LS Power has raised more than $47 billion in debt and equity to invest across the U.S. electricity system, from power plants and solar farms to grid-scale batteries and transmission projects. It’s also working on the demand side of the grid with its recent acquisitions of demand response provider CPower and electric vehicle charging network developer EVgo.
Earlier this month, it brought another facet of the grid landscape into its portfolio: microgrids.
LS Power’s purchase of GI Energy, now rebranded as Endurant Energy, gives it a platform to develop and invest in combined heat and power, geothermal ground-source heat pump systems, solar PV, battery storage, energy efficiency and smart load controls, LS Power CEO Paul Segal said in a Friday interview.
“The objective is to use a suite of commercially proven technologies to provide a trifecta of reliability and resilience, greener or more efficient energy, and an attractive cost proposition," Segal said.
That’s the same combination that’s enticed a growing number of energy project developers and infrastructure investors into the microgrid and distributed energy space. The scope of this work ranges from massive and complex projects from companies like Engie, Veolia and Schneider Electric-Carlyle Group joint venture AlphaStruxure, to more modular microgrid developments from Enchanted Rock, Scale Microgrid Solutions, Siemens-Macquarie joint venture Calibrant Energy, and the GreenStruxure joint venture between Schneider and Huck Capital.
LS Power’s plans for Endurant range “from relatively simple — a rooftop solar array plus a battery — to things that can be meaningfully more complex, essentially providing your own utility services within your own footprint, and ideally, if you have enough resiliency built into your system, using the grid very infrequently,” Segal said.
Resiliency against power outages is becoming a more pressing concern for property owners reacting to the rise of extreme weather events, he said. “I think the events in California last year and in Texas earlier this year,” as well the risk of cyberattacks like the one that disabled the Colonial Pipeline this month striking natural-gas supplies for power plants, “make people think about resiliency.”
The Endurant Energy technology mix
Endurant’s projects range from campuswide systems like Cornell University’s technology campus on Roosevelt Island and an "eco-district" at the former Hunters Point naval shipyard in San Francisco, to individual buildings ranging in size from New York’s Empire State Building to a Walgreens store in Illinois.
Most of Endurant’s projects use combined heat and power systems, which generate electricity using natural gas and capture the waste heat in buildings, or ground-source geothermal heat pump systems that GI Energy has been deploying since the early 2000s (the company’s original name was Geothermal International).
The latter approach is “about as efficient as you can get,” LS Power Senior Vice President Alex Staehely said in a Friday interview. It's also well suited for locales where natural-gas use is being discouraged or even prohibited.
Sustainability goals, plus the falling cost of solar panels and lithium-ion batteries, are driving more customers to add on-site solar and energy storage as well, although “it still has to make economic sense,” he said.
LS Power owns natural-gas-fired power plants across the country, which puts it at odds with clean energy and environmental groups pressing to close such plants and prevent new ones from being built. But when it comes to keeping large buildings or campuses running off the grid for long periods of time, solar power and batteries alone can be a cost-prohibitive option.
"I personally think that natural gas is going to be with us for quite some time," Segal said. "We need to think of solutions that can allow us to use natural gas in the most efficient possible way, or in configurations where there are carbon-capture opportunities on the other side."
No matter the combination of technologies, the main barrier to their broader adoption has been the upfront cost to building owners. That's where infrastructure investors have stepped in to fill the gap. Financial structures that pay back that investment over time range from shared savings agreements between building owners and infrastructure owners to direct power purchase arrangements, with the core equipment operating much like an independent power plant for the building or campus.
How to make money by investing in microgrids
Oil major Shell acquired a majority stake in GI Energy in 2018, adding to its growing portfolio of distributed energy businesses. Shell sold its entire stake in the company to LS Power for an undisclosed sum, Segal said.
With this transaction comes a shift in emphasis from designing and building projects for hire to taking them on as an investor or owner, Staehely said.
“They’ve built a pipeline for the last couple of years with Shell,” he said. “With our capital and support, we can really bring the asset ownership model to bear.”
Some of these projects are pushing the boundaries of how distributed energy resources interact with the grid at large. GI Energy’s battery projects in New York City are serving megawatts of energy to support the local distribution grid needs of utility Con Edison, as well as to participate in wholesale capacity markets run by grid operator NYISO.
Endurant is seeking opportunities for additional revenue streams from these kinds of grid services “on a case-by-case basis,” Segal said. CPower’s business of enlisting commercial and industrial customers for load curtailment programs and “dispatch and aggregation of distributed generation assets” could serve as an avenue for monetizing that grid flexibility, he noted.
Building on-site power into a new development can also cut the costs and time to upgrade the neighboring power grid to serve it, he noted. That constraint is becoming particularly acute for adding EV charging to dense urban neighborhoods, and LS Power is working with EVgo “to take advantage of some of those opportunities,” Segal said.
“One of the things we’re good at is looking at the technology we’re putting on a particular site and thinking about alternative ways of monetizing that [and] bringing the cost down,” he said. “It could be something as simple as selling [renewable energy credits] on a particular site.”
New York City and the decarbonization value of distributed energy
LS Power’s multiple activities in New York indicate the presence of more opportunities for microgrids and distributed energy. Among the company’s fleet of natural-gas-fired power plants, LS Power subsidiary Rise Light & Power owns the Ravenswood Generating Station, which can generate up to 2,200 megawatts of power, or roughly one-fifth of New York City’s peak electricity needs.
Ravenswood is under pressure from state carbon emissions and local air quality regulations to close down in the coming years. LS Power has won state regulator permission to build a 316-megawatt battery system at the site to replace most of its gas turbines. But it hasn’t yet won a contract for the project’s power, with utility Con Edison choosing a 400-megawatt-hour project from developer 174 Power Global late last year.
Rise Light & Power is now proposing a 1,200 MW transmission line to bring wind and solar production from upstate New York to Ravenswood, one of a handful of developers competing for the opportunity. New York will need to build more transmission to carry renewable power from the north, as well as for the gigawatts' worth of offshore wind farms being built off its coast.
But New York City will also need to manage the shift from fossil fuels to electricity to power vehicles and building heating, as it needs to do to reach its net-zero carbon goals. Buildings and campuses that can combine efficient low-carbon heating and electrification, on-site generation to reduce grid stress, and energy storage and orchestrated load controls to help balance the peaks in grid demand to come could be a vital tool in this task.
The combinations of technologies and business models to expand this demand-side flexibility range widely. Con Edison’s existing steam district heating system could be expanded and switched to electric power. Big batteries like those being deployed by Enel X’s Demand Energy can shift power consumption to avoid building new grid infrastructure in a constrained urban environment.
So can aggregated rooftop solar, behind-the-meter batteries and smart thermostats and other load-shifting resources, as Con Edison has done with its Brooklyn Queens Neighborhood Program, and as LO3 Energy is looking to do with its Brooklyn community microgrid project.
“We’re leaning into this suite of solutions that will be in increasingly higher demand as we decarbonize our grid,” Segal said. “It’s still early. It may not be in all cases the most efficient solution to a problem. But it may be a preferred solution to a problem.”
(Article image courtesy of LS Power)
Canary Media Newsletter
Join the newsletter to receive the latest updates in your inbox.