The following is a guest blog post by Scott Ungerer, Founder & Managing Director of EnerTech Capital and a board member of Tangent Energy Solutions.
Tangent and Cummins, Inc., a global power leader, announced a joint venture to promote edgeGEN™, a line of Cummins natural gas generators equipped with Tangent AMP™, a proprietary Distributed Energy Resource Management System (DERMS).
This joint venture is a major accomplishment for Tangent. As a worldwide leader in engine manufacturing, Cummins had a wide range of options for a partner in a venture like this. The fact that they picked Tangent is a source of pride for the company and a testament to the hard work and dedication of the management team and employees.
But, I would also suggest that, this JV between a traditional power industry manufacturer like Cummins and a grid edge DER/DERMS company like Tangent, is also a big deal for the energy industry and its continued evolution to a more decentralized energy grid.
In early 2014, Greentech Media published an article by Jeff St. John that asked the question “Will Distributed Energy Make up One-Third of the US Power Supply by 2020?” Within the body of that article there was a chart with a DER energy stack of sorts that identified more than 500GW of potential DER power from primarily customer-sited assets. What is significant is that more than 70%, or 360+ GW, of the mix was projected to come from engine based assets.
Now, more than two years later, I am not sure where we stand with respect to fulfilling the article’s DER capacity prediction, but with the passage of time two things have become more certain.
First, new sources of power are going to have to come from somewhere due to retirements of centralized generation capacity, especially coal. According to this S&P Global Market Intelligence analysis, about 50.5GW of coal generating capacity was expected to retire between 2012 and 2020 with the bulk of those retirements already completed. Additional support for this trend is in this eia.gov report which indicated “Nearly 18 gigawatts (GW) of electric generating capacity was retired in 2015, a relatively high amount compared with recent years. More than 80% of the retired capacity was conventional steam coal.”
The loss of centralized generation capacity is especially significant in regions like New England where, according to the ISO NE website, “…30% of the region’s generating capacity could be gone by 2020.”
Second, if customer-sited, engine based DER assets are going to play a meaningful role in replacing a significant share of the lost generating capacity, it stands to reason that major engine manufacturers will need to participate in this market in an expanded role. That means they will not only have to provide the assets, but also the means to manage and monetize the assets for the benefit of a range of stakeholders.
By partnering together in a joint venture, Cummins and Tangent are not only validating the market opportunity represented by grid edge DERs, they are also providing a template for future collaborations between traditional and grid edge energy companies.