Creation, Storage & Distribution of Energy31 January 2021
Welcome to our Urban Innovation & Foresight series.
In this edition we will examine the implications that news ways of creating, storing and distributing energy will have on the way we use land in our cities.
What is Distributed Energy ?
Historically, energy has been produced from the burning fossil fuels, from hydro or nuclear generators. More recently low carbon renewable sources of energy have exploded in production with wind and solar amongst the most common. Most energy has however relied on large scale producers distributing power across a network.
A new model for energy distribution is being established as the need to replace base load power from older fossil fuel based power stations with cheaper reliable alternatives using new technologies are now possible.
Distributed Energy is the new alternative. Localised production, localised storage and localised distribution with less reliance on the grid. These are also commonly referred to as Micro Grids.
Review the following video from Siemens on how this form of energy distribution makes more sense.
What are embedded electricity networks?
Embedded networks are private electricity networks, which serve multiple customers and are located within, and connected to, a distribution or transmission system through a parent connection point in the National Electricity Market. Common examples of embedded networks include shopping centres, retirement villages, caravan parks, apartment blocks and office buildings.
Within an embedded network, the embedded network operator (for example, a shopping centre owner) provides embedded network customers with network services. Many embedded network operators sell electricity to embedded network customers (for example, a business leasing space in a shopping centre). Previously, it was very difficult for businesses within an embedded network to source power from an alternative source, however new rules now require embedded network owners to be competitive in their pricing.
Distributed energy takes the embedded network a step further with storage facilities and a connection to the broader community.
Ikea is currently constructing the country’s largest grid-connected commercial microgrid, which will power its retail operations, store energy in on-site batteries and support the power grid. The first store, in Adelaide, will include 1.2MW of solar panels coupled with a 3.4MWh battery and a digital energy management system that enables surplus stored clean energy to be traded into the state grid when demand is at its highest. Ikea are also investigating including a the company will investigate the viability of hydrogen energy being generated on site.
Frasers Property’s latest initiative is to create its own energy company, Real Utilities, which owns and manages energy infrastructure within select Frasers Property developments and uses a combination of renewable energy, often generated through solar on the sites of their masterplanned communities, as well as certified carbon offsets to provide carbon neutral energy to its customers.
So what can we expect over the next decade ?
Over the next 5 years we expect to see more embedded energy networks in new developments and as the cost of energy storage reduces, we expect to see these networks include storage solutions and offer distributed energy options to adjoining users or back to the grid.
However, it is not until the cost and efficiency of solar and battery technology improves that widespread adoption of distributed energy systems will occur.
It will not be until the second half of the next decade, that we expect to see significant advances in battery technologies, enabling longer lasting, smaller batteries to store energy. These technologies will initially be used for automotive purposes and home storage solutions. Other chemical and mechanical energy storage systems will also emerge which will compete to reduce the overall cost of energy storage systems.
Over the second half of the decade, we also expect to see further advances in solar technologies with smarter photovoltaic cells used in larger volumes and in various forms including lightweight skins, translucent glass, traditional roofing products and façade materials.
With these advances in technologies we also expect to see new peer to peer energy pricing models to facilitate the sale of energy between producers and consumers at different locations.
Implications for Property & Real Estate
So what does this mean for property and real estate.
Advances in distributed energy cannot take place without co-operation between various land holders and the occupiers of the land. Property owners and investors therefore have a crucial role to play in building effective distributed energy networks.
The key to a broad scale adoption lies in the need for any system to;
- generate a lower cost of energy,
- provide a positive return on investment and
- be made with the support of a regulatory arrangement which permits the installation and the subsequent exchange of energy.
Ikea’s Pilot Project in Adelaide has been reported to cost $6.6m for a 1.2MW solar + 3.4MWh battery system, sufficient for 70% of the store’s needs. The installation is expected to save $600,000 in energy costs per year. If the figures are correct, the saving represents a return on investment of 9% per annum which is well above the typical cost of capital.
These returns are likely to be available now for property owners with larger industrial style warehouse & logistics and bulky goods properties where roof space can generate sufficient energy for low end users.
Existing buildings (ie office and residential) with smaller footprints will find it difficult to generate sufficient energy for to provide a meaningful offset. Owners of these assets, are unlikely to find alternative options until the second half of the next decade when PV and battery storage systems will be far more efficient.
New buildings will begin to incorporate new technologies in anticipation of a distributed network becoming available. Provisions for embedded networks, battery storage and solar PV systems will become standard whilst more efficient building designs, materials and systems will also assist to reduce energy demands.
The creation of micro-girds for new residential subdivisions are likely to emerge where individual house PV systems feed surplus supply to a community battery which is used as a primary external source (perhaps topped up by the grid during off peak times). That community battery may be owned by a third party who facilitate the investment and manage the supply.
We also expect large scale thin film and translucent PV systems will co-locate with some agricultural uses to export energy to local communities.
Of course any opportunity to reduce the tenancy costs of any facility should see an increase in demand for those facilities and result in a premium rent to the landlord. These are best obtained across buildings with multiple tenancies.
The next decade will see significant improvements in renewable energy creation, storage and distribution. Asset owners with access to large solar oriented surfaces will benefit most from these technologies and begin to create distributed energy networks which will bring down the cost of electricity to its occupiers.
The initial opportunities will be for large scale industrial warehouse and bulky goods facilities where solar generation and storage will enable the tenant to pay a premium rental due to the lower energy costs of the tenancy.