New business models

How can municipalities and utilities benefit from the energy transition?

Many municipalities and utilities fear that the energy transition will result in declining margins, lost income, and increasing costs. A joint study conducted by Siemens and the Technical University of Berlin – “Stadtwerke im Zeitalter der Sektorkopplung” (“Public Utilities in the Age of Sector Coupling") – found that 40 percent of all municipalities expect their financial position to worsen in the near future. The trend toward decentralized energy generation, however, gives these municipalities – and especially local multi utilities – many opportunities to join the ranks of those benefiting from the energy transition..

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New demands

Growing with the tasks

Public utilities have to guarantee security of supply, be cost-efficient, and – as municipal companies – share the burden of the changes in the energy landscape. The demands on municipalities and utilities are increasing as a result of the energy transition.

At the same time, market opportunities are improving due to the integration of heating and cooling as well as mobility and gas. The interconnection of these factors for public utilities establishes the ideal conditions for getting the most out of excess generation through sector coupling and with the help of distributed energy systems. 

Business models

Opportunities from sector coupling

Identifying and leveraging new potentials: Sector convergence is creating a whole series of opportunities that can be used to design new business models, depending on the situation. In the Siemens study »Stadtwerke im Zeitalter der Sektorkopplung« ("Public Utilities in the Age of Sector Coupling" - available in German only) we examined and analyzed these opportunities:
Power-to-Gas for Power

Power-to-Gas for Power

Based on annual electricity consumption, conventional power storage options like pumped storage power plants and battery solutions can compensate for gaps in electricity generation only in the minute range. Hydrogen storage currently seems to be the only practicable long-term storage system for large volumes of energy, and will therefore probably become much more relevant to the energy system in the medium term. Hydrogen can be fed into the gas network in a low percentage range and injected into cavern storage systems. Hydrogen obtained through electrolysis is therefore very well suited to the long-term storage of large volumes of energy obtained from fluctuating renewable sources.

Power-to-Gas for Industry

Power-to-Gas for Industry

The core of the Power to-Gas for Industry business model is a PEM (proton exchange membrane) electrolyzer capable of responding in just milliseconds to the huge jumps in electricity produced by wind turbines and solar plants. The high-quality hydrogen that is generated can be made available to industrial customers as a low-cost, locally available raw material. It takes the place of traditional hydrogen from the carbon-heavy gas reforming process, letting customers substantially improve their carbon footprint. If the electrolysis process uses only electricity from renewables, the hydrogen generation process is almost climate-neutral.

 

Because the hydrogen can be stored, electrolysis can also be considered as a switchable dynamic load and be offered to transmission system operators on the control reserve market as a secondary or tertiary control reserve. Thanks to their response times in the millisecond range, PEM electrolysis systems are ideally suited for use as dynamic load control components to offset grid fluctuations.

 

The electrolyzer can also be combined with other switchable loads and generation systems to form a virtual power station. Even systems from other operators can be included in a model of this type.

Power-to-Gas for Mobility

Power-to-Gas for Mobility

Hydroelectrolysis followed by methanation can be used to synthesize methane gas using electricity from renewable sources. This can then be fed into the gas network and used as fuel for CNG-powered vehicles. Public utilities can offer “green,” climate-neutral fuel if they use their own wind turbines or photovoltaic systems as the source of power for the electrolysis system. This is also a way to increase the usage rate of power generated by the consumer’s renewable energy facilities.

 

The methane generated can be marketed via the existing natural gas and fuel station network. Fuel station operators are therefore important partners for the supply of fuel to customers across regional boundaries. Settlement is by fuel card or app via a customer management system that will also give customers a transparent overview of their fuel consumption and CO2 emission savings.

Power-to-heat heat pumps

Integration of renewables to provide heat with lower emissions

Electric heat pumps, electric boilers, or heating electrodes in thermal storage systems are a beneficial Power-to-Heat option in areas that rely heavily on a district heating network. These devices can prevent curtailment of renewable energy sources during peak feed-in periods: and conversely, when spot market prices are low, electric heat can be generated at a low cost. 

 

This is especially cost-efficient where many households are already connected to an existing district heating system for their heat and hot water supplies. To expand the system, only the marginal costs of the expansion need to be covered. 

Power-to-heat district heating

A complete district heating supply using renewables

District heating offers great potential in terms of the flexibility to better integrate renewables into the energy system using Power-to-heat solutions. In fact, demonstrator projects show that a regional heating network can be completely supplied using just renewables at a reasonable cost: for example, using a combination of solar collectors, biomass, and the Organic Rankine Cycle (ORC), in addition to heat pumps and thermal storage systems. Depending on the season and specific requirements, the district heating system can be supplied using individual renewable heat generators or a combination of different renewable systems. Although solar heating systems are usually enough during summer, other components can be connected to meet requirements in the other seasons.

Power-to-cold with district heating

Power-to-cold via district heating system

Tri-generation – the combined generation of power, heat, and cooling – is a realistic expanded business model for Power-to-Heat for established district heating systems. A system that works efficiently, however, demands precise planning of the pipe system, throughput, and temperature gradients. Effects of scale when connecting a critical number of customers for cooling services in the supply area ensure that the system is cost-efficient. In addition, if a freely available coolant like sea water is used, cooling can be offered at attractive rates. Demand for low-cost cooling will pay off the required investments for the separate heating and cooling circuits, heat exchangers, and storage systems.

Power-to-mobility – E-mobility services

Power-to-mobility: Operating a system for e-mobility services

As the owner or operator of a charging infrastructure and mobility services, municipalities and utilities can operate an IT infrastructure to offer electromobility services for drivers of electric vehicles. The necessary e-mobility software isn’t developed by the operator itself, but is simply adapted to the operator’s requirements. The investment in a separate IT platform can be avoided, because an adapted operating portal is provided for the operator’s charging points in the form of software-as-a-service. Supra-regional software with a roaming function makes it possible to serve local businesses and also provide access to the European market. What makes this service particularly attractive to the customer is the cross-regional access to an expanded charging infrastructure via charging stations run by affiliated operators.

Power-to-mobility – On-street parking

Charging infrastructure for on-street parking

Street lights and the low-voltage network are well-suited for the installation of charging points for e-mobility by public utilities. With a relatively low investment, it’s therefore possible to offer an attractive urban charging infrastructure that will provide slow, low-power charging in inner-city areas and residential areas where there aren’t enough private parking spaces. Electric vehicle drivers need to provide their own cable with a calibrated meter and communications infrastructure, which will cover part of the charging system costs. The information and communications system can be purchased from the municipalities and utilities as a white-label solution.

Leasing of Power-to-heat heating units

Lessors for controlled heaters

The unique Power-to-heat solution in the load control range makes it possible to reduce investments in generation and distribution plant and minimize overall system costs. Residential households and commercial customers lease smart devices from the energy utility for heating and hot water, which the utility company can remotely control at predetermined intervals with no impact on comfort. Load management uses coordinated control to prevent loads from coinciding unnecessarily, which reduces peak loads.

 

This will cut required investments to expand and replace generation and distribution systems in the medium term. At the same time, predictable and controllable load flexibility enables better integration of fluctuating feed-in from renewable energy sources.

References

A winner in technical terms and for cost-efficiency: Sector coupling in practice

Successful sector coupling and digitalization go hand in hand. With Siemens as their technology partner, municipalities and utilities are already demonstrating how electricity generated locally from wind and sun can be used most practically and stored most efficiently with the help of digital solutions – and how they’re also making municipal utility companies more independent and agile.

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Seize the opportunities offered by sector coupling. Contact our experts directly to learn how your municipality or utility can best profit from sector convergence.