Photo Credit: EDF Renewable Energy
The colonization of American grid innovation by European utilities has advanced with remarkable speed.
A promising U.S. energy startup, tackling such problems as energy storage, EV charging or demand response, is more likely to find its way into the hands of Enel, Engie, Innogy or E.ON than their U.S. counterparts. This allows the Europeans to test out future business models far from their home markets, with negligible risk of cannibalizing their own core businesses.
Groupe EDF, which runs the electricity system in France and develops renewables around the world, has taken an inquisitive but less acquisitive approach to mining the U.S. energy sector.
It bought Maryland-based* groSolar in 2016 and turned that into the New World distributed development arm of its Renewable Energy practice. This past year it expanded that team with a new Distributed Energy and Storage unit, making use of the Store & Forecast software developed in France.
As a result, the company responsible for massive grid storage to balance France's nuclear fleet has moved into distributed, behind-the-meter storage in the U.S.
Earlier this month, EDF won a 10-megawatt/40-megawatt-hour contract with Pacific Gas & Electric. If approved by regulators, EDF will tap a group of commercial customers to host batteries to fulfill the utility's resource adequacy obligation, while generating savings for the customers.
This was not an obvious or guaranteed chain of events, but EDF determined that there's a market for distributed storage that it cannot afford to ignore.
"Jumping over the fence and getting behind the meter comes from solar," said Raphael Declercq, vice president of portfolio strategy at EDF Renewable Energy. "It was really a realization that customers were interested in this and there could be a very substantial reduction in their energy costs in some places."
Keep the customer satisfied
Distributed storage expertise bolsters EDF's credibility when selling clean energy services to large corporate customers, Declercq said.
If the company is outfitting rooftop solar on a warehouse, and the customer is getting slammed by demand charges from EV chargers in the parking lot, EDF can now toss onsite batteries into the mix.
It's still a small piece of the overall business, Declercq acknowledged, but it's poised to grow. And the company is growing the expertise in-house, rather than acquiring a storage developer as Enel and Engie did.
Behind-the-meter storage will rival utility-scale in deployed capacity by 2022, according to GTM Research. EDF has experience with utility-scale -- back in France, and with a 20-megawatt frequency response plant in PJM territory -- but the PG&E contract will build out the smaller-scale expertise.
"Now we’re able to offer a full set of services to the C&I customers that we were talking to," said Michael Robinson, business development manager in the distributed energy group.
Storage could open up opportunities to work with utilities as well. EDF RE has developed gigawatts' worth of renewable power in the U.S., including 500 megawatts for PG&E. Utilities across the country have expressed increased interest in distributed storage for such roles as voltage control, balancing solar-heavy distribution feeders, local capacity and non-wires alternatives.
Playing to internal strengths
As a startup of sorts within a much larger company, Distributed Energy and Storage can lean on two major resources that unaffiliated startups can't.
One is that EDF has a lot of money. The company leverages a $30.8 billion market cap with EBITDA of 16.4 billion euros in 2016.
This allows the company to finance its storage development on its balance sheet.
"Storage is still a bit early: The financial market isn't ready to finance most storage projects at competitive cost," Declercq said.
Financing has proven an obstacle to development thus far, especially at the commercial scale. Unlike solar, which provides a single unit of output to measure, storage comes in megawatts and megawatt-hours, and the timing of when it delivers can matter even more than how much volumetric energy it provides. This thwarts easy predictions of a storage plant's future value.
EDF's stuffed coffers allow it to circumvent the difficult pitch to financiers during the early stages of storage market growth.
"Once we have a track record, we’ll be able to third-party finance those, but for now, on the balance sheet is the plan," Declercq said.
The company also hopes to de-risk storage by association with its sizable operations and maintenance business. EDF Renewable Services, another U.S.-based branch of the corporate taxonomy, already manages 9 gigawatts of renewables.
That gives the team flexibility to include O&M from an established player in its storage contracts as needed, Robinson said.
Now the company has to wrangle some customers and get the systems up and running for PG&E by November 2020. The outreach process has already begun and includes previous renewables customers. EDF has a star-studded list to tap, having done renewable deals with the likes of Google, Salesforce and Kimberly-Clark.
Even before the dust settled on the storage move, EDF signaled increased interest in electric vehicles as grid assets.
Just this week, the company announced a Series A investment in San Diego-based startup Nuvve Corporation, which has developed IP around bidirectional car charging to turn EVs into a fleet of mobile grid batteries. That technology could find its way into bundled packages with solar and storage for large commercial customers in the not-too-distant future.
*An earlier version of this story said groSolar was based in San Diego. It is based in Maryland, but reports to San Diego-based EDF RE.