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Wärtsilä is a 180-year old company that pivoted through technology changes leading to engines for marine power and electricity, and is now a storage leader.
Andy Tang, Wartsila’s VP of energy storage and optimization, has had a winding road on the path to being a force for global decarbonization. He started in finance and telecom, becoming focused on optimizing infrastructure. He’d spent time in advisory roles, but wanted to pivot to a more direct leadership and ownership role.
Two bridge roles helped him along the journey. He left telecom and joined Intel, which was working on a competitor to 4G, getting him much more into wireless technologies. Then he jumped to Pacific Gas and Electric (PG&E), the large northern California company that was deploying a smart meter network, and wanted his wireless and business modeling chops.
Once the smart metering data started rolling in, the question became what do you do with the knowledge of when electricity is being used in a more fine grained way? PG&E’s EV charging analysis, for example, started in Tang’s office when he was there.
Like telecom, electricity distribution is designed for the busy hours, typically 5-7 PM. In telecom, you can find other uses for the effectively free bandwidth. Tang saw the opportunity parallel, in that at the time you couldn’t really Tivo energy. Grid storage was dominated at the time by pumped hydro, which were large infrastructure projects. However, with the cost curves for battery storage, now the Tivo model opened up. Telecom used to do demand management as well, just as electricity still does. Telcos have learned to put a lot more data through the same fiber with modern multiplexing, but there is no equivalent ability to multiply the electricity flowing through the wire.
Silicon Valley didn’t get the fundamental physicality of energy infrastructure and thought that it was as easily disrupted as data and media. They missed that the disruption flowing through electricity was wind and solar and that it was just moving much more slowly due to the inertia of big infrastructure. They also thought that electricity could be disintermediated as media was, and missed that any solution by necessity has to involve the utility as a partner. The first generation of investment in the early 2000s missed this. VCs lost patience and moved on. There is a second generation of VCs which has emerged with more patient capital and more insight.
Historically telcos and utilities were both natural monopolies. Wireless technologies enabled for last mile data and voice allowed true competition and made the telco monopolies no longer useful. Wireless power doesn’t exist beyond centimeters with Qi charging and the like, and distribution remains a natural monopoly. Energy distribution monopolies continue to make sense. In some market providers such as Bullfrog Power are leasing capacity on existing distribution networks from utilities to deliver under different pricing models or to deliver solely green electricity, so there is competition emerging, but they aren’t pulling their own wires.
PG&E was an intentional bridge role for Tang, as he wanted to be more entrepreneurial and able to change the world in a way that acknowledged the role the utility plays. The first startup was commercial building efficiency through AI and smart building technology. That business model was tough and the business didn’t succeed.
The second startup was focused on improving demand response through forecasting. It was a software company that helped utilities have a better prediction of demand response results. The other half of the firm was focused on controlling devices in people’s homes to reduce load. It wasn’t a perfect fit and Tang moved on.
In 2009, Tang was looking at EV charging impacts on utilities. They started with Prius registrations in California, but as electricity is a very local business, they needed to know distribution of EVs. He found that EVs clustered in neighborhoods, and that when clusters popped up they happened very quickly. It becomes a problem more quickly than averages suggest. They had the concept of a Smart Garage that would level charging over the night to reduce the impacts. It’s not a widespread offering from any utility yet that Tang is aware of.
Vehicle to grid technologies becomes more useful for demand management, but Tivo-ing energy mostly likely requires dedicated storage assets. There is also a fundamental conceptual hurdle that utilities have. Demand management depends on a counterfactual. You think that load is going to be in this place at this time at a load of ten units, and with demand management it will be at a load of eight instead, but there’s no way to prove that. It’s not like a gas generation unit that you turn down and can measure the difference. Procurement people inside utilities told Tang that if his company’s demand management projections were wrong, it was no big deal for Tang & co, but the utility procurement person would lose their job.
What Tang liked about storage is that it is the control for energy that’s not counterfactual, but tangible and measurable. Storage represents certainty. The willingness to take it into account in the utility control room is a lot higher. The sale is a lot easier as a result.
That led Tang becoming the 12th employee of Greensmith Energy, which had been founded in 2009 to build the energy management system to control emerging storage solutions. By the time Tang joined in 2014, it had become clear that they had to build a storage system to control, as well as the software. They remained as technology-neutral as possible, becoming compatible with 12 batteries and 16 inverters in addition to their own hardware.
In 2016, he was at a trade show in Dusseldorf in Germany and was approached by a representative of Wärtsilä, someone tasked with figuring out that firm’s strategy for storage. Wärtsilä is a 180-year old company that has pivoted through many technology changes from pulp and paper to glass to reciprocating engines, basically very large internal combustion engines, where they remain a leader in marine power systems. About 30 years ago someone in the firm had the idea that the engines could be put in buildings and become an energy business. Half of the revenue now comes from the energy business, somewhat countercyclical to shipping. And the question is, what would storage mean for their energy business?
Greensmith entered into a strategic collaboration with Wärtsilä where they would get fed leads by Wärtsilä’s global sales force in over 170 countries, and Greensmith would pursue them. They started working on bids together in places like Australia, with Greensmith’s legacy sales force in the US dealing with that geography.
And then Wärtsilä decided that it wanted to buy Greensmith outright, the acquisition closed July 2nd, 2017, and they are coming up on their five year history. Greensmith’s Max product has become one of Wärtsilä’s products. At the time containers were shipped to site and batteries were shipped and installed separately due to concerns about safety and calendar life degradation. Beginning in 2019, with Tesla’s industry leadership on shipping pre-installed batteries, the industry pivoted to follow and Max was no longer suitable. And so Tang started Project Mavericks after the big California wave, and developed their Quantum product.
Our conversation continued in another episode of CleanTech Talks, so watch this space for what Tang and Wärtsilä have been up to since.
is Board Observer and Strategist for Agora Energy Technologies a CO2-based redox flow startup, a member of the Advisory Board of ELECTRON Aviation an electric aviation startup, Chief Strategist at TFIE Strategy and co-founder of distnc technologies. He spends his time projecting scenarios for decarbonization 40-80 years into the future, and assisting executives, Boards and investors to pick wisely today. Whether it's refueling aviation, grid storage, vehicle-to-grid, or hydrogen demand, his work is based on fundamentals of physics, economics and human nature, and informed by the decarbonization requirements and innovations of multiple domains. His leadership positions in North America, Asia and Latin America enhanced his global point of view. He publishes regularly in multiple outlets on innovation, business, technology and policy. He is available for Board, strategy advisor and speaking engagements.
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