Electrification is big news these days, as innovation continues to revamp seemingly every industry at a rapid pace. Legacy auto manufacturers are shifting their focus to the electric vehicle (EV) market, trying to compete with tech-driven startups. Renewable energy is growing and contributing to the decentralization of the power generation space. Battery energy storage is becoming more common for utilities and consumers. Even the U.S. military is launching broad-scale electrification projects for its vehicles on land, sea, and air.
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The development of these cleaner, more efficient methods of producing, storing, and consuming energy means trillions of dollars of investment to be had, with an international effort now underway to fundamentally change the way we use power and the grids that support it. We sat down with Ideal Power President and CEO Dan Brdar and CFO Tim Burns to learn more about what the accelerating pace of electrification means for the future, and which companies are taking advantage of this historic transition away from fossil fuels.
Q: Can You Describe What Electrification Is And Why It’s So Important?
Dan Brdar: Electrification is society’s transition away from fossil fuels into the renewable generation of electricity on a massive scale for a wide range of activities, virtually anything that requires power. We’re in the midst of it right now, evidenced best by the move away from gas-powered vehicles toward an electric vehicle future, to name one example. But it’s in everything, from the way we power our homes to the way we do our work to the way we import and export all the goods we need. It’s impossible to overstate how central electrification and the transition to new modes of energy production really is.
Tim Burns: Of course, there’s a lot of work to be done before we achieve 100% clean energy and transition fully away from fossil fuels. It’s not as flashy as electric vehicles or offshore wind farms, but in order to make use of these things we need the right infrastructure in place. And that goes straight down to the component level. Without efficient, reliable components like semiconductor devices and power converters, there’s no way to get that energy from the solar panel into your car’s battery or the grid in a usable form. So, while companies are developing innovative technologies, it’s also about planning and implementing the framework that enables consumers to make use of it. It is this innovation and providing semiconductor devices for this infrastructure that we are focused on at Ideal Power.
Q: What Are Some Of The Most Important Ongoing Developments When It Comes To Electrification?
TB: Well, there’s the infrastructure bill and a lot of money pouring in to build out an electric vehicle charging grid. There are some companies that are significant in that space, like ChargePoint Holdings Inc (NYSE:CHPT) and Blink Charging Co (NASDAQ:BLNK). They’re putting systems together that will help establish the EV charging network that’s needed for EVs to reach mass adoption. You hear about companies like Tesla Inc (NASDAQ:TSLA), Rivian Automotive Inc (NASDAQ:RIVN), and Lucid Group Inc (NASDAQ:LCID), but without robust charging networks in place, mass adoption will be a hard sell.
We also see solar and wind providers and power conversion companies as important linchpins in electrification, as they’re the ones that enable the production and distribution of clean energy. Solar and wind are leading the way in terms of renewables right now, with many companies focused on the manufacture and installation of solar panels and wind turbines expanding the infrastructure in that space. But to convert the direct current produced by solar photovoltaics (PVs) or wind turbines into the alternating current that can be used in our homes and vehicles, we need power converters. That’s where companies like Solaredge Technologies Inc (NASDAQ:SEDG), Enphase Energy Inc (NASDAQ:ENPH), Fronius International, Huawei, and SMA Solar Technology (OTCMKTS:SMTGY) come in.
Q: What Are Current Challenges Facing The Transition To An Electrified Society Powered By Renewable Energy?
DB: The supply chain is a big one for everybody. Anybody who’s making a product right now is dealing with supply chain issues. For semiconductors, it’s a struggle to get silicon wafers. It’s hard to get components for power electronics or automobiles. This issue is global and it’s not going away soon as it takes time to add capacity.
The other issue everyone is having is hiring, especially technical talent. There’s so much demand for semiconductor talent but people don’t want to relocate and employers are paying retention bonuses and raising salaries to keep the talent they already have. The talent pool issue will be with us for quite a while, that’s not something you fix easily.
Additionally, the predictions with EVs and renewable energy are always a bit fuzzy. We don’t know what adoption rates are going to be, and manufacturers are struggling with cost challenges right now. An EVs most expensive component is its batteries, and the most expensive ingredient is lithium. That’s up 500% over last year. That creates a real cost challenge to scale up, and you can’t stimulate buying without scale.
Q: Why Is Improving Efficiency Of These Systems So Important?
DB: As the transition continues, we’re going to see people using energy systems in a more universally compatible way than we’ve seen in the past. We’re going to have connected infrastructure so that when your car is parked at home idle, its batteries can be used to power your home. Our sources of energy are going to become more and more distributed, which gives users more control and makes the grid less vulnerable.
To achieve all this, we need the most efficient semiconductor devices possible to support efficient power conversion and bidirectional semiconductor devices for applications with batteries due to their charge-discharge cycle. Better semiconductor devices means less heat produced, since they limit energy loss. This directly lowers the cost and potentially size of electrical systems and vehicles by eliminating the need to incorporate extra thermal management components. Bidirectional semiconductor devices potentially cuts the number of switches needed in half resulting in less complex circuits.
TB: On the semiconductor side we’re on, we don’t see a lot of innovation in terms of device architectures but there is growth in the use of wide band gap materials like silicon carbide. Our B-TRAN™ architecture can be made in silicon carbide (SiC), like what is used in certain higher cost electric vehicles today, but we’re waiting for costs to come down and quality to improve. Right now it’s very expensive and difficult to source. But the B-TRAN™ is a semiconductor device that will be able to adapt and scale as electrical grids are remade around the world. We’re ready to innovate alongside all these industries as electrification progresses and technology improves.
Ideal Power Q1 2022 Financials
Ideal Power Inc (NASDAQ:IPWR) expects to introduce its initial product for commercial sale as early as late 2022. The Company’s Q1 2022 financial statements showed $125 thousand in grant revenue and operating expenses of $1.9 million. Cash used in operating and investing activities during the first quarter was $1.4 million, with cash and cash equivalents totaling $21.7 million and no long-term debt outstanding at March 31, 2022.
