Request for spinout; Stored Energy at Sea

Grid backstops, synergistic partnerships, and having the balls to take action

StEnSea

It’s often difficult, when writing about climate tech, to resist making a number of impressively (ed. Is this the right word?) inappropriate jokes. This is especially true when writing about a technology, as we are today, that can be accurately described as “drop huge balls in the ocean.” Yes, it’s a hard job, and especially when one is a grown man with a sense of humor befitting a hyperactive teenager. We digress. Sea balls!

It’s genuinely cool technology, with a combination of simplicity and scalability that we find appealing in any discussion of grid backstops, and properly known as Stored Energy At Sea. The link will take you to a very good and accessible summary, but in short; Hollow concrete spheres are placed on the ocean floor at considerable depth where, in the way of things dropped into the ocean, they fill with water. Attached to the sphere is transmission cabling, and the shell is built around a simple apparatus consisting of inflow and outflow piping, a pump, and a turbine generator. In times of grid abundance, excess energy is used to pump water out of the sphere, thus charging the battery. During high grid demand, a valve is opened and water allowed to flow into the sphere. This motion turns a turbine and generates electricity.

All hydroelectric batteries tend toward similar themes. Water is pumped somewhere, generally through the use of intermittent renewable energy, then allowed to flow back to its starting place as needed via differentials in pressure or gravity. The practical differences and viability of driving market adoption often come down to ease of installation, capacity / scalability, maintenance, and environmental impact. StEnSea scores favorably on 3 of the 4. It’s more difficult to install a sphere farm on the ocean floor than to do the same with a pumping system on existing and geographically proximate reservoirs, and early modeling suggests that the round-trip efficiency is slightly lower. But, the simplicity of StEnSea systems allow for very long lives (an estimated 20 years for the pump, and about 60 for the shells), the scalability is vast (more on this shortly), and the environmental impact is likely lower. These are good things.

Here’s a good-if-dry breakdown on the economics of the systems at scale. While our usual caveat that no plan survives contact with the enemy holds true (ie, this is projection based on a small pilot project), it’s overall impressive stuff.

Public / Private

Our longtime readers may be wondering what the catch is, exactly. StEnSea is good tech with solid economics, and beginning to scale ahead of a larger 2026 pilot with the state government of California. This part brings us no joy to write. In researching this piece, we were surprised to find that the first paper proposing StEnSea was published as far back as 2011, out of the German Fraunhofer Institute. If you’re unfamiliar with this institution, it’s a part of the larger network of the Fraunhofer Society, a publicly owned set of research-and-spinout laboratories across Germany, which have teams working on more or less every area of applied science ever invented.

Let’s be very clear. The Fraunhofer Society is a wonderful force for good in the world, responsible for an immense amount of scientific progress, and has a shockingly successful track record of bringing their spinout companies, of which there are many, to commercial viability. But. Doesn’t 15 years seem a little slow to take this from ideation to pilot, given our global *vaguely waves hand* all of it? History and incentives create behaviour. If StEnSea is a viable grid backstop, especially in water-surrounded countries that can’t interconnect to larger grids, don’t we need to scale it as quickly as possible?

As deeply as we admire the Society and as sterling as their track record is, their spinouts generally don’t scale past $50m or so in revenue. This is not a bad thing! Germany receives a strong return on their investments, great technology is brought into the world, and everybody wins. We’d simply love to see the recognition that, at times, there are different approaches needed.

What might that look like in this case? Initial modeling of StEnSea suggests that sphere farms can generate free cash flow net of all expenses quickly after groundbreaking (seabreaking?), with all upfront capital returned to investors in 7 or so years. The materials are common, the parts modular, and the machinery straightforward. We’ve written many times that climate tech suffers from a lack of integrated partnerships, recognition of synergies, and creative go-to-market strategies. Consider the following.

1. Fraunhofer spins out StEnSea immediately into a separate enterprise, while retaining majority equity ownership and board control. The remainder of the cap table is filled by European and American utilities, and the venture arms of large steel and concrete companies.

2. The folks from steel and concrete provide their products at cost in exchange for profit sharing, and further commit to using the best-available green technologies, continuously updated, for their material inputs.

3. The utilities serve as pilot customers, with order responding roughly to the size of their capital investments. The board and leadership can, of course, veto sites depending on scientific feasibility.

4. The company aims to raise $50m in seed capital, to fund operations for 3 years, and the installation of three proof-of-concept sites.

5. Repeat and scale until the pilot contracts convert to multi-year enterprise agreements. Prep for the IPO.

Could it work? Hopefully, yes. The GTM is tricky. Utilities are the worst, the very worst customers to sell to as a startup. There is a significant danger of engaging first with their innovations / labs teams, where startups are typically funneled, and getting stuck in permanent pilots with buyers who don’t have the internal scratch to sign a real deal. Doing partnerships with steel and concrete pre-product is similarly tricky. Hiring the right early team is critical.

But goodness, stand up 3 sites in 3 years and the company will be iconic. There is a lot of money to be made, at very healthy margins, and we see utilities sprinting to embrace a solution that allows them to build true grid resilience, and by installing equipment on not-land. Have you seen real estate prices these days?

Dear Fraunhofer - You have a potential winner here. Let it run.

In Other News

• Company we like; Exterra, which just raised a $20m Series A. The company takes asbestos tailings, a common byproduct of mining, and applies chemical processes to turn it into sellable industrial materials. Asbestos tailings are, unsurprisingly, really nasty shit, and the mining sector needs a lot of help. Canadian clean-tech continues to rock.

• The NOAA is slashing overnight staffing in a number of climate-vulnerable districts, including our old stomping grounds in the high desert of the PNW. This means that more people will be caught in fires, floods, and tornadoes that crop up overnight near their homes. It’s not great. We’re fascinated by the model of IqAir, a maker of HEPA filters for the home, which also uses their devices as community-reporting sensors for air quality. We wonder if a similar model could work against other climate phenomena, with consumers paying a nominal fee to host a sensor on their property, and for access to alerts and data.

• Officials in Spain are starting to narrow down the initial point of failure on the grid during the recent and massive blackout, with signs pointing to a substation in Grenada. There is still little certainty as to the cause, despite the rantings on twitter against renewable energy from the predictable right-wing nutcase brigade. If nothing else, we hope the incident helps build willingness to keep nuclear power plants longer than their current phase out-deadline of 2035 in Spain.

• Request for startup; AI for weather prediction. Mostly because we want to see a climate company raise an AI round, and we think this is the most likely candidate. It’s also an enormously complex problem-set that someone badly needs to tackle, especially given the US government deciding to forcibly shit the bed.

• Trend we hate; The intersection of crypto and climate. Here’s a live example. We read that page 4 times so that you don’t have to, and still can’t tell what the pyramid scheme company is pretending to offer. Stop trying to make fetch happen, grifters.

• Company we’re intrigued by; Riverse, which just raised a seed round to scale up a science-based standard for carbon credit verification, and has an impressive set of backers and seeming commitment to transparency. Ok, maybe not intrigued so much as cautiously optimistic. Yes, we still mostly hate the VCM, but have come to accept that it will continue to exist. And so, let’s encourage companies who are working to get it right.

• Funding round of the week; Xoople, which pulled in $115m (!) from a variety of backers, chief among them the government of Spain. While we’re not sold on the name, which sounds like a rejected candy from Willy Wonka’s nightmares, the company is fascinating. It appears to be Palantir-for-Earth-intelligence, and is coming out of the gate partnering with Microsoft, Databricks, and a number of other heavy hitters in cloud infra, data, AI, and more. Bravo, Spain. We’ll be watching this one closely.

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