Decentralized Energy, North America, Renewables

A focus on decentralized energy

Issue 5 and Volume 17.

Decentralized energy is increasingly becoming an important part of the US power market, driving major sector players to respond with new offerings. We spoke with the Siemens US management team on the occasion of a company-wide meeting to mark its focus on this growing sector.

Decentralized energy is increasingly becoming an important part of the US power market, driving major sector players to respond with new offerings. One such firm is Siemens, which recently set up a Centre of Competence (CoC) for decentralized energy in the US, and aims to strengthen its existing focus on this important market in the coming years. We spoke with the Siemens US management team on the occasion of a company-wide meeting to mark this new direction.

The CoC began its life in 2015. Included in its scope are efforts from Siemens’ Power Systems, Energy Management, Building Technologies and Government Technologies businesses. Eric Spiegel, president and CEO of Siemens USA, describes the CoC as a ‘quasi-business unit’ that ‘cuts across multiple businesses that have products, services and solutions in decentralized energy’.

Siemens has 40 different business units in nine divisions, and Spiegel says ‘something like eight to 10’ of those business units are ‘very active’ in the decentralized energy market. The company’s recent acquisition of Rolls-Royce and Dresser-Rand has added smaller-sized gas and steam turbines to its larger Power & Gas business. And, says Spiegel, ‘We’re the only company that’s a major player not just on the power generation side, but also in the T&D and smart grid businesses.’ He also points to the firm’s ‘other side of the meter’ services in building energy management services.

Matthew Walters, head of the CoC in the US, says it is ‘not its own division’ but ‘a group made up of representatives across all divisions working to help facilitate our go-to-market strategy. We have dedicated folks within the CoC and that’s all they do,’ he adds, ‘and then we leverage the expertise from our divisions.’

‘We’ve worked in the decentralized energy space for the last several years,’ Spiegel adds, ‘but just in the last year we’ve formalized the organization to be able to pull together our capabilities in a more focused way to be able to meet the market. There is also our large financial services organization, which provides debt and equity projects of all shapes and sizes. This allows us to address a much larger portion of the market, but also to bring to bear capabilities and services that are difficult for our competitors to match.’

John Kovach, global head of Siemens’ Distributed Energy Systems CoC, adds that the company already has centres of competence worldwide, and notes that ‘each country has its own unique qualities. India, for example, which is integrating a lot of solar, needs to make sure that the lights are on that there is a reliable energy supply – that’s not as big a deal in the US or Germany, for example. In Germany there are a lot of renewables being pushed onto the grid, while the US isn’t quite at that level yet. So there are some unique challenges – but what’s not unique is the solutions and products we can provide to serve each market.’

Siemens business leaders discuss decentralized energy (from L to R: Kevin Yates, Barbara Humpton, Eric Spiegel, Barry Nicholls, Dave Hopping, Matthew Walters)

Why the US, and why now?

Kovach says Siemens has turned its US focus to decentralized energy ‘frankly because of changes in the market. If you look at the growth of centralized generation, it’s flatter than it has been in the past. Regulations are pushing renewables and a lot of other different pieces onto the grid, which creates different issues, whether resiliency, volatility or ability to manage all those different complex pieces.

‘Those renewables are much more affordable today,’ he adds, ‘about half, on average, of the total cost of renewables five years ago, and we expect that to continue to decrease. Another factor is the sustained low price of natural gas, and we expect that to continue, and the market expects it. So, with all the different pieces and also the breadth and depth of the portfolio Siemens can bring to this market, it made sense to make sure we’re doing everything we can to leverage those capabilities across all of our different divisions to succeed as a whole in the marketplace.’

Walters adds that the US market is ‘more developed, in most cases, in terms of the energy sector, how commercially you can transact here, in terms of the deregulated utility or regulated utility markets. There are nuances in both of those, but it’s a well-developed energy marketplace where transactions are much easier than they are in other developing countries. That ties in to lower business risk.

‘But the other unique aspect about the US is the low sustained natural gas prices and the fracking revolution that has transformed the natural gas industry here,’ he notes. ‘With that and the drop in renewable energy prices, the US market is very well-positioned to grow with the decentralized energy sector.’

L to R: John Kovach, Head of Siemens Global Center of Competence, DES; Matthew Walters, Head of the Siemens US Center of Competence, DES; Eric Spiegel, President and CEO, Siemens USA

Dave Hopping, president of Siemens Building Technologies, says another factor is that the commercial sector’s interest in energy management has grown. ‘The notion of energy efficiency has always been there,’ he says, ‘but I would say that the added need to be energy secure, and with a little bit more focus on sustainability, has brought more attention to the subject.’

Asked whether resiliency is a growing concern for the US power sector, Hopping says it is ‘a primary focus of ours, but the main underlying driver is economics. When you couple the fact that you have these new decentralized energy solutions that can save money and are economic to install with the fact that they’re lower carbon footprint, they’re sustainable, and they also provide energy security and resiliency, you’ve now really aligned yourself with the goals and objectives of the customer base.’

And Barbara Humpton, president and CEO of Siemens Government Technologies, adds that the government ‘has been very actively engaged in driving decentralized energy’, pointing to President Obama’s recent call for federal agencies to reach a $4 billion target in energy performance contracts by the end of this year, as well as the Department of Defence’s goal to generate 25% of its energy from renewable sources. Siemens is currently working on government projects on four continents, she notes, citing a 4.5 MW solar field which supplies 10% of the energy needs for the White Sands Missile Range in New Mexico state, which ‘saves about $1 million per year’; a wind farm for the Department of Energy and combined heat and power (CHP) projects for the Army.

The businesses

Each business within the CoC brings a different piece of the decentralized energy puzzle to the table.

Kevin Yates, president of Siemens Energy Management in the US and Canada, says his business’s ‘unique fit in the decentralized energy systems space is that we sit between a significant shift in generation assets and generation types – and that would include the evolving market around energy storage as well – and a growing informed and intelligent consumer with the capability, through software, to make more informed real-time decisions about their consumption of electrical energy. We help to connect the technology through products, services and solutions.’

As an example, he offers his team’s work at Blue Lake Rancheria, a Native American reservation in northern California. The project was a joint effort between Humboldt State University, the local Native tribe and Siemens on a microgrid connecting a 0.5 MW solar photovoltaic (PV) system, a 950 kWh battery energy storage system, a biomass-fired fuel cell system and several diesel gensets. The generation and storage systems are managed and controlled with Siemens’ Spectrum Power Microgrid Management System software.

‘We’ve successfully, through our microgrid technology, connected four different generation sources – the utility energy provider, three different alternative energy sources and a standby battery storage unit – and we have helped that reservation become not only more self-sufficient and reliable, but also helped to reduce their energy costs through technology,’ Yates says.

‘We feel our competitors in different parts of the market, or our singular competitors in any one of our divisions, may show up on one of these projects,’ he adds, ‘but none can show up like we can show up and offer a differentiated solution in that space.’

Hopping notes that the Building Technologies business features ‘technology, products, solutions and services that tie into the building or consuming space, but ultimately we help commercial and industrial customers manage their energy and sustainability needs for their buildings and infrastructure. What comes into play is helping customers use power, helping customers reduce power, helping customers purchase power and helping customers with the new trend of producing power locally at their site close to where they’re using energy. We do this mainly through our ESCO division. We provide turnkey energy efficiency solutions for, again, commercial and industrial customers, and pay for those solutions through energy and operating savings. So our big value proposition which ties into decentralized energy is connecting the supply with the demand, but helping end-user customers manage their energy and sustainability needs for their facilities.’

‘The time is right’

Barry Nicholls, vice-president of Power Systems Sales, says ‘the time is right for these sorts of projects. If energy efficiency savings are to be had inside a building, and at the same time you’re doing a cogen project, we’re able to put together different parts of our company to optimize a solution for the building or a campus or a factory or a community building. We bring our T&D people together with the generation people with the building technology people with potential financial solutions, and when you put all that together, we just need to get invited to the party and we believe we’ll be able to come up with a solution that works.’

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