Digital infrastructure: the invisible partner enabling renewable energy

April 2021  | SPECIAL REPORT: INFRASTRUCTURE & PROJECT FINANCE

Financier Worldwide Magazine

April 2021 Issue

Renewable energy technology is some of the best infrastructure America has ever built, California wind power pioneer James Walker is fond of saying. It just needs a few petabytes of data and a lot of analysis to make it perfect.

Walker once argued for extending the production tax credit for wind energy, writing in The Detroit News: “The credit has fueled sustained technological progress, including taller towers, longer blades, better gearboxes, computerized controls, and new power lines. Project developers now know how to locate turbines so that they capture the most wind with the least impact on local wildlife, while reducing pollution that threatens everyone.”

Furthermore, what project developers know is driven by data collection, reporting and analysis at every step in the process. We are seeing in the renewable energy sector a wide range of business and investment opportunities in all sorts of specialised digital infrastructure – from that which makes the energy transition possible to the nuts-and-bolts of 5G mobile internet infrastructure, and deeper penetration of fibre optic cables that requires.

Wireless communications and smart city modernisation opportunities are proliferating, including telecom towers, small cell and distributed antenna systems (DAS).
A growing number of enterprises invest in custom fibre connections to modernise their networks and meet customers’ digital expectations. As last-mile networks expand into the rural US and get fibre to the home (FTTH), other vendors focus on the ‘middle mile’ to link these local networks with a provider’s core network hubs.

Data centres too are offered in new versions – with various companies partnering to co-locate at a single centre, others employing hybrid models for both physical and cloud-based capacity, and huge companies owning and operating their own hyper-scaled data centres.

Digital wind farms, as General Electric calls them, are an example of how higher-speed data transmission in real time, across even previously underserved rural areas, continues to expand the impact of big data talked about for years. It is enabling not just emerging technologies, such as self-driving cars and virtual reality, but the pragmatic underpinnings of the rest of our economy, starting with the electrons in our wall outlets.

Increasingly ubiquitous and sophisticated sensors mounted on wind turbines and solar farms generate vast amounts of data. This data helps determine where to site new projects – to capture the most wind and sun and generate the power that will be valuable to the market over time. Analysis of the data helps a developer arrange wind turbines to minimise their interference with each other. Once a solar array is built, data collection reports to the owner of a solar array exactly which modules are shaded and which generate the most power, and how the tracking system is performing.

Data decides the most cost-effective maintenance intervals by spotting temperature spikes in a component before it fails or catches fire. On a much larger scale, it helps maintain the electric grid’s stability, enabling grid operators to integrate the power from widely scattered and intermittent renewable energy generators with few staff on site, as opposed to huge centralised power plants.

At times, grid operators can make renewable energy ‘dispatchable’ by leaving a margin of energy uncaptured – and then tuning the blades or turning on modules when they would otherwise turn on a gas peaker plant. With the right digital infrastructure, a utility-scale solar power plant can actually provide the functions of spinning reserves, load following, voltage support and frequency response. It is called ‘grid regulation’.

Even when it is not windy or sunny enough to generate power, advanced electronics in today’s wind and solar plants can be employed to help regulate the frequency of electricity carried on the wires, helping to avoid blackouts and providing a valuable service to the regional grid. The bigger challenge today is how to appropriately price and collect for these services.

Mapped against weather and power market prices, the constant stream of data flowing from these plants can even predict the financial performance of renewable energy projects. REsurety Inc., in its recently announced product REmap, can represent on a map who is making and losing money at critical moments for the grid. It found the heatwaves last August helped reverse a five-year decline in the value of solar power in California, for example. It reveals who wound up paying for the $9000-a-megawatt-hour prices that electric power spiked to during the recent deep freeze in Texas.

Such insights can allow buyers to negotiate supplemental contracts that account for varying generation, load and pricing – and if their exposure to market prices has turned out to be too risky, then to offload that risk to an insurance provider that will accept it (for a price).

SolarEdge, which makes both hardware and software, is among the companies driving the transition away from centralised power plants. It offers cloud-based control over a pool of resources, including solar PV, battery storage and electric vehicles, to create ‘virtual power plants’ (VPPs).

Such digital infrastructure can allow utilities to avoid the cost of new physical infrastructure that may just wind up being underused, by “leveraging pooled energy in VPPs to instantly overcome local supply shortages”, as SolarEdge puts it. They offer reporting intervals down to one minute.

This flood of data has become an invisible partner in the success of renewable energy, and it represents investment opportunities all along the value chain.

But these industrial control systems must be resilient, and ideally able to restart even without grid power. When Hurricane Maria hit Puerto Rico in September 2017, it destroyed one wind farm but left another nearly unscathed. However, the 101-megawatt Santa Isabel project still could not fully restart for months – the local utility first needed to provide ‘backfeed power’ to operate all its systems, before transmission capacity later became the issue.

Battery storage is helpful at a time like this. And enabled by data (and falling prices), energy storage systems are increasingly able to capture extra wind and solar energy generated at one time of day and shift it to another time when prices are better.

When storage is meshed with solar generation, EV charging stations and the right software, it forms a microgrid that can keep critical systems such as communications and refrigeration running through gridwide blackouts caused by a variety of natural disasters.

All these systems must also be made cyber secure, protected against tampering by US-based vandals and protected against interference by any foreign power that might want to threaten our grid. A biennial report by Claroty for the second half of 2020 found hundreds of vulnerabilities in industrial control systems, energy systems among them, and 72 percent were ‘remotely exploitable’.

“Anyone who thinks they understand the scope of this today is naive,” said Robert Lee, chief executive of Dragos, at a February 2021 US Department of Energy briefing  focused on the 2020 SolarWinds attack. It hit hundreds of organisations and government agencies through a widely used piece of infrastructure software.

Expect more scrutiny of supply chains, and a continued ‘buy American’ focus – or at least rules to ensure that America controls all this digital energy infrastructure.

 

Mona E. Dajani is a partner at Pillsbury Winthrop Shaw Pittman LLP. She can be contacted on +1 (212) 858 1061 or by email mona.dajani@pillsburylaw.com.

© Financier Worldwide

BY

Mona E. Dajani

Pillsbury Winthrop Shaw Pittman LLP

©2001-2024 Financier Worldwide Ltd. All rights reserved. Any statements expressed on this website are understood to be general opinions and should not be relied upon as legal, financial or any other form of professional advice. Opinions expressed do not necessarily represent the views of the authors’ current or previous employers, or clients. The publisher, authors and authors' firms are not responsible for any loss third parties may suffer in connection with information or materials presented on this website, or use of any such information or materials by any third parties.