. Fluence, founded in late 2017, has consistently been ranked among the top global battery energy storage system (BESS) integrators by research firms Wood Mackenzie and S&P Global. in August, while in October last year, and first if contracted projects were also included in the count.
Headquartered in Virginia, US, North America—with an emphasis on the US—remains a key market for Fluence. Our conversation with founder and Americas president John Zahurancik, which took place at the RE+ clean energy trade event in Anaheim, California, focuses on the company’s start of local BESS module manufacturing, the evolution of applications, markets and technologies, and Fluence’s financial performance and road to profitability. We’ve already heard about the challenge that making and the patchwork of startups and established manufacturers.
Fluence, meanwhile, is and sourcing cells from Envision AESC’s factory in Tennessee, , accelerated by Inflation Reduction Act (IRA) incentives. As a technology-centric company with a track record of delivering battery storage projects, including manufacturing of enclosures and racks, it is fair to say Fluence has experience handling all types of BESS equipment. Even so, making modules is a new area, and a complex one.
“To get to the point where you’re actually producing something, it looks like it happens quickly, but it actually happens over a long period of time,” Zahurancik says of the steps Fluence has taken to pull its Utah manufacturing lines together. “We found we needed the kind of talent that had built modules before, and so we started bringing people into the organisation that had worked with building modules for vehicles, building modules for stationary storage at various companies. We started to associate with some partners who were good at doing that kind of module manufacturing and then we were looking for the production line,” he says.
In selecting partners to work with, Fluence interviewed “several companies” for everything from equipment supply to setting up the production line, aiming to create what Zahurancik calls “an efficient, flexible, reliable line performance.” It is an exciting new step he says, and managing physical production can give Fluence involvement in quality management and a deeper connection to how it delivers and then controls projects in the field. From the beginning, Fluence has been developing control systems for BESS (and renewable energy) assets, but it is an important part of the strategy to look at what further steps it can take to deliver more value to customers, John Zahurancik says.
“The kinds of things that people are wanting to do with storage systems today require deeper integration through all the layers and it made sense for us to continue to take those steps.” This is especially true in a fast-moving industry like battery storage, with Fluence updating its product lines roughly every two to three years. “That’s pretty fast for a heavy capital goods industry,” he says.
“It speaks to the state of rapid innovation in and around batteries and even inverters. The core systems are getting changed very rapidly, and then all of the full balance of plant (BOP) is getting changed very rapidly. They’re getting denser, and they’re getting smarter.
So, you have to keep moving.” What are the things that people are trying to do with energy storage in the US? One thing that is really clear from the US market is the diversity of applications and use cases for large-scale battery assets. At the same time, for system integrators to be profitable, for the industry to scale up and find replicable opportunities, there is a move towards standardisation of products and solutions.
Perhaps the most obvious indication of this is the 20-foot containerised BESS becoming a standard unit from various manufacturers and integrators. Zahurancik says there is “still a bit of an art” to delivering solutions that are productised but customisable to individual project or portfolio requirements. “Everybody is working towards building standard platforms that they can then put together in a way that suits the customer best but working in and around those standard platforms is really the art of it,” he says.
“How are you combining power conversion and the DC part of the system? How much storage do you have? What’s the ratio and power conversion: is that matched well?” In terms of the diversity of applications, Fluence is seeing transmission system operators (TSOs) across the US start to recognise the capabilities of energy storage systems to deliver services traditionally provided by their now-retiring fossil fuel fleets. These might include reactive power or grid-forming inverter capabilities, which may have been nice-to-haves but looking forward, may become mandatory requirements. “With storage, you have a lot of capability.
You have a very instantaneous ability to change output, and to a very accurate set point. You can be charging or discharging, and you can also be doing leading or lagging reactive power. You can tie that to certain grid conditions,” Zahurancik says.
“We’ve started to look at things in the transmission system where the storage unit is mostly supplementing around congestion in the transmission system. So, not acting like a generation resource, but actually acting like a wires resource. Those are the cases that are multiplying.
” Geographically, too, the installed base of BESS fleets is spreading from the main historically strong . The Fluence Americas president says these will remain important and leading markets, but the company is seeing more and more opportunities outside that range. “Those are still big markets, but people are going up into the Pacific Northwest and looking down along the East Coast up into MISO territory,” he says, at the same time bringing a broader diversity of project types.
These might include projects in land or zone-constrained areas or in urban regions requiring smarter configurations of BESS and infrastructure layouts to fit into the space, which Zahurancik compares to building LEGO. Coupled with that is the need to configure systems to meet exacting power requirements, with most utilities and system operators needing something different, and of course, the opportunities change as market rules and structures change. One aspect of the energy storage space that is often overlooked in the excitement of its rapid growth worldwide is how difficult it is to be profitable.
Fluence’s stock has been listed on the Nasdaq Global Select Market since its IPO closed in late 2021, . In its most recently reported financial results—for the third quarter of the company’s business year—it narrowed down revenue guidance to US$2.7-2.
8 billion from US$2.7-3.3 billion previously given and guided adjusted EBITDA to a range of US$55-65 million from US$50-80 million previously.
However, in the quarterly results, reported in August by , Fluence reported while its order intake had also significantly increased. Fluence had previously said it expected to turn the corner into profitability during this year, and Zahurancik says the company is on track to do that. “We’ve had pretty substantial investment into the capabilities that we knew we would need to be a large-scale player for the long-term, and our plan was that this year we would start to turn positive on the financial results,” Zahurancik says.
“That’s happening. We’re continuing to scale up in terms of volume, of delivery, very reliable performance in terms of getting things to market and getting them out, turning it into revenue for us, working with customers, [there’s been] lots of improvement in terms of how we work at scale, that’s driving some of the profitability. As you move to scale with things, and you can do them repeatedly, some of that profitability is coming just from the fact that we’re starting to amortise those big investments over a bigger portion of projects,” he says.
“We started the company a few years ago and took it public a few years ago, and this was the plan that we outlined: to be on this trajectory. So, we feel good about where we are.”.
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‘We feel good about where we are’: Fluence on US strategy and 2024 profitability goal
John Zahurancik, president for the Americas at Fluence, and one of the system integrator-technology provider’s founders, speaks with ESN Premium.