Distributed Energy Resources, Utilities, Commercial, Sourcing Renewables - June 1, 2018 - By Ganesh Kalyanaraman
LEMs: An Emerging Corporate Energy Management Tool
Have you considered whether your captive power generation may be to the power industry what spare bedrooms are to Airbnb and car-sharing is to Lyft? Distributed energy resources—power generated by businesses and homeowners, usually via renewables—may prove highly disruptive to traditional utilities. That disruption, which is in its early days, may generate income and reduce energy costs for your organization.
One development to watch for is the rise of the local energy marketplace (LEM). A LEM is a localized mini-grid of businesses, institution, and homes generating, storing and selling power.
LEMs are the outcome of a slow but steady revolution in which increasing numbers of commercial power customers and homeowners now generate at least some of their own power via renewable sources such as wind and solar. One example is the Brooklyn Microgrid in New York. Excess power from solar-equipped homes is transferred to the microgrid for consumption by other consumers, with transactions captured via blockchain.
Compensating these energy "prosumers" is a key aspect of a LEM. The optimal LEMs will ensure fair pricing via stock market-like models, where prices are based on supply and demand. This pricing mechanism opens the door to an important way in which LEMs could fit into a corporate energy management strategy: getting paid for excess capacity. Here are other LEM-driven developments to watch for:
- Utility-backed LEMs. While a utility isn’t likely to be threatened by a single solar-equipped home generating 3 kW to 5 kW, 100,000 customers generating a total of 500,000 kW becomes significant. Further, the renewables market brings new competition to the power business. Utilities are attracted to building LEMs to retain relationships with customers that might instead turn to Tesla and others for storage cells and generation and forego the grid altogether. Joining a utility-supported LEM makes sense for large businesses: it would offer the potential revenue from market-based pricing among participants while also providing a failsafe—the utility’s generating capacity—if the microgrid faltered for any reason.
- Data-sharing with utilities. Sensors and analytics will help utilities aggregate home and business power generation into their grids and monitor and analyze power use at granular levels. Powerful artificial intelligence tools can use this detailed, real-time data to generate predictive insights. When considering participating in a utility’s LEM, the corporate energy manager should ask about and evaluate the utility’s analytics ability to generate and share insights about local power use, benchmarks against similar prosumers, forecasts, etc. Such data would be valuable in crafting energy management programs.
- Being green. Many utilities could use power from LEMs to help them meet local regulatory quotas for green power generation. Commercial entities unable to produce their own power and/or lacking capital to invest in solar or wind could similarly purchase renewables-generated power from an LEM to meet their environmental and sustainability goals. Some LEMs may also provide or finance installation of solar panels and batteries. Centrica is using a grant to do this in its LEM trial in Cornwall, England.
LEMs are still largely uncharted territory. Energy storage and “always-on” service reliability within a LEM constitute significant challenges while creating a fair and efficient marketplace is a complex task. Yet the disruption of the energy industry by prosumers and new competition is underway. To remain key players, leading utilities will deliver new service offerings and ideas such as LEMs to corporate energy managers. LEM participation should be a win for corporations, providing an avenue for income from captive power generation, power use forecasts and insights and another source of green power.
Ganesh Kalyanaraman is the Vice President & Global Delivery Head for the Energy & Utilities Practice with experience in managing large portfolios for Energy & Utilities customers. He has a total of over 23 years of experience in IT industry and has delivered various programs across the globe. He joined Cognizant in 1995 and was part of Cognizant’s fast-track program. He has led strategic engagements across the globe for clients from US and Europe geographies.
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