From the market and key industry players’ analysis above, there are two key takeaways: (1) many well-resourced companies are currently entering all segments of the market with battery products and (2) competition is currently based on the greatest amount of energy storage that can be provided for the lowest cost. Eventually, companies will be able to provide a large enough amount of energy at a low enough cost that competition will shift to services that the batteries provide.52
Due to this ongoing commoditization of the actual battery product, Energy Max will develop energy services software focusing on battery energy storage in order to provide value-added services on top of smart batteries.
The below sections detail how Energy Max plans to make this happen.
Management Team, Culture, and Organizational Structure
Energy Max will be co-founded by two former coworkers, Daniel Robinson serving as CEO and Volodymyr Petrushkevych will serve as CTO. The two of them gained extensive
experience in building large scale software systems capable of collecting and analyzing large amounts of data while working together at Recyclebank, a Kleiner Perkins VC backed startup in the recycling industry. Mr. Robinson served as a senior product manager there until
leaving to receive a master’s degree in international business from National Chengchi University in Taiwan. Mr. Petrushkevych served as vice president of software engineering while at Recyclebank for four and a half years and received his master’s degree in computer science and applied mathematics from National University Ivan Franko in L’viv, Ukraine.
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The company leadership team will strive to maintain a flat organization structure, with a maximum of three organizational levels while growing. This will promote a collective feeling in terms of decision making and will allow executive leadership to learn directly from team members who are closer to the bottom of the organization. The open flow of communication throughout the organization should create an environment of trust, integrity, and desire to help one another. Both co-founders also believe in the “lean methodology” of company building with a focus on meeting customer needs and being slow to hire new employees unless absolutely necessary. The team at launch will be the CEO, CTO, in-house developers, and outsourced developers. More details are given below.
Figure 7: Organizational Chart
An important part of Energy Max’s philosophy will be believing in the benefits of a distributed team. Not only will the staffing strategy involve utilizing offshore software
developers for some of the company’s software engineering needs, but Energy Max will have no office space in the first 5 years of operation. Instead they will use co-working spaces and encourage employees to do the same. Each employee will receive $300/month on top of their salary to either use towards shared office space where they live or to keep as a salary bonus.
The company will also hire based on skill and not limit hiring criteria based on geography.
While working together at Recyclebank, the two co-founders learned first-hand the
advantages of software outsourcing and traveled to Ukraine together twice. They plan to use MalkosUA for these services, and both co-founders are very familiar with the working environment of this company already. Two key hires will be a leader of data & analytics as well as a dedicated sales person. A staffing plan and expenses are below.
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Table 7: Hiring plan first 5 years
Table 8: Salary structure first 5 years
Value Propositions and Product Overview
As stated above, Energy Max will make software for the energy storage market. The product will first be tailored to the residential and commercial segments, but a utility scale software solution will also be developed quickly.
Data intelligence will be extremely important to the success of the product. Using machine learning algorithms and many datasets, the goal of the software will be to enhance the existing services for battery energy storage across the value chain. With advanced software and updated data, Energy Max will be able to:
1. Identify market opportunities and improve distribution and sales processes.
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Energy Max will maintain a database of what will be called “condition data.” This is data such as electricity rate designs and government incentives for a specific area, as well as weather patterns. This information can be combined with “variable data” such as battery storage system costs, system attributes (battery chemistry, system size, etc), and likely energy usage pattern to determine the right types of customers to target if you are a manufacturer or distributor. It can also be used to determine the right type of battery storage size to install. This data can be analyzed and then financial
information such as net present value and pay-back period can easily be calculated and shown to potential customers.
2. Using machine-learning and a cloud based platform to constantly enhance installed systems.
Most smart battery systems today have a type of controller with software installed that allows the battery to power a home during hours of peak demand and lower demand costs. Very few systems have advanced automation that will learn the energy patterns of the customer who has installed the battery and combine it with weather
expectations. This will allow the battery system to predict how much energy will be needed the next day. With this predictive knowledge system, the software can analyze how and when to charge/discharge the battery in the most profitable way for the end user.
Furthermore, electricity rate structures are regularly changing. By allowing the battery system to communicate with the cloud in near real-time these can be adjusted and tweaked.
3. Extending battery life
This can be done by knowing the battery chemistry (not limited it to Li-ion) and by continuously monitoring the depth of charge, charging voltage, number of charging cycles, battery temperature, and other attributes. Having this data continuously
updated on a cloud platform will allow potential problems to be preemptively handled and increase the useful life of the battery. This allows manufacturers to ensure they are meeting all warranty obligations.
4. Create a network of battery customers
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Energy Max’s software will be a cloud-based system that is capable of knowing current and predicted future conditions of all batteries on its network. By creating a network, these distributed batteries can act as a single resource in helping utility companies decrease load in times of high demand or take the place of a “peaker plant”
when more energy is needed very quickly onto the grid. A large enough aggregated set of batteries acts as a “virtual power plant.” Battery systems would also be able to share power between each other, however there would be fees and certain limitations associated with transferring energy depending on local regulations.
5. Ability to attract 3rd party financing
The in-depth data that would be tracked as part of the Energy Max system allows for a much more detailed and accessible view into energy savings attributed to a storage system. By having more granularity and certainty in the data, it opens up the
possibility for 3rd party financiers to help deploy these batteries with unique payment plans. For example, a financier could pay for a fleet of batteries to be deployed at no upfront cost to the person who owns the location where the batteries would be installed. Then, the site owner and financier could share the cost savings generated from storage system. This is only possible with data that can be trusted.
In order to deliver these value propositions to customers, Energy Max will develop a cloud-based software program. This program will communicate with the control systems that come standard on most battery energy storage systems today. The battery’s control system will connect to the cloud and send usage data to Energy Max’s platform. Energy Max will take in additional data such as weather patterns of the battery’s location, past charging/discharging characteristics of the installation location, and the electricity rates of the utility connected to the battery in order to provide an energy management analysis of the battery. Energy Max will then send back information from the cloud to the battery system providing it with an intelligent schedule to charge and discharge next. This communication should happen in intervals no longer than 15 seconds.
Target Customers
Some of the companies offering a similar type of intelligent software product (discussed below) are targeting end users of battery storage systems. The initial target customers for
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Energy Max will be battery systems manufacturers looking to differentiate their storage products, move into new parts of the energy storage value chain, and expand to new markets.
Building on the management team’s connections in the Asia-Pacific region, the density of manufacturing in the area, and lower competition among software providers, the target customers will be Asia-based companies.
Battery systems manufacturers that have indicated they are moving in a vertically integrated direction or already have a relationship in some form with end users represent strong first customers. There is already evidence that manufacturers are moving in this direction.
GoodWe, a Chinese solar inverter manufacturer, announced in June 2016 that they would begin providing a smart energy management system focused on utility scale systems.53 Another U.S. based software provider called 1Energy was acquired in July 2016 by Korean firm Doosan Group, a power generation and equipment provider.54 Two manufacturers, Samsung SDI and Dynapower, have joined forces to create an integrated battery storage product and have said “the integrated system is meant to flatten the supply chain” in order to make a more complete product for partners that deliver the product to end-users.55 Below is a target list of potential first customers.
Company Name Headquarters 2015 Revenue USD (approx.)
Key Insights
CatlBattery Ningde, Fujian $290 million Operates 2 energy storage pilot projects in Taiwan. Is China’s 2nd largest battery
Guoxuan Nantong, CN $230 million Has set up an R&D alliance with a wind power equipment maker to explore application of storage + renewables.
Coslight Haerbin, CN $108 million Has a strong presence in India,
including manufacturing.
Suzhou GCL Integrated Storage Technology Co
Hong Kong N/A subsidiary of large co. ($1 billion+)
The parent company lists “Gain full access to solar system integration business” as a key research and development item.
Trina Energy Storage Changzhou, CN N/A subsidiary of solar company
TrinaSolar (parent company) is a very consumer focused manufacturer.
Narada Hangzhou, CN $735 million Their R&D lists cloud-based energy management system as project in progress, and they claim to be “only manufacturer in China that can provide full energy storage system
solutions.”56
Amita Technologies Taoyuan, TW N/A Markets itself as green battery provider.
Simplo Technologies Hsinchu, TW $1 billion+ Provides batteries with firmware software for laptops and is looking to expand product offering.
Table 9: Summary energy system manufacturers and potential customers
Sales and Marketing Strategy
In order to reach these customers, Energy Max will need to rely on business development, networking, and a traditional sales process.
Seed Phase
Most potential customers will want a vendor to have previous projects completed in order to demonstrate a proven history of the product and company. In this early stage of the company there is a large need to rely on existing connections. Therefore, Energy Max will search out smaller scale projects in New York City and Taiwan. In September 2016 New York City became the first city government in the U.S. to set an energy storage target goal. The city is aiming to have 100 MW of storage installed by 2020, and is doing so by easing the permitting
process and local tax policies.57 One of the first installations is set to be complete in January 2017 with 300 kW of batteries from LG Chem and an energy management system from Demand Energy at low income housing complex.58 Due to this support of the energy storage market, and more importantly the management team’s working experience in New York City within the sustainability industry, it makes sense to begin looking in the city for pilot projects in order to build the company’s project portfolio. Although Taiwan’s market is not mature enough for high demand of energy storage yet, in November 2016 they opened a green technology park in Tainan for emerging green technologies. The country also has many manufacturers of Li-ion batteries. This could also be a good opportunity to build on the CEO’s connections in Taiwan to build a proving ground for Energy Max.
Growth Phase
After the technology is able to be successfully demonstrated through initial pilot projects, it will need to aggressively shift to attracting customers. The product will be sold
predominantly through a traditional sales cycle of developing and cultivating leads, meeting with potential clients and presenting proposals, and agreeing to terms. This will be done by cultivating personal networks and attending industry events. Even in the growth stages of the company, there will not be a large need for a huge marketing effort and resources dedicated to building a brand. Company representatives will need to attend industry trade shows and will also engage in content marketing in order to build awareness. Initially, Energy Max will target trade shows below:
Location Name and Description Expected Next
Date
Sydney, AT AUSTRALIAN ENERGY STORAGE
CONFERENCE & EXHIBITION
Exhibition & conference dedicated energy storage.
Australian Energy Storage Conference & Exhibition focuses on energy storage industry at all levels – for utilities, energy businesses, building management and the emerging electric vehicle markets
June 7-8, 2017
Shenzhen, CN CIBF - CHINA INTERNATIONAL BATTERY FAIR
International Battery Trade Fair. CIBF is the the preferred meeting venue for battery manufacturers and users to exchange ideas on new technology, expand their markets and promote their products and services to customers in the worldwide marketplace
Guangzhou, CN CHINA (GUANGZHOU) INTERNATIONAL CHARGING EQUIPMENT AND BATTERY EXHIBITION
International Charging Equipment and Battery Exhibition in China
Nov. 18-22, 2017
Tokyo, JP WORLD SMART ENERGY WEEK - TOKYO
The world’s largest-scale international B-to-B exhibition & conference covering a wide range of cutting-edge products & technologies from diverse energy industries
Mar. 1-3, 2017
Taipei, TW TIGIS - TAIWAN INTERNATIONAL GREEN INDUSTRY SHOW
Taiwan International Green Industry Show. The latest
“Green Tech” products ranging from wind power, fuel cell, LED lighting, electrical vehicles, recycling, anti-pollution, green building materials, to water treatment and deep ocean water applications
Oct. 11-13, 2017
Table 10: Popular Asian based energy storage and renewable energy conferences
Marketing messaging will emphasize the ability of Energy Max’s product to distill an immense amount of data, smartly analyze the data, and output control signals that add value to a battery system. Marketing should convey to manufacturers that the batteries they will sell with Energy Max’s software will have greater value and be more plug-and-play for their distributors. This will allow distributors to focus on marketing and acquiring end-users as opposed to the details of a technical installation. The marketing should also emphasize the robustness of the software - it will have no downtime and will have security features to prevent any type of hacking.
Pricing
Selling software to manufacturers that will be used by end-users of the product is
complicated. Traditional software-as-a-service (SAAS) offerings would charge a licensing fee with a recurring periodic payment either monthly or annually. Building software is an ongoing process with constant updates and tweaks needed to ensure it stays up to date and
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vendors for supplying software to that product. The SAAS model does not work in this situation.
However, batteries are sold with a warranty. This can vary by manufacturer, but most warranties will cover a battery for a specific number of years and/or charge cycles. For example, Tesla’s battery pack has a warranty for 10 years and Sonnen’s pack includes a warranty for 10 years or 10,000 charge cycles - whichever comes first.
Energy Max’s software product will be sold in terms that its customers can relate to. This means the software will be sold for a one-time fee per unit and match the terms of the battery warranty. After the expiration of the warranty, the software for the battery will discontinue to be updated and supported. The price will need to ensure costs are covered for the entire duration. There will also be an integration fee that will cover initial setup costs and testing.
As with many B2B businesses the exact price will be left to negotiation during contracting, however for strategic planning a customer-aggregated target price should be considered. It’s estimated that integration with a customer could take an average of 6 months. This includes technical testing, process integration, and any personnel training that needs to occur. There will be a $350,000 price for the integration process.
There is a wide range of technology costs for batteries, and these amounts vary by type of chemistry used. Costs are also very closely held trade secrets for battery manufacturers.
However, for lithium-ion the system price to end users can be estimated around $500/kWh. A 2014 report by NREL investigated the manufacturing costs and markup prices for Li-ion manufacturers in various geographies and is listed below. In 2014 (costs have declined since then) a China Tier 1 manufacturer was selling their batteries for $349/kWh and
manufacturing them for $217/kWh. From this information, the starting price point for Energy Max’s software will be $15/kWh, 11% of their 2014 markup. Therefore, using Tesla’s
Powerwall product as an example, the 13.5kWh pack which sells for $5,500 would incur
$202.50 of revenue to Energy Max.
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Figure 8: 2014 manufacturing costs and selling price for Li-ion battery manufacturers Source: National Renewable Energy Lab, http://www.nrel.gov/docs/fy16osti/66086.pdf
Given the market size, sales expectations, and price points the below are revenue expectations. These are discussed further in the Financial Projections section.
Table 11: Revenue expectations and pricing structure
Competitive Analysis
Below are the dominant competitors in the battery storage software space. With the exception of Geli and Viridity, other companies have backgrounds in the utility-scale storage segment and will be entering commercial and residential segments soon. Energy Max’s strategy attempts to be one of the first companies to start making software focused on the commercial segment. Furthermore, very few competitors are focused on the Asia-Pacific region. Energy Max will leverage the management team’s experience in Asia to develop partnerships before other competitors expand further.
Existing Manufacturer Distributors
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Almost all existing energy storage system manufacturers have existing distributors. These distributors integrate a software system of their own that controls the battery. The software is normally very poor in quality compared to Energy Max’s proposed solution. It is developed for the local market(s) the distributor is active in, but does not go outside of that.
Manufacturers rely on them to ensure batteries are aware of local demand charge
management structures and that the data gets updated whenever these rate designs change.
However, practically all distributors do not have advanced systems that are able to analyze large amounts of data and intelligently charge/discharge the battery. Most distributors do not
However, practically all distributors do not have advanced systems that are able to analyze large amounts of data and intelligently charge/discharge the battery. Most distributors do not