Antonio Ciudad Casafranca, FTMBA ‘20 reflects on Climate Week and Dynamic Line Rating
Who are you?
My name is Antonio Ciudad Casafranca, and I am a member of the Full-Time Haas MBA Class of 2020. I am originally from Peru, and one of my main reasons for coming to business school in the US and particularly to Berkeley Haas was to pursue sustainable investing. While at Haas, I served as a Principal at the Sustainable Investment Fund (“SIF”), where I met Charlie Michaels, who provided the initial capital for the Fund. This experience led to an opportunity to work with him at his fund Sierra Global, where I co-built two Climate Funds, including leading the launch of an Article 9 fund in Europe, and integrated sustainability into our investment strategies.
Currently, I am the Climate Investor and Head of Sustainability at Sierra Global, focusing primarily on public equity with a couple of significant growth equity deals, such as our investment in Enpal, the German leader in home energy solutions, three years ago. The TPG Rise Fund, among others, participated in the subsequent round last year.
What did you attend at Climate week?
During Climate Week in NYC, I attended several events, including a Jefferies discussion on nuclear fusion energy, a McKinsey session on scaling climate technologies, and a Goldman Sachs sustainability event. A key takeaway was the need for “patient capital.” Unfortunately, few institutions possess that kind of patience.
I believe we should categorize investment opportunities in the climate sector into two buckets: the “no-brainers” or low-hanging fruits, and those that require much more time to reach commercialization, such as nuclear fusion. Below, I will outline one area of investment where we can achieve the “big bang for our buck,” meaning opportunities that offer both attractive financial returns and significant impact in supporting our decarbonization goals.
What is a current problem that you are thinking about that private capital can help address?
Reflecting on the recent Climate Week, it’s clear that, as Al Gore emphasized in the Generation Sustainability Trends Report, fixing the grid is essential for a successful energy transition. [link]
The current power grid infrastructure is outdated and cannot meet the global need for supplying renewable energy. To unlock the future of energy transmission, investors need to understand the cutting-edge technologies that are growing grid transmission capacity, particularly, as I will argue below, Dynamic Line Rating technology. The power grid of the past relied primarily on burning fossil fuels at regular intervals to produce stable and consistent power. This is not the grid of the future! The grid of the future relies on unstable and difficult to predict renewable energy sources.
Building the capacity to capture and transmit renewable energy sources can take up to 17 years when accounting for building new transmission lines and securing permits from government agencies. We can do better.
The U.S. Department of Energy names four technologies that can drive the power grid’s transition to renewable energy. Advanced Conductor technology and Dynamic Line Rating (“DLR”) technology will increase the grid’s capacity to carry power the most. Advanced Conductor technology can boost grid capacity 20-40% and DLR can boost grid capacity 30-40%. Of these two, Advanced Conductor technology is a physical capacity addition with a 1–3 year deployment time, thus costing more, while DLR technology is a grid enhancement technology which takes only months to deploy and has an initial investment payback period of less than a year.
In addition to the speed of payback and the ease of deployment of DLR technology, savvy investors should also take note of the Federal Energy Regulatory Commission’s consideration of a DLR-specific mandate that would incentivize utilities to adopt DLR technology, further increasing the grid’s capacity to carry renewable energy.
Beyond regulation from the FERC, the Biden administration has also committed over $30 billion to modernize the grid.
As we assess execution among leading DLR companies, the critical question is: which technologies will excel under diverse weather conditions. The time is now to study what is working, and then invest and scale. With public spending, regulatory backing, ease of deployment, and a relatively short payback period compared to extant technology, the time for investing in DLR technology is now.
What are some examples of investment opportunities in this space?
As growth investors, our goal is to scale and deploy proven technologies. Modernizing the grid is crucial for making the energy transition a reality. The challenge will escalate as we work to triple renewable power capacity by 2030 and address the increasing demand from data centers. The solution, in part, lies in deploying and scaling Grid-Enhancing Technologies (“GETs”). GETs are hardware and software that enable utilities to expand transmission capacity quickly and cost-effectively on new and existing lines, while protecting or improving grid reliability, safety, and efficiency.[link]. According to the DOE, GETs such as Dynamic Line Ratings (“DLR”), Virtual Power Plants (“VPPs”), energy storage, and topology optimization are essential for optimizing and dynamically controlling a bidirectional grid.
These technologies improve transmission efficiency and reduce congestion through cost-effective hardware and software upgrades. By utilizing sensors and smart algorithms, GETs enhance power flow on existing lines, strengthen grid resilience, and facilitate the integration of variable renewable energy sources like wind and solar.
The DOE highlights Advanced Conductors and DLRs as the top solutions for increasing estimated effective transmission capacity (see Annex 1). [link] However, DLRs offer faster deployment—typically within 3-6 months—compared to 1-3 years for advanced conductors. While IRENA estimates a 5-20% increase in capacity [link], the DOE projects that DLR can enhance transmission capacity by 10-30% at less than 5% of the cost of rebuilding lines [link]. Additionally, DLRs have a payback period of under a year, whereas traditional upgrades can take 13-15 years. [link]
DLR is hardware and/or software that updates the capacity of existing transmission lines in real time. The technology establishes new limits to determine the true, real-time power line capacity. For example, on cold or windy days, power lines can easily deliver 50% more energy than their labeled limits.
However, it is important to recognize that DLR is not a panacea. According to Powergrid, an energy industry research specialist, DLR may only work under specific conditions: “Some don’t work at all, or at least not as advertised; and some are only cost-effective when congestion costs exceed the cost of the Grid-Enhancing Technology itself” [link]. The reality is that effective use of DLR depends on favorable weather conditions, site location, and other factors.
The DOE [link] notes that some direct-measurement sensors may struggle to accurately capture transmission line parameters during light loading, leading to errors in models, forecasts, and data collection. However, as Terron Hill, National Grid’s Director of Asset Development, mentioned, combining dynamic line ratings with broader grid operational changes is key to addressing interconnection challenges [link].
This overview aims to highlight existing solutions so that investors can closely monitor their implementation. It is not a comprehensive list but provides insight into technologies that, when scaled and deployed effectively, can help get to where we need to be.
Here are some companies with notable examples of increasing transmission capacity:
- Ampacimom [link]: Belgian company Ampacimon has over a decade of experience and has installed more than 630 DLR monitoring devices across 24 countries [link]. Since 2008, Elia has collaborated with Ampacimon to develop and test this technology [link]. Their modules have been installed on eight transmission lines that interconnect the Belgian, French, and Dutch grids, resulting in a 30-40% increase in power flow on these lines [link].
In September 2024, the company shared a U.S. case study demonstrating a decrease in congestion costs by $64 million between 2022 and 2023, while the cost of the DLR system was less than $1 million [link]. Elia sold its entire stake in Ampacimon for €1.6 million, realizing a capital gain of €1.2 million after 12 years. This sale was driven by Ampacimon’s intention to diversify its products and services beyond grid operators, making Elia’s participation less strategic [link]. Last year, the company raised $10.6 million in Series C funding, bringing its total funding to $17.2 million [link].
- LineVision: Founded in 2018 in the U.S., LineVision’s DLR technology can increase transmission capacity by up to 40% [link]. The company has partnered with major utilities, including National Grid and AES. In Upstate New York, LineVision collaborated with National Grid to deploy DLR on four congested 115kV transmission lines. Building on its successful experience in the U.S., Linevision has recently launched a two-year trial on a 275 kV circuit in the UK. This initiative has the potential to unlock an additional 0.6 GW of capacity per year, sufficient to power 500,000 homes [link]. Similarly, AES implemented DLR on five lines in Indiana and Ohio [link], with crews installing the sensors in about 30 minutes per line using standard tools and minimal training, all without outages or disruptions to grid operations [link]. Over six months, DLR increased capacity by 10-61% [link]. In 2022, LineVision raised $33.1 million, bringing its total funding to $49.8 million [link].
- Heimdall Power: Founded in 2022 in Norway, Heimdall Power has deployed over 40 DLR projects in 17 countries, achieving an average line capacity increase of 40% [link]. Their physical and virtual sensors offer real-time monitoring, enabling utilities to optimize transmission networks and avoid costly infrastructure upgrades. After a successful pilot with Great River Energy—serving 1.7 million customers in the Upper Midwest and achieving a 42.8% average capacity increase—Heimdall Power is set to install 52 sensors across their grid [link]. This year, they raised $25 million in Series B funding, bringing their total funding to $53.7 million [link].
We have strong regulatory tailwinds ahead. Government support for grid development is growing in both Europe and the U.S. As of June 2024, the Biden administration committed over $30 billion to transmission and distribution. In the UK, the government is acquiring the transmission system operator, while the European Investment Bank (“EIB”) has provided low-interest loans to grid utilities [link].
In the U.S., the $10.5 billion Grid Resilience and Innovation Partnership Program, launched by the 2021 Infrastructure Investment and Jobs Act, is a key driver. It funds three initiatives through 2026: $2.5 billion for Utility and Industry Grid Resilience grants, $3 billion for Smart Grid grants, and $5 billion for Grid Innovation. In October 2023, the DOE announced $3.5 billion in funding for 58 projects to improve grid flexibility and resilience. By August 2024, the first eight projects across 18 states, totaling $2.2 billion in federal investment, were announced, with more selections expected later this year.
As investors, it’s crucial to track the execution of these projects to evaluate which DLR technologies are proving effective under various conditions. Here’s the link to the DOE’s latest projects so we can monitor effectively:
Grid Resilience and Innovation Partnerships (GRIP) Program Projects | Department of Energy
(Unfortunately, we cannot see the specific technologies deployed here yet).
As utilities are the primary entity responsible for implementing grid-enhancing technologies (“GET”), targeted regulation may further accelerate the deployment of DLR technology. Therefore, it is essential to understand the role of the Federal Energy Regulatory Commission (“FERC”). FERC is an independent agency within the Department of Energy that regulates interstate transmission, with mandates that are legally binding for utilities.
FERC Commissioner Mark Christie has referred to DLR as a “no-brainer,” highlighting the importance of maximizing grid efficiency to meet reliability goals and consumer demands. FERC is currently considering a framework to mandate DLR as a means to enhance grid efficiency and reduce costs.
On June 28, 2024, FERC issued an Advance Notice of Proposed Rulemaking seeking public input, with comments due by October 15 and replies by November 12, 2024. This represents a significant milestone to monitor, as it could incentivize broader DLR deployment [link].
What questions remain?
These funding initiatives and regulatory developments are critical as we prepare to scale proven DLR technologies. This paper highlights the challenges, regulatory landscape, and promising innovations in the field. Notably, Ampacimon, despite having the longest track record, has raised the least funding, even though utilities tend to favor established companies. Understanding these discrepancies is essential, particularly when transmission enhancement capabilities appear similar across various firms.
The key question remains: Which technologies perform best under diverse conditions and enable rapid scalability? It is crucial that we closely monitor the progress of these companies, including those supported by the U.S. Department of Energy, to identify the frontrunners and expedite their advancement. Expanding the capacity of existing transmission lines at a low cost to consumers and with minimal deployment time is essential for achieving our climate targets. This is why DLR presents a compelling case.
As investors, we also have a critical role in advocating for changes in the incentive structures for utilities, which are responsible for implementing these solutions. By fostering an environment that encourages innovation and supports the adoption of effective technologies, we can drive meaningful progress toward achieving the “grid of the future” that we urgently need.
Annex 1:
Source: U.S. Department of Energy (2024, April). Pathways to Commercial Liftoff . Accessed on September 18th 2024, at: https://liftoff.energy.gov/wp-content/uploads/2024/05/Liftoff_Innovative-Grid-Deployment_Final_5.2-1.pdf