On May 11, the Biden administration approved the Vineyard Wind project, a major wind farm off the coast of Massachusetts capable of powering 400,000 homes and businesses. In announcing the agreement, US Secretary of the Interior Deb Haaland declared that “a clean energy future is within our grasp in the United States.”
Yet making sure it doesn’t slip through our fingers will require a greater integration between energy producers and consumers than ever before. In some ways, the rise of renewables both improves and complicates the situation. And in the same way that renewables keep improving, so are the new technology platforms that help balance and manage the emerging demand for cleaner energy with a still-variable supply.
The wind farm, the first big US offshore installation, is just one of a wave of projects aiming to create a carbon-pollution-free power sector by 2035, and a net-zero-emissions economy no later than mid-century.
Spurred on by similar aspirations from the European Union, the Paris Agreement and the United Nations, decarbonization is trending globally. Utilities are big players, but so are energy consumers, the demand side of energy. From municipalities and regions to commercial and industrial enterprises down to individual households, energy consumers are contributing to decarbonization by replacing fossil-fuel-powered assets such as vehicles and heaters with electrified versions.
The good news is that it’s estimated about 70 percent of today’s global greenhouse gas emissions can be addressed by clean electrification. The challenge is that these changes complicate the energy ecosystem while creating volatility in the grid that makes it difficult to manage.
Electrification raises consumption and sets new demand patterns. At the same time, wind and solar power fluctuate with the weather, which can lead to grid instability. When the wind doesn’t blow nor the sun shine, consumption can outpace production, causing operators to need to add additional energy to the grid. Often, they do so by firing up fossil-fuel plants held in reserve. But this is costly and negates decarbonization efforts.
Our new, broader energy ecosystem also brings complexity challenges. Aggregators have entered the market to bring consumers together to buy and sell wholesale energy they’re generating from their own small-scale solar and wind installations. Then there’s regulators, who are complicating energy management by mandating that millions of consumer devices such as solar panels, wind turbines, batteries and even e-vehicles can be linked to the grid.
But this new complexity creates an opportunity as well. Consumer participation in energy markets can help stabilize the power system, especially if utilities can easily connect them to the energy ecosystem.
The missing link in the green energy transition
Andel, one of Denmark’s leading utilities, is already making this connection in partnership with IBM, using the jointly created IBM Utility Flexibility Platform. It is “the missing link in the green energy transition,” Henrik Iversen, Vice President at Andel, said at IBM’s Think 2021 conference. The Utility Flexibility Platform—powered by a combination of IoT sensors, AI, blockchain and the cloud—integrates aggregators and their customers with the energy ecosystem for real-time, intelligent grid optimization.
A flexible platform enables utilities to engage consumers for a more stable, sustainable grid.
When the grid needs balancing due to fluctuating renewables or demand peaks, the platform’s AI analyzes when connected consumer assets, such as HVAC systems, water pumps and data centers, can run at reduced capacity with little impact on their performance. The platform then temporarily reduces their energy draw, in effect providing flexibility to the grid in lieu of relying on reserve power plants.
By using AI insights into both energy demand and the grid’s status, the Flexible Platform can be far more precise than traditional approaches to balancing the grid, where traders and aggregators often buy and sell energy by relying on intuition and rudimentary systems. The stakes can be high: one aggregator that bet wrong in its trades lost more than USD 100 million in one day.
“AI insights replace speculation,” Iversen said
Consumers on the platform stand to gain considerably. They not only conserve energy, but the big money comes from the fees grid operators pay them for reducing their consumption; it’s almost like how the utilities pay for running reserve plants. By returning energy to the grid when it’s scarce, consumers can earn up to USD 9,000 per kilowatt hour.
“As executives at commercial and industrial enterprises look ahead to the cost of doing business, they will find energy costs a significant factor,” says Larry K. Chalupsky, North America digital transformation and technology executive for the Energy, Environment and Utilities industry at IBM. “By entering the marketplace with the Flex Platform, they can improve their energy performance while trading excess energy. The usage reductions can save 30% or more of energy costs without significantly impacting operations.”
Copenhagen flexes its renewables
The IBM Utility Flexibility Platform is already showing promise in Copenhagen, Denmark, where Andel is testing it in the city’s buildings.
Denmark is already powered by 50 percent renewables, mostly wind with some solar, with plans for 100 percent by 2030. Thus, the setting is ideal for demand-side grid balancing. “With this new IT solution, it is estimated that Denmark may become the driving force for the development and advancement of green technologies, with a focus on consumption flexibility—a market with international potential,” Andel reports in announcing its IBM partnership.
Estimates are that 20 percent of the energy consumed by Copenhagen’s 3,600 buildings is flexible, able to be turned up, down or off to help balance the grid. Because the city had previously upgraded its buildings to the latest energy management systems and IoT, they are easy to onboard to the Utility Flexibility Platform at no cost.
Andel is already testing a version of flexible electricity management across numerous building in Copenhagen.
“It’s just good for business,” Anders Christian Lyngtorp, head of the Technical Unit for the City of Copenhagen’s buildings, said of smart, flexible energy management. “And that’s before we even consider the flexibility element, a long-term side benefit we didn’t know about when we started out.”
The Utility Flexibility Platform’s AI senses when the grid needs energy and how much each building can comfortably contribute. Although city buildings are the current testbed, the platform can link every consumer in the energy ecosystem. And as battery technology evolves, it can orchestrate storage when renewables create a surplus.
Transaction automation is a key platform feature. Blockchain transparently documents the value of each energy reduction and settles the payment at market rates. When grid operators pay for the buildings’ energy reductions, Andel keeps a service fee and returns the rest to the city. The environment wins, the city wins and Andel gains a new revenue stream, quite welcome in the tough business of selling commodity energy and natural gas.
Orchestrating the new energy ecosystem
For enterprises and individuals considering joining the flex ecosystem, the regulatory environment is most favorable in Northern Europe. But changes are coming in the US and elsewhere that are expected jumpstart the market. National and corporate sustainability goals favor participation. And there’s real merit in helping to balance the electrical system, especially given predictions of more extreme weather and grid instability in the coming years.
Still, participants need to carefully evaluate the flexibility parameters. How much operational downgrade can you accept and for how long in critical electrical systems? In the IBM Utility Flexibility Platform, AI and blockchain determine these values in lockstep with user guidelines, and you can always opt out of the program.
The Utility Flexibility Platform’s AI senses when the grid needs energy and how much each building can comfortably contribute.
Even if flexibility does impact production, it may be worth it. Say your organization hasn’t yet upgraded to the latest smart energy systems. Flex compensation can speed up their return on investment by 33 percent, Andel reports. And, of course, energy conservation and flex payments offset rising energy costs.
“We are embarking on a tectonic shift in the energy industry from vehicle electrification to low-carbon energy delivery,” Chalupsky said. “The challenge is to maintain a safe, reliable, cost-effective grid through this shift. Load optimization through citizen participation can ensure a stable transition.”