The Man Who Made More Than a Billion Shekels Out of Thin Air. Literally

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Or Yogev poses in at a facility in Yakum, Israel, June 6, 2020.
Or Yogev poses in at a facility in Yakum, Israel, June 6, 2020.Credit: Ofer Vaknin

“I asked myself, what’s going on here? It’s 12 noon and there are thousands of wind turbines that are supposed to generate 600 megawatts [of power] – but they’re not moving.” Or Yogev, founder and CEO of Augwind Energy, was on a trip with his wife to California in 2010 when he encountered the wind farms in San Gorgonio.

This is where he came up with the idea behind Augwind’s technology.

“In the western United States the wind blows mainly at night. I understood that energy created by the turbines needs to be stored via compressed air underground, and during the day the compressed air should be turned into energy,” he explains.

At the time, Yogev was a young engineer finishing a doctorate in mechanical engineering at the California Institute of Technology, after completing two degrees at the Technion – Israel Institute of Technology. After finishing his degree at Caltech, he got a job at eSolar, a small startup that had developed concentrating solar power technology. There was a lot of demand for this kind of technology at the time since it was relatively cheap to manufacture compared to photovoltaic systems.

A few years later, the tables turned. “Photovoltaic dealt us a knockout,” says Yogev. “But I learned a ton there. I understood that without a good way of storing energy, none of the renewable energy sources are worthwhile. My idea was to take ‘dumb’ wind turbines and upgrade them via a compressed air storage system nearby, turning them into a local power plant. The turbines create electricity at night: Sell part of it and power machines that compress air into underground containers with the rest.”

This concept – augmented wind – is behind the company’s name.

The idea of storing energy via compressed air wasn’t innovative in and of itself, but the problem was that a standard metal tank that could be used to store 50 cubic meters of air, compressed at 40 atmospheres of pressure, cost nearly $1 million.

Yogev thought he had a solution. He returned to Israel in 2012 with his wife and their four children, and founded Augwind. The company raised 2.5 million shekels (around $650,000 at the time) from the Capital Nature venture capital fund at a valuation of 194 million shekels. Capital Nature now owns a 16.25% stake in the company. Augwind built an experimental facility at Kibbutz Yotvata near Eilat.

File photo: Wind turbines in Israel.Credit: Gil Eliahu

The money ran out within two years, but by that point the company nearly had a commercial product. Augwind had developed an underground tank made from inflatable polymer, surrounded by cement. The tank used the ground’s mechanical strength to store 50 cubic meters of air at pressures exceeding 40 atmospheres.

Yogev said he tried to raise more money, but failed. The solar energy industry was in crisis at the time. Photovoltaic energy production still cost more than gas or coal, and no one was expressing interest in energy storage. So Yogev took out tens of thousands of shekels in loans to finish the development process.

The main advantage of Augwind’s product is the lack of metal components. This lowers production costs by tens of percent compared to the competition – heavy steel tanks.

Yogev decided to convert his product to suit industrial uses for compressed air, specifically those that use three types of compressors that are powered by electricity, diesel fuel or natural gas. These compressors are typically responsible for some 15% of their factories’ power consumption.

“I discovered that factories in the food, plastic, cement and paper industries use massive, inefficient compressors,” says Yogev. The compressors burn energy in order to compress air that is sent straight to the production line. This has the disadvantage of being very expensive, and demand for compressed air can vary within a given factory depending on the manufacturing process taking place at that moment.

As a result, the compressors are frequently turned on and off, creating additional wear on the machines. In addition, the factories are forced to buy enough compressors to serve them in their peak use times, even if that lasts only a few minutes.

The air compression processes in Yakum, Israel, June 6, 2020.Credit: Ofer Vaknin

Yogev’s solution was to enable compressors to pump air into his tanks, instead of straight onto the production line, and have the tanks deliver the air as needed. This works only if the tanks are very large, with a capacity of 150-200 cubic meters, he says.

“This is why no one other than us adopted this solution – it would be too expensive,” he says. Augwind’s tanks were inexpensive, and since they are kept underground, they didn’t take up space at the factory, either.

“When we started selling our product, Airsmart, I was surprised at how quickly it sold,” he says. “The positive response from our customers is because the investment pays off within three years or less, saves 20-45% of compression systems’ electricity costs, and improves operating profit,” he says. “There are no drops in pressure, there are fewer glitches, the factory has an emergency air supply and it needs fewer compressors.”

Augwind Energy's air compression technologies are installed.Credit: Or Yogev

Augwind’s customers include Tnuva, Strauss, the Israel Aerospace Industries, Nesher Cement Works, the polymers company Nilit, Pepsi Bottling and Iscar Metalworking, which last month made Augwind’s largest order to date.

Augwind has two business models: In one, the costumer pays for installation based on various benchmarks, such as a minimum level of electricity savings. In the other, Augwind pays for installation and it and the customer split the customer’s savings on electricity.

Augwind estimates that its market in Israel is worth some $100 million a year. The global market for industrial compressed air systems may be worth $24 billion by 2026. The company is seeking to focus its expansion on industrial parks in the United States and Germany that have high energy use costs, through partnerships with other companies that carry out sales and operations.

The industry’s quick adoption of Airsmart – and the cashflow that came with it – enabled Augwind to return to its original idea in 2019: storing energy for the renewable energy industry. This time the pieces came together. The price of solar energy had dropped compared to traditional energy, and all the renewable energy industry needed was a price-efficient way of storing energy, which would allow it to be a real alternative to traditional power plants creating a steady, reliable supply of energy around the clock.

Energy storage would address the main structural problem with solar and wind power – their inability to provide electricity at night, on cloudy or rainy days, or when the air is still. Currently, the industry addresses this with lithium batteries, through hydroelectric plants that use pumped water storage technology, energy storage through compressed air, and flywheel-based energy storage. Flywheels use a small amount of power over a long period of time, but can provide a large amount of power over a short period of time.

Yogev says his AirBattery, which is currently in the beta stage, offers significant economic advantages compared to lithium-ion batteries, which are currently the most common means of energy storage. “AirBattery is a battery whose raw material is compressed air,” says Yogev. “We developed a technology based on compressing air via a water pump.”

“Imagine that each one of our tanks is two meters in diameter and 20 meters long – a massive, sealed underground cylinder. The water pump sends water into the cylinder and the air starts to compress, until ultimately you have a layer of water with highly compressed air on top,” Yogev explains. “Augwind created a water compressor whose piston is made out of water.”

There are several major advantages to using a piston made from water rather than mechanical parts, says Yogev: “If I were to compress air to 40 atmospheres using standard compression instruments, the temperature would heat up to 800 degrees Celsius and the metal components wouldn’t be able to handle this. You’d need to cool the air with a fan pulling in external air, and therefore the yield from traditional air compression – the energy you receive versus the energy you expend – is only some 15-20%.”

“However, when you use water as your piston, the water’s good thermal conductivity prevents the air from heating up and means that most of the energy created in the compression process is kept as potential energy and increases Augwind’s energy yield to 80%,” he says.”

Augwind’s product will enable a solar energy field to use its power to run the water pumps and compress air during the day, when the price and demand for power are both low. When demand increases, the compressed air is released, powering water turbines that generate energy.

“This is like a pumped storage without a 400-meter water level. We took pumped water technology and combined it with an air compression system, creating a 50-cubic-meter installation that provides 250 kilowatts of energy,” he says.

The system is entirely green. It only uses water and compressed air, doesn’t require valuable land and it can be installed anywhere at a low cost.

While Yogev won’t disclose what it costs to store air with Augwind, he says it is much less expensive than lithium-ion batteries and is much closer to being able to store energy for renewable energy production, at a cost on par with coal- and gas-based electricity production.

Furthermore, the storage capacity of lithium-ion batteries decreases over time, and a solar field that uses lithium batteries would need thousands of batteries, cooled to 20-25 degrees.

Israel’s Electricity Authority has mandated that no renewable energy production facilities can be built without also providing a means of energy storage. “All of this makes our product a game changer,” says Yogev.

“With an electric car you can live with replacing the battery every six years, but not with a 300-megawatt field, like the field planned for Dimona,” he says. “It’s illogical to take green energy production and integrate such a non-green solution, since no one has any idea how to recycle thousands of batteries at the end of their lifespan – not to mention the safety problems that come with lithium-ion batteries,” he adds.

Augwind hopes to break into the global renewable energy industry, which is forecast to be producing 300 gigawatts of energy by 2030.

“When I founded the company I didn’t expect that needs would mesh so perfectly with our technology, as is happening now,” he says. “The company is growing exponentially.”

That said, Augwind’s revenues are still low – 7 million shekels as of 2019, up from 3 million shekels in 2018. However, the capital market agrees with Yogev’s assessment, and the company’s shares are being traded at a valuation of 1.2 billion shekels.

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