energy innovation

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The utility industry continues to undergo major transformation driven by goals to reduce carbon emissions, decentralization and digitization.   The emerging business model known as ‘Energy-as-a-Service’ (EaaS), is further disrupting the industry.

With EaaS, customers pay for an energy service without make any upfront capital investment or managing its use.  EaaS models usually take the form of a subscription for electrical devices owned by a service company that delivers the desired energy service in exchange for a steady revenue stream.

In the  electricity sector, Energy-as-a-Service provides the customer with energy services, such as lighting, in exchange for a recurring fee. The customer benefits from avoiding direct electricity payments, expensive upgrades for electrical equipment or software, or device management while still benefiting from the use of the device. EaaS includes other business models used in the energy space unrelated to energy efficiency, such as a subscription for solar energy.

The EaaS model arose as a method of delivering energy efficiency improvements. Although consumers can save money by upgrading to more energy efficient technologies, they often fail to do so, resulting in an energy efficiency gap. Even though customers and society can often benefit from reduced energy consumption, electric utilities are financially motivated to expand electricity sales to increase revenues and therefore have little reason to encourage energy efficiency 

Early Energy Service Companies (ESCOs) profited by providing energy efficiency upgrades (typically lighting retrofits) under a performance-based contract. Another ESCO approach is the Energy Service Agreement (ESA): the service company makes energy efficiency upgrades with financing provided through the customer’s energy savings. 

Other ESCOs manage a facility’s energy use more broadly in the form of a Managed Energy Services Agreement (MESA) by managing of the facility’s utility bills in exchange for a series of payments based on prior bills.  Sensors are used to discover areas of inefficiency, make energy-saving changes, and monitor energy use.  Technological advancements in Smart Meters that track electricity usage electronically, collect useful data regarding consumer demand to arrange optimal matches with available electric supplies.  

With solar energy, residential rooftop solar installations can also reduce customers’ electric bills for many years, but the upfront costs are high (on average, more than $12,000 after tax credits for a 6 kW  single-family home system). Such costs, as well as uncertainty about future energy prices and the payback period, can deter customers from making the purchase, even if future energy savings would deliver a positive net present value for the project.

The EaaS model for solar can overcome those barriers while providing two advantages that many homeowners want—electricity cost savings and environmental benefits—without requiring them to purchase or maintain the system. Under a solar lease or Power Purchase Agreement (PPA), a solar services company installs and maintains a solar system on a homeowner’s roof, at no upfront cost, that supplies the household with electricity for the duration of the contract, typically 15 or more years. 

With a PPA, the solar provider retains ownership of the system and charges the customer for the service, through either a monthly lease for the system or a PPA for the power the system produces. These rates typically offer either cost savings or cost certainty for the consumer relative to retail electricity rates. The solar provider receives monthly revenue and also benefits from policy incentives like the federal investment tax credit (ITC) and state renewable energy credits for the system’s generations. Because its revenue depends on system performance, the provider has an incentive to design and install the best possible system for each customer, and 

By removing market barriers to entry like upfront capital costs and maintenance, companies offering solar services, typically referred to as Third-Party Ownership (TPO) firms, have transformed and significantly expanded the market for residential solar. The TPO model has broadened the demand for solar to more demographic groups, in particular younger and less affluent populations in California, the state with the highest number of solar installations in the country. 

Residential solar as a service is expanding the deployment of rooftop solar for homeowners, but it requires a viable roof. An emerging and more widely applicable model is Community Solar, which allows ratepayers to subscribe for solar energy without putting solar panels on their own roofs. A community solar project is typically developed, owned, and operated by a solar company, which then sells subscriptions to customers for a portion of the energy that the system generates. These larger projects are less expensive per kilowatt to develop than individual rooftop solar installations, and thus solar companies benefit from economies of scale. 

Early successes of energy-as-a-service models for energy efficiency were mainly limited to municipal buildings, universities, schools, and hospitals, commonly known as the MUSH market.  Newer ESCO models that provide financing, such as companies offering ESAs or MESAs, have been geared more toward the private sector, particularly commercial and industrial customers.  

The EaaS market is expected to grow substantially.  Navigant Research estimates that the global market for Energy-as-a-Service agreements in the commercial and industrial sectors will reach as much as $222 billion by 2026.

Tremendous opportunities exist for EaaS businesses that activate demand-side management, assist with the integration of renewables, and encourage electrification.  The EaaS model used by ESCOs can help overcome barriers to technology adoption by reducing consumers’ capital expenditure and their responsibility for managing energy devices, thereby leading  to better outcomes for users and society overall.  

The costs to generate and store energy are decreasing, which is changing the nature of the utility grid from a centralized generation model to a distributed system of sources and loads.  Over the last decade, Microgrids have become a compelling means to accessing and managing Distributed Energy Resources (DER) and energy costs, as well as to keep the power on. 

According to GTM Research2, the trends driving microgrid growth include: 

          • New business models for microgrid ownership that involve multiple stakeholders 

          • Technology innovations enabling strategic energy management 

          • Opportunity for microgrids that support commercial and industrial customers

The control architecture is one of the most important elements of a microgrid system—it provides the brains behind the operation.  In most current designs, the microgrid is tied to the upstream grid via a point of interconnection (POI) and is managed by local control of assets, which enables faster, semi-autonomous or autonomous control of microgrid devices to better maintain operations within connected equipment limits. 

Previously, the controller was a customized solution. Today, new control technology exists that is pre-engineered and can be further customized to site-specific requirements. This approach can simplify microgrid projects that use a variety of renewable or distributed energy resources plus storage, making it easier to support forward compatibility as the system evolves. 

The move to a more distributed energy model is being facilitated by an electric system architecture that allows consumers, especially consumers of large amounts of energy, to generate, store and manage energy usage. In effect, power generation is moving closer to the user due to the availability of microgrid system technology that can be leveraged with multiple types of renewable or distributed generation as well as the lower cost of energy storage. 

The drivers for microgrid systems have evolved and the technology is being used by a broader mix of industries and applications. Installing a microgrid is no longer limited to science projects and forward operating military bases. Microgrids can now be easily applied to facilities that already have solar, storage or other on-site generation sources. 

As our electric grid becomes more complex, it is increasingly important that it is smarter, more reliable, allows for bi- and multi-directional transmission, and is responsive to the fluctuating consumption habits of businesses, residents and emerging community needs. This smarter grid will enable better control of energy costs, reductions in energy requirements, more effective support of sustainability initiatives and improved power reliability. 

If microgrid projects continue to meet analyst estimates, we will be relying more on stored and renewable energy. As projects increase, it is important to consider supplier expertise, experience, business stability and success with prior projects. Proven power engineering, substation automation and control experience is essential. Suppliers should also be able to provide rapid, dedicated, local support to help expedite projects, as well as on-the-ground expertise to address unforeseen challenges. 

Every application for a community or business is unique and customized solutions can help optimize, build and maintain an automated, secure and cost-effective renewable energy and storage project.  B-Tech is prepared to assist with selecting, installing, and managing either “end-to-end” microgrid solutions, or with customized designs and specialized technologies to support achieving renewable energy and storage goals in less time and at a lower installed cost.

As a global leader in environmental policy, California has adopted ambitious goals to transition not only to a zero-emission transportation sector but simultaneously to a 100 percent carbon-free electric grid by 2045.  Electric vehicle (EV) charging will help California to meet both its transportation electrification and renewable energy goals. 

Electric vehicles are widely popular in the state and gaining traction fast: Sales were up 63.7 percent year over year, towards a goal of 1.5 million zero-emission vehicles (ZEVs) on the road by 2025, and 5 million by 2030. In total, over 625,000 EVs are on California roads today. With more affordable and longer-range models coming to market, interest in this transportation option will only rise.

The state is also aggressively pursuing electrification of medium and heavy-duty vehicle fleets. The Innovative Clean Transit Regulation passed by the California Air Resources Board (CARB) in 2018 mandates that transit agencies transition to zero-emission buses by 2040. Similarly, CARB’s Advanced Clean Trucks Regulation is designed to accelerate medium and heavy-duty ZEV adoption by requiring manufacturers to sell an increasing percentage of their fleet chassis as electric. With Amazon’s 2019 order for 100,000 electric delivery trucks, public and private companies are taking note of the advantages of transitioning to ZEV fleets.

The time is now to get EV charging right. That means incorporating vehicle-grid integration(VGI) policy and technology into the emerging system of electrified transportation.  All EVs, from light-duty passenger cars to heavy-duty trucks, will need to be plugged into an electrical grid with the ability to handle and respond to increased electricity demand — and be charged with energy that is increasingly being generated by renewable resources.

Managing all this energy on the grid while ensuring that millions of vehicles can be reliably charged will require new, intelligent energy management solutions along with effective policies to help spur investment. California’s 2045 target of 100 percent carbon-free electricity will be largely comprised of wind and solar generation. Renewables, however, are not naturally "dispatchable" and have different energy patterns than centralized fossil fuel-based forms of generation. For example, solar is most abundant in the middle of the day.

This dual decarbonization effort, in a sense, places the transportation and energy industries at an intersection as the two become increasingly intertwined. These electrified transportation and renewable energy goals will not be achieved at the lowest cost unless the use of renewable energy for vehicle charging can be maximized. Up until now, the electric grid was designed to let energy generation follow load, but now load will need to follow generation.

VGI technology allows for charging to occur when it is most beneficial to the grid while still ensuring that customer needs are met. This could be when rates are most attractive or when a high proportion of renewables are available on the grid. VGI also gives utilities and grid operators more options to balance the grid and optimize the use of power available on the grid at any given time.

While VGI solutions are still being explored and slowly introduced, the time is now to enact policies that encourage and incentivize the rollout of these technologies as EV penetration and charging infrastructure are ramping up. Implementing VGI solutions at scale today will have a greater impact in the future and help California reach its ambitious energy goals more efficiently and cost-effectively by using EVs as grid assets.

If, on the other hand, we wait to implement VGI solutions — whether smart charging (V1G) or vehicle-to-grid(V2G) — the cost of implementation likely will be much higher. The effect would be similar to retrofitting a more efficient engine into a car five years into its life, rather than equipping it as such from the factory.

Pending legislation in California (SB 676) is aimed at optimizing the interaction of EVs and the grid in a way that is beneficial to electricity ratepayers. This can be achieved in a variety of ways: (1) adopting smart charging technologies, (2) altering rate structures to effectively use EVs as a distributed "virtual battery" to avoid expensive grid distribution upgrades, and (3) reducing the cost of electricity generation, all of which ultimately lower costs for ratepayers.

In 2019, the California Public Utilities Commission (CPUC) resumed its VGI Working Group with the goal of identifying the regulatory frameworks and improvements in market participation pathways that are needed to unlock the full value of VGI. Pending legislation will require the CPUC to establish strategies by Dec. 31, 2020, that will maximize the use of cost-effective and feasible VGI through 2030.

Implementing VGI solutions at scale now not only would benefit ratepayers, it also would give automakers a clear signal of this technology’s value in a crowded and highly competitive automobile market. As VGI solutions succeed in the marketplace, automakers will be incentivized to build these technologies and service offerings into their products from the start.  Stakeholders across the EV spectrum, from charging network providers to major automotive OEMs, energy industry suppliers and environmental groups have shown support for SB 676

Brian Ballo, Esq., B-Tech’s CEO and an energy regulation attorney, supports the passage of California SB 676. B-Tech looks to partner with VGI companies with smart charging technologies to achieve California’s decarbonization targets.