Innovation & Disruption at the Grid's Edge
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Innovation & Disruption at the Grid’s Edge St Brides 19 June 2018 One perspective … … and another Smart meter rollout - actual vs 15 year replacement and new starting in 2010 60.0% 50.0% 40.0% 30.0% 20.0% Smart Smart penetration 10.0% 0.0% Replacement and new Actual (BEIS) Customer Stratification From consumer to nonsumer Fereidoon Sioshansi Menlo Energy Economics San Francisco CA www.menloenergy.com Thank you To Nigel & colleagues for organizing To fellow speakers for contributing To you for attending Not a book marketing event Why Innovation & disruption at the grid’s edge My aim is to share my views on work in progress Hear other perspectives Get your feedback Background Forthcoming book First Consumer => prosumer => prosumager Old news? Next “Aggregators” & “intermediaries” Platforms for trading & exchange Already happening Where might it end? Semi-independent micro-grids of “nonsumers” Why/how such scenario may materialize New electric company: Your home Wall Street Journal 21 Jan 2015 Integrated energy services? Tesla energy: PVs, EVs & storage Source: Tesla unveils residential solar roof and new Powerwall battery, Utility Dive, 28 Oct 2016 Totally off grid … where there is no grid Semi off-grid … where grid is unreliable as in Puerto Rico Disrupters hard at work Facebook: Move fast & break things Source: http://www.yeloha.com/about Disrupters’ business plan Who currently delivers services Inefficiencies? Superior services at lower cost? Where is the weak point? Bundled services @ regulated price Clueless & lethargic incumbents not well-liked No need to get all services from wires company Unbundle energy from delivery Add value & monetize thru scale/aggregation Incorporate intelligence to profitable customers Lower monthly bills Go after the most valuable customers first Distributed solar 700,000 solar homes in CA and counting Prosumer => Prosumager Just add storage Source: The Wall Street Journal 2 May 2015 Distributed storage Tesla’s $5 billion gigafactory near Reno, NV Why stop there? Alternative steps to different end points Start w a ZNE building or collection of buildings Add distributed generation Add sophisticated energy management system Add intelligent storage, not just batteries Offer P2P trading on platforms Integrate thru remote sensing, monitoring & control Aggregate & balance load & generation Add artificial intelligence & machine learning Manage & monetize the entire value chain Zero Net Energy Will apply to new residential buildings in CA starting 2020 ZNE house: Not rocket science CA 2020 mandate for new residential, 2030 commercial ZNE village: Ditto West Village, Univ. CA Davis ZNE campus: Why not? Office parks, shopping malls, hospitals, universities, whole cities Source: NREL ZNE office Apple’s new headquarter going beyond ZNE Beyond ZNE: Solar ordinance City of Lancaster, CA: 2 W per sq. ft. living space CBD as powerhouse Entire surface of buildings generates power Source: Skanska Customer stratification Over time, consumers will self-select what works best Off-Grid Microgrid Prosumage Status Quo New interface/relationships Different needs/different cost causalities Consumers Content with status quo: Bundled, regulated tariffs ALL kWhs provided by/thru existing network Maintain existing relationship/interface/tariffs Prosumers Take few/fewer net kWhs from network Require different pricing/service relationship Prosumagers Ditto, but even more so Radically different pricing/service/interface relationship More exotic? Service aggregated/enabled/assisted by intermediaries Semi-autonomous micro-grids of “nonsumers” P2P trading & transactive energy Integrated energy services Where is the value the in the value chain? In the platform OhmConnect Sonnen’s Project in Prescott, AZ 2,900 homes,11.6 MW; 23 MWh Source: https://www.mapsofworld.com/usa/states/arizona/maps/arizona-state-map.jpg Who is in this space today? Head office? June 2018 Distributed Energy & Power Presentation for Innovation and Disruption Edmund Reid Centrica’s mission is to satisfy customers’ changing needs, and those needs are changing fast •Growth in distributed rather than centralized Decentralisation power generation “To provide energy and services to Storage •Rapid increase in battery storage capacity satisfy the changing Digitalisation •Technological advances provide more data and needs of our easier integration of the energy network customers” •Platforms and marketplaces used to co- Disintermediation ordinate rather than companies Centrica Business Solutions Distributed energy 35 Decentralised power is fast replacing centralised power, mainly through the growth in renewables as costs have fallen Renewables have fast overtaken coal generation in …driven by falling costs, which are likely to continue the UK… Coal and renewable 12 month rolling total generation (TWh) Solar capex costs ($/kW) 160 4.5 150 Coal Utility 140 Renewables 4.0 Commercial 130 Residential 3.5 120 110 3.0 100 90 2.5 80 70 2.0 60 50 1.5 -4% 40 1.0 30 20 0.5 10 0 0.0 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 99 01 03 05 07 09 11 13 15 17 BEIS, Dukes Centrica Business Solutions Distributed energy 36 Falling battery storage costs are likely to drive a substantial increase in storage capacity globally, fundamentally altering the power supply chain The cost of lithium-ion batteries has fallen rapidly in …leading to a rapid increase in battery storage capacity recent years; this trend is forecast to continue Lithium-ion battery costs ($/kWh) Global battery storage capacity (GW) 1,000 Utility scale Price Survey 900 Forecast Behind the meter 800 55.2 700 -18% 600 42.0 500 35.9 400 31.3 300 26.3 69.3 -10% 21.5 200 56.3 18.3 44.6 6.4 4.8 15.0 34.5 2.2 3.2 3.4 12.5 26.3 100 0.1 0.3 0.6 1.1 2.3 10.2 20.1 0.6 1.3 8.1 15.3 0.0 0.1 0.2 0.4 8.9 11.7 0 4.9 6.7 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 Centrica Business Solutions Distributed energy 37 Digitalisation is providing more data, greater control and easier integration of the energy system Smart meters are a building block for digitalisation …with IoT deployment accelerating UK residential smart meters (m) Cumulative Hive units sold 10 Smart-Type Meters 0.8 9 Smart Meters 8 0.8 7 0.8 6 0.8 0.8 5 0.9 8.8 4 0.9 7.6 0.9 6.7 3 5.8 0.8 4.9 2 0.8 4.0 0.8 3.3 0.8 2.7 0.8 1 0.8 0.8 1.9 0.8 0.8 0.8 1.2 1.5 0.6 0.7 0.7 0.7 0.5 0.7 0.9 0 Q4 Q4 Q4 Q4 Q4 Q4 2012 2013 2014 2015 2016 2017 Centrica Business Solutions Distributed energy 38 Competition is increasing, with a growing trend towards disintermediation Number of competitors in GB retail energy market Cornwall LEM and LO3 Energy are trialling blockchain innovations for local energy markets Ofgem data 69 52 40 27 24 20 14 13 12 12 12 12 10 11 Total Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17 Centrica Business Solutions Distributed energy 39 These trends are a significant challenge for Centrica’s core energy supply business UK Home electricity and gas (RHS) supplied 28 5.3 26.0 Gas (bn therms) 5.5 25.6 25.7 25.1 26 Electricity (TWh) 5.0 24 4.5 22.8 22.6 -39% 4.3 22.1 -20% 4.5 22 4.1 20.7 20 4.0 3.5 3.5 18 3.4 3.5 3.2 16 3.0 14 2.5 12 10 2.0 8 1.5 6 1.0 4 2 0.5 0 0.0 2010 2011 2012 2013 2014 2015 2016 2017 Centrica annual reports Centrica Business Solutions Distributed energy 40 DE&P is built to benefit from these trends by harnessing energy technologies for customers SOLUTIONS Buy less… OPTIMISATION Pay less… INSIGHT Use less… Centrica Business Solutions Distributed energy 41 DE&P has significant growth ambitions, and with a global reach We are aiming to reach £1bn of revenue by 2022, DE&P is already an international business, with plans CAGR of 42% to further expand our global footprint DE&P Gross Revenue (£m) (2016 adjusted for sale of building management systems business) 1,000 1,000 900 800 +42% 700 600 500 400 300 +34% 200 171 128 100 0 2016 2017 2022 Centrica Business Solutions Distributed energy 42 There is considerable customer benefit, the challenge is complexity and long lead times We are delivering real benefits to customers A more complex decision than energy procurement • Reducing costs •Deciding on overall business strategy and co-ordinating different business units. Executive buy-in is essential to motivate business units. • Improving resilience Executive • Facilitating faster growth •Projects often require large capital outlay, with different financing options, which the finance department will need to assess. • Expediting decarbonisation Finance Case study - St George’s Hospital •Manages the contracting of services, with energy as a service becoming increasingly important. St George’s Hospital in Tooting is the largest Procurement healthcare provider in South West London. It has 800,000 patients, and employs over 8,500 people. An •Manages the environmental impact of an organization’s operations and ensures regulatory compliance. energy centre is being installed to replace the Sustainability existing 40-year-old system.