Ideal Power: Enabling Sharp to hit California’s demand response market

Consumer electronics giant Sharp recently launched a new storage product in California, Smartstorage, aimed at reducing demand charges for commercial customers. Sharp selected power conversion specialists Ideal Power as supplier of a 30kW battery converter for the product. Designed to make it easier to integrate photovoltaics with energy storage, Ideal Power’s battery converter features the company’s patented Power Packet Switching Architecture which allows it to combine inverter and storage functions.

In addition, Ideal Power also produces a hybrid PV battery storage converter that features three ports, one for DC electricity in from PV, another DC port for bi-directional energy storage and an AC port to support both grid-tied and grid-resilient capabilities. The hybrid can be used to integrate multiple power sources and can boost grid-resiliency and micro grid applications, for instance in replacing diesel generation on island grids. PV Tech Storage spoke to Ideal Power president and chief commercial officer Paul Bundschuh about the Sharp deal and his company’s range of products.

Paul Bundschuh, president and chief commercial officer of Ideal Power. Image: Ideal Power.
Can you briefly explain what Ideal Power’s 30kW battery converter does please?

The way a conventional power converter works that is used for solar, for batteries and other applications is that power runs directly from the input to the output through a bunch of switches and filters. There are typically four stages, and each of them has components and losses associated with them. Our technology is radically different in that it doesn’t have any of the conventional stages of a traditional power converter. It’s a whole new theory of operation in that it uses indirect power transfer.

It has a central energy storage element, it’s a high frequency AC link connected to the input while it’s disconnected from the output. We charge up the energy storage element – in this case it’s a special inductor that stores the energy magnetically, then we disconnect it from the input. While it’s disconnected from the input and output it’s resonant so the voltage and current oscillate and when the voltage matches the output requirement, we just simply release the power. So the hardware topology is actually much simpler than what is used today and what we’ve done really is developed a software-defined power converter. In terms of the passive materials, like magnetics and capacitors, we’ve reduced those requirements by about 90% and those materials generally don’t get a lot cheaper every year.

What does the deal with Sharp mean?

Sharp has signed a multi-year purchase agreement with Ideal Power and plans to use our 30kW battery converters in their Smartstorage business. Sharp plans to install 50MW of systems in the next three years. The low volume pricing for this product is US$12,000 or US$0.40/W, so this could represent about US$20 million in sales. Sharp is one of several companies moving aggressively into commercial BESS (Battery Energy Storage Systems) focused on reducing monthly demand charges paid by commercial and industrial customers

Why was Ideal Power’s converter selected as a good match for Smartstorage?

Sharp used significant due diligence and evaluated Ideal Power’s products for more than a year. Our battery converter has 96.5% CEC-weighted efficiency while our closest competitor’s is 92.5%. The four percentage point improvement doubles with roundtrip battery use requiring 8% more input electricity and 4% more batteries to create the same output. Our product is also one sixth the size and weight of competition allowing easy installation with minimal loss of valuable commercial real estate.

Sharp has chosen to focus on the commercial segment initially with Smartstorage and it appears your company has done something similar – why the focus on commercial customers?

We view that grid storage batteries are still expensive and certainly are going to come down [in price] and what we think is important is to understand where they’re first going to be utilised in scale. They can be implemented in residential, commercial or utility scale systems. We put most of our systems in the commercial scale opportunities because we think those are the most economically attractive and basically the reason is that we think even with the cost of batteries today these are highly economic and highly financeable. And as the cost of batteries comes down of course there’ll be more applications but why we focussed on this market first is, due to the opportunity to reduce peak demand charges. This is somewhat unique to the US today but we don’t think it is long term.

Ideal Power's hybrid converter undergoing testing at the USA's National Renewable Energy Laboratory (NREL). Image: Ideal Power.
The way electricity is priced in the USA makes it almost unique in the world in making demand charge reduction commercially attractive. Can you explain the focus on demand charge reduction to our international audience please?

A lot of US utilities, or rather US utilities in general, charge both energy charges and demand charges, which isn’t so common elsewhere in the world and the charges are calculated from a 15 minute window of [peak] demand. That 15 minute window of demand can drive 30%, 40%, 50% of the utility bill for a lot of customers. So it’s a really attractive application for batteries today and this is the market that we think is growing very rapidly in California but also in other high demand charge states like New York, Hawaii and others. So we’ve decided to put a lot of our initial focus in that space.

So when you say “initial focus”, you mean that other segments may later become as attractive or more attractive markets for storage than demand response?

Certainly there are interests in integrating PV and storage, there’s interest in doing this in Germany for self-consumption purposes, but to me, that market is barely economic. Things are read as eight to 10 year payback, you’ll find some residential customers willing to pay that but generally I don’t think that’s attractive to commercial entities. In California, our customer solutions can have three and four year paybacks. That’s much better than solar.

Now the other thing that I think is attractive about this space is that you’re going to be able to install these storage systems with three to four year paybacks and they’ll be third party financeable so it’s a no cap-ex business model to the building owner and then once you have the batteries installed, it’s also very attractive to also use those batteries for grid resiliency, this is the backup power story and therefore the incremental cost of that can be quite small. One of the problems that has been holding back this grid resiliency and micro grid market is that the cost of the equipment is generally quite expensive and it’s really just an insurance policy – it’s only there for when the grid goes off and that’s a harder thing to economically justify.

If you’re already putting in most of the assets to reduce demand charges and can get third party – somebody else’s capital to pay for it and you really only need to pay for the incremental grid resiliency cost, then the whole cost structure of that changes dramatically.

Navigant Research has projected the market for micro grids to exceed US$40 billion in revenues by 2020, while Ideal Power estimates 20% of that to be spent on power converters of the type the company produces. Image: Ideal Power.
So in terms of markets it’s all about the commercial segment for Ideal Power, at least for the moment. Which other regions do you find interesting and will storage be driven by commercial customers in those too?

I think there’s a lot of opportunity for the solar market to grow in more remote regions of the world. Most solar has been installed in places like Germany, the US, Japan and China, but if you look at the growth of energy, the biggest growth of energy tends to be in South East Asia, in India, in Sub Sahara Africa, South America. Places that for the most part don’t have robust and reliable grids. So this ability that we’re trying to enable to build remote micro grids by integrating PV storage and diesel, we think is a very large new business opportunity for the industry. Largely in those parts of the world the cost of energy is much higher so the ability for these systems to be cost effective is very attractive.