Susan Kennedy, CEO of Advanced Microgrid Solutions, has observed, “The entire electrical distribution system is designed around a single premise: You cannot store energy.”
The premise of her company: “Equipping a building with the technology to store and manage its own electricity turns that building into a standalone storage unit,” and if you “combine a dozen buildings into a fleet, you have the utility equivalent of a peaker plant.” She told GTM recently, “We're offering utilities a customized solution using energy storage behind the customer's meter, harnessing that load to provide specifically what the utility needs in a particular region. It’s a clean, fast, flexible product that doesn't exist in the utility world today.”
And when mainstream infrastructure investor Macquarie Group declares its aim to put $200 million into a fleet of battery projects from Advanced Microgrid Solutions -- it's a good sign.
“AMS’ focus on contracted, grid-scale energy storage projects stands out amongst developers forging a path in energy storage space,” said Rob Kupchak, head of U.S. power, utilities and renewables for Macquarie Capital.
“Macquarie Capital is the gold standard for investment in critical infrastructure,” said Kelly Warner, president of AMS, in a statement.
Macquarie will provide project capital that will be used to build and operate a fleet of AMS’ distributed energy storage projects located at host sites. The systems will be used for "utility grid services including flexible and reserve capacity, solar integration and voltage management, in addition to retail energy services such as demand management, backup generation and enhanced power quality."
The capital will address AMS’ projects such as:
- The 50-megawatt contract from Southern California Edison to provide behind-the-meter battery storage in the Western Los Angeles Basin area
- California real estate firm Irvine Company's energy storage deployment across 24 office buildings equipped with Tesla Powerpacks and AMS’ software. The batteries are intended to "shave peak energy while also providing Southern California Edison with up to 10 megawatts of capacity."
- A number of other projects with Opus One Solutions, Skyscraper One Maritime Plaza, California State University, Shell Energy North America and the Inland Empire Utilities Agency.
With competitor Stem as a runner-up, this looks to be the largest dedicated energy storage finance vehicle and allows AMS to build out and manage the large contracts it has picked up so far. Macquarie will take ownership of the project company and will also carry interest, according to Kennedy. AMS has received equity funding from DBL Investments, Arnold Schwarzenegger and Engie SA, the large French electricity and gas provider.
With the news of the financing now reported, here are some choice quotes from CEO Susan Kennedy, someone who investor Nancy Pfund has dubbed "the utility whisperer."
On scaling: "We went to market with the strategy that we needed to scale. In order to get distributed resources at a viable price point so that they were adopted by utilities in a competitive way with traditional resources adopted by consumers, you have to get the costs down. The only way you get the costs down is scale. What we decided our entire project around [was] getting a large enough contract from the utility that will allow us to negotiate supply contracts that were large enough that we could get the economies of scale, where you'll be able to offer the utility something that is more competitive than you would if you were doing a pilot or a small project. We're able to pull off something that is valuable and cost-effective for the consumer. If we can't get out of pilots and get to scale, distributed resources will always be at the margins. [...] These are large projects that are designed to be aggregated for grid support -- we are not selling technology to a single building owner. That scale is a really important part of what’s making the technology affordable and competitive with other resources, and it’s what makes AMS unique in this space,” said Kennedy.
As Jeff St. John reported, AMS isn’t signing up customers for behind-the-meter batteries and then looking for ways to sell their capabilities to the utility. Instead, it’s working with SCE from the start to identify the optimal amount of load-shifting it could use at local stress points, like the Santiago and Johanna substations in the area where it’s building its first hybrid-electric installation.
AMS has 2.5 megawatt-hours in operation today. According to the CEO, "We have about 35 megawatt-hours in permitting/construction -- much of which is scheduled to be on-line by the end of this year."
On value: “Whether it’s for local capacity, up and down regulation, ramping, where it can help them reduce distribution upgrades -- we design the system for what the utility needs. [...] The host customer, in turn, gets a no-hassle, cost-free upgrade to its energy profile, with batteries that are usually discharging during the same afternoon hours that coincide with peaks in commercial building energy use.”
Kennedy added, “If we get this right with the utilities we're working with, it opens up the customer side -- the customer as the 'prosumer,' as the one who is actually generating a grid resource and opening up that value stream for the utility.”
On carbon and costs: "What you have here is the quintessential problem of the customer that thinks they're reducing carbon and doing great things for the environment by putting solar on their roof, but when the sun stops shining at the end of the day, their load shoots back to the grid. That is when the system peak occurs for the utility, and it’s also the most expensive energy of the day.
"All customers are paying twice. Not only do they have to pay for the electricity, and that’s very expensive at the end of the day, but they also are paying for the transmission and distribution system, not just to carry their electrons back and forth, but most importantly, to have that redundant system on standby.
"The only way to bring the cost down is to tie that load to storage in order to be able not just to control it for the customer but...to become the solution at the distribution level. In the United States, utilities spent $100 billion on the distribution system alone in 2014...[and] they're going to spend a $100 billion a year [on distribution] over the next decade. That’s where the money is.
"Batteries by themselves are just very expensive, so the only way a battery is ever going to be economic is if you can stack multiple functions off both the host side and the utilities side, and on the customer side, it's backup. It's load-shifting. But it doesn't reduce your costs. It's only demand management, and that's a very...regulatory-sensitive value stream. If you have solar, now you're actually reducing the customer's electricity costs, and so it adds value to the solar.
“Utilities are going to spend probably a trillion dollars over the course of the next decade in the United States chasing the loading curve. We can harness the consumer as a manager of loads. It is the cleanest, fastest, most flexible resource for the grid. It will actually allow us to shape the loading curve instead of chasing it.”