The term “smart grid” evokes an image of a digitally connected system of smart meters, intelligent sensors, control devices and communications networks. But the power grid to which all of this new technology is connected remains much as it was designed a century ago. That’s a huge electromechanical machine, built on static models that presume the steady and predictable flow of power from central generators and transmission corridors, down to the substations, feeder lines and transformers that deliver power to customers.

The intermittent nature of wind and solar power, the two-way power flows created by distributed generation resources, electric vehicles, and the insight delivered by today’s smart grid systems are all challenging that “analog” grid in ways never envisioned by its original creators, however. Perhaps truly “digital” power electronics systems, that can route and control electricity itself in ways similar to how the internet routes and controls data traffic, can help.

Varentec is one of the companies working on this challenge. On Monday, the San Jose, Calif.-based startup announced it has raised $8 million in Series B financing from previous backer Khosla Ventures and a new investor. That's Microsoft billionaire Bill Gates, a limited partner in Khosla Ventures, who put in an undisclosed amount as a private investor, Deepak Divan, Varentec CEO, told me in an interview.

"He's really interested in transformational technologies that can have broad societal impact," Divan said, adding that Gates regards "effective and efficient energy infrastructure as really critical. There's a transformation of the grid that needs to be done, and it has to be capital-efficient."

That's the concept behind Varentec's technology, which, along with startups like Gridco Systems and power electronics giants like ABB and Cree, is seeking to solve emerging grid challenges that old central control systems and legacy electromechanical equipment simply can’t handle, he said.

“To really manage the grid going forward, the old command-and-control model is not going to be sufficient,” Divan said. “You have to add a decentralized control component to it, and a little decentralized monitoring as well.” (Divan will be speaking at Greentech Media’s Soft Grid 2013 conference this week in San Francisco, alongside a host of companies and utilities pushing next-generation technologies like these onto the grid.)

While Varentec has already been working in pilots with test customers including U.S. giants Duke Energy and Southern Company, as well as U.S. rural cooperative utilities represented by the National Rural Electric Cooperative Association (NRECA), now it's looking at taking its first products to commercial scale. The new funding is meant to “fund the production rollout of Varentec’s intelligent power monitoring, control, and data analytics solutions for U.S. and international electric utilities,” as well as for industrial applications, according to Monday’s release.

Divan said that Varentec already has “a lot of units out in the field now, many hundreds, and we’re getting some really good data from the field, some good understanding, and learning a little bit more from the market.” The company previously raised a $7.7 million Series A round from investors including Khosla Ventures in early 2012, as well as a $2.2 million Department of Energy grant in 2010, and a $5 million grant from the Department of Energy’s ARPA-E “blue sky” research grant program in 2011.

While Divan declined to comment on which grid equipment partners Varentec might be working with on bringing its technology to wider markets, it's noteworthy that one of the members on its board of directors is Witold Bik, vice president of the automation systems division of S&C Electric Company. The Chicago-based grid technology vendor has been a leader in automated, self-healing grid equipment, and is also making a push into grid-integrated energy storage -- both areas where Varentec's technology could play a valuable role.

Building the Digital Power Network From the Edges of the Grid

Varentec’s technology is called ENGO, for “Edge of Network Grid Optimization,” and includes digital power control devices that can work autonomously as well as with traditional utility grid operations systems, plus the software and analytics to put them to use.

In February, the company launched its first product line, its ENGO-V hardware devices for distribution circuits. The devices combine grid monitoring and wireless communications with the ability to actually alter line voltages, using some power electronics and analytics that constitute the core of the company’s intellectual property.

One key application for ENGO-V devices is in volt/VAR optimization (VVO) and conservation voltage reduction (CVR), Divan said. CVR and VVO projects seek to manage voltages from distribution substations down to end users, to slightly decrease wasteful over-voltage conditions and thus save energy, while also keeping them within minimum operating boundaries.

But “a lot of people implementing CVR schemes were starting to run into problems,” Divan said, “because if you have one load that’s one volt too low, with preceding technology, you have to raise the entire feeder voltage” to keep that one problem circuit within operating boundaries. While there’s little that traditional CVR technologies can do to fix those problems, Varentec’s ENGO-V devices “can go in and literally fix those voltages, to squeeze the benefits out.”

There’s an even greater problem emerging for utilities that have deployed smart meters (AMI) or distribution sensors in places they’ve never had them before, he said. That’s the discovery that voltages out at the ends of their network aren’t actually as solid as their static models had presumed. “What we’re finding is that utilities have very poor information about what the loads are actually doing. When they put in AMI, they find out -- and now they have to go and fix it.”

And that's not including new disruptions to end-of-line voltages, such as customer-owned rooftop solar, which can feed power back onto the grid in unpredictable and unmonitored ways. “Distributed solar is a freight train that cannot be stopped -- but there’s no way to handle the amount of solar power that people are putting back on the grid,” he said.

That’s where Varentec’s software and analytics platform is playing an increased role, he said. The company’s ENGO-V deployments already come with software to manage the devices’ automatic and centrally controllable functionality to meet grid operator needs, with real-time grid voltage monitoring and apps for VVO and CVR.

Now Varentec is adding new analytics capabilities, such as real-time current and power factor monitoring, as well as asset monitoring, to expand the list of tasks that it can provide grid operators. These are the same kinds of data analytics offerings being offered by the likes of Oracle, IBM, SAS, Teradata, EMC, SAP, General Electric, Siemens/eMeter, ABB/Ventyx, Schneider Electric/Telvent, Toshiba/Landis+Gyr and many others -- but Varentec’s are tied specifically to its digital power control capabilities.

As far as when features like these will hit the market, “We are just beginning to roll that out, so it’s early days for us,” Divan said. So is the continued integration of Varentec’s software into distribution management systems on offer from all the grid giants, he added.

Digital Power Routers to Transform the Heart of the Grid

Varentec is also applying its technology to more central parts of the grid via its “Power Router” technology. That piece of hardware, being developed as part of the $5 million ARPA-E grant it won in 2011, is aimed at utilizing “dynamic power flow control technology, which can direct power on a specific pathway,” along transmission and distribution networks.

“This is a really interesting tool that doesn't really exist anywhere” on the grid today, is how Divan put it. “That’s why the ARPA-E folks were so interested.” In simple terms, the power router controls the flow of electricity where two power lines come together, injecting voltage in a way that controls both real and reactive power on those lines, and allowing for far more specifically directed flows of electricity from one point to another.

Similar tasks are done on the grid today in applications like high-voltage direct current systems, but they involve large-scale transformers and back-to-back power electronic converters that make them impractical for all but the largest projects. Varentec’s power routers are aimed at performing similar tasks at sub-transmission or distribution grid voltages, with corresponding weight, size and cost reductions, he said.

We’ve seen other research projects apply similar concepts. The Electric Power Research Institute is testing “Intelligent Universal Transformer” technology to link direct current fast EV chargers to medium-voltage grids, for example. In Japan, a group of companies has formed the Digital Grid Consortium, which is working on modeling and equipment specifications that could allow large-scale grids to operate as independent “cells” that don’t rely as much on the constant synchronization of power across entire regions.

Andrew Dillon, Varentec’s vice president of business development, told me at a February ARPA-E conference in suburban Washington, D.C. that Varentec’s 13kV/1 megawatt dynamic power router device was being tested in the lab, with plans to work with partner Georgia Tech to test three more on a “virtual grid” later this year and to launch a pilot with big Southeastern utility Southern Co. around the end of 2013.

Divan said this week that Varentec’s power router technology is “much further out as a product” than its grid-edge systems, with its Southern Company pilot set to start its first field tests in mid-2014. That’s in keeping with the timescales we’re hearing from other industry participants doing this type of first-of-its-kind work, which still has to prove itself before it can even begin to play a role in utility and grid operators’ long-term capital expansion and replacement plans.

As for proving out whether Varentec’s technology is going to play a part in this transformation, “The pilots are in, they’re doing well,” he said. “Now the question is how we can scale.”


There's a revolution underway at the edge of the grid. Distributed energy resources, new customer energy management solutions, grid-scale energy storage and other disruptive technologies are forcing utilities, grid operators, regulators and the energy industry at large to adapt with new infrastructure, market designs and business models.

Greentech Media calls this space the grid edge, and is launching a new research practice to deliver valuable insight into the technologies, solutions and business models advancing this transition towards a decentralized, distributed and transactive electric grid. We're also forming the Grid Edge Executive Council, an exclusive group of industry decision-makers who will work in tandem with GTM Research analysts in charting this path forward. Stay tuned for the launch of Grid Edge -- and join us.