Trading power with the neighbours

Imagine a world where you can trade power from your solar panel with others, linking households, neighbourhoods and regions through digital technology. 

Listen to a version of the future that is already happening in the Netherlands. 

Host:

• Richard Sverrisson, Editor-in-Chief Europe, Montel. 

Guest: 

• Philip Gladek, CEO, Spectral Energy. 

Transcript

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Richard Sverrisson, Editor-in-Chief Europe, Montel: 0:05

Hello listeners and welcome to the Montel Weekly podcast, bring New Energy Matters in an informal setting. I'm Richard Sverrisson, and today I'm joined by Philip Gladek, who's the founder and CEO of Spectral Energy, a company at the, the cutting edge of, of new energy technology. Uh, welcome Philip.

Philip Gladek, CEO, Spectral Energy: 0:21

Thanks. Uh, thanks for the welcome, thanks for hosting Richard.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 0:24

I, I, I'd like to ask by, you know, uh, if you could tell us a little bit about Spectral Energy and, and some of the projects you're, you are involved in.'cause you are, you're based in Amsterdam, just in a, in a very, kind of vibrant, sort of a buzzy area north of the, the center. And if you could sort of, you know, tell us a little bit about the projects you're involved in.

Philip Gladek, CEO, Spectral Energy: 0:42

Sure. So, um, well. To introduce Spectral, we're a company focused on system integration, and our mission is really to help accelerate the transition towards a hundred percent renewable supply. And we do that by developing technologies to help connect different devices together to prepare for the future digital energy sector. And yeah, developing energy control systems, which optimize buildings to save energy on heating, ventilation, and cooling. We also develop solutions for community grids and larger area level smart grids. Where we connect and optimize sources of renewable production, storage and flexible sources of, demands such as ev, charging points, heat pumps as well as large scale assets such as wind farms and, and grid scale batteries. So that's a bit the context of. The application areas that we focus on.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 1:37

And what's the underlying technology here? I mean, you mentioned blockchain. Um, is that, is that one of them? But not only, not exclusively blockchain, as far as I understand.

Philip Gladek, CEO, Spectral Energy: 1:45

Uh, so we do use blockchain as a, uh, powerful tool to support certain functionalities within the work we do. Mm-hmm. Uh, and that's mainly in the side of, uh, uh, the work around power trading and energy markets. Hmm. Uh, so we see blockchain as Yeah. Uh, as a, a very valuable it tool that. Can facilitate settlement and transactions between, yeah. Not only peers, but also between market stakeholders. And so that has been a theme in in a lot of our projects. But more broadly, we focus on. Yeah, energy control systems. So really the the digital backbone behind the future energy sector.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 2:23

If you could go into some detail about how you use then the blockchain. It's not just, if I understand you correctly, it's not just peer to peer, but it's also, you know, uh, microgrid to microgrid or device. Device. I mean, you go right down to the granularity and then up to the bigger sort of. System, uh, perspective.

Philip Gladek, CEO, Spectral Energy: 2:39

Uh, yeah, definitely. So maybe to give you a couple of examples, um, showing sort of the different flavors of how we can implement the blockchain as a technology. On one hand we have a peer-to-peer trading solution, which we're piloting or have already started piloting in 2017 with a number of communities. And there we actually use blockchain. As a means to, on one hand, tokenize renewable energy into a physical asset that can be traded on the blockchain. The example being the Juliet which was a project we did with the largest grid operator in the Netherlands in a community looking at how can you. Manage this decentralized exchange of value and also looking at the social aspects. And there we developed not only a software platform that allowed users to configure settings, but also to manage their trading activities. But also a hardware solution that is able to extract real time data out of smart metering systems. And to transact that data onto a blockchain so that everyone connected into the system has a record of all the transactions and the data that's been committed. And so that is for example one use case which we're working on and further developing in the context of also new upcoming projects. Another interesting use case where we're applying blockchain is more on the side of flexibility trading. We're working on on behalf of clients of ours developing solutions that can coordinate multiple flexibility sources that are bid by third parties or aggregators. A sort of a virtual power plant coordination platform where third parties can connect and bid their sources of flex. Which then together as a pool are used to, for example, provide frequency containment reserves to the TSO here in the Netherlands tenant. And so, uh, one of the interesting things which blockchain can support is again, uh, the, the settlement, uh, and, and trading between these parties because. To give an example, one of the projects we're working on is a private microgrid. Mm. Uh, with a community of 46 households. There they have limited interconnection capacity on the connection point with the public grid. Meaning that if they want to use their 31 distributed battery systems to be part of this kind of pool, to deliver FCR to tenants. Well there XC

Richard Sverrisson, Editor-in-Chief Europe, Montel: 5:02

being frequency control response. Yeah.

Philip Gladek, CEO, Spectral Energy: 5:04

Yeah, frequency containment, reserves. Okay. I'm sorry. Or the primary reserve market here if they want to participate. And obviously the volume they have is too small to participate on their own, so they need to be in, in, in such a pool. But there are moments where in the winter everyone's cooking, uh, you know, cars are charging heat pumps are running to heat the houses. And well, there simply isn't enough physical capacity. F on that connection point with the grid. While in those moments, platform can enable, and of course via fully automated trading agents, cript, a broker a deal with another aggregator, To be able to pick up the slack for them. So if, if they can't at that moment discharge or rather charge their batteries to deliver FCR for tenants this other solution provider can pick up the slack for them and that financial transaction can be fully automated. Via the platform. And using blockchain, all of these different parties who might, you know, uh, not have always a complete trust Mm. Uh, for one another are able to share the data and also the Yeah. Uh, immutable record of, of the transactions which took place. Mm. Uh, to deliver essentially, uh, together as one unit. These services.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 6:20

So what are the numbers involved here? I mean, um, for example, you know, a small, you know, you're going from 36 or households to uh, 46 Yeah. 46, sorry. To, you know, to to big wind farms and, and your systems can, can deal with both of those. I mean, is there, could you explain a little bit about the scalability of your technology or your, your solutions here?

Philip Gladek, CEO, Spectral Energy: 6:40

Uh, yeah. So I mean, we are very much, uh, focused on. Applications across, uh, you know, as you mentioned, from the household level up until grid scale system. So our platform is scalable across all different technologies and we support the communication protocols. Which are used by industry for, you know, uh, SCADA systems for wind farms down to, uh, smaller scale residential batteries. Mm. So in principle, our platform is technology agnostic. And indeed, I mean, one, uh, to give a concrete case, uh, building upon the example I already gave, uh, well, the s community there, they have, uh, 31 distributed battery systems, also smart grid ready heat pumps and, and heat storage. We're now starting up a project. To actually connect their pool of of batteries together with a a number of batteries, which will be stationed at a wind farm, which we're also controlling. And these batteries belong to a company which is renting them for festivals and events. So they have. Mobile containerized batteries of around 300 kilowatts per per unit. And they have 13 of these containers currently. So essentially we enables homes gripp to gain market access by bundling them with them with these larger, uh, systems, uh, so that together they can, um, yeah. Still yield. Be able to provide these services to tenant and, and participate on this market.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 8:04

Mm-hmm. So it's not just really a, a a a, you know, a small scale of, you know, 'cause often people mention microgrids and blockchain thinking it's just small scale, it's neighbors trading a little bit of excess solar. But it, from what you are saying, it, it's much more, uh, much more enormous. You know, it's much bigger than that.

Philip Gladek, CEO, Spectral Energy: 8:20

Uh, well, yeah. I mean, uh, it has been small scale to date in that the pilot projects, uh, uh, were, you know, have been focused on. Uh, getting the technology to a certain level of maturity. But of course, as we know, uh, in certain applications around peer-to-peer trading, there are some regulatory challenges which will, which aren't, let's say completely blocking these applications. But there are definitely work arounds you have to implement to, to make. These kind of solutions actually work in the current structure of industry and, and regulatory frameworks. However, we are in the, in the stage of actually scaling up. So the technology's reaching a more mature level. Of course, the buzz has, has, uh, a bit died down since, uh, 20 17 18 when, when everyone was talking about it. About blockchain. Yeah, yeah. About blockchain itself. And now I think it's being indeed, uh. Applied as more of an just simply a tool which can support different applications. Uh, and it's not the right tool for every application.'cause that was sort of the mindset, uh, in the beginning, uh, that a lot of people had. But definitely when it comes to managing distributed value exchange between different parties who might have some degree of. Distrust. Those are areas where it can definitely add value. And we're also working on an innovation program which is starting November 1st together with the city of Amsterdam, as well as there's a parallel demonstrator running in the in Spain in the city of Bilbao. And six other European municipalities are involved aiming to replicate the efforts of, of what we're doing. Mm. And in Amsterdam, spectral is leading the technical development of. The yeah. What we're doing here is essentially setting up a local energy market platform. We're connecting a number of our projects and pioneering energy communities within the same district in Amsterdam called Ba hum. And we're actually bundling together the volume of their, their energy, uh, uh, demand and, and the flexibility they have, uh, to provide them with this market access. And blockchain in is indeed used as, uh, a fundamental tool within this, uh, platform, uh, to facilitate transactions between these communities, between, uh, uh, these sources of, uh, flexibility. And that will in the start of the program will have around 500 households involved. Not only households, but also businesses like a large hotel and, and other commercial businesses. But we do aim to scale up to the entire district level within the five years of the program. So at least 10,000, uh, uh, consumers connected to the system. And that's. Sort of our first step towards scaling up the technology to a larger implementation.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 11:03

Yep. Very interesting. I mean, um, I will turn back to the, uh, to, to the regulatory challenges here, but, uh, if we can discuss a little bit, you know, you mentioned the environmental credentials or this was a way of facilitating the shift to a, to a, to a greener, uh, a greener world, less fossil fuels, more renewables. But what are the economics here? I mean, what, what, what are the costs of people? Is this, is this a, a costly transition or are you actually, uh, bringing, bringing those down?

Philip Gladek, CEO, Spectral Energy: 11:31

Yeah, that's a very good question. So, uh, I think, uh, and again, to bring perhaps the focal point of the conversation away from purely blockchain as a technology towards some of the broader applications we focus on in, in development of energy control systems. There our company has been very much. Commercially driven, so not relying on subsidies, but really looking at, together with our clients, together with the market developing solutions that have a positive business case. Hmm. So, uh, for one, the community grid at s Homes hip which is quite a revolutionary project in that via this legal exemption, they have their own private microgrid. They are illegally actually by via this exemption, their own grid operator, their own energy supplier, and their own energy producer. And if we look at the comparison between the status quo, so if everyone had had their own public grid connection with just PV on the roof, we took that case, uh, over 20 years and compared it to. The case of the smart grid, the private net, and every household having batteries and, and these smart energy systems and the payback period is actually around seven years. So without any subsidies. The community has a highly interesting business case through investing, of course, into their own solutions, and you do need capital to invest upfront. And they did so with their mortgages, with loans, and managed to, yeah, pull the project off. But in other cases where we, for example, focus on optimizing smart buildings so we, we actually analyze data from large real estate portfolios. We identify buildings that are really underperforming in terms of energy efficiency and or comfort levels. And we go in and actually take control of the building management system to, to optimize the heating, ventilation, and cooling systems. Well, I can share with you some results from initial pilots that are still ongoing now, but one Please do. Yeah, one case, uh, was uh, where a building in Eindhoven of 12,000 square meters large office building, which we're currently optimizing. So our business model works on a euro per square meter basis per year. So it's roughly, let's say in the range of one euro per square meter per year. Hence, uh, the costs for licensing our platform are in the range of 12,000 euros for that building. Uh, the results we've managed to achieve so far on the side of energy efficiency are. Uh, an average of a a thousand euros per week in savings with an estimate of at least 50,000 euros in savings for one year. Uh, if we count the roughly 10,000 euros, it also cost, uh, for the CapEx for integrating our platform and for setting it up for that building. Well, that's about 20,000 euros in total costs for, for the first year versus about 50,000 euros in savings. So there's an extremely positive business case, and that's also why this particular client has now asked us to roll out the platform across 66 additional buildings in their in their portfolio. So there's there's definitely positive business cases to be had in the smart energy sphere. And not only the business case, but in that particular building as well. There was an average of seven complaints a month or so before we actually started our implementation. And between June and August we had zero complaints for climate. I. So saving a huge amount of energy while actually also improving the climate within the building.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 14:59

Yeah, makes sense. Makes a lot of sense. If we can then return to some of these regulatory challenges for me is, is one, one of them. If you having, if you're setting up an energy system that has a lot of these small micro microgrids, then fewer and fewer people, um. Potentially using the, the, the high voltage transmission grid. Which then becomes more costly. So there's fewer and fewer, and people sharing, uh, you know, the costs of, of the upkeep and, and, and the maintenance and the, the construction of, of, of the grid. Isn't that problematic?

Philip Gladek, CEO, Spectral Energy: 15:30

Uh, yeah, definitely. And, and it's not only on the, the high, high voltage, but of course indeed the mid voltage. Networks and in general, um, you know, you point out an interesting challenge which the energy sector is is heading into, is that through investment into these microgrids or essentially I mean, they're still grid connected. They still have that point of coupling with the public grid. Hmm. But in the case of Cript, to give an example, normally the grid operator would be getting, you know, 46 times. The household connection, which is yeah, on a, on a periodic basis, uh, quite a lot of money, you know, a factor 10 more expensive than what they pay. Just having their one bigger grid connection. And at the same time, new digital solutions allow for automation of. For example, our smart building platform gives recommendations to users to be able to reduce their contracted capacity. And and that's something that also is cutting out the profit margins of these of these grid operators. And hence. Yeah. Here in the Netherlands because the costs are socialized across, well the, the entire public, that means as the profit margins, uh, of the grid operators go down, at the same time they have to invest into more infrastructure, because electrification of mobility and heating is creating a lot of strain. Renewables are creating a lot of, uh, pressure points in the, in the grid infrastructure. So you're getting a situation where, uh, more and more people are sort of. Partially opting out or in other ways, keeping their costs for grid connection as low as possible. While at the same time the costs are getting higher for the grid operators. Meaning more costs will be, have, have to be spread across essentially a smaller group of people. So yeah, this is, uh, potentially a sort of death spiral. If the current market models stay the way they do. On the other hand, I don't believe that's gonna happen. I believe. Policy and market mechanisms will evolve to address this issue. But this is a trend we do see at the moment.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 17:33

And in terms of other trends, I mean, you know, what, what does this, what you are saying here, your platform, your kind of systems, the, the world we're talking about here, where, where does the traditional utility sit and where does that leave the exchanges or the, the middlemen? You often, uh, blockchain's been, you know, been referred to as sort of. Bypassing these middlemen. Is this the case here as well?

Philip Gladek, CEO, Spectral Energy: 17:56

Definitely. In terms of certain, uh, existing market players such as, well, obviously banks have a huge role in still in that, uh, transactions are, you know, financial transactions are all running through banks. There's other service providers. In terms of also in, in the Netherlands you have like parties like the EDSN, which are responsible for energy data. A lot of these stakeholders. Start to become less relevant if you implement solutions such as blockchain. Um, so for sure there's gonna be a, a big shift in, uh, in existing market roles as this digital technology really takes away. Mm. My personal opinion is that the, uh, the role of the energy retailer, the, uh, the sort of, you know, administration company as it's traditionally been. The commodity trading aspect is really on the way out. So that's also why all the big energy suppliers are looking for new products and solutions, moving closer to the customer or getting behind the meter. On the other hand I do think exchanges, trading platforms. Are still an important element and while we see emergence of these local energy market platforms and more peer-to-peer exchange, yeah, there will always be an either excess or deficit that needs to be purchased or acquired somewhere. And whether this happens on an exchange or via new mechanisms such as you know, some kind of forms of PPAs. Yeah. That is something that, that the future will tell. But so that's, that's a bit of what I see happening. And when it comes to grid operator role, well, for sure there will always need to be the infrastructure in place and, and a company that's maintaining it. In the context of these private grids which we're developing, which also. EU policy is in, in large support of there. We see it again, more of a an approach where the traditional grid operators, the regulated bodies of course, aren't involved there. It's commercial entities, companies that take on the response, same responsibilities. For example. Spectral also offers software solutions to help monitor and manage and also provide billing services for these mini grids. So. Yeah. How that will all evolve is is very well, uh, difficult to predict. But there is definitely a scenario where more and more fragmentation happens in the sense that all, there's more and more mini grids, uh, sort of being serviced by commercial entities, which creates a, a certain level of competition, uh, to be the most efficient in providing those, um, management services and that competition doesn't exist. When you're talking about the regulated grid operators, so again, this could exacerbate the problem of, you know, you have the grid operators are usually owned by municipalities. They have more of a public service mentality, which doesn't often result in efficient processes or keeping overhead costs low. So if you suddenly have, you know, these smaller mini grids or areas that are serviced by more efficient commercial entities that can sort of do it at a, at a better price. Yeah. That again, creates more and more incentive for people to sort of opt out of the public grid situation and invest into their own microgrids. Yeah. I do see that these factors will impact how the the market is formed in the future.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 21:13

Absolutely. Do you think you must have had some interactions with. With regulators et cetera. How do they and, and, and, and TSOs, you mentioned tenant earlier and some of the distribution system operators. Are, are the regulators interested or how do they view these kind of projects? Are they, are they encouraging or a little bit more kind of conservative?

Philip Gladek, CEO, Spectral Energy: 21:31

No, uh, definitely interested. I mean, in fact, this, uh, special legal exemption I mentioned that we're making use of not only its phones scape, but at several other projects. The experimenting, it's called in Dutch. So the experimental exemption loosely translated that was created by the ministry of economic affairs essentially as a precursor to regulatory change to really see, okay. They give out a limited number of permits per year. With the goal of actually examining through practical applications, pilot projects, how should the regulatory frameworks be adapted to just make this part of the law the electricity law? And so actually given that we're amongst the first companies, and I think the only company in the Netherlands really pushing the boundaries on these innovative smart microgrids, the regulators are very eagerly looking at. How we're setting things up. I've had numerous conversations with the tax authorities. I mean also the tariff structures and how we communicate those to consumers have to be approved by the consumer regulator. The a CM here and the RVO is the the organization, the governmental organization within the Netherlands, responsible for actually giving out these permits on behalf of the Ministry of Economic Affairs. And we work very closely with the representatives from the RVO. Also giving our feedback on, which aspects of this permit are sort of blocking, um, innovation, which, which, uh, kind of, yeah, laws should be in place to make sure that it's fair but also encouraging investments into renewables and accelerating the transition.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 23:10

Philip, we could go on for hours here, but it's fascinating to, to hear all this and, uh. Thank you very much for, um, giving us a glimpse of the future, if you like, a sort of brave new world. So thank you very much for joining us. I think we could say, uh, uh, blockchain is certainly not dead yet.

Philip Gladek, CEO, Spectral Energy: 23:26

No, certainly not. And, uh, a lot of other, uh, innovative technologies underway. So thanks Richard for, uh, hosting and for inviting me to, to join the podcast and, uh. I hope all the listeners uh, found it interesting.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 23:39

I'm sure they did. That's all for now. Please follow all the, the latest energy news on montel news.com and on LinkedIn and Twitter. Um, you can subscribe to this podcast on Spotify and for podcast goodbye.