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Power efficiency, storage and solar: An interview with Green Charge Networks CEO Vic Shao

by Solar Server International Correspondent Christian Roselund

Vic Shao
Vic Shao

Vic Shao is CEO of Green Charge Networks, an intelligent energy storage company based in Silicon Valley. Since 2009, Vic led the company through its US $12 million smart grid project with Con Edison of New York, the US Department of Energy and Fortune 500 companies on a ROI-driven energy storage GreenStation with software intelligence to empower commercial and industrial customers to save on their energy bills.

With more than 15 years experience in software development and complex system implementation, Vic is passionate in applying software to improve power efficiency.


Solar Server: What is the difference between energy efficiency and power efficiency, and why is power efficiency important?

Vic Shao: The situation is that the utilities are spending hundreds of billions upgrading the distribution grid every year. And that is truly how much it costs to maintain our aging infrastructure. The challenge is always the 20 or 30 hours during the peak summer time in the country, to handle that peak capacity.

ConEdison of New York, who has been a key partner and customer for us, their peak distribution grid handing capacity is 13.2 GW, and they hit that peak in the summer of 2011, but they went above 13 GW for 7 hours of the entire year. 8,760 hours there are in a year, they went above 13 GW for seven hours, and they went above 12 GW for 29 hours.

But nonetheless, they have to maintain the grid by spending $2.5 billion a year to do construction and O&M. And that's their grid. So if you multiply that out by all of the number of utilities in the country, you get hundreds of billions of dollars.

Anyway, a lot of that money is spent to handle the peak throughput in the system. And that's what I mean about power efficiency.

The solution to this problem so far has not been that great. There has been demand response, but demand response is a little bit unpredictable. When the utility or the ISO calls a demand response event, they get a response rate of about 65-70%. Which means that out of the customers that have obligated themselves to reduce load, only 65-70% of them go through with it.

And it's unknown ahead of time where those customers will actually reduce demand. In New York, it could happen all the way across town. So the engineering department, the operations guys,  they know that it will go down, but they don't know where. So they can't put it into their engineering models of load reduction.

And, not to mention that it is a little bit annoying for the end user. They have to turn things off, they have to suffer the inconvenience. So power efficiency, in my nomenclature, is a better way of doing that, of leveling out the demand peak, with a 100% performance guarantee and without the inconvenience.

That's, as a society, where we need to get to.

And on the economics side of the equation, why is power efficiency more important than energy efficiency, well we have been tracking this for the last several years, and really the data that we have goes back 10 years.

Go through the PG&E, Southern California Edison tariff rates for industrial and commercial users, and plot that out over the course of 10 years, and look at the cents per KWh that those utilities charge, and then look at the dollar amount per kW that those utilities charge over 10 years, and you can see for yourself that the reality of that is that cents per kWh has been trending downwards for about 4% per year, while the cost per KW has been rising by 7% year over year.

So over time, power is what the commercial, industrial end-user is getting penalized for, more and more as time goes on, whereas I think they have a handle on costs per kWh. They can buy it on the market, it is competitively priced, they can install solar. More and more over time, the utilities are jacking up the kW side.

And that's another reason why power efficiency is important.


Solar Server: How do Green Charge's power efficiency solutions work together with renewable sources like solar PV?

Vic Shao: You are aware of the Duck Chart in California?

Solar Server: Oh yes.

Vic Shao: So you are aware that solar is driving down that dip in the afternoon, let's say noon to 4 PM. So right about 5-7 PM or so there's a huge ramp, and that ramp is getting steeper and steeper as time goes on. And that's a problem for California, they can't bring in generation resources fast enough to handle that afternoon ramp when the sun goes down.

I think energy storage is definitely a part of that solution, and in fact, a lot of what we do these days for commercial and industrial customers is to artificially depress that power usage from about 5 PM to 6 PM, when our dollar per kW is still really expensive. In Southern California it is about $37 per kW... so we keep the load low between 5-6 PM to save our customers money.

The ISOs are implementing programs to add incentives for commercial and industrial customers all the way up to 8 PM. And we will naturally be part of that solution as well, so that we can help not only the commercial/industrial end user, but also the ISO and utilities to stabilize that ramp.


Solar Server: Do you expect solutions like GreenStation to be included in the energy storage procurement target that the CPUC has set?

Vic Shao: Absolutely. Southern California Edison, for example, out of 90 MW of procurement targets for this year, 2013, 10 MW is for customer-sited energy storage. Same thing in PG&E territory and SDG&E it is 3 MW out of a total of 20 that they will do this year is customer-sited.

We are absolutely part of that procurement.


Solar Server: To get back to your product, can you talk about how your predictive algorithm software and battery hardware work together?

Vic Shao: The truthful answer is that they work against each other. The software makes the hardware smaller. When we installed our first systems, in late 2011 and the beginning of 2012, we installed a system that was three times as large as it is needs to be today. Because we didn't know what the heck we were doing. Our software wasn't mature, and we were very wasteful in how we manipulated the power loads and using a big battery sledgehammer to do things and not doing it well.

Today, we can tackle the same demand peak with a battery that is 1/3 as large. And the way that we do that is through software. We very accurately predict the way that the loads are going, and we manage the power loads in facilities very well, second-by-second in terms of battery charges and discharges.

So our software is making our hardware side small and keeping the cost down and delivering an economic solution for our customers. We send out 3-5 proposals a week right now; we've got it down to a science, but 90% of the proposals that we send these days have a return on investment of less than 5 years. 25% of them or more have an ROI between 1 ½ and 2 ½ years.


Solar Server: What role do you think energy storage will have in accompanying renewable energy in the United States?

Vic Shao: It's local and regionally specific. Along the coasts in the U.S., California, New York, New England, where the cost per kW is prohibitive, demand charge reduction is the game.

And also in the not-to-distant future, having the ISO implement demand reduction programs for energy storage. All of these things are coming, but the game is demand reduction. Reducing the dollar per kW. In other markets, I will give you Hawaii, you are aware of this yourself. They are starting to not allow for net metering, well, then the objective for energy storage is different.

We are talking to a number of project owners in Hawaii right now, and they are in the middle of a solar installation, and all of a sudden HECO tells them that they can no longer net meter. And they are hopping mad first of all, but second they are trying to figure out how do they make the best of the situation.

The answer is energy storage. Storing up some of the energy that is produced and then using it at another time. So the needs are different.

And in some locations in the U.S., currently today, it's not economic at all. If the dollar per kW is cheap, and the cents per kWh is cheap, it may not make any sense whatsoever.

But again if you look at the bigger picture, the broader picture of tens of billions of dollars spent on the grid every year, there has got to be a solution there where we can do this for a lot cheaper.

My big piece is that we can use a mixture of energy storage and intelligent software, to take the expenses at probably at three to ten times less than we are doing it right now, which is just brute force, more copper in the ground. I think we can get away with something ten times cheaper by using software and energy storage.


Solar Server: In Europe, what you talked about in Hawaii is called self-consumption. Do you see self-consumption market happening anywhere in the United States besides Hawaii, and how much of this do you see in Hawaii?

Vic Shao: You are going to see a lot more of this in Hawaii, and that's purely because HECO has stopped allowing solar projects to be net metered. So it is a very recent change, a recent enactment of the politics around there.

But you are going to see start to see more and more of this in island situations, Puerto Rico perhaps, Virgin Islands, some of these places where they are starting to get very high penetration, and the grid operator doesn't know what to tell people to do with this, except to tell people to stop interconnecting, or net metering.


Solar Server: Anything we didn't cover that you think is important for our readers to know about energy storage and PV?

Vic Shao: Just a whole dynamics of the return on investment (ROI) on the project. What we are finding is that by adding energy storage to solar, a lot of times this makes the solar project more attractive, and pencils out better. Given that the return on investment is less than five years.

A lot of times, we find that adding energy storage to solar projects brings down the ROI of the entire project. And also there are some interesting niche cases.

In PG&E, I'll give you an example, there is the E-19 tariff rate, which a lot of commercial and industrial users above 500 kW are on that, and it is $30 per kW, and solar developers can help a customer switch a E-19 tariff customer to a A-6 rate. A-6 is a solar-friendly rate, and it values electricity at $0.47/kWh, and that's why it is so attractive for solar developers to go in at that rate, but you have to limit the peak load below 500 kW.

And guess what? That's what we do. So by pairing energy storage with a solar project, allows the solar project to be switched on at an A-6. And a project that doesn't pencil out at all at E-19 all of a sudden pencils out great at the A-6 rate.

So there are some pretty special tariff switching opportunities in certain utilities that make the whole economics of the project much better.