The Energy Industry, Electricity with its assets & even built-in financial markets, is a multi-billion dollar industry, a big one, that the average citizen has never been able to partake in. The Energy Club is a small one, that only a small select players get to play in.
Especially in the United States, about 100 Front running firms, making up all the revenues in the US. Why is this? Well, it comes down to 1 thing. Storage. Electricity, since its birth… is an asset that when produced, it needed to be consumed instantly. No one could figure out how to store it long term in large quantities.
Even today, across a large majority of the United States, at the wholesale level, electricity cannot be stored, so demand and supply must constantly be balanced in real-time. I’m sure you guys have heard about the GRID!? The Electricity Grid. The interconnected system that delivers that sweet power to your home, lighting up the skies across the globe.
Well here in the US, these Grids are broken down into 3 main regions the western interconnection, the eastern interconnection & the Texas interconnection. Now, remember electric energy is an asset, that majority today still can’t be stored across the grids. It goes from the generator to the transmission lines, to the end-user home or business.
But in reality, there is another person in between. The middle man, the reseller of energy to homes and businesses. This is when the energy markets come into play. The trading of energy with resellers. Which breaks down the 3 grids, into 9 main wholesale energy markets.
California ISO, No-RTO West (aka no official regional market), Southern Power Pool, Electric Reliability Council of Texas, Midcontinent ISO, NON-RTO Southeast, THE PJM Interconnection, New York ISO & ISO New England. 9 wholesale markets, across the United States, for the most important energy asset.
And remember I said only small select players get to play, only about 100 front running firms doing all the business. The same players, controlling the energy for decades and decades, allowing monopolies to form, infrastructure to suffer, and prices to rise. The Energy markets are primed for change, and if you don’t see it coming, let me try and help you see the change that is coming.
As I said, electricity couldn’t be stored in the past, which has allowed this market design to take shape. Only the players who could provide the costly infrastructure could play, for generation and transfer. Those who could adhere to the regulations for real-time balancing of supply and demand. Not many players can do it.
But this real-time balancing leads to many different markets than regular capital markets, investors are used to. Energy markets are open, the trading of electricity. But you can consider it restricted-open. Real-time balancing creates its own systems and technicalities that have kept less-experienced traders away. Also, potential participants must show financial strength as well as technical knowledge to be granted access.
You need to be an accredited investor, and you need to pass a test to be granted access to these markets, which are on the BIG regulated exchanges, like ICE who has 165 futures contracts in the US, and 9 options and over in Europe, 10 futures and 3 options. The average citizen does not get to play with Energy.
It’s too complex! Chico’s opinion…This needs broken up, and it needs to be broken up now. For example, let’s just go to another place where these trader’s get to play. CME. They even have an online test, for those looking to dip their toes into the water of electricity and energy trading.
The question at the bottom is “What are the key characteristics of electricity that differentiates it from other commodities like crude oil or natural gas?” Answers are 1. It is completely interchangeable. 1-megawatt hour (MWh) electricity produced from Coal or Natural Gas contains the exact same amount of energy 2. It must be produced and used simultaneously.
Electricity storage is still prohibitively expensive currently. 3. Supply must meet demand exactly in the power grid. 4. All of the above The correct answer is…all of the above. See even today, CME the exchange, the regulators, and the overall consensus is, electricity storage is still prohibitively expensive. You might be right at this sliver in time within certain sectors of the United States, but you are totally wrong in the scope of things across the globe.
Electricity storage is here, it’s not expensive, & it’s going to change the energy game. Even now it’s traded. We are in the initial stages, but I’m living in the state of, California where batteries are the ground floor for the revolution. From this map, we can see California has 215 plus battery storage projects going on within it.
Next, biggest is Texas, Illinois, New York, and Pennsylvania which each has between 15-30. These States are the hotbeds for the coming energy transition and revolution. And guess what Just broke ground last year in California? A Battery storage project in collaboration between two entities PG&E & Tesla. Once up and fully running, it will be the largest utility-owned battery storage system in the world.
They expected it to be completed and operational by the second quarter of this year. And this isn’t the first Tesla, PG&E collaboration in 2017, PG&E’s first lithium-ion storage system was deployed with Tesla Powerpacks, which is fully operational today near Sacramento California.
This is called Grid Modernization, and it’s happening you just need to know where to look. Utility Dive put out a good blog titled “PG&E may answer the billion-dollar grid modernization question” the article says “There is a lot of money at stake with Grid Modernization.
The PG&E framework has two objectives: identify investments needed “to integrate the growing number of DERs (distributed energy resources) and determine how customer-owned DERs should be valued” Grid Innovation with PG&E that has been their focus, so we should probably look to who was leading that at PG&E.
September 2017, Kevin Johnson who worked at PG&E’s grid innovation department posted this blog on the meetings of the minds website “Were Smart Cities and Utility Overlap” and in it, he said “PG&E is taking a step towards smart platform enablement with the recent launch of a Distributed Energy Resources Management System (DERMS) pilot, in partnership with GE, Tesla, and Green Charge Networks.
Within that pilot, customer solar smart inverters and storage batteries take signals from the grid management system to “bid” in needed services, and then remotely and automatically execute on those services to the grid once bids are accepted. DERMs was a pilot program, based on distributed energy resources with Tesla Involved. Kevin Johnson knew oh so much about this in 2017.
Going to Kevin J’s LinkedIn today, he was promoted from the grid innovation department, and as of that year 2017, He is a Principal in PG&E’s Corporate Strategy Integration team, where he is focused on identifying, supporting, and tracking strategically aligned innovation…. Kevin is important at PG&E, a principal person with an eye for innovation.
A little over a year after getting this role, what did Kevin do? He offered insight, perspective and contribution to the energy web whitepaper in 2018. As we can see they thank Kevin Johnson of PG&E for just that!! And then once again with the updated version in June of 2019 Now, I want to go back to the DERMs pilot program.
It evolved and in January of 2019, the latest update was put out by PG&E from the Grid Integration and Innovation department Kevin used to lead. Large report with many good fiding but this was one of the key takeaways, and the last update from PG&E regarding their distributed energy resources management system DERMS was this “A comprehensive DERMS is still not readily available as of early 2019”.
They said “PG&E determined it is still too early to invest in a comprehensive DERMS based on the experience through this demonstration, the expected near-term impacts of DERs on the system, and the state of the industry.
While DERMS vendors exhibited capabilities in certain aspects of a DERMS, there was no vendor capable of the comprehensive DERMS system PG&E envisions at this time. Energy Web wasn’t involved with the last pilot, why? Well for one..the blockchain wasn’t live in January of 2019, it didn’t go live until June of that year. And now today, Energy Web has of course a live blockchain, but also the d3a, decentralized autonomous area agent. This is the comprehensive DERMs PG&E was looking for in early 2019.
The D3A optimizes the operation of each grid device through a modelling tool, allowing each hierarchy to be managed by its representative agent. Thus it can be used as a tool to configure an optimal market design and make investment and management decisions. This delivers an enhanced understanding of the smart grid mechanics, facilitating the adoption of bottom-up markets & decentralized energy management like never before.
And the beauty? Simulations!! Simulation environments can be run, analyzed, configured and re-configured for optimization before it is deployed to the modern transactive GRID!! So, the DERMS platform has alluded PG&E and Tesla for some time.
They couldn’t find it as of early 2019. Thus PG&E decided to take a chance on the energy web, blockchain, and the d3a. They joined the alliance, becoming an affiliate member, and Kevin, principal of corporate innovation is making sure they are contributing their thoughts to the whitepapers?? You make the connections and what the next DERMS pilot will consist of. Cheers, I’ll see you next time!.
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