(Over)heard at DistribuTECH 2024
More than 17,000 professionals congregated in sunny and warm Orlando at DistribuTECH 2024 to talk about everything grid-related, spanning alphabet soups of DER, VPP, AMI, V2G, and AI. In fact, it was more than a soup - it was a melting pot: the exhibition floor buzzed with energy from over 600 exhibitors, the technical program sessions hosted more than 400 galvanizing speakers, and more than 8 different startup competition sessions illuminated the future potential of technologies.
My focus for the conference was on the pivotal technologies that are reshaping the energy landscape: DERs & VPPs, V2X, microgrids, and AI. Some takeaways below:
1. Distributed Energy Resources (DERs) and Virtual Power Plants (VPPs)
I wanted to learn how to accelerate the value capture for DERs, as enabled by VPP deployment and FERC-2222 policy support. Some of the insights that I’ve gathered during the conference are below.
Most speakers and professionals I met at the conference were very bullish on the changing tide over DERs. The transition of consumers to prosumers is gaining momentum, driven by a demand for energy solutions that are not only cost-effective but also reliable, safe, and environmentally friendly. This pushes for more widespread DERs and in conjunction, a need for aggregating and optimizing mechanisms across DERs such as VPPs. In 2023, VPPs delivered 30-60 GW of peak demand capacity; and the target is 80-160 GW by 2030 (note: the US consumed 438 GW in 2023). On the policy side, this is supported by the FERC Order 2222, which enables any DERs of 100 kW or more to participate in the wholesale energy market.
Part of the equation for this macro trend is the role of the utilities. Utilities are leveraging their unique monopoly position to deploy and operate solar and batteries across both residential and commercial sectors. They are working with the respective public utilities commissions to explore more dynamic pricing models, rebate programs, and other subsidies. On the residential front, homeowners, especially those who are not associated with HOAs, are increasingly integrating batteries into their energy mix. However, some meet challenges with hardware issues (e.g. significant electrical upgrades that pose financial and logistical barriers), as well as software issues (e.g. cybersecurity requirements and telemetry needs for rapid ramping).
2. Vehicle-to-X (V2X)
It’s exciting to see California's rule that all new cars must be electric by 2035 is being picked up by 17 other states. In contrast with the optimism from the policymakers, there's a widespread concern among the industry players over insufficient customer demand for EVs right now. In this vein, I wanted to understand more about the deployment roadblocks from the perspectives of utilities, energy market, and regulatory bodies.
I heard mixed sentiments from the conference floor. While many were excited about the potential of EVs providing essential grid services, several concerns were prominent. On the consumer side, the impact on EV battery state of health and vehicle residual cost calculation, as well as the lack of clear value proposition were heard. On the utilities and balancing authorities’ side, cybersecurity and unreliable vehicle availability were heard. Adding to the complexity was the regulatory boundaries of charging/discharging management, i.e. does EV charging fall into the jurisdiction of utilities, or can it be fully third-party managed? Utilities believe they are best positioned to do so because they own the meters, and are closest to the end accounts. They are now closely studying customer needs and developing specific demand response programs to drive customer sign-ups.
On the technology front, external inverters were preferred due to current connection standards, but high infrastructure costs and hardware/software standardization for interoperability remain as the key blockers for commercial lift-off. While some startups are trying to address these issues, utilities present at the conference suggested focusing on solving the fundamental technology problems first, rather than concentrating on cost. The bottom line sentiment I got was - the integration of EV batteries into the grid energy mix is an exciting opportunity, but a breakthrough has yet to be demonstrated to overcome technology and regulatory challenges.
3. Microgrids
Microgrids have been a darling of the next generation of utility businesses for some time due to their resilience against the increasingly volatile grid, yet they haven’t taken off for various reasons. During the conference, I wanted to understand its value of resilience and monetizability, in the eyes of communities and energy retailers.
The benefits of microgrids are twofold: at the transmission and distribution (T&D) level are reliability, resiliency, capex deferment / avoidance, and local system balancing; at the bulk system level, benefits include market-based system balancing, carbon reduction, and energy market fluidity. For these reasons, some utilities have been quite active in pursuing microgrids, providing EPC and operations services for customers who want to avoid working through the development process on their own. Note third-party microgrids typically don’t want either utility-owned and/or utility-operated microgrids because of control (which generates revenue); however, utilities claim it’s their job to reliably and securely operate the grid, so they tend to reject proposals for third-party microgrid development that require the utilities to cede the control.
Despite their advantages, microgrids face significant challenges: 1) quantification of benefits as aforementioned, which include resiliency, renewables integration, and stacked values (e.g. ancillary services), 2) supply and labor constraints, and 3) complex and resource-intensive interconnection study such as on islanding, voltage shifts, and direct transfer trips. Duke Energy gave an example during the conference, where after 1 year of interconnection study, they realized only 1MW of battery storage can be connected, instead of the 2MW that they had planned. I’m still optimistic about microgrids, however, because as we increase renewables on our deteriorating grid systems, the need for resilience and local reliability will grow.
4. AI
AI is perhaps the most hyped topic of this year, and the grid industry is no exception. From the opening keynote speech to several panel sessions, the conference was full of AI discussions. Also, the grid industry serves a critical role in AI, as the shortage of 24/7 clean and reliable energy is one of the three blockers that are preventing even faster acceleration in AI development, as noted by the keynote speaker Zack Kass (the other two being the compute / chip shortage and the policy / regulatory support).
I wanted to understand how the bits (industrial AI) would influence the atoms and electrons (grid), especially from the perspectives of AI startups that strive to enhance grid operation processes. But first, some existential and thought-provoking points I took away: “We will achieve artificial general intelligence (AGI) by 2030”, Zack notes, which is the root of the widespread fear of job displacement. This has a deeper meaning than the mere loss of jobs because for many people it means the displacement of their identity. In a world where AI becomes the utility just like the grid and the internet, the challenge for us will be how to design our lives and work for the things that AI cannot do, i.e. optimize for humanistic qualities and skills.
On the operational AI startup side, utilities present at the conference floor noted that AI startups are perhaps more difficult to thrive with utility partnerships than hardware startups because AI startups need to buy into the entire ecosystem for data access. The AI startups often need to sell to the hardware providers of the utility company, i.e. not directly sell to the utility, leading to the lopsided power in the distribution channels and longer sales cycles. Some additional challenges for AI startups include utilities’ hyper-sensitive stance on cybersecurity, the utility control room being very conservative and resistant to change, and internal resistance to cooperating with and educating the startups on the individual utilities’ specific operational processes and internal systems. Overall, I heard somewhat negative sentiments against AI use in utilities operations, which makes me believe that we won’t really achieve AGI by 2030 in the very risk-averse grid industry.
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Title image generated with DALL-E on ChatGPT using the prompt: “Draw me a photorealistic image with the DistribuTECH conference trade show floor, where representatives from utilities, grid regulators, energy technology startups, and investors discuss new technology, policy, and business.”
About the author(s)
Dennis Cha is an MS/MBA candidate at Harvard Business School focused on energy and climate. Prior to Harvard, he worked at Google on hardware supply chain, with PG&E on electric infrastructure operations and wildfire analytics, with SoCalGas on asset decarbonization, and at Taslimi Construction on sustainable construction management. He is trained in civil engineering and data science, and began his career in structural engineering. Outside of work, he enjoys scuba diving, youth mentoring, and traveling.