Startup Series: Rondo Energy
John O'Donnell is the Co-founder and CEO of Rondo Energy.
Rondo is tackling the massive emissions problem of industrial heat. Almost everything around us requires heat to be made, from chemicals, to paper, to cement, to steel, and historically, nearly all of that heat comes from burning fossil fuels. Renewable energy is now becoming cheaper to procure than fossil fuels, but as we know, it's intermittent, and a factory needs access to heat for its processes when it needs it. So how do we harness the fluctuating availability of renewable power and let industry turn it into a reliable and extremely high temperature heat as needed?
John believes that figuring this out is the opportunity of a lifetime and one of the biggest levers to unlock decarbonizing our economy. The Rondo heat battery, in simplest terms, takes electricity and turns it into heat via an electric heating element, like those found in a toaster, and then circulates that heat across a condensed package of bricks that can currently achieve heat of up to 1500 degrees Celsius and store it at high efficiency for extremely long periods of time.
It's a surprisingly low-tech sounding approach for a very complex problem. In this episode, John discusses the problems of industrial heat, how industry has historically solved them, some emerging technologies competing to decarbonize heat, and how Rondo works. We also talk about how project financing is evolving to consider not just the power generation capabilities of a renewable energy project, but how an end-to-end system such as renewable energy plus heat or storage can change costs for an industrial heat and power consumer.
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Episode recorded on May 24, 2023.
In this episode, we cover:
[03:13]: John's background in computer science, building companies, and working in the solar thermal space
[06:08]: Introduction to global industrial heat needs
[08:17]: Why it's challenging to harness renewable energy for industrial heat
[11:30]: Why using electricity off the grid isn't feasible
[13:05]: Falling cost of renewables and policies driving decarbonization of industrial heat
[14:58] Carbon capture and the concept of a “green premium”
[17:12]: The new class of electric thermal energy storage technologies
[19:14]: Pros and cons of alternative energy storage options
[24:09]: Overview of Rondo's tech
[37:26]: How Rondo can convert stored heat back to electricity for grid supply
[39:03]: How John sees the evolution of Rondo
[43:11]: Rondo's projects in operation today
[45:24]: Partnering with manufacturers and exploring zero-emission cement manufacturing
[51:32]: The size and makeup of Rondo's products
[53:53]: How the project financing space has evolved
[59:12]: John's closing thoughts and opportunities in the space
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Cody Simms (00:00:00):
Today's guest on the My Climate Journey Startup series is John O'Donnell, co-founder and CEO of Rondo Energy.
(00:00:08):
Rondo is tackling the giant emissions' problem of industrial heat. Almost everything around us requires heat to be made from chemicals to paper, to cement, to steel, and historically, almost all of that heat comes from burning fossil fuels. Renewable energy is now becoming cheaper to procure than fossil fuels, but as we know, it's intermittent and a factory needs access to heat for its processes, when it needs it. So how do we harness the fluctuating availability of renewable power and let industry turn it into a reliable and extremely high temperature heat as needed?
(00:00:54):
John believes that figuring this out is the opportunity of a lifetime and is one of the biggest levers to unlock in decarbonizing our economy. The Rondo heat battery, in simplest terms, takes electricity and turns it into heat via an electric heating element, like those found in a toaster and then circulates that heat across a condensed package of bricks that can currently achieve heat of up to 1500 degrees Celsius and store it at high efficiency for extremely long periods of time.
(00:01:32):
It's a surprisingly low tech sounding approach for a very complex problem. John and I have a great discussion about the problems of industrial heat, how industry has historically solved them, some of the emerging technologies that are competing to decarbonize heat and how Rondo works. And lastly, we talk about how project financing is evolving to consider not just the power generation capabilities of a renewable energy project, but how an end-to-end system such as renewable energy plus heat or storage can change costs for an industrial heat and power consumer. I loved having this conversation with John and hope you enjoy it.
(00:02:17):
I'm Cody Simms.
Yin Lu (00:02:18):
I'm Yin Lu.
Jason Jacobs (00:02:20):
And I'm Jason Jacobs, and welcome to My Climate Journey.
Yin Lu (00:02:26):
This show is a growing body of knowledge focused on climate change and potential solutions.
Cody Simms (00:02:31):
In this podcast, we traverse disciplines, industries, and opinions to better understand and make sense of the formidable problem of climate change and all the ways people like you and I can help. And with that, John, welcome to the show.
John O' Donnell (00:02:47):
Thank you. It's great to be with you.
Cody Simms (00:02:49):
John, we're going to have so much to talk about and you have been in this space now for quite some time and you've seen the evolution of solar going from almost science project to full commercial deployment to where it's now essentially cost competitive or better than fossil fuels. And I am imagining you're starting to see the same thing happen from a storage and heat perspective. I want to hear your story. How did you get into all of this?
John O' Donnell (00:03:17):
Thank you. It is a good question. I was originally a computer scientist. My first job was building computer systems supporting fusion research, which has been on the breakthrough of reaching readiness for decades. I think the fusion programs had more than a 50-year schedule slips since I first started working on it. I built companies in the computer industry. I've got a machine in the computer history museum. I built a company in the semiconductor industry and in 2005 sold that chip company. And there was a moment there where the venture community was looking very broadly at energy technologies and saying, "Look, we can disrupt and really make a big impact in a way that we did in other industries." And there were a lot of lessons learned by myself as well as others about how different the energy industry is. But the premise that new technologies will create the framework for giant flows of private capital, building new kinds of infrastructure, that is the foundational solution to our giant problem.
(00:04:22):
Okay, what's available? I spent a while back in 2005, 2006 looking at a lot of things in [inaudible 00:04:29] office and I wound up falling in love with the solar thermal space because at the time photovoltaic solar was $20 a watt. There was technology that had been built that could be about six. I found an Australian company bought them. We thought it could be four. And that was a ton of learning about how hard it is to take a new technology to large scale. We signed a $600 million project with a big utility. We were unable to bring that into construction because a new technology that hasn't been built at scale, how does it fit with conventional project finance? We wound up having to sell the company to the French nuclear giant arriva who went on to build a few hundred megawatts around the world. But during that journey, photovoltaic solar was falling at an amazing reduction per annum in cost.
(00:05:28):
I was briefly a partner in a boutique fund, VC Fund looking at carbon removal technologies because I was skeptical of those conditions I met. Will we see technologies that can be deployed at scale, driven by private capital that can make an impact in the relevant timeframe? I met the founders of another solar thermal company and upon diligence left upon joined the firm and we went on to build more than half of all the solar industrial heat that's running worldwide right now.
Cody Simms (00:05:58):
That company, GlassPoint, I believe it was-
John O' Donnell (00:06:01):
That's right.
Cody Simms (00:06:02):
Has an installation that can do, what? 330 megawatts of peak power. Is that correct?
John O' Donnell (00:06:07):
Yeah, that's right. And the IEA published a report a few years ago on how much energy is needed and used for industrial heat. Industrial heat alone is a quarter of all world CO2, a quarter of all world final energy use, and it's essentially all oil, coal and natural gas. Now, the IEA, the if you do a units' conversion, it's about 10,000 gigawatts, about five times more wind and solar that's in the world that's needed to re-power it. And we built 0.3 gigawatts and that's more than half of everything that's out there. So it's a sector that hasn't gotten started yet. We learned a lot of lessons about what works and what doesn't work. We were firmly in touch with this is the problem we want to solve, is this the tool? Can we take this tool to large scale?
Cody Simms (00:07:03):
How many gigawatts did you say was the global needs based?
John O' Donnell (00:07:07):
10,000 gigawatts replaces, it's now about 110 exajoules of energy that today is coal oil and natural gas vastly.
Cody Simms (00:07:17):
For heat, specifically?
John O' Donnell (00:07:19):
For heat specifically. That's right.
Cody Simms (00:07:21):
When I think of heat, I think of cement production, I think of steel production, I think of chemical production. What are the other major uses of industrial heat today? And do you have a sense of what that breakdown looks like?
John O' Donnell (00:07:34):
No, absolutely. Yeah. So the world is really paying attention to these matters in a new way than just a few years ago. You nailed a number of the big sectors. The Department of Energy, the USDOE has now created an office specifically focused on this problem. Their assessment in the US, I think chemicals is number one, steel is two, food and bev is three. Everything from evaporated milk to pasteurization to making tomato paste. Paper products is next. Then cement, I think. So cement has emissions that come from the rock as well as from the fuel. The fuel is about 40%.
Cody Simms (00:08:17):
And why have we not been able to harness renewables yet in a major way for this problem? Is it primarily the intermittency issue?
John O' Donnell (00:08:28):
Well, there are a few things. People have said this is a hard to decarbonize sector. And first of all, for lots of commodities, those commodities are made with low margin. And for many of them, the cost of energy is a very big part of the cost of total production. We see the chemical industry relocating around the world based on the relative price of natural gas or fossil fuel. A friend used to say, "Why was all the heavy industry on the coast in England?" It's because that was where it was cheap to bring the coal.
(00:08:58):
So cost is a huge factor. And another is that heat is not heat. That is the way heat is used is different in different industries. But for sure, you mentioned the one matter, which is that it's got to be continuous, it's got to be reliable. Whatever technology has got to be inside the factory fence and the factory manager can sign a PPA for solar that's delivered to his substation and he doesn't care if the solar project is on or off.
(00:09:34):
The grid is going to balance it. Industrial heat is a really different matter, so the cost challenge is much higher. The standard of performance is higher. And then there's this matter that for many of the processes that you mentioned, people understand the temperatures that are required are high, and until recently, if the primary energy is too expensive, no one's going to spend time investigating, "Okay, how do we take that primary energy and use it for this?" The expectation all along has been the only way we're going to solve this problem is by continuing to burn fuel and now burn even more fuel to drive carbon capture, which is going to raise the price of all those commodities permanently. But that will solve the problem when we're willing to pay enough for it. And the wonderful thing is now there's an entirely new way of solving the problem that's lower cost than business as usual.
Cody Simms (00:10:30):
And I suppose when you think about it, coal and oil, very portable, and when you use them by releasing energy, you are automatically releasing heat just because they're combustion technologies. Whereas renewables, you're generating electrons and then somehow those electrons need to get converted to heat energy. That's not a natural byproduct. Am I thinking about that the wrong way?
John O' Donnell (00:10:52):
So heat does not convert to electricity at a hundred percent efficiency. There are all kinds of temperature and the carno limits. Electricity to converts to heat at a hundred percent efficiency in your toaster, in your hair dryer. With low temperature differences, heat pumps can actually convert electricity with more efficiency than one by harnessing some ambient heat that only works really practically at low temperatures, but at any temperature, electricity can be converted to heat at up to many thousands of degrees. It's a question of how you do it.
Cody Simms (00:11:29):
Got it, okay. And so historically, why hasn't just using electricity off the grid been a primary heat source then?
John O' Donnell (00:11:38):
When electricity on the grid is generated in a power station, it's converting 40% of the heat burned from the fuel into electricity and then you lose another five or 10% to get it to your point. You're always better off from a total fuel consumption, burning fuel locally instead of burning it in a power station. And the cost of running that power station, the grid also means that historically the cost of electricity per unit of energy has been much higher cost than the cost of burning fuel. And wind and solar fell below the cost of grid electricity in most places in the world several years ago. But we're right now at this transition point where wind and solar have and are falling below the cost of burning stuff in many places in the world and everywhere in the world for sure, just over the next few years. So that next step means that really it's only now, it's only very recently that there's not just a climate drive, but an economic drive, the notion that the zero carbon future can be cheaper than business as usual, that's only very recently.
Cody Simms (00:13:02):
And that's cheaper just on an input basis. These same companies are also now facing the fact that the outputs that they have, including the externalities of their emissions, are starting to, in some cases be counted against them from a balance sheet perspective as well as their share price or whatever is being beholden to some net-zero pledge or claim also, I'm guessing.
John O' Donnell (00:13:25):
Yeah, we're seeing a mix of public policies, things like the European ETS, which is now sending carbon prices all around the world because of the recently enacted carbon border adjustment mechanism. We're seeing policies in Canada that's setting a nationwide carbon prices. Many jurisdictions around the world are creating markets where carbon prices are investible. We are also seeing corporate action in buying low carbon commodities, low carbon aluminum trades on the world, exchanges at a price premium to conventional aluminum. We're seeing many different drivers in addition to simply what is the respective cost of fuel and availability of wind and solar on an energy purchase agreement.
Cody Simms (00:14:19):
So I'm hearing you say, A, the base economics of just access to power are tipping in favor of renewable energy sources. B, the responsibility a company has in terms of burning fossil fuels and releasing emissions is starting to face both regulatory and to some extent, social and economic pressures. And so these companies are looking for alternatives. Seems to me the easiest alternative is do what you already do and just plug a carbon capture device on it. But I know you surely have opinions on that, and it sounds like again, the underlying economics of renewables are even potentially making that less favorable toward new innovations.
John O' Donnell (00:14:58):
For decades, we've been saying that the carbon capture pathway is the only thing that we're going to do that's going to be the least expensive thing. It's going to raise production prices. It's going to effectively raise the cost of fossil fuel by maybe 50% because we're going to burn 30% more fuel and run lots of expensive equipment. And ultimately, if we're going down that track, if we do it at scale, we need to build a physical infrastructure that's about the size of the world's petroleum industry infrastructure and it lacks a business model without either taxpayers or consumers paying those extra costs.
Cody Simms (00:15:37):
That is the definition of green premium. You are creating more cost without necessarily greater economic benefit to the downstream consumer.
John O' Donnell (00:15:46):
Well, that's right.
Cody Simms (00:15:47):
Other than the externalities going away, I guess.
John O' Donnell (00:15:50):
That's right. And one of the foundational ideas about green premium though is that we hope that when we introduce new technologies that they come down in costs so that at scale they are no longer a premium price. The capture technologies, by definition, any process that's running carbon capture, it's cheaper if you just turn the capture off, but without a class of solutions that could reach that price point. But we've had 20 years of saying that's the way we're going to go. But during those 20 years, the wind and solar industries, through endless individual innovations that collectively get called the learning curve, brought costs down 90% so that now on a primary energy basis, you can have intermittent electricity at any scale you like. There is vast private capital that wants to build renewable electricity infrastructure. We understand how to do that at the largest scale in most everywhere in the world.
(00:16:55):
So if we could harness that to convert it into the form that industry needs of continuous and safe and high temperature and efficient, okay, now we have a completely different solution to that problem. And there are two buckets in that. One of the things that we've been working on now for at least a decade collectively is using that intermittent electricity to make hydrogen, store the hydrogen, burn the hydrogen. Absolutely, that will work. And absolutely best case, it's about 50% efficient, taking intermittent power, you can store it and delivering continuous heat, losses in electrolysis and especially compression and combustion. But it's wonderful. It's potentially cheap to store. You can move energy from July to January, but it's two megawatt hours of electricity for one megawatt hour of heat. This new class of technologies in which we are driving and others are now as well, don't do chemistry, don't do combustion, just convert electricity to heat the way your toaster does at a hundred percent efficiency.
(00:18:07):
Now, if you can build an energy storage system and you insulate it, you put the proper blankets around it, the least efficient of this new class of electric thermal energy storage, the least efficient are 90% efficient. We happen to be 98. So saving twice as much fossil fuel per megawatt hour of wind and solar can change the curve of how fast we decarbonize because it's true in the United States, it's true in Europe, one of the greatest challenges is how fast can we get the wind and solar facilities cited and permitted? There's plenty of capital that wants to build them. I was talking to the CEO of one of the leading wind companies recently said, "I have the turbines, I just don't have places to put them." And so technologies that can double the amount of fossil fuel that we save per megawatt hour, if they can deploy rapidly, they could really make an impact and we're pretty excited about it.
Cody Simms (00:19:14):
So I'm hearing a situation where legacy setup is most of these industrial companies essentially have to build some mini power plants on-prem, which is either burning coal, burning gas, burning oil to generate the heat that they need. And they are essentially fossil fuel buyers to do that. You mentioned two transition points. One could be replacing that fossil fuel with hydrogen, which still is combusted and presumably electrolyzing it on site. So you're having to use a lot of energy to create the hydrogen on site. You're using energy, I guess to convert it to heat, right? Is that the way to think about it?
John O' Donnell (00:19:51):
Yeah, that's right. And whether you do the electrolysis on site, which generally seems to be least cost, whether you move electrons or you move molecules, there's a lot of people working on that. But the fundamentals are about two units of electricity for one unit of heat down that track. But it's flexible with regard to time. You can have 30 days of fuel or 10 days of fuel already electrolyzed and waiting. So certainly is a role for that technology in the fully decarbonized world. Yes.
Cody Simms (00:20:24):
So that's one option that industry is looking at considering there's a lot of federal money flowing into trying to grow that and support it. The second option I heard you say is actually not combusting and converting the electrons into heat and then essentially storing the heat and using the heat when you need it, which I believe is the system that you're building, and we're going to spend most of our conversation today talking about that. I see two others that are out there. Correct me if I'm wrong. One is taking the electrons and storing them not as heat, but storing them as electrons, which is large grid scale battery storage, right?
John O' Donnell (00:21:03):
That's right.
Cody Simms (00:21:04):
And then I feel like the fourth one, which probably is still too much like the legacy to really merit its own conversation, but it's natural gas, which is a fossil fuel. You are combusting it, but you would have many people arguing, "Hey, that's a cleaner replacement than coal or oil, so why isn't the US just trying to do more in natural gas because we have such abundant gas resources?" To me, those would be the things I would lay out, but I don't know if that's the right way to think about it or not.
John O' Donnell (00:21:29):
You're absolutely right. Those are all worth discussing. So first of all, let's start with the last one. On the natural gas track, most industrial heat in the United States is natural gas, not coal. That is coal facilities. The pollution controls are quite expensive, and it's only the very largest heat sources that are coal. The vast majority of the infrastructure is gas today. That's true in Europe as well. And of course Europe today has a special matter with the disruption associated with the war. I was in a session not too long ago with the European Commission presidents where she said, "Look, we have the ground war, but we also have an energy war." And he thought he would bring us to our knees and he didn't.
(00:22:15):
Well, Europe has done dramatic things to do short-term mitigation and repurposing of their energy infrastructure, but there have been mass layoffs already, mass factory closures associated with limited availability of natural gas. So Europe's bullets in its energy war are domestic wind and solar electrons. And because you can build as much as you want domestically and have energy security is national security in a very stark way, I think, in Europe today. So that was natural gas.
Cody Simms (00:22:52):
And by the way, I'm not arguing in favor of natural gas at all. I just want to make sure we lay out what the reality of the options are out there.
John O' Donnell (00:22:59):
Yeah. So back one. What was your second to last? Your second to last was-
Cody Simms (00:23:03):
Battery.
John O' Donnell (00:23:04):
Yes, indeed. So down that track, of course that works, but it is many times, five, 10 times more expensive and it's actually lower efficiency. The best electrochemical systems are... Lithium ion systems are around 90% efficient. Where does that 10% go? Where is that lost? It's lost as heat. It's lost as heating in the battery cells. So if you can store energy as heat, in principle, you can do it with no losses. It's just how good is your insulation? And again, the best lithium ion is around 90, 92 and we're 98% efficient. But we're also a very small fraction of the cost because in our case, we store the same amount of energy per pound of brick as EV batteries do per pound of battery pack and brick is made of slightly lower cost material than lithium-ion cells, made of dirt.
Cody Simms (00:24:08):
Great. Okay. Thanks for helping us see the full landscape. And now let's narrow the scope down into this thermo energy storage category of which I believe Rondo would be considered to be one of the technologies that are in there. And we'll talk about your technology and using these superheated bricks, there's also technologies that use mirrors. There are technologies that use other forms, I guess, of heat as storage. Can you share how the whole category has been evolving? Because if I understand it, your prior role at GlassPoint was also in this, but in a different application of the technology.
John O' Donnell (00:24:46):
Yeah, thank you. So look, let's consider two things. First is how is the primary energy collected? And there have been many decades of using mirrors, focusing light on targets to directly capture solar heat at high efficiency. You built those concentrating solar plants, 70% of the light that's falling on the mirrors leaves as heat out of pipe, whereas in PV solar, 20 or 30% of the light that hits the panel leaves as electricity. On the other hand, you can move steam thousands of meters, you can move electricity thousands of kilometers, and you can use electricity to make heat at any temperature. The collecting heat directly with mirrors has lots of engineering challenges, and it used to be much lower cost if what you wanted was heat. And just in the last few weeks, just in the last year or two, it's now the case that actually, no, it's cheaper. It uses somewhat more land, but it uses much less money to collect energy as electricity. So we're starting with electric, whether it's wind or PV. We're starting with electricity.
Cody Simms (00:26:06):
I live in Southern California and driving to Las Vegas, you drive by that big Ivan Par solar facility and it has these huge towers that have bright light at the top. That's the mirror based system. Is that correct?
John O' Donnell (00:26:17):
That's right. I spent 15 years building technologies like that, and when that plant was built, it delivered some of the lowest cost solar electricity in the world. And today, PV systems deliver electricity at a small fraction of the price out of that plant. So now once we have that energy, how will we store it? And the solar industry that was using towers and other mirrors developed energy storage technologies that fit that using oil. They've used concrete. Then one of the things that was taken to the largest scale is using liquid salt, molten salt, nitrate salts that are also fertilizer. They melt at around 250 Celsius. They're good up to about 600. And you can have a cold tank and a hot tank and you can heat salt when the sun is shining and then pull heat out of salt to make steam on a 24-hour basis.
Cody Simms (00:27:15):
But these are also on-prem with the solar facilities like these big mirror towers are. Is that correct?
John O' Donnell (00:27:21):
Absolutely. That's right. You could also though, one of the things that people have been proposing and exploring is, well, you could just use electrical heaters and you could put those molten salt facilities at places where industrial heat is needed and charge them from wind or solar PV as well. So the mirrors are gone, but that energy storage technology is still there.
Cody Simms (00:27:44):
So the molten salt use case historically hasn't been for delivering heat at the source of industry. It's rather been purely as an energy storage mechanism to store intermittent power. Is that accurate?
John O' Donnell (00:27:56):
To use heat to generate electric power.
Cody Simms (00:27:57):
Yes. To generate electric power. Right. Okay.
John O' Donnell (00:27:59):
Yeah. And two companies ago, we built our first molten salt test facility in 2008, and it's a technology that, I don't know how to say it nicely. The more you know about it, the less you like it. There are a variety of costs and safety and performance issues that have bogged it.
Cody Simms (00:28:16):
That's a fundamental difference, right? Like, "Hey, we're going to use heat as a battery for energy generation," as opposed to, "Hey, we need to deliver heat at the point of making paper or at the point of making concrete or cement."
John O' Donnell (00:28:30):
Well, again, and if we're going to make paper with it, we have a much tougher cost hurdle that we must achieve because now we're not replacing electricity, we're replacing fuel. But yes, you're right, that same technology can be used in both places. But now that I think the world is waking up to wait, intermittent and electricity is cheap, storing it for industrial heat is one of the greatest business opportunities of our time.
(00:28:57):
In fact, Tesla just a month or two ago released their master plan three view of the fully decarbonized world. Their plan says that electric thermal storage powering industry, we need twice as much capacity in the decarbonized world as we need batteries connected to the grid. So we were pleased to see that that was our assessment several years ago. But it was nice to see a completely different method. But it is storing energy for use as heat solving this 26% of all the world's primary energy and emissions challenge.
(00:29:38):
Again, if we can hit the temperatures needed, the efficiency, the safety, and the cost. Today, people are looking at a lot of different materials in ways of doing that. There are at least four companies using various kinds of liquid metals, liquid silicon, liquid aluminum, phase change materials that have mixed alloys. There are at least four companies using graphite, solid carbon, which you can heat to several thousand degrees. It stores a lot of energy. It starts combusting at under 600C, so you need to keep it in some an inert atmosphere. What are the others? People will be using concrete, various gravel and crushed rock things. There are a lot of different ways that you can store heat. And when we started Rondo, we did a pretty broad technology review because we had spent 10 and 15 years previously working together trying to solve industrial heat.
(00:30:45):
We'd looked at lots of different ways of storing heat coming from solar fields. And it was respectfully pointed out to us by someone that there's this patent from 1828, the steel industry figured out how to store high temperature heat at steel mills to reduce their coal use with this thing that's called a blast stove or a calper stove that stores high temperature heat in brick and it's completely conventional, high temperature brick made from particular kinds of clay. "Oh, it turns out there's a million tons of that brick in use right now in the world at blast furnaces around the world. Oh, it turns out these things last 30 years being heated and cooled 20 times a day. Oh, it seems unlikely since brick is a pretty unsexy material. Somebody would've figured this out already. Let's at least look at that." And after about 78 design iterations, we found a solution to the hard problem of how do you take this material, which is high heat capacity, durability, it's cheap, but it's brittle and it's low heat conductivity.
(00:32:01):
We make fireplaces out of brick because it doesn't conduct heat very well, right? It doesn't burn the house down. So if you're going to heat brick rapidly, you've got to heat a big surface area and you have to heat it uniformly. We had a breakthrough that we could heat brick the way your toaster heats bread with the way the sun heats the earth with radiation. The Rondo heat battery is built of a core of brick that's an open 3D checkerboard of open boxes with electrical heaters surrounded by brick and bricks, surrounded by open boxes that we came up with this physics insight that let us use that 200-year old material in this new way.
Yin Lu (00:32:46):
Hey everyone, I'm Yin, a partner at MCJ Collective, here to take a quick minute to tell you about our MCJ membership community, which was born out of a collective thirst for peer-to-peer learning and doing that goes beyond just listening to the podcast. We started in 2019 and have grown to thousands of members globally. Each week, we're inspired by people who join with different backgrounds and points of view. What we all share is a deep curiosity to learn and a bias to action around ways to accelerate solutions to climate change. Some awesome initiatives have come out of the community. A number of founding teams I've met, several nonprofits have been established and a bunch of hiring has been done.
(00:33:20):
Many early stage investments have been made as well as ongoing events and programming like monthly women in climate meetups, idea jam sessions for early stage founders, climate book club, art workshops and more. Whether you've been in the climate space for a while or just embarking on your journey, having a community to support you is important. If you want to learn more, head over to MCJ collective com and click on the members tab at the top. Thanks and enjoy the rest of the show.
Cody Simms (00:33:46):
I was a Chinese history major in school. The traditional Chinese home has something called the Kong, which is the stove in the center of the house and the bed are all combined together so that your bed stays warm at night. And it's that same idea of using the residual heat leftover from the day of cooking to heat your bedroom at night, which I'm hearing a little bit of the insight you all had.
John O' Donnell (00:34:10):
Yep. Humans have made brick and used brick for heat storage for many thousands of years. Our particular thing that was the 1828 patent, that was the starting point.
Cody Simms (00:34:21):
And so as I understand it then, your innovation is you can take electricity as electrons coming when they are coming from solar and wind through a power purchase agreement. You can thus use essentially carbon-free energy if that's your mission as a company. But regardless, they're presumably cheaper electrons. You can then have on-prem the ability to convert them from electrons through an electrical heating element that heats these bricks up and then can retain the temperature in this oven-like device, if you will. Am I understanding correctly?
John O' Donnell (00:34:57):
Yeah, you have exactly right. Now the one or two little nuances. Number one, so you're right, it may well be through a power purchase agreement. And one of the things that there's a terawatt in the queue today. There's a ton of new generation that can't yet get connected to the grid. We need grid upgrades. One of the things about these heat loads, they are large utility scale loads. A single factory might be as small as 180 megawatts. It might be a couple of thousand megawatts, and many of them are in locations where you can build somewhere within 10 miles. You could build new purpose-built generation and not go through the grid at all. Just power heat batteries with a fully islanded system. We're building one of those right now because the queue is seven years or so in California and our customer and the project skipped to the queue.
(00:35:53):
So the CalGren unit that we're operating today is tied behind the meter at a customer facility, but we're building projects that aren't connected to the grid. There are also, you mentioned the PPA structure. This is a fundamentally new load that can be turned on and off instantly. It can follow prices, it can follow availability of generation, it can be dispatched by a utility or a grid operator the way that generation is dispatched. This is going to play a fundamentally new role in electricity grids.
(00:36:27):
And I mentioned that partly because last year in Oklahoma there were 2000 hours of negative wholesale electricity prices, which is really a problem for the guys who own the nuclear power plants and the coal plants that cannot turn down. But it's also a spectacular opportunity for technology like this to harvest otherwise negative or curtailed energy and deliver it replacing fossil fuel combustion. And we're seeing this, especially in Europe, there's a quite sophisticated market where you can go buy a hedge for the next 10 years for the cheapest four hours a day of electricity. There are places where they're really quite sophisticated models. So there are new build through the grid, new build, local merchant hedged. There are a number of different ways where the electricity supply will happen.
Cody Simms (00:37:26):
So we talked about a big advantage of your technology is the ability to deliver heat on site, but I'm hearing you say that you also essentially are an energy battery and thus if needed, the heat that you're storing can then also be reconverted back to electricity to be put back on the grid at times of high need. Am I hearing you say that?
John O' Donnell (00:37:47):
So what I was saying was that first, our consumption of electricity can be valuable to the grid, can be lowering electricity prices for consumers by absorbing [inaudible 00:38:01]. But you're absolutely right, a big portion of the world's industrial heat is delivered as steam and a very large portion of industrial steam is delivered through co-generation of heat and power where heat, some of it has turned into electricity, some of it has turned into power, and in many cases that power is exported back to the grid.
Cody Simms (00:38:23):
Today even, in the fossil fuel world, today's industrial power plants sell energy generation back to the grid.
John O' Donnell (00:38:30):
That's right. So those combined heat and power systems when they are renewably powered by Rondo steam, they are spectacularly efficient, they're more efficient than lithium-ion batteries, and they can play that same role of selectively providing power back to the grid as well. Yeah.
Cody Simms (00:38:50):
And are you seeing initial go-to market being utility scale type of projects? Are you seeing it being industrial buyers who are using it to replace their existing on-prem fossil fuel loads? How do you see the evolution of Rondo playing out? You just mentioned it could be an industrial scale battery essentially for energy, storage and generation. What's the evolution look like for you all?
John O' Donnell (00:39:15):
Yeah, well, you just said two things that in our case, they're actually the same. You said utility scale and industrial. And an individual industrial site may have five megawatts of electricity demand and 50 or 500 megawatts of heat demand. So the facility that powers the small cheese producer or the food producer, the tomato paste plant, you might build a little C&I behind the meter solar project for their electricity that's five megawatts or maybe 10, or 150 megawatts to deliver their heat, or a slightly larger facility. We have individual facilities that need 180 to 700 megawatts in small and medium scale industrials. We don't find any 700 megawatt projects that don't need a grid interconnection. So you can build it now, not 10 years from now, where energy can be sold at a price that's locked in and not subject to any curtailment either today or forward curtailment risk.
(00:40:23):
This matter of energy storage for industry is actually creating one of the greatest business opportunities of our time for the renewable energy developers. And we're starting to see renewable energy development companies beginning to originate heat as a service, particularly in Europe. It's emerging in the United States as well. But in every case, as you said, it's on-premises heat. We're just tying into the on-premises steam system or sitting next to a gas fired furnace and reducing the hours that gas fired furnace is operating.
(00:41:01):
So we're very intent on it being a drop in technology. There are a lot of decarbonization pathways where the industry is told, "Make whatever your commodity is, this entirely new way, throw away your infrastructure." The steel industry switching from blast furnaces to DRI is a great example. And that will happen at some rate, but there's a unique opportunity here to just, "Don't touch the factories, just change the fuel source and bolt these things into the heat network." So when you asked about our go-to market, there are only two models of the unit and one of them needs 20 megawatts of power, the other needs 70, and they happen to be replacements for particular models of industrial boilers that are in wide use.
Cody Simms (00:41:51):
Got it. And so the primary reason people are coming to you today is we want to replace our heat source, but in addition, these heat sources today often generate energy that we use to also power the plant other than heat. And you all can do that too. That's what I'm hearing you say.
John O' Donnell (00:42:08):
That's right. Although the first of those, the heat, that's what is the make or break. The economics of heat work. That's the driver. Yeah. And in a lot of cases though, whether you make potato chips or steel, today, you buy fossil heat as a service. There is all those folks would like to buy renewable heat as a service. And part of what our team does is originate renewable heat projects that are fully contracted and ready to be financed and we're developing partnerships with developers and finance parties. Because fundamentally we are doing something that they tell you not to do, bringing a new technology into a new market that we're participating in creating. But that's going spectacularly. A ton of what we're focused on today is establishing and ramping multi gigawatt hour per year production capacity right now. And we're on that journey right this minute.
Cody Simms (00:43:11):
You want to talk about a couple of the projects that are out there have been announced to help us all understand it a little bit more?
John O' Donnell (00:43:17):
Well, the one project that's been announced that's in operation, Rondo today operates the world's highest efficiency energy storage at the highest temperature. We're running a small what is for our customer, a pilot installation of a heat battery at a biofuel refinery in California with a company called Calgary Renewable Fuels. They announced a vision back in March, there was an opening event and the Calgary CEO announced their vision to bring the carbon intensity of the fuel they produce to zero. The US has large 18 billion production capacity for ethanol made from corn. There are a lot of folks who have concerns about that, right, ethanol made from corn. There's a huge emissions involved in refining the ethanol. We can set that to zero and cut the total carbon intensity about in half. The ethanol industry is also looking at capturing the CO2 emissions that come off the fermentation process. And if you do both of those things, you have a biofuel whose carbon emissions' intensity is essentially zero. And now yes, we're going to be electrifying land transport.
Cody Simms (00:44:32):
Zero on production. You still have to grow the corn, which has a lot of nitrogen and whatnot.
John O' Donnell (00:44:36):
The lifecycle carbon emissions including growing the corn and everything else go to zero.
Cody Simms (00:44:42):
Wow, okay.
John O' Donnell (00:44:43):
Because you're sequestering biocarbon that was emitted by the fermenting mash and that takes care of your upstream emissions, that balance, and then you're eliminating emissions at the refinery. So there is a many billion gallon production capacity of fuel that could become the next big step in the supply chain for sustainable aviation fuel, which as far as I can see, as far as lots of folks can see, the long-term, long haul aircraft for sure will continue to fly on the kinds of fuel they need that they use today, but it needs to be made with zero emissions.
Cody Simms (00:45:24):
And then in addition to that, few of your investors are large cement companies, I believe. So presumably they have a vision for how you could help them. I don't know what you can share there.
John O' Donnell (00:45:34):
We have a dream team of investors that came in at series A breakthrough energy ventures and energy impact partners who together do deep work in climate on the tech side and are deeply connected to both the electricity industry and capital markets. So as starting conditions for giant capital flows in electrifying industries of all kind, we have a dream team there. And as you say, we have a European and an Asian cement manufacturing company want to use this technology in their own processes. We were given a grant in consortium with a European cement manufacturer to pilot a first small pilot for zero emission cement manufacturing. And our tie partners, Siam Cement Group is also a developer of renewable energy projects who are as other renewables developers are originating projects that will use this technology to offer heat as a service to others.
Cody Simms (00:46:41):
What is out of reach today? Steel has incredibly hot temperatures required, I believe because you're using an electro... Gosh, I forgot the phrase you used. But essentially the toaster like thing that actually heats your electrons up in the first place can't get hotter than the temperature of steel or presumably it melts. So how do you get to the extreme heats you need for major industry in that regard?
John O' Donnell (00:47:04):
There's a theoretical physics answer and there's a business answer. So the business answer, half of the world's industrial heat is delivered as steam and we build a completely self-contained steam generator boiler that takes intermittent electricity so that from a technology readiness level, Rondo has a turnkey drop in answer for that portion of that. So about 30% of energy used in chemicals, a hundred percent in food and beverage, a hundred percent in paper is all in that. Now none of steel or cement are in that.
(00:47:43):
As we walk up in temperature, we then there's another tranche in chemicals making ethylene that's at around 900C. The next step, there are two steps making cement, one called calcination where you boil the CO2 out of the rock and the second called clinking where you do a high temperature reaction. In cement, that first step calcination, we see that as step two, that is heat batteries today driving steam and then take the same platform, take the boiler off, connect it directly to the cal signer.
(00:48:21):
As I mentioned, there's a pilot project underway in Denmark on that. That's something where the technology readiness level, it's about the cal signers that today we have a hundred years of optimizing those things for internal combustion. Now they need to run on continuous superheated gas coming from a storage unit. And then to your question about the temperature in the storage unit, the brick materials that we use are good to 1500C, way above what's needed for calcination. And we have a choice of do we use metal heaters or ceramic heaters? The ceramic heaters let us go to 1500. The metal heaters let us go to 1100. So the ceramic heaters cost a little more, but the same technology platform fits both. So say, crawl, walk, run, the cement heat for calcination alone is something like 2% of total world emissions. Two or 3% is just calcination need for cement.
(00:49:26):
So it really matters. And the way we get there and the journey that we're on is at the same time as those calcine projects by others are underway because we don't make white powder. So large scale deployments of the first tranche are underway. There are new manufacturing processes that are coming into play in steel. And we see it turns out that our role in that is moving essentially all of the energy that's used by making hydrogen to drive those. Because hydrogen DRI is one of the main ways that the industry is moving. We can reduce the total electricity by about 30%, but make all of the electricity intermittent so that you're only taking electricity when the wind is blowing, the sun is shining, but running that plant continuously. So it's not there. It's more about our role in enabling a combination of electricity and heat.
Cody Simms (00:50:30):
And going back to what we said at the beginning of the conversation, chemicals is the biggest aggregate heat source user of the various industrial processes. So it sounds like from a technology readiness level today, you're able to solve that use case and you're continuing to develop the technology to be able to solve for in the future cement and then in the future beyond that steel.
John O' Donnell (00:50:54):
That's right. So we're not going everywhere all at once. We are doing is creating partnerships with major producers of chemicals and materials and minerals and other things and working in a disciplined way to work on the journey with them of crawl, walk, run, how do we solve your problems and how do we together solve the whole problem? And I'm thrilled with how that process is going. We've built a spectacular team and we now have the team and the bandwidth to work those relationships and drive those projects.
Cody Simms (00:51:32):
John, a basic question, how big are these systems? What does this look like, the different products? You mentioned you have two different products today.
John O' Donnell (00:51:38):
Rondo heat battery, they're images on our website, but 10 by 30 meters. So what is that? That's about a hundred by 30 feet stores, 320 megawatt hours of energy. So 320,000 kilowatt-hours and Tesla model X is about a hundred kilowatt-hours. The little one is 30 by 30 feet and it stores 120 megawatt hours. So these are industrial scale units. And one of the things that's surprising is that because a heat battery, the way it's used, it's fully charged and discharged every single day. And these things last for 40 years with no deterioration.
Cody Simms (00:52:21):
And no moving parts, right? For the most part they're solid state?
John O' Donnell (00:52:25):
That's right. It's solid brick and iron wire. Now they're moving parts associated with the boiler that are completely conventional. But on a CO2 basis, a single one of the larger units is the same CO2 savings per year as 8,571 Teslas. The scale of industrial heat people don't quite get. Our corporate goal is 1% of world emissions in a decade, which sounds crazy, but there are absolutely no material limits to doing that. And part two of that is 15% in 15 years. That is about half of industrial heat.
(00:53:07):
And again, there are absolutely no supply chain critical minerals or anything, and there are economic tailwinds at every step along the way. And that's the thing that I said earlier, have we established the conditions for giant flows of private capital to build new energy infrastructure that everybody in the picture, the energy user, the plant owner, the folks who produce the technology, everybody goes home happy. And we are at that moment. I've been working on things for a long time and to actually be at this moment is just one of the greatest joys of my life and I'm amazingly honored to work with this team that we've got together at Rondo and with our counterparties.
Cody Simms (00:53:53):
How are you seeing the project financing space evolve as you go to look at building a new project where it may be the first of its kind installation of your use case to do the thing you need to do with the biofuels' facility?
John O' Donnell (00:54:08):
Yeah, I would say that's an area where there's been enormous learning. And myself personally, where I was hugely naive when I put together a First Solar [inaudible 00:54:17] and I mentioned that, "Okay, 600 million project and we failed to get it to NTP." Previously, I also had an 860 megawatt project that failed to get to NTP in both cases for PF reasons with a new technology and without adequate credit backstop and other kinds of facilities that were available at a suitable price. And I'll say one of the greatest compliments that we get given at Rondo is that what we're doing is boring and on purpose. Let's innovate as little as possible. Let's make sure that every element of the technology comes from a super strong credit worthy, respected entity so that we can meet the standards of PF. On the other hand, the PF community.
Cody Simms (00:55:02):
PF meaning project finance?
John O' Donnell (00:55:04):
Yeah. There's been enormous progress. It's huge recognition of this Valley of Death phenomenon that applies to every one of the technologies that we need for climate mitigation, whether it's dealing with water or carbon capture or energy storage or generation. And there are large players who are creating catalytic financing on early projects. Both breakthrough and energy impact partners are deeply engaged in this. The Department of Energy has hugely transformed their role in this, the Europeans are doing the same. And the magnitude of the opportunity is not lost on the community. The terawatt in the queue in the United States has about a trillion dollars that people want to spend to build that infrastructure. And the notion that just here in California, there's about 40 gigawatts of industrial heat projects to build that pencil that don't need a grid connection, and there are many hundreds of gigawatts across the United States that can be built faster than the things in the queue.
(00:56:20):
Of course, the other place where this is true is in the hydrogen economy that is a ton of investor of focus. The IRA's enormous subsidies for hydrogen have created, "Okay, here again is another place that we could put money to work building infrastructure that solves an important problem." And we are alongside that. It's actually an awful lot easier to build Rondo infrastructure than hydrogen infrastructure for a variety of reasons. But that marketplace understanding that, "Yeah, we're going to find ways to bring these new technologies to scale and cover off perceived or real technology risks," as well as the unique matter. If I'm selling energy to that chemical plant, it's different than selling energy to the grid. I've got different issues with credit worthiness and other things. How are we going to work those issues? The finance industry, I've gained a lot of respect for financial engineering, let me say that, over the last 20 years that I was pretty naive about, I was all about the physical engineering.
Cody Simms (00:57:26):
Well, it feels like it's hard to build a solar project today without including storage in it. And what I'm hearing is storage is getting smarter, which is storing for what? And you're saying, "Hey, if you're storing for heat, this is a solution that should be bundled together with the solar project and put in place all at once and penciled in together so that the unit economics all look like one large project," which at the end of the day, if you're a large company and you're calculating the overall cost of producing your goods, it is one big project.
John O' Donnell (00:57:55):
Yeah, no, look, you're absolutely right and that's a great summary. I think it's widely understood. We're in this era of energy storage enables this giant further growth in renewables. It solves these fundamental problems, and we, and now these other folks who are also now working in electric thermal storage are opening up this giant market that is next to. The industrial heat sector only needs five times more total renewables than exist in the world today. It's an interesting niche, if you will, and it didn't exist if there weren't solutions that weren't cheaper than business as usual. It's not an area where a state or a government can write a mandate that says X percent of your electricity will be renewable. It's much harder to do that for heat because the heat is not heat, it's not [inaudible 00:58:50], but economics drive. If we're now at this moment that the economics work, it is this giant new market that is now open and we're thrilled at the set of participants who are coming into it.
Cody Simms (00:59:02):
Well, John, thanks for coming on here, sharing what you're building at Rondo, sharing more about your background and just helping us understand the industry and the space as it evolves. Is there anything else I should have asked or anything you would like to ask of our listeners? I'll let you answer that either way you want.
John O' Donnell (00:59:20):
Wow. Thank you, Cody. Look, I want to thank you for what you've been doing. What you communicate, the education role you play, and it's compelling to listen to. I'm grateful for that. I think I've already said some of the things that I want to make sure your listeners know is that there is this giant opportunity to put brains and talent to work. We need help, we are building our team, but we need brains and talent in the PF counterparties who want to enable heat as a service and own that infrastructure. We need brains and talent in the industrials who are exploring, how am I going to decarbonize in lots of cases. There's a guy at McKinsey said, "Look, this is a new tool in the toolbox. It's a big hammer, but it's going to take some time for people to learn to use it."
(01:00:10):
We are really hoping that this entire class of technologies that as we come to understand how are they going to be participating in the grid, what are the things that we can do to unblock them and to really harness the value they can bring to the grid as well as to the industrials. That's a journey that's going to take lots of people engaged from number of perspectives. So that's not a single thing, but other than we would love to talk further about these matters because we think we create real value in a number of sectors, and you've got all those folks as your listeners, so thanks for letting me talk to you about it.
Cody Simms (01:00:51):
I love it. Well, it sounds like if you're looking to put your skills to work directly or if you work in finance and are looking to get creative about how projects all come together, John is looking forward to hearing from you.
John O' Donnell (01:01:03):
Indeed.
Cody Simms (01:01:03):
John, thanks so much.
John O' Donnell (01:01:04):
Yeah, thank you very much.
Jason Jacobs (01:01:06):
Thanks again for joining us on My Climate Journey podcast.
Cody Simms (01:01:10):
At MCJ Collective, we're all about powering collective innovation for climate solutions by breaking down silos and unleashing problem solving capacity.
Jason Jacobs (01:01:19):
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Cody Simms (01:01:42):
Thanks, and see you next episode.
