Guest lecture on "Next Gen Grid Tech Commercialization" for Duke University Energy Initiative graduate level course entitled: “Emerging Energy Technologies – From Lab to Market.” (790-01)

1. 1
Next Gen Grid Tech
Commercialization
Josh Gould: Director of Innovation @ Duquesne Light, former ARPA-E
T2M
The following is my opinion and not necessarily that of Duquesne Light
or ARPA-E

2. Personal Background
Part 1:
Starting out
Part 2: School
of Hard Knocks
Part 3: Grid
Tech
2

3. Primer: Utilities & Business Models
3

4. Commercialization necessitates a business
model
4

5. The regulatory compact
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6. “Cost of service” business / regulatory model:
What is it?
Major capital
expenditures, like
power plants and
transmission lines, but
also buildings,
computers, fleet
vehicles, etc.
Percent return
utilities make
annually on their
investment
Regular expenses,
like labor, power
purchases, fuel,
insurance and other
costs that recur
regularly
(Rate Base Investment x Rate of Return) + Operating Expenses = Rev Requirement
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7. “Cost of service” business / regulatory model:
How is value delivered / captured?
Utility
Distribution
Transmission
Generation
Value capture: Bill payments flow from ratepayers to
the utility, in exchange for energy consumed
$$
Ratepayers
Retail
Value creation & delivery: Electrons flow uni-
directionally from utility to the customer
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8. Pros & Cons of CoS Business Model
Pros:
• Utility stability, low cost
of capital
• Investor stability
• Universal energy access
(in developed countries)
• Improving reliability
Cons:
• Inherent capital bias
• Energy efficiency
disincentive
• Narrow focus (e.g.,
carbon, environmental
justice, resiliency not
necessarily part of
business model)
8

9. Important side note: Utilities come in
different “flavors”
Generation Transmission Distribution Customer/Retail
“Vertically Integrated”: Owns and earns rate of return on entire value chain
“Wires Company”: Owns, earns return on
T&D (sometimes just “D”); some own
customer relationship
Independent Power
Producers (IPPs):
Private companies
producing bulk power in
competitive, wholesale
markets (typically “wires
company” jurisdictions)
– NOT utilities
Competitive Retailers:
Provide retail electricity to
customers, often competing
against “wires company”
and other competitive
retailers. Most (not all)
responsible for procuring
energy supply and
customer billing. NOT
utilities (but some are
utility subsidiaries) 9

10. Energy System Design Principles, Societal
Values Changing CoS Business Model
From a system historically
designed for…
Universal
energy
access to
meet ever-
increasing
demand
Improving
reliability
Minimizing
the cost of
service
Climate
change
mitigation
and carbon
reduction
Improved
human
health
through
pollution
reduction
Resilience to
natural
disasters and
malicious
threats
Increased
customer
choice and
energy
democracy
Affordability
and reduced
energy
burden
Environmental
justice for
disadvantaged
communities
System
flexibility to
incorporate
renewable
and
distributed
generation
Economic
development
…to a system with
a new, expanded
set of values
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11. Consequently, regulatory reform efforts are
changing the ways in which utilities earn money…
I. Revenue decoupling II. New DER procurement
practices
III. Shared savings
mechanisms
IV. Performance incentive
mechanisms (PIMs) V. Equalizing Capex/Opex VI. Securitization of
stranded assets
VII. Multi-year rate plans VIII. Platform revenues IX. New utility value-added
services
11

12. …which is changing utility incentives
“De-coupled”
Performance-
Based
Regulation
Description Implications
• Utility revenues “de-coupled” from electricity
sold
• Utility negotiates “revenue requirement” (all
costs) w/ regulator, compensated for costs
regardless of electricity sold
• A feature, less a business model itself – can be
paired w/ other bus models
• Greater incentive for energy efficiency
• Many different “flavors”; in general, utility
compensated on ability to meet targets
• Often focused on outcomes (e.g., environmental)
arguably not incented in other models
• Can be paired with other bus models
• Newest, most nascent model
• Highly dependent on nature of incentives
• May be more cost-conscious, less capital driven
“Cost of Service”
12

13. I thought this class was about commercializing
next gen grid tech – why are we talking about
regulations and business models?
Follow – and please challenge – my logic:
1. Selling is in large part an exercise in empathy: In order to get
anyone to buy anything, you need to understand how your product
/ service could make their business or life better (and convince
them of this fact)
2. In order to understand the value-add of your product / service, you
must therefore understand how your customers, stakeholders, and
competitors make money, and what their underlying incentives are
3. In summary: Commercialization requires selling  requires
empathy  necessitates understanding of business model,
associated incentives
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14. Customer & Market Needs: Next Gen Grid
Tech
14

15. Growing need for next-gen grid tech to evolve
from “yesterday’s” grid
Current Power Grid
• One-way power flow
• Utility has control over electricity flow
• Match energy generation with
consumption
Generation
Market
Transmission
Distribution
Customer
Few large power plants
Centralized mostly regional
Based on large power lines
Top to bottom
Passive, only paying
15

16. What’s driving change?
Source: Utility Performance Incentive Mechanisms - A Handbook for Regulators
Customer
Preferences
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17. Double-click: Customer preferences over time
2010-2015
1900-2010 2015-2020 Beyond 2020
Transformation Trends
• Renewable expansion
• Decline of coal fired plants
• Growth in energy storage
• Smart cities and electric transformation
• More electric vehicles
• New technologies
17

18. Double-click: What does this mean about
where the grid is headed?
*Grid Modernization Playbook. EPRI, Palo Alto, CA: 2019. 3002015238
Stage 1:
Grid Modernization
Stage 2:
DER Integration
Stage 3:
Distributed Markets
Customer
Adoption
Distribution
System
18

19. Summary: Grid today increasingly clean, bi-
directional, distributed, customer-empowered
Today / near-future Power Grid
• Two-way power flow
• Intermittent resources (solar and
wind)
• More difficult to match generation
and consumption
Generation
Market
Transmission
Distribution
Customer
Fewer large + many small power producers
Decentralized, ignoring boundaries
Including small-scale transmission
and regional supply
Both directions
Active, participating in the system 19

20. Grid “3.0”: Multi-directional with customers
at the center
System
operators
Generators
WHOLESALE & TRANSMISSION
SYSTEM
Distribution
system
operators
DISTRIBUTION
SYSTEM
Microgrids
Generation & storage
Other
customers
Aggregators
CUSTOMER
Customers exchange services &
value with each other and the
grid
There is now the possibility for
bidirectional exchanges between
each step of the energy value
chain, visualized here as
concentric circles. For example,
aggregators can now bid customer
resources into wholesale markets.
In this example, flows are directly
counter to the traditional linear
flow from generator to consumer.
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21. Merging 3 infrastructures
Electrical Infrastructure
Communication and Data Infrastructure
Transportation Infrastructure 21

22. Challenge in getting from here to there: Grid
visibility for operators (utilities)
• System Operators have
certain visibility of current grid
• “Edge of the grid” is less
visible
• Less metering/sensing out
towards the “edge” of the grid
• Why this matters? This “edge”
is where DER/Customer
Programs is interconnecting
and needs managing the most
22

23. Challenge in getting from here to there:
Power systems intelligence, control, dispatch
Descriptive
Analytics
Diagnostic
Analytics
Predictive
Analytics
Prescriptive
Analytics
Difficulty
Value
Where artificial
intelligence
happens?
Where the utility
space currently is?
23

24. Shout-out to ARPA-E: Changing what’s
possible via technology innovation
• Device-level programs:
• ADEPT / Solar ADEPT
• GRIDS
• DAYS
• System level programs:
• GENI
• NODES
• Grid-data
• PERFORM
• Grid Optimization
Competition
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25. Implications for grid tech commercialization
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26. Test & iterate across valleys of death
Create
something
no one
wants / isn’t
valuable
Create
something
that doesn’t
work outside
the lab
Death by pilot
Long sales
cycles, low
gross margins
Key: Common Grid Tech
Commercialization
failure modes
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27. Apply scientific method to biz model
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28. What they all have in common…
• Customer-centric
• Flexible
• Partnership-driven
• Refusal to die or quit
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29. Final thoughts
• Deep de-carbonization probably requires us to electrify everything
• Electrification makes the grid ever more important
• Therefore, next gen grid tech is one of the most important and impactful
problems you can work on
• It’s also fun…there’s few vocations that leverage the right and left side of
your brain like this
• We need you!
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30. Q&A
Thank you!
https://www.linkedin.com/in/joshuagould/
gould.josh@gmail.com
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