Hardware Is Not Enough to Enable the Energy System Transition
Observations from a VC investor focused on the European energy sector
By Julia Padberg, Principal, SET Ventures
“The biggest challenge of the energy system transition lies in the orchestration, integration, and management of enormous volumes of decentralized and volatile energy sources, like solar.”
Whether solar PV will be the world’s largest source of electricity in 2030 is no longer a question. With tariffs dropping as low as USD 1.04c/kWh in Saudi Arabia (April 2021), solar has become the cheapest source of electricity in history and is therefore expected to be the dominant electricity generator globally from 2026 onwards (IEA, World Energy Outlook 2020).
However, it is a misconception that all these thousands of TWh of photovoltaic power will simply be installed due to Moore’s Law of ‘exponential technological progress’ in manufacturing, resulting in better and cheaper hardware. In fact, the biggest challenge of the energy system transition lies in the orchestration, integration, and management of enormous volumes of decentralized and volatile energy sources, like solar. A systemic solution is needed to make this happen and many companies are trying to address a piece of that puzzle.
At SET Ventures, the Amsterdam-based venture capital firm that for the past 14 years has 100 percent focused on the energy sector, I have seen thousands of fast-growing companies that offer smart software and services in each stage (printed in italic below) of solar PV deployment. I will mention some companies that stood out for me this past year.
Let me start with organizing the business aspects of new solar projects, which can be an untransparent and costly effort. Startups like WePower, ThinkRE and Pexapark automate the project development process until PPA-signing for corporate energy offtakers and solar park developers, and they fractionalize or aggregate PPAs for smaller offtakers and developers. There are many innovative ways to overcome financing barriers for solar installations for retail as well as C&I solar customers, provided by e.g., Solease, Sunrun, Sunvigo, Groendus and Younergy Solar. In emerging markets, financing is arranged by Ecoligo, Mango Solar, Mobisol (acquired by Engie) or Sun Exchange.
Then there is the design phaseof PV installations. Start-ups like Aurora Power, RatedPower and Terabase have fully automated this for commercial solar parks, using AI and 3D digital twins. SolarMonkey and Zolar do the same for residential rooftops. For complex industrial prosumer cases, Node.energy can plan the optimal setup, while Einhundert Energie organizes the full process, including optimal design and submetering software, for multi-tenant housing units. The solar PV installation process is streamlined by companies like Installion and Econic.
In the operational phase, 3Megawatt (acquired by PowerFactors) offers asset management software that automates the administrative workflow of project managers. Enercast, Solandeo and Dexter Energy, help operators with power forecasting using big data and AI. On the inspection and services side, Solytic, Raycatch and Milk the Sun offer monitoring and diagnostics software, while Above Surveying provides automated areal inspection and digital twinning for photovoltaic parks and Aerial Power provides automated drone cleaning solutions. Green Eagle Solutions takes it one step further and provides SCADA systems with full automation of the control room operations of large solar PV parks – thereby dramatically increase energy output.
A limiting factor for rapidly integrating more decentralized energy assets like solar PV into the grids, is managing the capacity of power grids. AI-based analytics companies like Envelio, Adaptricity, and Sensewaves help grid operators plan the necessary future grid reinforcements for facilitating volatile bidirectional energy flows. For preventing blackouts in daily grid operations, end-to-end smart grid provider depsys provides highly accurate real-time data, insights, and control points.
Subsequently, solar PV asset operators want to feed-in the generated power at optimal prices, while (implicitly) balancing the grid. German companies like Enmacc offer day-ahead trading access, while ESFORIN and Enspired offer intraday algorithmic trading directly to operators, so they can monetize the flexibility of their solar PV parks without splitting margin with a utility. For residential solar PV asset owners sonnen (now part of Shell), GreenCom Networks, Kiwigrid and GridX offer solutions to first optimize energy self-consumption within households, and subsequently optimize energy trading within a community or the wider grid.
All of this new connectivity poses inherent cybersecurity threats, which are mitigated by specialized OT-security providers such as Aperio, Avasun and Farsight.
Processing the data from photovoltaic energy assets and ensuring the right load forecasting and billing is enabled by AI-powered cloud solutions from Energyworx and PowerCloud. For location- and time-based energy provenance reporting, FlexiDAO uses blockchain technology as a digital notary for certifying this on an hourly basis to energy utilities and renewable power offtakers.
Finally, full circularity is provided by players like Milk the Sun with a marketplace for photovoltaic systems, and by Suncrafter, who organize upcycling of disused PV panels into off-grid solar charging stations for a variety of use cases in micro-mobility and emerging markets.
While often ignored, it is my strong conviction that innovation in these software fields is as least equally important to hardware innovation for enabling the transition to a new energy system with clean, distributed, and accessible power for everyone. Luckily, there is a lot of entrepreneurial effort that will be supported by the VC community.
*Names printed in bold are SET Ventures’ (exited) portfolio companies.
Article first published on Energy Tech Review
