Faraday Grid collapse predictable in a conservative market like energy

When people talk about modern digital electrical grids, they usually imply that an inordinate amount of money, something like $3 or $4 billion is at stake and that no-one has much of an idea of how to go about such an upgrade, nor has the appetite for it.

So when companies like Scotland’s Faraday Grid emerged suggesting it had all the answers, it is only reasonable to get all excited and think there is something of a breakthrough going on. Which is all the more reason to be a little disquieted about its seeming collapse this week into the hands of administrators. There was some considerable secrecy about just how the Faraday Exchanger worked, and even more about how this worked in concert with a piece of Blockchain driven control software, to enable grids to take considerably more renewable generation, without falling over.

Last week in the UK, we had a reminder of what a failure of that grid looks like, when two power stations went offline simultaneously and dropped about 15% of the UK’s electricity – causing 1 million homes to go dark and half of the railway network to lose power. So it’s no wonder that grid management companies like the National Grid, are careful before they allow such new devices and new software to work on a national electricity grid.

Faraday’s big claim to fame was the idea that it was being tested by UK Power Networks, which control electricity for London and the South East. This week official statements have been issued to distance UK Power from the Faraday Grid, saying that no such equipment has been installed, tried or delivered.

Given that the relationship was supposed to be 20 months old, quite frankly we don’t believe that. Because the crisis that has brought the company down is supposedly a need for even more money, despite a $32.5 million funding round in January. It looks like more R&D was needed and very probably it was only trying to use the hardware and software combination in anger that showed how far short of being ready for market the Faraday Grid was. It was also tested in a Scottish University.

Strangely Faraday Grid used some of that money to buy two Czech companies according and convert them into an “innovation” center and also acquired an energy storage system cabinet and two subsidiaries of Taiwanese manufacturing giant Foxconn.

We thought this might be to support imminent installations, but clearly the product was nothing like ready and Scobie was preparing a framework to be built out.

The Faraday Exchanger is described as a transformer which behaves more like a router from digital communications technology, allowing energy to flow in either direction, across any particular route to any destination, with each Exchanger also stabilizing the grid frequency as it does it.

The missing piece is perhaps the Emergent Transactional Platform which founder Andrew Scobie said is a system of control of energy distribution with the ability to trade that energy based on best offered price. So a kind of marketplace where several million energy suppliers could trade energy with several million customers.

Scobie’s message has always been that electricity grids are under-used and operate as a one-way delivery system, when they should be multi-lane highways where distributors, consumers, and alternative power generators can benefit from a free-flow of information, backwards and forwards.

Scobie wrote passionately about future grids being completely redesigned to act as a communications network and marketplace, as well as a distributor of power to consumers, facilitating real time transactions. That kind of innovation-speak in the face of one of the most conservative industries – energy – is like a red rag to a bull and he was always going to be a combustible combination when mixed with business men who want to make money, preferably now.

The company says the Emergent Transactional platform is designed to manage electricity generated from any location and from multiple generation sources, and delivered to wherever it is needed. The company has claimed on multiple occasions that this will facilitate the shift from 30% of renewables being a maximum on any one grid, to 60% or even 90% being possible.

Faraday Grid says that the Emergent transactional layer is jointly owned with a company called Amp, known for funding small renewable suppliers in the UK.

Key features listed of the Faraday Exchanger is that it can independently control output RMS voltage, control input RMS voltage, maintain frequency, maintain target power, remove all harmonics and maintain balance between phases. This would make a number of other technologies such as transformers, tap changers, StatComs, harmonic filters and capacitor banks all redundant.

But the question is that no major grid is going to contemplate that much change in s single leap of faith on a start-up. Microgrids perhaps, but nothing too major.

It is hard to see this collapse as a simple matter of running out of money, given how recently the company had a funding round. In Scotland it had just 45 employees, and if you add 100 in the Czech Republic, and other businesses which already had revenues, that cannot eat the cash that was pushed into the company, which was probably enough to run the business for 18 months or so. We suspect that money has been pulled back by investors, and the company was starved of cash.

Licensed liquidator Grant Thorton has laid off all but a few employees and is looking for a buyer for the technology. We doubt very much that a fresh grid architecture is going to be acquired by anyone other than the designers, and that the costs of buying it out will be low and it will almost certainly end up in the hands of Andrew Scobie, in some future financial guise, with another investor behind him and perhaps Amps involvement. Anyone else would probably not believe in the technology and its vision for an entirely new grid architecture.

Scobie’s biggest problem has been being in the UK, and he is likely to look for American money to pump in several hundred million dollars and see the company into first installations and an subsequent Nasdaq IPO. But equally he may not find any, and the Faraday Grid may just fade away.

In April the Faraday Grid appointed former UBS investment banker Mark Corben as CFO, and eBay executive Kris Beyens as chief operating officer, and a Schneider Electric group engineering manager Jan Juhasz came on board as vice president of engineering in the UK.

It would have been easy for any investor to see that Scobie had no intention of thinking small, and would need several hundred million dollars to bring his innovation to market and that’s when the clashes would have begun.