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100 years ago, industrials built the electric grid. Now they’re leaving it

100 years ago, industrials built the electric grid. Now they’re leaving it

Episode 63 of the Factor This! podcast features Jereme Kent, CEO of One Energy, a C&I developer and asset owner pouncing on the opportunity to serve the nation's 53,000 largest energy consumers. Subscribe wherever you get your podcasts.

More than 100 years ago, the electric grid was built by, and for, large industrial companies. What started with on-site power evolved into a network later extended to nearby homes.

That network promised improved reliability and lower costs and led rapidly to the dominance of utility-owned power.

But along the way, the focus, at least for utilities, changed. Expensive upgrades, prolonged timelines, and reliability shortfalls are now fueling a trend of industrials taking back their power, at least a good chunk of it, according to One Energy CEO Jereme Kent.

"Utilities are asking for special permission to do basic things like, maybe we should upgrade some of our systems from 1950," Kent said on the Factor This! podcast from Renewable Energy World. "Now, the industrials are tired of it and they're saying we can actually do this better ourselves."

One Energy is capitalizing on the opportunity provided by diminishing trust in utilities by the nation's factories, Kent said.

While the 53,000 industrial facilities in the U.S. represent only a fraction — 0.6% — of energy consumers, they consume 33% of the power. And their demand for (nearly) round-the-clock uptime is driving them back to on-site power similar to what was in place a century ago. 

Kent says that utilities "squandered the opportunity" to serve these customers and that they "got greedy and screwed up the grid." But even he acknowledges that there's more to the shift that allowed his company to close more business in 18 months than the prior 13 years combined.

A combination of volatile natural gas prices, spurred by Russia's invasion of Ukraine, and a growing focus on sustainable manufacturing, are important parts of the story, too.

One Energy owns and operates most of its projects and sells the power back to customers under a fixed, long-term, take-or-pay contract, which distributes risk between both parties. Most contracts "meet or beat" utility power prices, Kent said, with many realizing 5-10% savings.

"Our best salesperson is the alternative," Kent said. "The companies that have been living in the glory days of $3 gas, who got caught and exposed said 'We can never let this happen again,' what levers can they pull?

"There aren't a lot of levers and there aren't a lot of levers that are 20-year solutions."

Watch the full episode of Factor This! on YouTube

After studying civil engineering at the University of Michigan in 2007, Kent was at a crossroads. He knew he wanted to build stuff, he just didn't know what stuff to build.

He landed a job with utility-scale EPC D.H. Blattner to work on a wind energy project. Kent, a Los Angeles native, found himself in the North Texas town of Snyder, population 11,202 at the time. He had to "Ask Jeeves" to define a wind turbine.

"(It) was an education in just about every aspect for me."

Kent founded One Energy in 2009. For most of its existence, One Energy focused on developing and operating behind-the-meter, megawatt-scale wind projects for industrials.

The widening gap between customer needs and utility performance led the company, which maintains its "wind first" approach, to broaden its suite of tools to include solar.

But likely its greatest innovation takes a page right out of the utility playbook. And it doesn't include power generation at all.

In September, One Energy began commercial operations of its first "Megawatt Hub," a fully digital, transmission-voltage substation that acts as a "gatekeeper to the grid." The system, which was installed at the company's Findlay, Ohio, headquarters, works to allow energy-intensive customers, like electric semi-truck charging depots, hydrogen projects, and data centers, to access more power than they could otherwise procure from utilities.

One Energy believes that the 30 MW Findlay Megawatt Hub, which is expandable to 150 MW, is the first of its kind in the United States. The system will initially host a digital currency mining tenant, which is operating mining computers in enclosed mobile computing units, as well as a charging pad capable of charging up to 90 electric semi-trucks simultaneously.

"We're seeing these emerging industries get desperate for access to power," Kent said. "We're trying to get ahead of them so that all they have to do is focus on their business."

Digital substations offer improved reliability, real-time reporting, and lifetime cost savings to their predecessors.

To be sure, the technology is available to utilities, too. But Kent said decades-old standards, and a reluctance to innovate, have prevented adoption.

"When I have an ice storm coming through, or I have a big heavy windstorm or tornado warnings, no one on my system operator team gets nervous that our substation is going to fail," Kent said. "Why are we worried the power grid is going to fail? Why is it an okay thing for us to have to conserve?"

Evidence of the shift by industrials to on-site power alternatives is not just anecdotal. It's become so swift that One Energy’s growth prospects are only limited by their access to capital.

Each One Energy project requires millions, sometimes tens of millions of dollars, in capital. For reference, a megawatt of solar typically costs $1 million to build and install. A megawatt of wind? Double that.

In order to preserve control, One Energy is turning to public markets. In August, the company announced plans to list on the New York Stock Exchange through a SPAC deal valued at $300 million. The merged company would be listed as One Power (ONEP).

Companies that reach the scale of One Energy often crumble, Kent said. That's often either the result of new ownership from a private equity investment firm or a too-early bid to chase the allure of public markets.

"We think we've taken all the right steps to be there," Kent said. "We've done some stuff to make it very clear that we can't make a quick buck. We're in it for the long haul.

"I've been doing this for more than 13 years and I plan to be doing it for well past the next 13 years."