(Bloomberg) -- A startup backed by OpenAI Inc.’s Sam Altman has a plan to provide cheap, clean energy to data centers increasingly in search of ways to cut their emissions.
Miami-based Exowatt launched a modular system to generate, store and dispatch clean energy on Tuesday. The company pairs a solar energy collector with a thermal battery that can deliver either heat or electricity. Though the startup is relatively new, it already has a demand backlog of 1.2 gigawatts from some of the world’s largest data center operators and wind and solar developers, all hungry for new sources of energy amid the AI boom.
“They’re desperate,” co-founder Jack Abraham said of data center operators. “If the price of this energy were three times or four times what we’re able to deliver it at, we’d probably still have nearly the same number of customers.”
AI data centers are gobbling up huge amounts of energy, threatening to keep fossil fuel plants online and throwing a wrench in the energy transition. Generative AI’s massive energy demand is putting the climate commitments of big technology companies like Microsoft Corp., Alphabet Inc.’s Google and Amazon.com Inc. at risk while also straining grids already struggling to keep up with demand. For some countries, the energy demand for planned data centers exceeds the available supply of renewable energy, according to a Bloomberg analysis.
Exowatt is among a growing number of companies trying to fulfill this power demand with renewable energy. Rather than being a renewable energy project developer, it sells its hardware and software to customers to develop their own energy projects. The startup’s first data center project will go live later this year in West Texas, with a large crypto-mining customer, eventually growing to 50 megawatts next year, according to co-founder and Chief Executive Officer Hannan Parvizian. (The company declined to name its current customers.)
The startup has developed a unique optical collection system that uses lenses to collect energy from the sun. Abraham — who invested in Exowatt through his venture studio Atomic — likened it to a magnifying glass focusing the sun on a specific point to generate heat. “It's effectively that with a much, much bigger lens,” he added.
Exowatt’s system stores that solar energy in a heat battery made of a clay and ceramic composite, a cheap medium that’s readily available in US supply chains, Parvizian said. That heat can be stored for months, but most of Exowatt’s customers are looking for eight to 24 hours of energy to dispatch, allowing them to use it as electricity when other sources are more expensive. Exowatt says its unsubsidized, levelized cost of energy is $0.04 cents per kilowatt hour, which is comparable with conventional energy sources.
Since data centers are proliferating, “you want them to be self-sustaining in renewable ways, rather than straining the grid or, even worse, being on fossil fuels themselves,” said Nik Sawe, a policy analyst in the industry program at Energy Innovation, a non-partisan energy and climate policy think tank.
Thermal batteries like the one in Exowatt’s system are a fast-growing area of climate tech investment, with other companies including Antora Energy and Rondo Energy raising hundreds of millions to scale systems that store energy as heat. These companies mostly target heavy industries such as cement and steel production, which struggle to find 24/7 reliable renewable energy that can be dispatched as heat in addition to electricity.
These thermal battery systems, however, can be hard to scale in part because industrial facilities tend to be customized and require expensive and difficult retrofits to be compatible with them, said Sawe. Convincing industrial customers to “understand and think through the amount of retrofits they might have to do in order to electrify their current processes and get them off the fossil fuels can be a heavier task if there’s institutional inertia against that,” he said.
That’s partly why Exowatt is starting with data centers. Beyond being a big — and growing — source of power demand, it’s also a simpler and more scalable market, Parvizian said. Still, Exowatt’s solution won’t work for every data center. About 60% of data centers in the US are located in regions with enough sun for this to make sense, Abraham said, leaving a big market that the technology would not be able to serve.
Even still, the backlog of demand points to the value of Exowatt’s system, and the bigger concern is whether the company can scale up its manufacturing and build a robust supply chain. “Like Elon Musk famously said, it's easy to build a couple of prototypes; it's extremely difficult to build hundreds of thousands or millions of units,” Parvizian said.
©2024 Bloomberg L.P.