Community energy is the next big threat to utility companies – unless they manage to become part of this emerging energy economy. They still have a window of opportunity, says Craig Cavanaugh of software services company Omnetric Group, who spent six months researching the energy community market in Europe and the US. He sees three main opportunities for utilities: they can become “collaborative partner”, “community energy service provider” or “community energy platform provider”. In all cases technology is the key. “If utilities don’t move, communities will act on their own”.
“Community Energy is potentially one of the most important forces to disrupt the energy system”, says Craig Cavanaugh, CEO for the Americas of Omnetric Group, a joint-venture of Accenture and Siemens which provides technology solutions to the energy market. Cavanaugh and his team spent the past six months on research, and held interviews with community energy leaders and utility executives in Austria, Germany, the Netherlands, the UK and USA. They published their findings on 17 November in a white paper ‘Power to the People’.
Technological developments, for example in microgrids and blockchain technology, are quickly making it possible for communities – which could be consumer groups, businesses, or local governments – to engage in common projects for generation, distribution, management and consumption of energy.
Although no one knows how big the energy community market could become, it is clear, says Cavanaugh, that consumers are highly receptive to it. One study from Accenture found that 69% of consumers are interested in participating on an energy trading platform and 47% plan to sign up for a community solar program, managed by a third party, even if they do not have solar panels on their property.
Cavanaugh and his team found that the primary motivation for community energy participants is economic, as, according to the white paper, “a single household could make a one-off per capita saving of nearly $4,000 compared to going it alone, as well as hedge against future electricity price increases reaching upwards of 3% per year.”
Two other motivating factors are: the dangers of climate change, and “growing distrust of large public institutions.”
There’s a progressive awareness of what energy consumption means – for the planet, wallet, and community
Those large public institutions could be utilities of course. Nevertheless, Cavanaugh does feel there are opportunities for utilities to get involved in community energy. His research found that communities often lack “the in-depth technology and business knowledge” to realize their ambitions.
Here is where utilities could come in. “What the business opportunities are for utilities is very much dependent on geography, the type of regulatory structure, and the type of ownership,” says Cavanaugh. But technology is key to bringing community energy projects and utilities closer together, he notes.
According to the white paper, although historically there has been some unwillingness by utilities to engage with community energy, currently more and more of them are getting involved with communities and initiating joint discussions. Top of the agenda for discussion are the opportunities afforded by current technologies for more active management of the energy grid at a community level.
“For example, utilities can offer grid services for small-scale renewables generation,” says Cavanaugh, referring to the example of ‘Microgrid in the Cloud’, a remotely-hosted, microgrid control solution, based on the Siemens Microgrid Management System. “Cloud-based delivery enables flexibility and affordability, and enables microgrid deployment with less know-how than a traditional solution, since it is hosted, managed and maintained by the provider.”
Cavanaugh explains: “Microgrids are not only for areas beyond reach of the traditional grid. A utility could deploy a microgrid for enhanced system resilience – for example, as might be required by a ‘sensitive’ site, such as military or government. Or it could build a microgrid in response to community demand, like Hawaii’s ambition for 100-percent renewably powered energy in the electricity sector by 2045.”
It’s no longer a traditional marketplace – we are moving to a place where your neighbor says ‘you can buy solar power from me’
Another real-life example is that by the city of Fort Collins in Colorado. The municipality-run utility, Fort Collins Utilities, offers residents and businesses renewable energy for an additional 2.4 cents per kilowatt-hour (kWh) and provides electricity service to 90,000 residential and commercial customers at the sixth lowest rate in the state. It is a partner in the low carbon district initiative FortZED, which includes private sector partners testing out technologies that reduce peak energy use and integrate renewable energy into the grid in collaboration with an actively engaged consumer base.
“They’ve done this in the right way. The city administration decided to provide clean energy services to its citizens, enabling a positive feedback loop and attracting private companies to the benefit of ratepayers, as well as bringing the utility and customers together,” says Cavanaugh.
Among the different roles that utilities can adopt in relation to community energy projects, the white paper outlines three main opportunities:
- A collaborative partner essentially offers consultancy services in the early stages of project development, ensuring that the utility retains a seat at the table in case of further developments.
- A Community Energy service provider would not only work with the community to define a solution, but would also deliver the enabling technology as a business partner to the community enterprise.
- In the role of Community Energy platform provider, the utility assumes the role of optimizing the management of energy generated, stored and shared by the community.
Omnetric Group has developed a community energy concept, the Prosumer Energy Management Platform, which communities – and utilities – could use in their collective energy initiatives. It is a software-based platform that allows a community to measure, monitor and manage power generation and consumption across all households and businesses connected to its distribution system.
The platform demonstrates the types of solution already available for use in community energy projects. It can be used by communities or by utilities to support community energy projects.
A major factor in how far or how fast the envisaged collaboration between communities and utilities progresses is the regulatory framework. Although regulatory issues were not examined in detail in the research, the white paper states that “communities and utilities would do well to strongly encourage regulators to provide some degree of flexibility in the system,”’ and notes that “regulatory uncertainty slows progress.”
One example of forward-thinking regulatory reform is New York’s Reforming the Energy Vision (REV), which supports the city’s mandate to generate 50 percent of the state’s electricity needs from renewable energy by 2030, and in doing so brings system efficiency and energy efficiency into the core business of the utility. A recent order (14-00581) approved by the New York State Public Service Commission calls for the use of markets and new regulations to achieve increased system efficiency, carbon reductions and customer empowerment, and by aligning utility profits with market-enabling activities, sets up a new business model for utilities.
Renewables just keep getting cheaper, and that’s a real opportunity to engage in a new way
Cavanuagh: “This is an example of where a city decides that ‘our citizenry aspires to use only green energy.’ There’s a progressive awareness of what energy consumption means – for the planet, wallet, and community. As shown by developments like the New York REV, there is certainly a business opportunity for developers and utilities in working with a group of prosumers, and offering infrastructure as service.”
“Renewables just keep getting cheaper, and that’s a real opportunity to engage in a new way. It’s no longer a traditional marketplace – we are moving to a place where your neighbor says ‘you can buy solar power from me’ and you will be able to. That’s the future. If utilities don’t move, then communities will act on their own.”