The Renewable, Rechargeable Warehouse

Logistics, an industry that avoided much of the last wave’s disruptive forces as human hands were still required to pick, pack, load, drive and deliver goods, is at the sharp end of this wave’s technological convergence. The impact of this convergence is creating significant challenges for the retailers and manufacturers who use these spaces and the real estate companies who own and manage them. One of the more pressing challenges is the ability to ensure constant, reliable and affordable power to these increasingly automated buildings while increasingly ensuring that this power comes from sustainable sources. Previously, the only energy requirements were heating, air conditioning, refrigeration (in cool chain supply chains) and lighting, and innovations were mainly limited to motion sensors and reduced energy lightbulbs. Now not only do we need energy to power lights, heaters and refrigerators, but an army of robots, conveyor belts and packing machines that operate 24/7. There is also the oncoming EV revolution and the requirement to provide power to every type of vehicle that arrives at these facilities – from the heavy goods vehicles that pick up and deliver palletized goods, to light commercial delivery vehicles that do local deliveries and even the worker’s personal cars. This increasing need for electric power is problematic, for it arises when there is also a global movement to become more energy efficient while also reducing the dependency on carbon burning fuel sources. These challenges raise an interesting question and an excellent opportunity for eCommerce retailers and the real estate companies who manage their facilities – can the warehouse itself operate as a massive renewable battery, able to capture, store and dispense its own power?

A Return to Renewables

We talk of renewable energy as if it is a new form of power, but it was actually the very first type of energy that humans captured and used. Hydropower has been used to turn watermills since the days of the ancient Greeks, and wind power has been used to move sailboats down rivers and across oceans for even longer, dating back five thousand years to the days of the Ancient Egyptians. The problem was we couldn’t store the energy that was generated, and the power they were able to generate paled into comparison against the steam and oil-burning engines that have emerged since the 18^th Century. However, these required a fuel source and burning that fuel produced unwanted pollutants that we now know are causing significant damage to the planet’s fragile ecosystem. Billions are therefore currently being spent to harness the power of the sea, wind and sun, and governments and international bodies are doing all they can to accelerate this transition using a ‘carrot and stick’ combination of subsidies and penalties. Recent developments in renewable power generation have seen the price per kW plummet, with the International Energy Agency announcing in 2020 that the world’s best solar power schemes were now able to offer the cheapest electricity in history.^[i]

Power Islands

However, the centralization of this renewable power into the national grid has recently come under the spotlight for the wrong reasons, as the reliability of national grids struggle to guarantee supply, particularly during peak periods when expensive backup generation is required to keep the lights on. Recently, freezing temperatures caused mass power outages in Texas, and wildfires in California caused a season-long series of blackouts – all of which were seized upon by the opponents of green energy as examples of why this transition is too aggressive. To prevent these outages, a more decentralized power system that allows communities to generate and store their own energy using renewable sources is being developed. This decentralized power grid is termed dispersed or distributed generation (DG), and the generators are termed distributed energy resources (DERs) or micro-sources. It is possible to interconnect DERs in the form of what is termed a ‘microgrid’ – small, self-contained power systems that could draw from rooftop solar panels, nearby wind turbines and other sources – which allow communities and companies to generate and ration their own electricity. These microgrids can be connected to the central grid, allowing for backup power if needed while also allowing it to function autonomously in ‘island mode’ as physical or economic conditions dictate. This connection also means that any excess power that the microgrid produces that is not stored in the battery energy storage system (BESS) could be sold to the major power providers, helping in improving national power quality and reliability while also generating additional revenues from the sale of this energy. This model is shown in diagram 1 below.

There are a number of benefits to these microgrids. The first is affordability, as the energy produced by these local renewable sources is less than the price paid for power from the national grid. The second is reliability, a critical factor in a world where the supply chain is becoming increasingly dependent on electric machines, from warehouse robots to electric vehicles such as trucks. National outages can now be compensated for, and the use of local battery energy storage systems means that this reliability can be extended to times when weather conditions adversely affect the microgrid’s performance as well. The final benefit is, of course, environmental, for despite a record amount of renewable power now being used to power the national grid, the majority still comes from fossil fuel burning sources such as coal. This is important for companies that have made sustainability a core pledge to their customers and other key stakeholders.

Carbon Neutral Corporations

It is, therefore, no surprise that private corporations have grasped the opportunity that microgrids / DERs provide and developed their own renewable energy supply. Warehouses and fulfilment centres are particularly suited to the application of solar panels due to their large surface area and flat roofs. The roof is an idle asset that can easily (and increasingly cheaply, as solar panels have fallen in price by 90 per cent since 2010) be used to capture solar energy – and given that the recipient of this energy is the building it sits on, the transportation requirements are minimal.

Amazon is a company that has grasped this opportunity with both hands. In 2017, Amazon declared that it planned to install rooftop solar energy systems on 50 global fulfilment centres by the end of 2020, a feat it achieved six-months early.^[ii] Thirty-two of these systems are in the US, including an 855,000-square-foot installation on top of its robotic fulfilment centre in Thornton, Colorado. Of the remaining nineteen, twelve are in the EU, and seven are in India. Combined, these fulfilment centres are capable of generating 98 megawatts of energy, which is used to power the fulfilment centre’s LED lighting, advanced building management systems, warehouse robots, variable frequency drive motors, high-efficiency heating and cooling systems, and remote energy and power monitoring. Amazon has declared that it is committed to reaching 80 per cent renewable energy by 2024 and 100 per cent renewable energy by 2030 (though it is hoping to achieve this by 2025) and become a net-zero carbon company by 2040. It has so far shown that this is more than just empty words, becoming the world’s largest corporate purchaser of renewable energy. It currently has 127 renewable energy projects across the globe that in total can generate over 6.500 megawatts of energy annually, enough to power 1.7 million US homes.

Nike is another corporation that has declared its intention to move to zero carbon and waste, and like Amazon, part of its solution involves developing warehouses capable of generating and storing their own energy. In September 2019, it opened a 1.5 million sqm distribution centre in Ham, Belgium that is powered entirely by wind, solar, geothermal, hydroelectric and biomass power, and which recycles 95 per cent of its onsite generated waste. It also uses natural light as much as possible, using a unique daylight capture system and smart, automated LED lighting to help reduce electricity costs and its environmental impact. It is also situated next to a network of canals that enable 99 per cent of its inbound containers to reach the local container park by water, eliminating 14,000 truck journeys each year.[iii]

Nike is one of nine corporations that have recently joined forces to speed up the transition to a zero-emission by pledging to become carbon-neutral by 2050, with the other eight being Microsoft, Starbucks, Unilever, Mercedes-Benz AG, Natura & Co, A.P. Moller-Maersk, Danone and Wipro. These corporations are the leaders in what is sure to be a significant movement towards sustainable, smart warehousing, and this provides an excellent opportunity for logistics real estate owners to develop parks and fulfilment centres that operate off their own microgrid.

Generation, Storage, Dispensing.

Capturing and using power directly is one thing; storing it for a rainy day and sharing it amongst multiple tenants is another. Solving the storage problem is where Tesla is currently leading the way. In 2017 Tesla made headlines when it declared that it would build the worlds’ largest lithium-ion battery in South Australia to combat their numerous power outages caused by wildfires and adverse weather conditions. It also boldly proclaimed that this project would be completed within 100 days, or it would be free. The initiative was widely mocked by the public and politicians alike and described as a white elephant, but not only did Tesla complete it in only 60 days, but it also confounded its critics by immediately stabilizing the state’s energy grid and saving $40million AUD in its first year of operation. In late 2020, Tesla was also awarded another Australian contract to build a battery more than twice this size in Geelong, Victoria, that has a 300 megawatts power capacity and a storage capacity of 450 megawatt-hours, capable of powering half a million homes for 30 minutes. This kind of energy storage capability proves that it is more than capable of powering a fulfilment park and the machinery within it during times of low energy generation by the wind or solar systems. It is, therefore, no surprise to learn that Tesla has over 120 microgrid projects operating around the world, including its first flagship installation in T’au, American Samoa (pictured below), that stores enough energy to power the entire island for three days without sun.[iv]

The Future’s Electric – and Bright.

Combine these technologies together, and tremendous opportunities arise for a redesign of fulfilment centres and the logistics parks that house them. These opportunities range from creating individual fulfilment centres that generate their own renewable energy from solar panels that cover the roof, right through to the creation of a park-wide microgrid that offers cheap, renewable energy to all its tenants, allowing them to meet their corporate carbon reduction goals while also saving money. This need is going to increase as these warehouses increasingly become automated, and it will explode once EVs become popular in the next couple of years. The last mile is likely to be the first mile to be automated, so any eCommerce fulfilment centre that uses light commercial vehicles will soon need somewhere to power them. And they would like that energy supply to be from renewable sources – because if it comes from coal-fired power stations, it defeats the objective. Now imagine when heavy trucks such as Tesla’s Semi are widely used, and most of the workers have fully electric or hybrid vehicles. The provision of fast charging points will rapidly go from a nice to have to an essential. This means that the real estate provider that creates facilities able to charge these vehicles will suddenly find their properties are highly desirable. Fast charging points that are located in such a way that the delivery vehicles can be recharged as they are being loaded and unloaded would prove highly attractive, specifically because it decreases the trucks downtime. Once trucks become fully autonomous (probably within the next five years), onsite recharging facilities will prevent the vehicle’s routing algorithms from having to plan routes that involve incorporating a trip to a service station simply to recharge, speeding up deliveries and increasing its utilization rate.

A great opportunity exists for logistics real estate providers to design parks and buildings that not only consume power but generate it, either through solar rooftops or onsite wind turbines. These power sources could be combined into a park-wide microgrid that provides reliable, low-cost, renewable energy to all tenants, including the provision of fast charging points at each location for personal and commercial vehicles. The power generated by this microgrid could even be used to power an onsite EV service station that allows third party vehicles to pay to recharge. This ‘Energy as a Service’ (EaaS) capability could provide a new and profitable business model to the real estate owner while correspondingly doing their bit to help companies save the planet and meet their corporate carbon reduction commitments. A truly innovative commercial real estate company could even think really big and not only provide energy to this new wave of autonomous vehicles but even provide access to the vehicles themselves. A new business model where the company offers – as an on-demand service – not just the space to hold goods, but also the robots that travel in these spaces picking and packing them, the trucks that move the goods and the energy that powers them all.