Advanced Microgrid Solutions

Earlier this year the Midwest utility company Ameren Corporation (AEE:  NSYE) announced it advanced distributed energy microgrid located at the company’s technology center in Champaign, Illinois.  Those who follow the utility industry or those who are particularly interested in electricity transmission matters probably wonder what is so special about this news.  There have been a slew of microgrid pilot tests.  For example, Duke Energy (DUK:  NYSE) constructed a microgrid test bed in Mount Holly, North Carolina to demonstrate plug-and-play integration of its two dozen partner vendors.  Another example, is Southern California Edison’s (SCE:  NYSE) grid edge pilot in Orange County, California.  There are other microgrid pilots underway at Detroit Edison, CPS Energy and Oak Ridge Laboratory, to name just a few.

What is interesting for investors in the Ameren microgrid pilot?

Ameren has done something at its Champaign test center that has not been done before  -  configure a system with utility-scale voltages in a range of 4 kilovolts to 34.5 kilovolts.  The system is based on the idea of ‘islanding’ wherein a distributed generator continues to power a locality even though power from the electrical grid is no longer present.  The utility wants to be able to integrate wind, solar and natural gas sources into its conventional electric grid.  However, there are cost savings possible with microgrid structures.  For example, in the event of a storm that causes power lines to go down, the area can receive power from the microgrid. 

The U.S. utility industry could be experiencing pivotal momentum in development through Ameren’s accomplishment.  Microgrid technology, at least the way Ameren apparently intends to use it, is no longer simply an interesting toy that is handy to burnish a utility’s ‘green’ image.  The company claims grid modernization efforts undertaken over the last five years is saving its customers over $45 million per year.  The corporate appetite whet, Ameren is now taking microgrid’s to a new, ‘serious’ level that could make the technology a critical element of the utility operating model.

If this is an accurate assessment, then other utilities are likely to follow in Ameren’s footsteps.  There will be new demand for the various components that comprise microgrid systems.  The view on flourishing demand is shared by Green Tech Media Research, an industry research firm that has predicted the utility industry will spend $380 million on distributed energy resources management systems over the four years beginning September 2017 through 2021.  These systems manage devices and equipment at the grid edge.

Investors can rightly follow the bread crumbs to see which companies could be beneficiaries.  The most obvious target is Advanced Microgrid Solutions (AMS), a privately held developer of behind-the-meter batteries.  AMS was already selected by SoCal Edison to build 125 megawatts of distributed energy storage and demand response capacity for that utility’s microgrid pilot.  SoCal Edison customers will be getting AMS load control technologies and data analytics.  WalMart, Morgan Stanley, Shell Energy North America and Irvine Rand Water District are on AMS’s list of customers.

AMS just raised $34 million in a Series B round that attracted serious players in the utility industry such as Southern Company and GE Ventures.  Macquarie Capital was also a participant in the recent round that follows the investment firm’s promise to provide financing for AMS projects.  Well capitalized, the company can be expected to move aggressively to capture a meaningful share of the market for microgrids. 

It would not be surprising to see Advanced Microgrid Solutions among companies going public in the next couple of years.  There is nothing to suggest that its founder and management team aspire to lead a public company, but that long list of heavy weight investors are not likely to sit idly by without some exist event in their future.

Neither the author of the Small Cap Strategist web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein.