Siemens has pooled its existing start-up activities at innovation unit, next47, in a bid to foster disruptive ideas more vigorously and drive innovations.
The next47 team, headed by Lak Ananth, has a $1 billion pot at their disposal over the next five years, and has offices in Silicon Valley, Boston, Munich and London.
Activities focus on investing in and partnering with start-ups that are rethinking how things are done in the areas of industry, energy and infrastructure.
The number 47 refers to the year Siemens was founded ” 1847.
At last year’s Bloomberg New Energy Finance Summit, next47 partner Susana Quintana-Plaza stated, “theà‚ long term future of energy will be different. For me it’s in distributed energy.” She spoke to Decentralized Energy.
Decentralized Energy (DE): You expressed a lot of faith in the merits of distributed energy resources (DER) at the BNEF summit in September. It is a positive vision. What is behind that vision because some hold fast to the perspective that centralized generation will continue to be dominant?
Susana Quintana-Plaza (SQP): “You just have to look at the development of solar in the last few years to see what there it is to come. According to the World Energy Council report, over the next 40 years global power generation will double and nearly all that growth will come from renewables.”
“BNEF is predicting that by 2040, there will be 3.5 TW peak of solar and 1.3 TW of wind, and the beauty of solar is that it’s a simple technology without clear economies of scale. To set up and maintain a solar system there is not much advantage in putting in 1 GW vs 100 KW, so I would question why we would want to set up a centralized solar system and build a grid to distribute the energy versus putting a solar system next to where it is consumed.”
“Technically, I don’t see any real advantages for centralized solar systems over decentralized. This is particularly true in developing economies like Africa and the Middle East. I believe for those markets solar will definitely be the energy of the future”.”
“A lot of people make the argument that because solar is not available 24/7 it cannot be the solution. I think this is a very western view of the world. For many of communities in developing countries having energy for several hours a day will make a huge difference and now with batteries you can extend the hours that electricity is available. Even for enterprises that need base load, setting up a CHP system and microgrid on site may be the cheapest and fastest thing to do. The advantages of a decentralized system are greater. “
DE: What about resistance to that point of view, particularly from the coal sector? They would contend that developing economies are right to rely on their coal resources. Even though it is often the case that they have an ideal solar resource, clean coal technology is recommended, despite the fact that choosing solar is the socially responsible option.
SQP: “What are the economics for solar versus the economics for a coal or a nuclear plant? There are nuclear power plants being set up in the UK today with subsidies that are much higher than those required for solar power and that is only in terms of generation. You also have to take into account the cost of building a new transmission and distribution system in many cases. I don’t just think it’s the socially responsible thing to do, I think it’s the economically responsible thing to do.”
DE: There is still plenty of resistance out there to the clean energy transition. Despite utilities having lost so much there has been some slowness to adapt away from fossil power.
SQP: “For very traditional players centralized generation is the business they know, but they are no longer the only ones investing in energy generation. All new energy investors are focusing exclusively on renewable energy. Even China is no longer building coal plants”
DE: What about President Trump’s stated determination to revive coal power in the US?
SQP: “I believe, governments can accelerate or slow down progress in a given geography, but they cannot reverse technical and market advances on a global scale.”
DE: What is next47 doing in Silicon Valley in terms of innovations facilitating or assisting decentralized energy?
SQP: “Next47 is above all the venture capital arm of Siemens. We have $1bn to invest over the next five years in start-ups around the world. We are looking for category leading start-ups in the decentralized energy space to invest in them. At the same time, our value add is not only on the investment side but on using the Siemens ecosystem to help our investments scale and grow.”
DE: Are there any particular companies you can tell us about who are working with next47?
SQP: “Definitely. We are investing throughout the energy value chain from smart homes, to smart grids, to charging infrastructure for electrical vehicles. For example, Tado, a European smart thermostat company or Atom Power, a solid-state circuit breaker company set to completely change how circuit breakers work today. Another example is ChargePoint, which is setting up charging infrastructure all over the world.”
DE: How much faith do you have in energy storage to be the magic bullet? Is it advancing enough to make fossil power redundant or will we need fossil to bridge the gap for decades, before its economically utility scale?
SQP: “Storage is getting to the cost point it needs to be to be deployed in the electricity systems at scale. Many people ask, ‘what will happen with storage – will it make people disconnect from the grid? Will it make fossil generation redundant?’ The question to me is not whether people will disconnect or not or whether fossil generation will completely disappear, as long as batteries reduce grid consumption by 50 per cent, we need to rethink how the future energy system will work. In my opinion that is not a question of ‘if’ this will happen but of ‘when’.”
DE: But isn’t storage some way off, maybe decades away from where we would need it to be?
SQP: “All I can say with solar and batteries is that any prediction I see today is going to be an underestimation of what is actually going to happen. From 2008, when I started working in a German utility, until today we can say the energy system in Germany has completely changed and it is my expectation that that change will continue and expand all over the world.”
DE: When storage and renewables look so increasingly viable, are you bewildered then by investment in CCS and nuclear power?
SQP: “Carbon capture and storage is very important as there will always be CO2 generated, not only from power plants. The problem with carbon capture is not so much a question of technology, as of public acceptance, the not in my backyard issue. Also, from an economical point of view, until we have a Carbon market it will be difficult to make an economic case for the technology”
“On nuclear, it’s to do with costs. Look at the numbers in putting up a new nuclear power plant today versus putting up solar power and a battery.”
DE: Working in the Silicon Valley, how much is next47 gaining from swapping ideas and being in proximity to so much general innovation? Being in that culture, swapping ideas and information with other sectors, does it lead to a lot of breakthroughs?
SQP: “Most definitely. There is no doubt that today the centre of innovation is Silicon Valley and we benefit a lot from being there. That said, we see a huge growth in start-ups in Europe as local governments and businesses are setting up the environment for them to grow and succeed
DE: What kind of impact do you see from the electric vehicle revolution? Will this go for or against the clean energy system objective? There is some criticism at the moment that more conventional power is being used to assist charging of vehicles.
SQP: “I think that it is true today that electric vehicles (EVs) rely mostly on conventional power because there are more conventional power plants. However, EVs will increase the need for electricity and any increase in electricity will be supplied ultimately by renewables.”
DE: Finally Susana, is there any particular technology that you have seen in your time at next47 that excited you in terms of potential impact on the energy system?
SQP: There is a lot of very exciting stuff coming up “IOT innovations that are making the grid smarter, and artificial intelligence to increase understanding of supply and demand, but I think the goal for decentralised generation is to create an industrial supply chain that can serve the end customer in a cost-efficient way. Today the supply chain to deliver a decentralized system is not very sophisticated and that’s the innovation I would look for.”