Interview with Andy Tang, VP of Energy Storage & Optimization at Wartsila

Catherine: Hi, I’m Catherine McLean, Founder and CEO of Dylan Green. And today I have with me Andy Tang. Andy is the Vice President of Energy Storage and Optimization at Wartsila. Thank you so much for joining me, Andy. 

Andy: Thank you, Catherine. Looking forward to our conversation today. 

Catherine: You are joining us from California? 

Andy: Yes! From the San Francisco Bay area. 

Catherine: All right. Perfect. So tell us a little bit about yourself and your current role. 

Andy: So I have been in my current role for about three and a half years, and in my current role, I lead the global energy storage energy storage team at Wartsila. Over the past several years, we have deployed over four and a half gigawatts gigawatt hours of energy storage globally. We have a very international footprint with deployments in the United States, in Australia, in the Philippines, in the United Kingdom, and elsewhere.

Catherine: Okay, great. And you started out working in banking and then telecom, you worked for a few startups then PG&E before ultimately working for Greensmith and Wartsila. Can you talk about the ways in which your diverse background lent itself to the work you’re focused on now, and perhaps maybe some of the ways in which your experiences in other industries provided you with a competitive advantage in clean energy?

Andy: It was quite a circuitous route actually. If you looked at my resume maybe 10 years ago, it didn’t look like it was making a lot of sense and it didn’t look like it was particularly methodically well planned. Which it wasn’t, but it all came out well in the end. So maybe if I go back and look at this chronologically. I started off in a typical kind of first generation immigrant household, my parents had immigrated. I was the first American born in the family. And there was a tremendous amount of pressure to do something professional, either become a doctor or a lawyer. I wasn’t a particularly good writer. So I guess the chosen professional was medicine. Two of my brothers and my brother-in-law are physicians. So there was a lot of pressure in the family. So I went off to college, started the medical thing and really came to the conclusion that I don’t like being in hospitals. And not enjoying being in a hospital is a little bit of a disqualifying thing for wanting to be a doctor. So I was fortunate that I went to one of these smaller liberal arts colleges back east and I was able to take advantage of the career placement center.

And I got a job on Wall Street working for an investment bank. And the pivot was really more along the lines of when I was looking around at careers, I really had no idea what I wanted to do. And the way the investment bank career was really positioned was kind of like a see the world but see the world version of like, see all these different types of industries and explore business in general. So that really somewhat resonated with me. I started that off in technology because I just had a natural interest in all things tech. And that migrated to telecom and media. And so I spent 15 years as a tech, telecom, and media investment banker. And I got to know a lot. I worked a lot with them in the telecommunications industry where they were building big infrastructure. And so all the wireless networks and all the internet backbone that was being constructed, I worked with a lot of those companies helping to finance their growth. 

And so when I decided to leave the industry and do something else I looked around at the different types of industries that I could participate in. And interestingly enough, the electric power industry was the one that had a lot of similarities. The timeframe now would’ve been around 2007. What people were talking about was the innovation that starting in 1996 in telecom, was about to happen in the electric power industry. And it’s not too dissimilar actually, because the biggest thing that the telecom industry had to deal with was what they call the busy hour. So they used to build networks to serve the last call. And that last call was called the busy hour, and it usually was only one hour of the day. That was your peak, peak busiest. And you built hardware around that. The challenge became that you have all this fixed infrastructure and how do you monetize that hardware in the other hours of the day? And that was the ‘how do you monetize the business model even better?’

That is the exact same challenge we face in the energy industry. So the challenge we have now, our busy hour is, when is the peak sun? Because that’s when you have all your traditional generators and your solar pumping out energy onto the grid, and that’s your peak amount that you can deliver. But you only need to deliver as much as people are using, right? When they turn things on. So the challenge is how do we take that energy and essentially be able to offer it at different hours of the day, even though most of the generation happens at the peak hour?  

Catherine: I remember, in the UK they call it ‘turning the kettle on’. Everybody comes in and turns the kettle on. 

Andy: Yes! Do you know that story? There was some show that was very, very popular. The series finale was on one night and, and the UK had a huge demand burst. Because everyone rushed home to get home to turn the two kettle on.

Catherine: Exactly. 

Andy: Yeah. So that is almost the exact same challenge that the telecom industry had to face. And that challenge is really the underpinnings of many of the energy storage business models. So I left the banking world. I took a job with Pacific Gas and Electric Company here in San Francisco because I wanted to really understand the electricity industry and really understand the dynamic under which people made decisions. I kept hearing from folks that the utilities were really irrational, but somehow I didn’t think an irrational industry could be in existence for over a hundred years. So I really took the time to try to understand the economics of the principal buyer in this industry. The intent all along though, was to spend three to five years.

And after three to five years to do something more entrepreneurial, more risk oriented to do some startups. And so I spent four years at PG&E and then I went off to a number of startups.    Both were focused around demand response. And, one failed, rather spectacularly and the other, actually was just recently sold to Schneider Electric. So they had a successful outcome after a very long 15 years of existence. But the third one, third time was the charm, was this tiny company called Greensmith Energy. And we were a leading early pioneer in energy storage, both on the software and the hardware side. And so I joined Greensmith as the SVP of Business Development. And took that through to the acquisition instrumental in identifying the acquisition company. And then in the past three and a half years, I’ve led that business unit, that division. 

So it was really this diverse collection of experiences. One was ‘how do you finance large projects?’ And that was really the investment banking experience. Also from the investment banking experience: What do business models look like and what is possible in other industries?’ So given that I had a broader survey of different companies, I was able to think about different business models. From the utility, it was really ‘how do the utility customers think?’ And ‘how do demand response and other solar type projects, how are they financed and how are they thought of inside the utility?’ 

And so if you look at it from a purely linear perspective, it didn’t necessarily make a lot of sense. But if you take it now to my current role, all of the pieces are individual experiences that add up to the whole. And I really draw upon many of those past experiences in the work that I do today. So I guess my comment is that you never know where life will necessarily take you. But, as a developing executive or individual, collecting different types of experiences can never be a bad thing. And you don’t know how those pieces may come in to affect you later in life. 

Catherine: I just couldn’t agree anymore. As everybody knows, I’m very passionate about what I call net diversity, and that is bringing people in from different industries, different backgrounds, different skillsets, because we are still a relatively nascent industry. Obviously not electricity in the utilities, but clean energy and so forth. And so all these experiences really add a lot of value, I think, to what we’re trying to accomplish with this clean energy transition. Leadership style. How has your leadership style changed over the years and what do you think are the critical aspects of management that any effective leader needs to master?

Andy: I think they’ve changed fairly dramatically actually. I think the most important skill that I have learned is to listen. And I do have this natural desire to kind of charge ahead and solve problems and get in there and roll up your sleeves. And I think the biggest challenge has been to kind of take a step back and really listen and really engage your team and hear other perspectives. And then try to synthesize conclusions from a broader array of opinions at the table. And that didn’t come easy. I mean, that was for me a bit of a challenge. Cause I’m a bit of a type A personality, but I do think that was really important. 

And then the thing that has most recently come to the forefront is you have to inspire people. You have to find a way to get people to want to do the extraordinary for you. For me, I am very, very passionate about what we are doing. I am very, very passionate about the climate. I am very concerned about what is happening with the climate, with climate change. And so it is fairly easy for me to get pretty passionate pretty quickly, on these topics and on what we’re trying to to achieve. 

Catherine: Right. And I guess that goes back to kind of what we were talking about with bringing people in from other industries. I know some of my clients are very much like we’re open to people from other industries, but they need to share our mission, like our values. And so I guess when you’re looking to hire people from outside of the space, that’s something that you might probe around. 

Andy: I think it’s more natural than that. I think the people that are answering the job descriptions already, are coming in with a passion and with a bit of a bias. I manage both the hardware and a software team, and then a sales and marketing team. On the software side, there are many, many, many software jobs out there. There are many that pay really, really well because getting someone to pay five more cents at Amazon because you did a search optimization algorithm is really, really valuable. Right? But it’s not as meaningful. And so I do think that I’m really pleased with the fact that we tend to have a lot of passionate employees that are really keyed in on the mission. But I agree with you that when we look to recruit, there is a self-selection that’s happening and it’s people that are passionate about these issues.

Catherine: Right. Right. I wanna talk next about networking mentorship. So you really had to branch out and develop your own network in several different fields throughout your career. And so I know you’ve mentioned that Janice Lynn at Stratagen, for example, was key in advocating for you and introducing you to Greensmith. Do you have any advice for others looking to transition into industries that they are more passionate about, such as clean energy, whether it was mentorship, extensive networking, or otherwise?

Andy: Yeah, I think the extensive networking is really critical. I think that, especially the industry at its current state right now, which is growing like gangbusters, and we cannot find enough talented, eager individuals to fill the openings that we have. And that’s multiplied by all of my competitors and all of my customers and everything else. I would say that what’s most important is to get a foot in the door. And really start working for a company in this industry. And then you can make course corrections or adjustments as you see fit. But the industry’s growing so fast that opportunities will continue to present themselves.

Catherine: Yeah. I really, really agree with that. I tell people who are trying to get into the industry don’t get to myopic about where in the industry, if there’s an opportunity that you have, just get in and then you can kind of find your way as you’re within the industry and hone in a bit more specifically on what you want to do.

Andy: I think that’s fair. 

Catherine: I know that Wartsila has some exciting projects that heavily leverage AI and machine learning, such as your project with RWE Georgia. Can you talk a bit more about the complex PPAs you are helping RWE overcome and the role of software and other technology to optimize storage assets?

Andy: Yeah, absolutely. This is a small part of the PPA landscape right now, but it’s an area that I hope will actually expand. So REW was looking for a way to enhance the value that they could offer Georgia Power, in this project down in Hickory Park in Georgia, right. The issue was that it was exactly this issue that the hours that the sun peaks are not necessarily the hours that you most value the electricity that’s generated. So their ability to time shift that electricity to a later hour was incented by having a different payment structure at the different hours. So, that’s kind of bread and butter, taking storage and just putting a bunch of storage in so that you can shift the energy from one time to the other. The part that made it complicated was that Georgia Power, because they’re scheduling a number of other power plants and a number of other solar facilities, they wanted to have a firm commitment of how much power they were gonna get that day from that solar. And so this is a little bit of the holy grail. And this has been a little bit of the challenge that utilities, and when I was at the utility, this was the challenge that everyone would bring up, which is, oh, but you can’t count on it. 

So solar may or may not come, but you can’t count on it. You can’t forecast it for me, if the clouds go over overhead, then you’ve got a problem. And so at a very high level, the problem is valid, but at a deeper level, it’s something that analytics can solve. And so that’s what we do. So what we’re doing in the case of Georgia Power is we’re doing a lot of advanced analytics on the weather forecasts. What the pre-day, the 24 hour before commitment, the pre-day commitment is of how much power we will sell. cumulatively. And then managing the constraints of the PPA so that we can maximize the hours that are paid more, but at the same time, still make sure that we reach our minimum commitment so we don’t get penalized. So as we get more and more power onto the grid, more renewable power onto the grid, we’re gonna need to do more of that optimization. We’re gonna need to do more of that tweaking, and we’re gonna need to provide ways to provide the certainty to the utilities of what they’re going to get so that they can manage their other resources around that. And it’s really that, that I think software and AI have, have a really large opportunity for the industry. 

Catherine: What, what do you think are some of the key challenges the energy storage industry faces in the coming years ahead? Such as regulation or long duration or optimization, just as you were mentioning through software, and what are some of the top opportunities you foresee as well?

Andy: Great question. I think the top three issues are gonna be supply chain, supply chain and supply chain. Our industry is 95% based on lithium Ion batteries right now. Right. And over the past 10 years, 15 years, there was a little bit of a battle to see what technology would gain primacy. Lithium ion won those individual skirmishes. And to a certain extent we had, many of us had thought that lithium ion had won the war. A lot of little battles, and the war was kind of, kind of done. And then we had this unprecedented price shock in the industry that happened  really starting 12 months ago. And the price shock is underpinned by the fact that the electric vehicle market is more successful and growing faster than even the most aggressive pundits had suggested it would. And so we are  effectively the redheaded stepchild to the electric vehicle industry for the battery companies. And so there are a number of reasonably good reasons for that. First of all, the electric vehicle market represents 90% of the production of most of the battery manufacturers. And stationary storage and everything else is 10% for them. So on a pure scale basis it’s pretty significant. 

Then the other thing is just the industry dynamic where the electric vehicles, the car manufacturers manufacture a known quantity of cars every month. And so therefore, they take a known quantity of batteries every month. They don’t worry about the micro degradation that might happen if the car sits on a lot for six months. I mean these days it doesn’t, but in general, when we get to a more normal markets, you’re not worried about the starting SOC or the starting degradation, of where your battery is wound up. Whereas our projects are based on that. And, we actually have to write language in our contracts that if there’s a delay in the project going live then we have to adjust what the degradation looks like. And, and so then we try to push that back onto the battery company. And so at the end of the day, we’re just really difficult customers for the battery companies. So you have that, which is kind of the challenge that we have with lithium ion. Meanwhile, we’re a multi gigawatt hour scale, growing at double digit percentages. And so we don’t have time for some of these promising new, interesting technologies. Not that we don’t have time, but how do you do that transition and how do these companies go from manufacturing in the megawatt hour scale to the gigawatt hour scale. How do we manage that transition? So those are all huge challenges that we have coming up. And then of course, the issue with respect to carrots and sticks. So in the US, the biggest carrot that has ever been deployed is, obviously, the Inflation Reduction Act. Huge carrot that will incent  manufacturing of these resources in the states. The challenge is we don’t have built up supply chains in the United States. So these things will take time to get to a point where you can see manufacturing coming from the US. 

Another challenge is, it’s just the fact that it is more expensive to manufacture in the United States than it is to manufacture overseas and then ship the product over. And so we have some tough decisions from a policy standpoint about how strongly we want to support building our own kind of domestic supply chain. And then finally there’s sticks and the stick would be what was implemented in 2019, which was the Section 301, list 4A tariffs, which directly hit batteries. And those were not repealed when the Biden administration came in. And those are subject to new review in 2023. I think the punditry is suggesting that the tariffs will at least stay in place, and will actually potentially ratchet up over time. So you have actually a really well constructed policy where on the one hand, you’re providing carrots to manufacture in the United States.

On the other hand, you’re providing sticks to make the cost to manufacture overseas more expensive. So you’re, you’re really tilting the playing field. 

Andy: Interesting. Well, thank you so much for joining us, Andy. I really appreciate it. I’ve learned so much today. Energy storage is such a hot topic, so it’s good to speak with somebody with your expertise about it.

Andy: Perfect. It was my pleasure. Thank you, Catherine.