Market Insight

Software was the key focus at DistribuTECH 2018

February 05, 2018

Camron Barati Camron Barati Senior Analyst, Solar & Energy Storage
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DistribuTECH is one of the largest events focused on distributed energy in the United States and is highly attended by utilities and their partners. This year the focus has clearly shifted away from distributed generation and hardware towards software, aggregation, and effective management of distributed energy resources (DERs). Many vendors have entered and grown their presence in the market over the past year and sought to use DistribuTECH as an opportunity to educate the audience on their progress and how they differentiate from the competition.

The IHS Markit solar and energy storage team attended DistribuTECH; below are some of their key takeaways from the event:

Utilities were the primary audience, and everyone wants to sell to them

  • DER aggregators such as Stem Inc., ENGIE Storage (formerly Green Charge Networks), and Sunverge were all focused on proving to utilities and energy managers that their software solutions can effectively manage and optimize DER assets, primarily concentrated on behind-the-meter solutions. To date the utility sales channel has been slow to develop due to the slow-moving nature of the industry and regulatory hurdles, but interest continues to grow as pilot programs progress and the amount of systems deployed and operating increases.
  • While some utilities have had to mature quickly due to the rapid adoption of such technology in their territories, others were in attendance to learn about the coming wave of DERs and how they can be harnessed to provide valuable grid services. Regardless of their past experiences, it was clear that utilities across the United States are willing to pilot and understand emerging opportunities.

Solar PV and energy storage hardware vendors were few and far between

  • There was a big focus from conference attendees on being technology agnostic. With utilities being the target customer audience, vendors seemed less concerned with showing off the latest hardware (either from a storage or power conversion point of view) and more interested in demonstrating how such technology and assets could be controlled by a utility to provide value to their grid operations.

DER vendors are either getting into software or developing strategic software partnerships

  • Most of the companies offering solar PV, energy storage, or generally DER solutions were primarily focused on offering software services for the optimization and control of such assets. Every vendor seems to have some offering for managing DERs to make them more valuable for utilities, both in a reactive sense to manage the rapid growth of third-party deployments behind-the-meter and in a proactive sense to enable utility-driven deployments and program planning.
  • While reactive measures by utilities may have been the greatest driver of DER software management to date, particularly in markets such as California and Hawaii, the proactive opportunity for utilities to effective manage the growth and value of DER is gaining recognition, particularly as the regulatory landscape evolves to promote the adoption of DERs in key markets.

The landscape of software providers is not simple to follow

  • For starters, every vendor claims to be able to manage DERs, but how they approach it can be quite different. DER management system (DERMS) vendors such as Siemens and GE Power offer software platforms that can be integrated with a traditional utility SCADA or software layer to manage distribution level assets and send signals to customers and aggregators so they can respond to the various needs of the grid, including demand response, curtailment, etc. Essentially a top-down approach to managing DERs.
  • DER system aggregators such as Stem Inc. and Sunverge claim to have a similar solution for utilities by employing a bottoms-up approach which provides additional access to behind-the-meter data resulting in higher granularity and capabilities, eliminating the need to rely on multiple third-party vendors acting as an intermediary. Furthermore, vendors such as Enbala and AutoGrid also tout solutions that can aggregate behind-the-meter assets and integrate with utility system operations.
  • Acquiring the primary software relationship with the utility seems to be key for success. Because the burden of juggling multiple software vendors and platforms can quickly become overwhelming and detract from the value of services, having a centralized software management platform is preferred in many cases. A battle between behind-the-meter aggregator focused vendors and DERMs focused vendors appears to be developing, each eager to encroach into the others territory.
  • To further complicate matters, DER installers such as Sunrun, Tesla, and Vivint Solar are also eager to find an appropriate position in the utility-focused side of the DER market, each taking a mixed approach to what software aspects to keep in-house or enable through partnerships with third-parties. Though such installers have historically been in conflict with utilities over policies such as net metering, unless regulatory hurdles are overcome that currently prevent installers and developers from viably owning and operating aggregated DERs within regulated utility markets, such companies will continue to seek opportunities to work with utilities where it makes sense and leverage partnerships with software vendors to enable grid services.

The market for commercial behind-the-meter storage has expanded rapidly while residential storage opportunities have been slow to emerge

  • Commercial opportunities continue to grow as utilities and system suppliers are able to target and optimize attractive rate structures to address capacity needs and demand charges. Market leaders such as Stem Inc. and ENGIE Storage are finding success by securing partnerships with utilities to develop and manage behind-the-meter energy storage systems directly for commercial customers or work with customers hand-selected by the utility if the program is more exploratory in nature.
  • Residential storage has been slower to take off and has been relegated to primary markets such as California and Hawaii. Policy incentives such as California’s Self-Generation Incentive Program (SGIP) and Hawaii’s elimination of net metering for solar have been the primary drivers of demand, in addition to limited, but growing, demand for back-up power capabilities. In general, residential energy storage vendors at DistribuTECH admitted the market has been slow to grow, but the opportunities and business models that will help the market mature are still evolving. Pilot opportunities with utilities to enable virtual power plants by aggregating residential assets are only just now starting to emerge in select markets, but the potential has some exciting prospects for vendors and their utility partners. Additionally, as net metering for solar PV continues to be revised in markets where DER penetration rates have risen to disruptive levels, the value proposition of pairing solar PV with storage grows and will serve as an additional driver. Rate design changes to time-of-use rates that further degrade the value of stand-alone PV generation will also increase demand for residential storage by allowing the PV generation flexibly address periods of peak rates and demand into the morning and evening hours.

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