Interview with Stefano Melchior, BeChained, about generating income from energy flexibility.
The Spanish start-up BeChained provides a cloud based system that helps industrial and other large consumers to monetize the flexibility in their production processes. By shifting loads, they can avoid peak prices or even sell their flexibility for grid stabilization.
Typically, industry companies make the most money when their production runs on full load. With BeChained they could soon make extra money by slowing down and thus reducing their energy consumption and therefore CO2 emissions. The start-up is aiming to sell demand-side flexibility on the demand side for the balance markets to the transmission system operators. The target group are industry and large consumers with a minimum electricity consumption of 2 GWh per year. According to modelling from Smart Energy Europe and DNV, by 2030, the demand side response could add up to 164 GW in electrical load reduction and 130 GW in load decrease. Industry demand side response plays a major role in this scenario. But while positive and negative balancing power have been market assets for many years now, there are few countries with a dedicated market for demand side flexibility yet. BeChained´s CEO Stefano Melchior is convinced this will soon change.
There are many approaches for harnessing the flexibility of industrial processes. What would be a typical use case for your solution?
Let's take the pulp and paper industry. In paper production, a paper pulper’s blade will mince cellulose and recycled paper to a homogeneous mass. Although there has to be a certain mass flow, there is a tolerance. You can decrease the speed of the blade and get back to the normal or higher speed later. This on-demand reduction you can sell on the market. Also, you reduce emissions, because when electricity is short in the market there will be more fossil plants running, so carbon emissions are high. By shifting the load to periods with lower energy prices, you will automatically use more renewable energies.
Given that AI needs a lot of data for learning and your solution is new - how can your AI know what to do?
First of all, the customer will need a smart meter for each individual machine, so our algorithm will know the consumption. Then we use the machine settings from the past and limitations provided by the customer to define the range in which the algorithm can operate. We kind of put it in a cage, so it may never damage the customer´s production system. From that on, the AI will start learning and improving and create a digital twin of the factory.
How can you measure and sell this flexibility?
The baseline is our historical data. The consumption in response to the call for flexibility will be tracked by a blockchain. That means it cannot be manipulated. So the customer can prove that he really reduced the consumption as a response to the request. Of course, you need a market that trades this type of flexibility. In Finland, Belgium and The Netherlands such a flexibility market is already established. Austria, Spain and Germany do not have a market for flexibility yet. Germany tried with the Abschaltbare-Lasten-Verordnung (Interruptible Load Directive), but that proved to be inefficient. If you completely interrupt the power supply, processes may stop and this can mean that the customer will lose big amounts of valuable raw material, time and business opportunities. But the EU is pushing the flexibility markets and there will be more markets coming up soon.
What is the exact business model?
We offer the software as a service. The customer pays us once for tailoring the software according to his needs. When the customer sells flexibility to the market, we will also receive a percentage of their turnover. We therefore have an interest in generating high value for the customer, this is a win-win-game. We are planning to aggregate as many customers as possible, so we can get more relevance on the market.
Speaking of relevance, how are you planning to compete with the big companies like Siemens and others?
We need to use our small size as an advantage, being more flexible, quicker and more precise in our forecast and at the same time very reliable. We are a team of eight people right now and founded the company in 2020. On the technical side, we have a phd data scientist, several data engineers and a block chain developer working for us. I studied mechanical engineering, and attained a masters degree in business administration and another in business analytics, on top of 20 years of experience in global business, including purchasing energy for multinational companies. So, despite being a young company with a small team, we have more than 45 years experience in energy tech.
Do you have any reference projects yet?
Yes, we do, although it is not selling the flexibility to a market. We implemented our system in a factory in the UK. The customer wants to increase production and will need more power, but expanding the electricity grid would take five years. They built a PV plant and a battery, and our AI is controlling the whole system. It considers of course the hard factors like the available power from the grid and the sun, but also weighs up electricity prices. So it might make sense to charge the battery at night when electricity is cheap and be prepared for the next day with its price and consumption peaks. With 30 % self production and the load shift they can save 70 % of their energy costs.
In addition, we are working with our first customer in Spain, a steel factory. This system is in a pre-testing phase. We are planning to finish the implementation by the end of the year and start tests in early 2024. According to our simulation, they can reduce 19% the energy consumption. After the testing, we can expand the system to other customers. And we will have to push the transmission system operator to test and certify our system.
What are your plans for the next three years?
We would like to extend our service to other countries as well as other industries. For example, Germany has a strong industry in the fields of steel, chemicals and paper. There will be a lot of potential and a lot of need for flexibility, to match those industries with the grid capacities. Within three years, we want to operate on a European base. Also, we are planning to get into the carbon offset market. As mentioned, we shift energy consumption to the hours with a lower carbon footprint. Our plan is to certify this reduction and sell it on the carbon offset market.
Did EM-Power help you with your plans?
It definitely helped to make many new contacts. At our booth we had many conversations about what we do and how it works. The start-up pitches on Thursday and our presentation on Friday in the panel for energy flexibility of smarten Europe were also very effective. We got a lot of new contacts from that.
BeChained was exhibitor of the Start-up Area at The smarter E Europe 2023.
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