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July 31st 2018
Public
Economic Benefits of Distributed GenerationSatish Jayaram
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58,600+Employees worldwide
190+Countries and territories
$734MInvestment in research and
development in 2017
$20.4 billionCMI 2017 revenue
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Five operating segments
Cummins has a nearly 100-year-long track record of delivering leading power solutions. As we look ahead, we know our industries and markets will continue to change, and we are committed to bringing our customers the right technology at the right time.
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EngineEngine PowerSystemsPower
SystemsComponentsComponents DistributionDistribution Electrified
PowerElectrified
Power
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New Paradigms of Disruption and Growth
ELECTRIFICATION
DISTRIBUTED GENERATION
DIGITAL SOLUTIONS
CORE BUSINESS
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“The power generation industry is experiencing disruption of
unprecedented scope and speed.”
- LISA DAVIS Chairman and CEO Siemens Corporation, USA Americas Wall Street Journal, November 17, 2017
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“Driven by evolving customer expectation, rapidly changing technologies and new public policies, the energy industry will go through more change
in the next 20 years than in the past century. From a customer’s point of view, we’re entering a
golden age of choice, convenience and control.”
- LYNN JONES GOOD, Chairwoman, President & CEODuke Energy, Summer 2017
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1.0
Large investments
Large-scale infrastructure
Guaranteed fixed returns
No customer choice
Grid…
Last 80 years
RegulatedCentralized Generation (CG)
2.0
Large investments
Large-scale infrastructure
Customer choice
Last 15-20 years
DeregulatedCentralized Generation (CG)
3.0
Lower investment
Smaller-scale infrastructure
Higher penetration of renewables
Customer optionality
Last 3-5 years
DeregulatedDistributed Generation (DG)
All 3 currently exist around the world today
Evolution of energy creation and delivery
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Utilities deliver electricity along a linear supply-chain, from large baseload generators via a network of Transmission and Distribution infrastructure
Customer demand is predictable and Distribution systems are sized with adequate safety margin
Through regulation, Utilities are allowed to earn a fixed rate of return on assets to meet service targets
Central Generation
Coal, Nuclear, Gas, Renewables
TransmissionBalance the system by adjusting output
DistributionOversize "last mile” infrastructure
RetailDeliver and bill ”rate-payer”
“Rate-payer”Little knowledge of consumption and how to optimize
Regulation
Allow a fixed rate-of-return for meeting customer service standards
In front of the meter Behind the Meter (BtM)
The changing electricity markets: Grid 1.0Central Generation & Regulated
The meter
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Generation & Distribution are unbundled
Customers have choice and are able to purchase from any supplier on the grid
Purchasing of power is done through market mechanisms like the “Power Pool”
CustomerShift from “rate-payer” to “customer with choice”
TransmissionBalance the system by adjusting output
DistributionOversize "last mile” infrastructure
Regulation Allow rate-of-return for regulated T&D portion Create and monitor a competitive marketplace for deregulated participants
RetailCompetitive retail programs
Central Generation
Coal, Nuclear, Gas, Renewables
Power PoolMarketplace to buy & sell electrons
The changing electricity markets: Grid 2.0Central Generation, but De-regulated
In front of the meter Behind the Meter (BtM)
The meter
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Interconnected ecosystem of smaller power generation systems at or close to the point of consumption that eliminates cost, complexity and inefficiency associated with transmission and distribution, and if connected, can sell power to the central grid
De-carbonization driving regs & policy
Technology availability & cost decline
New entrants and business models
Utilities deferring large investments
Changing demand patterns
Central Generation
Coal, Nuclear, Gas, Renewables
Transmission & Distribution
System balance & “last mile”
RetailCompetitive retail and procurement programs
Power PoolMarketplace to buy & sell electrons
Regulation
“Prosumer”A consumer AND producer of electricity
Customer expectations
The changing electricity markets: Grid 3.0Distributed Generation
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19962016
Fully Deregulated
Partially Deregulated
Regulated
Partially Deregulated
Partially Deregulated
Fully Deregulated
Regulated
Utility markets have evolved and transitioned over time
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Emergency use only Driven by code or business critical needs Initial cost is important ($/kW)
Continuous use Driven by economic opportunities Operating cost is important ($/kW-hr)
STANDBY(formerly C&I)
Our current markets are blurring together … while new applications and business models emerge
PRIMEPOWER
Evolution of power generation applications
DISTRIBUTED GENERATION
Microgrid
Microgrid
Batteries could usher more DG adoption
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‐
20.00
40.00
60.00
80.00
100.00
120.00
140.00
160.00
180.00
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
GW
DG Central DG Trendline Central Trendline
Source: Navigant Research
Annual Installed New Capacity (GW)
U.S. DG capacity build expected to surpass CG ~2019
At least 321 GW of DG expected to substitute new large-scale power plants
Diesel gen sets are still the largest source, followed by Solar PV, with Storage leading at 30% CAGR in 2020 and beyond
Utilities projected to lose $223B from substitution over 10-year period
New energy development is shifting from Central Generation (CG) to Distributed Generation (DG)
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Back-up generation; Prime Power, Off-grid &
Military
Peaker Plants, Frequency Reg
Behind the Meter Applications
Customers have 3 common motivations for changing energy use patterns
Reliability & Resilience
Economic
Clean Energy
Front of Meter Applications
Municipality and Co-opsNon-critical C&I, DCM, DR
Grid Deferral, Non-wire alternatives
Net-metering and FiT Renewable integration
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Front‐of‐meter: ISOs, Utilities
Behind‐the‐meter: C&I, Residential
FOM & BTM: IPPs, Aggregators…
Monetizing Value Streams: Many value streams exist, but stakeholder fragmentation and regulatory barriers mean value capture can be complex
Defer infrastructure investments
Avoid expensive
peaker plants
Reduce cost to integrate renewables
Demand charge
reduction
Coincident peak
reduction(I-CAP)
Avoid ToU Self-use
ArbitrageNet-metering or sale
back of electricity
Capacity market participation
Frequency Regulation
Voltage Support
Operating Reserve
Reduce capital
investments
Reduce electricity charges
Sell electricity
Sell capacity
Sell Ancillary Servs
Cos
t A
void
ance
Rev
enue
S
trea
ms
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Our approach to Distributed Generation
Establish partnerships
Fast cycle innovation
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Phase I: Capacity of 348 MW of power
(enough to power 460,000 homes)
18 sites across the UK
Largest reciprocating gas engine generation
capacity for the UK National Grid
Phase II: 160 MW; Equipment only
CURRENT PARTNERSHIP: Cummins & UK Power
Reserve
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edgeGEN™ combines the reliability of
Cummins generators with the enhanced
economics of Tangent AMP™, a Distributed
Energy Resources Management System
(DERMS).
Municipality, Co-ops, Electric retailer and
Commercial & Industrial energy management
solutions
Capital free and savings based solutions
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PARTNERSHIP: Cummins & NRG5 things to know
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1) The Northeast United States is prime for Distributed Generation: The Cummins + NRG solution will be available in the Northeast region of the U.S., the largest de-regulated energy market in the world
2) Distributed Generation is complex for customers: NRG and Cummins bring simplicity and ease through single point of contact, combined infrastructures and consultative selling process
3) Big energy users can save big money: Large consumer and industrial customers have the potential to save up to 15% over current energy costs
4) Distributed energy can be cleaner and greener: Environmentally-driven customers can leverage renewable energy sources
5) This partnership is a win for Customers: With over 250MW of BtM solutions deployed in the market and gives customers a economic solution for smart energy management with no capital upfront costs
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S t a t i o n a r y E n e r g y S t o r a g e
Lithium-ion Technology• Modular racks to scale • Integrated HVAC & Fire suppression• 4 – 8 racks• 800 VDC
Battery Management• Multi-level BMS• Rack and Module level• System-Level BMS
Inverter• 125kW• 900 vdc input• 480 vac output• Grid Forming
Local controller• Coordinate BMS & inverter• Dispatch Algorithms• Link to HMI• Link to outside EMS
LoadRemote Connectivity• Modbus, DNP3,OCPP, CAN• Scheduling• Data Logging & Trending• Area Frequency Regulation• Demand Response• VAR support
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OUR OBJECTIVE
Deliver sustainable and economically leading solutions that enable our customers to realize the full potential from their distributed generation investments
Cummins will lead in shaping power business models of the
future
Cummins power generation technology capabilities and vast distribution channel are differentiating elements for us to compete and win in Distributed Generation
Cummins is creating partnerships with other companies to reduce complexity & risk, and increase speed to market
Cummins has a long history of leading through change and the current evolution in the energy industry will be no different
Takeaway from our effort in DG
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?Questions
Thank you for coming today
Cummins Confidential
