Distributed Energy Systems (DES) enable universities, hospitals, enterprises, and even entire cities or islands to take control of their energy needs. What’s needed is cutting-edge digital technology paired with a partnership approach, including planning and innovative financing.
by Marc Engelhardt
Algonquin College in Ottawa, Canada, takes its task of teaching applied technology so seriously that its leadership decided to apply the latest energy technology on its own campus, which serves 20,000 full-time and 43,000 part-time students. “Initially, they just wanted to improve their facility, lower their power costs, etc.,” says John Kovach, the Global Head of Distributed Energy Systems at Siemens. “In the end, Siemens put together a holistic solution, combining a number of different technologies, including battery storage, solar photovoltaics, combined heat and power units, and electrical vehicle charging stations throughout the campus, using a Siemens microgrid to optimize the system.”
Today, the largest college in Eastern Ontario is a test bed for holistic integration of distributed energy. It serves as a model for other facilities wishing to take more control of their own energy needs and shows how they can achieve this through close cooperation with an experienced DES provider like Siemens.
Power to yourself
Powering, and thus empowering oneself through a local energy solution, is a rising global trend, for campuses like Algonquin as well as for commercial or industrial enterprises, cities, municipalities, or anyone who wants to generate power for their own consumption. “The first requirement is to have clarity on your energy needs and goals,” Kovach advises. “What sources of energy do you need? Hot water, steam, heating, cooling, power? Are reliability and resiliency important factors for you? For example, do you want to safeguard your industrial process? Do you want partial or full autonomy from the grid?” All those questions have to be discussed against a background of an economical solution, Kovach knows. “Saving money is typically a goal, and many of our clients want to reduce CO2 emissions as well.”
Algonquin is a success because the partners worked together closely from the very start of the project, says Kovach. That included the demand side, because the cheapest power is that which is not consumed at all. “We implemented various facility improvement measures to lower demand. We can implement a wide variety of these improvements at a facility, improvements ranging from simple measures like installation of high-efficiency light bulbs to complex solutions like a system that uses variable frequency drives to optimize the usage and lower the energy consumption of chillers.” Solutions are tailor-made, based on modular applications that are combined to match the client’s exact needs.
And then there is financing. “We knew that the client had a fairly predictable OPEX budget, and the ability to invest heavily in CAPEX was slim,” Kovach explains. “The savings generated by all these projects, systems, solutions, and services were put into a performance contract, so the OPEX savings fund the capital investment.” Siemens put financing together and addressed another C$24 million of deferred maintenance through a 20-year servicing contract as well.
For many DES clients, the question of financing is at least as important as the technical specifications, as Kyle Smith is well aware. He is in charge of Finance Innovation for Siemens DES, and has the responsibility of enabling solutions for clients through innovative funding and financing options. In many instances, financing solutions are the catalyst that enables project implementation. However, he is adamant that innovative financing solutions are simply an extension of prudent planning and risk management.
“A hospital, for instance, prioritizes its investment in medical centers or healthcare technology, while investments in more efficient power and utility solutions are often second-tier priorities,” Smith says. “If Siemens can provide the capital investment as well as the technical and service solutions over an extended period of time, our clients can maintain the focus of their capital resources on their priorities, lower their risk and still realize significant operational savings.”
An enabler for holistic solutions
Moreover, he adds, clients know that energy is Siemens’ core business, and they can trust the company to deliver what they need consistently: “Having Siemens responsible actually bolsters their confidence. This is especially important since most DES investments require site-specific technical solutions and ongoing proactive management to maximize the return on investment. Financing is often an enabler for a holistic solution that binds Siemens more closely to our clients.”
How exactly financing is organized depends on the client’s specific needs, Smith emphasizes. “We start with the customer needs and work to solve their technical and financial objectives as a team. Siemens offers traditional lease or loan options for our DES technical solutions, and we have recently extended our financing solutions to include the options of transferring or owning the DES facility wherein Siemens provides Energy as a Service,” he explains. “Under this model, Siemens owns the assets long term and delivers the outcome to the client as a service – like a utility would do, but with a much more customer-centered, tailored solution.”
Importantly, Siemens fills a gap most utilities and traditional banks don’t serve, with the majority of DES projects developing in the 0.5- to 15-megawatt range and representing a relatively small capital investment. With Siemens, the customer has a one-stop shop for technical solutions, service and life cycle financing that historically has not been available nor competitive at a smaller scale. And for some institutions, like universities in the USA, such financing models facilitate previously unattainable tax savings that are worth from 25 to 50 percent of the project investment. Those benefits can be shared with the client, providing financial incentives for both sides. “Siemens is able to unlock this value and build it into our value proposition by simply extending our creativity to include both our technical and financial solutions.”
Saving money is typically a goal, and many of our clients want to reduce CO2 emissions as well.John Kovach, Global Head of Distributed Energy Systems at Siemens
Digital and cloud-based
More incentives lie hidden in the applications Siemens is providing, like one first developed for the German market. “German facilities may be charged with high grid fees based on their peak energy consumption over a 15-minute period during the course of the year,” Kovach explains. “So even if your consumption is fairly flat over the year, that high grid fee is going to be assessed as if you consumed that large amount of energy over a typical day, and not just as an anomaly. Our solution protects against this from happening. For a customer in Hannover, we have installed a new, highly efficient Siemens transformer and switchgear. Energy storage covers the first few minutes of a higher load, and two CHP units can further support more substantial energy needs. Load shedding enables us to further shave off peaks. All of this results in a steady load profile and greatly reduces the grid fee.” It’s one of many examples where DES applications create instant savings for the client.
Combined, those applications can grant energy ownership to whole cities. Wunsiedel is one city looking to lead this energy transition: Its integrated, local system lays the groundwork for a fully renewable power supply of this rural German town of some 10,000 people. It includes an 80-kilowatt solar power plant, wind power, and biogas installations as well as a digital microgrid and battery storage systems.
The next step is further integration of the data network via MindSphere, Siemens’ new IoT platform. “Through microgrid control, we are connected to multiple sites today and are already performing remote services,” Kovach notes. “In the near future, we expect data availability and transparency to continue to increase. The MindSphere platform will allow us to provide even better site optimization and to more effectively service our customers, all at reduced cost. In addition, I expect that MindSphere will also enable us to create offerings that we haven’t even conceptualized yet.”
As more and more devices are capable of transmitting their data, Kovach expects that these local systems will be optimized and customized to suit customers’ needs in real time. While this requires unprecedented system transparency, it also shows that the energy market has become, and is becoming, a much more complex and potentially risky place. “So if you are going to generate your own energy to meet your goals, do you want to take on that challenge, especially since it is probably not your core competence, or do you want to leave it to us?” For Kovach, as for those clients who opt for Siemens as a local system provider, it’s a rhetorical question. The promise is simple, Kovach says: “We simplify the complex energy market for our clients so that they can achieve their goals, whatever those may be.”
Marc Engelhardt is an independent journalist based in Geneva
Picture credits: Siemens AG
Subscribe to our Newsletter
Stay up to date at all times: everything you need to know about electrification, automation, and digitalization.