During William A. Schmitz¡¯s seven-year tenure as Chief Operating, Officer of Ultralife Corporation¡¯a designer and manufacturer of batteries, power solutions systems and communications systems, that company¡¯s annual revenue soared from US$30 million to over US$250 million in large part due to the ability of Schmitz and his team to create innovative new products designed specifically to problems his customers solve energy-related.
In 2010, Schmitz became Chief Executive Officer of Arista Power, Inc., a developer of renewable power solutions with an expert capability in renewable energy generation through solar Photovoltaics (PV) and wind turbines, as well as energy storage and management and power distribution. Together with his experienced management and engineering team, Schmitz has transformed Arista Power from a single-product wind turbine manufacturing company to a diversified energy solutions company with a suite of new products and a proven ability to provide power solutions that offer compelling value propositions to customers.
The team has developed a proprietary new product called ¡®Power on Demand¡¯ that optimizes solar PV and/or wind power for large users of electricity who are hit with monthly ¡®demand charges¡¯ that increase their electricity bills. This new product provides a unique solution to solar PV customers with a value proposition that is extremely compelling.
When Schmitz joined Arista Power, the company manufactured just one product, the highly-efficient, ducted small wind turbine. But Schmitz quickly realized that the payback period on a stand-alone wind system did not provide the value proposition. Schmitz also realized that wind resources at some customer locations were simply not attractive enough for wind power alone to provide a solution, and that adding solar PV to the company¡¯s product mix would broaden its potential customer base.
In addition, when Schmitz and his team visited potential commercial customers, they began hearing a remarkably similar refrain. ¡°We kept hearing the same question over and over again,¡± says Schmitz. ¡°What the heck are these ¡®demand charges¡¯ that are driving our electricity bills through the roof, and is there anything we can do to bring them down?¡±
¡°I love the challenge of developing new products to solve a problem,¡± says Schmitz. ¡°At Ultralife, we were very good at developing new products that store and distribute energy. We did a lot of that for the Army, where they came to us with a specific problem and asked us to devise a solution.¡±
Solving a Problem for the U.S. Army
Mark Matthews, a chemical engineer and long-time battery designer who is now Vice President of Sales & Marketing at Arista Power, and Hari Nayar, Arista Power¡¯s Director of Electrical System Engineering, took up the challenge of devising a way to reduce demand charges.
The team had already developed a mobile, trailer-mounted renewable energy system that utilized wind, solar PV and an onboard storage system to produce and manage power. That system, which Arista Power calls its ¡®Mobile Renewable Power Station¡¯, was designed to solve a problem for the U.S. Army: how to provide power at remote locations and to reduce the need for dangerous fuel convoys that must deliver diesel fuel to those locations, such as unmanned radio stations. According to CNN, a recent U.S. Army study revealed that an astonishing 1 out of 8 Army casualties in Iraq resulted from protecting fuel convoys.
The mobile trailer can be set up and begin capturing, storing and using renewable energy sources within 5 minutes. It contains 14kWh of energy storage capability, AC/DC power distribution and controls/integration and can be configured for a permanent installation and scaled as needed for larger power consumption.
¡°We developed the ¡®Mobile Renewable Power Station¡¯ specifically to address the issue of reducing the need for military fuel convoys,¡± says Schmitz. ¡°But we are also finding other markets for that product as a way to provide a micro-grid at other kinds of off-grid sites.¡± Both the U.S. Army and the Federal Bureau of Investigation, which were looking for a way to power remote cell towers, have purchased the solution. It can also be used to provide emergency power during natural disasters, power at construction sites, and to provide clean water, communications, and a foundation for emerging infrastructure in underdeveloped countries.
¡°The Mobile Renewable Power Station was the genesis of Power on Demand,¡± says Matthews, ¡°Essentially, what Hari and I did was to take the concept of the mobile wind and solar power generation and storage system and adapt it to a brand new market as a way to address the issue of reducing electricity demand charges.¡±
What Are ¡®Demand Charges¡¯?
Utility companies charge commercial customers and other large electricity users demand charges for periods when they use the most energy throughout the billing period. These charges are based on the highest level of demand, called peak demand, used by the customer during the billing cycle--even if that peak demand only lasts for a brief period of time, such as when a manufacturing company turns on its machinery at the start of a work day.
A demand charge is essentially a fee imposed by electric utilities to reserve a certain amount of capacity based on a customer¡¯s peak usage. The theory behind demand charges is that the customer must be charged for the maximum power delivery capacity it requires from the utility--even if that capacity is only used briefly. The utility argues that it costs money to build and maintain that capacity, and that any customer that utilizes it--however briefly--must pay its share of that cost. These demand charges are remarkably burdensome--in many cases, they can comprise between 30 to 70% of an electric bill, and they are spreading not only throughout the United States but also throughout the world as electric utilities look for new ways to offset rising infrastructure and maintenance costs. Just a few minutes of peak demand can make a monthly utility bill go through the roof.
Arista team has tried to solve this problem by smoothing out electricity demand on the grid through the use of wind and solar PV, electricity drawn from the grid itself during low-cost periods and a custom-designed storage and distribution system that enables electricity users to draw power from their own storage system rather than the grid during periods of peak demand. This concept is called peak shaving, and by reducing the spikes in power demand from the grid, Power on Demand thereby reduces demand charges, which lowers electric utility bills. Figure 1 shows an actual utility bill of a light commercial customer--the demand charges are more than half of the total bill. Figure 2 illustrates the peak power spikes and how the ¡®Power on Demand¡¯ Dynamic Monitoring System (DMS) can address these.
A Huge New Market for Wind Turbines and Solar PV
¡°The storage and power management aspects of our system and the ability to reduce demand charges opens up a new market for both solar PV and wind turbines,¡± says Bill Schmitz, ¡°because the dramatic reduction in demand charges when combined with a reduction in consumtion charges from the energy generated shortens the payback period of our system to as little as 2 to 6 years, which is a value proposition that no stand-alone wind or solar PV system we know of can match. The customers will have the potential to expand their business by adding more machinery while at the same time reducing demand charges.¡±
Some of the characteristics of ¡®Power on Demand¡¯ are:
-It addresses a large and growing market consisting of all commercial customers with high energy costs & demand charges, recently estimated by industry analysts to be a multi-billion dollar market;
-It is a power management system that utilizes energy from multiple sources integrated with a custom-designed and scalable battery storage system;
-The system maximizes the value of energy from wind, solar, fuel cells and/or the grid;
-The system releases energy at optimal times when energy costs are highest to reduce peak demand charges;
-Custom-sized systems are priced in the mid-to-high six figures or higher;
-The system can provide a return on investment of 2 to 6 years--a payback period unmatched by any stand-alone renewable energy system;
-The system¡¯s islanding functionality allows for UPS (Uninterrupted Power Supply) functionality for critical operations, such as hospitals.
renewables by integrating them within
-Costomers do not have to charge their operations to receive the benefits of the system.
The overall concept of the system is to store energy generated by the power source (wind, solar and grid power) when the cost of the power is minimal (night time for grid, anytime for renewable generation) and rapidly release the power during the high demand levels, thereby increasing the value of the energy that is created by the wind turbine/solar array. In order to extend the battery life (both calendar and cycle life), an algorithm is used to reduce the demand peak by dynamic monitoring of the customer¡¯s real-time usage and only supplement the power load when it is financially beneficial (during the peak usage times).
Evaluation of Demand Charges
When designing the Power on Demand system, Arista Power optimizes the customer savings based on the kW charge (demand rate), consumption charge (US$/kWh), and the available renewable energy resource (wind/solar). These factors are combined with the actual usage profile to determine the optimal renewable energy solution.
Monitoring, Power Distribution and Energy Storage
The company uses a combination of commercial off-the-shelf products and custom in-house developed solutions to monitor electrical energy consumption in a given facility. The commercial off-the-shelf products are enhanced meters or measuring equipment that are capable of measuring and logging voltage and current on phases, power factor and other metrics that communicate power and the quality of power that is being consumed at a location. Its in-house developed solutions include custom-monitoring solutions where electrical demand is computed and logged in addition to parameters found in the commercial off-the-shelf monitoring solutions. Energy storage options vary from application to application. The system is designed to provide the optimal combination of peak power and operating time.
¡°The ability to store and manage energy generated by renewable sources like solar and will be one of the great growth stories of the next decade,¡± says Bill Schmitz. ¡°Enhancing the value proposition for systems can accelerute the growth of these vital industries, which are so important not only to our environment but also to our national security. At Arista Power, we find a groundswell of support for renewable energy among business, both large and small, who are eager to ¡®do the right thing¡¯ if they are offered a compelling value proposition. At the same time, electric utilities are imposing demand charges more frequently in more areas, not only in the United States and Canada but also overseas--they are also raising the cost of these demand charges. These two factors are combining to create what we think is a massive and rapidly growing new market for products that can generate and manage renewable energy so that it can be utilized when the cost of power is most expensive. There is no doubt in my mind that this emerging new industry will dramatically increase demand for both wind and solar PV systems.¡±
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