Reducing Operational Constraints and Emissions by Increasing Flexible Energy Capacity
Credit to Author: POWER| Date: Thu, 01 Jun 2023 04:27:23 +0000
Today, modern network technology can transform commercial and industrial facilities into power sources that generate, store, and trade clean energy, allowing owners to increase cash flow, achieve decarbonization goals, and improve energy reliability.
Energy flexibility can be a competitive advantage, particularly when an industry is operating under increased constraints. Changeable power costs, the need to reduce carbon emissions, and questions about energy reliability are frequent concerns shared by commercial and industrial (C&I) companies. However, the industry has more options now to deal with these challenges, which include tapping into their building assets to increase cash flow, achieve decarbonization goals, and improve energy reliability—all at the same time.
Common Power-Related Pressures
Power constraints are tightening as C&I companies do more with electrification, automation, and the Internet of Things. These capabilities improve efficiency and flexibility, but they also require more power. In some cases, the electrical grid substation serving an industrial company cannot handle the added demand, and electrification can mean that the company must pay to upgrade its grid connection. In other cases, C&I companies may be competing more broadly for power resources, as newer technologies, such as cryptocurrency, demand more electricity from the grid that serves the community.
Power costs have also been increasing. According to the U.S. Energy Information Administration, the average price for electricity in the Industrial sector was more than 17% higher in 2022 versus 2021. Depending on the electricity market a company operates in, those costs can spike unexpectedly as a function of supply and demand, as happened in Texas with Winter Storm Uri in 2021.
With severe storms, heat, and increased power demand, companies are also concerned about the stability of the grid. The National Oceanic and Atmospheric Administration’s National Centers for Environmental Information tallied 18 “Billion-Dollar Weather and Climate Disasters” in the U.S. in 2022. The cost of downtime due to a power outage following one of these events can be significant in the C&I space, making reliable methods for maintaining operations and energy imperative. The U.S. National Renewable Energy Laboratory offers a free “Customer Damage Function Calculator” to help companies estimate the cost of an electrical grid outage for their site.
Many C&I companies also need to reduce carbon emissions from energy consumption. According to the U.S. Environmental Protection Agency, “Industry” was the third-largest producer of greenhouse gas (GHG) emissions, representing 23% of the total. Investors and local governments are increasingly requiring reductions in Scope 1, 2, and 3 emissions types. The National Conference of State Legislatures reports that 16 states plus Puerto Rico have GHG emissions reduction requirements, and cities such as New York, Boston, St. Louis, and Houston have their own emissions reduction standards.
Overcoming Challenges with Flexible Energy Capacity
So, how can C&I organizations overcome these common constraints? With flexible energy capacity, buildings have the ability to generate, store, and manage their own energy through onsite solar, electric vehicle (EV) charging (Figure 1), battery energy storage systems, and other solutions.
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1. Commercial and industrial organizations can implement a variety of energy solutions that improve system flexibility. One is managing electric vehicle charging based on real-time supply and demand signals. Source: Envato Elements |
But before companies begin implementing these sustainable solutions, it’s important to baseline an organization’s energy usage and emissions. This will give companies real data and insights for determining where they have flexible capacity, what their carbon emissions profile looks like, and the relative scale and economic implications for leveraging flexible capacity and reducing carbon emissions to required levels.
Real-time, in-building data and analytics technology, such as Blueprint Power’s proprietary metering hardware (DIGBOX) and online portal, capture and display data (from chillers or cogeneration units, for example) at a building systems level. This data is more detailed than what a typical building management system or utility meter is designed to capture, and by layering on energy load consumption curves, dual fuel usage, and weather information, a more precise energy profile can be formed.
From there, companies assess patterns in their energy consumption. Are systems running when they don’t need to be, or not running when they should be? For example, companies have been able to save money by identifying power spikes caused by malfunctioning systems or missed maintenance on equipment that was scheduled to be run and serviced monthly. Companies can also evaluate the feasibility of operating systems at different times when power rates are lower. Furthermore, they can identify which systems and processes are generating the most emissions, and determine if there is flexible energy capacity that can be sold to the grid.
Optimizing for Regulations and Incentives
Companies should also conduct a regulatory review. They can check to see if they qualify for a different electricity tariff rate, for example, which may be less expensive or structured to better align with how they operate. It’s also important to know what federal, state, and local emissions requirements apply.
Once a company has a good energy and emissions baseline established, it is easier to put together an actionable emissions reduction strategy. Right now, there are unprecedented incentives for implementing clean energy technologies, some of which could potentially cut project costs by 40%. Depending on their power provider, companies might also have access to power contracts that incorporate renewable energy sources or bundle in Renewable Energy Credits to partly offset emissions, while more permanent emissions reduction measures can be implemented.
Unlocking Value from Existing Flexible Energy Capacity Assets
Many companies may find they have untapped, existing flexible energy capacity in their buildings that they can sell back to the grid. This is new cash flow that can be generated from existing assets that could also help fund future clean energy investments.
Depending on the building’s location, electrical grids may offer bill savings or revenue programs to curtail energy usage during peak demand. Companies can potentially generate tens or hundreds of thousands of dollars annually by participating in these programs. A regulatory review can help companies identify the grid demand response programs they qualify for. By using existing flexible energy capacity, C&I companies can add cash flow, support grid stability, and reduce Scope 1 emissions using their current building assets.
Electrifying to Reduce Emissions
Industrial companies are also looking at increasing electrification to replace inefficient assets (such as switching to electric heat pumps) and reduce Scope 1 emissions from their own operations, Scope 2 if they can utilize a clean power purchase agreement, for example, and Scope 3 from indirect users. But before making these investments, C&I companies should check that their electricity substation can support additional electricity demand.
A good baseline of a company’s energy profile can make this assessment more accurate. Additionally, optimizing existing energy use can make a big difference. Through careful planning, companies can avoid overbuilding grid upgrades: a 70%–90% “full” electrical substation could potentially be reduced to 60%–75% by applying more data-informed energy consumption processes and building operations.
Electrifying fleets can reduce a company’s Scope 1 emissions, while adding EV charging can support Scope 3 reductions from value chain partners. The Commercial Clean Vehicles Credit from the U.S. Inflation Reduction Act could potentially defray up to 30% of the cost of replacing diesel- or gas-powered commercial vehicles—ranging from cars and pickup trucks to long-haul trucks—with EVs for eligible programs.
When implementing EV charging, C&I companies can optimize the solution based on a number of factors. For example, it’s important to balance the number of EVs, and therefore, capital expenditures, required to satisfy facility operations, while not impacting site output. Companies can also optimize the times in which the EV fleet is charging.
Some fleet solutions, such as bp Pulse Fleet, can help companies optimize fleet operations based on signals their facilities are receiving from the grid regarding electrical grid congestion. Fleet operators may ramp up or ramp down their operations depending on electricity demand signals from grid operators, and by doing so, earn bill savings or new revenue through grid demand response programs that reward facilities for their usage flexibility. Companies should also consider the physical space available onsite to implement new EV infrastructure, as well as how permanent or expandable they want their EV solutions to be. There are various options on the market to support different scenarios.
Adding Clean Energy Power Onsite
C&I companies can also add new, clean energy capacity onsite, such as with solar, battery energy storage, and wind. Clean energy tax credits can provide up to a 40% federal tax credit for eligible solutions, and monetizing existing flexible energy capacity can help companies fund these clean energy additions.
Once this new capacity is online, it could also potentially be monetized to increase cash flow, while supporting the stability of site operations and reducing emissions. Many companies only look at implementing one type of clean energy onsite, such as solar, but organizations can potentially multiply the value of their investment by integrating a combination of solutions, such as solar, EV charging, and battery energy storage systems.
Sequencing Investments to Maximize Benefits
Like everything else these days, supply chain planning is important, and the intentional sequencing of site improvements can dramatically impact project economics. For example, lead times for delivery of battery energy storage systems can be up to 18 months. To offset this delay, C&I companies should plan a mix of near-term and longer-term projects to support cash flow, decarbonization, and energy reliability priorities.
Delivery orders for battery energy storage systems should ideally be placed early in the process as soon as organizations have a good idea of their emissions reduction strategy. Getting in the queue will be particularly important as more emissions regulations come into play and competition for these types of energy resources increases.
In the near-term, companies may be able to optimize their existing energy usage, connect flexible capacity to grid programs, purchase Renewable Energy Credits, and procure green power supply via power purchase agreements (PPAs) to offset power and carbon emissions constraints while generating cash flow to fund additional investments. For the longer-term, C&I companies have good options for implementing sustainable approaches as part of their daily operations. Companies can continue to optimize energy usage over time by consistently managing their energy and emissions profile. They can also electrify building systems and fleets, and add onsite energy generation to increase flexible energy capacity that may be monetized and used to reduce carbon emissions and improve site stability.
The approaches mentioned here can be adapted to many building types, so C&I companies can use a similar framework for different buildings within their footprints. And, by using advanced, real-time data and analytics technologies, companies can also aggregate and share clean energy benefits across multiple buildings in their portfolio to reduce constraints and spread the value of their investments even further.
—Nick Schmidt is CTO with Blueprint Power, and Alex Hyans is business innovation program manager with Blueprint Power.
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