November 4, 2021
Storage is Making the 21st Century Grid a Reality. It will be Multilateral, Customer-Centric and Data Intensive
In the year since #ESACon20, the storage world has found itself in a dramatically different context. Stakeholders have accepted that the grid is on the verge of a historic inflection point. The grid is poised to assimilate the innovations which have disrupted other sectors over the past decade: AI, machine learning, big data, IoT, algorithms and blockchain. Accordingly, a draft of Fluence’s I.P.O. prospectus referenced the words “software” and “digital” 107 and 131 times, respectively.
Those buzzwords have captured the attention of investors, with the sector rapidly graduating from venture capital to SPAC mergers to conventional IPOs during just one year. There is now a critical mass of public information to help sift through all the excitement and assess the sector with greater clarity. There has been a growing recognition that this shift is not going to be limited to any single segment or sub-sector. As recently as 2020, the industry appeared to be coalesced around a consensus that residential markets — driven by adoption of solar panels and emerging VPP technology — would lead adoption of new grid technologies. Today, there is a realization that adoption is shaping up to be both quicker and broader, simultaneously affecting multiple segments. That includes the emergence of viable V2G technologies, the opening of utility-scale storage markets and the growing sustainability mandates among large corporations.
“Bilateral” has been a popular buzzword in storage markets; a more accurate word for the future power grid is “multilateral.” What this means is that delivery in-and-out of the grid is going to get much more complicated: developers need to place solar or wind onto the most appropriate nodes, industrial customers suddenly need to understand which of their sites are most suitable for renewables and more individuals are placing solar panels on their rooftops and parking an EV in their garages. All these participants will need to communicate with each other, trade with each other and, ultimately, balance each other so that the grid will be able to continue to function reliably. It will be a far cry from the 1920s-era centralized, or unilateral, power grid.
This new multilateral power grid is going to generate far more data than ever before. That data will need to be properly collected, monitored, analyzed and fed back to the participants to empower their ability to respond to fluctuations. This is going to be happening in real time. The power sector has always been data intensive, but the old mode of data — centered around optimizing coal and gas supply chains — is going to become increasingly marginalized by renewables penetration.
For instance, the core issue with renewables is intermittency. The power sector needs to become a lot better at weather forecasting. This requires highly sophisticated AI and machine learning software. Likewise, on the demand side, the coming wave of EVs is introducing an entirely new and volatile source of demand. As sources of both supply and demand increasingly fragment, participants need to look outside of their own organizations to collate and make sense of this data in real time. No one player holds all the cards anymore: that’s the nature of the multilateral grid.
It has become apparent that storage will drive a convergence of all these end markets: renewables and storage, C&I and residential and EVs. However, that convergence will happen in stages, and the sequence of that staging is not yet clear. For example, right now there is a lot of excitement around EVs, and rightfully so. Still, the catalysts for large-scale EV adoption — charging infrastructure, public sector fleet transformation — are likely a couple of years away. In the medium term, there is a lot of debate as to who will be the first major wave of adopters of energy storage: will it be developers commissioning utility scale batteries or large industrial consumers moving to decarbonize operations or the residential solar market, which has attracted a lot of attention in the last five years. Therefore, it may be imperative for storage market participants to be in all these market segments from day one.
For that future convergence to become a reality, the grid needs to be run by software that has in-built flexibility to provide real-time, 360-degree feedback for a truly responsive, multilateral grid to emerge. Data will need to be collected and analyzed in real time, then automate the charge or discharge response. The same underlying technology will become accessible to utilities, developers, office buildings, factories, homes and EVs. Software will thus become the “glue” for the multilateral grid to hold all the various segments together, ensuring resiliency and reliability through the peaks and troughs which will inevitably be a core feature of the Energy Transition.
The grid is now on the verge of an era of innovation more dramatic than any since the 1920s.