Stryten Energy: Tim Vargo

IndustrialSage

Tim Vargo returns with Stryten Energy to discuss the interwoven world of automation, infrastructure, domestic manufacturing, and the evolving energy industry.

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Danny:

– Well hello and welcome to today’s IndustrialSage Executive Series. I am joined by Mr. Tim Vargo who is the CEO of Stryten Energy. Tim, thank you so much for joining me on the Executive Series.

– Great to see you again, Danny.

Danny:

– Well I’m excited to jump into this. For those who aren’t familiar with Stryten Energy, tell me a little bit about who you guys are, what you do.

Tim:

– Sure, happy to do so. So Stryten Energy is a company that has 13 different manufacturing plants in North America, in the United States, over 2 million square feet. We supply a variety of energy storage needs across several different platforms. So we have multiple chemistries solving multiple problems, and really excited about our future given all the challenges we’re having with energy storage today.

Danny:

– There are certainly a lot of challenges.

Tim:

– That’s for sure.

Danny:

– I think you guys have a lot of work cut out for you, but a lot of great opportunities. Let’s talk a little bit about—we can go into a little bit of the pandemic. What I think is interesting is just hearing from companies about how things have really altered that future for you. Some, it’s completely changed it. Some, we’re still the same. What was that effect for Stryten?

Tim:

– Our company is one of the essential manufacturing companies in the infrastructure of our company for both the military and stored energy. Our plants never closed. Our plants were open every single day from the beginning of the pandemic until now. We’ve had virtually no lost work days from a plant perspective. The demand for our products has been exceptional across the board in every segment that we serve. Our challenges have been, through the pandemic, two-fold. We all had to learn to work from home. That turned out to be a lot easier, I think, than everybody thought. Frankly, it’s a little harder to get people back to the office now because everybody likes to work from home, me included. I think we’re all sensitive, though, to the need to make sure that we’re continuing to build the team. Communications are always a little better in person than they are just, how many Zoom calls can you do in a day?

Danny:

– Exactly, yeah.

Tim:

– Having said that, our other challenge is just getting a workforce that is robust enough to handle the demand for our products. Like all manufacturers around North America that I’m aware of, we’re all short-staffed. We could probably all make more products if we had the employees to staff all the shifts and all the machines that we have. All of us are accelerating our plans to automate certain functions in the plant, so it’s not an automation play that’s designed to reduce the number of people we have, but I think we’ve all recognized we’re probably not going to get too many more people. Yet our demand is very robust, so we’ve got to figure out a way how to automate and use the people that we have to make more products. So that’s pretty exciting stuff in addition to the products that we’re making have huge demand and a really, really bright future.

Danny:

– Yeah, absolutely. Let’s talk a little bit about the bright future, too. One of the things is that, this whole idea of going with net-zero carbon emissions by 2035. What is Stryten’s role in that and your stance on it?

Tim:

– Sure. I’m going to focus just on the United States. Our plants are all located in the United States. We have a very tight supply chain centric in the United States. We get very few products from China at all, very few, a few electrical components that are also available from other parts of the world. We do get some supply out of Europe for our lithium blocks, but we’re in the process of bringing that all in-house in North America. It’s our ambition to provide a stable stream of energy solutions that are manufactured in the United States. We’re really positioned well to do that with that 2 million square feet of manufacturing that we have and with the knowledge that we have, the deep engineering and manufacturing and design knowledge we have of energy storage. That’s going to play a key role in the whole goal for 2035.

That will not be possible without a concerted effort by a lot of manufacturers across a variety of different chemistries and solutions to provide that energy storage because one solution… lithium is not going to solve the world’s energy storage problems. Lead is not going to solve the world’s energy storage problems. Flow batteries and any other technology are not going to, by themselves, so it’s going to take a concerted effort across a variety of different chemistries and platforms to do that. I think we’re really positioned well to do so.

Danny:

– What I was unaware of before our conversation is that how much domestic production was happening. I think you said then numbers, it was over 90% or 90% there at.

Tim:

– For our supply chain, it’s well over 90, 95% of the products that we manufacture in the US are captive in the US from a product standpoint. When we look into the future with lithium expansion, flow expansion, the electrification in order to get to that net-zero by 2035, it becomes a little more pragmatic in how we end up getting there. It’s going to be interesting, that’s for sure. And then when you layer on top of the really enhanced regulations that are coming down the pipe, we were headed this way anyway.

California has had energy challenges for well over a decade. The infrastructure is not able to support the demand in the electricity market. Storage has been a big deal out there for a long time. With the infrastructure that we have in North America that is so aged and the lack of investment in actually the electrification infrastructure and the reduction of nuclear energy and the reduction of coal, the storage of energy is going to be just so exciting and so demanding that even without government regulation to accelerate the process, it was going to accelerate naturally anyway. But with government regulations, they’ve got us on a fast track with some huge, great, ambitious goals for energy storage.

Danny:

– Talk to me a little bit about the—what does that future look like for you, down to on a consumer level or even from an industrial standpoint?

Tim:

– Sure. So if you think about the consumer level, obviously a lot of folks want to have solar power so that they can reduce their energy storage bill so they can send power back to the grid and have a stable amount of energy coming into their home. What has been lacking, really, over the last couple of decades with very few exceptions has been the storage of that energy that’s captured from a windmill in your backyard, solar panels on your roof or a solar array set up in your yard. That’s all fed back into the grid, and there’s really nothing stored in your home, for the most part, if you looked at it over the last decade or so. The opportunity there is to provide a variety of different storage solutions for the home.

We have a lead solution which is probably a little more complicated than most people would like. Lithium storage is certainly the most convenient. It’s also pretty expensive. And so as lithium cost continues to go down, that’s going to be a very efficient way to store energy so that when the power goes out, you have actually energy stored up to run everything in your home from your heating to your air conditioning to your refrigerator to the lights on. That grid that can be made—let’s call it a micro-grid. Micro-grids are generally, would be more of a neighborhood thing. But just a grid for your house, you can support yourself. What the government is doing now, the government is talking about legislating micro-grids for neighborhoods.

And so then you’re going to need something more than lithium to back it up, and that’s where we think the flow technology—we’re using vanadium as our chemistry to store energy because we happen to know it’s pretty efficient, more efficient than many of the other flow battery technologies—but that flow battery is going to be able to hold an awful lot of energy for a much longer period of time, four hours in duration or greater. And it’s completely scalable for the size of the grid that you want to support. Pretty exciting stuff.

Danny:

– That is super interesting. So I’m going to break that down to, in my mind, to an elementary level. I’m curious; I want to make sure I understand this right. You’re thinking that the future will be that, obviously, there’s a higher demand in energy production that needs to happen at a local, micro level, at your house or neighborhood and that we need the ability because you’ve got a solar array. You’ve got EV. The EV market, I guess we can talk about in a little bit, that’s exploding. Everyone wants their Teslas and their Rivians, and Ford’s coming—all this stuff. That’s creating a bigger demand there. From a storing standpoint, if the issue goes—we have issues. That would happen at a local, residential level, or even at a neighborhood level—call it micro—that’s pretty interesting.

Tim:

– The challenge here is that lithium today is the ideal solution for home energy storage. I’m going to venture to say that probably 95% of the lithium batteries that we get in the United States are made in China. The world, not only the United States, is very dependent on China-manufactured product. Long supply chain, I won’t even get into all the other nuances of products coming out of China relative to the importance of owning our own energy storage. Right now we have a foreign country that virtually owns our energy storage opportunity.

Danny:

– It’s a critical infrastructure issue.

Tim:

– It is, absolutely. Given that, we are, along with several other North American manufacturers who know how to build product and energy storage to scale which is really critical, we are all driving towards a North American or a United States-sourced supply chain and manufacturing to manufacture lithium energy storage right here in the United States for the United States. Government regulations, as they’re being formed today, are going to be requiring that energy storage to be manufactured in the United States, not only for your home, for the micro-grid or for the total grid backup, the critical infrastructure for all of the power plants. If you were to do that today, you’d have to go to China to get that product. We have the manufacturing technology in the United States. We have the understanding, the design, the footprint, and the intellectual capital to build that product right here. We just need a few years to get it done.

Danny:

– That’s super exciting. I love that. And we’re hearing all these stories across—actually I’ll give you a really interesting—not in the energy space, but in healthcare. There was, and just down the road, one of our clients over at Optimum, Jackson Healthcare. It’s a big healthcare staffing. They ended up buying an antibiotics manufacturer called US Antibiotics in Bristol, Tennessee. During the pandemic, they ended up going bankrupt and had employees that were coming in that were working there because they are the only domestically-produced—the only domestic producer of antibiotics, so penicillin, amoxicillin. That’s the only one in the United States, and it went bankrupt. And so they bought it, and we have to keep this thing moving forward. That was fascinating to me; a little terrifying, to be honest with you, saying wait a minute. When we’re talking about critical infrastructure here, certainly energy storage, the grid, you want to talk about big issues? That’s a big one.

Tim:

– You know, driving towards electrification, and obviously the EVs are at the forefront of that. That’s what gets all the publicity. The unfortunate part is, if you look at the average home in America, it only has 100-amp service. That 100-amp service, for the most part in the average American home is probably about 90% used. If you’re going to put an EV charger in your home, I think you need somewhere between 60 and 80 amps.

Danny:

– That’s a significant—

Tim:

– Where’s that going to come from? You’re certainly not going to say, well listen, we can’t use our refrigerator today because we have to charge our Tesla or our Ford pickup truck. Let’s take it down a couple notches. Ford’s got the great Mustang Mach-E which is a great vehicle. They’re selling a ton of them, manufactured right here in the United States. They’re sold out of their F-150 Lightning truck. If you want to do home charging with a reasonably fast charger, you’re going to have to have more amps in your home or you’re going to have some form of stationary backup power that you can charge through solar or through your network, hold that energy so when you come home at night to charge your vehicle, you plug in, and it runs off of that instead of your 100-amp box. So there’s a lot of things that are going to have to change in order for us to meet our net-zero goals.

Danny:

– A ton of things, but I do think it’s super interesting. We were talking about a little bit how people are—there’s this shift. I think even before we started recording, we were talking about this idea of creating energy production at the micro, at the home level or an industrial facility, what have you. I think that’s an interesting frontier, especially as now I feel like the costs have dramatically dropped. I remember looking at this 10 years ago. Okay, this is—the return on this, and now we’re really actually, the costs are going to—and from a storage standpoint. What is that looking like over there?

Tim:

– Lithium has dropped dramatically in the cost per kilowatt hour, which is how I think businesses around the world look at it, cost per kilowatt hour. It’s still expensive. It’s a lot more expensive than traditional energy storage. Let’s just use lead acid for a minute. We have our lead acid batteries in data centers around the world storing energy for if the grid happens to have a little hiccup. You lose power for a little bit, our batteries can pick up the delivery of electricity. That’s been tried and true for decades. It really works well, and it’s really cheap. Lithium hasn’t gotten there yet from a cost yet, but it is a lot more compact. It has a better charging cycle, and there’s virtually no maintenance to it.

On the lead side, we’re working with a variety of different government agencies to try to improve and enhance the technology that’s being applied to lead acid battery manufacturing, so we think we’ve got considerable upside there to get it more competitive with lithium. There are some other chemistries that are being used that are also pretty exciting that are manufactured. The batteries are manufactured in the same way, but they just don’t use lead. Nickel zinc would be an example, so instead of using lead, they use nickel and zinc. They make a battery that just looks like a regular battery, only it has better characteristics for storage and charging. It gases less; you don’t have to worry about it being in your house. One of the challenges with lithium that you’ve seen in the news where your Tesla catches fire and burns to the ground; the fire department can’t put it out. So let’s just put that battery in your house. Little concerning for a lot of people, and so our understanding of that is pretty implicit because we’re in the energy storage business. It’s pretty hard to catch a lead acid battery on fire. It’s like the safest thing you can do.

Where we were heading with our lithium drive to find, develop, and manufacture those products in the United States, we bought a great little boutique company up in Canada. They have the intellectual property that has lithium with significantly reduced exposure to explosion and fire. Between an enhanced battery management system that controls the electricity going out, electricity going in, in an absolute way, the technology that they’ve developed that we now own and are trying to commercialize for things like home energy storage is the dramatically reduced flammability of that lithium that everybody talks about as being so flammable. So again, applying what we know how to do from an energy storage standpoint, getting the right IP to be able to develop that—this happened to be for a military application, so it’s very usable and can be made a lot more cost-efficient if you don’t have to do these certain things that the government requires you to do for military applications.

We see a huge opportunity there for us to supply a lithium product for the home that’s safer than anything that’s on the market today. It’s going to take us a couple years to get there, but it’s going to take everybody else a couple of years or longer. We’re going to have that again, manufactured right here in the United States with products from the United States or in some cases perhaps products from NATO-related countries with lithium.

Danny:

– I think that’s just—we’re hearing more stories of more insourcing, more companies switching supply chains saying, hey, we want more domestic production. I love it. I think it’s awesome. I’m curious; let’s talk about labor a little bit for a second. Obviously you mentioned before, there are some serious issues. It’s forcing, pushing a little bit more of investing into automation. How much of that was happening, before the pandemic versus—obviously the pandemic shone a light, and that created some interesting opportunities. Obviously a lot of companies were looking at automation, but maybe that was on the pecking order. That was, okay, that’s a nice-to-have, not necessarily got-to-have. When we’re looking at specifically with domestic production, and labor rates being higher than what they might be going to China, was automation part of a solution before that, before the pandemic?

Tim:

– Yeah, so great question. I would say that most people in manufacturing have a road map to improving their automation. Although the labor issue has been really acute during the whole Covid two years, it was a problem before. It really depends on what industry you’re in. If you look at automotive manufacturing, for example, where there’s a lot of risk for injury because you’re moving a lot of heavy items, automation has been a key to that for a long time. The wages that the car manufacturers pay their workforce is considerably higher, so automation became a cheaper way to do that. Your robot never takes a day off. They don’t leave for the first day of hunting season and all the other things that we all talk about in manufacturing. And so it really depends on your own business, but everybody has been working on automation, and it’s just gone up a couple of notches here in the last couple of years.

Danny:

– Yeah, it’s been super interesting, and I think it’s opening up all these other opportunities for companies that maybe didn’t have the same road map that you have. I actually think that’s really exciting because I appreciate that domestic production.

Tim:

– Not wanting to get too sideways, but a lot of those robots aren’t made here either. A lot of those circuit boards aren’t made here either, and so the big announcement about Intel and their huge manufacturing effort to begin making things here in North America again, in the United States again is critical to that whole robotics supply chain as well because we need to be making that here. We shouldn’t be depending on somebody overseas making that product for us. It’s a complicated problem, but there are great solutions.

Danny:

– Absolutely. I’ll go a little bit more on EV. I know we talked about some of the challenges and the impacts that’s happening. I would say challenges, but also opportunities with that. I’m curious from a, obviously we were talking about Ford, and I’ve always, from an automotive standpoint, but there are also so many applications. One of the areas that I’m fascinated in for multiple reasons because I’m a pilot, but that’s one, is actually in the aviation space. When it comes to drones or UAVs, in the parcel and packaging, so a lot of FedEx and a lot of, part of the—and I’ll throw a little, part of the Industries of the Future initiative that we’ll be launching here soon, one of the episodes we talk about that space and one of the former—looking at the future of the industry, drone delivery was one, and that’s one that keeps coming up. Obviously that’s incredibly battery-dependent.

Tim:

– Yes, it is.

Danny:

– Not to mention, there are a lot of other issues with weather and whatnot. I’m curious from your standpoint, from a technology standpoint, that and maybe even deeper aviation as we’re looking at some of these electric that are carrying passengers and larger cargo than just a package that’s this big. Have we arrived?

Tim:

– I think from a package standpoint, an unmanned drone to do a variety of different things, whether it’s military use, application is clearly an unmanned drone, whether it’s a drone that you put out in the field with sensors on it to determine where the enemy is or whether it’s a drone in flight, there are a lot of different drones that the military is using all using lithium technology. Again, challenge to find the product made here, so there are a couple of US manufacturers, competitors of ours who have been in that for a long time, and they do a great job. They’ve got a nice little head start, a very compact, different than an EV, for example, and clearly different than aviation.

You’ve seen, if you’re an aviation buff, you know how long it takes for the government to approve something, and even when they do sometimes they mess it up. I’ll leave Boeing out of this because the government helped Boeing mess that up, but it took years to get those approved only to find out they didn’t work. Think about how long it’s going to take them to be comfortable putting a battery that burns on an airplane to fly people. A lot of drone development’s going to be done, large drone development’s going to be done with the government, with industry. It’ll likely happen but probably not in your business lifetime or mine would be my guess. I’m a little older than you—a lot older than you, so it’s certainly not going to happen in mine, but I could easily see it happening. The great thing about manufacturing ingenuity is, is that it never ends. It’s amazing the things that we can do to solve problems and create jobs and different solutions that we had only dreamed of before.

Danny:

– Absolutely. Well speaking of the ingenuity and being able to solve problems, if I were to give you a magic wand—this is a magic wand question—to solve one thing in the industry, what would that be?

Tim:

– People, that would be the biggest magic wand I could come up with. Whether you’re in the car repair business, trying to find a technician to do that is hard. Our schools aren’t set up like they used to be to train people for anything other than going to college. And yet we have a lot of jobs that are required to make America work that we don’t have the people for. We’re in the forklift battery business, so we have a nice share of wallet in that for new fork trucks and used fork trucks. Well guess what? They don’t have the technicians that they need to have either, so whether you’re an automotive technician, a motive power technician, you’re a technician working on a Navy submarine, you’re a technician working in an electrical substation, you’re an electrician, all those skills, all of them are short. We’re short hundreds of thousands of those people.

So from a magic wand standpoint, if I could wave one, that would be it because then that would allow us to do all of the other things that we need to do to build the infrastructure to get the job done. If we don’t have those people—A robot can’t do that unless somebody can build it. A robot can’t do that unless somebody can design what the robot’s going to do. And even though there’s a lot of work being done for artificial intelligence, and frankly that gets a little bit scary from my perspective. I think if you heard Elon Musk’s interview it scares the heck out of him too. If he’s afraid of it, I think I should be afraid of it too. I’m just saying. AI is going to be doing a lot of things. We just have to be careful what we let it do. So anyway, the magic wand: people, labor.

Danny:

– Alright, another question then with that: how do we solve it? That’s the million-dollar—that’s the, well, billion-dollar, multi-billion-dollar question.

Tim:

– It’s going to take what we’re trying to do right now with this energy solution. It’s got to take a combination of government and private enterprise to work together to solve it. The government has one idea of what public education ought to be, and that varies by geography. But I think that we all have to recognize that as a challenge and invest in it together. Private enterprise can do an awful lot, but we have a huge education infrastructure that costs us trillions of dollars a year. We have to figure out how to better solve our education problems other than the way we’re currently solving them.

Danny:

– Interesting. Well, listen Tim, I loved this. I do have one more question. Last question, I think.

Tim:

– Last question, alright. Sure, I believe you.

Danny:

– As the leader of your organization, and this is a little bit more of a personal question here at the end, what do you do to help stay at the top of your game?

Tim:

– I’m in the manufacturing business, and we manufacture products with people. The best thing I can do with our leadership team in concert is to make sure we’re effectively communicating to all of our employees where we’re going, how we’re going to get there, and what it means to them and their families. Those are the things that our team works on every day is we’ve got to have clear goals. They have to be attainable goals. We can have stretch goals; we can dream big. But we’ve got to make sure we’re explaining that to the men and women that we work with every day so we’re all along on this journey together. We all know where we’re going. We have a pretty good idea how we’re going to get there, but we’re not going to get there working in isolation. We’ve got to get there working as a team. We’ve got 2500 employees in 13 different plants around the country. We’ve got to work together to make this work as well as we all aspire to have it work.

Danny:

– Awesome. Well Tim, thank you so much for joining me today on the Executive Series. Fascinating conversation; I know I threw you some curveball questions there, but I appreciate it.

Tim:

– Danny, it’s my pleasure. I really enjoy doing this with you. I like what IndustrialSage does here, and we’re happy to participate any time. So thank you .

Danny:

– My pleasure. So if anyone wants to learn more about you guys, they can go to—I’ve got the website here. It’s stryten.com, and learn all about the innovations. You guys have a fascinating story. Thank you for all the work that you’re doing. Love the mission, and we want to help; we’re here to help support that.

Tim:

– That’s great.

Danny:

– That’s awesome.

Tim:

– Thank you.

Danny:

– Alright, well thank you. Okay, well that wraps our interview with Tim. Thank you so much for coming on. Awesome; I loved it. So many great takeaways.

So listen; if you are not subscribed, you’re missing out on great content like this, great interviews with leaders who are really creating innovative solutions, who are changing the world, really solving some of our pressing challenges that we’ve got going on. There are some great opportunities here. So subscribe; you can go to IndustrialSage.com. Subscribe there, and otherwise you’re missing out. That’s all I’ve got for you today. Thank you so much for watching, and I’ll be back next week with another episode on IndustrialSage.

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