Posted on October 18, 2021
In 2020, the Indiana Chamber of Commerce Foundation released a study detailing the factors driving Indiana’s energy changes. One driver influencing energy rates is an emerging technology known as a DER (distributed energy resource.) These systems and partnerships present innovative solutions to balance costs and demands. In this case study, you will learn about a Distributed Generation (DG) partnership with a large commercial client and a rural REMC.
R.E. Dimond and Associates, a consulting engineering firm in Indianapolis, helped design a unique financial partnership between Sweetwater in Fort Wayne and their local utility, Northeastern REMC.
Sweetwater is North America’s largest online retailer of musical instruments and pro audio equipment. The company serves over 1.5 million unique customers with musical equipment purchases, generating over 1 billion dollars in revenue. In 2020, just as COVID hit, Sweetwater added over 400 new jobs and opened a brand-new 480,000 SF distribution center. Increased demand required additional expansion over the summer with a 50,000-SF addition to house even more inventory. This giant distribution facility covers eight acres and is fully conditioned and humidity-controlled.
Northeastern REMC is a Touchstone Energy Cooperative, member-owned, and supplies electric power to six counties in northeast Indiana.
Northeastern REMC is a distribution utility and purchases power from other providers – in this case, from PJM. PJM is a regional transmission organization that provides grid operators access to wholesale power markets.
A partnership opportunity emerged during construction of the distribution facility. Sweetwater had a business need for standby generation in the event of a power outage, and Northeastern REMC had a need to reduce system-wide demand on peak days.
R.E. Dimond and Associates designed a generator system that will be used to back up the Sweetwater facility to Northeastern REMC’s advantage. Sweetwater’s additional cost for generators with more stringent emissions requirements and paralleling gear is offset by the incentive offered by Northeastern REMC to call upon the generators occasionally. This innovative partnership helps Northeastern REMC ensure reliability and reduce costs because they could call on Sweetwater to generate power when necessary.
Sweetwater ultimately opted for two generators that met stiffer emission requirements and provided a 6-year payback. This partnership will become a new revenue stream for Sweetwater because they will continue to receive credit for generation.
Since natural gas customer-generated power is less expensive than purchasing through one entity at future-related pricing, this strategy gives NREMC options through power purchase agreements with key customers.