The U.S. is facing a power crisis as it struggles to modernize its more than a century-old infrastructure. Johannes Rittershausen, the CEO of energy storage solutions company Convergent, joined Cheddar News’ Opening Bell to discuss the difficulties in upgrading the aging grid and how the tax credits and regulations in the recently passed Inflation Reduction Act could help. "What this has done is it's created a 10-year time window for those credits and for that regulatory certainty to exist, meaning that developers like us and capital providers can really push forward and make the investments in the transition to clean energy," he said.

Opening Bell

 How the Aging Power Grid Is Getting a Boost From the Inflation Reduction Act

here to discuss the challenges within the energy grid is Johannes Richard housing a ceo of convergent johanna's glad to have you on this morning. There were 549 policy and deployment actions on modernizing the grid during the second quarter of 2020 two. But of the $12.8 billion 478.7 million so far. Can you talk to us about why the US grid has been and still is so slow to modernize? Sure, Well, Alicia first, thank you so much for inviting me to be here. I represent convergent energy and power. We are a developer owner and operator of energy storage assets. Um we cite those assets adjacent to our customers which are large commercial and industrial customers as well as utilities for utilities specifically to provide them with reliability of power and lower cost solutions to an aging uh infrastructure and grid that we have and to take a step back the electric grid in the US is over 100 years of cumulative infrastructure. We're talking about the largest capital endeavor in human history and it takes a long time to upgrade that for current needs. And so what we converge and do is we build projects, energy storage projects that address the needs of those customers. Whether they're cost based reliability or enhancing sustainability and renewables. I wonder then how did how did the provisions in the inflation reduction act impact the storage industry? Well, there's a lot in this bill. It's as as you probably know and the viewers know it's over $400 million $400,400 billion dollars of uh credits and variety of funding for the energy transition. I'm gonna focus just on the energy storage aspect of that. So for the first time, tax credits are being uh extended to energy storage. When you think of energy storage, think about the batteries you have in your pocket for cell, your telephones, scale those up into massive shipping containers and buildings to store electricity from times when uh the grid doesn't need it when you and I are not using electricity two times during for example, heat waves or times when it's really needed for the grid. And that's what we do with our big energy storage systems. And for the first time these products are expanded to that technology set. The other thing I would say that's important about this bill for the entire renewable industry is that it provides certainty. Right? So usually there were tax credits in the past, it was a couple of years here and there will they get extended, will they know in this environment of uncertainty, it was hard to make capital decisions, hard to make investments. Well, what this has done is it's created a 10 year time window for those credits and for that regulatory certainty to exist, meaning that developers like us and capital providers can really push forward and make the investments in the transition to clean energy when you when you look at building additional infrastructure, What are the main challenges in that sphere? And I wonder does the split authority between the federal government and states really add an added layer of complexity here? Well, sure, that is the uh the complexity of the electricity industry is almost second to none. You've got federal agency that regulates, you've got state level entities. And then in fact when you're building projects, you often are interacting with local authorities, uh for example, building city councils and uh doing permitting and local and county authorities. So when you're building these projects, you do have to go go through quite a bit of effort with all the way from federal to local authorities. That does make it challenging. However, the I. R. A really does help by providing incentives for um uh those of us to build that are in the business of building these assets. It allows us to do that more cost effectively, therefore work with customers more uh and provides more incentives to get involved with those very agencies and authorities and build those projects. So, um you know, the the the pressure of transition and the ability to cost effectively do that really, we think will open the spigots here. Um and there's also an increasing understanding amongst the general public that this is for the broader good is to reduce cost. That's to reduce our reliance on fossil fuels and it's to increase reliability of our aging grid. A big kind of wrench in almost all the plans around, you know, updating the infrastructure or just dealing with the infrastructure or even the storage side of the industry is a threat of extreme weather. Can you just talk a little bit about how much a threat um, this is in the energy storage industry and even in the infrastructure updating component? Well, sure. I'll go back to my opening thought, which is that the electric grid is 100 plus years of cumulative infrastructure. A lot of the investments that we use today were built by our great grandparents um, and we're still using them today. And so it is really time to modernize that grid and in fact to use new technologies like energy storage to provide for grid reliability. A lot of the weather effects you're seeing, for example, on the screen, you got wildfires um, are a threat to the traditional uh, sprawl of the energy infrastructure which spans from large central generators all the way to your home. We believe that if we can distribute the sources of electricity, for example, solar voltaic panels plus batteries put them adjacent to where customers need them instead of out in the middle of nowhere and deserts. Right, That creates a more resilient infrastructure less exposed to these extreme weather events. So part of the revitalization of the grid is rethinking what it is and how it will work. And that's something that we have converged and are very, very proud to be right in the middle of give us a better sense of convergence kind of position and being part of the solution here, especially when it comes to, you know, growing in the energy storage industry. Well sure, thank you. So convergence been at this for 10 years now over a decade and as of right now we have $500 million of projects operating or an advanced development. So we've been at this for a while and in fact we've been growing, we've been almost doubling our growth even before the I. R. A year over year now, what if the Ira does is it really turbocharge is our ability to provide cost effective offerings to customers and therefore will turbocharge our pipeline. And that's just uh you know, that's where we're seeing this going. We're extremely excited about it. We're extremely excited about the value propositions that we can offer our customers now and the improvement that we can do that. The improvements we can offer them um to create more value for them. And for us it's really a win win win solution if you do this right, right. Society wins because emissions are going down customers win by lowering costs and our investors win because they they're they're building attractive projects. You know, we we talk a lot about the inflation and inflation pictures, how it's impacting consumers, certainly, how it impacts sectors. And I'm curious to get your thoughts in terms of how much our raw materials used in the energy supply system and what's the level of concern over rising prices there. Yeah, well, two points I'd make one is the short term which is as anybody who has tried to buy a washing machine or anything knows the global supply chain is is a bit of a mess. And we are certainly along with all the other industry players exposed to those supply chain issues. That's the short term. The long term however, is a balancing of supply and demand. It's the manufacturing capacity. It's the incentives for folks to invest in clean technologies and balancing that with the demand that will come. And that's one of the things that's great again about this Ira is that it provides incentives for domestic manufacturing. It provides that long term regulatory certainty needed for investors to make investments in those technologies, both as developers and as technology suppliers. And so we are really bullish about what this does for the supply landscape over the medium to long term. It provides that certainty to invest in that manufacturing capacity because everybody knows the markets will be there now because of these incentives so that that's really the short and long of the short of it is it's still gonna we're still managing the month to month, quarter to quarter challenges of of the supply chain. But the medium term has certainly in my opinion at least become much more rosy because of this Ira johanna's such great insight, really appreciate your time and that insight, Johannes rutter, hausen ceo of convergence.