind of cost sharing and other mitigating actions to help keep things rolling forward. What's hard

is when you don't know if things are going to change. And then when it comes to the IRA, whatever you're going to have around domestic content incentives, whatever you're going to have around the tax credits and the incentives that drive that, let's just get them stabilized. And we'll whirl forward from there. It is an industry that knows how to deal with this. What we're doing is important, and it's not just important anymore from an ecological perspective. It still is, but it's not just that anymore. It's really, how do we create the right energy portfolio in the U.S. to help us be successful? Storage in particular is a critical part of that. Okay, so in 18 months, a leading integrator like Powan is going from 100 to 300 megawatt hour projects now to 500 megawatt

hour projects. If we look out in the coming years, what do you think the typical utility scale battery storage project is going to look like in terms of size, duration, use case? Yeah, I think you're going to see them continue to grow in size. You know, I would expect, if we would even talk two years from now, I think two gigawatt hours will probably be the size of projects that will be more the median than even the maybe 800 megawatt hour that you have today. LFP will, I think, remain dominant in that time frame just because you're going to see the cost curves continue to drive down. What you are going to see, though, I think more is more of a push toward long duration. You know, in some ways, LFPs can, there's a crossover point where LFPs are probably not going to be as cost effective as other technologies.

I think that'll get extended because you'll see, you know, margins start to drop in a way that people will keep pushing just to try and keep taking advantage. of factories that have been created. But you will start to see more eight-hour, 12-hour type applications emerging. And I think as that happens, you'll see other technologies kick into gear that will enable that better than LFP. I think where that sits right now,

it's a bit tough to say. The other one I would talk about is sodium. You know, sodium is it has the promise of being very, very safe, you know, and that you don't have a lot of the same issues that you do with lithium ion batteries. I think it remains to be seen if it'll ever hit the cost points that will allow it to be adopted. And I think as well, the other challenge you have with sodium is that the safety around LFPs just continues to get better and better.

So as that becomes less of an issue, I think sodium has a little bit of a steeper hill to climb there. But it's something we still track. We still think there's a lot of promise. And depending on the application, we think it's something. that will have some potential out there. The last piece I would just throw in is I think you're going to see a heightened sensitivity around cybersecurity. It's something we're putting a lot of juice into as a company.

We do have systems that have electronics and computing and communications that reach into the grid. So it does create access points for bad actors. Our utility customers talk about the thousands and thousands of intrusions and attempts they have at the grid to try and shut pieces of it down, I think that's something that's going to be a significant push, especially when you look two to three years from now in storage. So we could see 75 gigawatts or more deployed in the U.S.,

battery storage deployed in the U.S. through 2028. If you look at what could happen between now and then, what are you worried about and what do you think is going to accelerate the industry? You know, we talked about the resilience before. I think in the industry, I think you always have to expect that every probably five or six years, you have two really bad years. And it usually goes back to something around, well, with the exception of COVID, usually goes back to something around policy.

So I would say of everything, you know, the things that keep you awake at nights are the things that you have a hard time controlling. So I would say policy continues to be just the challenge. And how do you make yourself as nimble as you can to handle? you know, like changes in the IRA or changes in tariffs or in domestic content policies, supply chains, you know, if we do have a shutdown coming out of China, are we able to pivot to other supply chains to keep things rolling? That, I think, is the only thing that's going to stay in the way of storage getting adopted. And I think the numbers that, you know, we've been citing, I think those are conservative.

I think they factor in a lot of these artificial barriers that could come up. Remove those, and I think storage will be pervasive. Jeff Water, CEO of Powan. What a great tour of the utility scale battery storage industry. Thank you so much. Well, thank you, Stephen. I really appreciate the time. This episode was produced in partnership with Powan. Powan is pushing the frontiers of energy storage. To learn more about Powell's integrated energy storage systems,

and to read case studies of how the company is executing projects, go to powen.com.