This article is sponsored by Fluence
How has the proliferation of renewable power generation impacted the grid and broader energy markets?
Gianmarco Pizza: You only need to look back one or two decades – depending on the country – to the beginning of the mass deployment of renewables to see how significant the change has been. There used to be a relatively small number of large-scale generation units feeding into the transmission grid. Nowadays, we have hundreds of thousands of wind turbines scattered all over the place, as well as hundreds of millions of photovoltaic modules. And not only are there more units, but these units are no longer deterministically operated. They are fully exposed to environmental variables such as the strength of the wind or the power of the sun. Finally, they are generating a volume of data that is beyond anything that a human being could make sense of.
The electricity market itself has also been transformed by the proliferation of renewables. When wind that was forecasted does not materialise or the sun shines more than expected, the markets have to rebalance the entire system. In short, there is a level of complexity today that was not there historically, and which cannot be managed without the support of technology.
What role does storage, in particular, have to play in managing these challenges and in driving the energy transition?
Rebecca Boll: Our entire business thesis is built around the idea that storage is critical to the clean energy transformation. Wind and solar are intermittent assets. They do not necessarily create energy when that energy is needed, and so it has to be stored somewhere and then released into the grid when required.
As Gianmarco alluded to, that all makes managing the grid far more complex than was the case in the past, both in terms of the operation of the grid itself, and in terms of how asset owners make money. These are both areas where AI and machine learning can help by making millions of decisions in very short periods of time. And that digital technology is just as critical as the physical energy storage devices themselves.
In addition, as we see in headline news today, there is the potential for blackouts in many parts of the US, particularly during the heat of summer, largely due to planning-related challenges – in our view, energy storage is central to creating a long-term, reliable and resilient electric grid. Our 10-plus years of experience in this industry have clearly demonstrated how structured deployment of battery energy storage grid can create a grid that is highly flexible, low cost and integrates clean energy resources.
GP: Storage is certainly important for grid stability because whilst renewable generation can be forecast, it cannot be scheduled. But I would add that storage can also help solve the challenges that exist around building new grid elements, particularly here in Europe. With storage, you may not need to build out the grid, you may simply be able to use the existing one, whilst reducing congestion.
So, how exactly is technology being employed to help solve the challenges that have arisen as a result of rapidly increasing levels of renewables in the energy mix?
RB: There are a number of different challenges that have arisen, each with a different technology-based solution. The first is simply that energy storage needs to be available all around the world. That’s not a software challenge. But it is a technical challenge.
Fluence has responded to this by turning energy storage into a product line. Rather than addressing one project at a time, buying the batteries from an OEM, shipping them and customising the software, we have focused on developing safe, repeatable and yet flexible products that can be adapted to different types of battery, but where we control the entire supply chain.
The next challenge is that once in situ, the energy storage needs to do what it is supposed to do. And it is not a one-size-fits-all situation. The beauty of energy storage is that it can fulfil multiple functions. It can perform capacity or ancillary services, or energy arbitrage or as a grid transmission asset. This is a software challenge. But not cloud-based software. Rather it involves software that sits at the edge of these assets.
Energy storage often has to respond almost instantaneously to the needs of the grid and that means there is not time for information to travel to the cloud and back, not to mention issues with connectivity. We therefore have teams of edge software experts that understand the grid code requirements of different jurisdictions and different customer needs, and write code that sits at the edge and ensures the energy storage performs as it is meant to.
The third challenge is that once energy storage is mixed with renewables, we have to deal with the resultant market complexity that Gianmarco referred to. And that is where technology such as our bidding application comes in.
GP: The bidding app is designed for wind, solar and storage clients looking to sell into the merchant market. Every few minutes, models analyse weather forecasts, pricing forecasts and a number of other factors to calculate the optimal bid that the plant has to submit to the market in order to maximise value.
In addition to optimising commercial performance, however, digital technology is also being used to optimise technical performance. For example, we use AI-based models for predictive maintenance, to forecast power generation or to track faults on certain photovoltaic panels that could impact energy output.
Crucially, all of these models have to be connected. The bidding model has to be aware of a technical issue impacting output, for example, so that bids can be adapted. There needs to be seamless integration.
What should asset owners be thinking about when selecting a technology partner?
GP: Clients need to make sure their provider is bringing the right expertise to the table, not just in terms of digital capabilities, but in terms of sector know-how as well. Can they apply the right machine learning tools and extract the right information? Do they also have the asset-specific technical expertise to help guide an asset owner through the final steps of value creation?
RB: Longevity is certainly important. There have been players that have come and gone. But there are a couple of us out there that just keep on growing a bigger install base and building experience. That experience is critical because it helps asset owners to have a partner who has seen both good and bad things during asset deployment, operations and services.
Investors should also be looking for players that can offer a full ecosystem. If a potential partner has the hardware, for example, but does not have knowledge of the markets, good edge controls or the software to optimise assets, that is probably not the way to go. Asset owners looking to finance also gather greater peace of mind having a single partner who can perform all these functions in a reliable manner.
Clients are also looking for the ability to perform services. Around 70 percent of our clients sign long-term service agreements with us because financial backers, in particular, need to ensure assets are going to be maintained and performing for 15 to 20 years. Having a 98 percent performance guarantee over 10 years counts for a lot.
Another important component of the ecosystem we offer involves digital partnerships. For example, we have partnered with Pexapark, which provides software advisory services for renewables sales and risk management. The business helps investors look at the deployment of green energy systems and where the risk and reward lie. Partnerships like that help our customers make smart investment decisions.
Finally, I would point to bankability. This has been a hot topic for the financial community in the past, and a hallmark of Fluence solutions is that they can and do attract bank financing.
GP: A global footprint is important as well. Most of our clients are global players and they want a provider that can meet their needs across those different markets. Meanwhile, being exposed to the most advanced markets means that you stay ahead in terms of the latest developments. Clients want a partner that has a clear view on where the market is heading.
After all, having the in-house expertise or partnerships in place to address their needs right now is critical, but so is the ability to meet their needs in the future. And this is a very fast-moving industry. You need a good track record, certainly, but you also need to demonstrate agility and an ability to follow market trends.
Fluence recently acquired Nispera. Can you talk a little about the rationale behind that deal?
GP: Nispera adds a number of different applications to the Fluence offering, including a predictive maintenance app, an operations and maintenance app, a portfolio management app and an app for providing enhanced power-generation forecasting services. When combined with the Fluence bidding app, the two companies are covering the entire spectrum and the deal has provided a lot of strong synergies.
For example, Nispera is now expanding its capabilities into storage plants, while it previously focused on wind and solar. Very rarely do we find a client whose portfolio is built around just one of these technologies. They are typically diversified, and they want a partner that can work with them across all areas as well. Nispera’s power-generation forecasting capabilities are also being integrated into the Fluence bidding app in order to provide customers with what they need in a more thoughtful and joined up way.
Where next for energy storage and the technology supporting it?
GP: We are currently at an inflection point. Renewables are no longer seen as an addition to the energy mix, but rather the critical solution for ending our dependence on fossil fuels once and for all – a situation that has only been exacerbated by the current geopolitical landscape.
Crucially, however, the world now recognises that we will not be able to have a fully renewable power system without storage, nor without the appropriate digital tools to ensure investors can properly manage risk and materialise their expected returns.