It isn‚Äôt easy to transform a century‚Äôs worth of electricity infrastructure from the ground up, particularly in the face of climate change-induced firestorms.¬†
In looking back at 2019‚Äôs most important developments on the grid edge¬†‚ÄĒ GTM’s term for the interface of the traditional utility enterprise with rooftop solar panels, behind-the-meter batteries, plug-in electric vehicles, and other distributed energy resources (DERs) ‚ÄĒ it‚Äôs hard to overstate the impact of California‚Äôs wildfires and power outages on the U.S. market.
Over the course of 2019, we‚Äôve seen California, the country‚Äôs leader in most DERs, wracked by a climate change-induced emergency that‚Äôs bankrupted its largest utility, Pacific Gas & Electric, and forced millions to go without power during fire-prevention blackouts. The crisis has left the¬†future of PG&E¬†as an investor-owned utility in doubt, and forced the state to confront the costs of transforming its energy infrastructure to decarbonize its economy¬†and¬†prevent future disasters.¬†
At the same time, California‚Äôs crisis has emerged as a major opportunity for DERs. State regulators have responded not only with orders for multi-billion dollar grid-hardening investments, but with¬†policies to¬†promote battery-backed solar¬†systems for those most at risk from fires and blackouts.
California‚Äôs community choice aggregators, a growing force in the state, have also taken¬†distributed solar-storage projects¬†to protect their most vulnerable customers.¬†
As California goes, so goes the national trends, and that seems especially true of energy-related issues. Wood Mackenzie projects that California‚Äôs crisis will drive a significant increase in the ‚Äúattach rates‚ÄĚ of batteries to California home solar systems next year, boosting prospects for key vendors¬†such as Sunrun,¬†SunPower,¬†Enphase, and even possibly Tesla.¬†
There are many moving parts when it comes to the transformation of the grid edge. But here are three of particular importance.
Solar-plus-storage as backup power is proving its worth across the country, including places where you might not expect it. Vermont utility Green Mountain Power‚Äôs fleet of Tesla Powerwall batteries in homes¬†kept more¬†than 1,000 customers¬†powered through blackouts¬†this fall.
Blackouts remain rare in most places, which means that in order to pay their way over time, backup batteries must be able to contribute even when the grid is running ‚ÄĒ shaving peak loads, cutting capacity charges, arbitraging on-peak versus off-peak rates, or other tasks.
Such functions can become even more powerful when DERs are allowed to act in concert. But not all regions and utilities offer DERs the opportunity to aggregate.¬†
That is changing. We‚Äôve seen early examples of the possibilities for aggregated DERs in energy markets in California, where¬†solar-battery systems¬†and¬†smart thermostats¬†are being enlisted to store and shift energy. Hawaii unveiled its first large-scale,¬†third-party DER aggregation¬†this year, starting with Sunrun solar-battery systems.
Other regions are starting to see opportunities for DERs to participate at the wholesale market level. Grid operator ISO New England made changes to its market rules last year that opened opportunities in 2019 for battery, solar and demand-side¬†DER aggregators¬†in Massachusetts.¬†
There’s still a long road ahead, however, and other key DER-integration initiatives saw less success in 2019.
For example, regulatory efforts in California, New York, Hawaii, and Minnesota to get utilities to contract for DERs as non-wires alternatives (NWAs) to grid investments are struggling to yield workable models for matching projects to third-party providers. Such stumbles, while perhaps inevitable in such complicated regulatory efforts, underscore the slow pace of change at many American utilities.
That‚Äôs not to say that utilities aren‚Äôt keenly aware that DERs will define their future.¬†In Arizona, regulators have given¬†utilities permission to¬†impose demand charges¬†and fixed fees on solar customers, while also funding some of the country‚Äôs most¬†advanced DER integration¬†projects.
The European and U.S. energy companies and oil majors that have driven a wave of consolidation over the past few years continued to snatch up DER¬†startups and commercial-scale competitors in 2019.
Royal Dutch Shell, one of the more prolific acquirers, racked up three different DER acquisitions in the first three months of the year¬†‚ÄĒ U.S.-based EV charging network provider¬†Greenlots¬†in January, German battery-solar contender¬†sonnen¬†in February, and U.K-based demand response provider¬†Limejump¬†in March.¬†
Shell also took stakes in retail energy markets, rebranding U.K. energy supplier First Energy as¬†Shell Energy Retail¬†in March, and acquiring¬†renewables power retailer Hudson Energy¬†in October. This month, it closed its purchase of¬†Australian retailer ERM Power, giving it access to one of the world‚Äôs fastest-growing solar-storage markets.¬†
Other European giants made significant acquisitions this year.¬†Engie acquired Genbright, a U.S. solar, storage and demand response startup,¬†and took a¬†majority stake in Tiko, a Swiss DER aggregator seeking to expand from Europe to the U.S. and Australia. Centrica made a similar investment in¬†Greencom Networks¬†and Mixergy, and acquired U.S. energy services company¬†SmartWatt for $37 million.¬†
Beyond covering the bases for likely DER growth, acquisitions like these give startups the financial backing to reach utility scale. That‚Äôs the logic behind this summer‚Äôs creation of Uplight, a private equity-backed merger of¬†Tendril and Simple Energy, two U.S. startups with many utility customers, with three other startups,¬†EEme,¬†EnergySavvy, and¬†FirstFuel Software.¬†
Speaking of Uplight, the company is a participant in another interesting development on the grid edge¬†‚ÄĒ a partnership between¬†Google and AES Corp. announced this fall, meant to tap the search giant‚Äôs computing might to modernize the grid and support new renewables projects.¬†¬†
Tech giants like Google, Amazon, Apple and Facebook have become a major driver of corporate renewable energy procurements in the U.S., with their constant demands for¬†clean data center power.¬†
They‚Äôve also made inroads into other parts of the energy ecosystem that look more like what utilities do. Beyond breaking new¬†renewables portfolio¬†records and promising millions of dollars for clean-powered¬†manufacturing¬†this year, Google took the unusual step of joining two¬†regional transmission organizations, an indication of its clout as a power buyer.¬†
But it‚Äôs behind the meter where Google and Amazon may find the greatest grid edge traction, through their conquest of the voice assistant device (VAD) market. More than 66 million U.S. households have VAD devices, and Wood Mackenzie Power & Renewables¬†predicts¬†that they will become the dominant home energy management interface in years to come.
Amazon and Google, which hold roughly two-thirds and one-quarter of the U.S. VAD market, respectively, both have extensive partnerships and¬†investments¬†in technologies to serve the ‚Äėsmart home,‚Äô including energy management.¬†
Some of Google‚Äôs efforts this year included work with Tendril/Uplight and several U.S. utilities on enabling VADs to convert spoken questions about utility bills into¬†data-informed answers, rather than canned responses, and partnerships to tap Nest thermostats for¬†grid revenues in California.