Executive Summary:

Software plays an enabling role in the green utility transition as data driven solutions are required to drive electrification in an optimize way to reduce wasted energy in the process and maximize the electrons from generation to consumption.

The most critical factors of electrification are driven by:

• Currently energy producers and consumers have three main pain points:
  • 1. Energy prices are volatile, 2) Lack of energy security, and 3) Lack of optimization
• In North America the digital grid landscape experiences regulated and unregulated laws managed at the state level.
  • Deregulated markets are targets for rapid injection of renewables. Therefore, need grid flexibility to be able to keep up with production
• Europe has taken the lead in renewables integration into the grid
  • Laws like the full usage of energy in Germany* allow for market arbitrage on $/kWh creating data-based marketplace as a potential
• With the rapid integration of renewable energy, the grid is experiencing an optimization problem as it needs to match demand and supply with rapid responses
  • Demand for renewables will increase significantly to 3 – 5x the total electric usage
  • EV owners will see a step up of home energy consumption by 5x
  • C&Is and residential consumers are changing their consumption patterns becoming prosumers
• The energy sector is undergoing a 5-step maturity process where the integration of decentralized renewable resources play a key role. Geographically dependent.
  • 5-Steps: 1) Status quo (Energy sales - Centralized/Monopoly - Reactive), 2) Grid modernization (Energy efficiency for service info/cost mgmt. – Measured/IoT), 3) Bidirectional (Energy Mgmt. for Supply/Reliability - Adaptive), 4) Transactional (Multiparty energy trading - Orchestrated), and 5) Autonomous (Mutual value creation - Strategic)
• Software acts as an enabling technology
  • Big data sets are being generated with the electrical finger-print from each consumer, IoT and smart metering allowing for demand and supply balancing
  • Virtual Power Plants (VPP) allows for Energy Management Systems to balance demand and supply as this commodity sector digitizes
  • Software can be implemented through the full life of a renewable system integration from business development to its end of life allowing for rapid update of these technologies
• The digitalization of the energy space is a fragmented sector with current US market size of $2B and growth potential to $22B+/yr.
  • VPPs enable DER technologies depends on the maturity of the local energy market and its regulation.
  • Solutions vary for singular addressing DERs, to more mature ADMS, to localized demand/supply balancing with DERMS and not asset specific with VPPs
  • Software solution vary from SaaS, AI/MLs, and APIs. Gartner recommends to focus on enterprise-wide solutions and standardized APIs for ease of integration
  • Ideally, solution to have a horizontal integration to better match supply and demand

Vocabulary:

DER : Distributed Energy Resources

EMS: Energy Management System

EMOS: EM & Optimization System

VPP: Virtual Power Plant

ADMS: Advanced Distribution Mgmt. System

DERMS: DER Management Systems

CCA: Community Choice Aggregation

ISO: Independent System Operator

C&I: Commercial & Industrial

DSO: Distributed System Operator

DNO: Distributed Network Operator

TSO: Transmission System Operator

Global Trends

Political:

Political:

• The US SEC proposal on Standardized Climate-Related disclosures for public companies, the EU Taxonomy for Sustainable Activities and the Paris Agreement constitute a strong drive for business to re-evaluate climate risk and impact by corporation based on the IPCC report creating urgency to reduce GHG globally.

Economic:

• The FERC No. 2222 allows for small energy generators (1kW to 10k kW) to participate in the energy markets run by regional grid operators. This will enhance competition in DER at the consumer and distribution level.
• Oil & Gas has been pushed by investors to transition their business models increasing R&D and M&A investment through CVC

Technology:

• Renewable energy cost reduction allows to reach cost parity with fossil fuel energy producers giving DER market competition
• Renewables are intermittent causing the need for grid flexibility felt at 50%+ renewables
• AI/ML, APIs and Platform solutions act as enablers in the energy demand/supply match bolstering the flexibility of DER

Cultural/Social:

• The rapid adoption of solar, energy storage, EVs, and energy management systems will increase consumption by 3-5x
• Consumer are seeking choice in their energy management

Environmental:

• The energy sector emits approx. 31% of the total Global GHG. Optimization, reduction in energy transfer and renewables integration are necessary to reduce this massive impact.
• Grid resiliency and adaptability due to Climate Change calls for DER to avoid power outages during environmental disasters

Value Chain and Key Factors

How does the electric grid work?

Generation: Traditionally single location. Fossil fuel, nuclear and hydro sources.

• 2020 Adoption of FERC law No. 2222 shares the power of energy generation from the utilities to the consumer in a balance.
• Solar, wind and batteries tech cost reduction by 70 to 90% increases grid edge decentralized generation at customer. Expansion to solar and wind farms.

Transmission: High voltage transmission and tower lines.

• US 23% utilization with space of peak events. Still, infrastructure is dated with 40-yr life expectancy with need for software driven optimization.

Distribution: Last mile energy split at substations with voltage step-down

• Increase in Distributed Energy Resources (DER) of >50% requires rapid (<5min lag) read out and orchestration as solar, wind and battery storage add variable loads to the grid.
• Software enables orchestration with DER Management Systems (DERMS) and Virtual Power Plants (VPP)

Consumption: Variable use at C&I, offices and residential

• Building Electrification
• Building electrification is expected to add 3 to 5x the current energy load. IoT + Software, AI/ML and platforms allow for data management and response
• EV Charging and Storage
• EVs consume 2.5x the normal residential energy consumption. They will also become a source of energy back into the grid. DERMs for EV.
• Decentralized Generation (i.e. Prosumers)
• Flexible loads with geographic and natural tendencies created for climate adaptation. VPP and DERMS are required to match demand and supply.

Each Component within the Value Chain has developed software to support their transition in an end to end DER implementation. From obtaining business leads all the way to the end of life of the product.

Step 1: Energy Generation

At the utilities generation:

• Status quo (Natural gas, coal): Utilities have baselines and peaker loads to apply to support the demanded electricity needs. The need to be able to predict how much energy is needed to be produced from 5 min to 24 hours ahead to prepare and optimize their operations. To have that level of prediction and manipulation, facilities need to know what is their allocated supply requirement.
• Renewables: Solar-farms, on shore and off-shore wind are the typical installation and need to be integrated into the electric generated

At home/business generation:

• A home normally utilizes 5 to 10 kWh of electricity. Solar panels installed at home have a certain hour range depending on location. Wind could also be found as an onshore/home installation but is a little rear. Energy at home could also come from EVs charging homes in a dual way.
• Currently the US has regulated and un-regulated markets creating openings for renewable penetration to increase rapidly. Utility companies are increasingly looking towards existing technologies like wind and solar as the go to trends. Other types of renewable technologies in the market are modular nuclear, geothermal, hydropower

Solar:

• $19B Global TAM 2025 ($3B US TAM) —> $250M ARR at top 20 solar software Co
• Scale with software + automation
• Solar software watch list: Aurora, Colossus, Omnidian, RatedPower, GlintSolar, PVcase, RaptorMaps

Wind:

• 3,600TW with 189x global power demand. Capacity factor improved. Megascale plant/ Software/data scale benefit. Offshore.
• Wind Watchlist: EnsembleEnergy, Zededa, clir, Matroid, Akselos, Arcadia, Level10Energy, Lancium, Shoreline, SkySpecs

Battery Storage:

• Solve intermittency of wind and solar. Grid edge storage, EV adoption 29% CAFR by 2030. Software defined materials innovation. Lifecycle battery cost reduction.
• Technology constrains and supply chain dependency. Li-Ion advantage (cost efficient/energy density/end-use flexibility/production volume). Potential for new alternative batteries for non-EV uses (power wall edge electrification). Li-Ion Cost declined by 90%. 2030 demand 2,500GWh (250GWh on 2020)
• TAM: $390B (2025 ⇒ Hardware $262B, Services $113B, Software $15B with 48% CAGR). $77B (EPC = 15%, Development =15%, BoS=33%, Battery =36%)
• Battery watch list: [Materials] Exabyte.io, Citrine Informatics, KoBoldMetals. [Storage Cost] Twaice, VoltaIQ, PowinEnergy. [ENhance storage] Titan, Element Energy, Recurrent

Step 2: Energy Transmission

The transmission lines are usually not owned by the utilities themselves but it varies per location. The grid in the US normally runs at approx. 20% capacity on average with enough room to load up to 100% in extreme energy consumption events like heat waves that increase the energy take significantly. Still, we know that the upkeep of transmission lines is a challenging topic as they are known of being the cause of several fires in CA. The normal life of transmission lines are 40 yrs. They drive power loads using AC current to gain efficient transfer to very long distances (i.e. 500km max, 110kV+). With distributed energy the AC/DC transformation is not as needed as the energy distance traveled would be direct to the home. Still, if excess energy needs to be place back in the grid then a transformer is required.

Transmission Software watch: LineVision, newgrid, smartWires, IrisAutomation. [New transmission] Pearl Street, envelio, neara, sensat, prisma photonics

Step 3: Energy Distribution

In the step down process from high voltage transmission lines to lower voltage for consumption is done at local substations

Step 4: Energy Consumption

EV Charging and Deployment of energy

EV charging increases the energy consumption of a household by 2x. Transformers can usually balance up to 8 households but with increase in EVs power management is needed.

TAM: $17.5B for home, $16.3B public and $1.8B work

EV Charge software watch list: [EV Managed energy] evEnergy, WeaveGrid, ChargeLab, Optiwatt [EV transactions] smartcar, Monta, enode, evconnect

Other EV: two way electricity flow. regulation does not allow it or does it? Leap vs WeaveGrid discussion?

Building Electrification:

Home connections also need electrification and IoT to modulate or respond to reduce peaker power need. Drivers: demand, building Opex reduction. Local pollution reduction. Optimization systems with 3 yr pay back. real state play, regulatory play, product offerings

Building Energy Software watch list: 75F, runwise, passiveLogic, cove.tool, BlocPower

Distributed Energy Resources

The key parameters to consider in the DER sector is the orchestration of resources that align to the market. Currently, the globe has enough capacity to have every single home produce their own amount of electricity. There are two major factors competing against this approach:

1. At home renewables must become cheap enough to have environmental equity and access to solar, wind in a consistent way. Prices have been reducing at a 75-89% rate but it is still expensive and complex to integrate into the grid.
2. Utilities will start reducing control of the production and monopoly like of their operation driving costs up for all users. As explained by my geothermal friend Keith, as soon as each house in a neighborhood starts transforming their energy resources one by one, then each other non transformed house will get a higher cost to cover for the OPEX portion of the utility companies.

Currently renewables have dependencies on weather patterns. Solar and wind in the US are complementary meaning tat in regions in the south and west have more solar potential and the middle of the country has more wind capability. Also, in the middle of the night when the sun does not shine, the wind normally picks up generating more electricity. Still, energy storage needs to also be integrated into the system to abate the variability.

Therefore, grid flexibility is imperative in the energy transformation.

In order to enable this technology we are required to use large data sets to balance the demand and supply including multiple producers and consumers. This necessitates integrated resources at each stage of the value chain.

DER Aggregation and Management watch list: Leap, Voltus, Camus, EnergyHub, David Energy

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