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25 May 2022

UEP emerges not quite from stealth, but still has to create factory

Rethink Energy was curious as to why we had not heard of Urban Electric Power (UEP) when we wrote up last week that it had secured a Memorandum of Understanding to supply Pine Gate Renewables with 4.5 GWh of rechargeable zinc alkaline batteries over the next five years.

We asked Ann Marie Augustus VP of operations if she had been operating in Stealth mode and she more or less agreed. “We’ve had no public relations functions until now, and are built around some research out of the CUNY Energy Institute (CUNY stand for City University of New York) which took place back in 2008.”

“We were still working at the University in Manhattan until 2014 and it all came into being when we responded to a Department of Energy ARPA-E (Advanced Research Projects Agency-Energy) competition to find a battery with a cost of 3 cents per kWh per cycle. We proposed that the primary alkaline battery just needed to be made re-chargeable. After all it has a $13 billion supply chain already in place,” and in a year when the word supply chain has usually meant rising prices for alternative battery cells, that idea has a lot going for it.

“In 2012 we got a grant from ARPA-E and now 45 minutes North of Manhattan we have a pilot 30 MWh a year manufacturing line,” said Augustus. The business is now led by Sanjoy Banerjee, the lead inventor and Distinguished Professor & Director of CUNY Energy Institute.

The battery is a sealed cell costing about $30 per kWh when made in the 1,000s, with a warranty for 10 years and so far the company has the battery re-cycling 2,000 times, not as many yet as lithium ion equivalents, where the industry standard sits around 3,000, but way more than anyone else in the industry has made possible on a zinc and manganese dioxide alkaline battery. This has been achieved by changes to the cathode and the use of various dopants, none of which is public knowledge and all of which are subject to patents. The US patent 10,230,132 suggests the cathode is a paste comprised partly of manganese dioxide, partly graphite and partly some other phase of carbon.

The company claims 24 awarded patents with 40 further applied for, although the USPTO quick search shows only one existing patent we can find awarded to the company.

So if the pilot factory is only just in the process of being set up, how is UEP going to produce 4.5 GWh over a five year period. Augustus says this will be a combination of monies from the Department of Energy loan program, a contribution from the State where the factory is to be built, topped up with debt and equity.

“We will build a factory which offers 1 GWh per shift per year,” says Augustus, from which we presume this is a factory that could run 2 or 3 shifts, so might be stretched to 3 GWh per annum if absolutely necessary, and certainly two shifts for 2 GWh, which means that the company could produce the amount of battery it needs for the Pine Gate deal in around 2 to 3 years.

So it makes sense that the company has a deadline of building that factory inside two years, preferably within 15 months and Augustus is currently booked onto flights this week, looking at potential sites.

The company so far seems to have only raised a few million dollars, although a precise number is not published on the website, and it is clear from talking to Augustus that the company cannot pay for making its own factory today.

“We have a long standing relationship with Jamshyd Godrej, the CEO of Godrej & Boyce G&B holdings a leading manufacturing conglomerate in Mumbai, India, and he sits on our board,” said Augustus. What does Godrej make? Everything from aerospace parts, consumer appliances, all manner of locks, car components and process equipment, and it has created a $1.5 billion revenue business around this, and has been going since 1897.

But this does not mean that the factory might be in India. Certainly not the first one, which will be somewhere in the US, mostly because of this MoU, and Augustus is currently negotiating the supply of factory automation equipment from Bosch, with the advice of Godrej.

Where will the investors come from to top up the factory monies? Not VC funds they are not patient enough, and probably not private equity depending upon how much control they want. Augustus reminds us, “the reason we are still around is that this journey has taken patience, if we had take money from a VC in the early days, we would have been sold off by now.”

So this is a case of selling out the output of a factory first, then building the factory – which Augustus seems proud of, until we remind her that alternative battery chemistries is a race, and going slowly is not an option. Rethink Energy has said a number of times in the past that problems with thermal runaway, dendrite formation, the lack of US lithium battery factories and the low number of cycle times – could all evaporate from lithium ion, potentially by the time solid state batteries emerge in volume in about 3 years. And it is the alternative battery company which has multiple GWh of existing clients in place and product delivered, that will survive as an alternative to lithium ion on the grid.

In our view Urban Electric Power should be open to all manner of funding offers to accelerate its progress, and get a factory to market sooner rather than later.

So far UEP has only sold batteries in 1MWh chunks, such as its deal to replace toxic lead acid batteries for backup at the San Diego Supercomputer Center (SDSC) replacing 20,000 pounds of batteries.

In August 2020 the company even pivoted to making hand sanitizer from a gelling agent used in its battery development. Under a VC that certainly would have been seen as too “off target,” but it was a shrewd move that kept the company open during the pandemic.

Augustus makes the point, “most of the projects in development at Pine Gate need around 800 MWh of battery, so we could fulfill our MoU in just 5 or 6 projects, as the company has 15 GWh of storage projects planned.”

Survival in our view will be a close run thing where UEP is concerned, and certainly a large manufacturing partner in India will do it no harm, especially if Godrej offers to fund an India branch of the business. We will keep in touch with UEP and keep our readers up to date.