Distributed Energy Resources
Meet Rakhesh Martyn, VPP Product Manager at Evergen who talks about DERs and why they are valuable.
Tell us a bit about your background and your role at Evergen?
After studying chemical engineering at university, I worked in a large-scale petrochemical plant design for about six years. In 2015 I moved into energy, working for a demand flexibility aggregator in London. I worked in and around that part of the industry for about 18 months including a stint at one of their big six utilities doing distributed energy resources (DER) engineering work, before moving to Australia in 2017. Prior to starting at Evergen, I spent four years in sales and project engineering at the largest market-facing aggregator of behind-the-meter capacity in the world.
Evergen started as a single-site, single-home battery optimisation business that has grown impressively into fleet-management across thousands of homes, and providing services to retailers and Network Service Providers. My role is to see how we can take those capabilities and translate them into larger-scale applications for business customers, as well as for what we call front-of-meter applications, which are sites that were built purely to generate electricity. What we do and the way that we do it is scalable, so it’s about finding the best and quickest way to do that.
You’ve been in the energy market or industry for quite some time. Tell us a bit more about some of the key changes that you’ve seen in the last five years in regards to renewables in Australia?
Whenever we talk about energy, I like to separate it into the financial and the physical. There’s financial transactions that occur, and then there’s also the physical transfer of electricity from point A to point B. There are two major events that stand out in my mind relative to these.
The first of was the announcement in 2016 that a large power station, Hazelwood, was going to close about six months after the announcement had been made.
What that meant was that in only a few months’ time, a large piece of grid-scale generation that provided consistent capacity throughout the year was going to be gone, 1.6GW gone just like that. And that triggered a huge shock amongst the industry and the future outlook on price went up significantly. One of the reasons the owner of Hazlewood gave for closing the plant down was their desire to move towards investment in low-carbon energy sources.
Generally, we consider the retirement of coal-fired power stations to be a good thing, but that announcement actually led to a significant financial impact because the outcomes were not well planned or forecasted. So when a C&I customer went to renew their retail contract(which occurs yearly or triennially), the tariffs on offer to them had jumped up significantly. Many of the customers that I came across at that time were saying, “Look, my energy bill has gone up three times. What can I do?”. From the outsider’s perspective, Australia is a trailblazer when it comes to renewables but this situation gave renewables a bad name, because a lot of the chat in the industry at the time was, well, if this reliable generation hadn’t been taken away in favour of new renewables that are coming in, then none of this would’ve happened.
To me it is just a symptom of very poor planning. This is one of the major events that drew a line in the sand and we started to see change. Change in public consciousness around the topic and an onslaught of opportunity was realised. A lot of new market ideas gained traction, ideas started to be designed and new entrants came in with behind-the-meter capacity using technology that had started to improve globally. The options for stuff that we could do in Australia started to increase. And the uptake of rooftop solar PV was starting to really take hold around that time.
The second major event that has affected the industry in the last five years relates to the physical side of things. The system black event in South Australia in 2016, which highlighted how much of a problem system security was, and AEMO and Network Service Providers (NSPs) started to pay a lot more attention to it. Elon Musk wrote that famous tweet that then gave rise to the Hornsdale Power Reserve being connected towards the end of 2017.
“Tesla will get the system installed and working 100 days from contract signature or it is free. That serious enough for you?”
Elon Musk on TWITTER
In my opinion, that was really when people started talking about batteries in a big way in Australia. To most people, a battery is just a small cylinder that you put in your torch or tv remote, but now we can see these huge containers and supposedly they’re going to save our electricity supply in Australia.
Batteries are really something that everybody’s talking about now with regards to plugging the gaps around firming capacity. As renewables are intermittent, firming capacity plus renewables is a match made in heaven to kind of dispel the myths around reliability of renewables. We shouldn’t fool ourselves into thinking that if you take away an engine that’s going to keep rotating no matter what, and replace it with something that’s dependent on the weather, you’re going to get the same outcome. Of course you’re not, right? But we have to accept that taking that rotating thing away is something we have to do if we want to reduce our emissions.
We are replacing it with something that’s beholden to the weather. So we need to find ways to make that, in terms of security of supply, a sustainable solution for the future, and that is where this firming capacity comes in. The public understanding and even business consciousness around that now has started to change because at the very beginning, there was a significant focus on the price of electricity and let’s do whatever we can to bring our electricity costs down.
Over the last two to three years, I’ve started to notice that people are also now thinking about how they can meet ESG goals, get more solar on roofs across business sites with batteries and improve our carbon credits. These are all things that people are starting to think about, and that really has been maybe towards the back end of this last five year period.
How do you think Australia is comparing globally, in terms of the transition towards renewables?
We’re at the front of the queue, right? It’s pretty exciting to be here. If you think about it from an energy nerd’s perspective, most people want to work in Australia or on Australian projects because we have such unique markets and networks. We have an energy-only market settled every five minutes, with ancillary services being purchased by the market operator to prop up the security of supply on the side. That’s it! That’s not many things, there’s not much that’s actually being done there and the whole system just works. There are new forms of grid-scale renewable energy capacity being announced all the time, there’s old capacity that’s being retired. AEMO’s most recent ESOO suggests that security of supply is not going to be a major issue over the next ten years, which is huge news.
That retirement is actually probably going to be accelerated now the more renewables come on. I think Australia are true trailblazers. Many people around the world really recognise and respect us for that. Unfortunately the maturity of the market is not quite where it should be to match the degree of sophistication that’s really needed. But from my perspective, I think that’s a huge opportunity for businesses to come in and really take advantage of those gaps.
If you look at somewhere like the UK, there are like six or seven aggregators there. These are people who are not retailers, they’re not generators, they are aggregators. They focus purely on behind-the-meter stuff and are market-facing as well. And they’ve been doing it for a long time, they’ve been doing it for ten years maybe, and they’re all really, really good at doing it. So they’re all looking for small points of difference now and it’s got to the point where they’ve done that 80% and they’re looking for the additional 20, whereas here in Australia, there’s maybe two or three players like that, if that, and everyone else is still trying to figure it out. So we’ve got this kind of combination of not a very mature marketplace, but a very advanced network, which is very exciting to be in.
Tell us about DERs in Australia. Can you describe what a single-site environment might look like and how we optimise that site?
The cost of energy for any consumer, for any business, is broken down into two major components. The first component is the retail component (this is the financial). The retailer has to procure electricity from the wholesale market in a purely financial transaction to make sure that everything that’s recorded on your meter is accounted for by an accompanying market transaction. The retailer doesn’t physically transport any electricity to you, but they have to meet that financial obligation.
This makes up around 50% of the energy bill, roughly speaking. The other rough half of it is the physical component, which is for your network service provider to physically deliver energy to your door. This electricity has to come from the NSP’s network, and they have to make sure their network is capable of managing all of the consumers in their area. What that means is: when each of these consumers is at their peak demand, can I supply them and is my network going to stay stable? There are some other small components of an energy bill, which are not really worth talking about like subsidies and so on that have to be recouped, but the network cost and the retail cost are the two major components. These are the two things that we optimise against. This is what your goal is. If you can optimise against your position relative to those two things, then you can bring your total cost of energy down significantly.
Let’s use the example of a hospital with battery and solar to talk about single site optimisation.Say the hospital has 1MW of flat-ish demand that goes up a bit during the afternoon, especially in the summer. They’ve got 500kW effective capacity of solar and a 1MW/2MWh battery. During the day the site’s grid import is reduced by 500kW and the battery has been charged overnight, so is sitting idle for a time in preparation for later.
Let’s talk about your financial component. Your retailer typically is going to charge you a tariff based on peak rates and off-peak rates. Peak rates are during the peak period of the day and your off-peak rates, no prizes for guessing, are during the less busy periods of the day. So when you know your peak rate is being levied, it’s in your interests to consume less from the grid, and typically solar is the thing that helps you to do this, but also individual customers are using batteries to extend the impact of solar later on in the evenings. This means your well-optimised solar + battery combination will help you to minimise your electricity consumption when your retailer’s charges are highest.
Your network service provider also will charge a peak demand tariff in certain ways, which accounts for a high proportion of your bill as mentioned earlier, the physical component. In some parts of the country, e.g. in Victoria, most of the DNSPs will charge their network tariff 24 hours a day, seven days a week, throughout the year, which basically means if you have a flat load profile, you can’t do much to reduce that charge. There’s no battery that’s going to last you 24 hours to bring your capacity down significantly for that whole time. Batteries may help you if you have a peak that only occurs at certain times of the day. Certain network service providers will levy that peak demand charge during certain windows of certain days of the week, which presents a really good opportunity. For large businesses in South Australia, for example, it’s in the latter hours of the evening on business days only. Therefore if you take a battery and you reduce the site’s demand during that period of the day, that means your peak demand charge is going to reduce. This is what Evergen would be doing for the sample hospital if it was located in South Australia. During the day, the site import is 500 kilowatts because their solar has been taking action. And then as you go into the evening, their site load is actually going to reduce even further through the action of the battery and solar together, following which the battery will manage things for the remainder of the peak window.
If it’s a 2MWh battery, it gets to 5pm and your solar is starting to drop off. You start to discharge your battery over a 3½-hour period. That means you are discharging just under 500 kilowatts every hour simplistically, and then your battery is nearly sapped of energy. The upshot is that it has taken you up to 9pm, which is the end of the peak demand window. And that means you have avoided/reduced your demand charge for that day.
Overnight, prices are going to be low (you are in the off-peak component of your retail tariff) and site demand is likely to be lower, so you can then import a little bit of extra electricity to recharge your battery. You can trickle charge it if you want, or you can charge it quickly in such a way that your peak demand is not exceeded. Evergen’s software will ensure that these peaks are not crossed. And then it’s ready for tomorrow. Now that’s all in a single day. All the while, we are looking ahead, setting a schedule for the next 48 hours. We’re looking at the weather, pre-dispatch prices, and trying to make sure that the battery is always going to be ready for what is coming. The closer you get to the interval when the action is to be taken, the more accurate the action is going to be, but generally speaking we want to charge when the price is low, and want to discharge when the price is high. This can be relative to a time-of-use tariff or even wholesale price exposure. We also want to make sure that a peak demand threshold is not exceeded. Those are the two big wins Evergen’s software offers for a standard customer, but we also provide access to other markets where these are available to the customer.
An alternative to this is that the customer has solar and a battery, and the battery just runs, does the same thing every evening to extend the impact of the solar. Now don’t get me wrong, this is still a pretty good set of circumstances, and most customers who do this are benefiting greatly, but we improve on this even further. You can significantly enhance your payback through machine learning. With every action Intelligent Control takes, it is learning from the site. It is predicting: okay, today is a Tuesday. What happened last Tuesday? How will this site behave today based on our data-driven predicted profile of this site?
Commercial and industrial sites especially have generally predictable load profiles. Even if load increases, it tends to increase with some degree of predictability and certainly not by surprise. Machine learning is pretty handy asit can predict everything that’s going on and improve the performance of the assets as a result.
Quantification of our benefits depends on the circumstances. Where demand charges are levied across a specific window, we have seen that we’re able to make a significant, positive impact to the payback period of a battery, to the tune of 20-35% versus just having a PV array and battery on their own.
How do DERs help the grid and the planet?
There are two major things to think about here. One of them is what’s happening to the grid-scale capacity that’s already in existence.The other is what are you doing to prevent new capacity from being built. I’m always a fan, at an individual level at least, of doing more with what I already have before I start to think about getting new things. That’s why I love DERs really, because the origin of demand-side response was load curtailment or switching to on-site generation when the grid needed it the most. This would mean that high wholesale prices didn’t continue for a sustained period, and also started to provide proof of concept to grid operators that the demand side could play a huge role with existing assets, removing the need for building expensive new power plants. Over time, this has evolved into the great behind-the-meter battery technology we see today, providing firming capacity that the grid really needs.
If you think about it, electrification is increasing across the world, mostly in developing countries but also in countries with quite mature power systems. Demand is not necessarily increasing across the board, it’s mostly peak demand that’s going up, which is certainly the case in Australia. Generally speaking, because rooftop PV is starting to increase, minimum system demand is actually going down. So you’re seeing what we call the duck curve. The back end of that duck curve is what is starting to get higher in places, and a power system needs to be ready for its most tense time. Networks have previously required augmentation to deal with a scenario that is experienced for maybe 1% of the year. That augmentation costs a lot of money. Instead, DERs can contribute to providing that capacity for 1% of the year such that that peak can be dropped down and flattened out (flatten the curve, where have we heard that before?), and that means you don’t have to build out the network to deal with something that may never come. It’s difficult to make the case to some people who work in system planning teams because they’re used to relying on things they’ve built and can see with their own eyes, but the more of it that happens, the more likely they are to take it on and accept that this is really something that works. That’s something that DERs are really doing to help the grid – avoiding the need for expensive new single-function (i.e. built only to generate into the grid) assets.
If you can prove that DERs are providing you with equivalent capacity that is firm and reliable, then that means you don’t have to build new stuff. If you think about the reliability that exists, people always can trust what they can see and what they know works. So if I’m a system planner and I want one gigawatt of capacity, I’m going to look at all of the times that I’ve seen one gigawatt of capacity in the past, and I’m going to think, I know it works.
If it ain’t broke, don’t fix it, put another one in.
Unfortunately those are all old and very polluting types of technology, which are not sustainable. The growth and success in demonstration of DERs and their reliability is going to mean that our carbon emissions over time (as a society) can reduce because the energy industry contributes a significant amount of pollution to the atmosphere, just to be able to service our lives and our businesses. We could make a huge impact by making it so that these old fleets don’t have to be replicated in the future.
How do you see DERs working in the future in terms of new energy models?
It’s the million-dollar question. What may help is to look at how consumer behaviour is changing and the themes that they follow. Transportation is probably the next big one. A lot of legacy fossil fuel-powered transportation is being retired and replaced with electric vehicles. Everyone’s very excited about that, but it means you’ve got more stuff that needs electricity. You need more robust networks in places where previously all that they expected was a bunch of houses with kettles and air-conditioners amongst other things. All of this stuff is going to change, and we have to be ready for it. People talk about vehicle-to-grid as a big trend, because an electric vehicle that is charging in a smart way could provide valuable services to the grid when combined with others. That’s still quite fanciful in my opinion. Let’s not forget that the cars belong to individuals who can do whatever they want! Demand response as a concept has been around for ~20 years, but behaviour-driven Demand Response is still difficult to manage and most energy companies have given up on it. Incentives have to be structured carefully to make it happen, and I think V2G fits into this category to some degree. The networks are not ready to take advantage anyway but I would think that in, say, 10-15 years’ time, it’ll be a more common concept.
Businesses are increasingly going to see the value of managing their own energy consumption instead of relying on the electric grid. This has been happening for years but will become more prevalent with improving technology. And you’re probably going to see this kind of democratisation of energy at smaller and smaller scales where whole communities are probably going to be able to manage their own power needs through distributed generation systems, a combination of different asset types. That may well be the world that we’re heading towards, and I’m pretty excited about that.
Getting electricity from one place to another is hard and it’s expensive, and what we’re seeing increasingly is that it doesn’t need to travel from Tasmania to Queensland. We just don’t need to do it like that anymore. Some forward-thinking networks are actually thinking about different ways in which they can manage minimum demand concerns. It used to be that peak demand was the problem, but now the problem is the demand is going too low. Network predictions in South Australia are showing the minimum demand could be negative sooner than anticipated – originally expectations looked like ~2026 but it’s likely to occur within the next 18 months due to rooftop PV.
That’s a huge problem for them. How do they manage it? They used to have to worry about too much demand, and all of their emergency systems are set up to deal with that, but what do they do with too little? They’ll have to curtail PV in a way that isn’t ham-fisted so we can smooth it out, and that’s something that we’re offering as a service to networks now to help them. Evergen has control over many inverters, we can take a signal from them and then distribute it to thousands of homes if needed.
In closing
What I love about our part of the industry and the way we talk about it is we acknowledge that change is needed, but we see it as an opportunity for innovation and for human ingenuity to solve the biggest problem of our time. We need to ensure that humanity can progress the way it has done over the centuries, but we just need to do it in a different way. Improvements in living standards across countries correlates strongly with increased environmental awareness and more sustainable behaviour but it doesn’t work in reverse, so let’s not forget that.
We’re all smart. We’ve all got ideas. Let’s make it happen and be positive about it! There is so much we can do and so many of us working on this, let’s dive in headfirst and make decarbonisation our generation’s greatest achievement. If we made better use of the resources we have around us today, we’d make a huge dent in these issues going away soon, and the rest of the work will be well within our capabilities. That’s what motivates me to work in this part of the industry, and I know we’ll get there.
