World energy markets are poised at a tipping point. Within this century, energy generation and distribution as we know it will cease to exist. Driven by massive electrification (and its ensuing demand), calls for deep decarbonization in response to the climate crisis, and the desire to decentralize energy in response to advances in technology, the energy transformation is inevitable.
At the heart of this transformation is the need for greater resilience and, with it, increased reliability. Faced with challenges like severe weather events, extreme temperatures, global crises, value chain disruption, and fluctuating power supply and price, many companies are seeking to improve energy security and responsiveness to “future-proof” their operations.
Reliability of power supply is a real — and growing —concern. A survey of 250 energy managers indicates that 25 percent of companies experience regular power outages. These power disruptions can be costly: 18 percent of responding companies had experienced an outage that cost $100,000 or more. A full 71 percent of them indicated that they already own or are considering alternative power sources as a result.
The key barrier to achieving reliable power supply is either an immature or aging grid. For instance, in India, where more than 240 million people still lack access to power, 50 percent of electricity generation is wasted due to poor transmission to rural areas, as well as power theft.
And in the U.S., the older, centralized grid would cost billions of dollars to upgrade or replace. It has already increased delivery costs by 14 percent in the last decade. The 2017 grid reliability study commissioned by the U.S. Department of Energy found that, while recent increases in the penetration of renewable energy generation do not threaten the reliability of power, the need to create transmission infrastructure to support expansion in renewables could be significant.
The solution to reliability doesn’t rest in stockpiling coal to support conventional baseload generation, as some have suggested; this is actually risky. During Hurricane Harvey, grid operators in Texas had to switch from coal-fired generation to natural gas due to the coal’s level of water saturation. Instead, the real key to the reliability problem is an integrated, active approach to energy management that enables resilience with its diversity of supply and demand. Rather than treating the procurement, dispensation and evolution of energy as disparate activities, the Active Energy Management approach assumes that these activities are interdependent and indispensable.
By addressing operational efficiency, enabled by digitization and technology, operators can reduce susceptibility to outages and potential downtime. Strategically sourcing energy supply from a diverse portfolio that includes renewable generation reduces risk while maximizing continuity. Investing in new energy opportunities and distributed energy resources (DERs) — like demand response, battery storage, smart grid technologies, fuel cells, combined heat and power, and distributed solar — can further the development of corporate assets that are responsive, agile, and reliable.
The happy result is both cost and carbon savings. Reductions in resource consumption from efficiency projects lower carbon emissions and the money saved can be used to fund sustainability projects. Once a cost center, clean, green and renewable electricity is now cheaper than conventional generation in more than 60 countries, and will be the most inexpensive source of power everywhere by 2020. DERs continue to drive savings by allowing organizations to store power to use during peak load times and by reducing transmission utility charges.
DERs are on the rise
As more entities embark on the Active Energy Management journey and explore the flexibility of DERs, the growing deployment of microgrids will become inevitable to achieve grid autonomy. A self-contained, localized grid that typically includes a combination of generation and storage assets, microgrids can both integrate with existing grids or operate independently in “island mode.” This flexibility and reliance on DERs makes them the epitome of true energy resilience.
Microgrids can be used as stand-alone power generation sources — as they are in both rural or off-grid electrification, or disconnected, remote geographies — or as back-up power stations that ensure continuity of critical systems. And new financing models, such as microgrids-as-a-service, mean that companies can invest in a system without any upfront costs.
As an example, Schneider Electric client Montgomery County, Maryland, will install microgrids at its public safety headquarters and correctional facility to modernize critical systems as part of the county's efforts to improve resilience. Schneider Electric itself has also invested in a microgrid at the company's Boston One Campus, where the system is expected to produce 10 percent of the campus’ electricity needs at a 20 percent reduction in cost.
Market trends don’t match corporate action
Despite the advantages of Active Energy Management and its role in improving reliability and resilience, corporate intention lags implementation. A study conducted by GreenBiz and Schneider Electric found that while 82 percent of respondents have initiated energy efficiency upgrades, only 30 percent are planning projects directly related to resilience, and a mere 1 percent have considered or implemented energy storage solutions.
Pursuing Active Energy Management and its range of distributed energy solutions can help businesses and communities future-proof themselves against energy disruption and the inevitable energy transition. Reducing energy consumption, diversifying energy supply to include renewables and investing in evolving clean technologies like microgrids creates valuable redundancies in power supply that reduce the value of lost load, especially for power critical industries like data centers, health care and air transportation.
To learn more about the evolving role of new energy opportunities like microgrids, we invite you to access our white paper.