My curiosity was piqued by a new energy storage offering last week. Younicos (a subsidiary of Aggreko) announced that it is launching a new battery rental package that it calls “Energy-Storage-as-a-Service.” The model allows customers to choose from containerized solutions that are shipped to the site and operated by Younicos. As a part of the program, customers pay a rental fee and transport charges, but incur no other costs. In a press release, the company explained that it will begin by offering contracts with a 2- to 4-year minimum duration, but will offer multi-month contracts beginning in 2019.
To learn more about the service model, I reached out to Dean Tuel, vice president of Americas sales for Younicos. He has shared his insights below:
Distributed Energy (DE): This seems like an industry-disrupting solution. What effect do you think energy storage-as-a-service will have on distributed generation?
Dean Tuel (DT): We believe it will increase the appeal and viability of energy storage, for example with C&I users in behind-the-meter applications, where there are opportunities to integrate renewables to reduce load and energy consumption. Being able to rent rather than buy will enable greater access to tailored storage solutions.
DE: In what applications do you anticipate energy storage-as-a-service will be the most widely adopted?
DT: This model will appeal to a developer who wants to tap into balancing market opportunities, or if there’s a need to bridge some time before a larger grid connection can be made. The sweet spot will be storage combined with another resource, such as wind or solar. As far as specific applications are concerned, such a system could provide a number of services, including renewables integration, ramp rate control, spinning reserve, and peak demand reduction.
DE: Beyond the bottom line, what benefits does the reduced asset investment provide?
DT: Without question, the fact that customers will be able to simply pay a monthly fee versus make a significant up-front cash outlay is a major benefit. Some customers don’t want to put a lot of capital upfront for these types of services due to budgetary concerns—or for certain utilities it may be regulatory concerns. The rental model allows the customer to assign the cost of what the asset does into a variable cost bucket, or treat it as a pass-through cost, which for many companies and/or utilities is preferred.
DE: Do you think that the option to “try before you buy” may inspire companies to incorporate energy storage into their energy configurations?
DT: Absolutely. By limiting the term of commitment, companies will be able to prove the use case and payback, as well as more readily adapt to changing business needs by reconfiguring their system configuration and/or services.
DE: Are there specific markets you are targeting for this storage-as-a-service offering?
DT: Yes; we believe it makes the most sense in cases where there are multiple system resources—storage, renewables, possibly diesel generators for baseload. With these more sophisticated systems, our control software can extract maximum value, thereby improving ROI and justifying deployment. And we can provide a bundled solution that brings in our parent company, Aggreko, to finance the system.
DE: What sort of ripple effect will this model create? Do you see it as potentially expanding energy storage markets?
DT: It will definitely expand the market. This model enables more users to implement storage because the cost of entry is lower, and we assume the performance risk of the asset. If a company is undecided, unable, or unsure about making a commitment to purchase, this is a type of “subscription” with a limited term and limited risk. Another effect is that there will be other entrants making similar as-a-service offerings available, which proves that it’s a good idea! We’re already seeing this happen in the US and Europe. We think our experience with 220 MW of storage deployed among 50 projects, combined with our intelligent control software, will be a differentiator.
Here’s a bigger-picture perspective: At the birth of the storage market, the type of technology was the main differentiator. Once lithium-ion technology became the de facto standard, price became the lead factor. With today’s hyper-competitive pricing, customers are focused more on who the supplier is, what’s their track record, can they guarantee performance, and do they have a software advantage. We feel confident in all those areas. The next step in this market evolution is financing and as-a-service models, and that’s where Younicos and Aggreko are headed.