P | P | P – our chat with RheEnergise
We caught up with Stephen Crosher, Founder of RheEnergise, as part of ‘Product | People | Potential’. RheEnergise are developing a High-Density Hydro storage solution producing 2.5x the energy compared to the use of water.
The purpose of article series ‘Product | People | Potential’ is to feature and showcase the very best UK start-ups with great potential, truly inspiring businesses that are shaking up their sector. We capture and share the stories behind the name. We collate authentic peer to peer real-talk, while celebrating the growth and success thus far and gather a glimpse of what’s ahead.
ADLIB: Can you please introduce yourself, what RheEnergise does, what stage you are at currently and what makes RheEnergise unique?
Stephen: The business is called RheEnergise, we are developing an Energy Storage Solution based on pumped hydro, which is the oldest form of energy storage having been around for over 100 years and which has the largest install capacity of energy storage system worldwide. About 96% of all energy storage is pumped hydro.
Where we are at is that our next stage is to build a demonstration project, which we are doing a feasibility study for at the moment. This would mean that we need to fundraise to do that, and we will need to expand the team as well, so that is our aim for 2021 – this will probably end up being operational in 2022 if all goes well.
ADLIB: Can you share the story behind the origin of RheEnergise?
Stephen: When me and my colleagues were going to conferences a while ago, we were wondering why, although pumped hydro was most widely deployed with proven track record, everyone was talking about batteries as the future of energy storage. This led us to think about what the reasons were. This includes social-environmental issues around flooding valleys, areas of natural beauty, as well as the amount of time it takes for projects to be built (around 15 years). Also, as the market is changing so rapidly, if you commit to spending on a project, the revenue opportunities may be entirely different by the time you finish construction, which puts investors off.
As it’s a mature technology, it has a mature supply chain and lots of people know how to do it, we thought about whether there was anything innovative we could do to modernise it and make it compete with battery storage, which is our main competition. We decided that the area to look at was the density of the fluid, essentially if you double the density, then you double the power and double the energy – it is a totally linear equation. The fluid we ended up with is 2.5x the density of water, is environmentally sustainable, available and affordable.
ADLIB: Speaking of People, can you share some challenges you have faced, are facing, or are anticipating around scaling and growing your team? Do you have any top tips you could share with those businesses faced with the same issues?
Stephen: I think it’s most likely that we will set up our R&D department first, but the very first hire would be someone office-based to pick up day-to-day tasks that are quite time consuming, so the management can focus on other things. But then, the growth of the engineering team will be critical.
We’re thinking a lot about location as there are areas that you get money to relocate your business to, but that’s only good if you can recruit the right people there, So we’re focused on making sure we set up somewhere which has got a good set of skills, and we need skills across chemistry, fluid dynamics, mechanical systems, electrical systems and software engineering.
We focus on finding all those in close proximity, in an area where people will be prepared to commute to as well as selecting a location with strong support from local authority and governments. We’re leaning therefore towards somewhere Southern Scotland or Midlands, near Birmingham or even potentially south towards Reading or Bristol, but we haven’t committed just yet.
ADLIB: Moving to Product, what has been your approach to understanding and implementing product-market fit or sales cycles?
Stephen: In terms of market opportunity and site opportunities there are for a system like this, if you look at market reports from people such as Bloomberg Energy finance, they talk about a $620billion market for energy storage by 2040. This is a huge number and the indication is from all commentators that energy storage is an absolutely essential enabling technology to dramatically increase the amount of renewable energy, and even if the number is half of that, the market is still going to be big. Therefore, getting to market with our product as quickly as possible is essential as well.
So, with our system, instead of using open reservoirs, we are using buried storage tanks. A typical project might have 2-4 at about 35 metres diameter, buried next to the powerhouse. In terms of site area, we would need about 100×100 metres and it would be similar to building a small sewer water treatment works at the edge of a town, which you often see when you drive past in the car. One of the key things we need to be able to do in order to compete with battery storage is to be able to consent and build these projects in the same 2-3-year timeframe, which we believe is entirely possible.
We also want to commoditise the system, so it can essentially be picked off the shelf and installed on-site like other products in the water pumping industry, unlike traditional hydro where projects are bespoke, one-off systems.
We have identified around 30 areas of intellectual property around our business with a host of patent opportunities, which, we are calling an IP moat, where one thing on it’s own might not stop someone else from following behind us, but having a moat of IP surrounding the business idea will give the business security to be able to develop projects going forward.
However, we don’t really intend to be a project developer, so our business model is to license this IP knowhow to project developers. Our revenue then comes from the license fee, project management fee, operation, and maintenance fees and then utilisation fees as well (a small payment on mw/ph).
ADLIB: And then Potential, can you share some challenges or barriers you had to overcome to create RheEnergise?
Stephen: The list is as long as my arm! I wouldn’t say barriers because that implies that they’ve stopped us, but I would say hurdles is a better term. We’ve got a good team and there are things that have been difficult, but we’ve been able to identify the way through the problems relatively quickly. We’re increasingly confident that there’s no fundamental barrier to stop us doing what we want either in terms of the technology, costs or market, so we feel that all the challenges are addressable. That doesn’t mean that there’s not a lot of work to do to get through them! For example, it was essential to find a fluid that was environmentally benign. That was an early challenge which took us a while to navigate. In the early days, we thought it would be possible, but we didn’t know for sure. There are a few other challenges on the way, but we can see the pathway through those already.
ADLIB: Investment can often be a challenge for start-ups & scale-ups. Do you have any piece of wisdom you could share around best approach?
Stephen: The advice is that it takes a huge amount of work and don’t underestimate how much time it takes, and you’ve just got to do your work upfront and find out what the investors are interested in. Do it early, engage in conversations and build relationships.
We are fundraising at the moment, so we’re going to go live on Crowdcube soon, as we decided crowdfunding would be the best way to go at this early stage. Primarily, this keeps the timeframe in our hands at this stage, rather than going through a larger investor. The syndicate route will be good for us, but it will take a bit longer further down the line.
We were also awarded two grants from Innovate UK in September, one is for the feasibility study for the demonstration project, but we do still have to find the cash flow as you tend to be paid a few months in arrears, so you’re building a fairly substantial piece of equipment which we need the cash for, and the other one is an R&D grant. We also have a grant under the B4I scheme which is underway with the Science & Technology Council and others underway as well. We have been verbally advised we have another small grant with the National Engineering Laboratory tool, so we’ve had 8 grants overall this year, mostly fairly small, we’ve been like a grant machine this year (or turbine)! We’ve also got a fairly good relationship with Scottish Enterprise. We’re confident that if we go to Scotland, they will be supportive of us, but we need to know where we are at with the demonstration project before we know.
Thank you for taking the time to introduce your company!