Why electrifying industrial heat is such a big deal

A full quarter of global energy use goes toward heat that powers
industrial processes. To provide clean industrial heat but avoid
the variability often associated with renewable energy, a company
called Rondo makes a thermal battery, storing renewable-energy
heat in bricks. In this episode, Rondo CEO John O’Donnell talks
about this breakthrough technology and the opportunities that
thermal storage promises to open.


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transcript)


(Active
transcript)


Text transcript:


David Roberts


Electricity gets the bulk of the attention in clean-energy
discourse (this newsletter is, after all, called Volts) but half
of global final energy consumption comes in the form not of
electricity, but of heat. When it comes to reaching net zero
emissions, heat is half the problem.


Roughly half of heat is used for space and water heating, which I
have covered on other pods. The other half — a quarter of all
energy humans use — is found in high-temperature industrial
processes, everything from manufacturing dog food to making steel
or cement.


The vast bulk of industrial heat today is provided by fossil
fuels, usually natural gas or specialized forms of coal.
Conventional wisdom has had it that these sectors are “difficult
to decarbonize” because alternatives are either more expensive or
nowhere to be found. Indeed, when I covered an exhaustive report
on industrial heat back in 2019, the conclusion was that the
cheapest decarbonization option was probably CCS, capturing
carbon post-combustion and burying it.


A lot has changed in the last few years. Most notably, renewable
energy has gotten extremely cheap, which makes it an attractive
source of heat. However, it is variable, while industrial
processes cannot afford to start and stop. Enter the thermal
battery, a way to store clean electricity as heat until it is
needed.


A new class of battery — “rocks in a box” — stores renewable
energy as heat in a variety of different materials from sand to
graphite, delivering a steady supply to various end uses. One of
the more promising companies in this area is Rondo, which makes a
battery that stores heat in bricks.


I talked with Rondo CEO John O'Donnell about the importance of
heat in the clean-energy discussion, the technological changes
that have made thermal storage viable, and the enormous future
opportunities for clean heat and a renewables-based grid to grow
together.


All right, John O'Donnell of Rondo. Welcome to Volts. Thank you
for coming.


John O'Donnell


Thank you. It's a great pleasure.


David Roberts


I am so excited to talk to you. I've been geeking out about
thermal storage for over a year now, just wanting to do something
on it, and there's so much there. And I find that unlike a lot of
electricity topics which I cover, there's just not a lot of
baseline familiarity out there among, let's say, normal people.
So there's a ton to cover from the ground up. So I want to start
at the highest possible level, which is to say, let's just talk
about heat. Like in the clean energy world, electrical power gets
a lot of attention, a lot of discussion, a lot of technological
development.


Everybody's got their favorites, everybody knows what's going on.
But then there's also heat, which is the sort of weirdly ignored
not so much anymore, but up till pretty recently ignored. So
maybe just start with an explanation of why heat is important if
you care about clean energy, why you should care about heat?


John O'Donnell


Thank you. Sure. That's a great question. And that context you
just provided is, of course, dead on. There's a really simple
answer. Heat. Industrial heat is 26% of total world final energy
consumption. Whether you are making baby food, or fuel, or
cement, or steel, the manufacturing processes vastly
predominantly use energy in the form of heat, not electricity.
Globally, it's three quarters of all the energy used by industry
is in the form of heat. Again, whether you're pasteurizing milk
or melting steel. And the DOE has just created a new office
focused on this topic. We're thrilled about it.


Their assessment is that industrial heat is 11%, I think, of all
total US CO2 I'm in California. Here in California, we burn more
natural gas for industrial process heat than we do for electric
power generation. And to a first approximation, as you just
mentioned, no one knows that.


David Roberts


Right. So heat is a huge portion of final energy consumption.
It's a huge portion of global CO2 emissions. So maybe give a
sense of like, what percentage of total heat final consumption is
industry, like how's the total heat-pie divided up.


John O'Donnell


So when I said 26% of world — that's industrial heat, right. So
that's not buildings, that's not other heating sources.


David Roberts


Right. Heat is a bigger category than that.


John O'Donnell


I mean, if you take actually heat for buildings and heat for
industry, together they're like 60% of all the natural gas used
in Europe. But within industrial heat, people sort it out by a
couple of different things. One of them is the temperature.
There's a lot of heat in cooking processes. That's around 150°C
in the form of steam all the way up to the highest temperature
heat in making cement, that's around 1800°C. About 95% of total
heat is used in processes that need it below 1500°C, about maybe
half to two thirds of industrial heat is below about 400°C.


There's a fairly steep curve. About half of all industrial heat,
something like that, is delivered as steam.


David Roberts


Right. Steam is the lower end of the temperature spectrum. I
recall looking at these charts of sort of what industries use,
what levels of heat. Up at the super high heat, you have pretty
singular industries, like steel's up there and concrete's up
there. But down in the lower heat registers, where you're using
just steam, there's a bunch of little industries clustered up
there. Most of the industries are using that.


John O'Donnell


That's right. All of these have been things that people say are
hard to decarbonize because across many of these industries,
they're making commodities, whether it's steel or tomato paste
that are relatively low margin and for which the cost of heat is
a very significant portion of the total cost of production. So
this is a sector where all these processes use heat in somewhat
different ways. The cost of that energy is really critical to the
competitiveness of that industry and what commodities cost
consumers. And there have not been great solutions until recently
that could provide decarbonized heat at the same or lower cost.


David Roberts


So the situation is there's a huge chunk of our energy that goes
toward heat, a huge chunk of that goes toward industrial heat.
And there's been comparatively little work on finding zero carbon
versions of that heat. That's the problem we discussed the last
time we talked, probably three or four, five years ago.
Everything pre-pandemic is a haze. But I think it was around five
years ago I covered this big comprehensive report on industrial
heat options, like, what can we do about industrial heat? And it
went through the options, and basically the conclusion was that
continuing to do it with fossil fuels and just capturing the
emissions post combustion was the cheapest option for a lot of
these heat uses.


And I dutifully reported that. But I didn't like it. I didn't
like the idea that that's the best we can do is create these Rube
Goldberg machines where we're digging up carbon, burning it,
capturing the carbon, burying the carbon again, et cetera. I was
like, surely that's not the best we could do. But things have
changed a lot, since then. So maybe just run through what are the
low carbon heat alternatives and which ones have emerged
recently, and what has changed that has helped them emerge?


John O'Donnell


Yeah. Thank you. You said for a long time there hasn't been much
work on this. I would say partly there hasn't been so much
success on it. I've been working on for 15 years.


David Roberts


No offense, John.


John O'Donnell


And in two previous solar companies we wound — who are a lot of
the team here at Rondo worked with me there — we wound up
delivering more than half of all the solar industrial heat that's
running worldwide right now. But to say that's a drop in the
bucket is oversizing a drop you asked exactly the right question.
What are the options? Because the world has really changed.


There has always been the option of burning biomass, which is
more or less sustainable, but very high cost, high air pollution,
and very, very limited availability. Other kinds of biofuels,
like renewable natural gas, if we take it to a giant scale, it
might power as much as 1% of our industrial heat. And it's easy
to laugh about, but it's true. The thing that has profoundly
changed is what the wind and solar PV industries have
accomplished over the last 15 years. The 95% reduction in cost
means that intermittent electricity is becoming — has become —
the cheapest form of energy that humans have ever known.


And it's now cheaper than burning stuff as a source of heat, but
it's intermittent. So how do we take that intermittent
electricity and use it to deliver the continuous heat? I mean,
you turn on a smelter or a factory or even a tomato paste plant,
you run it for months or a year on end, it has to have continuous
heat or it will be damaged.


David Roberts


It's worth just pausing to emphasize this. The vast majority of
industrial processes are continuous. They cannot run
intermittently. They cannot stop and start with the sun and the
wind. It just would be wildly uneconomic.


John O'Donnell


That's a beautiful and concise way of saying it. Like there are
processes where if they get a half second interruption in their
energy supply, it takes a week to restart the process.
Reliability is a very big deal. So what are the tools we have for
that? Intermittent electricity, which is becoming plentiful. And
in places right now, you can have essentially unlimited amounts
briefly every day at prices far below fuel prices. We have
hydrogen, electrolytic hydrogen, make hydrogen, compress it,
store it, and then combust it. That works. Although electrolyzers
are today expensive, they're coming down in cost.


But the laws of physics bite you in that you get about one unit
of heat for every two units of electricity because of the
chemical steps involved.


David Roberts


Right. All the conversions.


John O'Donnell


Yes.


David Roberts


But can you just dump hydrogen into existing boilers and kilns?
Like, is existing equipment hydrogen ready, as they say?


John O'Donnell


Not exactly. It's hydrogen ready for a few percentage of
hydrogen. But when you look at a boiler, 95% of its lifetime cost
is the fuel, not the boiler. So upgrading boilers to run that
other fuel, that's something that you would do if the economics
of that fuel were sensible.


David Roberts


Got it.


John O'Donnell


Right? Now at taxpayer expense. We're creating a period where
hydrogen, electrolytic hydrogen is going to get down to the same
cost as fossil fuel in the US with tax credits. But again,
intermittent electricity by itself today is cheaper than fossil
fuel. Doesn't need tax credits to get it to that point. And now
there is this emerging class of electric thermal energy storage
systems that don't do chemistry. They just convert electricity to
heat directly and then store the heat. Because heat storage,
another thing you could do I skipped over is you could, of
course, store electricity in a battery.


Right.


Which would be the most expensive thing.


But if you have a coffee thermos on your desk, it's storing
energy as it happens. The energy stored in your coffee thermos is
more energy than the energy stored in your laptop battery, and
it's a bit cheaper than your laptop battery. Storing heat is
cheap right now in the thermos. What do you have? You have hot
water, which stores a lot of energy per degree, and an insulation
thing around it, depending on how good the insulation is, that'll
tell you how long that thing will store energy. All those things
have been around for a long time, and suddenly, okay, how are we
going to heat these things electrically?


How are we going to use simple technology? Because most people
who are working on electric thermal storage are doing simple
things. There are some exotic things using conductive materials,
liquid metal things, but there are simple things that people are
doing also.


David Roberts


You're hitting directly on something. That is why I love this
area so much, why it sort of kind of caught my imagination so
much. Like, you really have a situation here where electricity
was just more expensive than fossil fuels for these purposes up
until like five minutes ago.


John O'Donnell


Exactly.


David Roberts


In terms of looking for opportunities for just storing. Now that
electricity is cheap, we're looking for ways to store it and use
it as heat in a lot of ways for the first time. And what that
means is there's like, very simple low hanging fruit all over the
place. The way I think about it is, like, my generation maybe
like younger people than me, when we think of technology or
advanced technology, we generally think digital, and that
generally means opaque. Like, we don't know what's going on in
there. Even cars these days. Like, so little of it is mechanical
anymore and so much of it is digital and computerized.


It just seems opaque to us. And these technologies of storing
electricity as heat are so delightfully simple. Like, you're
literally just heating up a rock and that's, like, you might say
that heating up a rock is literally the oldest energy transfer
mechanism that humans have available to them. It's probably the
very first way we moved energy ever, literally. So it's just fun
to me in that it's almost like a childlike sense of discovery to
it. Anyway, that's just my that's completely off topic, but ...


John O'Donnell


One of the electric thermal energy storage technologies actually
uses rock. And on the outside of the pilot it says, welcome to
the new Stone Age. And there's a mastodon as the mascot. So, yes,
it's a well understood thing.


David Roberts


So just to sort of summarize where we've been so far, you need
all this heat. Up until very recently, it was overwhelmingly
cheaper to do it by combusting fossil fuels. A lot of the
alternatives to fossil fuels are more expensive than fossil
fuels. But now recently, along comes renewable wind and solar
electricity, which are cheaper than anything. So now the
challenge is, well, how do you get the heat from the wind and
solar electricity? As you say, the applications are running
around the clock. Wind and solar come and go. So in between the
wind and solar and the applications, you need something that's
going to store that wind and solar that can release it in a
steady flow.


John O'Donnell


Exactly.


David Roberts


So that's the new thermal storage technologies that are emerging
now are sitting right in that space, including Rondo. So if
you're talking about something sitting in that space, what do you
need out of it? What are the sort of metrics by which you judge
the performance of that thing that's sitting in between the
renewables and the application?


John O'Donnell


Great question. So obviously you need safety, efficiency, cost,
temperature at which the heat can be delivered.


Right.


Some other things as well. One of them is the faster that you can
charge the system and deliver energy continuously. If you can
charge it, if it takes you typical batteries, they charge and
discharge at the same rate. But here we'd like to charge perhaps
during the solar day in six or 8 hours and deliver for 24 hours
continuous. If you could charge in about 4 hours, we find that's
even more valuable. The periods of curtailment and the periods of
zero and negative electricity prices in electricity grids are
short.


So the ideal thermal storage can charge very rapidly. You can
control its charging like other batteries, it could participate
in providing grid services and it can run continuously, shut it
down once a year for inspection and when the factory that it's
connected to is shut down and just sit there and require low O
and M, operating and maintenance, costs.


David Roberts


Yeah, and I presume low losses too.


John O'Donnell


Yeah, that's right.


David Roberts


But I want to pause and just emphasize the first point you made
just so people get it. We have these wind and solar all come
online at the same time because they're all using the same wind
and sun. So what you have are these periods of oversupply. I
think people are familiar with this. You get oversupply more than
the grid can use and today that just goes to waste. It's
curtailed. That energy is not used. And so what you're doing is
proposing to come along and use it. But if that's your economic
sweet spot, those couple of hours of curtailed energy, you need
your battery to charge as much as possible during those couple of
hours.


In other words, charge really quickly because the amount of
energy available in those curtailed hours, especially in coming
years, is going to be potentially huge. Right. So you need to
stuff a lot of energy in your heat battery really quickly.


John O'Donnell


That's right. Now the early deployments of heat batteries will
use what is curtailed today. One of the things that we see that's
uniquely pretty cool about this class of electric thermal storage
is the total amount of energy that industrial heat needs is
really large for scale. I think we had a 52 gigawatt system peak
in California not long ago. We've got about 20 gigawatts of PV in
the state. Just repowering the boilers and furnaces that we have
right now in California needs 100 gigawatts of new generation to
replace those fuel BTUs, about 40 of those gigawatts can actually
be built without any connection to an electricity grid.


One of the things that's great about ETES powering industry is
we're headed for a world where industrial electrification is not
creating more problems for the grid, but we'll get there. But
this matter of fast charging rate means that new generation
projects that are serving the grid, the best ones, the cheapest
ones, will be built selling part of their power to thermal
storage. Like during the peak and curtailed hours and then
delivering those broader shoulder renewable power to the
electricity grid. And we're seeing again and again that that's a
formula for low energy prices for the industrial and for lower
prices to the grid.


There's an interesting synergy.


David Roberts


Yeah, we're going to get into that synergy in just a second, but
I want to focus on how we're evaluating the heat battery. So we
want it to absorb a bunch of energy quickly.


John O'Donnell


Fast, charge. Yeah.


David Roberts


And then we want it to hold that energy with very little losses.
And this is the other fact about thermal storage that blew my
mind that I do not think is widely appreciated, which is the
incredibly low losses here. People are accustomed to, I think if
you want to store energy in hydrogen, you're losing about 50% of
your energy through all the convergence. Like a 50% efficiency
ish yes, batteries, lithium-ion, depending, you're getting up to
don't know what the standard average is, but just heating up a
rock, you get 90% to 95% of that heat back out of that rock.


That is wild to me.


John O'Donnell


That's right. Yeah. The least efficient of the thermal energy
storage systems are around 90%. We happen to be 98%.


David Roberts


That's just crazy. So the heat just sits there in the rock and
doesn't go anywhere?


John O'Donnell


Well, fill up your thermos with hot coffee, take the thermos and
wrap it in a couple of blankets, open it up, three days later the
coffee is still hot. It's not like a chemical system where
there's self discharge or something. The only place energy can go
is either lost to the environment through insulation or delivered
to the target. So it's a lot easier than it sounds. A lot of
people think, "Oh, this efficiency couldn't be possibly the
case." It really is almost embarrassingly simple.


David Roberts


And now my question though is when we say 95-98%, what are the
time horizons of that? Like if I fully charge your thermal
battery and we're going to get into the guts of your thermal
battery here in a second, but if I fully charge a Rondo battery
and then just don't do anything to it, how long would it take for
all that heat to be lost? Like what is the time horizons we're
discussing here?


John O'Donnell


Again, the use case that we're considering that we're targeting,
is it's discharging continuously?


David Roberts


Right. It doesn't need to hold it that long. Theoretically, I'm
wondering.


John O'Donnell


Theoretically that's right, because the one place where you are
holding energy, we've got a food factory that runs shift work.
They operate one shift five days a week. So yeah, you're storing
some energy and you got more energy on Monday than you did on
Friday afternoon. The short answer is we lose about 2%, 2.5% per
day. So if you were holding energy multiple days, there would be
self discharge. But that's because we were designing for a
particular use case. Again, you could decide the rate at which
your thermos loses heat by if you wrap it in a blanket ... you
could make it store energy for months on end.


Then the question is, is that valuable? If you really want to
store energy for months on end? If you want to move energy from
July to January, chemical storage is a great thing because it
doesn't have self discharge.


David Roberts


Right.


John O'Donnell


If you are in a place where you can have a salt cavern and you
can make hydrogen in July and pull out in January, okay, that's
great.


David Roberts


Right? Because the hydrogen you pull out in January contains the
exact same amount of energy ...


John O'Donnell


Exactly.


David Roberts


... as you put in the hydrogen.


John O'Donnell


As long as it didn't leak out. But yes.


David Roberts


So in the hours today's, maybe multiple days, rarely a week time
horizon that you're working in, you're getting 98% efficiency.
98% of the energy that goes in comes back out to the application.


John O'Donnell


Yes. In that use case. That's right.


David Roberts


I think now that we're focused in here on the heat battery, let's
just discuss what the Rondo heat battery is, and maybe while
you're telling us, tell us what some of the other options in this
space are. I know people are heating up. You're heating up
bricks. Some people are heating up giant chunks of graphite. I
think sand is on the table. I don't even know what all the
options are. But what are people trying in that space?


John O'Donnell


The one technology that's been at scale for quite a while, that's
been used by the solar industry since the 1980s is using nitrate
salts, which melt at around 250 degrees. Salts? That's right.
They're stable up to about 600°C. And so you can have a big tank
of cold salt, which is something like 600 degrees Fahrenheit. It
looks like a transparent liquid, but stay away from it. And a
tank of hot salt, and you heat by pumping from one to the other
and pull the heat out going the other way. I built my first
molten salt test facility back in 2008 at a national lab.


David Roberts


I remember there was a hype cycle around molten salts that has
kind of faded. Why has it faded? Like, why are rocks preferable?


John O'Donnell


The more you know about it, the less you like it. It's one thing
to use it in a solar power station where there's nothing in there
for a mile away except for the turbine. It's quite another thing
for an energy storage facility to be put inside a factory where
people are working. When I mentioned safety first, you don't want
a system that can catch fire or spill a superheated liquid that
would burn everybody or release toxic gases. I'm not aware of any
molten salt projects that haven't sent at least one person to the
hospital. So there's the molten salt systems.


And again, they work. They're proven but they have proven
challenges.


David Roberts


They just require a lot of engineering to contain.


John O'Donnell


Well, and that's another matter that you've talked about
previously, which technologies get cheap, right? Molten salt
systems are a lot like they have the nuclear reactor
characteristic that everyone is bespoke, those tanks at that site
with that engineering and there has not been much learning
capable to drive cost out. The modular approach, the factory
manufactured approach, eludes that technology. Now there are a
lot of people exploring how do we do modular factory manage. And
one of the things that you first do if you want to store heat is,
okay, what's it cheap to store heat in?


As you mentioned stone, crushed rock, various kinds of rocks in a
box or sand in a cylinder where you build an industrial strength
hairdryer. You blow superheated air through the rock or the sand
bed. And then when you want heat, you push cool air the other way
through the sand or the rock bed. That works. There are people
taking it to scale. It has temperature and cost challenges. What
you find in every one of these cases, the rock is cheap, but the
box costs a lot.


David Roberts


And the fans, I assume like the fans and that kind of engineering
adds to the ...


John O'Donnell


That's right. And remember now that your fan has to blow at your
peak charging rate. And there's an example of a technology that
leads you to it's more expensive to charge fast. But the big
problem with those unstructured materials is when they heat up,
they expand and you have to have a container strong enough and
then when they cool, they shrink and settle and then the next day
they expand again and they slowly turn into dust over at a rate.
So the material looks really cheap, but the system turns out to
be not so cheap.


Right then you mentioned there are a lot of interesting science
experiments with new materials that have never been used this way
before. When we started Rondo, we did a really careful look at
everything that's out there. There are people using liquid
silicon. It melts at 14° Celsius stores a lot of heat. Just like
ice melting in a glass absorbs a lot of heat melting and
releasing silicon. Freezing silicon is a really good thing for
high temperature heat. But what do you make the glass that's
holding that silicon-ice? How do you keep it like there are a lot
of challenges that companies have been working on for years and
it's probably going to take another decade before that technology
is at the point that an ordinary project finance guy will say,
yes, that's as low risk as PV. I'll invest in that at the same
finance rate. And that time to bank ability is one of the biggest
issues. If you want a technology to go big fast, everybody's got
to agree it's boring and low risk and that's a challenge with new
materials. Graphite is another material that's interesting. It
has higher heat capacity than rock or brick, especially when it
gets hot, but it catches fire at 560°C. So you want to store
energy at 1500° or 2000°.


You've got to keep it in some atmosphere so that it can't catch
fire for 30 years and it's conductive electrically, which could
be great. But anyway, there are interesting engineering
challenges and there are at least four companies working on that.
One of them is also looking at using that graphite not for
electricity to heat, but electricity to heat to electricity.
Using PV cells to capture the light from the graphite.


David Roberts


Is that Indora?


John O'Donnell


Antora.


David Roberts


Antora. Yeah, I talked to them, too. And in terms of like
science-fiction geeky fun, that one is just a great one. They
heat the graphite up, it gets so hot that the energy comes back
out as light.


John O'Donnell


Light.


David Roberts


So they have it covered in shutters that they can open
incrementally. And the light can either shine on tubes full of
fluid if you want heat, or these special PV modules that they
built especially for it. If you want electricity, like the whole
conceptually, that's very satisfying.


John O'Donnell


It's super cool. My first job was infusion power, where you have
a reactor that wants 100 million degree plasma right next to a
superconducting magnet that has to be five degrees. The Antora PV
challenge when they solve that that technology is cool for
electricity to electricity because it could turn out to be long
duration, no moving parts storage. It's hard for us to see that.
That's an example of we're going to do something deeply
innovative. How long will it take to prove that it's bankable and
what we're doing is much more boring? The back to electricity is
their superpower is back to electricity.


David Roberts


Yeah, I want to discuss that. Like the ability to go back to
electricity and what, you'll come to that. We'll get to that. But
you guys have settled on rather than any of these materials
science fun time experiments. Bricks.


John O'Donnell


Yeah. Okay. Somebody told me this the other day. How many
gigawatts of batteries are there in the world right now, do you
know?


David Roberts


I don't.


John O'Donnell


Somebody told me there are about three gigawatts of batteries in
the world right now.


David Roberts


Lithium-ion batteries, you mean?


John O'Donnell


Yeah. So how much heat storage is running in the world right now?
As we speak, there's about 30 gigawatts of heat storage running
right now. In 1828 was the first patent for a thing called a
cowper stove, which is a tower with a thousand tons of brick in
it that has air passages that on a 1 hour cycle. The still
combusting exhaust of the blast furnace is blown down through
that tower and heats all the brick to about 1500°C. And then for
about 20 minutes, fresh air is drawn up through the tower and
it's providing the inlet air to the furnace and it's delivering
115 megawatts heat for about 20 minutes.


David Roberts


Crazy.


John O'Donnell


And then it's heated again. These. Things are heated and cooled
24 times a day. They last 30 years. There's a million tons of
that brick in service right now at the blast furnaces around the
world.


David Roberts


And these are just ordinary brick-bricks that people are familiar
with. Like, what are bricks made of?


John O'Donnell


What, are they the term they use? Yeah, there are a bunch of
different materials, but two of the most abundant elements in
Earth's crust are silicon and aluminum. Silica, silicon dioxide,
alumina, aluminum oxide are two of the most important minerals.
Different bricks are made of different mixtures of silica and
alumina. And there are other kinds of bricks as well that are
even higher temperature, but they call it aluminosilicate brick.
It's higher temperature brick than in your fireplace. Looks a lot
like it. And it's what is in every if you have a ceramics kiln,
that's what's in your ceramics kiln liner.


It's in a cement kiln, and it's again, used in all kinds of
areas. People have been making brick like this for thousands of
years. Brick is made from dirt. I mean, certain kinds of dirt.
You mix it up, you put a little binder, you throw it in a kiln,
and you've got your brick.


David Roberts


So if I'm looking inside a Rondo box, am I literally just looking
at a stack of bricks?


John O'Donnell


Pretty much. The one thing that's different ... our breakthrough.
So the brick, as you know about brick, it's brittle. If you drop
a brick, it'll break.


David Roberts


Right.


John O'Donnell


You also know that brick is not a good heat conductor. That's why
we make fireplaces out of it. So if we want to heat it fast, we
have to heat it uniformly. If you stuck a brick and you had,
like, one side in a bucket of water and the other side in a fire,
the brick might fracture. But if you put the brick in the middle
of the fire, it'll heat up rapidly to the temperature of the
fire. It's one of those ideas that once you see it, it's obvious.
But it only took 80 design revisions.


If you look inside a Rondo unit, what you'll see is a brick stack
that's full of these open chambers. It's a checkerboard of open
boxes surrounded by brick, and brick surrounded by these open
boxes. And electrical heaters are embedded directly in the stack,
and they provide radiant heat within those open boxes. And
because thermal radiation of every object in the universe goes as
the fourth power of its temperature in degrees Kelvin, as I know
you remember.


David Roberts


Of course.


John O'Donnell


Things that can see each other get to become the same temperature
by exchanging heat. So the result of this was we found a way to
directly, rapidly heat the brick.


David Roberts


And this is an alternative to blowing hot air over the bricks.


John O'Donnell


That's right.


David Roberts


Which, a. would require more engineering and more money, but b.
also might not heat them uniformly, like might heat one side
before the other side or something like that.


John O'Donnell


Hot air. You can heat them uniformly, like the blast furnaces do
that. But in that case, you have the same electrical heater
that's in something like a hairdryer. And inside a hairdryer, the
heaters are mostly radiating to the metal plates, which in turn
are heating the air, which in turn would in this case, heat the
brick. There'd be a couple of hundred degrees difference between
the final temperature of the brick and the temperature of the
wire. In our case, that's about five degrees.


David Roberts


So instead of using the wire to heat the air, to heat the brick,
you're just sticking the wire in the brick, and the wire is
heating the brick directly.


John O'Donnell


That's right. So we just last week, we announced the world's
highest temperature thermal energy storage system running. That's
not because we use different heating materials than others. It's
because of that physics insight that led to that structure.
That's right.


David Roberts


Got it. Okay, just quickly, what are some of the engineering
challenges here? Do the bricks expand and contract when they are
heated, or do they degrade over time? What sort of things are you
dealing with here with bricks that you had to overcome?


John O'Donnell


Yeah, there were lots of things because what we're talking about
is kind of at some level obvious, and people have done really
good work on this previously. But the challenge is you have to
think about, yes, the bricks expand and contract, so build your
structure. But the nice thing is they're freestanding. They don't
need a container to hold them in. So if you build your structure
properly, it can freely expand and contract.


David Roberts


So there are like spaces between the bricks in which they can ...


Where they're touching when they're hot and spaces open up when
it's cold. Exactly. Other big challenges consider if you have a
storage system and one area has some airflow blockage so that
during discharge, it's not getting as cool as another area the
next day when you put heat in, it's going to wind up hotter than
another area. And the day after that, even hotter thermal runaway
that would cause failure because one part was too hot. If you
have that possibility, you have to run the whole thing cooler. So
it turns out one of the hard problems, one of the hard
engineering problems is making sure that the temperature inside
the material is uniform.


John O'Donnell


And it's uniform not just when the unit is new, but when it's 30
years old.


David Roberts


Your promise here is that this Rondo battery has the same
capacity and the same performance characteristics in 30 years
that it does today. Is that the idea?


John O'Donnell


That's exactly right, yeah.


David Roberts


And no other battery? There's no other battery that can say that.


John O'Donnell


I think that's true. But here, there's a million tons of this
material running in the world, and those guys have much higher
mechanical force on it. They build 30 meters tall things. We
build eight meter tall things. They heat and cool it 24 times a
day. We heat and cool it once a day. Lasts 30 years for them.
Pretty clear it's going to last longer than that for us. Yeah.


David Roberts


And let me ask about getting the heat out to where it needs to
go, because as I have been reading about, I did a thing on a
company a while back that was using concentrating solar to
superheat a fluid. And they could get to these levels of heat
that are germane to concrete and whatever the higher end, the
higher temperature applications, but only at a particular spot.
Right. It's got to be right where the sun is and where
everything's coming together in that one spot. And then, of
course, you face the challenge of how do I get that heat to where
it needs to be without losing a bunch of the heat?


And this is sort of, obviously the other half of the thermal
energy challenge. And there's sort of two challenges. One is
making it into steam right. For all these lower temperature
applications, and then, I don't know, making it into what, for
the steel or the super high energy. I don't even know how you
transfer that high version of heat. So what are you using on the
back end?


John O'Donnell


Yeah. So every combined cycle power station in the world has a
jet engine that's generating electric power. Its exhaust is
around 605 C. That exhaust is passed through a boiler, a heat
recovery steam generator that drives a steam turbine that makes
extra electric power. So the world knows how to build those
boilers that run on about 600 C air.


David Roberts


Got it.


John O'Donnell


The Rondo storage is much hotter temperature than that we mix
down. And for the systems that are delivering steam, we work with
leaders who build conventional boilers and we've engineered the
heat battery to include that boiler. So the basic heat battery
models are exact drop in replacements for particular models of
industrial boilers. They're just about the same size. Stick us
next to your existing one, hook us up to the pipe.


David Roberts


You're replacing a fossil fuel run boiler with a heat battery and
a boiler in the same space.


John O'Donnell


Yeah. We think of the heat battery as from the substation to the
steam flange in that case. So it is a like for like drop in
replacement. The less work the customer has to do, the better off
we are.


David Roberts


Yeah, I was going to ask it. We might as well discuss this now,
because this is obviously one of the this is something you run
into with battery chemistries all the time. Right. Which is just
like there's so much existing infrastructure that even if you
have something clever and fancy and new that's super cheap, if it
requires all the facilities to update themselves, you're just
starting way, way behind the eight ball.


John O'Donnell


That's right.


David Roberts


So to what extent is the sort of Rondo heat battery plug and play
like in a low temperature steam application and like a steel
plant, can you wander into any of these and just switch out with
no pause.


John O'Donnell


All of the energy. So the top four categories in the United
States, the Doe just gave a talk recently and the top four
categories in descending order of industrial heat use are
chemicals, food and beverage, paper products (That includes
everything from toilet paper to cardboard,) then cement, and then
steel. So for chemicals, about a third to 50% of all the heat is
steam. For food and bev and paper products, it's all steam. And
for cement and steel, none of it is steam. So we are
simultaneously, we're delivering drop in boilers today and
simultaneously with our investors and partners building and
developing the calciners, the ethylene crackers, the kilns, to
drive particular industrial processes.


Because you made this point about the solar tower. Yeah, you have
a spot that's 100 meters up in the air where you can have your
heat. But what we want, the heat is in some process unit. And
look, we have 200 years of designing industrial process units
that are powered by fuel. Which of those can we retrofit? Where
will we need to design new things? We were given a grant by the
Danish government. We have a project underway to design and pilot
a true-zero cement process, intermittent electricity to
zero-emission cement. Most of the work in that project is the
design of a calciner that instead of internal combustion, runs on
superheated air or superheated CO2.


So it doesn't all happen all at once, but it does all happen, but
some of it will. The high temperature things will take more work
to integrate because industrial plants today were designed with
magnificent engineering and heat balance and efficiency burning
fuel. And so, as it happens, everything that runs on steam, easy
drop in all the high temperature processes. We have work underway
now and hope to have results over the next couple of years that
use the same thermal storage platform.


David Roberts


But this first commercial battery that you've deployed now, which
by the way was just last week, I think, what application is that
or what temperature level is that?


John O'Donnell


Yeah, that's targeting steam, steam, steam, steam and steam. The
particular installation is at a fuel producer and it's at a
biofuel producer. Whether you're making renewable diesel from
soybeans or animal fat or ethanol from corn, about half the total
carbon intensity of that fuel is fossil fuel that was burned to
produce that biofuel. And we can set that to zero. So we can
produce biofuels that are about half the carbon intensity of what
they are today. Interesting, our customer is really a visionary
that's going to zero because the other thing that's been talked
about a lot with biofuels is combining carbon capture of the
biogenic CO2 in those facilities.


As it happens, using Rondo for the heat eliminates about half the
total carbon intensity using carbon capture, eliminates about the
other half and together you get about essentially a zero-CI,
zero-carbon-intensity fuel. That little unit we just started up
is the pilot for deployment of a series of larger ones to do
exactly that, to produce zero carbon biofuel.


David Roberts


Very interesting. So let's pull the lens back a little bit, maybe
talk about business model. Is the idea long term that if I'm say
I'm a manufacturing facility and I'm making I don't know what
baby food, is the idea that I buy a Rondo unit and install it in
my factory? Or is the idea that Rondo comes in, sets things up
and sells me heat as a service? In other words, am I buying the
equipment or am I buying the heat? Or some of both.


John O'Donnell


Yeah. Over time, there are as many answers to that question as
there are to how conventional gas turbines and steam turbines are
sold. Right. Sometimes people own their own cogeneration plant.
Sometimes they contract with someone else to provide them
electricity or heat as a service. The renewable heat as a service
business will develop the same way. In the United States today,
there's a huge community of developers who know how to shave a
few pennies off solar and wind electrons, but have never really
looked at these industrial facilities. In Europe, actually, there
are already renewable developers who are out there originating
renewable industrial heat projects.


So, first of all, Rondo is offering, on four continents,
commissioned, guaranteed installed heat batteries. That's the
foundation. We are also originating and financing heat as a
service, principally in North America.


Interesting.


Because, again, whether you make baby food, as you said, or
steel, you don't drill gas wells to get the fuel to run your
process. You buy energy as a service, your capital dollars, most
folks want to spend it on their own processes. And this class,
this thermal energy storage class, is arguably creating one of
the great business opportunities of our time for the development
community, because we all know wind and solar deployment is
slowing down, not because of reduced demand, but because of
congestion.


And I think the interconnection queue time in England is now 13
years.


David Roberts


Yes, there's like a terawatt now, I think, waiting in the queues.


John O'Donnell


Right. Rondo heat batteries. Our basic unit, the RHB 300, needs
70 megawatts of generation. Typical installations may have two to
ten at a single site. These are utility scale energy demand and
they can be built with no grid connection.


David Roberts


Right. So the idea is you go build a solar farm or a wind farm
that is just attached to these batteries.


John O'Donnell


That's right.


David Roberts


And then you're selling the heat from the batteries. So at no
point do you need the electricity grid. You're not waiting for
the interconnection or anything else, that these are a coupled
unit. Wind and solar being so cheap, the implications are endless
and often counterintuitive. Like when I hear I could either buy
heat from a conventional boiler or I could buy heat from someone
who had to go out and build an entire utility scale renewable
energy installation and a couple of heat batteries. Intuitively,
that just sounds more expensive. But are wind and solar so cheap
now that that's competitive?


John O'Donnell


Yes, absolutely. And it depends, right, because one of the things
that's exactly the right matter that you just raised someone is
making an investment that's going to provide 40 years of energy
to your facility. They're going to sell it to you on a contract,
they're going to care about your credit worthiness and your
willingness to sign that contract. That's one of the things
that's unique here. It's different than selling electricity to a
utility. On the other hand, from your standpoint, someone is
saying you can get off the fossil fuel price roller coaster. Not
surprisingly, there are a lot of people in Europe who ... and
we've seen that in US.


Prices have been fourteen, they've been two, they're ten. And
they are also in places that have carbon prices. You can have a
permanent. This lack of volatility and exposure to regulatory
matters also is a strategic advantage. A friend of mine said, why
were all the factories in England built on the coast? Because
where it was cheap to bring the coal, low cost, reliable energy
supplies are the foundation for industrial investment.


David Roberts


So you're free from fluctuations in fossil fuel prices and you're
free from any worry about escalating carbon prices or other
carbon related regulations. Basically, like two huge worries
because as you say, for a lot of these facilities, the cost of
energy is the bulk of the costs. And to have the bulk of your
costs fluctuating 500x back and forth over the course of a couple
of years is just an insane way to try to run an industrial
facility.


John O'Donnell


That's right. This matter of what kind of risks do we take?
People say, oh, it's risky to work with this new technology, but
look at the risks that we just were used to taking. And we're
entering this new world where we're not talking about a green
premium, we're talking about the same or lower energy cost with
these reduced risks. And then, of course, depending on what the
commodity is, low carbon aluminum trades at a price premium on
the London Metals Exchange. Low carbon fuels trade at much higher
prices in California and Germany. And for consumer facing brands,
there are buyers, coops of producers who are seeking low cost
effective renewable heat sources so they can offer to the market
low carbon commodities.


David Roberts


Yeah, I mean, it seems like there ought to be a bunch of market
actors that are just ready to embrace this. Like, for one thing,
as you say, just on a quantity basis. If you take all that energy
that we're using for heat and transfer that to electricity, you
need a lot of new electricity and a lot of new clean electricity.
So it seems to me like renewable energy developers ought to be
over the moon about this, like beating down your door. Are they
lining up to be proponents for renewable heat in the industry
generally or have they not caught on yet?


John O'Donnell


In some places the answer is yes. As I mentioned, Europe is very
aggressively moving in this direction and a number of folks over
the last few years have said "this Rondo thing sounds too good to
be true. Come back to me when you're operating something
commercial." We're now operating something commercial. So the
short answer to your question is yes, because again, these
projects offer this mix of speed and certainty that we're not
tied up in a grid queue. Scale, utility scale, there's a lot of
commercial industrial C&I Solar, where people are building 2
MW here, 2 MW there.


It takes the same amount of brain power and lawyer time to do the
two megawatt project versus the 400 megawatt project that the
same facility would use for heat, and returns now that we're in
an era where that's the coolest thing is that the numbers work
for the heat user, they work for the financier, they work for the
builders of the solar fields and they work for us. And that's a
new world and economic tailwinds driving it. It will keep going
faster and faster. The size you mentioned, I think at the end of
2021, there was about 1000 gigawatts of wind and 1000 gigawatts
of solar each in the world.


The IEA did an assessment of industrial heat and their number is
it's about 9000 gigawatts of new generation that's going to be
required to replace the oil, coal and natural gas now being
burned.


David Roberts


Good grief.


John O'Donnell


That's worldwide, right? And so it's only, what is it, 20% of
that in the US. Yeah, that's right. It's only a few thousand
gigawatts in the US.


David Roberts


An enormous opportunity to build more renewable energy.


John O'Donnell


Yeah.


David Roberts


A similar question is, and I have always had this question about
electric vehicles too, which is electric utilities are sort of
notoriously stressed, worried about this death spiral, they're
worried about grid defection. And you represent potentially just
a wild new load, a new responsibility for them. Something that
natural gas utilities were doing, were handling, is now all going
to transfer and be their responsibility, which is just a way for
them to grow and invest and just a wild new opportunity for them.
Why aren't they at the front of the line beating down the door,
trying to make this happen faster?


John O'Donnell


That's a great question, and they are. One of our investors is
Energy Impact Partners, whose backers are the North American
electric power industry. And for sure the lowest cost way that
we're going to decarbonize all of civilization is
electrification. And for sure the electric industry is at the
heart of that. One of the things that's really profound about
what we're doing for them is that electrification, you install an
electric furnace. That furnace is now running on wind power 30%
of the hours of the year. And the other 70%, it's a new load on
gas fired or coal fired power stations until the grid has fully
decarbonized.


David Roberts


Right.


John O'Donnell


These thermal storage systems, these things can be dispatched by
the utility the same way they dispatch generation. The deal is
not that I want a megawatt continuously, the deal is I want 24
megawatt hours today. You deliver them when it's convenient.
These things become an asset in the electricity grid and a
solution to these problems of variability and over generation and
balancing.


David Roberts


Right. In the same way that sort of any controllable load helps
grid stability. These are controllable.


John O'Donnell


Yeah, but people talk about controllable load, demand response,
for example, is a load that you expect to run all the time, but
you can turn it off during emergencies. That's not this, this is
something that no, no, you're going to dispatch it so that it
never takes a single megawatt hour of spinning reserve or gas
fired power generation. You're going to dispatch it so that it
never raises the peak demand on your transmission or distribution
system. You can manage it with telemetry from the grid operator.
It's different than anything that's come before. It's like
lithium-ion batteries in that sense, but at a tiny fraction of
the cost.


And we're not trying to solve from moving electric power from
noon to 07:00 p.m.


David Roberts


Right.


John O'Donnell


We are taking that electric power and replacing gas combustion
principally in North America, and oil and coal combustion. We're
opening an entirely new segment to renewable deployment. So,
yeah, the electric utilities are getting engaged now. They face
all kinds of issues with the regulatory frame that we have for
electricity. Of course, they're already facing those matters as
renewables deploy. And there are some new challenges, but there
are people actively working that issue and we're thrilled to be
working with them.


David Roberts


So if I'm, I've got this manufacturing facility, I've got a big
Rondo battery and I'm trying to decide between two options. One
is I could build my own off-grid behind the meter generation,
solar and wind. I could put my own solar and wind up, or I could
just get on the grid and time my charging so that I'm chasing the
clean energy on the grid so that I'm only charging when there's
clean energy on the grid. Do we have any sense of which of those
will be more economic or why you'd want to go one way rather than
the other?


I'm just wondering how many of these sort of self contained,
off-grid, purpose built renewable energy installations there are
going to be, it seems to me intuitively like that ought to be
more expensive and what you ought to prefer is just for the grid
itself to clean up so you have more, so it's easier. But what are
the choices there?


John O'Donnell


These questions are right at the heart of the matter. You're dead
on. And I'll give you the long answer. The short answer is it
depends. And it depends primarily on where you are. Pre-war
economics, one project in Europe, large operation, that wanted to
replace a 250 megawatt gas boiler. They could install a 250
megawatt electric boiler and eliminate their scope one. Their
actual scope one, plus scope two would go up because they're in
an area that's about 40% wind. And now, if 60% of the energy is
coming from a coal plant, you were worse off.


But from an economic standpoint, they were paying $35 a megawatt
hour for gas fired heat. The electricity price annually would
have been about €68 sorry. Per megawatt hour. But upon a study,
given the presence of offshore wind in that area, their expected
energy price on a long term buying in the cheapest 4 hours a day
was under €10 a megawatt hour. So that's an example where the
grid connected thing is exactly right, and it will only take four
years to get the grid upgrade done, of which about three months
is construction. So in a lot of places, the grid connection for
grid projects is a matter.


Oklahoma last year had 2000 hours of negative wholesale prices.
If you put a project in Kansas or Oklahoma, you have energy
prices that are slightly negative on an annual basis. If you can
charge very rapidly, if you are allowed to participate in the
wholesale market, there are regulatory obstacles.


David Roberts


But in theory, in Oklahoma, during a time of negative wholesale
prices, your facility that's running off a Rondo heat battery
could be paid to charge itself.


John O'Donnell


That's right.


David Roberts


Is that how that works? Is that what negative prices means?


John O'Donnell


That's what negative prices means.


David Roberts


That's so mind-blowing.


John O'Donnell


Well, again, and we have lots more of that coming. I know you've
spoken to folks about the IRA. The production tax credit coming
to solar is going to broaden the areas of the country where we
see intermittent negative prices. Because, of course, if I'm
getting $20 megawatt hour for tax credit, I'm perfectly happy to
generate when prices are negative $19, right?


David Roberts


Yeah. That's just crazy.


John O'Donnell


Technologies like this that can absorb those periods are going to
lift the price floor. They're going to benefit all the
generators, especially the generators that can't turn off. And
we're pretty excited. But again, it's can we connect to the grid?
Can we capture those prices?


David Roberts


Because if you can, there's enough heat to absorb all the
curtailed power in the US, times a gazillion. Theoretically, if
you could hook up all heat to electricity, you'd never curtail
again, or at least not for decades. Probably.


John O'Donnell


Of course, subject to where is the heat-load versus where is the
curtailment? Some curtailment is regional associated with total
generation. You know, some of it is transmission constrained. But
to a first approximation of the answer yet, that was correct,
yes?


David Roberts


Yeah, that again, seems just a crazy business opportunity for
everyone involved.


John O'Donnell


Yeah, we agree.


David Roberts


But you do expect to see these off grid, custom built renewable
energy installations, purely powering heat batteries in areas,
say, where the grid is congested, or the grid is dirty or the
interconnection queue is unusually long. You do expect to see
those pop up?


John O'Donnell


Well, as I mentioned earlier, and just for scale, California has
on the order of 20 gigawatts today. We need 100 gigawatts of new
PV just to replace the BTUs of fuel now being burned for
industrial heat. About 40 of those gigawatts, because of where
the things are cited, could be built with no grid connection at
all. And most of them will need some kind of grid connection. We
see again and again that the new renewable project development
model is going to be building a project that part of its
electricity goes to industrial heat, into a heat battery, and
part of it goes to the grid.


And that, that's the sweet spot that delivers lower cost
electricity to the grid. And we're absorbing what would have been
curtailed power from that new purpose built thing to get all the
power we need for the factory or the cement kiln or whatever.


David Roberts


Right. Yeah, if I'm a renewable developer and I catch wind, that
there's this whole category of renewable projects that don't
require this unholy paperwork nightmare that they all go through.
Now again, I just can't imagine that they're not going to be
stampeding in this direction. I mean, I hear them complain about
this constantly.


John O'Donnell


What are the required conditions? Obviously the financial
community we have to get our minds around. Okay, how are we
structuring these projects where most of the energy is going to a
single factory rather than to the utility? Let me think about the
credit worthiness of that. And then for the moment, how long will
it take to retire the Rondo technology risk? How do we backstop
that? And we're busy building systems and projects that this
first one of course, is the first step at commercial scale to
build the track record. But again, there's a reason why we chose
these century proven materials specifically, so that once you
turn one of these things on and operate for six months, there's
nothing left to prove.


We know it works and we already know everything is durable.


David Roberts


The brick heats up, the brick cools down. It's not again, it's so
simple.


And exact ... but that exact material, there's a million tons of
doing that around the world. Doing that right now in much more
severe service. But yes, it's simple. That's right.


And I would imagine also that this space is going to see a lot
more entrance competition. Of course, once it's kind of uncorked
and it becomes clear what the opportunity is.


John O'Donnell


Look, trillion dollar markets don't happen without lots of people
trying to enter them and nothing could be better, right? That's
what we urgently need.


David Roberts


Right. One other question about industry, about location matters.
You mentioned industry clustering along a coast where the coal is
available. As more and more of our industrial activity in general
and civilization gets hooked up to cheap renewable energy. Do you
see something like over the course of I mean, I guess this will
take years and decades, but do you imagine areas of intense
renewable capacity like with lots of sun and lots of wind
becoming new attractors to industry? Do you see global industry
starting to migrate to renewable energy? Is it that much of a
chunk of the cost of an industrial facility that it might be
worth someday literally moving to it?


John O'Donnell


The short answer to your question is yes. Just look at what
happened with the shale gas revolution in the US. Vast
investments in petrochemical and other manufacturing immediately
shifted to where huge employment growth shifted to where that low
cost energy was. And there's a question of how fast these
transitions happen. Vasila Smill likes to talk about, "oh, it
takes a really long time," but there are lots of examples where
that is not true. Just, again, when the rules changed and
combined cycle gas fired power generation was allowed in the US.
We saw giant capital flows and giant rates of transformation.


Now, that took awareness. It took enough experience that
investors could say, oh yeah, I'll build that giga project
because I know it's going to work. It took awareness of the kind
that you are building that these opportunities exist, but the
long term. Yes, absolutely. That's right.


David Roberts


That'll be such an interesting geopolitical like of all the
forces in the last 50 years or whatever that have moved industry
around the globe, this will be just a completely new version of
that. It's going to scramble all the previous alliances.


John O'Donnell


Yeah, but there is one example that's even faster, which is not
just the long term, but the right now. A couple of weeks ago, I
spoke at the Munich Security Conference in a session with a
number of industry CEOs and Ursula von der Leyen, the European
Commission president and president. Wevine said, look, there are
three wars underway. There's the ground war, there's the energy
war. He thought he would bring us to our knees. And there's a
clean energy war, mostly with China. And a huge challenge before
us today is how do we get off gas? But we need to get off gas
without deindustrializing.


There have already been giant plant shutdowns and layoffs because
of the unavailability of gas right now and the forecast
unavailability of gas longer term. Europe's bullets in the energy
war are clean electrons, domestically produced, stable, low cost
sources of energy. And again, we and all the other electric
thermal storage technologies because we save twice as much gas
per kilowatt hour as hydrogen. We're an important part of
speeding up that transition there and preserving an existing
industrial base. I think the same thing is true in the US as well
as carbon prices come into the world. As gas prices rise, the
competitiveness of US manufacturing on the world stage is going
to be affected by how fast can we make this transition to
renewables.


And it doesn't happen all at once. But there are beyond the
climate drivers, beyond the huge business response that we've
just seen in the last five years, to the climate drivers, the
pledges, and not just pledges, but action that we're seeing
across all kinds of industrial producers. We are really at an
amazing moment. I kind of wish we had gotten started with what
we're doing here at Rondo five years ago. But five years ago what
we were doing was stupid, right?


I mean, go back ten. What we're doing somebody could have figured
out earlier.


David Roberts


I said it at the outset, I'll say it again, I say it over and
over again. Wind and solar being as much cheaper now as they were
five to ten years ago is just like it's not an incremental
change, it's a phase change. It's a flip to a different system.
All we're doing now is just like sort of one at a time here and
there in different industries, in different places, kind of
opening our eyes to like, oh, this is a completely different
landscape, like completely new opportunities. It's a different
world now. It's going to take a while just to absorb the
implications of super cheap renewables.


John O'Donnell


Yes. And the thing we know for sure is that every year somehow
those cost reductions will continue, right? We have some short
term supply chain things, but somehow, I mean, I worked in the
electronics industry for decades and everybody every year said,
oh, Moore's Law is over, it can't keep getting better.


David Roberts


They say it every year for wind and solar too, right?


John O'Donnell


Yeah, exactly. And you look back over every five year period,
every year's forecast was wrong, it fell faster than that. It's
reasonable to assume we're going to continue to be in that, so
that this era that we're entering, it keeps getting better and
better. Our storage technology and the other storage technologies
will cost reduce as they come down. But the storage technology is
only 20% of the cost of the total project. The fact that the wind
and solar are coming down so steeply, this cost advantage is
going to continue to open for the people who have made this
transition onto renewables.


David Roberts


It's really interesting watching people in industry try to sort
of skate to where the puck is going to be, as they say, sort of
like start off on something that might not be economic when you
first start developing it, but you're going to meet that cost
curve, right, in five years, and then your business model will
become viable. It's a real tricky timing there. There's a lot of
people trying to sort of coordinate that dance just right.


John O'Donnell


Yes, but my point is we're already at that point where we're at
break even or better, we're not waiting five years. That's one of
the big difference of this class versus there are a lot of things
that are just as you said, we're investing now because we're hope
it's going to be cheaper in the future.


David Roberts


We're already at that point, right, so a final question. I wanted
to ask you a little bit more about this, but maybe we can try to
do it quick, which is just you've got these things that store
electricity as heat, fairly cheaply for a long time, with very
low losses. The applications you're overwhelmingly focused on are
industrial, because as we've discussed, industrial heat is huge,
difficult to decarbonize, giant market opportunity. But I'm just
wondering, it seems like there are probably other uses that we
could think of for boxes of heat. Are you actively pursuing any
or alternatively, like, do you see any out there over the horizon
that you might get to eventually?


What else could we do with heat batteries?


John O'Donnell


There are two big things we've been pulled into that. If you'd
asked me a couple of years ago, I would have said, oh, that's
going to happen much later. One of them is industrial
Cogeneration. PURPA back in the 1980s established special tariffs
for Cogens because it's the most thermodynamically efficient way
of delivering electric power and heat. Repowering Cogens with
renewable heat makes them more efficient. A unit that delivers
industrial steam and electric power is 95% efficient. It's more
efficient than any lithium-ion battery, although it's only
delivering about 20 or 25% of its energy as electricity, and the
rest is heat.


Almost every industrial Cogen, the industrial needs so much heat
that that Cogen is exporting power to the grid as a side effect
of delivering all that steam. So, renewable cogeneration, or they
also call it combined heat and power, is an area that we see
distributed generation. 20 MW here, 50 there, ten there. That is
decarbonizing small industries, but providing baseload
distributed high value generation to the grid.


David Roberts


Briefly, what does that look like, though? What is a cogen?
Because cogen, just for listeners maybe, who aren't familiar,
you're using a turbine to generate electricity and then you use
the excess heat from the turbine ...


John O'Donnell


That's right.


David Roberts


For whatever you need. So what does it look like in this case?


John O'Donnell


You said it exactly right. Instead of throwing the heat away into
a condenser, you are using that heat as medium pressure steam,
making tomato paste or paper or chemicals or any of the things.
And so you have a facility that the heat battery, or today, a
natural gas boiler makes high pressure steam, goes through a
turbine, medium pressure steam goes to the factory and
electricity comes out from the turbine. Exactly the same thing.
Now you've got a heat battery making high pressure steam and
driving combined heat and power. So really it's 95% efficient.
Electricity in to heat and electricity out and you are exporting
back to the grid.


So that's one. The other has been a surprise. Again, it's
something I would have said we wouldn't be engaged in. I think
just today there was the announcement that the latest EPA rule is
going to cause another 15 gigawatts of coal retirements.
Coal-fired power stations people think of as about 40% efficient.
That's about right. But that's about an 85% efficient boiler,
times a 47% efficient turbine, minus the loads associated with
air pollution cleanup.


David Roberts


Right. All the filters and whatnot.


Keep the turbine, knock down the boiler, make that a giant long
duration electricity storage. That's now in one of those places
where there was negative prices, you have anchors for
development. We have several projects where developers are
looking at these conversions as enabling the construction of a
huge renewables cluster, sometimes an offshore wind landing
point, or onshore wind development. And right there, reusing one
of those things.


So this would look like, say, a bunch of offshore wind turbines
generate electricity. They generate excess. The excess is stored
in a heat battery, and then that heat battery is used to run an
existing turbine.


John O'Donnell


That's right.


David Roberts


Like at a coal plant to produce power. It would just be a
dispatchable. It would be like a peaker plant.


John O'Donnell


However you want to use it. That's right. Whether you want to use
that to take intermittent and now get to base load underneath the
intermittent. But it's an electricity storage approach that
reuses all the infrastructure, including the turbine. It is lower
efficiency than electrochemical batteries. It's far lower cost.
Those are large projects. I'd say that's the other one that's a
little longer term out the cogeneration, though, the combined
heat and power is more efficient than any other electricity
storage technology. Right. More efficient. So I think those
things will happen first, and we'll see about both of them.


David Roberts


If I'm repowering a coal plant turbine, that electricity to heat
to electricity conversion is lower efficiency than what I would
get from electricity to lithium-ion battery to electricity.


John O'Donnell


That's right. But the coal turbine provides other services, like
inertia that are needed to make the grid work.


David Roberts


And it's already there.


John O'Donnell


It's already there. It's already operating. There's. The first of
these conversions using molten salt. That's underway right now in
Chile.


David Roberts


Interesting.


John O'Donnell


AES announced a project recently that had been in development for
a long time. We're very interested to see how fast that sector
moves. And all of our focus is on the industrial side. But as I
said, we've been pulled into some of these projects.


David Roberts


Yeah, that's interesting. There's a lot of talk from a lot of
different directions about repowering these turbines, these
existing turbines that exist. I know the geothermal people are
big into that idea, but it just does make intuitive sense. Like,
you have all these quite sophisticated and expensive turbines
built all over the place. Why not just go take out boilers and
use renewable heat instead? To power them and then sort of like
open your eyes, you're like, oh, we're like we're surrounded with
turbines.


John O'Donnell


Yes. But this brings us back to one of the little laws of physics
about temperature. The higher the temperature of heat, the more
efficiently it can be converted to electricity. Those coal plants
use burning coal. Geothermal systems make heat at lower
temperatures. They can't directly because we're the highest
temperature storage. We're the only one today that can repower
those coal plants at higher than their original efficiency.


David Roberts


Is that, no limit?


John O'Donnell


No, it's removing the losses from the boiler and removing the
losses from the station load. So basically, it's getting the net
power efficiency much closer to the gross and leaving the gross
unchanged.


David Roberts


Interesting.


John O'Donnell


Pardon me, diving in too deep. But there's very interesting
synergy with other lower temperature heat, with waste heat
recapture and with geothermal heat, where some of our customers
are showing us stuff, where they're combining high temperature
heat from storage and recapturing some lower temperature heat.
And it's going to be very interesting to see how that develops.


In terms of innovation for Rondo itself. And I promise this
really will be the last question. I'm just wondering, brick is
simple and the whole system is simple. As we've been saying,
that's part of the that's part of the delight of it. But I'm
wondering, where are opportunities for big innovation? Do you
have materials science? Is it within reach to heat bricks up
hotter than you've got them to get up to the full, whatever
1500°C or whatever insane super hot? What's the innovation
horizon for you?


Well, the driver for us, first of all, is speed, speed and speed
to scale.


David Roberts


Right?


John O'Donnell


We're manufacturing in two locations now. A lot of our material
science will be driven by qualifying other sources of materials.
We've produced now on three continents, little pilot scale
things. So one chunk of material science is about just getting
this 2 million ton a year scale. The company formal goals are 1%
of world CO2 in a decade and 15% in 15 years. And there are no
material blockers to doing that. It's okay. Did we execute
properly? Did we find the finance and developer partners? But to
your point, the pieces today we're using the most expensive brick
materials, the highest temperature, highest strength there will
be innovations in simply reducing cost by the system is way
overdesigned for reliability as we gain experience.


All kinds of cost reductions come from that. But as I mentioned,
we have two international cement manufacturers today as
investors. We have this project with some Danish universities and
a cement plant builder. We're working on high temperature
applications where most of the development is the process
equipment that will need the heat. And then we'll be taking this
core technology and connecting it to those other things. But
speed, scale, cost and then temperature and serving these other
industries are the priorities.


David Roberts


Thank you so much. For spending all this time with me. As you can
tell, I find this particular area so interesting and fascinating.
And it will be interesting to come back and talk again. Maybe in
two or three years, who knows?


John O'Donnell


Thank you, Dave. It's a real privilege to speak with you. I'm
just delighted. Thanks so much.


David Roberts


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