Extending The Net Metering Policy To Energy Storage Devices Will Grow The Market

Sheru, an energy storage startup supports storing energy in the cloud and solves the lack of storage problems by aggregating idle battery capacity to create a virtual energy storage platform.

Sheru was started by three friends, Ankit Mittal, Shikhar Sharma, and Nakul Mehan, engineering graduates from  BITS Pilani. Having helped build robotics solutions in India’s first deep tech unicorn, GreyOrange, they later took the entrepreneurship plunge themselves. With a passion for sustainability and recognizing an opportunity in India’s energy sector, they started Sheru in 2019. SaurEnergy caught up with Ankit Mittal to understand the firm’s plans and business idea better

Q. How did the idea for Sheru come after their stint in Grey Orange? Was entrepreneurship always a plan?

Ankit Mittal: Entrepreneurship was a plan for us ever since college. We registered the company in the third year of our college, though we were fully aware that we did not know much about the specifics of it and realized that it would be a new journey for all of us. But for me personally (Ankit Mittal, CEO), growing up in a business family, I knew that I wanted to try my hand at entrepreneurship at some point in my life. Meeting each other in college, we bonded over a common passion for sustainability and the numerous technologies that can be built around it. And we wanted to create solutions around those technologies.

At Grey Orange, we saw warehouses trying to reduce the cost of operations. They were also looking at reducing their supply chain costs, and a large component of this was in the form of energy and transportation. Moving towards renewable energy and adopting e-mobility was thus an opportunity. We saw the possibilities that this presented and recognized the synergy that existed between renewable energy and electric mobility. This was the platform that then led to us founding Sheru later on.

Q How do the founders know each other? How difficult or easy was it to take the plunge?

Ankit Mittal: We met at college in BITS – Pilani. Sharing a passion for technologies around sustainability, we knew that we had a common goal in mind of working towards creating a positive impact and a change for good. We also saw that technology’s use in India was limited to building software and wanted to leverage its power to build solutions.

Taking the entrepreneurship plunge was certainly a challenging thing. One has to be aware that what is envisioned at the beginning of the journey would most certainly evolve over time and must be flexible to go with that change. But having a vision of the possibilities of where the industry might move towards is very important when starting out. Though it was not an easy decision to make, we had the belief that our idea was in the right place and that gave us confidence.

Q What was the company’s model vis a vis E-rickshaws?

Ankit Mittal: Sheru provided swappable batteries on a pay-per-use basis to e-rickshaws. The lead-acid batteries that they ran on suffered from issues such as constant maintenance, long charging times, and were cumbersome. Drivers also had to buy the batteries outright and it was an expensive upfront investment for them.

Sheru’s platform provided a solution for each of these issues. Our pay-per-use model eliminated their battery CAPEX and expenses were thus limited to usage. Waiting time for charging was practically zero as the swap to get a fully recharged battery was less than a minute, thus increasing the time they could work. And the improvement in technology meant that the newer batteries were orders of magnitude smaller and lighter than what they previously used.

Q The idea of a transition to a virtual energy storage. Explain it and the concept in detail please in the context of your existing client base and battery base now?

Ankit Mittal: Our work with the battery swapping service for e-rickshaws gave us learnings through scaling it up and operating it. The first learning was that there would always be idle time for the batteries. And this idle time increases in afternoons, as a large proportion of people are not travelling and are at offices and other places. This results in a dip in demand for mobility, and the requirement for batteries from charging stations.

The second learning was that battery swapping is set to be commoditized. And there is also a need for it to be commoditized for it to be distributed at scale. In the Delhi NCR region alone, the number of 2 and 3 wheeler vehicles is 85 lakhs. The city also has 400 petrol pumps and 10,000 retail stores. A retail store can house 20 batteries at most, and a petrol pump can house 100 – 200 batteries. The total number of swappable batteries these can then host is around 3 lakhs. This is nowhere near the numbers needed for the requirement that we have. India’s goal of 30% electrification of the mobility sector by 2030 would also be in jeopardy in the absence of this infrastructure.

It is thus the case that battery swapping as a service would not be the ideal business model for a technology company. We thus decided to stick to our technology roots and pivoted to become a technology solutions provider to retailers, who would then be providing the service to the end customer.

Through our experience with battery swapping, we were aware that EVs contain within them a large battery capacity that can be aggregated onto a platform and provide solutions to the energy industry. It would also provide an additional revenue stream to EV owners, and reduce the overall cost of EVs. These learnings helped us move the company in a new direction and find value in building a cloud platform for energy storage.

Q Who are your target segments? What is the pitch to them?

Ankit Mittal: Our primary customer is renewable power producers. They face two major issues. One is that of curtailment. The second is irregular payments from utilities. By getting the energy storage cloud, Independent Power Producers (IPPs) can store energy that would otherwise be curtailed and which they can then later sell in retail markets. With the help of this cloud, they can also increase their B2B portfolio where they can get more regular payments. So the energy storage cloud can help IPPs increase their revenue without any CAPEX.

We also see utilities as our customers. Utilities face issues in the form of discontinuous power supply and through distributed power generation, which they were not built for. They thus see large amounts of transmission & distribution (T&D) losses. Through a pay-per-use model of accessing distributed energy storage, utilities can reduce their T&D losses and allow for greater renewable integration in the grid at the same time.

This unlocks network effects for our core customers. The growth of renewable energy is hindered by a lack of storage, and utilities getting storage solutions allows renewable power producers to tap into a larger share of the power market. It is thus a virtuous circle for our core customers as our other areas of business see growth.

Finally, we also see large data centers as a target segment as they have strict requirements on the use of renewable energy for their power needs. As renewable energy has intermittency issues, there needs to be storage to supply these facilities with power 24×7. We ensure that this is the case while reducing their CAPEX by providing storage solutions on-demand and on a pay-per-use basis.

Q. As EV’s gain share and numbers, how will your model evolve? Isn’t this a capital intensive business?

Ankit Mittal: Our business model is asset-light. Our primary investment goes into technology development. The growth of EVs will see us getting a good mix of different categories of vehicles on the platform. In the long term, we will expand beyond the aggregation of battery swapping operators to include idle electric vehicles of all kinds such as buses and personal 4-wheelers. These are expected to contribute significant capacity to the platform in the long run, which will also help them get cheaper through monetization of the battery in the vehicle.

Q. Is existing policy environment in sync with your model? What is the big change needed to super charge it? What is the biggest obstacle to expansion right now?

Ankit Mittal: The current policy environment has incentives for renewable growth and the adoption of EVs. India’s policymakers have been behind the growth of renewable energy and electric mobility, and there are ambitious targets for 2030 and beyond. We are also moving towards EV-PV growth, a model that allows for EVs and solar energy to work in tandem. This leverages the strengths of both and draws out immense synergies, thus boosting both the energy and mobility sectors. So there’s a strong tailwind for the business.

One minor change that can boost our model is extending the net metering policy to energy storage devices. This allows an energy storage system to make full use of the incentives available to renewable energy and would allow for further growth of the storage ecosystem. Utilities also gain as it would allow for the energy storage devices to take part in supplying the grid during times of demand.

The biggest obstacle is the lack of pace in the expansion of the smart metering network. A smart metering network would provide granular data, which utilities can use to make decisions on demand and better integrate different sources of power supply. But the supply of smart meters has been impacted by the semiconductor crunch as a result of COVID – 19. However, we see this stabilizing soon and the rollout of the meters getting back to normal.

Q How will Sheru scale up? Does the model have scope for say, franchisee led growth or some other option?

Ankit Mittal: Sheru will primarily scale up by integrating with third parties. These third parties will be retail tech companies and will enable us to transform retailers into battery swapping operators at a large scale at a much faster pace. This will also provide them with additional revenue streams. We will also open the platform to battery swapping operators, 4 wheeler OEMs, and electric bus OEMs to monetize their assets through the usage of the idle battery capacity in their networks. These collaborations will enable scalability on the supply side.

On the demand front, there is already a great deal of it from the market. India’s energy storage market is today 95% not catered to, and the lack of solutions for it is a hair on fire problem for the energy industry at large and renewable power producers in particular. The demand thus exists, and it is desperately in need of solutions at the moment. We are the right party to help them with this.