Kohler Power buys startup that uses game-theory math to manage microgrids

Can game-theory mathematics help keep the balance as solar panels, batteries and electric vehicles are linked together in microgrids? Kohler, the bathroom fixtures giant, is betting yes.

Kohler Power Group, the corporation’s quiet but globally active generator and energy services arm, has announced that it is acquiring Heila Technologies, a six-year-old Somerville, Mass.–based startup whose technology is currently managing two dozen microgrids across North America.

Heila’s software and hardware are built around the idea that a rigid command-and-control approach is not the best way to integrate solar arrays, EVs, batteries, fuel cells, backup generators and other distributed energy resources (DERs).

Instead, Heila has used principles of game theory — a branch of mathematics dedicated to modeling and predicting how independent agents behave in cooperative or competitive settings — to develop a system that enables individual DERs to work out among themselves the best ways to balance the grid.

Heila’s unique distributed control architecture allows DERs to respond to shifts in the balance of supply and demand of electricity, voltage or frequency fluctuations, and other disruptions to their shared system in what’s known as a ​“self-healing” approach. The idea is that DERs can self-adjust in ways that bolster grid stability as a whole without centralized controls that attempt to manage each device’s actions.

The concept is emerging as a central theme for a host of technologies developed to keep increasingly complex microgrids running or to get lots of DERs to support power grids that weren’t designed for them.

Companies like Heila that can successfully pull off these complex coordination tasks are becoming hot commodities for grid software vendors and energy services giants looking for ways to tap into fast-growing distributed energy markets.

Kohler and Heila did not disclose the terms of the acquisition. Heila had previously raised $3 million from Table Rock Infrastructure Partners, Massachusetts Clean Energy Center and Acario Innovation, a wholly owned subsidiary of Tokyo Gas Co., as well as other private investors.

“We want to make batteries and microgrids and generators work together everywhere,” Heila CTO and co-founder Jorge Elizondo said in an interview. ​“Working with Kohler, we can take our technology worldwide.”

Elizondo and Heila co-founder and CEO Francisco Morocz met at the Massachusetts Institute of Technology. They grew the company they co-founded with a combination of federal government grants and revenue from early projects such as a showcase microgrid at the Stone Edge Farm winery in California.

Further Department of Energy–backed work at New Mexico’s Kirtland Air Force Base and an all-electric housing project in Basalt, Colorado led to connections to utility and battery partners, as well as an expanding roster of projects in Louisiana, Florida, Washington, D.C. and, in the company’s first venture outside the U.S., Costa Rica.

How Heila fits into the complicated microgrid landscape 

Heila is a small player in a big industry. Deep-pocketed private-equity firms are putting billions of dollars into distributed energy and microgrid businesses, partnering with established grid vendors such as Siemens and Schneider Electric that have their own microgrid control platforms. Companies like Enchanted Rock, Scale Microgrid Solutions and PowerSecure are building projects centered on natural-gas-fired engines that provide reliability when the power grid goes down.

The increasing cost-effectiveness of solar power and batteries is also driving more fossil fuel generator companies to integrate them into their projects. Generator makers such as Caterpillar, Cummins, Rolls-Royce, Wärtsilä and Aggreko have all partnered with or acquired battery-management technology platforms to expand their capabilities on this front.

Kohler Power Group, which has manufactured generators since 1920 and sells them in more than 100 countries, is adapting to similar demands from its customers, Brian Melka, group president, said in an interview.

“Companies have put in solar to try to reduce their energy costs,” he said. ​“They likely have backup generators on-site or emergency standby power, and now they’re trying to add battery storage to that system, or fuel cells.”

“One of the main challenges with traditional solutions is the level of centralized command and control,” Melka said. ​“It creates a lot of complexity in connecting power sources and power consumers” — a complexity that only grows as customers add and subtract new devices and loads.

“Heila allows us to tie that all together in a way that not only increases resiliency but lowers operating costs over time,” he said. And for customers concerned with reliable backup power over everything else, Heila’s self-healing responsiveness offers another layer of security, he said.

Today, Heila’s software comes in hardware devices connected to various devices it’s seeking to control, from generators, batteries and solar inverters to the electricity-using devices that rely on their power.

Kohler Power intends to integrate the technology into ​“every product we put out [so they will] be what we call Heila-ready,” Melka said.

While the vast majority of Kohler Power’s business is with commercial and industrial customers, it recently launched a Power Reserve battery system targeted at residential customers, along with a new home energy management division.

That puts it in competition with Tesla, Sunrun, sonnen, Sunnova and other rooftop solar vendors offering batteries, as well as with Generac, a leading generator maker that’s now selling batteries and smart thermostats.

These companies are investing in technology to manage solar, batteries and other household loads in ways that can help reduce stress on the power grid. For example, Generac has launched a grid services unit, fueled in part by its acquisition of Enbala, a company that aggregates devices such as pumps and motors, backup generators and behind-the-meter batteries to earn money in energy markets.

Heila’s work on linking solar- and battery-equipped homes into neighborhoodwide networks could offer even more fine-grained levels of grid-balancing capabilities, Melka suggested. ​“The ability to link up a community of homes that have solar-plus-storage, and generators as well, and create resiliency for 40 to 50 houses rather than just one house at a time — Heila has demonstrated they can do that.”

Heila’s software integrates economic values, such as varying cost of electricity produced from different DERs or the potential payments they can receive for providing grid-stabilizing services alongside the physics-based measurements that keep DERs in balance, Elizondo said. ​“It comes with the [utility-rate] limitations on how much you can import and export at what times, services you can provide the utility such as demand response and voltage support,” he said. ​“Interacting with the utility and the grid is one of our main features.”

The benefits of going with a game-theory design versus a command-and-control approach can really start to pay off when ​“trying to scale and bring many resources together,” Elizondo said. ​“There’s a limit to what you can handle from the centralized approach.”

Melka emphasized that Kohler intends to give Heila free rein to continue providing its technology to projects outside of Kohler Power. ​“We want them to be agnostic in how they go to market,” he said, ​“and really scale and create power resiliency everywhere.”

Can radically distributed DER controls gain traction in the market? 

Ben Hertz-Shargel, the global head of grid edge research for analysis firm Wood Mackenzie who holds a doctorate in mathematics, noted that Heila’s game-theory approach follows a long-running body of academic research into complex systems and swarm intelligence, in which there is no centralized control.

Distributed DER control systems are being developed by companies such as PowerFlex, the California Institute of Technology spinout acquired by EDF Renewables North America in 2019, and PXiSE, the Sempra Energy subsidiary that was acquired by Japanese energy tech conglomerate Yokogawa Electric last month. Toronto-based Encycle has used a decentralized ​“swarm” approach to perform commercial HVAC energy management since 2005, Hertz-Shargel added.

“Whatever the claims about game theory, emergent intelligence and the like, a microgrid is just about physical stability,” he said. Whether centralized or decentralized, the control architecture needs to maintain frequency and voltage throughout the network. ​“Heila has a significant burden to prove that their solution is more robust than those of companies like Enchanted Rock, PowerSecure and Schneider Electric, who own the market and have years of complex projects behind them.”

Heila and Kohler are also competing in an increasingly crowded marketplace, Hertz-Shargel noted. Large commercial and industrial customers ​“are being approached by companies across the value chain, from asset developers to retailers, to provide integrated energy solutions for resilience and sustainability.” he said. ​“The majors will be soon to follow.”

Similar competitive pressures exist in the residential space, not just from providers of generators, batteries and solar but from the tech giants such as Google, Amazon, Apple and Samsung vying for market share in home automation, voice-activated devices and smart appliances, he said.

“Once you control the home ecosystem of devices, it’s a small step to managing their energy consumption,” Hertz-Shargel said. 

One big question for microgrid technology providers like Heila trying to make inroads into these residential markets is how successful they will be at convincing partners to embed their technology into new ​“smart” devices, he said.

Companies will face plenty of opportunities to compete against each other — or to partner to combine the capabilities of their technologies in new ways.