Electrification on the Visible Horizon – New Business Models
In 2019, there was good news on the decarbonization front: a reduction of greenhouse gas emissions from the US power sector. Still, there is a long way to go to meet the UN’s Intergovernmental Panel on Climate Change goals. “We have lowered the river, but haven’t raised the bridge,” said Peter Kelly-Detwiler of NorthBridge Energy Partners at NECEC’s Emerging Trends Series: New Business Models for Electrification. With renewables up and energy storage growing, there is an opportunity to use clean energy to electrify other high emissions sectors of the economy. Despite current barriers and challenges, including the pandemic, experts are optimistic.
The road to decarbonization is paved with transportation and heating electrification
According to Peter Fox-Penner, author of the just-published Power after Carbon: Building a Clean, Resilient Grid, “The emerging consensus is that the path to decarbonization in the developed world is to accelerate energy efficiency and electrify most, not all, transportation, along with building heat and some industrial processes.” Forecasts on deep decarbonization indicate that US electric supply will have to grow by 60% to 115% to meet decarbonization goals by 2050.
Fox-Penner kicked off the event with keynote remarks. Afterwards, an expert panel moderated by Kelly-Detwiler and featuring Robyn Beavers of Blueprint Power, Patty DiOrio of National Grid, Judith Judson of Ameresco, and Colin Murchie of EVgo shared their insights.
There is a pause with COVID-19, but the outlook is hopeful
COVID-19 has slowed the economy and, consequently, the move towards decarbonization. Evidence is becoming clearer that the pandemic is hurting renewables in the short term with supply chain disruptions, contracts facing force majeure, and city and state revenue losses.
Still, panelists agreed that there is strong momentum to tackle climate change. Five years ago, utilities started talking about new business models related to distributed energy. Then, in January 2020, heavy weight investor Black Rock announced it would exit investments that “present a high sustainability-related risk.” Doubt is forming about the long- term viability of oil and gas exploration. Kelly-Detweiler observed that “externalities are beginning to be added to the spreadsheet.”
Electrification is emerging as one pathway to decarbonization. National Grid recently completed a study on whether the Northeast could get to deep decarbonization. According to National Grid’s DiOrio, “We did the math and found that we could get to the midpoint of 40% of carbon reduction with existing technologies. Along with energy efficiency, electrification does play a key role in the work we did.”
Legacy companies and startups are navigating the electrification markets
Despite uncertainty, companies committed to making a difference on climate change are building businesses involving electrification. With a 20-year history and roots in energy efficiency, Ameresco’s business has been built on the Energy Services Company model of installing and operating customer infrastructure for guaranteed savings. Ameresco is using that business model to serve customers who want carbon reduction plus savings. According to Judson, that is where Ameresco’s expertise in developing and operating infrastructure comes in. Projects are designed to bring together the right combination of energy efficiency, renewables, and storage. A big piece of project development is financing, and that is also where Ameresco’s track record and access to financing mechanisms is beneficial.
Ameresco is also seeing a growing interest in microgrids for resiliency on the part of campuses, municipalities, utilities (operating microgrids at a substation), data centers, and real estate developers. In this market, new business models for owning and operating microgrids are evolving. For example, companies could own and/or operate microgrid assets for a single building or group of buildings, earning revenue through stacking benefits.
According to Murchie, a critical task for EVgo is to figure out where to build out charging infrastructure. The company created a heat map to display patterns of EV adoption and charging behavior, taking into consideration how behavior is influenced by local rate design. Design is happening in the context of the rapid development of charging technology - faster, bigger (350KW) and more expensive equipment.
Ultimately, EVgo wants to be known as the EV charging provider that builds stations in locations where customers want them. “A customer needs to be able to get to a fast charger that is not occupied inside of ten minutes and that may not be in a high usage location. We start from the customer experience and then factor in interconnection costs,” stated Murchie.
Blueprint Power aims to help real estate owners and operators manage monthly demand charge or capacity exposure. The vision is to help buildings generate additional revenue by becoming flexible resources for the grid. According to Beaver, “Well-coordinated distributed generation in buildings can make money like a centralized power plant can make money. That is the market revenue generated by BluePrint Power.”
What is BluePrint Power’s market? “We are growing this business city by city. The idea is to build local geo-clustered networks of buildings with complementary load profiles,” said Beavers. Places like New York, which has high density and large portfolio owners, make it easier to go to market. The state’s market rules are also attractive. Blueprint is a NYISO market participant. Regulations across states vary widely, so moving into a new market can be a challenge. This meant that Blueprint had to design a platform that would be adaptable to multiple markets.
Data is the fuel of electrification
Data access is important to companies seeking to operate electrification-related businesses. For example, it makes sense for developers to know where interconnected distributed energy resources, including EVs, can provide the most value to the grid. “Right now, we have about 1,100 MW of distributed generation approved to get connected into the system, equivalent to one large nuclear power plant, spread over a lot of places,” said DiOrio. “It has been a learning process. We are working openly across the footprint with regulators. It is important to get it done simply and correctly.”
With the addition of distributed energy resources, storage, and EVs, there will be millions of time and location dependent points on the grid. Fox-Penner believes that connected vehicles – those connected in real time to traffic systems - could generate exabytes of data.
“The existing grid will need to become a fast-moving data platform,” according to Beavers, a veteran of Google. “The big question around data is who owns what data and what are the rules of engagement, in a world where data is being exchanged, used and monetized?” Building owners claim ownership of data such as sub-metering data and load curves; utilities have data associated with a building location, smart inverters setpoints, etc. Panelists agreed that continued investment in cybersecurity protection is needed.
It is not just about the technology – policy and regulation
A lot needs to be done in policy and regulation to enable viable businesses. For example, there are a lot of approaches that can be taken to encourage clean EV adoption: tax breaks for EV purchases, government mandates, rates that incentivize EV charging during off-peak hours, and tradable zero emission credits for the installation of charging stations in apartment buildings., among others.
National Grid recently installed a large battery storage system (BESS) on Nantucket, deferring an investment in a new cable to deliver generation to the island as a “non-wires” alternative. In this case the numbers worked out, but according to DiOrio, often a single use case for BESS doesn’t pencil out and need value stacking to make it work.” Extra-procedural efforts, like NY’s Reforming Energy Vision, can help to shape policies that assign value to services delivered by DERs and storage.
“Make-Ready” primes the pump for EVs
Electrification of vehicles is a complex task, requiring investment in grid infrastructure to handle new demand from EVs and charging equipment. Massachusetts has done well to pursue Make-Ready programs. Under Make-Ready, National Grid and Eversource cover the costs of charging infrastructure and provide discounts for behind-the-meter charging equipment for commercial buildings and multi-family housing.
Make-Ready programs are good for the utility, the community and the EV charging providers. DiOrio reported that National Grid was able to subscribe their program in about half the time that was expected with a lot of funds are going towards social justice communities, low-moderate income customers, municipal fleet managers and transit buses.
“Make-Ready has made it easier to delineate responsibilities and allocate costs,” said Murchie. “There is still a bit of work to be done in getting the utility to adjust to a new conversation about interconnection. When charging companies are thinking about installing chargers, it is in a general area where customers want public charging. Utilities are used to seeing an application for a service connection at a specific building.”
Lessons from the pandemic will help the clean energy transition
Will we make our goals by 2050? “There is a policy gap and an innovation gap. No one knows the full spectrum to get to 2050,” said DiOrio. All agreed that continued investment in research and development is needed.
One of the unexpected consequences of COVID-19 is clear skies. The pandemic has revealed the importance of the social fabric and innovation. Kelly-Detweiler concludes, “We can use this experience to make the clean energy transition as we recover from the pandemic, in a way that creates jobs and strengthens the economy.”