Season 2, Episode 8 - Game Changers and Transition Makers: Mega-scale battery transformation with Akaysha Energy

Elena Lambros:

Hello and welcome to ESG Matters @ Ashurst. I'm Elena Lambros, a partner at Ashurst Risk Advisory, focusing on climate change and sustainability. You are listening to the second season of Game Changers and Transition Makers. In this series, we meet global entrepreneurs who are embracing disruption to boost business performance and drive to sustainability agenda.

In today's episode, you'll hear my conversation with Paul Curnow, the managing director and chief commercial officer of Akaysha Energy. Akaysha is a dedicated builder-owned operator of mega-scale battery energy storage system. And so without further ado, let's jump in and hear the discussion. Hi, Paul. Welcome to the podcast and we're so happy to have you here today.

Paul Curnow:

Good to be here. Nice to see you again, Elena.

Elena Lambros:

Nice to see you as well. I thought we might start by explaining to our listeners, you could tell a little bit about yourself and a little bit about your business, Akaysha Energy.

Paul Curnow:

Sure. I'm the chief commercial officer at Akaysha Energy. And who are we? Well, we are a developer-owner-operator of large-scale grid-connected batteries. Our whole mission is to accelerate the energy transition through the innovative design, rapid deployment of mega-scale batteries. And I guess the context for that is that we all know in Australia that we've got an 83% renewable energy target by 2030.

And to get there, to bring more renewables onto the grid, we need large amounts of storage. And of course there's different forms of storage, different duration, pumped hydro and others play a role in terms of that longer duration. But when we're talking about the bulk of the storage needs, the decarbonised electricity grids, it's really around batteries and that's where we play. That's our focus, on large-scale grid-connected batteries.

Elena Lambros:

Yeah, thank you. And I think that is really obviously an important part of this whole kind of energy transition and having those large-scale batteries. Do you want to, so people can visualise it, because your batteries are quite large, when you say large-scale, they're significantly large. Maybe explain that a bit more.

Paul Curnow:

Yeah, that's right. They're a little bit larger than a power wall on someone's home. I guess what the project that put us on the map as it were is the Waratah Super Battery just north of Sydney on the old Munmorah coal-fired power station site. That's an 850 megawatt two-hour battery. That's the world's most powerful battery in terms of the 850 megawatt's capacity. That was a project we won under tender from the New South Wales government. And that battery is playing a very specific role to provide system strength and system protection services for the Sydney Ring, particularly around where New South Wales bring in more renewable energy capacity from those renewable energy zones. That's a very large project for good reason, providing that service and virtual transmission.

We also building a very large four-hour battery. We recently closed the financing just over a month ago on Orana, which is our 415 megawatt, 1680 megawatt hour battery just outside of Wellington in New South Wales. That's the world's... Well, we think it's the world's largest. I think we are claiming that because it's done as one stage. But yeah, I guess the point is we are going for big batteries. And part of the reason for that is the grid needs it. We clearly need a lot of large storage and parts of the grid really need that significant capacity.

Certainly, areas around the Central-West Orana REZ, which is where the Wellington battery is located, that's going to play a really key role building up that Central-West Orana REZ capacity. And as I mentioned, the Waratah Super Battery is playing an important role given the size of the task around New South Wales renewable energy targets. We've also got 150 megawatt two hour project in Queensland, Ulinda Park and a 205 megawatt two hour project in Brendale as our four projects currently under construction. That puts us at four gigawatt hours under construction at the moment.

Elena Lambros:

Okay. Well, that's pretty impressive. Four gigawatt hours under construction. And I think you can absolutely claim being the world's largest.

Paul Curnow:

Yeah, okay, that's fine. I think there's a Tesla one in California that's two stages, but hey, look, the more the better. If someone building the next biggest one, that's fantastic because we need more of this storage. This is really about decarbonising electricity grids. And as I said, we can talk about renewables, but we don't get to 85, 90, 100% renewable energy grids without solving the storage at the same time.

Elena Lambros:

Yeah, absolutely. Storage is obviously becoming a really big part of that. And then it correlates into my next question, which is talking about how the idea came about and what you were trying to address. Maybe just talk a little bit more around that and how you've ended up with all of these projects underway at once.

Paul Curnow:

Yeah, for sure. We are a young company and so we have to pinch ourselves a lot of the times when we say four gigawatt hours under construction and the size of those batteries and we've only been around since June '21. Akaysha, the origin story, Nick Carter, our CEO, Andrew Wegman, our chief investment officer and CFO and Tony Fullelove, our chief development officer set up Akaysha in mid-'21. And they all came from backgrounds across the energy sector from a development, engineering, finance, technology background.

I was actually at Ashurst at the time working there and brought Akaysha on as a client. I was doing a lot of that early work as the lawyer in the business or helping the business at that stage. The business thesis from day one of Akaysha was really that standalone large scale view of batteries. We didn't think about, "Oh, we want to do batteries alongside renewables or looking at behind the meter." And they're all valid. They're also part of the mix.

We were really focused on that market segment. And I guess as I mentioned in those introductory marks, it was really around the clear need for that size of system being able to scale those sorts of batteries. But it was also around proving that we can make batteries work in existing power markets with the price signals that exist. And so we've built Akaysha on the basis that we're not chasing subsidies or necessarily capital grants. I mean obviously they could play a role and are important, but we wanted to show that we could do batteries on their own and they would be economically viable and hit the returns that we need for our investors on the basis of the existing pricing in wholesale markets.

One of the things we did very early on was bring in our director of energy markets, Pan Galanis, who has the team now of five energy analysts and market forecasters. We have our own very sophisticated in-house view of how energy markets operate and what revenue will be made in those, including having built our own dispatch optimisation software. And that was a key part of what I guess is Akaysha's about, demonstrating that these projects are viable and can work. One of the things that's a challenge around that is always balancing that contracted revenue. Getting off-take products for those batteries, that balances that against obviously the merchant upside that we see we can make in the market.

Probably an interesting irony of batteries at the moment, particularly in a volatile market, wholesale market like Australia, not just Australia, is that business case for batteries is really supported by volatility. You think about charging when you've got excess renewables, particularly even negative pricing. We're seeing a lot of that in Australia, especially Queensland. And then discharging when you've got high vol events. And that's really part of the economics of batteries as well as the ancillary services like frequency control.

But I think that in many ways that we're seeing the volatility in these markets because storage wasn't done at the same time as rolling out renewables. There's a big focus on we've got to get renewables over the last 10, 15 years and now storage is playing a catch-up. And you start to see that's led to a lot of volatility in those wholesale markets. Which if you probably designed it from day one, maybe that's not how you do the transition, but that certainly does support the business case for batteries.

Elena Lambros:

Yeah, excellent. If you think about the fact that this is where we are, you're a young company started in '21, you've already got four projects under construction. You've really worked out the market in terms of how this can be economically viable to focus on those large-scale batteries. What then is the next step in terms of success for you? Where do you see Akaysha going and the role it can play, I guess not only here in Australia, but global role?

Paul Curnow:

Yeah, it's a good question because we keep an eye on that. Notwithstanding we've got a lot to do in delivering the projects we committed to. Definitely new markets. And this is an interesting point to make actually, we definitely see that what we've developed here in Australia with our business model and the success to date, we can export that into other markets.

And the interesting thing about Australia, as you know, we are a bit of a test bed or a guinea pig for a lot of this because we have a lot of challenges in our grid that other markets don't have. A long, stringy grid, very small load areas or concentrated load areas with all the renewables then spread out. And it's a bigger challenge than compared to the US and Japan or Europe in terms of those markets.
What we're designing, how we designed the batteries, the grid issues we face, the off-take products that we are writing, we absolutely can export that to the world. And when I say we, I mean us Akaysha, but really Australia, the learnings in Australia. We are looking at Japan, we've got a number of early stage sites in Japan. It's a big market, as you know, a power market. I don't know, maybe is it 10 times as big as Australia's? It's huge.

Elena Lambros:

Something like that. It's very big.

Paul Curnow:

Something like that. It's very big. And decarbonising there is a challenge. They don't have the wealth of renewable resources, at least not on land. There's a lot of solar of course, and no offshore winds coming. We see some good opportunity in Japan. It's probably a bit of a slower market because they've just been going through liberalisation of the wholesale market, but we definitely see some good price signals that will emerge there for storage. And then we're also looking at the US. The US, and when we talk about the US, there's nine different power markets or grids there. It's not one.

Elena Lambros:

It's not just one easy market to get into. Right? It's quite a complex. Yeah.

Paul Curnow:

Well, actually an interesting fact, the ERCOT, which is the wholesale market for Texas, and that's actually an island. Texas' grid is pretty much an island. It's not connected in any meaningful way to the rest of the states. And it's an energy only market like Australia, so a lot of similarities. They had gigawatt demand, but the gigawatt demand on one day was the whole of the NIM.

Elena Lambros:

Oh.

Paul Curnow:

Yeah, so it's a big market. We think the US, there's a big opportunity for us there. Obviously there are other players, but what I described in terms of our approach to making batteries work and viable, we definitely want to take that into the US. We've got a couple of projects already secured in ERCOT and looking at building out a few more parts across California, the Central West or the southwest area. And then the challenge in the US, like a lot of these markets is grid congestion. Just the fact that providing the grid connection, the grid capacity, that's a big constraint on all systems at the moment to decarbonise because of course that whole rollout of that infrastructure has its own economic basis in that runs a bit slower I think than where we probably need it to be.

Elena Lambros:

That's actually fascinating. You are looking at Australia and Japan and the US, which are all different markets, but still making that economic viability work for batteries. If you think about that then what do you think is really the key to reimagining that kind of current system and I always ask the question around changing the game in terms of about trades and the energy transition?

Paul Curnow:

Yeah, it's a good one. I think for me there's a big challenge with... And we've seen it with a lot of our renewables, is that you have these large grids and the way they were built around centralised generation for many, many years, whether that's coal or gas or hydro or nuclear. It's just very hard to rewrite the rules and make those changes that can easily accommodate a lot of renewables and storage. I think that is a hard one if you think about reimagining current systems and how do you change the game in a quick way. I do think making sure that the rulemaking process is as quick and nimble as you can is really key, I think. But at the same time, we see in most markets that that's actually really difficult because you have so many interests.

Elena Lambros:

I was going to say, that's a really complicated thing to do, right? You're rewriting things that have been in place for such a long time and in such a different approach, it's hard to do that quickly.

Paul Curnow:

Yeah. And so, if you think about some of the policy drivers for renewables. Well, you look at the policy drivers for renewables in Australia over the years, and now even with the Capacity Investment Scheme, which covers generation and storage, it's an overlay on the wholesale market. It's not putting a new price signal into the wholesale market. It's actually just another policy that's being written on top.

And that's what you see. I guess for me, reimagining current systems changing the game would really be around making sure that the price signals or those policies, those changes actually drive the right price signal within the system. Now of course, we know one way to do that, which is the whole economy carbon price. I mean, the economists have been telling us for decades it's the most efficient way, and that would absolutely drive all the sorts of outcomes around delivering more renewables and storage. And if you put the carbon price on emissions.

Elena Lambros:

You could do that. It seems unlikely that that's-

Paul Curnow:

No, I know. Yeah, I'd put that in the changing the game category only because politically it's just so not an option in most markets. So that if someone could really do that, I think that would be game changing, even though it's not a new policy by any stretch.

Elena Lambros:

Paul, I think you have a really interesting investment structure in terms of the way that Akaysha got started with quite a large investor stepping in to support the start of Akaysha.

Paul Curnow:

As I said, yeah, we're a young company, started mid-'21. And then we were acquired by BlackRock in mid-'22. We are a BlackRock portfolio company. To be more specific, we sit under the climate infrastructure division at BlackRock and invested by a few different pools of capital within that space. Part of our capital comes from the Global Renewable Power Fund III that BlackRock's been invested capital from. We've got some co-investors in there as well on different assets, but it's all BlackRock managed funds.

And so if you think about our investor base, it's pension funds, super funds, insurance companies, sovereign wealth funds. And they are, as you know, long-term institutional investors looking for that long-term return. And so that really underpins, as I said, our model of being a long-term or a developer-owner-operator as I said right at the beginning. Our model is not to develop and then flip projects, which of course is a valid model as well and part of the picture. But we are will be long-term owner-operators of these assets.

For us at the time looking to grow the business, it really was important to find that equity partner who would see that long-term vision. And to your point about scaling up quickly and where do we want to go next? We wanted someone who would partner with us to come on that journey. And so it's been amazing to have BlackRock as a partner. You think about Waratah Super Battery, that was the no debt, 100% equity commitment. We've brought in debt on some subsequent projects to help recycle that capital and push that into the new projects. But amazing commitment from BlackRock to underpin our expansion plans.

Elena Lambros:

Yeah. That is an amazing commitment. And also it gives you the confidence that your model that you have around the economic viability and long-term structure is probably well-founded given that they're willing to invest with you. It's great.

Paul Curnow:

Yeah, you're right. I mean the best validation of a business model is to be invested in at that level, right? Absolutely.

Elena Lambros:

Changing tack slightly, what is your own personal commitment to net zero in the next 12 months?

Paul Curnow:

Well, I think for me, I have bought an electric vehicle recently.

Elena Lambros:

Have you?

Paul Curnow:

Yep.

Elena Lambros:

You like it?

Paul Curnow:

I love it. Maybe I won't say which one because it's probably better not to say.

Elena Lambros:

That's okay. No, yeah, yeah, that's fine.

Paul Curnow:

But no, I do love it. And I've actually just got a charger finally installed at home, so now I can actually time it so I can be drawing the solar that I've got on the roof to be charging the battery. Obviously that's the dream way to do it. I'm really excited about that. I think we are all waiting for batteries to get... And this is an interesting point. We're going to see this in large-scale batteries and small-scale batteries to get more bit denser so you get more energy out of those batteries and that increases the range. I think that's going to be critical for the EV market, of course, to increase range and the charging infrastructure that goes with that.

Maybe just to add, I think at an Akaysha level, one of the things, and this is personal as well as Akaysha, is really our Scope 3 emissions around flights and stuff. We are looking at setting up an offset program around that because one of the things we have to do as a BlackRock entity is obviously report all of our Scope 1, 2, 3 emissions and other ESG metrics up into different reporting processes.

And we actually fall under the EU SFDR Article 9 requirements because the fund that invests into Akaysha is domiciled in the EU. We do reporting under the EU taxonomy and all of that sort of stuff that flows up from Akaysha's portfolio company into BlackRock. And so we are looking obviously across our Scope 1, 2, 3. And Scope 3, how do we improve that in our supply chain with our customers?

How do we do that in terms of our own corporate footprint? That is something we're looking at because we do, given those plans I mentioned, ambitious global plans, we do a lot of international travel, so we need to obviously be looking at how we can offset and manage those Scope 3 emissions.

Elena Lambros:

Yeah, great. Thank you for that. Thanks for sharing it. And I think also being an Article 9 fund obviously does buy that intense level of scrutiny to meet that. I think it's really great that you can admit to being an Article 9 fund because I know that's the way to case.

Paul Curnow:

Yeah, just on that. One thing, I think it's an interesting point to share on the Article 9. I know, I mean this probably for a lot of listeners, they're probably thinking, "What the hell is that?"

Elena Lambros:

What is Article 9? Yeah.

Paul Curnow:

Yeah. But I think that whole EU taxonomy, the Article 9 is all about providing greater transparency and more consistency across how corporates and funds and investors obviously report on the level of impact across a whole range of ESG criteria. If we just look at carbon emissions or we take batteries as a part of the decarbonisation efforts, what I like about what Europe's done is they've basically treated batteries as being compliant and meeting those ESG requirements as an enabler for more renewables.

And so yes, of course batteries, like a lot of manufacturing stuff have embedded carbon. But the way in which we demonstrate compliance with Article 9 is how we manage the Scope 1 and 2 emissions, on-site matters, all of that, the sorts of things, whether it's water, modern slavery, a whole range of those ESG criteria. But the good thing about it is it is very much positioned that batteries have a key enabling role for more renewables. And so you don't have that detailed scrutiny down to how are you tracking and minimising every embedded ton of carbon in the projects.

Elena Lambros:

Yeah, okay. That is really interesting actually. Because that allows you to enable the transition obviously without trying to also then do the embodied carbon end-to-end with the scale that you would think because it's got to balance it, right?

Paul Curnow:

Yeah. Yeah. Because otherwise, sometimes... And I think this is happening a little bit in green hydrogen space where you're almost handicapping that expansion by putting this level of scrutiny or requirements around some of those things. And so if you take the hourly matching or the timestamp matching on green hydrogen, that's a high bar to be meeting from day one.

I have no doubts over time if we take batteries for that matter and Article 9, there'll be a point where you have to show actually what's the level of recycled content in your battery? And that's legitimate. We need to keep raising the bar. But what I like about the approach is, the batteries, it's not making us get over that hurdle on day one because I think it just would slow down the deployment. And that doesn't help the decarbonisation of electricity grids.

Elena Lambros:

No, it doesn't. And you've always got to make some of those choices along the way, right? From day one, you can't meet every criteria that you try to. I think that's really an important point. My final question is going to be, if you could provide our listeners with one takeaway from this conversation, what would it be?

Paul Curnow:

I think it would be that, and particularly for those of us who work in the sector and the listeners also in the sector, we've got to keep reminding the broader public, our families, our friends, others, that it's not all doom and gloom when it comes to climate. Yes, we can't deny the science and it is bad in terms of the impacts already and what the task required. But I do think there's a lot of really positive stuff that's happening. Our journey has been amazing I think, and that's part of our mission to make that positive contribution. But there's a whole bunch of really good stuff, and I really believe we've got to make sure people see that, hear that, understand that it's not all just bad news. And I think that's really important. Otherwise, we lose people along the way.

Elena Lambros:

Yeah. No, thank you. One of the reasons I love talking to you is because of that positivity and the fact that you work at Akaysha Energy or somewhere who is making such a climate positive impact. Thank you for joining. Really liked talking to you.

Paul Curnow:

Yeah, that was great. Thanks, Elena. Yeah, really enjoyed it.

Elena Lambros:

Thank you for listening to this episode of ESG Matters @ Ashurst. I hope you found this episode engaging and inspiring. To subscribe to future episodes of Game Changers and Transition Makers, and to hear previous episodes, click on the link in the show notes or search ESG Matters @ Ashurst on Apple Podcasts, Spotify, or wherever you get your podcasts. And while you're there, please feel free to leave a rating or a review. And finally, to learn more about all Ashurst podcasts, visit ashurst.com/podcasts. In the meantime, thanks again for listening, and goodbye for now.