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This week, the country’s foremost utility geeks descended on San Antonio to let their inner wonks run wild.
The conference, DistribuTech International, featured the nation’s largest utilities mingling with service providers demonstrating their latest technologies and offerings on impressively large screens and surprisingly intricate displays.
The themes of this year’s conference across the floor: resilience; flexibility; and distributed energy resources (DERs).
While most conversations are deep in the utility use cases, the challenges and opportunities discussed are just the other side of the energy transition coin. I asked some leading experts and service providers what they thought the most exciting trend — or technology — is in the energy transition.
Distributed energy resources and microgrids
DERs such as rooftop solar, electric vehicle (EV) charging stations and energy storage are here, and utilities have opportunities to evolve to include them in their business model. This is a change in tone: Utilities historically resisted, fearing it would lead to grid defection and threaten their legacy services.
Over the last two years, however, a growing number of utilities have begun working with customers to integrate DERs into the grid (a process known as grid integration) to become a new revenue stream for both parties.
For the end user, that means cleaner, more reliable energy that also could save money.
“I’m happy that utilities are fully engaged now in distributed energy generation and microgrids,” said Clark Wiedetz, director of microgrid and renewable integration at Siemens. “That will help the end-use client, namely commercial and industrials, because they’re looking for saving money by having their own generation.”
The growth of grid integration could pave the way for more companies to embrace microgrids (assuming utilities streamline the process to interconnect them with the grid) and provide utilities more resources in the case of an outage or a natural disaster, such as wildfires, hurricanes or floods.
According to Wiedetz, the biggest barrier to more microgrids and DERs is policy.
“Technically, the solution has been out there for quite a while. The technology is there,” he said. “So now the flip is, do we have the legislation to make this happen and do we have the financing? Once those two start to get streamlined, you’ll see more expansion.”
Flexibility is essential for utilities to retire dirty energy plants while providing reliable and affordable energy.
“The next big trend is going to be the ability to provide flexibility at scale across a wide value stream,” Vera Silva, chief technology officer at GE Grid Solutions, told me.
Simply put, grid flexibility is the ability to shift energy demand to match renewable generation using software (including demand-response technologies) and hardware (including energy storage to save energy for when customers need it).
Both require a level of customer participation — especially to keep energy prices low while utilities strive to meet their clean goals.
“The customer-centric grid is going to be the key enabler to achieving some of these aggressive renewable portfolio standards that require more customer distributed energy resources,” Brad Williams, vice president of industry strategy at Oracle, told me. “To do that safely, utilities need to engage those customers to be participants of the grid operations.”
On the hardware side, energy storage is deployment is also key.
“It’s not a brand new innovation, but pricing is getting to the point that energy storage is more interesting in more applications,” said Jason Abiecunas, associate vice president and client account executive of distributed energy at Black & Veatch. “We’re at a point where more widescale deployment at commercial installations to support resilience plus sustainability is going to start to pencil out and check those boxes of sustainability goals.”
New business models
With every consumer becoming a producer (referred to as “prosumers”), off-takers have a lot of decisions to make about a quickly changing field with a lot of moving parts.
As a result, service providers — such as Siemens, ABB, Engie and Schneider Electric — are building a business in designing comprehensive energy strategies for companies, campuses and municipalities. As Don Wingate, vice president of sales at Schneider Electric, put it, “Who do you know that tried something new and got it right the first time?”
In addition to consulting services, these giant companies are developing business models that sidestep initial capital outlay that may scare off some commercial and industrial customers. Schneider Electric, for example, offers “energy as a service,” where it builds, maintains and owns a microgrid at a client’s facility and sells the energy to that client.
“Microgrids are very complicated sometimes; how do you take the mystery out of it? How do you make the right choice?” Wingate said. “Being able to go to a customer and say, ‘You don’t have to have a capital expenditure, you can get a defined solution, an outcome,’ is exciting to the industry.”
Automation and optimization
Here’s the thing about energy customers: We’re lazy, and it’s hard to get us to do anything.
That’s why so many vendors are working to crack the code to automate processes to help DERs work together and provide better grid flexibility. These usually involve a combination of using internet of things technology to connect to devices, artificial intelligence to make sense of the signals from the devices and deep learning so the automation learns from the data it receives. To name a few developments at the conference:
GE Grid Solutions launched its Digital Energy Innovation lab
AutoGrid and Schneider Electric announced a partnership surrounding management software that incorporates behind-the-meter DER optimization and automation
OSIsoft announced a partnership with DERNetSoft related to its AI-based tool for data visualization and optimization to make an energy marketplace
ABB is boosting automated services through its “Grid Edge Solutions” services
“Automation for solutions is really being able to do control and energy management, especially when we’re looking at multiple components,” explained Maxine Ghavi, head of grid edge solutions business at ABB. “We have solar, we have storage, we have EV chargers and you want to manage all of that — plus the existing assets that are on-site for C&I customers.”
The idea is your devices and assets can communicate — and balance — the other demands on the grid. So basically, your operations can be a team player with the rest of the grid. This will become increasingly important as demands for electricity grows, driven by the electrification of heating, the electrification of transportation, edge computing and indoor agriculture.
The value of resilience
Underlying each trend is the urgency to increase energy resilience as natural disasters — and corresponding grid outages — increase.
Many technologies are cost-competitive with conventional options only when factoring the value of keeping the lights on. It’s no longer just the price for a watt, it’s also the avoided cost of power outages.
“Organizations still struggle to understand what that value is,” Abiecunas said. “You know, how much does it cost me if my bank branch is offline for a day? Or, what is it worth to keep my gas station online? I think more organizations are starting to think of on-site energy as kind of an insurance policy against those events, and they’re willing to pay something for that and compare it to not just their energy stack, but their insurance stack, too.”
Wingate hopes Schneider’s energy as a service model will help persuade consumers to take the leap to microgrids at once instead of piecemeal.
“A lot of people with the value stacking might start off saying, ‘I just want to do X, and I’ll do something later. I’ll put solar on my roof, then I’ll add a battery, then a fuel cell,’” Wingate said. “With energy as a service, we’re finding you can bundle things together so you can maximize the value sooner, rather than delaying things in the future.”
Editor’s note: This is the second article in a two-part series about microgrids. The first part, discussing market dynamics, can be found here.
Increasingly, U.S. businesses are concluding that they need the type of business continuity, cost predictability and sustainability goal-aligned energy solutions that microgrid-plus-storage installations offer.
Here are seven companies hoping to capitalize on the interest in technologies that can serve commercial and industrial needs. While numerous software and services players are rising up to focus on this opportunity, this list (presented alphabetically) primarily highlights participants going to market with turnkey solutions.
When the Carlyle Group and Schneider Electric announced their plan to create AlphaStruxure in April, the industry took note. It is not every day that one of the world’s largest private equity companies and a leading energy management and automation company join forces to seek out opportunities in the microgrid market.
With AlphaStruxure, the goal is to develop a partnership capable of taking on large, bespoke projects such as the JFK airport modernization project, which will use microgrids to transition the airport to 100 percent renewable energy, as well as modular microgrid-enabled energy-as-a-service solutions for C&I customers. For AlphaStruxure, “energy-as-a-service” means offering C&I customers energy solutions that include an initial advisory service, on- or off-site generation, energy efficiency upgrades, load optimization, contract structuring and capital.
“This means that we are accountable for the capital investment and the delivery of predefined outcomes that meet a customer’s goals for sustainability, reliability, resilience and cost-effectiveness,” Juan Macias, AlphaStruxure’s CEO said, noting that AlphaStruxure will own the microgrid asset for the duration of the energy service agreement.
In 2020, AlphaStruxure plans to look for C&I energy-as-a-service opportunities in a wide range of segments. “We are ready to support a customer who needs a zero-capital-cost energy solution that delivers cost predictability, resilience, reliability and achieves sustainability commitments,” Macias said.
Like the Carlyle Group, other private equity firms are exploring opportunities in this space. In July, BlackRock and GE announced an agreement to build Distributed Solar Development, a new solar company that will design, build, own and operate distributed solar and storage solutions for customers.
When a heatwave and summer storms triggered power outages in New York last summer, Home Depot stores using Bloom Energy’s fuel cell microgrids stayed open, and other retailers took note.
“[Our] technology is well suited for retail companies… Because we use the natural gas infrastructure, which is a mesh network, and because our technology is on site, it’s able to power through extreme weather — blizzards, typhoons, etc. — providing electricity 24/7,” said Asim Hussain, vice president in commercial strategy and customer experience at Bloom Energy.
Compared with solar, Bloom’s microgrid technology has a small footprint. “[That’s] important for big box stores that have little space in the parking lot or on their roofs for microgrid technology,” he said. Additionally, retailers also appreciate the cost predictability of Bloom’s installations, he said, noting that Bloom provides this in five to 20-year contracts.
In addition to retailers that can lose significant amounts of business during outages, Bloom is seeing a spike in interest from hospitals and the healthcare sector.
“Hospitals are required to have diesel backup generation, but we’ve heard that with the outages lasting longer than the fuel supply for their diesel generators, they’re looking for alternatives to their usual setup — and diesels are bad for the environment,” Hussain said.
Kaiser Permanente is a large Bloom Energy customer for primary power, and it is considering options for microgrids.
Turnkey microgrid-plus storage systems have been having a moment in the wake of the California utilities’ recent public safety power shutoffs.
“After two weeks of outages and utility shutoffs, many businesses have had to shut their doors because of cash flow issues or because they lost their inventory at a critical time of the year,” said Angelo Campus, founder and CEO of BoxPower, a startup that makes pre-engineered microgrid plus storage systems that can be dispatched and stored in shipping containers.
More climate-vulnerable companies no longer see small and medium-sized microgrids as a “nice thing to have,” but something that they need to have, he said.
BoxPower is in the market with two turnkey microgrid solutions plus storage products, one that relies solely on solar power and another that uses solar power and natural gas.
“Solar and renewable resources are inherently intermittent, and many commercial clients want to know that they will have 100 percent reliability in the event of an outage,” Campus explained. Hybrid solar/generator systems provide an ideal combination of cost savings from the solar and guaranteed reliability from the generator, he added.
In 2020, BoxPower’s C&I focus will be on geographies susceptible to extreme weather brought on by climate change, such as California, the east coast and the Caribbean. BoxPower is also looking for opportunities at schools and gas stations.
“It is less electric car-focused; gas stations fit our customer profile. They are the right size [for BoxPower’s turnkey microgrids],” he said. During outages, some gas stations rely on generators, but many have no backup power at all. “In Nevada County [California], there was only one gas station open during the last round of PSPS events, and there was a four- to six-hour line of people waiting to fill gas tanks for their cars and home generators,” he added.
As a concept, BoxPower’s shipping container-based turnkey solar microgrid solution was a reaction to the 2010 earthquake in Haiti. Efforts to mobilize generators for critical services after that disaster failed because Haiti’s power system went down and the country experienced fuel shortages, resulting in many deaths from preventable disease due to the inability to refrigerate medicines and vaccines.
When it comes to deploying microgrids, early movers in the commercial market often have been companies that already operate backup generators and/or emergency power systems. With this in mind, power management company Eaton has developed an industry-first solution that transforms emergency power systems used in data centers, and other commercial and industrial applications, to serve as a distributed energy resource.
This means data centers can use their emergency power system as a value-generating asset that can push or pull power from the power grid, said John Vernacchia, segment manager for renewable energy solutions at Eaton.
Eaton’s first project of this kind was done in collaboration with the Microsoft Innovation Center in Boydton, Virginia, using the Eaton EnergyAware UPS technology.
According to Vernacchia, the capability that this project demonstrates is important and relevant to the microgrid space because the ability to optimize and intelligently control distributed energy resources is at the heart of microgrid technology.
“Most, if not all, critical power facilities — like hospitals, data centers and manufacturers — have already invested in emergency power systems. This new capability gives these facilities the ability to perform microgrid system functions, including demand charge management, time of use optimization, demand response and frequency regulation,” Vernacchia said.
It also can help facilities reduce electric bills and enable them to use more renewable energy resources, while also helping to support a more resilient electric grid, he added.
Data centers’ growing power demands are changing the requirements of the grid, Vernacchia said, noting that on a global scale, data centers use about 400 terawatts of power, or roughly 3 percent of all the electricity generated on the planet. Now, the battery systems used in data center emergency power systems can help stabilize the grid to balance the increasing use of solar and wind power, he added.
Based in Fremont, California, the city that is also home to Tesla’s automobile manufacturing plant, Gridscape Solutions is focused on solar-powered-plus-storage microgrids and electric vehicle (EV) charging systems.
“EVs will become a significant driver of the microgrid industry two to four years out, and they will need a place to charge,” said Vipul Gore, president and CEO of Gridscape.
In many ways, it is convenient that microgrids and EVs are gaining momentum at a time when there is an urgent need for new investment in the U.S. power grid. There is a unique opportunity to introduce cleaner generation, while adding capacity and decentralizing the grid. In the face of the more extreme weather brought on by climate change, decentralizing the grid is increasingly seen as vital for resiliency.
“Battery prices and EV prices are both going down. [In the coming years] it will be important for automakers and fleet owners to leverage EV as a source of power during an emergency,” Gore said.
The ability to discharge energy, as well as charge, would enable EV fleet owners to use — and in some instances monetize — their power.
In the coming year, Gridscape plans to continue focusing on its microgrid-based EV charging stations and related services. It is also exploring ways to service hotels as they look to develop EV charging solutions for guests. “[Hotels] can put an EV charging station in front, so EVs can charge at night, and they can make money,” Gore said.
It should come as no surprise that the French oil and gas giant Total and its battery energy storage subsidiary, Saft, are expanding in the microgrid space.
Last spring, Saft acquired Go Electric, an Indiana-based startup specializing in turnkey renewable microgrid solutions. Whereas Go Electric has focused on developing microgrid solutions for commercial and industrial customers, communities and military bases, Saft’s business has centered on storage for solar-diesel or wind-diesel hybrid microgrids for remote communities and mining companies.
To date, most of Saft’s microgrid projects have been for customers eager to save on fuel and lower their emissions, said Jim McDowall, senior technical advisor at Saft.
Saft and Go Electric are still functioning as separate groups.
Most large oil and gas companies have been investing in and developing renewable projects that involve storage, but Total is the only major energy giant that owns a battery manufacturer.
Siemens plans to have its first microgrid cluster out this summer. In a microgrid cluster, multiple microgrids operating in a defined area are connected and controlled via a microgrid master controller that can optimize resources.
On arrival, it also will be the first microgrid cluster in the United States and the first commercial-sized microgrid project that will have bidirectional power flow, said Clark Wiedetz, director of microgrids and renewable integration for Siemens Smart Infrastructure USA.
The bidirectional power flow feature will allow Commonwealth Edison (ComEd) and the Illinois Institute of Technology (IIT) to buy and sell power to each other.
“If you think of the potential applications for this, it will be applicable in areas hit hard by climate change. And this is not a demonstration project — the Bronzeville microgrid will have 7 megawatts of generation assets, and IIT already has 10 MW. This is a good size to provide resiliency and reliability to communities,” Wiedetz said.
The cluster would not really benefit any singular commercial or industrial client. However, when an area is hit by a storm, it isn’t just one company that is affected — it’s the whole neighborhood.
“You not only want your locations to keep running, but you want the people who work there to be safe and to have a place to go. It’s all about society. The concept of a community microgrid or microgrid cluster now comes into play for a C&I [customer] that is trying to bring resiliency to its employees,” Wiedetz said.
Editor’s note: This is part one of a two-part series about microgrids. The second part, on microgrid companies poised to make their mark, will publish Dec. 31.
Increasingly, U.S. companies are concluding that they need the type of business continuity, cost predictability and sustainability goal-aligned energy solutions that microgrid-plus-storage installations offer.
Heading into 2020, the energy services provider Veolia is managing a pipeline of microgrid projects valued at more than $1 billion. “Our pipeline is predominantly commercial and industrial opportunities, with a small component of federal work,” said Jack Griffin, vice president at Veolia North America.
In the year ahead, Veolia expects to take on more commercial and industrial (C&I) projects, such as the 14-megawatt combined heat and power microgrid that it developed at New York’s Hudson Yards, he said.
Navigant Research, a Guidehouse company, in 2018 predicted that the global market for microgrids would reach almost $31 billion by 2027, with the most rapid growth coming from C&I installations.
Because the pool of invested capital in the microgrid-plus-storage space is so varied, it is unlikely that any single solution will emerge as a clear victor in the near future. In the long run, however, the expectation is that the most sustainable microgrid technologies will gain the upper hand, said Jon Yoder, managing director and head of Goldman Sachs Asset Management’s Renewable Power Group in New York.
“The two largest changes that can accelerate microgrid deployments are availability of financing and streamlined regulatory approval with the utilities,” said Angelo Campus, founder and CEO of BoxPower, a company that makes turnkey solar power and battery units that can fit into a shipping container.
Boutique lenders, such as Constant Energy Capital, are already financing residential and commercial microgrid systems, and the expectation is the development of solar-lease type financing options in the microgrid space will have a big impact on deployment in the coming years.
Veolia’s Hudson Yards project lets companies contract how they want to ride through an outage, and it lets companies sell power back to the grid. “The Hudson Yards model values the resiliency component of [a microgrid’s] islanding capability. This isn’t an energy efficiency offer but a reliability and resiliency one,” Griffin said.
This model also makes sense going forward because ride-through capability is important to some entities and less important for others, he said.
A microgrid is a local energy grid that can disconnect from the traditional power grid and operate autonomously. A microgrid generally operates while connected to the grid, but it also can create an island of power and operate on its own in times of crisis or during power outages. Microgrids can be powered by distributed generators, batteries and/or renewable resources such as solar panels. Depending on how it’s fueled and how its requirements are managed, a microgrid might run indefinitely. Currently, in the United States, about 75 percent of new microgrids have battery storage, according to Navigant Research.
The persuasive power of California wildfires
For many companies, the California utilities’ recent preemptive public safety power shutoff (PSPS) events — aimed at preventing wildfires from being started by electrical equipment during the state’s dry wind season — drove home the message that real money is on the line. “They know how much outages cost them due to the costs attached to the lost productivity and sales when the grid is down,” said Peter Asmus, a research director at Navigant.
It was a wake-up call that the power could be out for days. “It also reminded people that there could be any number of reasons for outages beyond the control of the utility, including earthquakes or acts of malice, like physical or cyberattacks on the grid. A modest effort on preparedness will go a long way if and when a prolonged outage happens,” added Alexandra “Sascha” von Meier, an adjunct professor of electrical engineering and computer science at the University of California, Berkeley, and a director in the California Institute for Energy and Environment’s electric grid program.
Since the PSPS events, queries about microgrids from C&I accounts have surged. “So far, we’ve seen a 30 to 50 percent increase in monthly revenue since the [PSPS] outages … And we expect to continue to see an increase over the coming months as next year’s PSPS season gets closer,” BoxPower’s Campus said.
A new risk paradigm
As California’s recent wildfire season showed, companies are already dealing with the consequences of climate change. Industrial companies, which often rely heavily on energy use, heavy equipment and manual labor, are particularly vulnerable to power disruptions.
“It’s essential for companies to build resilience to minimize their financial losses as climate change impacts gets worse,” said Emilie Mazzacurati, founder and CEO of Four Twenty Seven, the Berkeley, California-based research firm that prices climate risk. Credit ratings agency Moody’s bought a controlling stake in Four Twenty Seven in July.
Preparing for climate change goes beyond traditional risk management, because the past is no longer an accurate predictor of the future. “Companies cannot base future preparedness measures on the frequency and severity of past events,” Mazzacurati said.
In addition to understanding their forward-looking risk exposure to climate hazards at key facilities, companies need to be prepared for events that happen in quick succession as well as overlapping events, she said.
According to Four Twenty Seven’s data, about 47 percent of industrial companies with U.S. headquarters have a high-risk exposure to heat stress and about 10 percent have medium risk or higher for hurricanes and typhoons.
“Based on our experience, many companies are still looking at climate change from a traditional risk management perspective,” Mazzacurati said.
While there continues to be a need for that, there is also a need for this approach to incorporate a systematic, forward-looking climate risk assessment and more resilience planning, she said. Four Twenty Seven does not factor into its climate risk assessments whether a company takes resilience measures such as deploying microgrids.
When it comes to deploying microgrids, the bottlenecks are often the utility interconnection and the building permits. Also, the technologies wrapped into microgrids are advancing faster than the regulation, Asmus said.
“We need to be able to connect microgrids more quickly, and the utilities and planning departments need to provide permits quicker,” said Vipul Gore, president and CEO of Gridscape Solutions.
The time that it takes to connect to the grid is already on the way down. In 2017, it might have taken 10 months to connect to the grid, and in 2019, it was about six to eight months, he said. Getting permits currently takes about two to three months. Gore believes that both could compress to about two to three weeks.
The United States has the least reliable power grid of any industrialized nation, according to industry experts, and it is continuously facing extreme weather events such as wildfires and hurricanes. It also uses technology from the 1950s in many parts of the county, said Asmus, who focuses on emerging energy distribution networks models for Navigant.
Ultimately, modernization of the U.S. power grid will require planning, customer focus and enabling technology. “Microgrids are just one tool,” said Jared Leader, manager of industry strategy at the Smart Electric Power Alliance, a non-profit that is working to facilitate the electric power industry’s transition to a carbon-free energy system by 2050. Microgrids, distributed energy resource management systems, virtual power plants and non-wire alternatives are all enabling technologies will facilitate grid modernization.
A decade ago, many utilities generally viewed microgrids as a threat. Now, progressive ones, such as Duke Energy, are experimenting with them as a demand response energy resource and as a resource that is capable of providing other services to the larger grid.
States of change
When it comes to commercial and industrial settings, the main reasons to deploy a microgrid are energy security, resiliency and energy cost savings, said Takehiro Kawahara, senior associate at Bloomberg NEF, adding that the environmental benefits, although important, are often secondary.
Because technologies are still emerging and the need to act is heightened by climate change-related risks, some C&I companies are entering into energy-as-a-service arrangements that are structured as leases and in which the management of the microgrid is outsourced to a third-party service provider. Others are turning to 100 percent renewable microgrid solutions or renewable microgrids that rely on natural gas as a backup source of power. Natural gas has its downsides, but it is a step in the right direction because it is a step away from diesel, according to industry officials.
The major advantage of using natural gas as a backup source of power is that it can cover long-duration outages with a much smaller footprint and at a lower price than diesel, said Allan Schurr, chief commercial officer at Enchanted Rock, a provider of long duration natural gas backup power systems. When organizations use renewable microgrids that rely on natural gas as a backup source of power, emissions only occur during grid outages.
Natural gas offers a 20 percent improvement on greenhouse gas emissions (GHG) emissions during outages when compared to diesel, and this can help companies achieve their sustainability goals and comply with tighter state rules and regulations around emissions, Schurr said.
Even though the United States is withdrawing from the 2015 Paris Agreement, 25 governors have pledged to uphold the commitments laid out in the global pact.
An examination of the mixed electrical energy storage future in the United States would not be complete without mentioning steel flywheel energy storage technology. Steel flywheel technology does not rely on rare metals mined outside the United States, and it is fully recyclable, according to industry insiders.
Over 99 percent of the product is made of steel, which lasts for 20 years and can be recycled to produce a new flywheel, said Ed Chiao, CEO and co-founder of Amber Kinetics. His firm’s flywheels store electrical energy in a large spinning steel rotor. Essentially, the faster the rotor spins, the more energy it stores. A motor-generator is used to charge (accelerate) and discharge (decelerate) the steel rotor. Flywheels can be powered by any type of generation: solar; wind; diesel; and so on.
“Our solution has an installed cost that is comparable with lithium batteries,” Chiao said. “Over the life of the asset, the economics of flywheels win because our technology can be cycled 10,000 plus times with zero degradation and zero replacement. Not only is the technology more sustainable and better for the environment, it is also better for customers’ bottom line.”
According to Chiao, steel flywheel technology is a natural fit for microgrids in remote locations because it can operate with low maintenance and it can withstand extreme environmental conditions.
“While our solution can absolutely be installed in dense and urban areas, in cities the cost of real estate becomes a real factor, and our economics are better where there is more space available for solar plus storage,” he said.