Giuseppe Laudicina, our ENEL-X consortium member has been working on the CATALYST business models and provides an update and overview below:
Current business models for district heating and power flexibility provisioning are facing a deep change although at different speeds. On the one hand, the faster market is the one related to power flexibility since consumption electrification, electric mobility and renewable growing are strongly encouraged recently. On the other hand, the thermal energy market is exploring new solutions to adopt waste heat reducing the fossil fuel demand for space heating and therefore greenhouse gas emissions. However, the center of gravity of waste heat related initiatives is still much located in northern Europe.
It’s time for change for all of us. As a matter of fact, the name: “prosumer” is an increasingly known and used term for domestic users also. It indicates a new player, which born as normal end user (behind the meter) and starts entering the energy market by offering on-site renewable overproduction and flexibility to fight congestions and ensuring higher strength and reliability to local networks.
The CATALYST’s challenge is to define new business models integrating Data Centers (DCs) in the new energy framework making them active players in the energy transition. Indeed, DCs are full of redundancy energy systems so they potentially can act several strategies to provide flexibility. Moreover, DCs consume more than 1.5% of electricity per year at global level, almost all the fed energy is dissipated as heat which, in some cases, can be partially recovered.
Each business model has been designed by using the Canvas model. The core of a Canvas is the value proposition, around which key activities, partners and resources are defined as well as channels and customer relationships are identified to get revenue from customers at a certain cost.
Thanks to the CATALYST Solution, the DC operator is able to exploit his assets (batteries, IT workload scheduling or the cooling system, for instance) providing flexibility services to the grid such as balancing services. The customer segment coincides with the Distribution System Operator (DSO) since in the CATALYST vision DCs are more suitable for local congestion management but, considering the current situation of the market, today they can already provide ancillary services to the national grid. Offers can be placed on the CATALYST flexibility marketplace and the DC can participate alone or through an aggregator. Revenues comes from flexibility services provision. Among key sources we can find monitoring devices, that can be financed by Energy Service Companies (ESCo). Direct cost that a DC may incur are mainly licensing or services costs (to use CATALYST tools).
Here we are introducing the scenarios integrating DC in the heat value chain. In the case in which recovered heat is used inside the DC (e.g: for office space heating) it is quite simple because the investment for recovering devices is quite limited and revenues comes from primary energy saving. Differently, if recovered heat is huge it makes sense to deliver it by the district heating network. In this case the investment is more expansive (pipes for the connection to the network, heat exchangers, metering, maybe heat pumps) and the network operator could require to sign an agreement for ensuring a minimum yearly injection of heat at a fixed price.
From our evaluations, an effective business model should have a DC with a connection to the heat network and a bilateral agreement with the Heating Grid Operator (HGO) for a defined amount of recovered heat injection over the year. While, the excess of heat should be traded on the CATALYST Heat Marketplace to get more revenues. Here above a graphic representation of all possible scenarios connecting DC to heat end users. It is clear how DC has several possibilities for delivering the recovered heat outside its boundaries. Directly through bilateral contract with local entities (e.g.: swimming pools, greenhouses) or the heating grid operator. As we said mostly of heat should be granted for the HGO while waste heat surplus can be offered in the marketplace, directly or via heat broker.
Along these last months of the project we are performing financial analysis to evaluate if proposed business models are economically sustainable. Moreover, we are trying to define how to involve the customer of the Data Center in these business models to overcome potential barriers that can occur in colocation DCs. The deployment prospect of CATALYST solutions could leverage on the new business model we defined from the perspective of the ESCo, named ESCo 2.0. Mainly, its value proposition consists in the Flexibility Performance Contract (FPC). It is a new kind of agreement inspired by the well-known EPC (Energy Performance Contract), nonetheless, its value doesn’t consists only in traditional energy efficiency actions executing aimed at reducing the DC’s energy consumption. But, lies in making the DC a local prosumer, able to obtain value from the exploitation of its flexibility. In this context, the ESCo model plays an important role in the colocation DC’ customer engagement problem.