The Climate Torch: CEO Interview with Joe Mastrangelo of EOS Energy Storage
Led by CEO Joe Mastrangelo, EOS Energy Storage produces modular battery storage systems using the company’s proprietary battery chemistry, in an effort to reduce battery cost and cut grid scale carbon emissions.
What does EOS Energy do, and what makes the company unique?
We are a stationary energy storage company. We do not work within the mobility space. We work with systems at both ends of the scale spectrum and everywhere in between. We have projects in indoor urban storage and also have projects at utility scale. From a product perspective, we are unique in our chemistry -- zinc hybrid cathode -- which sources abundant and non-toxic chemicals, ultimately leading to greater sustainability in terms of end-of-life recycling and the mitigation of safety and flammability concerns. We view these benefits as being quite distinct from lithium-ion batteries.
Can you talk about the specific use cases of the batteries themselves?
Our batteries were designed from the start to be coupled with solar generation, leading to a larger duration discharge application. Our product can discharge for anywhere between 3 to 12 hours. In this way, we offer a lot of use case flexibility that differentiates us from our competitors, but more importantly provides value for our customers.
Your product offers true scale. From one article I read, you had a project near 1 GWh of capacity. Can you talk a little more about that?
We have one large project in California and another in Texas. We are going to build those projects out and are in the process of finalizing permitting and offtake agreements to get these projects deployed in late 2021 or early 2022. We are also in the process of scaling our manufacturing capacity. We are not a venture capital, “prove your technology” startup, but we are also not at scale yet. We are in the process of making that jump.
Your approach seems to be first, to sell your products, and then to build them in a capital efficient approach. This is in contrast to many cleantech startups in the past. Is that a fair description?
The whole company is meant to be modular, including the factory. We can build a 1GWh factory for as little as $25 million. And as we grow, our plan is to build out the factory in 250 MWh increments, with a manufacturing capacity of 1.5 GWh in 2022.
How do you get project financiers comfortable with your technology?
We have ten years of operating experience with the technology. Our research and development facility in Edison, New Jersey is one of the largest battery testing facilities in North America. On the manufacturing side, we are in a joint venture with a company called Holtec International, so when we talk to customers about the warranty on the product, they see an established partner that works in the nuclear space, which makes them feel comfortable with what we are offering. The more interesting dynamic is the longer term (15-20 year) performance of the product. Part of the motivation for going public through the SPAC route was to over-capitalize the business to be able to self-insure our product and have the balance sheet to facilitate 15-year commercial agreements with our partners.
How about your own personal back story and how you came to this role?
I spent 25 years with GE, with the majority of that time being in energy or energy adjacent roles. I was in oil and gas, power generation, electrical systems, ship propulsion, and renewables. When I left GE, I knew that I had energy industry expertise, and I wanted to make a bet on myself in a new sector. I started talking to the Board at EOS and quickly began to realize the scale of the market opportunity in the energy storage industry. I spent a year with the company as a Board advisor because not having a background in chemistry I wanted time to validated the core technology. After we were able to exceed expectations on the validation front, I felt comfortable joining the company as CEO. I am really happy to be in the position I am in and where we can take the company in the future.
How do you all measure or communicate the climate and social impact that you are having, and to what degree is that a motivation, outside of financial returns, for your investors?
The amount of energy discharged back onto the grid is the metric by which we measure our impact. Moreover, compared to other forms of storage, when we operate one of our energy storage systems, we don’t need ancillary support from HVAC systems, so we are able to provide a very carbon-light approach to energy storage. At the end of the day, our mission is to decarbonize the energy value chain, so this climate mission is central to every aspect of our day-to-day operations as a company.
Another aspect of your climate impact seems to be the maximization of renewable resources by capturing energy that would be otherwise curtailed. Is that another benefit of your work?
In fact, that is the use case that the company was founded on, and from there we have looked to develop microgrid and commercial industrial applications beyond that.
How would you characterize the balance in motivation of your investors, between financial and ESG (Environment, Social, Governance) goals?
It is a mix. The investors that we had prior to going public consisted of some strictly financial investors while others had made careers in the clean energy space, such as Jim Hughes of First Solar. Other investors were interested in the ESG principles at play within our company.
What do you hope the company looks like in 10 years?
A lot changes in ten years. Looking back ten years ago, it's almost hard to imagine the energy picture today. We have an opportunity to fulfill a very real and growing market demand in the energy storage sector, but we are also very aware of the constant need for evolution as market dynamics change. So more than anything else, I hope that we are still relevant and at the cutting edge ten years from now.
We have not said too much about the obvious headline about your recent SPAC merger. Do you have anything to mention regarding this, or any advice for other entrepreneurs looking to raise money in this environment?
We were in the midst of raising a series E venture funding round when we were approached by B. Riley Merger Corp., and we immediately felt that we had a good fit. When we compared the alternatives -- raising a series E or going public through the SPAC -- it became clear that, in terms of capital provision and consequent leverage to operate the company in a strategic manner, the SPAC process made a lot of sense. The result was $130M in net proceeds to help us grow. However, it was really the fact that we felt we had found the right fit in our sponsor that made us comfortable to pursue this option.
In terms of advice, for companies in a similar position where you have a technology that works and are looking to make the jump to scaling operations, I’d continue to emphasize the importance of fit with your financial partner. Beyond fit, it is certainly important to have a long term strategy that guides where the company is moving once the financing constraint has been removed. Additionally, it is important to not underestimate the process of going public and the work that it requires. Personally, one of the benefits in becoming the CEO at EOS was the ability to operate the company in a non-public manner after my time at GE, but now I am back into it again (chuckling).
We both know that entrepreneurship is hard, despite its upsides and potential for big impacts. Can you talk about a setback you have had at some point with your time at EOS?
I think the transition from GE to EOS was certainly a learning process. One of the primary lessons that I learned was how scarcity can drive better decision making and execution. Sometimes when you are working on new technologies, I think it is enticing to try to make the quantum leap, but it is important to remain focused on the end goal and drive simplicity in the intervening steps. In our case, we reduced the complexity of our mechanical and conversion technology to really emphasize our core electrolyte technology. With this focus we were able to improve efficiency by 10% and double the output of the battery. It is also important to remain focused on field application and customer needs because lab processes and testing procedures often diverge from these use cases.
Do you have a book you would recommend?
The best book I read in the last couple of years was the Da Vinci biography by Walter Isaacson. I think this book really demonstrates that life is much less about your background or where you started than it is about creativity, curiosity, and solving problems.
Do you have a quote that keeps you driven?
“Better never stops” is a quote by Sir Clyde Woodward who was an English rugby coach that won the World Cup. Woodward was always looking for ways to get better and thought that the rugby world could learn from other sports and domains such as the business world. I try to maintain this mindset and always like keeping this one in front of me.
How about a podcast that you would recommend?
I love a podcast called Business Wars by David Brown that dives into the decision-making processes at critical junctures in the life of various businesses that most of us have heard of. I have always been interested in how these decisions, that have a decade plus of implications, are made in the moment and how they look in retrospect. I think you have to find the humility to make contrarian decisions while remaining curious and striving to be better.
Is there a final motto or piece of advice that you would offer to other climate entrepreneurs or financiers?
I think this is the most exciting time that I can remember in my professional career, in terms of the change that is happening in the clean energy world. I think it is important that we all stay committed to the course and keep the value chain in focus, understanding that a mix of technologies is the only way to reach our climate targets that obviously have very significant implications for future generations.
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THE TORCH is an interview series from Entrepreneurs for Impact. We profile CEOs and investors mitigating climate change. Our goal is to highlight their work and inspire others. As we deal with multiple crisis, from Covid and racial injustice to climate change and economic recession, we need some of this positive light in what seem like dark times. Onward and upward.