Microcap Conference questions using the Zoom Q&A interface at the bottom of your screen. After the presentation, we'll open to your questions. With that, Drew, I'll turn it over to you.
Awesome. Thank you, Alex, and thanks everyone for joining us today or anyone who ends up watching the recording. Yeah, I'll give a presentation here, maybe 15-20 minutes, and then leave it open for Q&A. Yeah, I'll get started. First, to give you the quick corporate overview of where we at is ESS is a manufacturer of long-duration iron flow batteries. Our main product is called the Energy Base, which is a 10-20-hour long-duration storage system. Our main technology is called iron flow, and so this is a little bit different than other batteries that are out on the market. In the first instance, you can think of it as something that just uses very abundant earth materials, so iron, salt, and water.
What we do is we take that and we turn it into an electrolyte solution, then as we run that iron, salt, and water, iron is a great charged element where you can have it in a very positive or negative charge. We run that through our battery stack system, you can either add electricity or charge the battery or discharge it at a pretty easy cycle over time. Where this competes relative in the market is relative to the lithium-ion systems that are out there. The big thing for iron flow batteries that differentiate it from a lithium-ion system is most lithium-ion systems today come from China, we're mostly built in the U.S. Lithium has a thermal runaway, so these things can catch on fire, as I'm sure everyone has read about.
Also, the degradation of batteries is something that happens to lithium-ion over time. You get less charge as you cycle it longer. That's not something that happens to our batteries. Where we've taken the product very recently is it's a non-containerized solution. What we're trying to do is build a much bigger battery system for your hyperscaler, for your utility company within the U.S. These are systems that they can pair against any other energy creation system, whether it's solar, natural gas, wind, et cetera, and they can use the battery system as a way to hold the charge and distribute it at a different time. We've got a nice manufacturing facility with over 100 MW scaled manufacturing capacity in place at our plant in Wilsonville, Oregon.
As I'll talk through a little bit on the next slide in the company timeline, we've got some really nice contracts that we're looking to execute on in 2027 and 2028, with some really T ier 1 names in the space, whether it's SRP, it's Salt River Project, that's one of the biggest utilities in the Phoenix, Arizona area, Google, and then the U.S. Air Force as well. Maybe I'll turn to the next page and give an overview of the company timeline. Here you can see the history of ESS and the history of the iron flow technology. We were founded in 2011 by a husband and wife who came from the academic sphere, and they really wanted to see if they could take this iron flow battery technology and turn it into a product that was in the real world here.
Before that, it was more abstract, and they wanted to turn it into a full product. That's what they did between 2011 and 2021, is they invested a lot of time and resources to basically build and take iron flow from an academic research to sort of a lab scale and the beginnings of a commercialization scale of the battery itself. In 2021, the company listed and became public via SPAC, and they were able to raise a few hundred million dollars to take the product then from its lab scale and beginning of commercialization scale and take it towards the full commercialization and to deliver that to customers, to those utilities, and to hyperscalers. Over the next four years, there was a lot of work that got done into trying to sign commercial contracts, finalize the commercialization of the product.
If you're selling to utilities, there's a lot of work you have to do around everything from being compliant, having fire systems, having really strong controls and software. A lot of that work was done between 2021 and 2024. As the market evolved in that time, the original thesis for the battery and where iron flow should sit in the market is that it should be a battery that would be very competitive with lithium. Lithium systems right now, they come in a containerized solution, and effectively you plug them in. It's a little more complicated than that, you plug in these lithium systems, and then from there, you have a battery. What ESS tried to do from the beginning is that they tried to develop this technology so that you could have a system that rivaled lithium. It was another containerized solution.
That's the product that was sold from 2021 to 2024. What we found over that time is that lithium, really, because of everything that was going on with EVs, the lithium curve in terms of cost went down really quickly. Where the iron flow technology was, is it wasn't as competitive with lithium as we had thought 10 years ago because it came down the cost curve so aggressively. China had put in a ton of manufacturing capacity as it relates to lithium, and they were really selling these systems aggressively, and the price came down very fast. Our original thesis of putting lithium or putting our battery into a container and then competing with the container of lithium, and maybe we could be lower cost or longer duration, we had to change that a little bit.
In 2025, the company strategically pivoted to removing the iron flow battery out of the container, and we started to sell that as a full system just in the open air. That really changed the nature of the type of projects that we could look at, both in size and scale and opportunity. Really, it allowed us to lean into a little bit more of the electrochemistry reasons that you would want to have an iron flow system rather than maybe any other battery system. It works at a much bigger scale. The proof behind that is the flagship projects that we signed with SRP and Google.
In that project, the idea is to put a solar energy generation system next to our battery, and then you can deliver all that power to Google as the offtaker who will use it in sort of a hyperscaler data center type of a scenario. The U.S. Air Force is also a very interesting one, and we've announced that contract value is around $10 million, which by the way, is the same amount of revenue that the company generated just about in that 2021 to 2024 time period, to give you an idea of the change in scale. That was another Tier 1 customer and Tier 1 contract that came in as we've brought it out of the container and are selling more of a solution.
That brings us to when I took over as CEO in January of this year, that we're looking at taking this single product focus with our Energy Base that I talked about that does a really good job of decoupling power and energy, which is what the customer wants and can be an advantage for us. We've got a refreshed management team now. We've got a couple of very strong commercial contracts, now it's all about for us to execute and bring ourselves through that path to deliver these customer contracts in 2027 and then 2028 and beyond. As we're able to scale up, we'll be able to take the cost down out of the product, and the hope is to deliver a very robust EBITDA margin in the future once we've gotten to that scale point.
For now, it's all about finalizing that commercialization of the technology product so that we can deliver to these customers, and we're really excited about the progress we've been making there. To give an idea of where the market is going into the future, we can just talk about the storage market, how it is overall, and then the segments that we're going after right now. You can see on the right-hand side how much the global energy storage market is growing between 2026 and 2031. We're really in an unprecedented time for the needs of electricity in the United States and actually in the globe. For the past 20 years, energy demand has been growing, but not at the same pace that we're going to see now, driven by AI, driven by new data centers and compute power that needs to be out there.
Both the demand style is changing and also the shape of how the demand is going to change as well, because the electricity that you need to run a data center or you need to run an inference or training model on AI is much different than the way that we've consumed electricity in the past for our homes, et cetera. That demand curve and the way it's going to come in is changing. The whole overall market and need is growing. Behind that, you've got a lot of these utility companies that it's not just like they're running nuclear anymore, or they're just running coal or nat gas. They have a bunch of different assets that they're running, whether it's wind, solar, and then all the other ones that I mentioned.
What that creates is a very strong need to be able to store some of these electrons. When you have this whole portfolio and it's operating differently, and then the demand itself is changing and growing, there's a real place in the middle of that to have energy storage and to have batteries that can help to smooth out some of the needs, help store some of the energy that might be coming off the solar that's in excess of relative of what's needed at that time, because the sun doesn't shine all throughout the entire day and doesn't shine every day. The wind doesn't blow every day. There becomes, as you can see on this bottom part of the slide, a huge need for energy storage that's growing in the market, and that's the area that we're trying to address with our product.
You can see from the customers we have, there is real demand out there and people who want to develop some alternatives to the only solution that's in the market right now, which is really commercial, which is lithium-ion. This is just a little bit more about how to break up the market and to see some of our key customer segments. We've talked about utilities and grid operators and hyperscalers, and then the government, and there's other in terms of IPPs or industrial and infrastructure customers that are out there. To give an idea of where we think our competitive advantage really lands in the market is solving this 24-hour day. In the less than 10-hour duration battery storage, lithium-ion is the clear winner. It's got the best cost.
The product itself and the way the physics work for it work well in that zero to six -hour range, and maybe even up to eight hours. Once you get to 10 hours and maybe into 10 to 24 hours, that's the area that we think that we're really going to be very well positioned because we can optimize around that full day of daily charging and discharging. If you think about the eight-hour day and you're able to get power from the sun for eight, and we can deliver that power back from our battery on a 16-hour, all of a sudden you've got a 24-hour day where you're getting base load power, and that's what we're trying to go after in the market.
Again, you can see the growth here in terms of how big the long-duration energy storage market is, our market specifically growing into the future. Here's just a little bit more information on some of the research as to where we think the long-duration energy storage market, our market is, in terms of the growth between now and 2034. Big opportunity in the utility and grid operators. That's going to be a big area for us, as you think about these applications over here on the right-hand side. Again, the hyperscaler and data center and large loads, I think that that's actually going to be a bigger segment.
We're still learning, and I think the customers themselves, the Googles, OpenAIs, Metas, they're all still learning how they want to get power and how they want to set up their power portfolio so they can get it over time, and they're still trying to figure that out. I actually think that we could see even bigger growth from the hyperscaler side, because they really need this. Right now, it's a very big arms race in terms of getting these data centers, getting these assets in the ground so they have the compute. The nice thing for us is it doesn't really matter to us if OpenAI has the better model, or if you prefer Claude, whatever. For us, it's all about the infrastructure.
If you believe in the way that AI is going to grow over time, the AI infrastructure assets, data centers themselves, and then, of course, the power and energy markets, that's where we think we're going to make real inroads. Talk about the product a little bit more. I've mentioned a bit of this so far, it's really trying to lean into that open architecture. It's not in a container anymore. You can see some of the renderings on the right as to how it will look. You have these two big tanks of electrolyte, it runs through the stacks that are towards the back of that picture on the top right. It's great for daily cycling. Over time, there's no degradation, we can provide 15 years of power at the same level.
Because it's a closed system, there's no degradation of power over time, and there's no real losses in there. Again, we're targeting these bigger applications. You won't see an iron flow battery in a car, you won't see it in a cell phone. You're going to see it at these major, large industrial, utility, hyperscaler size applications. Here's a bit more on the technology itself. I won't go into too much detail, but happy to answer any questions on it. I direct anyone who wants to learn more, there's a ton of great videos on our website that can give you a bit more information as to how the technology works. Always happy to have that conversation if someone wants to go deeper.
The most important thing to say is that for us, I think we really do have the best patent portfolio and technology portfolio as it relates to iron flow batteries right now. Recently, in February, we completed the acquisition of VoltStorage, which was a German company that also did flow batteries. At this point, for a technology in this medium duration, I think that we're the furthest along in terms of creating a product that can actually serve that market need. You have a couple of things. You've got the installations that we've done over the past five years, the patent portfolio. We've just acquired the number two competitor in February. There's a lot of reasons to believe that we have the highest technology advancement as it relates to iron flow.
Some of the real-world technology validation is super important, too. As you're trying to bring out new product into the market, there's always that question, does it really work? What's the gap in terms of getting the technology to commercial readiness? These are some of the demonstrated things that we've done. APPA put out a nice report on us, talking about how our technology works, how the strategy can help a utility. I think that was really critical for us. Then we just recently commissioned something in California Central Valley to show how an iron flow system can do something on a over-canal situation. I think this shows that, if you look at the installations that we've completed, the reports that come out, plus the new customers that we've got in the pipeline, there's a lot of optimism to bring to this market.
Then we look at the long-term demand picture and talk about where these power and energy needs are going and what needs to be completed. There's a lot of excitement and interest in having iron flow batteries to meet some of these energy shortfalls and gaps. Maybe I'll do one more slide, and then I'll open it up for questions. This is the technology roadmap. I think one of the things that ESS really needs to show to the investors, show to the market, is that this new Energy Base product that we're working with and that we're trying to develop for these key customers actually works the way we say it works, and can continue to meet the technology hurdles that we need in order to see the visibility to delivering on these bigger projects in the second half of 2027.
If you look at everything that we've done in the past and brings us up to today, you can see that in the third quarter, we want to commission a energy system in our own location in Wilsonville, Oregon, that basically shows that the new Energy Base, this will be the new form factor, that it works, charge, discharge, shows some data that's coming off of the machine, that tells you what we've been able to achieve. I think that's a really important proof point, and we're pushing really hard towards that, because I think that will show the investors, that will show the market overall, that will show the customers that this technology actually works the way it's supposed to, and that you can make some real projections as to where we think the technology can go from there.
Then from Q3, we're going to continue to build up the system. You can see in the first half of 2027, we're going to do 800 kW, and then into the second half, we're going to deliver on that SRP Google project that we had discussed earlier. I've got a few more slides, but maybe I'll stop there, given we got eight minutes left, and see if there's any questions
Absolutely. Drew, well, thank you so much for sharing all of that context. We have a couple of questions from the audience about competition. I know you spoke about lithium-ion costs have fallen. Sometimes, there are situations where it doesn't make sense to use them. Could you talk about the competitive landscape and some of the success you've had in selling ESS against them?
Yeah, sure. Look, I think it's a great question, and it's a very dynamic industry that we have to talk about on the battery side and what's going on. The way I think about it and the way I think about the competition is lithium is the cheapest solution, and they own that shorter duration market. If you want to discharge your battery for zero to six and maybe even to eight hours, lithium is the cheapest solution. The only technology I see that can really compete with that in that short duration is going to be sodium-ion, which is starting to come up the curve. The reason that sodium can be a competitor to lithium is that it doesn't have the lithium piece of it. Structurally, it should be lower cost relative because you're not using a rare earth.
One thing you have to give up with that is the energy density part. A sodium-ion battery doesn't have as much energy per pack as you get from a lithium-ion. If you have the space, then you can actually use a sodium-ion battery to challenge lithium-ion. That's not going to be the place where we can compete and challenge them with our technology. From that zero to eight -hour duration, they're going to be less expensive than us. Where it's really interesting for us is when you start to scale it up. Let's say you have a lithium-ion system that can do four-hour discharge. If you want to do eight-hour discharge, you have to put another lithium-ion system on top of it, so you've got two systems, and now you're doing eight. Let's say you want to do 16 hours.
Well, you have to have four systems like that, right? Our ability to scale isn't linear like that where you have to keep adding systems. For us, as you want to have more discharge and more duration of energy, you just have to add more electrolyte to the side. You're just adding bigger tanks. If I go back, let me go back, too. For us to go from a system that discharges for 12 hours to a system that discharges for 16 hours, these white tanks in the back are basically all that needs to get bigger. You add more liquid electrolyte, and you add bigger tanks. The scaling effect, once you get to a point, let's call it 12 hours, is where you get this crossover where lithium becomes that extra, that four th system of lithium that you have to put on top.
Once you get to that 12-hour and beyond point, that's where our technology becomes super attractive from a cost standpoint. The nice things about the technology, there's no degradation, it's not Chinese-made, there's no rare materials are all great. In the end, the customer needs it to be cost at scale, right? They need to get that electricity because that's what they want. They want electrons. You got to be able to deliver those electrons at the same or better price. Otherwise, they'll always go with what's cheapest. They're running for a profit as well. For us, that big crossover point at scale is around 12 hours. As you get to bigger, because we don't scale the same way that lithium-ion, that's where things work out really well.
If you want to look at who's really competing with us in this area of sort of, call it 10-24 hours, there's a lot of other technologies that have come up the curve and are fighting for their position, whether it's geothermal. You can think of, let's say, geothermal or vanadium batteries, or there's so many different solutions that are coming into this space. I'm having trouble thinking of all of them right now. To me, I think that the thing that we have an advantage of is we put a lot of product out in the market. We're changing the way that we distribute the product, or that we package the product, so it's much easier for customers to take it on.
I think the evidence of that is if you look at the SRP tender, with Google, I think they looked at 14 different technologies and picked us. I think the couple of reasons that they did were cost, of course, is really important, but also the sort of historical viability of the company and the fact that we put product into the market. That gives you a sense that we're leading this race a little bit as it talks about going to market and bringing new technology to market.
To me, I think there will be a lot of different systems that can fit into different areas, and whether you're trying to maximize energy density, discharge time, whether you've got a lot of sunlight or a little, there's going to be different solutions there, but the market is very open for us, and I think we have a time to market advantage, and I do think that there will be other technologies that come into play.
Great context. Thank you. We have a couple of questions around financing. Basically, how capitalized are you to achieve near-term milestones, and then sort of what does your need for financing look like longer-term as you scale up commercially?
Yeah. I would say it's a great question. We ended the first quarter with $20 million on the balance sheet. Look, I think that if we do this right and we rightsize it, so to fund the SRP project specifically, that's a separate, and we're looking at you doing that as a project finance, so not really through the equity, typical ESS company that we're doing. That's a sort of a separate thing. The way to think about that is there's the revenue that comes off of the power purchase agreement for SRP. There's the tax credits that go into that. There's a really nice IRR from a project perspective on that project of itself.
It's not our idea on that or what we're looking to do, what we're in discussions for is to do that more as its own standalone project, that's what we want to do for projects like that going forward. If it's going to be a power purchase agreement and not an equipment sale, we want to package it so that there's a nice IRR within that project finance company. To take it back to what we need for the company itself, I took over in January, I do think there's opportunity to still right-size our investment, there's things we're doing to make sure that we're spending money wisely. I think that for my view is we'll probably look to do another raise into the third quarter, to recapitalize the company a little bit.
We want to combine that with hitting some of these milestones around technology, perhaps new customer wins and contracts like that to give the market a good view as to that we're really progressing and we're taking this to the next level. It's not a situation where we need to come back and ask for more money without any real value that the market's seeing that we're showing progress.
Understood. Maybe as we come up on time, just to sort of summarize for investors who may be coming to you from AI infrastructure or energy density stories, but they're new to your story in particular, how would you sort of sum up the value proposition for those folks?
Yeah. I think the best way for a public investor, so my background, I spent almost 20 years being an investor myself, on the buy side at a company called William Blair. We were a long-only equity shop, focused on growth, focused on long-term ownership. That's my background. I would say to anyone thinking about ESS, I think we still have a lot to prove in terms of our ability to execute and show the market that we can deliver on some of these contracts and that the technology's moving. The value of the company right now is so low that you look at other solutions in the market, like your other public companies.
I think on a technological perspective, we're pretty far along. I do think that the conversations we're having, if you just use Google as one example, hyperscalers really need these power assets. It's not just a situation where you can build more solar or you can build more wind, you can connect back to the grid really easily. They need different assets to meet their power needs. We can be part of that. It doesn't matter which hyperscaler wins or which model wins, if they all get commoditized. We know that as compute power continues to rise, you need more electricity to do it. We think our solution is really well-placed to be able to do that. To me, as in I'm thinking about it with my investor hat on, people don't expect much of ESS at this point.
It's really valued like we're not going to be able to execute. As you see those execution wins, as things are working, I think that's the opportunity to make a good investment return on something like ESS.
Absolutely. Well, with that, we are at time. I'd like to thank you, Drew, for sharing the presentation and the story and taking questions with us. Also thank everybody listening for spending time with us today.
Yeah. Thanks everybody, and thanks Alex for hosting. Really appreciate your help. Thank you.