Explore the innovative grid equipment company emulating strategies from the auto industry

In an ambitious move to address a U.S. energy growth bottleneck caused by a shortage of power grid equipment, Ayr Energy is bringing manufacturing principles from the automotive industry to the power grid sector. The company, which has more than $250 million in signed equipment orders for planned projects totaling 10 gigawatts, is seeking to upend the U.S. market for grid equipment and reduce lead times to one year.

The founders of Ayr Energy opted for venture capital funding over traditional debt or private equity, seeing a lot of white spaces where new technology can be developed and should be developed. Ayr Energy's approach is only possible due to the current environment developers find themselves in, particularly those building in the U.S., where there's an ability to propose efficient specifications that eliminate 70% of the variability in the entire process.

The company's strategy is evident in its pipeline, which is heavily dominated by solar projects, a direct result of the final shape of the reconciliation bill. Another key trend in Ayr's pipeline is projects that are slated for co-location with data centers (though most of those will also be grid-tied).

Ayr Energy partners with multiple Indian manufacturers who operate as Original Equipment Manufacturers (OEMs) in the domestic market but work as contract manufacturers for Ayr's designs, keeping early costs down. The company's supply chain leverages excess capacity at established factories in India, which are already manufacturing power grid equipment for their domestic markets and Southeast Asian markets.

Ayr Energy is standardizing certain components with particularly long lead times, which is already cutting lead times for critical equipment in half. This approach eliminates much of the customization at the front end, unlocking bottlenecks in manufacturing and the supply chain. Key components like high-voltage bushings and load tap changers, components with long lead times, are ordered up front by Ayr Energy based on their expected orderbook.

The surge in demand for grid equipment is due to electrification, the artificial intelligence boom, and aging infrastructure, causing lead times for high voltage equipment to range from three to five years. Wait times for key equipment in the power grid equipment sector were "sky high" and getting longer, and the gap between supply and demand was growing, as incumbents didn't seem to be acting fast enough to solve the problem.

Availability of components is a key challenge preventing projects from coming online, and it can "make or break" a project, especially now when developers are facing significantly shortened timelines to qualify for Inflation Reduction Act tax credits. Ayr Energy's approach gives suppliers of components certainty about their needs and when they need them, and uses them flexibly across different projects.

In the world of grid equipment, customers place orders "before they do anything else with the project," leading to long lead times and customization happening at the front end of the manufacturing process. Ayr Energy's manufacturing principles, modeled after the automotive industry, aim to unlock efficiencies across the process.

In the longer term, Ayr Energy's plan to stay relevant will require it to expand beyond inverters and switchgear. The company has already partnered with industry giants like Schneider Electric and Siemens for their production of power grid equipment in India.

In a bid to circumvent China entirely, Ayr Energy is seeking to reduce lead times to one year, reimagining the supply chain, from contracting and design to manufacturing. This revolutionary approach could mark a significant shift in the power grid equipment sector, addressing the pressing need for efficiency and speed in a rapidly evolving energy landscape.