Analysis: What Morgan Stanley Got Right and Wrong about the New Energy Paradigm

Oct. 23, 2018
To understand the real value of distributed energy technologies — like fuel cells — it’s important to watch not so much how they perform alone, but how they work together.

A new report for energy investors by Morgan Stanley makes a point often missed about the new energy paradigm. To understand the real value of distributed energy technologies — like fuel cells — it’s important to watch not so much how they perform alone, but how they work together.

“Investors generally assess power-related technologies (batteries, solar panels, EVs [electric vehicles] and fuel cells) on a stand-alone basis, but we see these technologies converging in interesting ways,” says the report, The Intersection of EVs, Solar, Fuel Cells, Hydrogen and Energy Storage.

The reason? Acting together distributed energy tech often captures efficiencies, emissions reductions and grid-related revenue streams more effectively than when they act singularly.

The October 18 report finds California particularly ripe for the convergence, given the state’s need to find use for the excess solar energy it produces in the afternoon, the infamous Duck Curve.

EV charging can absorb some of the excess solar. But it also can be used another way — to produce low carbon gas. Bloom Energy’s fuel cells, which use natural gas to produce electricity — get a shout-out as part of the scenario.

In essence, the excess solar would be used to split water into hydrogen and oxygen. Bloom’s fuel cells produce carbon dioxide as a byproduct, which would be captured and combined with the hydrogen to create methane. The methane would be injected into the natural gas utility system, “creating a sustainable, controllable (a key differentiator from renewables), zero-carbon energy loop,” says the report.

California has already set the stage to encourage development of zero-carbon alternatives to renewables with SB 100, a law signed by Gov. Jerry Brown last month that requires 100 percent zero-carbon electricity by 2045. Lawmakers purposely avoided making the mandate 100 percent renewables given the prospect of innovation in other zero-carbon technologies like the one described in the Morgan Stanley report.

The report also posits that producing power from the hydrogen/methane approach is cheaper (4 cents/kWh) than energy storage (16 cents/kWh) when needed over multiple days.

Where are the microgrids?

Where does the Morgan Stanley fall short? Oddly, it never mentions microgrids, although they are the obvious coordinating intelligence for EVs, solar, fuel cells and energy storage.

Included within a microgrid, these technologies (or other forms of distributed energy) can be managed to create a range of synergies and efficiencies, in terms of how they interact together, with customers, and with the central grid.

For example, advanced microgrid controllers and related software can determine the best time to run the microgrid’s solar versus its energy storage, natural gas or other assets. The microgrid can make these decisions to achieve lowest price, least emissions, highest reliability or other variables.

Bloom Energy says that 15 percent of its servers already are deployed in microgrid configurations. And microgrids are a big part of California’s energy plans, as it looks at ways of managing its rapidly expanding supply of renewable power.

California Gov. Jerry Brown last month signed into law a requirement that utilities consider rates, tariffs or other ways to support microgrid development. The California Energy Commission (CEC) this year began allotting about $50 million in grants to boost commercialization of microgrids, a follow-up to a $26.5 million grant program for microgrid demonstration projects. In addition, the commission is expected to soon release a microgrid roadmap to help guide policy and regulation, not only for the California but other jurisdications as well.

So the Morgan Stanley report keenly gets that the energy revolution is bigger than the sum of its parts — more about how energy technologies work together than how they perform apart. It’s a worthwhile read. But it misses that a coordinating technology — a microgrid — exists to kick it all up to the next level.

Join us in San Diego, California for Microgrid 2019: Shaping the New Electric Grid, May 14-16.

About the Author

Elisa Wood | Editor-in-Chief

Elisa Wood is the editor and founder of She is co-founder and former editor of Microgrid Knowledge.

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