Wind Forecasting (II) — A Business Case, Demonstration, and Investment Opportunity Based on Ultra-Low-Power, Smart Sensor Technology

Final Avatar 80x80-Logo-SG-1-and-2-and-IX-LOGO-e1363114874895-150x150

 

Dominic Geraghty, SGiX (smartgridix.com)

 

Meso logo 150x103

 

John Manobianco, MESO Inc.

 

Recap of SGiX’s First Dialog on Short-Term Wind Forecasting

Wind power generation facilities continue to be deployed across the nation as a result of RPS mandates. In our previous dialog on short-term wind forecasting, we showed that: (1) it is possible to improve the accuracy of wind forecasts, (2) improvements can create substantial value for different Smart Grid (SG) 2.0 stakeholders, (3) increased accuracy requires both higher quality data and improved modeling, and (4) better data is expensive to collect.

cropped-DSC_0288_2.jpgWe also pointed out that there are two potential pricing points for wind forecasting services: today’s (mostly) low-priced commodity market with little differentiation in forecasting accuracy among service providers, and the potential for a value-priced service providing customized higher-accuracy forecasts.

New Business Opportunity for a Smart Sensor Application in Wind Forecasting

This dialog is about an opportunity to develop a value-priced service based on a unique and innovative, approach for collecting higher quality meteorological data, using smart micro-sensors. Dr. John Manobianco, VP, Business Development at MESO Inc., my co-dialog-er, is leading the development of this business. He is an industry veteran with very deep experience in weather forecasting and the use of wireless sensors for meteorological applications.

John has already completed a substantial body of work developing a technology solution based on ultra-small, smart sensors, and identifying and solving some (but not all) of the technology challenges. This work has been supported by NASA from 2002-2005 and NSF in 2012 through a Phase I SBIR I contract - see also a summary here.

He has analyzed the costs of developing and commercializing the technology in some detail. Either of two alternative business models – a systems sale or a services business – seems possible.

To improve and refine the business case, and assess the technology and market risks, John is looking for collaborative help from the SG community.

Two Partnering Offers

In addition to participation in the team-solving process, John is also offering two partnering opportunities: (1) a technology demonstration and (2) a matching-dollar equity investment option (see below).

This Is a Chance to Work on a Real Business Opportunity, and Create a Work-Product On-Line

Smartgridix.com likes this opportunity because it is a real, market-driven need for a business case.

On-line team-solving allows John, the entrepreneur, to leverage the collective intelligence of the SG community in building his business case and identifying creative solutions for some of the technology challenges.

Meso logo 150x103

 

John Manobianco:

 

Business Concept Application for Wind Forecasting

The overarching vision of our business concept is to revolutionize environmental sensing by developing a system of disposable, centimeter-scale probes that weigh less than a gram and gather data as they drift passively through the air.

Our novel probe design exploits component miniaturization as well as the integration of sensors and other components. But here’s where it gets really interesting: GlobalSense probes can provide measurement accuracy equivalent to or even better than currently accepted instrumentation.

AA013709 150xThis innovation is based on the trend for ubiquitous sensing and “smart dust” – extremely large numbers of low-cost electronic devices or smart sensors that measure various parameters and communicate that data to support different applications.

The Smart Grid target application of GlobalSense is to improve wind and solar forecasting for energy generation and load balancing.

Micro-Probe Technology Is Deployed to Float Freely in the Atmosphere

Our GlobalSense system includes strategies to deploy probes and communication platforms to retrieve sensor data. Since the probes will settle out of the air even with relatively low fall speeds (about 25 centimeters per second), the most practical deployment methods include release at higher altitudes using balloons or aircraft.

Each probe will transmit ultra-low power signals that can be detected by mobile or fixed receivers using a signal processing technique known as forward error correction. This same protocol has been used for years by GPS satellites and cellular telephone networks.

Should We Choose a Product or a Service Business Model?

There are currently two business models envisioned for commercializing our GlobalSense system.

For business model 1, the GlobalSense system would be licensed or sold to users interested in collecting and integrating raw data for specific applications. In this scenario, clients would lease or own and operate the system with recurring revenue generated from the purchase of disposable probes.

In business model 2, revenue from GlobalSense would be generated by either selling data from the system or deriving value-added forecast information. The latter would be accomplished by integrating data into diagnostic or forecast models. These models would allow us to create products that significantly improve accuracy or other attributes of meteorological information that are important to clients.

For either path, the fundamental value proposition is a greatly expanded suite of measurements that can provide substantial benefits to a broad range of applications sensitive to atmospheric conditions.

Probe, Deployment, Receiver Station, and Software Costs

As part of the NSF Phase I SBIR grant, preliminary system costs were estimated to be $75 per probe. This estimate was based on low-volume, commercial-off-the shelf (COTS) components as well as other business expenses for production, sales, and marketing. The target price point would be less than $10 per probe -- that would include the cost for packaging required to release probes from balloons or aircraft.

Deployment cost could vary by a large margin depending on whether existing assets such as aircraft or balloons are already being used to make other measurements. In that case, the incremental cost would be very small. On the other hand, deployment costs could be significantly higher if aircraft or other assets are used only to deploy probes.

GlobalSense requires fixed or mobile stations to receive probe data. An approximate receiver sales price has been estimated based on COTS hardware components and limited, custom software development. Depending on the application and environment, a reasonable per unit sales price would be $2,000.

What Are the Key Technical Challenges?

AA013709  150XTechnology challenges related to the development of GlobalSense include optimizing probe shape, design, and component integration. In addition, the concept of operations for business model 2 must be more fully developed. This effort will help to determine if making additional measurements with the system is practical and cost-effective when compared with the benefits from improved forecasting.

Another challenge is to ensure that the probes do not pose a contact or environmental hazard to people or property – we discuss possible solutions to this here.

A second technology challenge deals with system performance and having all components provide the quantity and quality of sensor data needed to meet specific client needs under real world conditions.

Are the Benefits Sufficient to Justify the Costs?

All transformational technologies carry risk. The business risk with GlobalSense is that probe data collected from the system will not improve forecast accuracy enough to justify its cost for a given application.

Studies funded by the National Renewable Energy Laboratory suggest potential annual savings in U.S. renewable energy integration costs as large as $1 to $2 billion with improved wind power forecasts. With 24% wind energy penetration in the Western Electricity Coordinating Council region covering 14 western U.S. states, Lew et al. (2011) estimated that a 20% improvement in wind generation forecasts would reduce costs by about $195M per year. The same improvement translated to the entire U.S. power system would reduce operating costs by about $975M per year (Lew et al., 2011).

These studies imply that improved short-range weather forecasts of wind and temperature for energy traders, grid operators, and power producers focused on the day-ahead spot markets have significant economic value.

Capital Required for Commercialization Appears To Be Relatively Modest

Prototype development is a critical milestone that must be met to commercialize the system. A Phase II NSF grant or project of similar magnitude ($500K-$750K over 18-24 months) would be sufficient to develop and test a prototype system. We are seeking a partner for this demonstration (see below).

Additional investments would then be required over the subsequent 12-24 months to commercialize GlobalSense.  Assuming business model 1 commercialization, the required investment is estimated to be between $1.5 million - $2 million. For commercialization following business model 2, the amount is projected to be on the order of $4 million.

We are Offering Demonstration and Equity Partnering Opportunities

As part of the follow-on Phase II NSF SBIR project, we are looking for strategic development partners and potential customers who would be interested in working with us. The opportunity could include direct support from the Phase II grant as well as allowing participants to beta-test products and/or services derived from either business model 1 or 2 commercialization.

In addition, we are interested in identifying equity partners that could help us fund commercialization in parallel with or after completion of the NSF project. Note that NSF would provide matching funds up to $500K for any third-party investments offered during the Phase II grant.

We welcome on-line “team-solving” here, using the comment box below, especially interactions with potential partners and customers to address technology challenges, qualify market opportunities, and scope out details needed to quantify the business models.

I am very excited about this business opportunity! I look forward to your comments.

Final Avatar 80x80-Logo-SG-1-and-2-and-IX-LOGO-e1363114874895-150x150

 

Dom Geraghty:

GlobalSense is a real-life opportunity to help shape and/or become involved with a new business. Yes, the business is very early stage, and risky – but since when has that been different?

There are three opportunities for the SG community here: (1) participate in an innovative entrepreneurial effort that has the potential to greatly improve wind and solar forecasting by commenting on our joint dialog in the comment box below, (2) get involved in a real technology demonstration project, and/or (3) consider an equity stake in the business.

I especially want to encourage comments on how we can best quantify the benefits of improved forecasting– as discussed in the previous dialog on wind forecasting, quantification of value is tricky.

We will synthesize your comments and present them in a follow-up dialog.   You can access three reference documents providing much more detail on the GlobalSense business concept in our Archives.

Please note that nothing in the dialog above is an offer to invest. Any discussion of any investment should be conducted directly with MESO, Inc.

Leave a Reply

Your email address will not be published. Required fields are marked *