The following interview is a conversation we had with Curtis VanWalleghem, CEO of Hydrostor, on our podcast Category Visionaries. You can view the full episode here: $322 Million Raised to Build the Future of Energy Storage.
Curtis VanWallenghem
Happy to be here, Brett. Thanks for having me on.
Brett
Yeah, no problem. So, before we begin talking about what you’re building there, let’s start with a quick summary of who you are and a bit more about your background.
Curtis VanWallenghem
Co-founder and CEO of Hydrostor. We’re based in Toronto, Canada, and I guess I’m an engineer MBA, worked in capital projects and then the utility sector before I started Hydrostor about twelve years ago and live in Toronto. Got a wife and a six year old son. And that’s not like long walks on the beach, all that jive.
Brett
Nice. And two questions we’d like to ask just better understand what makes you tick. As a founder and as a leader, what CEO do you admire the most and what do you admire about them?
Curtis VanWallenghem
That’s a tricky question. Someone I’ve been reading a lot about is Bob Iger, now back at Disney. What I really take from him is more about relationship building and strategic decisions and doing less things, but having them more impactful and being very thoughtful about how you’re building the business. I’m less inspired, I guess, by the workaholic CBO that’s just trying to do everything. And I try to model myself more as that calm, thoughtful person that makes the right steps at the right time to really build a strong business and then really values relationships with his team, customers, and kind of key stakeholders. So I’d probably say Bob Iger, if I had to be put on the spot.
Brett
And what about books would it be Bob Iger’s book? Or are there any other books that really have had an impact on how you view the world and how you think about business?
Curtis VanWallenghem
Yeah. I mean, I liked the ride of a lifetime. I also like biographies of Elon Musk, Steve Jobs, just not that I necessarily want to model myselves after them, but there’s something to be said about learning their stories and how they’ve kind of come up. So a lot of biographies that I read as well, and a whole range of different interesting people. And I always find that I take something from each one.
Brett
Is there anyone random that you’ve read about, like a non business figure that you just found to be fascinating?
Curtis VanWallenghem
I was india volunteering after my MBA, and my grandfather’s brother was a Jesuit priest out there for decades. And when I was out there, I got to read a fair bit about Buddhism and that sort of thing. And there was a couple of books that I really was living in this far off land, kind of by myself. I spent some time in Bhutan and I was reading about Buddhists and their philosophy and so that’s probably the most random thing. I kind of went deep down a rabbit hole there for a while.
Brett
And do you consider yourself a Buddhist now?
Curtis VanWallenghem
I do not. But I did take a fair bit from that time of my life.
Brett
Nice. I just read a book called Why Buddhism is True and it was a really fascinating book and just a good view into Buddhism. I didn’t really know anything before that.
Curtis VanWallenghem
Indeed. Yeah. No, it is fascinating. And again, everyone could take a little bit from that.
Brett
Absolutely.
Curtis VanWallenghem
Nice.
Brett
Well, let’s talk about what you’re building now. So you’ve definitely reached into the territory of fu money. $322,000,000 raised. So talk us through at a very high level what the company does and what you’re doing with all of that capital.
Curtis VanWallenghem
Yeah, so hydrosource, what we do is we build energy storage facilities so you can think of it like a battery because the wind’s not always blowing, sun’s not always shining, you need something to store that electricity if we’re going to decarbonize and rely on wind and solar for most of our electricity needs. And lithiumion batteries are quite expensive, they don’t last that long, so they’re good if you just need to store for an hour or two. But if you need to start storing for a day, 24 hours worth of power, lithium is just non economic there. So what we’ve done is we’ve made an air battery where we dig a hole in a bedrock about 2000ft underground, and it’s about size, maybe a couple cubic football fields of avoid space. When building the rock, you then flood it with water and you use oil and gas equipment to pull air from the atmosphere.
Curtis VanWallenghem
So just a big air compressor. And you send the air deep underground to start filling the cavern and it lifts the water up to a little surface reservoir. So when you’re fully charged, the cavern is filled with compressed air and you’ve got a little surface reservoir filled with water. And then when the grid needs power, you open a valve and the weight of the water brings the air up and it spins a turbine. So it’s an air rock and water battery that lasts 100 years and is really cheap to build compared to batteries. And it can be built anywhere there’s bedrock. So we patented that solution. We then had to show it would work, build small pilot plants, get the ability to wrap it, guarantee and warranty that it would work when it was built, convince the construction companies that build caverns and mines as well as the oil and gas equipment suppliers to sell us their equipment and stand behind it.
Curtis VanWallenghem
And so once we put that all together, then we had to go show our business model would work and go get contracts for big facilities. So we started to develop projects, get interconnection rights to the grid, lock up land, and then we started signing contracts and we probably got about two and a half billion dollars worth of contract signs for two facilities with more contracts to come. And now we’re going to start construction next year on those larger facilities. And so once we kind of hit that milestone of getting the commercial traction patenting and proving out the solution, being able to warranty it, goldman Sachs and the Canadian pension plan got behind us and gave us 250,000,000 in. Growth funding to really just build a pipeline of dozens more of these projects and to advance the projects we do have through construction and in cooperation, which is then when we start earning real money.
Curtis VanWallenghem
And those plants then are spitting off cash for the next 50 to 100 years. So we’re excited about it, but it does move a little slow because we’re doing big infrastructure. Wow.
Brett
So a lot to unpack there. Let’s start with where did this all begin? This isn’t some little SaaS product that you could just spin up and launch an MVP in a couple of weeks. I’m sure it took a lot of time before it got to the stage where you could really start to operationalize it. So what were the early days of the company like? And then how did you come up with this idea in the first place?
Curtis VanWallenghem
Yeah, so it has been a while. I started the business about twelve years ago, so it’s been a long run to kind of get it to this point. And it was a pretty small team in those first three, four, five years. But where it all started is I was working at an electrical utility, and we had a big nuclear plant that doesn’t turn up and down well. And we had to start turning it up and down depending on how windy it was, because there was now enough wind on the grid and it kind of had priority to dispatch over us. And so the maintenance team came and said, our budgets are going up, the reactor is not meant to operate this way. And so I tried to build a pumped hydro plant which is pump water up a hill and then hold it there like a dam when you need the power again.
Curtis VanWallenghem
And those are almost impossible to permit. They’re really tough to find sites, so we just weren’t able to move on forward. I then tried looking at batteries. There was no way they were cost effective. And one of my analysts came to me and said, there’s this guy in Canada that filed a patent for a new way of doing compressed air and compressed air. There was a couple of plants built like 50 years ago, but they were only built on salt caverns and they still burnt some natural gas, so they had emissions, they weren’t very efficient. And this guy came up with two innovations to basically totally change how you do compressed air. One was using these water compensated rock caverns, and the other one is storing a bunch of heat and hot water when the air is compressing. So he patented this, and my analyst kind of connected me with them, set up a lunch.
Curtis VanWallenghem
I had met the guys named Cam Lewis and he kind of said, I got a patent and I got an idea for Attack. And I came up with a company name, but that’s about all I got and I’m not too sure what to do next. So I got to know Cam really liked him as a person, and I knew that this would have a big role to play in the energy transition. So I made the leap of faith back in 2010 to quit my job, put the first bit of money in, and start getting my friends and family to give us a little bit of money and some angel investors. And then we just started plotting away on the engineering and these little pilot systems and try to get some grant money. And then we’ve just been slowly building it kind of brick by brick over the last twelve years.
Brett
And what was going through your head in 2010? Was that a very scary leap for you? Were you fearless going into it? Did you have friends and family asking if you were insane? What was that whole journey like for you in that starting point?
Curtis VanWallenghem
I had spent the previous decade traveling the world, turning around troubled projects for a management consulting company, and I was exhausted. But I also made a fair bit of money in that. And so then when I joined this utility where I was in that planning role, that wasn’t going to be the long term career for me. So I was looking for what’s next for me. And I didn’t want to live on a plane. I wanted to start a family. And my older brother just had his daughter, my niece Shay. And I remember thinking, this is our generation’s, world war, this climate change, and we got to do something. And I go, I can’t just be out there making money, not contributing. And then when Shay grows up and the world’s burning, she’s like, what did you do about it? And I said, nothing. I just watched it burn and made some money and made myself comfortable.
Curtis VanWallenghem
So I really felt that I needed to get in the ring and try something. And I was tired of traveling. I was looking for my next thing. So with my wife’s blessing, we put a bunch of our life savings into Hydra Store and I went, I think it was three or four years without a salary. And there was a lot of daunting times when you could have lost everything and it would have set your family back a long wings in terms of financial security. But I ultimately believed in the fundamentals of they need storage on the grid. If we’re going to save the planet, we got to go to renewable electricity. And the fundamental engineering and physics of what we offer is pretty compelling visa, Vis, batteries and alternatives. So I just kept the faith that there would be a way. And we’ve had many pivots along the journey, but yeah, there definitely was some white knuckle moments along the ride.
Brett
Are there any specific moments that you can remember where you had to throw in the towel or just felt like you couldn’t continue any longer?
Curtis VanWallenghem
Yeah, there was kind of two that were that jump out most. One was when my son was born, but it was not a straightforward birth and he ended up almost not making it and being in the ICU for a number of weeks and the company was out of money. And I remember being in there, my wife had an operation, my son was in that natal ICU and I’m sitting there trying to close an investment. I really thought about hanging it up there and through a bit of luck, we ended up closing that financing and it was with great partners that really stuck with us. So that was one that I really thought were done. And then when COVID hit, were in the middle of raising money and we only had six or seven weeks of cash left. And then COVID hit and every investor just said, I’m not getting involved or I’m not making commitments until we know where it’s happening in the world.
Curtis VanWallenghem
So then me and a bunch of others mortgaged homes and put more money in to get the company to survive and then we win our first contract. But it’s in Australia, we don’t have any people in Australia and they shut the border. And then I had to frantically get a JV partner so that we could move the project forward and that was really trying time as well. But again, happily we made it through with a bit of luck. Wow. Yeah.
Brett
It’s always amazing to hear what’s happening behind the scenes and what that journey is like to build a successful company because it’s so hard and so painful. And I feel like in the media a lot of the times you don’t hear those stories. You just hear about the big fundraising announcements, the big exits, but you don’t hear about the pain that happens along the way.
Curtis VanWallenghem
It has been painful. I was on a panel and they said, if you knew what you know now, would you have done it again? And the honest answer is, I would have had a really tough time making the same decision to plunge in because it’s been really hard on your health, your family, just a really long, hard road. I mean, I am proud and happy we’ve kind of made it to this point, but boy, it was a lot harder than what I was expecting. It took a lot longer.
Brett
Yeah, I can imagine. And starting in 2010, I feel like that was climate tech or energy tech before it was cool. Now it seems like everyone’s talking about it. There’s a lot of activity. What was it like in those early days trying to convince investors to fund this type of thing? And how have you seen the space evolve over the last twelve years?
Curtis VanWallenghem
Yeah, it’s night and day. I mean, especially here in Canada, I think, you know, the West Coast US has always been a little bit ahead of the curve, but in Canada the clean tech ecosystem was very benign at the time and now it’s raging with new funds kind of being announced all the time. So it’s come a long way. I remember in those early years, really tough to raise money. One, there wasn’t many people looking at the space, but two, they were all kind of five, seven year funds and they’re like, you’re not even going to have your minimal viable product kind of demonstrated by then, let alone by the time you construct scale plants and you get real revenue for an exit. This isn’t even happening in my funds lifetime. So it was a quick note from a lot of people just because of the sector that were in and how ambitious what were trying to do was, thankfully met this one gentleman, Tom Rand from ArcTurn Ventures, who was just a believer in the need to do something.
Curtis VanWallenghem
And he felt that you’d be able to parlay it into. He wouldn’t get an exit through an IPO, but would be able to hand the investment to bigger investors to take it further down the road and that the size of the prize was so big that it would be worthwhile. And really grateful for Tom’s involvement from the early days personally as well as an investor from our first series eight venture fund. And he stuck with us through thick and thin along the way and really been a great partner for me to lean on. And I’m proud to say that this fund has also done extremely well for themselves out of it. So it’s worked out for both of.
Brett
Us getting positive returns and making the planet a cleaner place to live in. That’s a win.
Curtis VanWallenghem
You got it. It took a lot of confidence and decision making and just conviction by him back then. Thinking back, I don’t even know how he convinced this investment committee and stuff to back this horse, but really grateful he did.
Brett
And in those early days, did people think there was just from an investment perspective that there were no returns to be had in this type of space.
Curtis VanWallenghem
It was more the uncertainty on when and what that world is going to look like. It seemed like, yeah, everyone knew climate change was coming, but this could be a 20 year away, 40 year away. What the solution? Is that small modular reactors. Is that something totally different that we don’t know and just the timescales we’re working with? It was tough to say, let me invest now, and in 1015 years, we think this is going to be the right bet that pays off. It was just tough for them to draw that link and no one was signing contracts. So you had to envision a world where the electricity markets changed and they started to value storing electricity, which you didn’t really value before. And so it was a lot of you had to have a leap of faith in a number of different areas to kind of envision the future and big risk.
Curtis VanWallenghem
So it was a lot of a lot for people to digest and wasn’t a right fit for most investors out there.
Brett
And what are your thoughts in general on the progress that we’re making as a society for net zero 2050? Do we have any chance of hitting that or are we going to completely miss it? And what can we do or what should we be doing right now to course correct if we need to do so?
Curtis VanWallenghem
It’s a monumental task, what we’ve got to do. For 100 years, they built an electricity grid, but it was 85% carbon emitting. And now what we’re going to do is we’re going to shut down all these internal combustion engines, take all these industries off of oil and gas, and we’re going to electrify them. So the grid is going to triple in size and the 85% that is fossil based has to shut down and be replaced with renewable energy and firming capacity or storage. So it’s just what was done in 100 years. We got to rip apart 85% of it, rebuild that with renewable and then triple it. And we got to do all that in like 20 or 30 years. So it is wildly ambitious and hard, but we are making pretty steady progress. Whether we get to net zero by 2050, whether we can keep the cap at two degree rise, those are, I think, in jeopardy.
Curtis VanWallenghem
But we are putting in a pretty good effort globally. And I think the inflation reduction act in the US was a big push. The Ukraine war in Europe was a big push. Now we got to make sure that India and China really lean into it. But we’re getting there. You see what’s happening in Australia. South Australia has been running on 100% renewable energy now for most days, the last couple of weeks. And so we had one blackout, like seven years ago and they just made a commitment and they’re there so we can get there. It’s just everyone’s got to keep the pedal to the metal and really do it because it’s an ambitious lift. And hopefully the oil and gas companies get behind it and support it instead of try to make hydrogen. Something that it’s not and distract and use their industrial complex to focus on things that are more self serving versus achieving the end goal that the climate really needs.
Brett
And something I wanted to ask about as well, just because it’s a hot topic, I believe it was last week they announced a big breakthrough in nuclear fusion and there’s a lot of excitement around that. Do you have thoughts on nuclear energy and how that can contribute to the net zero 2050 goals?
Curtis VanWallenghem
Yeah, I think it has its place and if they can get the costs down. The problem with nuclear has always been it’s got a bit of the safety record stuff but it’s still, you look at it in the macro it’s pretty safe and those are pretty remote events. It’s mostly been a cost thing. They take forever to build, they cost a lot more and the public purse is giving them free insurance and a bunch of other things to subsidize them. So to me it’s always been a cost thing but they’re very scalable, they have a lot of advantages and so the hope is the small modular start being more manufacturing and can get their costs to where it needs to be envision. I mean there’s still a long way to go there. We’re still decades away and whether it can be done cost effectively and solve all the challenges they still have in front of them.
Curtis VanWallenghem
But we need every idea possible moving forward. So I do think small modular reactors clearly have a role. Cost is the big open item. We’ll see this first wave of deployments and people should keep working hard on fission and fusion to make sure that it’s one more option in whatever backpack toolbox that we have. Whether or not it can be cost effective, I’m still not totally sure but we should give it a shot, makes a lot of sense.
Brett
And something else I want to dig a bit deeper into and I know we can’t talk about specifics but you’d mentioned there was a big deal that closed, I believe it’s like one point four, one point five billion dollars. Can you just talk us through what those types of deals generally look like?
Curtis VanWallenghem
Yeah, I mean in the electrical grid they do planning and the regulatory agencies do planning and they say all these load serving entities have to buy so much energy. So that could be wind, solar, gas, whatever and you have to provide so much capacity or backup power that you know, is always there to keep the lights on. So they kind of have a top down planning model based on their region and they’ve now said they’ve got so much wind and solar that these utilities have to now start buying storage or backup power for when there’s no wind and sun. And they want, because of carbon policy, they don’t want it to be done with natural gas peaking plants sitting idle and turning on when there’s no wind and solar. So then these utilities run a procurement and they say, okay, everyone, now bid. And so our team got sites, got access to the grid bid on these contracts and came out successful, meaning that our solution does have a compelling value proposition.
Curtis VanWallenghem
Visa vis batteries and pump hydro. Because with a newer technology, you can’t just be a dollar better and win these contracts. You’ve got to be significantly better for them to take a bit of a leap of faith on backing a new horse. So the fact that in Australia and California, we’ve come out on top on these pretty loud big procurements, I think shows the value of our solution. And now, as the rest of the world keeps decarbonizing, our job is to replicate that in all the other markets and do more in those markets as well.
Brett
And what do you think you’ve done right, just from a trust perspective to get people to believe that you guys can do what you say you can do. That’s always an issue with the founders that I interview, and normally it’s enterprise SaaS or things like that, and they have a hard time getting an enterprise to embrace a new SaaS tool. So what did you do to build trust with these big government agencies and these big utility companies to get them to take that chance on you?
Curtis VanWallenghem
Yeah, it’s a little bit how we frame our solution. I mentioned earlier that there has been other compressed air running for decades. So we kind of frame it as we’ve just tweaked what was already kind of a proven asset class. We also have all proven components and so there are no new widgets in what we’re doing. It’s more integration of proven components and then we put it on our own balance sheet. So most of our competitors are asking the utilities to front the $1 billion to buy the first system. We kind of took a different approach, saying we’re going to develop and win the contracts and they don’t pay you a dime if you don’t perform. And then our challenge isn’t so much as convincing them because it’s easier when they just have a pay for performance sort of contract. But then we got to go find the money to build it.
Curtis VanWallenghem
And our bet was that would be an easier path given the amount of money sloshing around looking for climate sort of investments. And with our solution, we have a high enough return profile that it covers them for that risk. So we developed our own projects and then funding them kind of on our balance sheet to start, has been, I think, the winning formula that many competitors just didn’t want to take that step because it can be hard and dilutive and it requires a lot of capital and that sort of thing. But going the other way, you could sit there for 1015 years and no one actually be your first customer and you could regret it down the road. So we just decided to bite the bullet early and embrace this model and build the team and fund them accordingly so that we could do it this way.
Brett
And how much of your time in the day is spent on regulatory stuff? I have to imagine that this is a big undertaking from a regulation perspective.
Curtis VanWallenghem
Yeah, we have a team that does it, so I don’t actually spend that much of my day on it, but we have dedicated individuals that all they do is monitor regulatory policy, intervene. We have lobbyists. We got to watch the electricity regulations very closely and make sure they’re not being tilted in the favor of different technology. We just want a tech agnostic. What’s best for the grid wins, as opposed to rules that are jerry rigged for one technology or another. And so that’s really what we’re watching out for.
Brett
And in the early days, did you have to lead some of those efforts from a regulatory perspective or from a lobbying perspective?
Curtis VanWallenghem
Yeah, getting the first our pilot system in Ontario was done through a storage pilot program that us, and we created an association of other storage companies, lobbied and got this program launched. We were pretty influential in some of the policies in the US. But also in Australia that favored storage and just really pushing the regulators to think ahead about wind and solar as a bigger part of the grid. And you don’t want to wait till you’ve got a problem to start looking at solutions, but you know it’s coming. Start testing things out, start putting the framework in place. And we’ve set a fair number of precedents with our projects being kind of the first of a kind to do something in a certain regulatory construct. So it has been a big part of it. And that’s, I think also why we’ve been successful is we’ve leaned into that as opposed to assuming they’re going to figure it out.
Curtis VanWallenghem
We’ve kind of tried to help accelerate that.
Brett
Makes a lot of sense. Now, last couple of questions here before we wrap. What excites you most about the work you get to do every day?
Curtis VanWallenghem
It’s really the impact. When I think of every time we contract a plant, you’re shutting down a giant coal plant or a gas plant and you’re enabling a whole bunch of long wind and solar. So with us doing a dozen or two dozen of these, it’ll actually have a measurable impact on the world’s emissions. So we have the potential to have real meaningful impact. And it’s just because I believe so much in the climate battle, it’s rewarding to know that we can have that impact. But it’s hard work. I get a lot of people saying it must be fun leading a company that was a startup and now you’re scaling. And I’d like to say that it is, but it’s a lot of hard work and challenges and it seems every day you got to overcome a new thing. So it’s been largely a grind and what keeps us at it is knowing that we can have that impact.
Curtis VanWallenghem
And then you look back five years ago and you’re like, we have really moved the business forward. It seems to move slow in the day to day, but when you stop and reflect and think back on the last year, you realize the team really is moving the ball forward. We more than doubled our team this year, we’re going to double it again next year. And so it’s rewarding from that perspective, but definitely a lot of hard work.
Brett
Yeah, I can imagine it’s a grind, especially doing the same thing for twelve years. That takes a lot of perseverance, I think, just to do that. As an entrepreneur, I’m sure your brain is probably running with lots of different ideas at all times too, right?
Curtis VanWallenghem
Yeah, exactly. But I like the fact that I’ve been able to focus because I know so much about our technology and the industry, because I’ve just been in it for twelve years and the industry didn’t really exist when I first started. So you’ve seen it grow up, you know, every competitor, you go to a conference, you recognize half the faces in the room and everyone on stage. And there’s something rewarding about becoming an expert in a field as well. I’ve tried to embrace that because back in consulting, you can be an inch deep and a mile wide. It’s kind of nice to be a mile deep, albeit in one industry.
Brett
Yeah, I can imagine. Last question here. If we zoom out into the future, what’s the three year vision for the company?
Curtis VanWallenghem
Three year vision is to get our first big plant running and have a couple more under construction and another ten contracted is really kind of what we can achieve in the next three years. And once you’ve done that, the machine almost will run itself because there’s construction companies out there that do this and we then just start, we’ve kind of validated the technology in the business and then it should be rolling from that point forward. So I think it’s really setting the course for the business and locking it in will be the next three years and really excited about it.
Brett
Amazing. Unfortunately, that’s all we’re going to have time to cover for today. But before we wrap, if people want to follow along with your journey as you continue to build, where’s the best place for them to go?
Curtis VanWallenghem
At Hydrostor you can subscribe to a newsletter we publish twice or three times a year, given updates on all the major things that have happened across the business.
Brett
Amazing. Curtis, thank you so much for taking the time to join and share your vision. This is all incredibly exciting and look forward to seeing you execute on this vision.
Curtis VanWallenghem
Excellent. Thanks so much, Brett. Really enjoyed the discussion.
Brett
All right, let’s keep in touch. Cheers.
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