Microgrids primed to keep growing
10 February 2021
A Q&A With Cordelia Thielitz
In June 2020, Rolls-Royce expanded the business formerly run as electricity storage specialist Qinous GmbH into its Microgrid Competence Center as part of the company’s continued expansion into distributed energy systems.
“We’re seeing great global demand for microgrids in a wide range of application areas,” said Cordelia Thielitz, vice president of Microgrid Solutions business unit of the Rolls-Royce Power Systems business unit.
Thielitz spoke with Diesel & Gas Turbine Worldwide about microgrids, the impact of COVID-19 and other issues for this Q & A. The remarks have been edited for length and clarity.
Question: How do you see the future market for microgrids over the next, say, five to 10 years?
Answer: We are really, totally convinced that this market is going to grow and really grow big. It’s still in its early stages, but when you look at the key trends like electrification, climate change, globalization, de-carbonization. digitalization, all those things are kind of belonging to the same story and they drive towards a more decentralized energy system. Having more renewables in the system means stress on the grid.
When we look at various studies, be it Bloomberg or McKinsey or others in the field, the overall microgrid market is already today in around six, seven billion Euros and will grow in the next five years to 17-18 billion Euros. And this is really a movement that is happening all over the place. Especially in the last two years, and some of that may be impact from Corona, governments all over the place are really in favor and now supporting sustainability as a major topic. And that automatically applies to decentralized energy solutions.
Q: In the short-term, will the economic damage caused by COVID-19 impact the growth of microgrids?
A: There have been positives and negatives to it and it depends really on which region on whether the net impact is rather in favor or a little bit hampering the development of decentralized energy solutions.
So on the one hand side, we have a bit of a hampering impact when it comes to the fact that oil prices are very low and usually when oil is cheap that doesn’t exactly spur a big appetite into changing from cheap diesel to something a little bit more expensive, at least when it comes to CAPEX and initial investment into renewable base energy assets.
You also see in there was huge interest in decentralized solutions before the pandemic in the hotel and lodging, industries and small- and medium-sized companies that put some money aside to invest in renewable-based energy generation and storage. These are companies that have paused their activities. I have not really seen projects that were canceled, but the speed by which projects develop has slowed. That was tempered, on the other hand, because of government subsidies in some cases.
So the pandemic has been really a little bit of a trade-off. At the height of the pandemic, projects were slowed because things like permits and inspections were hard to get simply because officials were not at work. When you talk with grid operators, everything that is kind of linked to commissioning to, to government agencies, and all the bureaucracy basically was slowed down and that had an impact.
Q: Microgrid development is pretty much a global phenomenon, but are there certain types of applications you’re seeing in the market?
A: There’s a huge variety of operators who have shown an interest in deploying decentralized energy solutions, and the applications are also diverse. Utilities have shown a lot of interest because as we saw that also now during the pandemic that much of the energy needs could be supplied by renewables. But those are fluctuating, which stresses the grid. So developing battery storage would be one way to avoid grid congestion.
Also where you have weak grids, such as on some islands or in areas that are not that well populated. And usually, on an island, where you’d have an old stinky, smelly diesel genset, you can put PV plus storage and as well as an updated diesel genset as a backup. So it is an initial investment and the CAPEX of such a solution is initially higher than just basically replacing, um, old inefficient diesel systems with new diesel systems, but over its lifetime, your operational costs are that much lower compared to the conventional system.
Another area of interest is where we see a growth in the need for electrical vehicle (EV) charging. We see more and more gas stations and other public places getting ready to have fast charging stations. So you have a spot that was maybe supposed to see a peak power demand of 100 or 200 kW suddenly sees demand for much, much more. It’s not always possible to dig holes in the ground, expand cables and expand grids—and that can also be expensive. So here again, PV plus a battery could be a solution.
Q: In the US, space, generally speaking, isn’t an issue. But for some installations, wouldn’t it be a challenge to find space for PV, wind turbines, battery storage, etc.?
A: In certain areas, but honestly, not that much. I think what we have, in Germany in particular, is a higher sensitivity when it comes to aesthetics. People don’t like to see a wind turbine next to a church tower, for example. People are sometimes also a little bit suspicious (of the technology). So those are some reasons why the areas where wind turbines and PV plants can be developed are very limited, actually.
And the technology is changing. One idea that I really like is agriculture PV where the PV actually helps protect the crop from things like sleet or hail that could damage it. So there are some really cool ideas out there, like using floating PV on lakes, that we’re only starting to look at the potential.
Q: How does Rolls-Royce Power Systems see itself?
A: I think we’re really following the mission of pioneering the power that matters. That’s really our mantra. Our management recognized early on the trend towards electrification and concerns over climate change. We do know that our engines, as they are today—our diesel and gas systems—contribute to CO2 emissions and greenhouse gas emissions. So it’s our mission to use all of our experience with these assets to make them work with synthetic fuels, for example.
A CO2 neutral production (via renewable energies) of alternative fuels will give the combustion engines new perspectives. We’ve also invested in transforming ourselves, to bring new products on like fuels electrolyzes, so at the end of the day we have a completely CO2-neutral product portfolio at minimum. This is really the mission of the entire company. And we are in that process, we need to continue changing our product portfolio.
We are adding batteries, we’re adding fuel cells, we’re adding more and more other technologies. Plus at the same time, we work on making the diesel and gas products highly efficient so that when they burn fossil fuels, that they burn it in the most efficient way.
In this transformation process, it’s not just renewing our product portfolio, but we also want to move to from being a sole product or system provider to a solution provider, to approach our customers in a more holistic fashion, understand what they’re needs are and not just dump a piece of product onto the yard.
So we are also changing our business model to have more of a focus also on service, including financial services. It really completely like a closed loop, kind of all set and forget solution that is fulfilling exactly the customer need. So for Rolls-Royce, it’s really been a huge transformation that we’re in.
Q: One of the perceived benefits of renewable energy is simplicity. Fewer moving parts, less maintenance, etc. That’s good for the end user, but doesn’t that hurt your bottom line?
A: Every company has the choice: either we do it or someone else is going to do it, because the maintenance business in this traditional fashion is going to go away anyway. So, for us, it is important to have these innovative decentralized solutions, instead of betting getting a nice value care agreement or service contract from a system that we won’t be seeing for much longer.
I also think there’s a huge potential that is opening up that we don’t fully grasp yet. With all the data that we can extract from these decentralized solutions, I think there’s so much we can tune and fine tune and optimize and work with the customer—information that has a value at the end of the day. So there are new revenue streams that I definitely see upcoming by analyzing what is happening inside the decentralized solutions.