Europe’s Battery Storage Boom Explained ft. Julian Jansen | Soliverse Ep. 46

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0:00Julian Jansen: 00:00:00:01 - 00:00:23:14 Julian Jansen Every percentage of availability is worth a lot of money for a customer in a merchant market context. So making sure that you have high availability and fluency speed has been certified to be operating at more than 99% availability. In this context, you have a very, very strong case for why you need to re-engineer the way a product also looks that was deployed. 00:00:23:20 - 00:00:29:13 Julian Jansen Rather than thinking we can just pack as much density into the same footprint container as possible. 00:00:33:09 - 00:00:38:22 Peter Pongracz Well, what is the actual difference between the container based models and something that you guys have? 00:00:39:04 - 00:00:58:09 Julian Jansen So there's two fundamental differences, right, if you think about it. One is the level of modularity that the product brings for it, because a smart stack, you have the smart socket at the bottom and then you have the full battery parts that get attached on top of product. Well, have you seen most products in the industry are basically just the container trying to get as many batteries as possible. 00:00:58:09 - 00:01:22:21 Julian Jansen And two, that container that's creating a lot of challenges when you're actually trying to transport those containers and install them because they're becoming heavier and heavier and heavier, which means you're starting to require specialized cranes. You start to require specialized vessels. And it's creating a real issue. And I guess some sites that are in rural areas with small roads and you have to carry equipment that is 50 tons plus. 00:01:22:26 - 00:01:45:23 Julian Jansen And that creates a challenge. Well, if you have the modular approach, both from a logistics, transportation and also installation perspective, it's much simpler. You know, what we're seeing is some products in the market now require on site a loading of the modules into the battery containers again, which is something the industry moved away from quite some time ago because it's very costly, it's very time intensive. 00:01:45:23 - 00:02:12:10 Julian Jansen So the installation process starts slowing down again and we're smart. So it really allows us very fast installation on site. So you're combining the best in class density with the modularity, which allows for better installation and transport, and that's one of the big differences. The other one is that it's an AC solution. So rather than being a DC battery block where you don't have a central inverter, in this case, you have to string inverter architecture that is included into the smart socket. 00:02:12:17 - 00:02:19:02 Julian Jansen And again, therefore, you're creating greater modularity, higher performance, and actually better services performance as well. 00:02:19:13 - 00:02:36:29 Peter Pongracz So basically, you guys already thought about the engineering side of things as well, right? Best is so kind of new and especially new at scale that most people don't really think about the real logistics of it. Right. And within Europe, we have decent roads, most of the cases. Okay, you have some small access roads where we still need to get to it. 00:02:36:29 - 00:02:45:05 Peter Pongracz And getting there with the specialized truck with that carries like double or triple the weight or the load capacity that normally would. Then that's quite a challenge, right? 00:02:45:16 - 00:03:21:27 Julian Jansen It's how people approach the storage industry. Right, is what we're seeing with a lot of the more standardized 20 foot container sized blocks. The focus there is to manufacture as many blocks as cheaply and quickly as possible. But energy storage is complex and critical. Energy infrastructure and developers, operators, owners don't look at this asset class as a very exchangeable whole product base that is doing something very simple, like generating electricity. 00:03:21:27 - 00:03:54:25 Julian Jansen But they actually look at it through the multitude of applications and therefore our approach and what ships must look at the engineering design prowess thought that went into it is very much shaped by the fact that our role is to allow our customers to maximize the profit they have on a project. When we're talking about a major project or if we're talking maybe in terms of a utility or data center context to actually ensure the critical applications, you need to run off this asset work and work very well. 00:03:55:02 - 00:04:22:29 Julian Jansen So you're looking at it as much more of a holistic solution that needs to be tailored to what the project is trying to achieve and what the ultimate output and goal is. And I don't believe that you can achieve that by purely manufacturing a very standardized block that is interchangeable, but it is combining the scale with thinking through the entire project value, and that includes the transport, that includes installation, that includes performance, that includes how you maintain the system. 00:04:22:29 - 00:04:47:10 Julian Jansen Right. And how you make sure that the performance is continuously strong through the lifetime of the asset, how you reduce the complexity of services, how do you keep uptime up every percentage of availability is worth a lot of money for a customer in a much market context. So making sure that you have high availability and fluence as fleet has been certified to be operating at more than 99% availability. 00:04:47:18 - 00:05:10:19 Julian Jansen In these contexts, you have a very, very strong case for why you need to re-engineer the way a product also looks that was deployed rather than thinking we can just pack as much density into the same footprint container as possible. And I think that model will run into its barriers as the industry matures and people see the operational learnings from their projects. 00:05:11:08 - 00:05:17:01 Peter Pongracz And do you think project developers and asset owners fully understand the complexity of this? 00:05:17:12 - 00:05:56:22 Julian Jansen Yes, many do. In particular, those that are the Wild West and that have experience in the market and that have been operating assets. I still think we sometimes see in particular developers that come from different asset classes treating it a little bit differently and maybe thinking of it as quite a simple solution. But I think what we're seeing now is a very big shift in the way developers, asset owners think about this asset class and of course, the business case needs needs to pencil, but it is also very clear that they all think of 15, 20, 25 year time horizon. 00:05:56:27 - 00:06:23:21 Julian Jansen They deeply understand the business case and they deeply understand the levers that you can pull to improve it. Right. Whether that's improving your efficiency, whether it's improving your availability, whether it's providing flexibility in the way you structure your performance guarantees in order to allow your customer to maximize the revenue opportunities that the market is offering. That is all something that we're now seeing asset owners, operators deeply understand and starting to value more and more. 00:06:23:27 - 00:06:46:15 Peter Pongracz Maybe this is the right point to green to the beginnings, right. You've been in the in the industry for way before batteries were cool. So take us back to the early days and you know, the the capacity or basically you had maybe up to one hour storage capacities, etc.. Like how did the industry mature from that point on and how big is the gap that we have actually covered in that timeframe? 00:06:46:24 - 00:07:08:03 Julian Jansen Yeah, I got I got into energy storage around 2014. That feels like a long time ago in this industry, but I still have colleagues that got involved even earlier than that. So they remind me of the true early days, but I think even at that point we were talking about very small energy storage projects and the majority of projects were actually 15 minute, 30 minute duration maximum. 00:07:08:10 - 00:07:37:01 Julian Jansen And that was the first part where energy storage was able to compete with other asset classes to provide faster frequency response in various different markets, whether that was in PJM in the U.S. or whether that was then in Europe and the GB market and the German market providing primary frequency control. And it was really there where people thought that's what batteries are good at, very quickly responding and then starting to ramp down when the short term requirements are met from the grid. 00:07:37:01 - 00:08:03:07 Julian Jansen And then other types of technologies take over. And I think over the years, technology has continuously surprised people and prove people wrong. And, you know, there's this lovely anecdote that some of the veterans here influenced how time and time again, when they first got involved in 2008, you know, it wasn't really about battery making money or a battery being able to be a large scale, commercially viable solution. 00:08:03:12 - 00:08:29:17 Julian Jansen It was actually about proving that a battery could even provide frequency regulation because nobody believed that it could. And through that early pilot that the team back then at a is that in the U.S. it really kickstarted a process that in the end has accelerated at a blistering pace over the last decade. And now we're starting to see storage not being a niche technology, but being a fundamental part of our grid infrastructure. 00:08:29:22 - 00:08:38:11 Julian Jansen And in Europe, we're going to expect a doubling of energy storage capacity over the next four years, which is just mind boggling when you think about where we come from. 00:08:38:11 - 00:08:54:06 Peter Pongracz Indeed. And, you know, you've touched on a couple of key words here so that the kind of crossing the bridge from a niche technology to actually critical infrastructure, can you pinpoint that in a timeline of when that would be roughly happening in the past? 00:08:54:15 - 00:09:15:22 Julian Jansen I think that depends quite a lot on the market and the market context. I got involved in it because somebody said to me, Hey, why don't you start looking at this battery energy storage thing? Could be interesting in the future. So, you know, I started investigating it started researching it, started working on it. And what became very clear, very quickly was that it was extremely powerful. 00:09:15:29 - 00:09:33:17 Julian Jansen And to me, it was something that would become a game changing technology in the market. So that's why I personally I got very interested in it and started really investigating early business models, some of the crazy pilot projects that were being done in different parts of the world. But I think what changed for me the first point was 2016. 00:09:33:27 - 00:09:59:20 Julian Jansen That's where we saw rapid acceleration from the end of 2015 through 2016 and the PJM market and the U.S. right by the end of 2016, it was about 274 megawatt of battery storage systems installed in that market. And it was also the same year where National Grid released an enhanced frequency response tender in the U.K., which awarded 201 megawatt in total back then, which was a very large number at the time in the market. 00:09:59:26 - 00:10:25:10 Julian Jansen And we also started to see the first installations of Germany being deployed for primary frequency reserve. So that was really the first point where it was very clear storage would be the type of technology best suited to provide first frequency reserve. But when we were observing the market and at the time I was an analyst in the energy storage industry, we started observing the market, really thought this was going to be the major part of the revenue stack for storage. 00:10:25:16 - 00:10:48:02 Julian Jansen And guess we would start to grow and develop a little bit into more secondary reserve. We would maybe start seeing some opportunities for even faster response services on the grid, but we really felt that was probably the main market for storage. Maybe we would see a shift to one or two systems, but really at the long duration lithium ion battery storage wasn't going to be the solution for the long term. 00:10:48:11 - 00:11:15:09 Julian Jansen And then I think over very quick time, so probably 2 to 3 years things shifted again. And I think to me and at the time I was very heavily involved also in Asia as well as the US had a very global view of the market. And I remember in 2018 and at the time I was going to Korea twice a year, we had a lot of customers there and in 2018 South Korea installed 2.9, so 2.9 gigawatt hours of battery storage in a single year in one market. 00:11:15:09 - 00:11:37:20 Julian Jansen And that was partially driven by subsidy like it was very much driven by a subsidy scheme from the Government. But I think it was the first point for me where I went, hang on a second, this is a really at scale technology and all it needed was a small government subsidy that allowed storage to really get also into the renewable time shifting segment as well as tackling the CNI market. 00:11:37:28 - 00:12:07:00 Julian Jansen I think it was that point where it was very clear that storage would go beyond those fast response applications and also become really a technology that becomes critical for the entire flexibility value stack as well as providing these critical time shifting applications that we start needing more and more as we have greater renewable penetration on the grid. So it would really be those two points in time 2016 and then 2018 when the South Korean market really took off. 00:12:07:14 - 00:12:31:04 Peter Pongracz And if you think about those timelines as well, it's kind of a natural creation of a flywheel, right? That kind of feeds itself. So around the same period of time as well, we kind of reached a bit more economies of scale as well. And also there was the cost collapse as well. Right, that, you know, we could pack more and more megawatt hours now into the same, you know, cell density, etc., and new technologies are coming online as well. 00:12:31:04 - 00:12:50:02 Peter Pongracz So how did that impacts the whole industry? Like how do you think that actually influenced, you know, these new kind of we are talking about great service infrastructures right now. Right. And before that, we were only talking about serving local, you know, grid balancing, use cases, etc.. So when did that big growth cost. 00:12:50:13 - 00:13:18:23 Julian Jansen You think that kind of bridge or that evolution of the market happened kind of post 2018 into the kind of early 2020s? First was that the automotive industry started to really shift significantly towards E-Mobility and that is something we always have to remember. The reason lithium ion in particular established itself as the dominant technology for stationary energy storage, which was not the case at the very early stages of the industry. 00:13:18:23 - 00:13:46:28 Julian Jansen And the market was really driven by the scale that was enabled through the rise of E-Mobility and that drove a lot of manufacturing capacity, that drove technology improvements and naturally stationary storage became a major beneficiary. Now, at the same time, we also saw a shift in technology away from NMC, technology towards LSP. So lithium ion phosphate technology, and that was driven by multiple areas. 00:13:46:28 - 00:14:15:21 Julian Jansen But as LSP started to show stronger performance characteristics as well as a higher or improving density, and at the same time the applications shifted a little bit more from power towards energy, it became the most suitable technology and top of it. It was able to address some of the safety concerns and some of the high increases in raw material costs that affected NMC kind of towards the end of the 20 tens. 00:14:16:03 - 00:14:44:21 Julian Jansen So that shift therefore enabled two things. One, as costs came down, storage became suitable for greater number of applications, in particular utilizing lithium ion battery energy storage. So where before the high costs really only enabled the most lucrative parts of the electricity market, the very first frequency response market, we started to see more of a shift where actually storage was able to compete with gas fired power plants and capacity markets in places like Great Britain. 00:14:45:00 - 00:15:17:17 Julian Jansen We started to see the hybridization of renewables becoming more sensible as you were able to time shift electricity for cheaper over longer periods of time. So it's really been this extreme rapid acceleration where the cost reductions and technology improvements paired with the increasing need on the electricity grid created a perfect accelerator for battery energy storage. And I think what has shifted now is that at the beginning we really were reliant on the development of the automotive industry. 00:15:17:23 - 00:15:41:28 Julian Jansen Now the capacity in stationary storage markets is big enough and that's where we started to see therefore. So bifurcation on the technology side, on the manufacturing capacity, which is only benefiting stationary energy storage, even more so than it did at the beginning. So that is a fundamental shift on the battery technology side. But of course, there's also other areas of improvements that have enabled new value cases, new revenue streams to be access to. 00:15:42:09 - 00:15:59:29 Peter Pongracz And it kind of brings us to today as well. Right. So in in 2026, we just came back from the key words of the day were flexibility base and basically figuring out what to do with the curtailment and do most of those applications or issues best can really provide a viable solution right. 00:15:59:29 - 00:16:17:27 Julian Jansen Correct. So I think if you look at today, I mean, let's let's take European market because of course, every market is a little bit different. But in most European markets, you have a similar stack of applications, right? You still have your fast frequency response services, you have your secondary response services. That's where storage is. You know, still a very capable technology. 00:16:18:05 - 00:16:39:26 Julian Jansen But those markets will have become saturated. The revenue opportunity is becoming less lucrative. And really where we've now shifted to is where arbitrage is making sense and is also starting to enable longer duration storage system. So for hours really becoming the norm, for example, in Germany now because we're starting to see enough value in the electricity market to trade against those. 00:16:40:05 - 00:17:10:15 Julian Jansen At the same time, you still have capacity market in many European countries, whether it's Poland, Belgium, GB and those capacity markets really are creating a good baseline, very bankable revenue stream that investors can can get a lot of security from. But then at the same time, we're starting to see also more of a shift towards kind of true grit stability, because as we're losing a lot of synchronous generation and we're moving to inverter based generation through solar, through renewables, both starting to see is a need for inertia on the system. 00:17:10:23 - 00:17:48:29 Julian Jansen And again, that's where battery energy storage is really now creating a strong opportunity, strong use case, where through basically creating synthetic inertia storage is contributing heavily to the grid stability element. And even, you know, as a grid forming technology rather than a grid following technology. And then even though in many markets that today doesn't create a huge that's a monetary opportunity when we look at the overall system benefit, you have now a technology that really can cover the entire spectrum and therefore plays not just a key role for, let's say, enabling renewables, as many people thought about in the past. 00:17:49:06 - 00:18:13:05 Julian Jansen But actually, it becomes a technology that is fundamental for energy security and also helps us reduce the overall costs of running and operating the electricity system, which then benefits ultimately European consumers. And that's the goal as we're needing to bring electricity prices down again in Europe, because we're dealing with some of the highest electricity prices in the world, and that's hurting our industry and that's hurting our consumers. 00:18:13:11 - 00:18:35:28 Peter Pongracz And that's that's I think, a great segue into, you know, the recent news from last week. Right. So we got the new electrification act out. So we have a target of 46% by 2040. So that's a that's a big number. We are at around 23, 24% depending on how we look at it. And I think batteries will need to play a key role in this as well. 00:18:35:28 - 00:18:58:12 Peter Pongracz Right, because we just need all the help we can get. And on the other hand, if we are bearing on investor hat as well, you know, investing in disorder on its own, it's getting more and more challenging because of the negative hours, you know, the basically big swings during the day. So we need to have some sort of help and technology that helps us balance these two aspects. 00:18:58:12 - 00:18:58:21 Peter Pongracz Right. 00:18:59:01 - 00:19:19:02 Julian Jansen And I think there's a system element that it needs to be considered, right. The most storage we have, the more flexibility we have in general doesn't need to be storage, but flexibility as a whole, it ultimately again allows more renewables to be installed from a system perspective that actually means the reinforcement of our grid infrastructure can be done in a more efficient manner, which again benefits electricity consumers. 00:19:19:15 - 00:19:44:04 Julian Jansen But from an investor perspective, you also highlighted very clearly the challenging environment for solar. And I think we're now starting to see the point where in Europe, hybridizing solar systems with battery energy storage is starting to make sense and in many cases it's often the only way you can get a solar system to still pencil. I think that is a fundamental shift because in Europe for many years we didn't really have a hybrid opportunity. 00:19:44:04 - 00:20:09:18 Julian Jansen It was mainly a standalone storage opportunity. But now we're seeing in many markets, especially those that have long periods of negative pricing that actually powering solar with storage becomes them. That's a no brainer solution in particular, as you're also struggling to get grid capacity, grid access, and you also have a lot of existing plans that might be starting to fall out of subsidy schemes, may require repowering, and maybe it's a natural choice to pedis with battery storage systems. 00:20:09:26 - 00:20:31:00 Peter Pongracz And we spoke about different European markets. And when you mentioned the curtailment then and you know, with with connection issues, etc., that really brings me to Germany, right? Because it's the largest market in Europe in terms of both battery capacity and overall renewables installment as well. How is the market looking in what has been changing in the last 12 months? 00:20:31:12 - 00:20:55:13 Julian Jansen I think right now Germany's going through significant boom and acceleration. It is in track, attracting the largest number of investments across European storage markets, starting to see a lot of international capital flowing in the market. It's right now a very hot project, M&A market, actually, a lot of projects changing hands, a lot of interest in more mature, higher quality, large scale projects. 00:20:55:23 - 00:21:17:05 Julian Jansen And I think that is a really positive development because Germany does need battery energy storage and it needs it fast. When we look at the last 12 months, what has shifted in particular, a change in particular? The few things that that really have come in. One is we starting to see a big shift in project size. We're seeing more larger megaprojects in the gigawatt hours scale compared to what we've seen in the past. 00:21:17:05 - 00:21:41:19 Julian Jansen We're starting to see a shift in duration. So we're seeing a clear move from 2 hours to four hour duration. But energy storage systems, most projects are now actually changing through the development cycle to 4 hours. And it's a great area where our high density product is able to help a developer shift a project from 2 hours to 4 hours without a significant increase in land use, which of course has a cost benefit we're now starting to see. 00:21:41:19 - 00:22:03:24 Julian Jansen As I mentioned earlier, there's a great opportunity around grid forming and inertia in European markets. And Germany actually is one of the markets where there's a market that will remunerate battery energy storage assets to deliver those services. So it's very critical that you actually have the inverter capability, but also most importantly, controls capability to accurately reflect the requirements of that inertia market. 00:22:03:29 - 00:22:37:11 Julian Jansen And that's where Fluence MOTSYK is giving our customers a huge advantage, enabling them to tap into revenue streams that are potentially creating hundreds of thousands of additional revenue upside every single year. I think on a market and regulatory side, there's also a few big developments we've seen over the last year that are now enabling the market. More clearly, we've had a bit of a rollercoaster ride around the grid fee exemptions, but now we have some real clarity from the regulator over the great fee exemptions that projects that come online by August 2029 and that at the same time reach 50. 00:22:37:12 - 00:23:00:00 Julian Jansen So the final investment decision by the end of 2026, they will be exempt from grip fees going forward. So investors know what to do and we expect that a grid fee exemption has an impact of about one and a half to 2% on project IRR. So it's very lucrative in order to hit those two deadlines so that you can actually create a significant uplift to your investment case. 00:23:00:08 - 00:23:27:04 Julian Jansen Investment case still works even if you pay grid fees in most cases. However, of course that is a welcome boost for developers and asset owners and we are really working with our customers to enable those deadlines. Right, really working through the right commercial structures, accelerating, contracting. We know the market inside out. Therefore, we can be a real partner to our customer to meet those regulatory milestones and meet them quickly because that in the end helps them make more money. 00:23:27:10 - 00:23:52:27 Julian Jansen And then on top of it, we had a huge issue around the grid connection queue and that's not a unique problem to Germany. But with the introduction of the so-called I forgot the phone, which basically is now starting to sort the grid connection queues by project maturity, project quality. We believe that the market has taken the right regulatory step in order to allow for more deliberate way of reviewing and granting grid connections. 00:23:52:27 - 00:23:55:06 Julian Jansen And I actually think that will benefit the industry in the long term. 00:23:55:17 - 00:24:15:14 Peter Pongracz I was at the another conference a few months back and we had an analyst from the International Energy Agency and she said that we have around 400 gigawatts of renewables stuck in waiting for grid connection and basically waiting to be connected in Europe. So if we would only connect those, we would actually hit all of our targets, right? 00:24:15:27 - 00:24:39:10 Julian Jansen That's right. And I think the problem for storage is even most of you, Germany alone, right. You have lost officially communicate that number at the end of 2025. Was that at at that point in time, there was 720 gigawatts of grid connected requests for battery energy storage systems just in Germany. And already we have 78 gigawatts of battery energy storage system that have confirmed grid connections. 00:24:39:10 - 00:25:01:13 Julian Jansen So that doesn't mean that necessarily those grid connections and the short term, but overall we're starting to see a really clear backlog. So even just connecting a fraction of the queue and getting those 78 gigawatts built, that would really deliver incredible value for the market. It would ensure greater energy security and it would ensure more price stability and also markets. 00:25:01:13 - 00:25:22:24 Julian Jansen So I think we're starting to see the the right direction. We're starting to see that interest shown in the grid connection queue. But we also start seeing the need to really clear up that grid connection queue in Germany but across European markets. And I do believe that I forgot the farm is a step in the right direction because it does start to create a bit of a natural filter for projects there right now. 00:25:23:03 - 00:25:42:09 Julian Jansen But nonetheless, if we think about where does the market go, you know, we're expecting really over over the next year or actually within 26. So, you know, we're halfway through by the end of 26, probably about 4 to 5 gigawatts of additional large energy storage to be installed, according to S&P Global. 00:25:42:17 - 00:25:59:21 Peter Pongracz And we talked about the markets, we talked about the customers a little bit as well, where does a typical customer start to ask questions? So what are the kind of fundamental things that the customer needs to know and understand before they want to step into, you know, developing best projects for us? 00:25:59:21 - 00:26:25:04 Julian Jansen Often it starts when the developer starts actually early on in the development cycle and that's where we as a business, as a team in Germany, really try to help our customers through that entire development journey. Right. Whether that's around, you know, answering questions on fire safety specific requirements around wastewater protection as a lot of requirements and regulation that you have to be considering early on in the development cycle. 00:26:25:17 - 00:26:52:08 Julian Jansen I think as people are kind of looking to invest into the asset classes, a few key deliberations, right? One is understand the complexity of developing a storage project, but then also operating a storage project. You know, people still often come with the lens from a, let's say feed in tariff subsidy world and solar, and that is not the right lens to take on energy storage and therefore really understanding the operational complexity, the impact of performance. 00:26:52:15 - 00:27:15:16 Julian Jansen I think in the end we're talking here about electrochemical technology and that's where you have degradation. You have to make sure that the system is operated the right temperature. You need to have sufficient cooling capacity. You have a lot of safety aspects that you have to consider. So really starting to think not just about how to build a project and then it will just generate money, how to build a project and then how to operate it in the optimal way. 00:27:15:16 - 00:27:41:25 Julian Jansen How do I manage performance so that I have continued output and continued profitability from the system? But also, how do I make sure that I can capture some of the outsized revenue opportunities that the market offers? So, you know, we are seeing more and more tools coming in, you know, really people providing long term revenue, security and backing, you know, ten, seven, ten, maybe even longer tolling agreements for battery energy storage, which obviously provides a lot of revenue certainty. 00:27:42:04 - 00:28:01:11 Julian Jansen But there's also a lot of upside to be made when you go down from a merchant market opportunity. So understand really the upsides and downsides, understand the complexity through the entire development cycle, and then really think about how do you maximize the operational performance of the asset over the lifetime of the project. 00:28:01:23 - 00:28:21:11 Peter Pongracz And I guess it also comes back to whether you are a developer or are you an asset owner, right. Because we are wearing two different hats, which sometimes are working hand-in-hand, sometimes not exactly. So I guess the asset owners have a little bit of a more long term view, right, both in terms of financial viability and project viability as well. 00:28:21:11 - 00:28:32:10 Peter Pongracz On the developer side, if my business model is just to build and sell, it's a little bit of a different incentive structure, right? So I guess what would be the right way of aligning those incentives? 00:28:32:23 - 00:28:52:15 Julian Jansen It's different incentive structures and I think that's okay. Right. There's different business models and different ways of benefiting from the scale of this technology and how it's being deployed. I do think it's also important that it's not as easy as buying some land and securing a grid connection. Right. In particular, when we look at the German market, the permitting processes are very, very challenging. 00:28:52:22 - 00:29:11:09 Julian Jansen They take a long time. You need to provide a lot of information. You need someone who stands by your side as a partner. You know, also from a technology supplier perspective, to really help you navigate that permitting process. There's a lot of pain points now with the introduction of traffic, I forgot farm, we really have to prove project maturity. 00:29:11:09 - 00:29:30:11 Julian Jansen Project readiness is not like speed to request as people used to think about, like, you know, I need to be the first and the earliest to product grid connection request. No no I need just now start really think about how good is my project, how mature is that, how to approve that. And again, you need a partner, partner by your side like fluence that can help you navigate that. 00:29:30:20 - 00:29:57:18 Julian Jansen And then also as you are starting to kind of, you know, mature, the process of developing the project is really thinking holistically, okay, how do I now built this? What are the benefits when I'm thinking about land versus duration? How how dense do I need a system? And really working with someone that understands all of those complexities, that understands the regulation, that understands the requirement around grid connection processes as well. 00:29:57:18 - 00:30:24:02 Julian Jansen Right. We have things like flexible connection agreements coming in now in Germany which really impact a business case. So, you know, if you're only looking at from a developing lens and I'm going I'm buying land, I'm getting a grid connection, I think you start underestimating how valuable your project could be or you could start actually thinking that your project is more valuable than it is in reality when you start, when you're wanting to sell it, while of course you're long term asset owner, you have to look at a much broader range of the equation. 00:30:24:08 - 00:30:42:06 Julian Jansen You have to start still with that development picture, but then you have to really think about, okay, what is the optimization of my performance over the long term? How is the system service? What is the availability I can rely on? What is my, let's say, repowering strategy? Do I think about augmentation down the end of the project or do I not? 00:30:42:09 - 00:30:59:28 Julian Jansen How does that impact maybe the design of the system from the beginning, even though it's something I'm doing at 15 or 20 years time, how flexible is my degradation curve? Is there ways where I could maybe trade off some additional cycling early on in the project to earn outsized revenues, maybe for some worse degradation towards the end of the project? 00:30:59:28 - 00:31:20:14 Julian Jansen Like how do to make those operational decisions? So I think there the complexity becomes even more critical. But I also find that often, you know, the people know best, the asset managers, the traders are not involved enough at the front end of the process. So often I think what, you know, gets delivered may not always be what they require and how they think they can maximize their money. 00:31:20:20 - 00:31:30:00 Julian Jansen And again, that's where you need a partner that understands the markets more deeply, that understands how people make money, rather than thinking about how to produce the most standardized highest volume. 00:31:30:06 - 00:31:54:10 Peter Pongracz DC BLOCK Indeed, because I speak to a lot of mostly silver developers, EPCs on a daily basis, and we've seen this huge jump between 2025 and 2026 of in 2025. People were already mentioning, you know, best in hybrid systems on solar projects in 2026. It's about 80% of all projects. And nobody is building solar anymore. Everybody's building hybrid. 00:31:54:10 - 00:32:18:09 Peter Pongracz Let that be either solar plus base or solar plus plus plus wind. So it's it's really becoming this blended picture of the whole whole architecture. But it must be extremely challenging to really zoom out and see the whole picture. Right, because, okay, you can look at buying different types of best solutions with, you know, the largest capacity and just plug them in. 00:32:18:17 - 00:32:32:19 Peter Pongracz But it might not serve your use case best on the mid to long term. And I think that's a challenge that people still need to wrap their head around as well, that it's there is you know, the typical rule of thumb is a cheap solution can be really expensive in the long run, right? 00:32:32:28 - 00:32:52:19 Julian Jansen Absolutely. In particular with a technology that is so dependent on how you cycle the how the performance looks over the long term, how is the battery degrading? But that has a big impact on how much money do you make over the lifetime of the project. And ultimately, that's where most of the value is. The failure EDA, the modular inverter level, that's fairly straightforward and that's not. 00:32:52:19 - 00:33:15:18 Julian Jansen Therefore the value doesn't lie. And what is the warranty? How does it operate? What's performance with storage is complete opposite. You know, that's where most of the value actually sits on the system rather than the installation and construction of the project. Because ultimately that's where you make your money. And if your warranties are not served well, if you availability drops off, you lose money, right? 00:33:15:18 - 00:33:35:02 Julian Jansen That's the reality. And yeah, you might have a guarantee against a certain availability number, but that penalty will never make up for the lost revenue that you might face in the market. And therefore, actually looking at it beyond, what does my guarantee look like, but actually how do people to perform when they're operating those assets and how do they service those? 00:33:35:09 - 00:33:55:09 Julian Jansen Well, that is money every single day. And the particular during those peak periods, those events that you don't expect right there was this really nice, I don't quite remember the exact year, but in Australia there was one year where I believe there was an outage on some coal fired power plant and it's like in a couple of days storage systems made so much money more than over the rest of the year. 00:33:55:17 - 00:34:13:25 Julian Jansen There's an outsized, unpredictable event. Right. But these events happen when you're running storage systems on the electricity grid. So you need to be ready to maximize when that event happens and not then have a problem that your system is not available or there's an outage and you actually can't earn money during the period where you would earn most of your money. 00:34:14:08 - 00:34:49:13 Peter Pongracz I guess if you look into the future, you know, like just purely basing on unpredictable weather events like we had this year in Europe, right? The heat was extreme. Everybody was running their AC. You know, the grid was consuming way more than we have anticipated or the Spanish and Portuguese blackout last year. I think these events are going to become more regular then Black Swan events in the future and then if you have a good strategy in place, then you actually might be able to both create a lot of value to consumers as well, but also for yourself, because you will be able to monetize those capacities as well. 00:34:49:27 - 00:35:25:15 Julian Jansen That's exactly right. And I think it's just proving that also energy security is actually security. Right. We are so dependent now on our daily life on electricity. So we need to have that resilience in our European electricity grids because that's the only way we can stay secure and how we can fuel and power economy. So I think there is a clear dual benefit where, you know, yes, a developer, asset owner can make outsized revenues during certain windows on certain events, but at the same time to actually providing the critical infrastructure that helps keep the lights on, that helps keep the grid stable and make sure that we remain secure. 00:35:25:24 - 00:35:27:11 Julian Jansen When we look at our electricity supply. 00:35:27:22 - 00:35:50:17 Peter Pongracz And we've talked a little bit about the grid and energy security as well. I guess the elephant in the room is always the EIA and the data center part, right. So how has that demand shifted across Europe, like, for example, in Germany when it comes to, you know, different ways of connecting to the grid with batteries or how are these two kind of a natural fit? 00:35:51:00 - 00:36:11:16 Julian Jansen Yeah. Battery energy storage systems are really seen as an essential enabler now of datacentre growth and. I think we've seen that mainly in the US right today, but other markets will start to follow. But in the US today we're really seeing that. You know, one good example to give here and I'm going to just quote the numbers from last month's earnings call just to avoid kind of any doubt. 00:36:11:18 - 00:36:46:14 Julian Jansen But, you know, FLUENCE outlined that we now at about a large data center pipeline. We have massive supply agreements that are where we now act as a qualified supplier for major hyperscalers. And, you know, quite frankly, a year ago this was not really a major application for battery energy storage, but as we have seen as rapid increase of datacentre capacity being built and planned, in particular in the US, we are starting to see past becoming really a foundational element of that AI ready datacentre infrastructure and there's a few different use cases here. 00:36:46:14 - 00:37:05:27 Julian Jansen When we look at the AI and datacentre space, one is that it actually helps overcome long connection delays for data centers, but you could have it as kind of, let's say, bridge to power piece there because you don't have the grid connection. You could utilize battery energy storage to be part of kind of an off grid solution for your data center. 00:37:05:27 - 00:37:24:13 Julian Jansen And then you connect to the grid when a grid connection becomes available. And that's a real life application in the sense that has datacentres ready built, not able to connect to the grid to day and several markets at the same time. What we're seeing with the rise of I was starting to see a lot more fluctuation in the electricity demand within the datacentre. 00:37:24:13 - 00:37:45:24 Julian Jansen So when before datacentre was not a particular volatile demand source with air is we starting to see much more volatility there and actually the battery energy storage is able to bring down the peak. And it's you know, it's a classic peak shaving application which has been around for a long time. But now we're starting to see it as an applicability within the datacentre space. 00:37:45:24 - 00:38:13:04 Julian Jansen And then, of course, we also have the ability to provide overall reliability benefits, instantaneous backup power, voltage support, blacks. That capability was adding to sea storage, together with renewables being a really interesting power supply combination for datacentres in particular, as people are looking to bring green electricity to power those datacentres. So I think it's really becoming a really nice symbiosis and we're seeing that first play out in the US but also in other markets. 00:38:13:04 - 00:38:36:03 Julian Jansen And you know what, Germany might be a little bit behind. It does offer a significant growth opportunity. There's national ambitions to double datacentre capacity by 2030 and a German market. And therefore, I think it's opening up a great opportunity for storage. But there's a big shift that needs to happen, right? While in the U.S., people are very actively looking at storage being a clear add on to the datacentre infrastructure to the design base. 00:38:36:09 - 00:38:59:23 Julian Jansen From the beginning, I think in Germany most people are still looking at it from this gas generation that you attach to your datacentre. They're not really thinking about that. Storage can actually accelerate their datacentre deployment, improve resiliency, and provide a much more flexible alternative to conventional solutions. Or maybe alongside conventional solutions for the datacentre market here, also in Germany and other markets in Europe. 00:39:00:08 - 00:39:32:08 Peter Pongracz What's interesting to hear is that, for example, in the US, I have many friends in the industry and they are saying that it's not an extremely clear cut path forward, right? When you want to put the best systems somewhere, you really need to do a lot of stakeholder management ahead on the local or county level. Right. Is it similar in Europe as well, so that people are still not really comfortable with having a big battery next to their house or or is it a bit of a different lens and different viewpoint here? 00:39:32:18 - 00:39:58:12 Julian Jansen I think that's very hard to generalize. That's right. Because you see very big differences in how communities react to different technologies, I would say is always important to engage your stakeholders right through your permitting process. You need to engage your local authorities. You need to engage local fire departments. You need to do a lot of education because of course, it's not everything is written down and it's an established technology and everyone knows exactly what to do while it is becoming more established. 00:39:58:19 - 00:40:20:11 Julian Jansen For a lot of communities, for a lot of stakeholders, it is still relatively new. So there's a critical requirement for developers, for people building the batteries to engage with those communities. You know, we as a technology supplier, we support our customers and that as well in many markets, you know, we stood alongside our customers engaging with fire services locally, engaging with local communities. 00:40:20:11 - 00:40:44:06 Julian Jansen Just explain what the technology is, what it does. I do think overall it is as battery storage, as a standalone technology is often a little bit easier to accept for local communities. Right. You don't have the height issues that you might have with wind turbines, know you don't have the issues around maybe land use, water use that you have with datacentres where it's really creating a competing source. 00:40:44:15 - 00:41:04:11 Julian Jansen But of course it still takes up land. Of course, you know, you have something built nearby. You have noise concerns that may come from local residents. So it's very important to take that series and engage and build a solution that fits into the environment where you're building it and you're making sure that actually stakeholders locally are on board with what you're developing. 00:41:04:15 - 00:41:32:23 Julian Jansen And then I think it can be a very successful deployment path. And I think we generally see a lot of openness from local authorities because that you look at it as ultimately a tool for energy security as well. So in short, yes, it's a problem here as well. Yes You have to engage with local authorities. But overall, when we talk in Germany or most European markets and very few cases have we seen let's a real blockage. 00:41:32:23 - 00:41:39:01 Julian Jansen I think it's more about concerns, education and taking people serious on your development journey. 00:41:39:15 - 00:41:58:06 Peter Pongracz It's important to educate them what it does. But actually, I think what's even more important and what it doesn't do you know that it's not going to burn your house down. It's not going to, you know, damage your grief, connection or basically like melt your cables, whatever the case might be, which is which is perhaps some of those myths that are worth debunking, right? 00:41:58:21 - 00:42:26:29 Julian Jansen Absolutely. I think all myths need to be tapped out like it's all about kind of rational and fact based education. You know, unfortunately, there's a lot of let's say you can watch videos of burning batteries online, but it's a very different battery than what we're putting into large scale stationary energy storage system, the safety elements that are included in the product that really mitigate along the entire way to avoid any form of major incident or thermal. 00:42:26:29 - 00:42:58:09 Julian Jansen Runaway, I think is very critical. And just taking people on a journey and them, as I said, also with fire departments like really working through what is the emergency response plan, how should they act and operate. We showed for our large scale burn test, right. If you know, all safety features fail. Right. Which is very, very unlikely. And should it happen and it should be for some reason an ignition, the way the modular system is built, you'll have one port on top of this market that could potentially burn out, get let burn out. 00:42:58:21 - 00:43:23:09 Julian Jansen And then the whole of the system can continue operating. And I think it's just educating stakeholders that that's what happens in the worst case scenario, which is already extremely unlikely to happen. And therefore people are then very much clear on what to do, how to react and what the worst case scenario is, which actually does not create a huge and major effect on the overall project and on the local communities, local residents. 00:43:23:09 - 00:43:37:16 Julian Jansen And I think that part is even more important that education happens early on because ultimately then people see it as a technology, it is is very safe, that it's designed for safety and that can be very much contained should there be an incident. 00:43:38:08 - 00:43:58:23 Peter Pongracz And you've actually touched on the hardware side of things briefly. You guys were probably one of the first, you know, larger scale providers in the past. How has the kind of thinking around the hardware part shifted, you know, from the early days to something that you guys have today, for example, with Smart Stack. 00:43:59:06 - 00:44:17:18 Julian Jansen Certain things are shifted, certain things have come back, right. You know, you start at the beginning. Storage systems were actually often built within buildings. Right. So you basically racks and it looked a little bit like a think about a datacentre, but you had battery racks within a building that very much went away. You know, it was not a cost effective solution. 00:44:17:18 - 00:44:39:05 Julian Jansen There was more safety concerns when you build it that way. So the industry moved away from it, moved to the kind of containerized system we actually had string inverter technology in the kind of mid 2000 tens then it was not as competitive as a central inverters, but now that's coming back right now utilizing string inverters for AC product and there's other, other products as well that have gone down that route. 00:44:39:11 - 00:44:54:16 Julian Jansen So you starting to see kind of a shift on the inverter technology. And as I mentioned earlier, we've gone through a period where we weren't very modular in the early 2000 twenties, kind of six years ago, there was a real need for more density as projects became bigger because when projects were smaller, it was less of an issue. 00:44:54:24 - 00:45:13:29 Julian Jansen Now projects are becoming bigger, so density is becoming a major driver, and I think that that journey will continue to evolve. But I think the biggest shift now, at least the way we're looking at it at Fluence, is that where we went initially from kind of individual products projects, but now thinking of our smart stack product as more of a platform. 00:45:13:29 - 00:45:40:14 Julian Jansen So now it's not like you can get ten megawatt hours in a single unit. In previous generations it was seven and a half megawatt hours. But you're not changing the fundamental architecture, so you're not having to you're not introducing a new product from the ground up, but you're actually starting to build more of a platform where you don't have to reinvent the wheel, but you can basically have a modular, repeatable platform which allows you to bring rapid innovation onto a stable platform. 00:45:40:20 - 00:46:09:15 Julian Jansen And think of it as, you know, Apple doesn't redesign the iPhone every single year. Right? But it can release a new version of the iPhone every year and they can very quickly iterate and innovate using a standardized hardware and software architecture that then allows them to bring rapid innovations into the product. And I think similarly, we're looking at Smart Stick as a long term sustainable platform that allows us to bring in different cell technologies and cell chemistries, also maybe different module form factors very quickly. 00:46:09:21 - 00:46:34:27 Julian Jansen It allows us to much more rapidly iterate on our software capabilities without forcing a customer to redesign the entire project from the ground up. It allows us to bring in new inverter architecture into the same product as well. So you're starting to give much more of a base for continuous development and innovation, and I think that is required because the innovation cycle we've seen in storage has been very, very quick, right, 12 to maybe 18 months. 00:46:35:04 - 00:47:02:27 Julian Jansen You start seeing new product innovations coming out and I think therefore we now have the right platform, the right mix that allows us to bring in innovation quickly while at the same time creating a lot more stability for our customers and the development process where they don't have to redesign a whole project every single time. And that ultimately means we give them a platform that they can trust while maintaining agility to deliver on advanced density, the highest level of safety and security and grid integration capabilities. 00:47:03:09 - 00:47:26:07 Peter Pongracz I guess what you mentioned is mostly related to cost and compatibility, right? You want to have an architecture that you can continuously build on while the new technologies are coming out and you don't have to rewire your whole project, which is extremely important. But perhaps if we can segway into the chemistry part of the batteries, like how have we actually evolved in terms of the different mixes that we use? 00:47:26:07 - 00:47:33:17 Peter Pongracz Then perhaps if you could guess what is the future in the next five years? What kind of chemistries would we be using in the future? 00:47:33:24 - 00:47:57:18 Julian Jansen I think there's one as a shift in chemistry and that is more nuanced changes within the chemistry, right. So obviously the market has shifted, as I mentioned earlier, from AMC technology to NSP technology, which is now firmly established as the technology of choice. But we're starting to see sodium ion really come and push into the market. There's a lot of development happening there, mainly driven by fluctuating raw material prices. 00:47:57:18 - 00:48:19:25 Julian Jansen Right? There was a period where lithium prices were very high, so sodium ion R&D was accelerated. Then they dropped sodium ion, R&D was decelerated and lithium prices went up again. And sodium ion is now kind of pushing into the market. And I think as we see a shift towards longer duration, I think it's clearly a technology that can compete, but it still has some major issues, for example, around the density aspect as well. 00:48:20:02 - 00:48:47:24 Julian Jansen So I do think there's of evolution on the chemistry and then there's evolution within the right. We're starting to see much higher density cells for LSP. We've seen improvement in performance. So there's nuance to it. Beyond just changes in chemistry, but also continuous evolution of each individual chemistry. I think there will be a continuous evolution and I think the critical element is we need enough scale in order to also drive down costs, technology improvements, improve manufacturing processes. 00:48:48:03 - 00:49:11:19 Julian Jansen And I think that's where we have really squarely achieved that with LSP. And I'm yet to see another technology that can achieve the same scale benefits and therefore compete directly. And, you know, sometimes it's not always the on paper best technology that that wins out, but actually the technology that's best suited for the application while at the same time delivering the scale benefits that drives down costs. 00:49:11:23 - 00:49:31:24 Julian Jansen And that's ultimately then the winner, even though, let's say on paper from the pure technical specifications and then another technology may seem more suitable. And we've seen that in many industries over the years. So I think it's a really interesting one to watch. I would not want to make any predictions. We are starting to see sodium mine to really compete in particular on some of the longer duration applications. 00:49:32:00 - 00:49:50:22 Julian Jansen So I think it would be very interesting to see how that that's what shapes out over the coming years. But I think what's important is that as a technology supplier and developer of technology, we have to again have the agility and a stable platform that allows us to actually rapidly iterate and bring in new battery technologies, new chemistries if we need to. 00:49:51:03 - 00:50:08:16 Peter Pongracz To wrap it up. There are many components of the all bets solution question, right? So there is that there's the chemistry, there is the software part, there is the architecture part. Is there anything that I missed that kind of completes the picture of a successful best solution, so to speak? 00:50:09:01 - 00:50:27:18 Julian Jansen We talked about it quite a lot. Is the performance of the system over a long period of time and how you stand in for those services, for those guarantees? I think that's very critical. And I think ultimately it's being or working with a reliable partner that understands the market, that understands your business case, that understands your pain points in order to solve that. 00:50:27:24 - 00:50:45:09 Julian Jansen But I think if you can bring those things together while then at the same time making sure we have a regulatory environment that allows storage to compete on a level playing field and capacity markets that allows the opening of new revenue streams such as the inertia market, where you're starting to see the simplification of the grid connection process. 00:50:45:14 - 00:50:54:06 Julian Jansen I think you're starting creating the recipe or you have the ingredients to have a very successful recipe for storage over the long term across Europe and globally. 00:50:54:13 - 00:51:04:20 Peter Pongracz Is there anything else that we perhaps missed that people should know about in the in the best base of what's about to come? Some interesting developments, anything that we should keep an eye on. 00:51:04:28 - 00:51:25:11 Julian Jansen We should actually keep an eye on on European Union regulation. Now, that seems like maybe the an interesting kind of pitch or segway. We've not talked about it a lot, but I actually think this is something I'm very passionate about. Also, in my role as a vice president of the European Storage Association. And I think it's a shift in the role that our industry and our technology plays. 00:51:25:23 - 00:51:50:07 Julian Jansen You know, it used to be very agreeable. Quite a lot of regulation would not impact us, would not touch us. We were now moving front and center said for things like the Industrial Accelerator Act in Brussels, like the Cyber Security Act, it directly impacts storage. And I think as an industry and business, that's maybe a little bit of a plea also for your listeners, for everyone working in this space, we need to start standing up as the large industry that we are becoming. 00:51:50:13 - 00:52:20:25 Julian Jansen We need to stand up as an industry that is critical for energy security in Europe. And therefore, we need to play a very active role and have a voice that is heard in Brussels and across the member states to make sure that the environment we're creating is ultimately serving our electricity consumers make sure we have energy security in the market and does so in a sustainable way that creates an asset class that is not going for a boom and bust cycle, but that continues to attract capital in the long term, which is good for all of us. 00:52:21:02 - 00:52:29:25 Peter Pongracz Beautifully put to the listeners out there. For those of them who might not know Fluence or yourself, what is the best way to reach out to you and who should reach out perhaps? 00:52:30:09 - 00:52:48:03 Julian Jansen I think there's lots of different Fluence that you that you can find and reach out to reach out to myself or anyone else on the team and I can point in the right direction or you can get in touch via LinkedIn a point into the right direction. Within our team, we have a great team working on business development, on marketing, and they are all the right touch. 00:52:48:12 - 00:53:13:07 Julian Jansen So whether that's through our website, what is a clear contact form that you can utilize or whether that's reaching out to the many Fluence that are very active on LinkedIn, that are sharing their views, that are active thought leaders, reach out, join a discussion, join the debate. We love to learn. We love to listen. We love to work together because only that way can we continue to advance as an industry and we can best serve our customers and ultimately everyone involved in this space. 00:53:13:22 - 00:53:18:13 Peter Pongracz Julien, thank you very much for being here, for sharing your knowledge and let's do this again soon. 00:53:18:16 - 00:53:29:25 Julian Jansen I really appreciate the opportunity and what a great conversation we've had

The difference between container-based models and what Fluence offers

0:33Peter Pongracz: What is the actual difference between the container-based models and something that you guys have?

0:39Julian Jansen: So I think there's two fundamental differences, right? If you think about it, one is the level of modularity that the product brings, right? Because the smart stack, you have the smart skid at the bottom, and then you have the four battery pots that get attached on top of the product. Well, if you see m most products in the industry are basically just the container trying to get as many batteries as possible into that container, that's creating a lot of challenges when you're actually trying to transport those containers and install them because they're becoming heavier and heavier and heavier, which means you're starting to require specialized cranes, you start to require specialized vessels, and it's creating a real issue.

1:15You know, you have some sites that are in rural areas with sl roads, and you have to carry equipment that is 50 tons plus, and that creates a challenge. Well, if you have the modular approach, both from a logistics transport, but then also installation perspective, it's much simpler. You know, what we're seeing is some products in the market now require on-site uh loading of the modules into the battery containers again, which is something the industry moved away from quite some time ago because it's very costly, it's very time-intensive.

1:45So the installation process starts slowing down again, and with SmartSec, it really allows us very fast installation on-site. So you're combining the best in class density with the modularity, which allows for better installation and transport. And that's one of the big differences. The other one is that it's an AC solution. So rather than being a DC battery block where you then have a central inverter, in this case you have the string inverter architecture that is included into the smart skid.

2:12And again, therefore, you're creating greater modularity, higher performance, and actually better services performance as well.

2:19Peter Pongracz: So basically, you guys already thought about the engineering side of things as well, right? Best is so kind of new, especially new at scale, that most people don't really think about the real logistics of it, right? And within Europe, we have decent roads. Most of the cases, okay, you have some small access roads where we still need to get to it, and getting there with a specialized truck with that carries like double, triple the weight or the load capacity that normally would, then that's quite a challenge, right?

2:45Julian Jansen: It's how people approach the storage industry, right? Because what we're seeing with a lot of the more standardized 20-foot container-sized blocks, the focus there is to manufacture as many blocks as cheaply and quickly as possible. But energy storage is complex and critical energy infrastructure. And developers, operators, owners don't look at this asset class as a very exchangeable product base that is doing something very simple like generating electricity, but they actually look at it through the multitude of applications and therefore our approach and what shaped Smartslack and the engineering design prowess thought that went into it is very much shaped by the fact that our role is to allow our customers to maximize the profit they have on their project when we're talking about a merchant project, or if we're talking maybe in terms of a utility or data center context, to actually ensure the critical applications you need to run of this asset work and work very well.

3:54So you're looking at it as much more of a holistic solution that needs to be tailored to what the project is trying to achieve and what the ultimate output and goal is. And I don't believe that you can achieve that by purely manufacturing a very standardized block that is interchangeable, but it is combining the scale with thinking through the entire project value.

4:16And that includes the transport, that includes the installation, that includes the performance, that includes how you maintain the system, right? And how you make sure that the performance is continuously strong through the lifetime of the asset, how you reduce the complexity of services, how do you keep uptime up? Every percentage of availability is worth a lot of money for a customer in a merchant market context.

4:39So making sure that you have high availability and Fluence's fleet has been certified to be operating at more than 99% availability, in these contexts, you have a very, very strong case for why you need to re-engineer the way a product also looks that was deployed, rather than thinking we can just pack as much density into the same footprint container as possible.

5:02And I think that model will run into its barriers as the industry matures and people see the operational learnings from their projects.

Do project developers truly understand the complexity of energy storage?

5:11Peter Pongracz: And do you think project developers and asset owners fully understand the complexity of BES?

5:17Julian Jansen: Yes, many do. In particular, those that are well worse and that have experience in the market and that have been operating assets. I still think we sometimes see in particular developers that come from different asset classes treating it a little bit differently and maybe thinking of it as quite a simple solution. But I think what we're seeing now is a very big shift in the way developers, asset owners think about this asset class.

5:46And of course, the business case needs to pencil. But it is also very clear that they all think of a 15, 20, 25-year time horizon. They deeply understand the business case, and they deeply understand the levers that you can pull to improve it, right? Whether that's improving your round trip efficiency, whether that's improving your availability, whether that's providing flexibility in the way you structure your performance guarantees in order to allow your customer to maximize the revenue opportunities that the market is offering.

6:17That is all something that we're now seeing asset owners, operators deeply understand and starting to value more and more.

How the energy storage industry evolved from the early days

6:24Peter Pongracz: Maybe this is a right point to segue into the beginnings, right? You've been in the in the industry for way before batteries were cool. So take us back to the early days when you know the the capacity or basically you we had maybe up to one hour storage capacities, etc. Like how did the industry mature from that point on and how big is the gap that we have actually covered in that time frame?

6:46Julian Jansen: Yeah, I got I got into energy storage around 2014. That feels like a long time ago in in this industry, but I still have colleagues that got involved even earlier than that. So they they remind me of the true early days. But I think even at that point, we were talking about very small energy storage projects, and the majority of projects were actually 15-minute, 30-minute duration maximum.

7:08And that was the first part where energy storage was able to compete with other asset classes to provide fast frequency response in various different markets, whether that was in PGM in the US, or whether that was then in Europe, in the GB market, in the German market, providing primary frequency control. And it was really there where people thought that's what batteries are good at, very quickly responding, and then it's starting to ramp down when the short-term requirements are met from the grid, and then other types of technologies take over.

7:40And I think over the years, the technology has continuously surprised people and proved people wrong. And you know, there's this lovely anecdote that some of the veterans here at Fluence tell time and time again, when it first got involved in 2008, you know, it wasn't really about a battery making money or a battery being able to be a large-scale commercially viable solution.

8:03No, it was actually about proving that a battery could even provide frequency regulation because nobody believed that it could. And through that early pilot that the team back then at AES did in the US, it really kickstarted a process that Indian has accelerated at a blistering pace over the last decade. And now we're starting to see storage not being a niche technology, but being a fundamental part of our grid infrastructure.

8:29And in Europe, we're going to expect a doubling of energy storage capacity over the next four years, which is just mind-boggling when you think about where we come from.

When did battery storage cross from niche technology to critical infrastructure?

8:38Peter Pongracz: Indeed. And you know, you you touched on a couple of keywords here. So the the kind of crossing the bridge from a niche technology to actually critical infrastructure. Could you pinpoint that in a timeline of when that would be roughly happening in the past?

8:54Julian Jansen: I think that depends quite a lot on the market and the market context. And I got involved in it because somebody said to me, Hey, why don't you start looking at this battery energy storage thing? Could be interesting in the future. So, you know, I started investigating it, started researching it, started working on it. And what became very clear very quickly was that it was extremely powerful.

9:15And to me, it was something that would become a game-changing technology in the market. So that's why personally I got very interested in it and started really investigating early business models, some of the crazy pilot projects that were being done in different parts of the world. But I think where it changed for me, the first point was 2016. That's where we saw rapid acceleration from kind of the end of 2015 through 2016 in the PGM market in the US, right?

9:41By the end of 2016, there was about 274 megawatt of battery storage systems installed in that market. And it was also the same year where National Grid released the enhanced frequency response tender in the UK, which awarded 201 megawatt in total back then, which was a very large number at the time in the market. And we also started to see the first installations in Germany being deployed for primary frequency reserve.

10:05So that was really the first point where it was very clear storage would be the type of technology best suited to provide fast frequency reserve. But when we were observing the market, and at the time I was an analyst in the energy storage industry, we started observing the market, we really felt this was going to be the major part of the revenue stack for storage.

10:25And yes, we would start to kind of develop a little bit into more secondary reserve. We would maybe start seeing some opportunities for even faster response services on the grid, but we really felt that was probably the main market for storage, and maybe we would see a shift to one hour, two hour systems. But really, at the long duration, lithium-ion battery energy storage wasn't going to be the solution for the long term.

10:48And then I think over a very quick time, so probably two to three years, things shifted again. And I think to me, and at the time I was very heavily involved also in Asia as well as the US, so had a very global view of the market. And I remember in 2018, and at the time I was going to Korea twice a year, we had a lot of customers there. And in 2018, South Korea installed 2.1 nine, sorry, 2.9 gigawatt hours of battery storage in a single year in one market.

11:15And that was partially driven by a subsidy, like it was very much driven by a subsidy scheme from the government. But I think it was the first point for me where I went, hang on a second. This is a really at-scale technology, and all it needed was a small government subsidy that allowed storage to really get also into the renewable time shifting segment as well as tackling the CNI market.

11:37I think it was that point where it was very clear that storage would go beyond those fast response applications and also become really a technology that becomes critical for the entire flexibility value stack, as well as providing these critical time shifting applications that we start needing more and more as we have greater renewable penetration on the grid.

12:00So it would really be those two points in time, 2016 and then 2018, when the South Korean market really took off.

How the EV boom and cost collapse transformed the storage market

12:07Peter Pongracz: And if you think about those timelines as well, it's kind of a natural creation of a flywheel, right? That kind of feeds itself. So around the same period of time as well, we kind of reached a bit more economies of scale as well. And also there was the cost collapse as well, right? That you know, we could pack more and more megawatt hours now into the same, you know, cell density, etc.

12:28And new technologies are coming online as well. So how did that impact the whole industry? Like how how do you think that actually influenced you know these new kind of we are talking about grid service infrastructures right now, right? And before that, we were only talking about serving local, you know, grid balancing use cases, et cetera. So when did that bridge got crossed?

12:50Julian Jansen: Yeah, I think that the that kind of bridge or that evolution of the market happened kind of post-2018 into the kind of early 2020s. First was that the automotive industry started to really shift significantly towards e-mobility. And that is something we always have to remember. The reason lithium iron in particular established itself as the dominant technology for stationary energy storage, which was not the case at the very early stages of the industry and the market, was really driven by the scale that was enabled through the rise of e-mobility.

13:24And that drove a lot of manufacturing capacity, that drove technology improvements, and naturally stationary storage became a major beneficiary. Now, at the same time, we also saw a shift in technology away from NMC technology towards LFP, so lithium ion phosphate technology. And that was driven by multiple areas, but as LFP started to show stronger performance characteristics as well as a higher or improving density, and at the same time the applications shifted a little bit more from power towards energy, it became the more suitable technology, and on top of it, it was able to address some of the safety concerns and some of the high increases in raw material cost that affected NMC kind of towards the end of the 2010s.

14:15So that shift, therefore, enabled two things. One, as costs came down, storage became suitable for a greater number of applications, in particular utilizing lithium-ion battery energy storage. So where before the high costs really only enabled the most lucrative parts of the electricity market, the very fast frequency response market. We started to see more of a shift where actually storage was able to compete with gas fire power plants in capacity markets in places like Great Britain.

14:44We started to see the hybridization of renewables becoming more sensible as you were able to time shift electricity for cheaper over longer periods of time. So it's really been this extreme rapid acceleration where the cost reductions and technology improvements paired with the increasing need on the electricity grid created a perfect accelerator for battery energy storage.

15:10And I think what has shifted now is that at the beginning we really were reliant on the development of the automotive industry. Now the capacity in stationary storage markets is big enough, and that's where we started to see, therefore, also bifurcation on the technology side, on the manufacturing capacity, which is only benefiting stationary energy storage even more so than it did at the beginning.

15:30So that is a fundamental shift on the battery technology side. But of course, there's also other areas of improvements that have enabled new value cases, new revenue streams to be accessed to.

Where does the European energy storage market stand today?

15:42Peter Pongracz: And it kind of brings us to today as well, right? So in in 2026, we just came back from the keywords of the day were flexibility, BES, and basically figuring out what to do with the curtailment. And to most of those applications or issues, BES can really provide a viable solution, right?

16:00Julian Jansen: Correct. So I think if you look at today, I mean let's let's take European market, because of course every market is a little bit different, but in most European markets, you have a similar stack of applications, right? You still have your fast frequency response services, you have your secondary response services. That's where storage is still a very capable technology.

16:18But those markets are or have become saturated, the revenue opportunity is becoming less lucrative, and really where we've now shifted to is where arbitrage is making sense and is also starting to enable longer duration storage systems. So four hours really becoming the norm, for example, in Germany now, because we're starting to see enough value in the electricity market to trade against those.

16:40At the same time, you still have capacity market in many European countries, whether that's Poland, Belgium, GB, and those capacity markets really are creating a good baseline, very bankable revenue stream that investors can get a lot of security from. But then at the same time, we're starting to see also more of a shift towards kind of true grid stability.

17:00Because as we're losing a lot of synchronous generation and we're moving to inverter-based generation through solar, through renewables, what we're starting to see is a need for inertia on the system. And again, that's where battery energy storage is really now creating a strong opportunity, strong use case where through basically creating synthetic inertia, storage is contributing heavily to the grid stability element at even you know as a grid forming technology rather than a grid following technology.

17:30And then even though in many markets that today doesn't create a huge, let's say, monetary opportunity, when we look at the overall system benefit, you have now a technology that really can cover the entire spectrum and therefore plays not just a key role for, let's say, enabling renewables, as many people thought about in the past, but actually it becomes a technology that is fundamental for energy security and also helps us reduce the overall cost of running and operating the electricity system, which then benefits ultimately European consumers.

18:03And that's the goal, as we're needing to bring electricity prices down again in Europe because we're dealing with some of the highest electricity prices in the world, and that's hurting our industry and that's hurting our consumers.

What the new electrification act means for batteries and solar hybrids

18:13Peter Pongracz: And that's that's I think a great segue into you know the recent news from last week, right? So we we got the the new electrification act out, so we have a target of 46% by 2040, so that's uh that's a big number. We are at around 23-24%, depending on how we look at it. And I think batteries will need to play a key role in this as well, right? Because we just need all the help we can get.

18:39And on the other hand, if we are wearing an investor hat as well, you know, investing into solar on its own, it's getting more and more challenging because of the negative hours, you know, the the basically big swings during the day. So we need to have some sort of help and technology that helps us balance these two aspects, right?

18:59Julian Jansen: And I think there's a system element that it needs to be considered, right? The more storage we have, the more flexibility we have in general. It doesn't need to be storage, but flexibility as a whole, it ultimately again allows more renewables to be installed from a system perspective. It actually means the reinforcement of our grid infrastructure can be done in a more efficient manner, which again benefits electricity consumers.

19:19But from an investor perspective, you also highlight there very clearly the challenging environment for solar. And I think we're now starting to see the point where in Europe, hybridizing solar systems with battery energy storage is starting to make sense. And in many cases, it's often the only way you can get a solar system to still pencil. I think that is a fundamental shift because in Europe, for many years, we didn't really have a hybrid opportunity.

19:44It was mainly a standalone storage opportunity. But now we're seeing in many markets, especially those that have long periods of negative pricing, that actually pairing solar with storage becomes the no-brainer solution, in particular as you're also struggling to get grid capacity, grid access, and you also have a lot of existing plants that might be starting to fall out of subsidy schemes, may require repowering, and maybe it's a natural choice to pair those with battery storage systems.

Why Germany is the hottest battery storage market in Europe right now

20:10Peter Pongracz: And we we spoke about different European markets, and when you mentioned the curtailment and you know grid grid connection issues, etc., that really brings me to Germany, right? Because it's the largest market in Europe in terms of both battery capacity and overall renewables installment as well. How is the market looking and what has been changing in the last 12 months?

20:31Julian Jansen: I think right now Germany's going through a significant boom and acceleration. Like it is in track attracting the largest number of investments across European storage markets. We're starting to see a lot of international capital flowing in the market. It's right now a very hot project MA market, actually, a lot of projects changing hands, a lot of interest in more mature, higher quality, large-scale projects.

20:55And I think that is a really positive development because Germany does need battery energy storage and it needs it fast. When we look at the last 12 months, what has shifted in particular or changed in particular? There's a few things that that really have come in. One is we're starting to see a big shift in project size, right? We're seeing more larger mega projects in the gigawatt hour scale compared to what we've seen in the past.

21:17We're starting to see a shift in duration. So we're seeing a clear move from two hours to four hour duration battery energy storage systems. Most projects are now actually changing through the development cycle to four hours, and it's a great area where our high density product is able to help a developer shift a project from two hours to four hours without a significant increase in land use, which of course has a cost benefit.

21:40We're now starting to see, as I mentioned earlier, there is a great opportunity around grid forming and inertia in European markets. And Germany actually is one of the markets where there is a market that will remunerate battery energy storage assets to deliver those services. So it's very critical that you actually have the inverter capability, but also most importantly, controls capability.

21:59To accurately reflect the requirements of that inertia market. And as with Fluent Smartstack, it's giving our customers a huge advantage, enabling them to tap into revenue streams that are potentially creating hundreds of thousands of additional revenue upside every single year. I think on the market and regulatory side, there's also a few big developments we've seen over the last year that are now enabling the market more clearly.

22:22We've had a bit of a roller coaster right around the grid fee exemptions, but now we have some real clarity from the regulator over the grid fee exemptions that projects that come online by August 2029 and that at the same time reach FID, so the final investment decision by the end of 2026, they will be exempt from grid fees going forward. So investors know what to do.

22:45And we expect that a grid fee exemption has an impact of about 1.5 to 2% on project IRR. So it's very lucrative in order to hit those two deadlines so that you can actually create a significant uplift to your investment case. The investment case still works even if you pay grid fees in most cases. However, of course, that is a welcome boost for developers and asset owners.

23:09And we're really working with our customers to enable those deadlines, right? Really working through the right commercial structures, accelerating contracting. We know the market inside out. Therefore, we can be a real partner to our customer to re meet those regulatory milestones and meet them quickly, because that in the end helps them make make more money.

23:27And then on top of it, we had a huge issue around the grid connection queue. And then that's not a unique problem to Germany, but with the introduction of the so-called Reifegrad Verfahren, which basically is now starting to sort the grid connection queues by project maturity, project quality, we believe that the market has taken the right regulatory step in order to allow for more deliberate way of reviewing and granting grid connections.

23:52And I actually think that will benefit the industry in the long term.

23:55Peter Pongracz: I was at another conference a few months back and we had an analyst from the International Energy Agency, and she said that we have around 400 gigawatts of renewables stuck in, waiting for grid connection, and basically uh waiting to be connected in Europe. So if we would only connect those, we would actually hit all of our targets, right?

24:16Julian Jansen: That's right. And I think the problem for storage, you know, is even more severe. Germany alone, right? The last officially communicated number at the end of 2025 was that at that point in time, there were 720 gigawatts of grid connection requests for battery energy storage systems just in Germany. And already we have 78 gigawatts of battery energy storage systems that have confirmed grid connections.

24:39So that doesn't mean that necessarily those grid connections are in the short term, but overall we're starting to see a really clear backlog. So even just connecting a fraction of the queue and getting those 78 gigawatts built, that would really deliver incredible value for the market. It would ensure greater energy security and it would ensure more price stability on all cell markets.

25:01So I think we're starting to see the the right direction. We're starting to see that interest shown in the grid connection queue, but we also start seeing the need to really clear up that grid connection queue in Germany but across European markets. And I do believe the Reifergartfawn is a step in the right direction because it does start to create a bit of a natural filter for projects there right now.

25:23But nonetheless, if we think about where the market goes, you know, we're expecting really over over the next year, or actually within 26, so you know, we're halfway through by the end of 26, probably about four to five gigawatts of additional large-scale energy storage to be installed according to SP Global.

What developers and asset owners need to know before entering the BESS market

25:42Peter Pongracz: And we we talked about the markets, we talked about the customers a little bit as well. Where does a typical customer start to ask questions? So, what are the kind of fundamental things that the customer needs to know and understand before they want to step into developing best projects?

25:59Julian Jansen: For us, often it starts when the developer starts actually early on in the development cycle, and that's where we as a business, as a team in Germany, really try to help our customers through that entire development journey, right? Whether that's around answering questions on fire safety, specific requirements around wastewater protection. There's a lot of requirements and regulation that you have to be considering early on in the development cycle.

26:25I think as people kind of looking to invest into the asset class, is a few key deliberations, right? One is understand the complexity of developing a storage project, but then also operating a storage project. You know, people still often come with a lens from a, let's say, feed-in tariff, subsidy world in solar, and that is not the right lens to take on energy storage.

26:47And therefore, really understanding the operational complexity, the impact of performance. Like in the end, we're talking here about an electrochemical technology, and therefore you have degradation, you have to make sure that the system is operated, the right temperature, you need to have sufficient cooling capacity, you have a lot of safety aspects that you have to consider.

27:06So, really starting to think not just about okay, how do I build a project and then it will just generate money? How do I build a project and then how do I operate it in the optimal way? How do I manage performance so that I have continued output and continued profitability from the system? But also, how do I make sure that I can capture some of the outsized revenue opportunities that the market offers?

27:27So, you know, we are seeing more and more tolls coming in, you know, really people providing long-term revenue security and backing, you know, 10, 7, 10, maybe even longer tolling agreements for battery energy storage, which obviously provides a lot of revenue certainty. But there's also a lot of upside to be made when you go down through a merchant market opportunity.

27:46So understand really the upsides and downsides, understand the complexity through the entire development cycle, and then really think about how do you maximize the operational performance of your asset over the lifetime of that project.

Developer vs. asset owner: how do you align incentives in storage projects?

28:01Peter Pongracz: And I guess it also comes back to whether you're a developer or are you an asset owner, right? Because we are wearing two different hats, which sometimes are working hand in hand, sometimes not exactly. And so I guess the asset owners have a little bit of a more long-term view, right? Both in terms of financial viability and project viability as well.

28:21On the developer side, if if my business model is just to build and sell, it's a little bit of a different incentive structure, right? So I guess what would be the right way of aligning those incentives?

28:32Julian Jansen: It's different incentive structures, and I think that's okay, right? There's different business models and different ways of benefiting from the scale of this technology and how it's being deployed. I do think it's also important that it's not as easy as buying some land and securing a grid connection, right? In particular, when we look at the German market, the permitting processes are very, very challenging.

28:52They take a long time. You need to provide a lot of information. You need someone who stands by your side as a partner, you know, also from a technology supplier perspective, to really help you navigate that permitting process. There's a lot of pain points now with the introduction of the Reifergradfawn where you really have to prove project maturity, project readiness.

29:12So it's not like speed to request as people used to think about, like, you know, I need to be the first and the earliest to provide that grid connection request. No, no, I need to now start really thinking about how good is my project, how mature is it, how do I prove that. And again, you need a partner by your side like Fluence that can help you navigate that.

29:30And then also as you are starting to kind of you know mature the process of developing the project, is really thinking holistically, okay, how do I now build this? What are the benefits when I'm thinking about land versus duration? How how dense do I need as a system? And really working with someone that understands all of those complexities, that understands the regulation, that understands the requirement around the grid connection processes as well, right?

29:57We have things like flexible connection agreements coming in now in Germany, which really impact the business case. So, you know, if you're only looking at it from a developing lens and I'm going, I'm buying land, I'm getting a grid connection, I think you start underestimating how valuable your project could be, or you could start actually thinking that your project is more valuable than it is in reality when you're starting to when you're wanting to sell it.

30:18While if of course you're a long-term asset owner, you have to look at a much broader range of the equation. You have to start still with that development picture, but then you have to really think about okay, what is the optimization of my performance over the long term? How's the system service? What is the availability I can rely on? What is my, let's say, repowering strategy?

30:38Do I think about augmentation down the end of the project or do I not? How does that impact maybe the design of the system from the beginning, even though it's something I'm doing in 15 or 20 years' time? How flexible is my degradation curve? Is there ways where I could maybe trade off some additional cycling early on in the project to earn outsized revenues, maybe for some worse degradation towards the end of the project life?

31:00How do I make those operational decisions? So I think there the complexity becomes even more critical. But I also find that often, you know, the people know best, the asset managers, the traders, are not involved enough at the front end of the process. So often I think what you know gets delivered may not always be what they require and how they think they can maximize their money.

31:20And again, that's where you need a partner that understands the markets more deeply, that understands how people make money, rather than thinking about how do I produce the most standardized, highest volume DC block.

Why a cheap storage solution can be the most expensive decision long term

31:31Peter Pongracz: Indeed, because I speak to a lot of mostly solar developers, EPCs on a daily basis, and we've seen this huge jump between 2025 and 2026. Of in 2025, people were already mentioning, you know, BES and hybrid systems on solar projects. In 2026, it's about 80% of all projects. So nobody is building solar anymore, everybody's building hybrid, let that be either solar plus best or solar plus best plus wind.

31:59So it's it's really becoming this blended picture of the whole uh whole architecture. But it must be extremely challenging to really zoom out and see the whole picture, right? Because okay, you can look at buying different types of best solutions with you know the largest capacity and and just plug them in, but it might not serve your use case best on the mid to long term.

32:22And I think that's a a challenge that people still need to wrap their head around as well. That it's there is you know, the typical rule of thumb is a cheap solution can be really expensive on the long run, right?

32:33Julian Jansen: Absolutely, and particularly with a technology that is so dependent on how you cycle it, how the performance looks over the long term, how is the battery degrading, right? That has a big impact on how much money do you make over the lifetime of the project. And ultimately that's where most of the value is. If there's a failure either at a module or inverter level, that's fairly straightforward.

32:51And that's not therefore the value doesn't lie in what is the warranty, how does it operate, what's the performance, where storage is the complete opposite. You know, that's where most of the value actually sits on the system rather than in the installation and and construction of the project, because ultimately that's where you make your money. And if your warranties are not served well, if your availability drops off, you lose money, right?

33:15That's the reality. And yeah, you might have a guarantee against a certain availability number, but that penalty will never make up for the lost revenue that you might face in the market. And therefore, actually looking at it beyond of what does my guarantee look like, but actually how do people perform when they're operating those assets and how do they service those?

33:35Well, that is money every single day. And in particular during those peak periods, those events that you don't expect, right? There was this really nice, I I don't quite remember the exact year, but in Australia there was one year where I believe there was an outage on some coal-fired power plant. And it's like in a couple of days, storage systems made so much money, more than over the rest of the year.

33:55There's an outsized, unpredictable event, right? But these events happen when you're running storage systems on the electricity grid. So you need to be ready to maximize when that event happens and not then have a problem that your system is not available or there's an outage and you actually can't earn money during the period where you would earn most of your money.

34:14Peter Pongracz: I guess if you look into the future, you know, like just purely basing on unpredictable weather events like we had this year in Europe, right? The heat was extreme, everybody was running their AC, you know, the grid was consuming way more than we have anticipated, or the Spanish and Portuguese blackout last year. I think these events are going to become more regular than black swan events in the future.

34:37And then if you have a good strategy in place, then you actually might be able to both create a lot of value to consumers as well, but also for yourself, because you will be able to monetize those capacities as well.

34:50Julian Jansen: That's exactly right. And I think it's just proving that also energy security is actually security, right? We are so dependent now on our daily life on electricity. So we need to have that resilience in our European electricity grids, because that's the only way we can stay secure and how we can fuel and power our economy. So I think there is a clear dual benefit where, you know, yes, a developer asset owner can make outsized revenues during certain windows and certain events, but at the same time, they're actually providing the critical infrastructure that helps keep the lights on, that helps keep the grid stable and make sure that we remain secure when we look at our electricity supply.

How battery storage is becoming essential infrastructure for data centers

35:28Peter Pongracz: And we've we've talked a little bit about the grid and energy security as well. I guess the the elephant in the room is always AI and the data center part, right? So how has that demand shifted across Europe? Like, for example, in Germany, when it comes to you know different ways of connecting to the grid with batteries, or how how are these two kind of a natural fit?

35:51Julian Jansen: Yeah, battery energy storage systems are really seen as an essential enabler now of data center growth. And I think we're seeing that mainly in the US, right? Today, right? Other markets will start to follow, but in the US today, we're really seeing that. You know, one good example to give here, and I'm gonna just quote the numbers from the last Fluence Earnings call just to avoid kind of any doubt.

36:11But you know, Fluence outlined that we now have a data center pipeline, we have master supply agreements that where we now act as a qualified supplier for major hyperscalers. And you know, quite frankly, a year ago, this was not really a major application for battery energy storage. But as we have seen this rapid increase of data center capacity being built and planned, in particular in the US, we are starting to see BESP becoming really a foundational element of that AI-ready data center infrastructure.

36:41And there's a few different use cases here when we look at the AI and data center space. One is that it actually helps overcome long grid connection delays for data centers, right? You could have it as kind of, let's say, uh bridge to power piece there, because you don't have the grid connection, you could utilize battery energy storage to be part of kind of an off-grid solution for your data center, and then you connect to the grid when your grid connection becomes available.

37:06And that's a real life application in the sense that as data centers ready built, not able to connect to the grid today in several markets. At the same time, what we're seeing with the rise of AI, we're starting to see a lot more fluctuation in the electricity demand within the data center. So when before data center was not a particular volatile demand source, with AI use, we're starting to see much more volatility there.

37:30And actually, there battery energy storage is able to bring down the peak. And it's you know, it's a classic peak shaving application, which has been around for a long time, but now we're starting to see it as an applicability within the data center space. And then, of course, we also have the ability to provide overall reliability benefits, instantaneous backup power, voltage support, black stud capability.

37:50We're starting to see storage together with renewables being a really interesting power supply combination for data centers in particular as people are looking to bring green electricity to power those data centers. So I think it's really becoming a really nice symbiosis, and we're seeing that first play out in the US, but also in other markets, and you know, while Germany might be a little bit behind, it does offer significant growth opportunity.

38:15There's national ambitions to double data center capacity by 2030 in the German market, and therefore I think it's opening up a great opportunity for storage, but there's a big shift that needs to happen, right? While in the US, people are very actively looking at storage being a clear add-on to the data center infrastructure, to the design base from the beginning.

38:34I think in Germany, most people are still looking at it from there's gas generation that you attach to your data center, and they're not really thinking about that storage can actually accelerate the data center deployment, improve resiliency, and provide a much more flexible alternative to conventional solutions, or maybe alongside conventional solutions for the data center market here, also in Germany and other markets in Europe?

How communities and local authorities respond to large scale battery projects

38:57Peter Pongracz: What's interesting to hear is that, for example, in the US, I I have many fans in the industry, and they are saying that it's not uh an extremely clear-cut path forward, right? When you want to put a best system somewhere, you really need to do a lot of stakeholder management ahead on the local or county level, right? Is it similar in Europe as well, so that people are still not really comfortable with having a big battery next to their house?

39:25Or is it is it a little bit of a different lens and different viewpoint here?

39:29Julian Jansen: I think it's very hard to generalize this, right? Because you see very big differences in how communities react to different technologies. I would say it is always important to engage your stakeholders, right? Through your permitting process, you need to engage your local authorities, you need to engage local fire departments, you need to do a lot of education because, of course, it's not everything is written down and it's an established technology and everyone knows exactly what to do.

39:53While it is becoming more established, for a lot of communities, for a lot of stakeholders, it is still relatively new. So there's always a critical requirement for developers, for people building the batteries to engage with those communities. You know, we as a technology supplier, we support our customers in that as well. In many markets, you know, we stood alongside our customers engaging with fire services locally, engaging with local communities.

40:17Just explain what the technology is, what it does. I do think overall, it is as battery storage as a standalone technology, is often a little bit easier to accept for local communities, right? You don't have the height issues that you might have with wind turbines, you know, you don't have the issues around maybe land use, water use that you have with data centers where it's really creating a competing source.

40:41But of course, it still takes up land. Of course, you know, you have something built nearby, you have noise concerns that may come from local residents. So it's very important to take that serious and engage and build a solution that fits into the environment where you're building it, and you're making sure that actually stakeholders locally are on board with what you're developing, and then I think it can be a very successful deployment path.

41:05And I think we generally see a lot of openness from local authorities because they do look at it as ultimately a tool for energy security as well. So, in short, yes, it's a problem here as well. Yes, you have to engage with local authorities, but uh overall, when we're talking Germany or most European markets, in very few cases have we seen, let's say, uh real blockage.

41:30I think it's more about concerns, education, and taking people serious on your development journey.

41:36Peter Pongracz: It's important to educate on what it does, but actually I think what's even more important is what it doesn't do, you know, that it's not going to burn your house down, it's not going to, you know, damage your grid connection or basically like melt your cables, whatever the case might be, which is which is perhaps some of those myths that are worth debunking, right?

41:56Julian Jansen: Absolutely. I think all myths need to be debunked. Like it's all about kind of rational and fact-based education. You know, unfortunately, there's a lot of, let's say, you can watch videos of burning batteries online, but it's a very different battery than what we're putting into a large-scale stationary energy storage system. The safety elements that are included in the product that really like mitigate along the entire way to avoid any form of major incident of thermal runaway, I think is very critical.

42:26And just taking people on a journey and educating them, as I said, also with fire departments, like really working through what is the emergency response plan, how should they act and operate. We showed through our large-scale burn test, right? If if you know all safety features fail, right, which is very, very unlikely, and should it happen and there should be for some reason an ignition, the way the modular system is built, you'll have one pod on top of the smart skid that could potentially burn out.

42:54You let it burn out, and then the whole of the system can continue operating. And I think it's just educating stakeholders that that's what happens in the worst case scenario, which is already extremely unlikely to happen. And therefore, people are then very much clear on what to do, how to react, and what the worst case scenario is, which actually does not create a huge and major effect on the overall project and on the local communities, local residents.

43:20And I think that part is even more important that education happens early on, because ultimately then people see it as a technology it is that is very safe, that is designed for safety, and that can be very much contained should there be an incident.

How hardware design thinking has evolved from early storage systems to SmartStack

43:35Peter Pongracz: And you've actually touched on the hardware side of things briefly. You guys were probably one of the first, you know, larger scale providers in the past. How has the kind of thinking around the hardware part shifted, you know, from the early days to something that you guys have today, for example, with smart stack?

43:56Julian Jansen: Certain things have shifted, certain things have come back, right? You know You start at the beginning, storage systems were actually often built within buildings, right? So you basically racks and it looked a little bit like a think about a data center, but you had battery racks within a building. That very much went away. You know, it was not a cost effective solution.

44:14There was more safety concerns when you build it that way. So the industry moved away from it, moved to the kind of containerized system. We actually had string inverter technology in the kind of mid-2010s, then it was not as competitive as the central inverters, but now that's coming back, right? We're now utilizing string inverters for AC product, and there's other products as well that have gone down that route.

44:36So you're starting to see kind of a shift on the inverter technology. And as I mentioned earlier, we've gone through a period where we weren't very modular in the early 2020s, kind of six years ago. There was a real need for more density as projects became bigger, because when projects were smaller, it was less of an issue. Now projects are becoming bigger.

44:53So density is becoming a major driver. And I think that that journey will continue to evolve. But I think the biggest shift now, at least the way we're looking at it at Fluence, is that where we went initially from kind of in individual products, projects, we're now thinking of our Smartstack product as more of a platform. So now with Spartstack, you can get 10 megawatt hours in a single unit.

45:15In previous generations, it was seven and a half megawatt hours, but you're not changing the fundamental architecture, so you're not having to re- you're not introducing a new product from the ground up, but you're actually starting to build more of a platform where you don't have to reinvent the wheel. But you can basically have a modular repeatable platform which allows you to bring rapid in innovation onto a stable platform.

45:37Think of it as you know, Apple doesn't redesign their iPhone every single year, right? But they can release a new version of the iPhone every year, and they can very quickly iterate and innovate using a standardized hardware and software architecture that then allows them to bring rapid innovations into the product. And I think similarly, we're looking at Smartstack as a long-term sustainable platform that allows us to bring in different cell technologies and cell chemistries, also maybe different module form factors very quickly.

46:06It allows us to much more rapidly iterate on our software capabilities without forcing a customer to redesign the entire project from the ground up. It allows us to bring in new inverter architecture into the same product as well. So you're starting to give much more of a base for continuous development and innovation. And I think that isn't required because the innovation cycle we've seen in storage has been very, very quick, right?

46:2912 to maybe six 18 months, you start seeing new product generations coming out. And I think therefore we now have the right platform, the right mix that allows us to bring in innovation quickly while at the same time creating a lot more stability for our customers in the development process where they don't have to redesign the whole project every single time.

46:48And that ultimately means we give them a platform that they can trust while maintaining agility to deliver on advanced density, the highest level of safety and security, and grid integration capabilities.

What battery chemistries are shaping the future of energy storage?

47:00Peter Pongracz: I guess what you mentioned is mostly relates to cost and compatibility, right? You want to have an architecture that you can continuously build on while the new technologies are coming out, and you don't have to rewire your whole project, which is extremely important. But perhaps if we can segue into the chemistry part of the batteries, like how have we actually evolved in terms of the different mixes that we use?

47:23And perhaps if you could guess what is the future in the next five years, what kind of chemistries would we be using in the future?

47:31Julian Jansen: I think there's one, there's a shift in chemistry, and then there's more nuanced changes within the chemistry, right? So obviously the market has shifted, as I mentioned earlier, from NMC technology to LFP technology, which is now firmly established as the technology of choice, but we're starting to see sodium iron really come and push into the market.

47:48There's a lot of development happening there, mainly driven by fluctuating raw material prices, right? There was a period where lithium prices were very high. So sodium iron RD was accelerated, then they dropped. Sodium iron RD was decelerated, then lithium prices went up again, and sodium iron is now kind of pushing into the market. And I think as we see a shift towards longer duration, I think it's clearly a technology that can compete, but it still has some major issues, for example, around the density aspect as well.

48:17So I do think there's an evolution on the chemistry, and then there's evolution within the chemistry, right? We're starting to see much higher density cells for LFP. We see an improvement in performance. So there's nuance to it beyond just changing chemistry, but also continuous evolution of each individual chemistry. I think there will be a continuous evolution, and I think the critical element though is we need enough scale in order to also drive down costs, drive down technology improvements, improve manufacturing processes.

48:45And I think that's where we have really squarely achieved that with LFP. And I'm yet to see another technology that can achieve the same scale benefits and therefore compete directly. And you know, sometimes it's not always the on paper best technology that that wins out, but actually the technology that's best suited for the application while at the same time delivering the scale benefits that drives down costs, and that's ultimately then the winner, even though let's say on paper from the pure technical specifications and another another technology may seem more suitable.

49:16And we've seen that in many industries over the years. So I think it's it's a really interesting one to watch. I would not want to make any predictions. We are starting to see sodium iron to really compete, in particular on some of the longer duration applications. So I think it would be very interesting to see how that better shapes out over the coming years.

49:33But I think what's important is that as a technology supplier and developer of technology, we have to again have the agility and a stable platform that allows us to actually rapidly iterate and bring in new battery technologies, new chemistries if we need to.

What completes the picture of a truly successful BESS solution?

49:48Peter Pongracz: To wrap it all up, there are many components of the whole best solution question, right? So there is a there is the chemistry, there is the software part, there is the architecture part. Is there anything that I missed that kind of completes the picture of a successful best solution, so to speak?

50:06Julian Jansen: We talked about it quite a lot, is the performance of the system over a long period of time and how you stand in for those services, for those guarantees. I think that's very critical. And I think ultimately it's being or working with a reliable partner that understands the market, that understands your business case, that understands your pain points in order to solve that.

50:24But I think if you can bring those things together while then at the same time making sure we have a regulatory environment that allows storage to compete on a level playing field and capacity markets, that allows the opening of new revenue streams such as the inertia market, where we're starting to see the simplification of the grid connection process.

50:42I think you're starting creating the recipe or you have the ingredients to have a very successful recipe for storage over the long term across Europe and globally.

What the industry should be watching in European Union regulation

50:51Peter Pongracz: Is there anything else that we perhaps missed that people shouldn't know about in the in the best space of what's about to come? Some interesting developments, anything that we should keep an eye on?

51:02Julian Jansen: We should actually keep an eye on on European Union regulation. Now that seems like maybe the an interesting kind of pitch or segue. We've not talked about it a lot. But I actually think this is something I'm I'm very passionate about, also in my role as a vice president of the European Storage Association. And I think it's a shift in the role that our industry and our technology plays.

51:22You know, it used to be very agreeable, quite niche. A lot of regulation would not impact us, would not touch us. We were now moving front and center, so therefore, things like the Industrial Accelerator Act in Brussels, like the Cybersecurity Act, it directly impacts storage. And I think as an industry, and this is let's say maybe a little bit of a plea also for you listeners, for everyone working in this space, we need to start standing up as the large industry that we are becoming.

51:47We need to stand up as an industry that is critical for energy security in Europe, and therefore we need to play a very active role and have a voice that is heard in Brussels and across the member states to make sure that the environment we're creating is ultimately serving our electricity consumers, make sure we have energy security in the market, and does so in a sustainable way that creates an asset class that is not going through boom and bust cycle, but that continues to attract capital in the long term, which is good for all of us.

52:18Peter Pongracz: Beautifully put. To the listeners out there, for those of them who might not know Fluence or yourself, what is the best way to reach out to you and who should reach out, perhaps?

52:27Julian Jansen: I think there's lots of different fluence that you that you can find and reach out to. Reach out to myself or or anyone else on the team and they can point you in the right direction. You can you know get in touch via LinkedIn, I'll point you into the right direction within our team. We have a great team working on business development, on marketing, and they are all the right touch points.

52:45So whether that's through our website, whether there's a clear contact form that you can utilize, or whether that's reaching out to the many fluents that are very active on LinkedIn, that are sharing their views, that are active thought leaders, reach out, join the discussion, join the debate. We love to learn, we love to listen, we love to work together, because only that way can we continue to advance as an industry and we can best serve our customers and and ultimately everyone involved in the space.