AI and the Energy Industry: What Lies Ahead

By ICR Team

The energy industry is facing a number of challenges today — extreme weather, aging grids and power storage and distribution among them. Clean energy companies are using cutting-edge, AI-driven services to solve these and other energy challenges.

One of these companies is Stem, Inc., a global leader in AI-driven clean energy solutions and services designed to help customers maximize the economics and resiliency of their energy assets and portfolio. Stem’s customers are mostly consumer, industrial and large solar developers or asset owners. More than 30 Fortune 500 companies currently use Stem’s clean energy solutions.

Stem, Inc. CEO John Carrington recently visited with ICR CEO Tom Ryan to talk about these and other challenges facing the energy industry.

A Transforming Energy Grid

It’s no secret that the energy grid is transforming and there’s a lot of aging infrastructure out there, said Carrington. “The extreme growth of renewables has kind of caught everybody by surprise and driven grid intermittency. There’s also the increase of extreme weather, whether it’s wildfires or just excessive heat. All of this plays into interesting opportunities for our company.”

Carrington explained that the assets Stem puts in place give utilities and grid operators a compelling way to address some of the challenges they’re facing. “We’re seeing anywhere from three to eight to even 10 times the number of calls on an annual basis to our system,” he said. “This means you can effectively put a virtual power plant in the middle of Los Angeles, or any other major city and the utility and Stem can work together and call on those assets instantaneously to help offset any grid resiliency issues that may arise.”

Stem’s proprietary AI software, which is called Athena, plays a large role in helping utilities run smoothly and keeping people safe from extreme weather events. “We built this from scratch and believe it to be the best-in-class software platform,” Carrington said. “Utilities and grid operators are relying on this software more and more.”

Impact of the Inflation Reduction Act on Renewable Energy

Carrington believes that the Inflation Reduction Act (IRA) could be a boon to renewable energy. “This represents a $370 billion investment in clean energy, which is the largest investment of this type in U.S. or probably global history,” he said. “These investments touch a variety of areas, including solar and electric vehicles. They will be transformational for the country and the clean energy space.”

The IRA’s 10-year guarantee of tax credits provides assurance to customers and more clarity around financing, Carrington added. “It’s a massive enabler and will benefit the country through much higher employment. Think of it this way: If solar works in any market in the country, now with the IRA, storage will also work. The retrofit piece of the IRA is exceptional as well.”

Carrington believes that the biggest barrier to adoption of renewable energy was just removed. “There was never a standalone ITC for energy storage,” he said. “So if you had a solar facility you were spec’ing out or building, there were a lot of IRS rules related to adopting storage in conjunction with your solar that have now been removed. Now you have the ability to retrofit an existing solar asset or specify and include energy storage on anything out there in solar. The standalone storage piece will also become very compelling.”

Carrington called it a “no-brainer” for Stem’s commercial and industrial (C&I) customers to do this. “In fact, now it’s much more beneficial to do both, while before they were more solar-focused because that was easier to do,” he said. “Now with the combined offering of the IRA it’s a compelling opportunity and we have everything in place that we need: the hardware, supply chain relationships and AI software with Athena. It’s going to be pretty powerful.”

New Partnership Expands Opportunities

Stem recently entered into a new partnership with InCharge Energy, Inc., an EV charging infrastructure solution. “EVs are focused on the charging platform to the vehicle,” said Carrington. “But there are a lot of unintended consequences going the other way, from the charging platform to the customer, including higher demand charges and significant spikes in energy usage.”

Carrington explained that if you’re a C&I customer, your energy bill will be based on the highest 15-minute peak each month. “If you get these massive spikes while people plug their vehicles in all day while they’re at the office, you dramatically change your energy portfolio costs,” he said. “We’re now helping our customers understand this.”

Stem is working with InCharge’s software platform to integrate EV charging loads to help customers lower their energy costs by optimizing when they should be charging. “We can help them integrate and modulate based on the time of use and how many customers are coming to the charging stations,” said Carrington. “More and more EV companies are coming to us for help with this very problem.”

Looking Ahead

Carrington sees continued exceptional growth in the energy storage industry over the next three to five years. “I think we’ll see more IRA-type programs in Europe,” he said. “It’s no secret they’ve got a real problem over there, not just with Russia but more broadly.”

The solar side of the business will continue to grow at a solid pace and be outpaced by storage because every solar project will have storage associated with it. “I think the wind side is a little bit difficult right now but they’re adding more and more storage,” Carrington said. “I believe storage and the analytics associated with it is the place to be in the renewable space over not just the next three to five years, but the next 10 years.

“We’re really excited about what the future holds and believe our best days are ahead.”

Get all the details of the AI and energy discussion between John Carrington and ICR’s Tom Ryan. Listen to the full podcast episode.