Phillip Man is exhausted. He founded a watch trading company with his flatmate, but the hard work left him exhausted.
“We’ve been doing that for 10 years,” Man said. “It’s very difficult to stay motivated when you know the whole reason for your business is to sell expensive things to rich people.”
He was previously a jet fuel trader at Glencore (“the evil side of energy”) and felt himself returning to that world. “I wanted to get back into energy and do something that would have a real impact for profit while also helping the planet.”
Climate seemed like an obvious starting point. His native Germany was awash with wind and solar power, and when the country shut down its nuclear power plants, it needed a way to keep the grid humming even on calm, overcast days.
Grid-scale batteries help conserve renewable power and have boomed in recent years, with global capacity expected to triple by 2023, according to BloombergNEF. The company’s analysts also expect production capacity to nearly triple again before the end of the decade.
“The industry is still young, but it was built the wrong way,” Man said. “Today, people make batteries and other people swap them.”
Man’s alternative, embodied in a startup called Terralayr, is a variation of a virtual power plant. Experts call this when energy traders pool batteries and manage their use. He said Terralayr is similar to AWS, Amazon’s cloud service, which aggregates computing resources and sells portions of them. “We gather grid-scale energy storage assets, bundle them, virtualize them, and then sell off the capacity in anywhere from 15 minutes to 15 years,” Man said.
AWS has revolutionized enterprise computing, allowing businesses to run servers without owning the hardware and quickly scale as needed. In some ways, virtual power plants do the same thing. Grid-scale battery owners can sell their capacity to traders, who then aggregate that capacity to a level where it makes sense to operate in large-scale power markets.
Terralayr manages both its own batteries and other batteries, but Man said the difference is that it acts more like an exchange rather than a trader. “Our argument is as if we are not traders. We don’t do any transactions at all. In fact, we will find the buyer best suited to your capabilities.”
The startup charges battery owners a “small” fee based on their profits. If Terralayr can operate its batteries more profitably than its competitors, it will get some of the upside as well. (How is that determined? Man said the company uses a model built in part using customers’ previous bids to predict what a typical trader will do.)
For buyers, power trading can help fill gaps in production. In places like Germany, where Terralayr is launching, power suppliers need to predict how much electricity they will produce over the next 24 hours. You could be penalized if your expectations don’t match, such as when a freak thunderstorm causes a cloud cover to your solar farm. By leveraging battery arrays to sell power at the same time, you can bridge the gap and avoid costly fines.
Terralayr currently has 7MW of capacity on the grid, with an additional 40MW expected to come online soon, Man said. The startup has signed development contracts for more than 200 sites in Germany totaling more than 7 gigawatts, or about 3% of Germany’s total power generation capacity. He added, “It will take about 5 to 10 years.” “Not all of the 7 gigawatts will be completed.”
To fund the expansion, Terralayr raised €62 million in equity and €15 million in debt from investors including Creandum, Earlybird, Norrsken VC, Picus Capital and Rive Private Investment. “I wouldn’t call it a seed, but technically it is,” Man said, adding, “Seed would wrongly imply the early stages of a business.”
Terralayr is currently focused on Germany, but Man said the company is eyeing the U.S. market, particularly California and Texas. “We believe this is a generational opportunity,” he said.
