THE DIGITAL PATH FROM EFFICIENCY TO THE ENERGY CLOUD

THE DIGITAL PATH FROM EFFICIENCY TO THE ENERGY CLOUD: THREE I′S FOR THREE D′S

Synopsis:

EE + DERs + BMS= GEB

GEBs + VPP = Energy Cloud

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1.- Energy Efficiency

According to EU, Energy efficiency is "an energy source in its own right". By 2030 more energy will be saved than the amount of oil-based energy, thus energy efficiency is expected to actually become the “first fuel”.

Three years ago when I founded Greenward Partners, we still needed to exert ourselves, explaining what efficiency was about, the differences between active and passive measures, deep retrofits, paybacks, dynamic baselines, EVO, Pay-for-Performance … nowadays, the concept seems to be mainstream and even managed to have the “Energy Efficiency First” principle crystalized into our Spanish legal corpus.

But only a minority of owners, tenants and investors, still understand the whole value stack efficiency offers across the value chain.

Historically, quantification of efficiency benefits largely focused on the economic value of the energy savings, but far less attention has been paid to other value streams as demand flexibility services, increased asset valuation, system avoided costs, not to mention its positive impacts on health, labor and economic activity.

Energy efficiency value goes far beyond its potential to save money on the energy bill, it is a cornerstone behind-the-meter lead actor in the coming digitalized, decarbonized and distributed energy system: the Energy Cloud.

The digitalization path starts (should start) even before actual efficiency is harnessed. Energy Services Companies (“ESCOs”) and nowadays, specialized new market entrants, by integrating intelligence through algorithms and big data analytics with very little information, can perform extremely accurate diagnosis of efficiency potential at the building and portfolio basis, calculate the Net Income embedded ready to be activated and delineate dynamic normalized baselines as a basis for a robust output?measurement and verification system which opens the door to a metered/pay-for performance servitization far more reliable and bankable than former “deemed savings” financing structures.

Further on the digitalization path, modern ESCOs capitalizing on the new potential of smart meters, IoT and interoperative devices are implementing a new service beyond the Energy Performance Contract (EPC) called Active Building Performance, bundling typical efficiency returns with new flexibility services income streams.

For all those not familiar with the concept, Flexibility is the grid’s ability to manage variability and volatility to balance supply and demand. There are three main ways to source flexibility: implicit flexibility (tariff), network flexibility (smart grids) and flexibility services (storage, demand response, generation).

Demand response encompasses various customer actions taken to reduce or shift electric load (peak shaving) in response to signals or requests from a utility or system operator. This typically is done to provide load relief at a time of high system demand and high energy prices.

The Active building EPC (AEPC) Concept is an enhanced modular and performance-based delivery, using the financing mechanism for the efficiency renovation and optimization of existing and new buildings, tapping into all passive and active energy and cost saving measures, while leveraging a comprehensive set of technical, digital, operational, usage, behavioral and dynamic energy and CO2 pricing parameters. The AEPC concept is an enhancement of the basic EPC concept, through a strong focus on the electrification (including mobility) and the addition of active control measures availed through a smart building management, control and interoperative system.

It is a new business model for building renovation projects that uses an enhanced Energy Performance Contract (EPC), to allow ESCOs and aggregators to work together. By combining revenues from both energy efficiency and demand response, clients can maximize revenues from their energy assets which leads to shorter payback periods and an improved return on investment.

2.- Distributed Energy Resources

One of the new paradigms for energy is the idea of distributed energy resources (“DERs”). Distributed resources are smaller, incremental units of energy that can be provided through a variety of supply-side and demand-side technologies to create a flexible resource portfolio. These incremental amounts of energy might be controlled by any of a number of participants in the increasingly competitive energy marketplace. The beauty of distributed resources is their adaptability and efficiency in meeting changing needs. Another key advantage is that the use of distributed resources helps keep supply and demand in closer proximity, with less risk and without the adverse economic and environmental impacts that accompany large-scale projects and excess capacity.

3.- Buildings Management Systems

?The cornerstone to advance to the next level of digitalization is what is known as Buildings Management Systems (BMS).

?BMS are more than ever the digital hub of the changing building management reality, it is the ultimate Building automation integrator.

?Martin Feder, BMS partner and certification badge of?EcoXpert puts it this way: “The BMS has become the integration center of connectivity to other systems, including less obvious ones. It’s the integration center of connectivity to power, lighting, energy, lifts, and far more”.

?Integrated and intelligent building management, leveraging new technologies, protocols and intelligent solutions is the name of the game in which the building management system is the center of the building’s nervous system and brain in which the IoT, data analytics, cloud and ?AI and cognitive systems will play an increasing role as control devices in rooms and spaces

?The keywords here are obviously data and analytics in order to gain an end-to-end view and an increasing automation, autonomous decision making and gathering of insights and intelligence with the BMS as the hub in a far more holistic approach and IoT as a key driver.

?So, while there is a decentralization as is typical in IoT with intelligence and analytics at the same time there is a centralization within the building management space whereby the BMS is the integration center of connectivity with it all and with several areas that are related to buildings but don’t fall under the traditional scope of building management as it used to be.

?BMS are evolving into Deep Connected Platforms, what I term the “foundational pillars” of a smart and connected building: the ability to perform over the air software and configuration updates to every installation, collect high-quality, event-driven data from the building occupational performance, Interoperate with assets and transmit user-facing diagnostic commands that a servicer or facility manager could use to improve efficiency and track down or repair a technical issue, thus reducing energy demand, decreasing O&M recurrent costs and activating new grid related income streams.

?4.- Grid Interactive and Efficient Building

Buildings are on their way to becoming more flexible – and even dispatchable – demand-side resources that mimic “peaker” power plants. But they can offer much more than that. Buildings are becoming virtual energy storage nodes by providing flexible load management services for utilities to employ in order to offset their peak power demands. We are moving without possible turn back to a new paradigm “Grid-Interactive Efficient Buildings” (GEB′s).

GEBs are buildings that leverage technologies and strategies to provide continuous demand management and load flexibility. GEBs include a holistic and optimized blend of energy efficiency, energy storage, distributed energy generation, and load-flexible technologies/controls. What makes them unique are their ability to optimize across these attributes (today such measures are individually optimized), provide load flexibility, and be continually optimized over time.

GEBs result in a less peaky, more flexible energy load profile that reduces operational costs through demand charge savings. Buildings drive up to 80% of the peak demand on the grid, and thus are key to balancing the grid. GEBs reduce the number of power plants, increase grid performance, and better utilize the renewables (lower curtailment) that are on the grid. The traditionally centralized, one-way electrical grid does not provide the optimal environment for managing many of the new and emerging energy challenges and opportunities of the 21st century. A smart, two-way grid interacting with smart, responsive buildings can fortify the system to deal with economic, security, supply, and demand disruptions while leveraging new opportunities for efficiency, cost savings, resilience, and distributed energy generation.

Grid-interactive energy-efficient buildings are the next frontier for reducing energy consumption and demand, operating costs, and carbon emissions in the built environment, they provide a great deal of untapped value to building owners, grid stakeholders, and society at large.

Building owners can achieve grid-interactive buildings in several ways. Energy efficiency is always the lowest-cost, highest-impact carbon-reduction measure. Beyond efficiency, here are some additional measures to consider.

1. Battery storage, which allows a building to supply its own electricity when demand is highest, avoiding costly demand charges.
2. Thermal energy storage, for both heating and cooling
3. Smart electric vehicle charging
4. Smart controls and appliances, including grid-interactive electric water heaters; smart, programmable thermostats; smart controls on clothes dryers; and smart controls paired with high-thermal mass buildings, all of the above managed through a well-designed BMS.

5.- Distributed Resources management and Virtual Power Plants Platforms

We are witnessing the transition from and old energy system paradigm where customers have been considered buyers of electricity as a commodity against a certain tariff to a new one which is becoming bidirectional, and morphing?from a vertically bundled supply chain into value networks “with multiple entry and exit points” availing ?new business models, as did the telecom industry following liberalization.

A service fee-based pricing method may best reflect the new interaction dynamics between generators, distributors, suppliers and end-users, as opposed to traditional marginal cost, transaction-based pricing.

Rather than energy (watts), data (bits) will be the most valuable asset when and if activated through deep tech energy services platforms (SaaS model) capable of managing vast amount of small and dispersed DERs and more easily GEBs integrating them to provide new grid services and empower consumers into real prosumers.

ICT introduced at the micro-scale, e.g. smart appliances, smart meters and EV charging, opens business model opportunities in the retail market for a service provider positioning themselves as a “platform” intermediary. The intermediation process can take place in the retail market which, despite low profit margins, offers value capture potential due to its large market size and large transaction volumes.

The value of domestic consumers as grid resources is at the heart of the transition to a platform market for electricity. The complexity of the “consumer” side, as uptake devices, generators, and flexible resources, with differentiated elasticities of demand, is what makes an aggregator or platform mediator coming with smart optimization capabilities viable and even necessary.

Households that are more sensitive to price changes and are willing to give up more control to the platform to shift, interrupt, or reduce their energy consumption, offer higher potential for volatility reduction and efficiency gains.

The transition to a smarter system with real-time pricing, ICT, smart meters and appliances leads to the possibility (and value) of an intermediation service provider (aggregator and VPP) to match consumers with specific energy services based on the newly available energy data.

Outsourcing the energy management service is a way of ensuring that new entrants and complementary providers will capture value in this market.

The electricity retail market is emerging with the elements of a platform market, namely a need and high added value for one or more “match-making” intermediaries between suppliers who cannot predict their generation and consumers who start participating in active energy demand management.

Virtual Power Plants allows consumers to bundle together DERs, adding a digital and smart management layer, which enables households, energy communities, retailers, and large multi-site GEBs owners to improve the efficiency and interaction with energy markets.

It is the last step in the digitalization path towards the Energy Cloud paradigm.

As a token and proof of how this is path is moving forward and is irreversible, last week USA historic agreement on the so called “Inflation Reduction Act“ includes a 4,3 Billion national "performance-based, whole-building" program that analyzes and values metered energy consumption changes based on energy savings and the grid value of their impact depending on timing, location, and greenhouse gas emissions. This "measured-performance program" enables a comprehensive technology-agnostic strategy that integrates various solutions into?Virtual Power Plants?that can meet grid and decarbonization goals.

6.- Three I′s for three D′s

Should all of the above be difficult to assimilate or remember, here is a simple formula of my making to easily grasp the essence of this digital path:

Intelligence, Interoperability, Interconnection output FOR A Distributed, Decentralized and Decarbonized outcome