As of March 30, 2022, Theia Ventures is excited to announce our investment in EdgeGrid’s seed round along with our partners Lightrock India.
EdgeGrid is a marketplace energy tech platform, which works with last mile consumers primarily commercial and small medium scale industrial buildings to manage their energy usage through Time of Day tariffs and ‘behind-the-meter’ monitoring, integrating their power supply with solar assets for lower tariffs and reducing energy wastage along the power transmission lines.
What does the current power sector landscape look like in India?
India is currently the third-largest energy consumer in the world. While energy use has doubled over the last two decades, India’s per capita energy use is still lower than half the world average, implying that the latent energy demand is high and transmission to electricity to end-consumers is inefficient. Further, over 270 million people are set to join India’s urban population over the next two decades – requiring significant additions across electricity generation to distribution.
There are $500 BN worth of energy assets deployed in India by power utility companies and discoms, but only 39% are fully utilised, due to poor quality of assets (distribution transformers), inadequate planning and transmission losses faced by discoms. Poor infrastructure along with lower asset utilisation, results in downstream last-mile consumers not receiving full supply of energy while the cost of supply is increasing. This is also taking place in tandem with the prices on a tariff basis for end-consumers are also increasing. In the power grid, supply and demand need to match exactly. If consumers demand more power than producers can supply, or if producers provide more power than consumers need this could result in imbalances and possible blackouts. There are changing dynamics in India’s power sector, primarily driven by:
Further renewable capacity being added;
The introduction of EV’s; and
Policies such as delicensing of power distribution (Budget FY21-22) which offers choices beyond the discoms monopoly in their state, and introduces competition and retail choice for customers.
The increase in Renewable Purchase Obligations (RPOs) has been in line with the government’s ambition to deploy 450GW of renewables by 2030. To support capacity addition, Govt is also working on Green Energy Corridor scheme, which focuses on transmission augmentation to facilitate the integration of renewable energy into the national grid.
The need for energy management systems
Allowing more renewable energy to be purchased by discoms and fed into the grid, increases the need for real-time system balancing to ensure grid reliability and stability while allowing for a more cost-optimum economic dispatch of other power generation sources, such as coal, whose costs are rising rapidly.
In order to speed up the distribution of power, to move away from long-term and expensive Power Purchase Agreements (PPAs), to plan for power requirements, encourage competition and efficiency, and to strengthen the wholesale market, the Indian Energy Exchange launched the Real-Time Electricity Market (RTM) platform in June 2020. Through the introduction of trading mechanisms, such as Renewable Energy Certificates (RECs), the RTM allows buyers and sellers an opportunity to correct any mismatch of demand and supply closer to delivery, thereby enabling discoms to manage demand variation more efficiently. For generation companies, RTM provides the ability to optimize and sell power surplus better (un-requisitioned capacity) while improving the ability to manage renewable usage, and obtain RECs from any unanticipated surplus generation. For discoms, they can manage their power demand dynamically, enhance the security of the grid, save on huge deviation-related penalties and integrate renewables in an effective way, addressing the challenge of intermittency associated with renewable energy.
In addition, the launch of the Green Term Ahead Market (GTAM) in September 2020, which allows discoms and corporates (with load of 1 MW and above) to procure renewable energy from asset developers on a short-term basis in the open market without the need for PPAs, has already seen a significant uptake by discoms. Electricity scheduled through the GTAM also contributes to the Renewable Purchase Obligations (RPO) compliance of the buyer. This allows for discoms to have the opportunity and incentive to optimize generation and supply-side dispatch of a wide range of available resources that are currently underutilized (e.g., BTM solar, storage, EVs, etc.).
On the consumer side, new hardware-software IoT and metering solutions backed by Artificial Intelligence, Machine Learning, and data analytics layers specifically geared for smart-metering, fault detection and energy savings, will continue to find ways for scalable solutions for energy problems. In addition, there will be a market for smart grid solutions that help forecast power supply from distributed energy resources (DER) and integrate them smartly to match it to forecasted demand.
On the industrial side, there is a broader move towards Industry 4.0, which is a digital transformation of manufacturing processes and products, such as AI, IoT and the cloud. This brings connectivity across building assets, such as cooling systems, lighting and machines, which allows for the opportunity to monitor these assets through data analytics and insights. These insights can lead to cost savings and cleaner, more flexible and resilient power supply. Energy optimization and management is another growing trend for industrial clients for whom both cost savings and resilience is important for their operations.
Distributed Energy Resources (DERs) platforms and their relevance
Distributed Energy Resources (DERs), such as onsite solar, wind and battery storage, as well as EV chargers, and micro-grids are increasingly prevalent for industrial businesses to achieve their energy management goals. The costs of DER (in particular, solar tariffs on a per kWh basis) have fallen sharply in recent years, so that these resources outcompete conventional energy sources, even without policy incentives. For discoms, as more industrial customers link their energy usage to increasingly sophisticated energy management systems, discoms can tap into these resources to meet peak demand or unusual spikes in electricity usage, and use this new flexibility to help balance electricity supply and demand as the share of large scale solar and wind power (which can be intermittent) grows.
Energy storage technologies that help manage peak power loads and balance the grid will find greater demand, and a large opportunity for grid modernization.
Centralized energy storage is usually in the form of:
i) spinning turbines, so that power generation companies can ramp up production if demand spikes; or
ii) coal or diesel backup generators that can be fired up quickly.
But these approaches are either costly, polluting, or both.
By contrast, clean energy storage solutions such as batteries and pumped hydro-storage systems are already being used globally, while other storage technologies, such as flywheels, super-capacitors, and green hydrogen, are in the early stages of development.
Batteries represent a wide range of technologies that can provide numerous benefits to the grid. Importantly, a single battery can provide several services over its life. For example, a battery system can be installed for the primary purpose of shifting peak electricity consumption from a time when the distribution or transmission is congested to a time when capacity is available. This may only require the battery to be dedicated to this service for a few hours each day. When that battery is not providing this peak shifting service, it can be used as a firming or flexibility resource to smoothen renewable generation to better match demand.
Discom initiatives in the decentralized energy storage space
In India, discoms have already begun pilots in the decentralized energy storage space.
In 2019, TPDDL, the Delhi discom, installed a 10 MWh battery bank commissioned by AES and Mitsubishi in 2019 at the substation level. The battery bank is capable of applications ranging from peak load management, frequency regulation to system flexibility. It helps balance distributed energy resources including rooftop solar.
Moreover, a 1.25 MW battery storage pilot was also commissioned in Puducherry in 2017 for PGCIL discom, with the objective of testing the technical and economic effectiveness of grid-connected Battery Energy Storage Systems (BESS) in providing dynamic frequency regulation, capacity firming, energy time shift of renewable energy generators, peak shaving and load following, dynamic reactive compensation and voltage support.
In Delhi, BRPL discom is planning to deploy a 10 MW battery energy storage system for managing the distribution network congestion and for reducing peak power purchase requirements.
Energy storage systems of the future can support the grid 24x7 by providing frequency and voltage support, offsetting the use of diesel sets. Furthermore, these energy storage systems can be integrated with solar panels and EVs for grid stabilization to use the Time of Day (ToD) charges during the off-peak demand period. This kind of application also allows for power back-up, peak load shaving, solar integration, EV charging, frequency and voltage regulation and selling power back to the grid. In addition, battery storage units can be clubbed together in order to provide additional power when needed, and support grid services for frequency and voltage regulation. Batteries can be charged with inexpensive electricity when the power price is low, and then discharged when the electricity price is high.
The energy storage system can provide a similar time-shift duty by storing excess energy production from renewable energy sources which might otherwise be curtailed.
At generation level, batteries can store the energy produced with renewables that could not be injected to the grid and would have been curtailed. Besides, variable renewable generation, combined with energy storage, represents a fixed generation capacity that can be valued on capacity markets. Batteries can also compensate for the destabilizing effects of variable generation on grid stability.
At the transmission and distribution level, batteries can offer several ancillary services to stabilize the electricity grid, improving its working conditions, extending its capacity and making it more secure, reliable, and responsive. Batteries can provide reserve capacity to the grid to take over the role of the spinning reserves delivered by conventional rotating generation units.
At the household level, a battery system connected to a solar panel or small wind generator can increase the amount of self-produced electricity, as well as increase self-consumption. Furthermore, batteries can minimize the distortion caused by inverters to optimize the injection into the grid. Prosumers (a blend of consumers and producers) can also offer ancillary services to grid operators: these services can also be aggregated and managed by third parties. Battery energy storage can support customer loads and provide backup power throughout an entire power outage period, working as an uninterruptible power supply unit (UPS) .
Demand response and time of day experiments through discoms
Internationally, distribution utilities have been able to achieve 1–3% energy savings per household by sending them reports on energy usage, which were compiled using data analytics and behavioral science. While the market is nascent in India for Time of Day tariffs and demand response management, discoms in India are actively looking for ways to reduce energy wastage on the grid. For example, in Karnataka, the discom BESCOM decided to energize irrigation pump sets during daytime in a manner that broadly tracks solar generation patterns. This enables them to serve the morning and evening peak loads better.
In 2019, Australian platform Powerledger led a pilot with the Uttar Pradesh (UP) government in India, where blockchain technology was introduced in the rooftop solar segment. UP is the only state that has amended its regulatory framework to enable controlled P2P energy trading in India. The pilot project run by India Smart Grid Forum, was drafted by state power utility Uttar Pradesh Power Corporation Limited (UPPCL) and Uttar Pradesh New and Renewable Energy Development Agency (UPNEDA). There were 12 consumers participating in the pilot (who also produced solar energy on their rooftops), and they experienced a 43% lower than the retail tariff for P2P market buy price. Powerledger’s platform were integrated with smart meter systems to enable households to set prices, track energy trading in real time, and enabled the settlement of surplus solar transactions in real-time through smart contracts executed on blockchain.
In March 2021, Tata Power-DDL also worked with Powerledger in rolling out live peer-to-peer trading of solar power from over 2MW of solar PV systems in Delhi NCR, for 65 prosumers and 75 consumer sites, with 140 buildings participating. This was done in collaboration with Tata Power, Tata Power Trading Company Limited and Tata Power Solar. Consumers could choose which seller (prosumer) to buy electricity from, with Power Ledger’s blockchain audit trail of energy transactions providing near-time settlement and complete transparency throughout the entire process.
As Reji Kumar Pillai, President of India Smart Grid Forum said, “India is about to delicense power distribution business and make open access to retail customers enabling them to buy electricity from anybody from anywhere. In that scenario, blockchain platform for P2P trading of electricity will be a perfect game changer for the clean energy revolution in the country”.
BSES Rajdhani Power Limited (BRPL) now uses a customer engagement software to study residential energy consumption habits and accordingly provides customized insights. The ongoing pilot has at least 200,000 enrolled customers and will enable comparison between household energy use patterns using a randomized controlled trial to inform decisions about system expansion.
To make demand response work at scale, state governments need to:
Allow discoms to develop more granular and cost-reflective tariffs that are approved in a timely manner and revisited frequently
Develop awareness campaigns for discoms to educate customers on financial benefits and increase participation
Implement a robust communication network and data processing approach that allow discoms to understand where flexibility exists and provide the correct price signal to the right customer at the right time
Roll out smart meters with high temporal granularity to enable effective Time of Day tariffs
At Theia, we are excited by the innovative solutions to transform the power sector using technological innovations that address the climate agenda. Our three portfolio companies (Probus, Sheru and now Edgegrid) fit nicely into this thesis.
Edgegrid, our latest investment, is uniquely positioned to harness the enormous DER market opportunity, through its technology expertise to create a robust offering for utilities, commercial, industrial and residential customers both to minimize power wastage and carbon emissions, but also to move towards a more dynamic, climate-friendly transactional market for energy trading. We can’t wait to see the new innovations on the tech stack that they roll out next.
We look forward to a wonderful journey with an incredible team!