Making grid edge a business innovation

 How innovative finance solutions make grid edge investment easy.

Grid edge as a flash point of innovation goes beyond technology. It is also where business innovation is booming – a critical enabler for companies looking to finance their transformation.

 

By Klaus Gruenfelder and Dr. Holger Mueller

Situated exactly where the consumer, prosumer and the intelligent grid interact, grid edge is the interface of a regulated grid and the more decentralized, unregulated area with an ecosystem of conventional and new players. 

 

While grid edge breaks away from the traditional model of how energy is distributed and consumed, the critical enabler of many next technological leaps would depend on how we rethink our investment models – particularly if we aim at decarbonizing on a meaningful scale and at an unprecedented pace, without constraining business growth. 

Investing in the future

Let’s begin by looking at the areas grid edge technologies hold the potential to revolutionize: energy trading, energy storage, grid-interactive buildings, sector coupling and EV charging, to name just a few examples. These solutions are leading the change in efforts to increase efficiency and sustainability by integrating renewables, stabilizing the grid and optimizing the energy performance of buildings, infrastructure and entire industrial complexes. The potential savings, in terms of both carbon footprint and expenditure, are massive.

 

According to a recent study led by the World Economic Forum, grid edge technologies are boosting the electricity industry by $2.4 trillion over the next 10 years. This transformation of the electricity industry will benefit not only the industry, but the customer and the environment as well.

However, getting there involves considerable investments in infrastructure. A mindset shift is direly needed to make the transformation as beneficial for both established and new players driving the cutting-edge developments, as it can be for the planet.

Grid Edge is exactly where intelligent grids, smart buildings, and prosumers meet on a physical and digital layer. This interaction is opening up space for new energy systems to become more sustainable and environmentally friendly. Here is where new markets are arising and bear new opportunities for a multitude of players, which also drive a vast number of innovations in technologies as well as in business models.
Holger Mueller, technology and strategy expert at Siemens Smart Infrastructure

The new financing concept

Unlike investment in traditional infrastructure, grid edge technology generates value from the service it provides. This opens up the possibility to optimize cashflow by moving tangible investments away from capital expenditure (CAPEX) to operational expenditure (OPEX) on the balance sheet. For businesses, this means access to innovation without taking on the costs of fixed equipment at all. 

Transforming industries and enabling new, more digitalized business models in the digital grid area is the opportunity where financing can and will be a decisive role. The significant amount of investments and the mid- to longer-term nature of flexible business cases require creative thinking in business offerings that maximize impact.
Klaus Grünfelder, Financing Solution Partner for Smart Infrastructure, Siemens Financial Services

Charging as a service

Infrastructure for charging electric vehicles is one of the most pressing areas of investment. Parking lots as well as entire depots for electric buses and trucks will need to be equipped with appropriate systems and solutions. This includes charging devices at charging points, as well as grid connection, backend and operations solutions.

Siemens Financial Services (SFS) is perfectly positioned to help businesses in their grid edge pursuits. By combining data analytics and financing, Charging-as-a-Service allows fleet operators to transition to electric vehicles in a balance-sheet-neutral way. Since a company’s credit line remains unaffected, businesses can go green through their grid edge transition while planning more reliably and with much less risk.

Smart financing solutions from one source

In the commercial and industrial space, the “Energy as a service” (EaaS) model helps businesses finance grid edge technologies using the savings generated from their energy efficiency performance.

 

Recent examples of such a platform type of financing solutions in the EaaS space include Calibrant Energy  in the U.S., which is a joint venture among Siemens Smart Infrastructure, SFS, and Macquarie’s Green Investment Group, and also Berkeley Energy Commercial & Industrial Solutions (BECIS), a company in partnership with Siemens providing businesses in Asia-Pacific access to distributed energy solutions. The EaaS model allows businesses to pay for tailored energy services without the need for any capital investment, therefore addressing both their energy cost and sustainability challenges.

Sustainability for the planet and businesses

EaaS is just one example of how smart financing solutions, by calculating the precise needs, allow unprecedented flexibility that drives both technological transformation and financial value. When “flattening the curve” is equally urgent amid a pandemic and climate crisis, we believe accelerating grid edge innovations can be the stepping stone towards a more sustainable future.

How do Smart Finance Solutions work?

“X as a Service”, like e.g. “Smart building as a service”, can generate savings to cover investment costs. Here, the building owner pays for improved technical performance as part of a flexible payment plan. These service contracts can cover upgrading and servicing technology, increasing energy efficiency, charging infrastructure for electric mobility or the storage of green energy.

 

“Pay-for-performance” solutions based for example on MindSphere, the cloud-based, open IoT operating system, bring digitalization into the financing process itself. The instalments align with the actual performance use of the financed machine and thus offers great flexibility. This solution offers a high level of transparency, enabling calculable variable costs and allowing users to evaluate the data that is generated using various MindSphere apps.

 

For larger infrastructure projects platform type of solutions, there are also options for project and structured financing or active participation in projects through equity investments as is currently the case for example with airports.

The autors

Klaus Gruenfelder is financing expert at Siemens Financial Services and a Financing Solution Partner for Smart Infrastructure. With a background in Finance, Venture Capital and Private Equity he combines financial expertise with innovative business case development and customer focused solutions.

 

Dr. Holger Mueller is technology and strategy expert at Siemens Smart Infrastructure. With his background in engineering, strategy and innovation development he has many years of experience in linking technological and business model innovations.

February 17, 2021

Picture credits: Siemens AG; Getty Images/Cultura RF

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