Venture Review: ESS Tech, Inc. (NYSE: GWH)

The company's revenue generation engine looks like it is starting to sputter to life.

Executive Summary

• ESS Tech, Inc. (NYSE: GWH) is an Oregon-based manufacturer of iron redox flow batteries for long-duration energy storage.

• The long-duration energy storage market is nascent but presently receiving a secular tailwind from growing power demand from AI datacenters.

• ESS’s key technical insight allows the commercialization of iron redox flow battery technology that NASA tested in the 1970s but abandoned due to technical hurdles.

• ESS’s CEO is an experienced executive who co-founded several firms, one of which, Silver Spring Networks, went public and was subsequently acquired by a larger firm.

• Iron redox flow batteries are a novel technology similar to a mature technology called vanadium redox flow batteries.

• Vanadium is toxic and rare, while iron is non-toxic and plentiful. Vanadium is simpler to use in redox flow batteries. ESS believes that as demand for long-duration energy storage increases, the cost and disposability benefits of its iron batteries will enable it to out-compete vanadium battery suppliers.

• Both types of flow batteries have advantages over lithium-ion batteries for use in long-duration, stationary energy storage facilities, though many proponents are working to ensure that lithium-ion batteries retain their dominant market position.

• ESS believes it can deliver batteries with a lower total levelized cost of storage than all competitive offerings. Levelized cost of storage is a complex metric with various built-in assumptions, but we think that ESS’s claim is likely true for larger installations designed to store power for longer.

• Long-duration energy storage is a key requirement for continued decarbonization. The widespread implementation of renewable energy generation, paired with long- and short-duration storage, has the potential to materially reduce atmospheric carbon dioxide by spurring much more clean and efficient grids.

• ESS’s financial position is tight. The company noted “doubt about status as a going concern” in its most recent financial statement but stated that revenues will jump materially when full-year results are posted in early March, and an increase on the order of 4x is possible in fiscal year 2025. The company is working on both dilutive and non-dilutive financing strategies and managing cash flow with efficiency initiatives.