Switched Source creates 'detours' around electrical grid trouble

Switched Source LLC, a 2017 spinoff from Michigan State University, is partnering with NextEnergy, the Detroit-based nonprofit that works to advance energy technologies, and has moved into the Tech Town incubator across the street to commercialize its power-grid technology. The tech has been heavily funded by the U.S. Department of Energy's Advanced Research Projects Agency-Energy, or ARPA-E, program, which supports promising energy technologies that are too early for private sector investment. ARPA-E first awarded Switched Source with a $2.4 million grant in 2011, followed by a $1.5 million grant last year.

Switched Source could be considered a poster child for cooperation among a variety of institutions nationally in support of entrepreneurship and innovation. Most recently, on Sept. 25, New York Gov. Andrew M. Cuomo announced that Switched Source won $250,000 at the annual 76West Clean Energy Competition, one of the largest competitions in the country that focuses on supporting growing clean energy businesses.

At the heart of Switched Source's technology is what it calls a unified power-flow controller, hardware created by Dr. Fang Peng, a professor in MSU's Department of Electrical and Computer Engineering.

In 2011, ARPA-E announced its first grant for Peng, covering the time period of February 2012 to November 2015 for him to develop a prototype controller to more easily integrate power from renewable energy sources such as wind and solar into the grid, allow for a reduction in the need for expensive transformers and make it easier to reroute electricity around trouble spots, such as a downed line.

The DOE liked the prototype well enough to help fund its commercialization through last year's grant.

In 2016, before a company was formed or the technology licensed from the school, MSU, hoping to commercialize the technology, reached out to the Energy Foundry in Chicago, a venture-capital firm that invests in early stage energy-technology companies, which in turn hooked MSU up with Charles Murray, a veteran of the energy industry who vetted the technology and founded a company as its president in September 2016. A licensing agreement was signed with MSU last year. The company has two patents granted and three in process.

Murray was working then on his MBA at the Booth School of Business at the University of Chicago and had let it be known he was looking for opportunities to help energy startups.

"I had worked with some of the incubators and startup funds, and I was getting a lot of pitch decks on my desk," he said, referring to presentations companies make in search of capital or management. "Dr. Feng had knocked it out of the park with respect to building a beautiful prototype."

Previously, Murray had been manager of business development for Chicago-based Invenergy LLC, where he managed the construction of more than 65 megawatts of energy-storage projects in the U.S. and large power projects in renewable generation and natural gas in Latin America.

Murray said that the second ARPA-E grant had been announced late in 2016, but the award was held up until August by the Trump administration, which had voiced strong opposition for the program but eventually permitted Feng's grant.

"In hindsight, it was one of the best things that ever happened to us," said Murray of the delay. "We didn't have the money, so we couldn't do engineering, so we talked to customers and went through a lot of startup boot camps."

Meanwhile, Jim Saber, the president and CEO of NextEnergy, met Murray in Chicago and told him about the financial and infrastructure support available in Michigan. Murray decided to move the company to Detroit instead of launching it in East Lansing or Illinois.

NextEnergy helped Switched Source get matching funding for the ARPA-E grant of $200,000 from the Michigan Economic Development Corp., a contract managed by NextEnergy, which makes sure milestones are met as payments are made over time.

Last year, Switched Source was also a finalist in NextEnergy's Next Challenge: Smart Cities contest, winning $40,000 to help develop components for its grid-system-management system.

Saber said he likes that Switched Source's design allows energy from solar, wind and energy-storage systems to more easily be fed into the grid. And in the event of downed power lines, its technology makes it easier and much faster for electric companies to redirect current within circuits.

"It is a smarter, lighter, more easily deployed technology that is married to large generators," he said. "If a road needs to be closed for a sinkhole, you need to create a detour for traffic. Switched Source's technology creates a detour around downed electric wires quickly and efficiently."

Last year, Switched Source also won $150,000 at the Clean Energy Trust Challenge of the University of Chicago's Innovation Fund, and at the New Venture Challenge in Chicago, it won second-place prize money of $80,000.

In March 2017, at the GreenLight Business Model Competition, an early stage pitch competition at MSU's Wharton Center, Switched Source won the third-place prize of $10,000.

And in February this year, Switched Source won the $10,000 first-place prize at the nationwide Pitch and Play Venture Challenge at the Association of University Technology Managers' annual meeting in Phoenix.

In all, the company has raised about $600,000 in various competitions.

Switched Source is testing its hardware, now, and hopes to have hardware deployed in the field in the first quarter by a variety of utility companies.

"We're very proud of that team and the nondilutive funding they got, more than $3 million," said Jeff Wesley, executive director of Red Cedar Ventures, a funding arm of the nonprofit Michigan State University Foundation that commercializes faculty research and has invested $100,000 in Switched Source. It has raised a total of $530,000 in equity funding so far.

Nondilutive is grant and other funding that does not acquire equity in a company. "I'm very proud of the path they are on and that they are moving on to contract manufacturing. They've got a great year ahead."

Dave Washburn, the executive director of the MSU Foundation and president of Red Cedar Ventures, said the company is eligible for further funding of up to $500,000 from the Opportunity Fund, a $5 million fund Red Cedar manages for follow-on investing.

Murray said he has begun talks with investors for a Series A funding round, the size of which will be determined later.