Innovations to Accelerate Renewable Energy Adoption: DERs, Storage, and Digital Technologies

Vertech Capital
Mar 27, 2019 · 6 min read

Hong Kong, 13 March 2019 — Sheryl Foo, Director of Vertech Capital, was invited as a panelist at Baker McKenzie’s 3rd Annual Global Renewable Energy Conference: Powering the New Energy Transition to share her expertise on digital innovations in the energy sector. The conference was held in Hong Kong on 13th March, 2019.

Hosted by global law firm Baker McKenzie, the 1-day conference brought together leading industry experts and leaders to discuss critical topics including the rise of digital technologies for smart grids, trends in offshore wind, corporate power purchase agreements (PPAs), and risk appetite for institutional investment in the energy sector. The conference was opened with a Women in Renewables Breakfast hosted by the Women in Renewables Asia group, and speakers included attendees from Bloomberg Intelligence, Engie, Asian Development Bank, Google, and EDF Renewables among others.

Panelists from left to right: Sheryl Foo, Director, Vertech Capital; Yisha He, Founder and Chairwoman, Unisun Energy Group; Harsh Thacker, Senior Storage Analyst, Customized Energy Solutions (CES); and Paul Curnow, Partner, Sydney, Baker McKenzie.

Powering the New Energy Transition

As part of a breakout panel titled “Focus on Innovation: Distributed Generation, Smart Grids, Electric Vehicles, Storage, and Digital Technologies”, Foo discussed dynamic innovations changing the landscape of the energy sector, and how digital technologies are presenting solutions to accelerate distributed energy resources(DER) adoption across Asia.

The panel highlighted that digital innovations allow utilities to prioritize distributed generation, smart grids, electric vehicles, and storage. There are four emerging trends in energy sectors across Asia Pacific:

  1. Decentralized Markets and Energy Generation
    Energy markets across Asia are liberalizing to incentivize investment in low carbon technologies through competition. There has also been increased interest in decentralized energy generation through rooftop solar; common initiatives for distributed generation include off-grid DER for energy access and urban microgrids.
  2. Digital Technologies for Smart Grid Roll Out
    Industry Interest in smart grids is shifting from power generation to grid modernisation, especially in issues related to resilience and reliability for transmission and distribution infrastructure.
  3. The Rise of Electric Vehicles
    Electrical vehicles (EVs) are hailed as a silver bullet to resolve urban environmental challenges such as carbon emissions and air quality. Investment trends indicate that EVs are expected to become decentralized, digitized, autonomous, and shared in the next decade.
  4. Decreasing Cost of Energy Storage
    The decreasing cost of energy storage systems (ESS) will be crucial in defining the technology’s deployment for different applications. ESS enables grid balancing by reducing the intermittency of renewable energy generation, and can be used to replace peaking plans and restructure power markets to incentivize DERs.

Commercialization efforts for these technologies, however, have been limited due to challenges in scaling projects beyond the pilot stage. Challenges include slow policy reform to support decentralization, high capital expenditure (Capex) of infrastructure, and the incompatibility of traditional financial mechanisms with the risk profile of emerging markets in Asia.

Interpreting Trends and Innovation

Utilities and energy companies must stay agile in a digitalized and liberalized energy market. A two-pronged approach must be taken when predicting trends in the market:

  1. Recent, historical developments — understanding and analyzing recent developments in the industry allows us to predict trends for the next 3–5 years. Decarbonization of the energy sector is becoming a priority for governments to meet climate change goals. At the same time, 100% electrification is important to meet the UN’s Sustainable Development Goals (SDG). DERs present a cost-effective solution to simultaneously meet these targets through off-grid initiatives deploying rooftop solar and biomass plants; rural and urban microgrids that incorporate solar and storage systems; and digital technologies that increase the operational efficiency of DER hardware.
  2. Exponential Trends — Energy companies must look beyond a 3–5 year timeframe and decipher new signals of change that often come at us in fragments. For example, there is increased movement towards an open innovation ecosystem where the linear model of energy production and consumption is changing to give rise to ‘prosumers’ and increased consumer choice. In new decentralized energy ecosystems, however, the technologies that enable these futures must scale to avoid the ‘pilot trap’ while complying with privacy and regulatory challenges.

Digital technologies including blockchain, artificial intelligence (AI), and robotics are introducing new solutions for DER adoption. Some applications, such as blockchain for peer-to-peer (P2P) energy trading, aim to transform the way energy is produced and consumed. Other applications focus on increasing operational efficiency, such as drones for detection and resolution of faults in DER infrastructure.

Innovations from other sectors can be used to accelerate DER adoption and promote cross-domain applications. For example, the rollout of 5G networks are being coupled with edge computing in the manufacturing industry to improve efficiency in supply chain functions. This application can be deployed in the energy sector for data computing closer to the edge of the network, namely smart meters collecting data, for real-time grid balancing and fault detection.

Drivers and Barriers for Energy Innovation

Investment and policy are two key drivers of innovation in DERs and storage.

High-risk, high-reward investment funds focused on energy innovation will be required to support commercialization of energy technologies despite longer returns on investment (ROI). Majority of the investments in this space in Asia are driven by the private sector, including incubators and corporate venture arms.

However, given the high Capex of infrastructure required for energy projects, investment structures need to be remodelled to de-risk upfront payment by consumers and be adapted to the high-risk profile of emerging markets. From the use cases evaluated by the discussion panel, this remodelling can be effectively achieved through consumer-centric offerings for rooftop solar installations, subsidies and tax credits from public sector financiers, and grant schemes for city-specific pilot projects that accelerate DERs. Regular engagement between investors, banks, and regulators is therefore necessary to ensure financial mechanisms are supporting of energy technologies.

On the policy side, regulators must allow testing and scalability of technologies to evaluate policy reform required for commercialization. Given that energy is a heavily regulated infrastructure-first industry, public-private sector partnerships are important for innovations to accelerate. Project testbeds, research institutions, and government-supported incubators are a few ways startups, corporations, research institutions, and government players in APAC are collaboration. Singapore’s government, for example, has created an ecosystem that fosters industry heavyweights including GE, DNV-GL, and Siemens to establish APAC hubs. These hubs invest in and pilot solutions with local and foreign energy startups.

The biggest barrier to the growth of renewables and digital energy innovations is the feasibility of integration with existing infrastructure. The current state of grid infrastructure in several markets in APAC presents technical and product integration challenges particularly for digital technologies that require real-time data processing. Infrastructure must be resilient, secure, and must accommodate the bi-directional flow of energy between production and consumption sources without destabilizing the grid.

Policy, with regards market structure as well as infrastructure deployment, often reforms very slow to include market competition, and DERs are often perceived as a competitor for utilities. However DERs and digital technologies also present new business opportunities and can be a new source of revenue if utilities’ role shifts to a service-based model.

Vertech Capital partners with innovative companies to help them scale in new markets. We curate and manage a global portfolio of cutting-edge technologies and investments, with traditional expertise in the energy sector.

Based in Singapore, our advisory arm focuses on the commercial translation of innovation, including disruptive technologies like blockchain and artificial intelligence. We are committed to building a global innovation ecosystem to accelerate access to the 4th Industrial Revolution.

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