Revenue growth and profits for U.S. power utilities have always been predicated on increasing demand, regulatory framework and relationships with regulators. Though still highly regulated, that business modus operandi is being turned on its head. Rapid growth in distributed solar, wind and other renewable energy resources and the development of smart grid and demand-response systems are two factors driving these changes. The movement to put a price on carbon emissions – based on the polluter pays principle – is another.
Also driving change are innovative new power industry participants, some of whom are now progressing from bleeding to leading edge, and from pilot stage to commercial scale. Leveraging its innovations in demand reduction/power efficiency software and the latest in battery storage systems, Santa Clara, Calif.-based Green Charge Networks (GCN) believes it has the ways and the means to generate very healthy returns by smoothing out customers’ electricity load profiles and boosting power, as opposed to energy efficiency.
It’s not only GCN’s customers, but the U.S. power grid and society as a whole that stand to benefit. With critical federal and state government support, GCN is out to prove that it can not only lower consumers’ electricity bills, but enhance U.S. power grid utilization, reliability and resiliency as well. That may well prove to be the missing link capable of driving U.S. renewable energy growth and adoption over the top.
From an even bigger-picture perspective, the energy conserved by making full use of integrated power storage systems that reduce peak demand, such as GCN’s GreenStation, would help realize what is widely recognized as the best way to address an increasingly costly, threatening and global-scale problem: climate change.
GreenStation: Peak power-demand reduction with battery storage
Founded in 2009, GCN was formed in the wake of the housing crisis and financial industry debacle with a $12 million Department of Energy (DOE) grant that came courtesy of President Obama’s American Recovery & Reinvestment Act (ARRA). Work on a $93 million DOE Smart Grid Demonstration Program project followed, enabling GCN, in collaboration with New York City and Westchester County utility Con Edison, to develop its flagship products: the GreenStation intelligent demand reduction system and GCN GridSynergy smart grid energy management system for utilities.
The first of its kind in the U.S., a pilot GreenStation system was installed by 7-Eleven in New York in July 2011. Its ability to reduce grid demand, boost power efficiency and deliver savings month after month has driven GCN’s rapid transition from pilot stage to commercial scale, with a roster of customers that includes Avis and Walgreens.
On Feb. 4, GCN announced that it had reached a milestone, having signed 1 megawatt (MW) worth of 10-year Power Efficiency Agreements (PEA) with customers. That number is growing, and fast, to include municipalities and universities, as well as other commercial businesses across California as well as New York, GCN founder and CEO Vic Shao told 3p in an interview.
At GreenStation’s core are its proprietary, patent-pending software algorithms and service-delivery features, which, Shao elaborated, “are akin to stock trading algorithms.” On the energy storage side, GreenStation’s Li-ion batteries – supplied by SAFT – discharge and recharge second-by-second based on instructions from the controller’s real-time analytics and prediction engine, the main goal of which is to optimize power efficiency, flatten the load profile, and hence reduce customers’ electricity bills. As Shao explained,
“Building loads change minute to minute. We employ stochastic decision-making based on imperfect information to charge or discharge the battery pack on a second-by-second basis to even out demand and flatten out the load profile.”
Changing U.S. power market dynamics
Accumulating and analyzing huge amounts of real-time data on energy consumption and other real-world operating conditions from customer sites, GCN has been able to realize drastic improvements on the ability of its system to predict power consumption and respond to changing supply-and-demand conditions.
The stochastic algorithms embedded in GreenStation’s system controller, “essentially an industrial computer,” are now predicting power usage with accuracy in the 80 to 90 percent range and making adjustments to minimize customers’ peak energy use and maximize savings. That significantly enhanced predictive ability, combined with its service delivery capabilities, translates into a higher utilization rates, lower energy bills, shorter payback periods and higher returns on investment (ROIs) for GCN customers, Shao explained.
Though GCN’s products and services would produce significant, long-lasting benefits for society as a whole, their businesses are often constrained, if not derailed, by a regulatory framework that has been built for centralized fossil-fuel energy systems and can be painfully slow to adapt to changing environmental and social, as well as economic, conditions.
On the other hand, GCN is benefiting from state and federal government support for energy efficiency, renewable energy, smart grid and, most recently, battery storage systems. California is on the leading edge of enacting an institutional framework that spurs development of a new energy infrastructure with programs such as the Self-Generation Incentive Program (SGIP), which “pays $2 per watt for an energy storage solution. That’s typically about half the cost, which has really helped state of affairs in California,” Shao noted.
Taking the lead on energy storage, California last October enacted a state-wide mandate that requires investor-owned utilities to expand their energy storage capacity and acquire 1,325 MW of electricity and thermal storage by 2020. New York is expected to enact similar legistlation in the near future, Shao pointed out, a development that will spur a lot in the way of additional demand for systems like GCN’s GreenStation.
Power vs. energy efficiency
GCN is finding that its intelligent demand response-battery storage platform can provide customers with attractive bottom-line and investment returns without tax credits or government mandates by taking advantage of the way electricity usage is priced, however.
As Shao explained, utilities typically charge customers – residential, commercial and others – by the kilowatt-hour (kWh) for the electrical energy they use. Commercial, industrial and other larger-scale customers, including municipalities, educational institutions and the like, are also charged at a rate priced by the kilowatt (kW) for electrical power during periods of peak demand.
Known as demand charges, these rates have been rising 7 to 10 percent annually, accounting for larger and larger portions of larger customers’ electricity bills, as high as 70 percent, Shao related. In contrast, non-peak electrical energy prices, priced in kWh, have been declining. That growing differential is where GCN earns its daily bread.
GCN’s business case is based on reducing electricity demand, more specifically, peak power demand. “It’s really demand reduction – peak kilowatts,” Shao said.
In California, demand charges for peak rates during the summer are around $37/kW, he pointed out.
“New York, it so happens, has the highest demand charges in the U.S., at $43/kW in peak summer.” Hence, the electricity bill savings realized by customers in Con Ed territory in New York can pay back their investment in GCN’s GreenStation in as little as 1.5 to 2.5 years. The story is similar in California.
Ninety percent of the proposals GCN is sending out to prospective customers in California have ROIs, or payback periods, of five years or less. The average is in the 3.5 to four year range. “The returns are absolutely incredible when you factor in all these rebates and tax credits and so forth. Some really super attractive situations have ROIs in the 1.5 to 2.5 year range, about 25 percent of our deal flow,” Shao elaborated.
Image credit: Green Charge Networks