About three decades ago, Stephen Fernands underwent a religious conversion, renounced his Army ROTC scholarship at Penn State University, and completed an economics degree at his own cost in just three years. Then he enrolled in the Moody Bible Institute in Chicago to learn how to be a missionary.
After evangelizing in Chicago and in South America, Fernands discovered he also had a calling to business. He and his wife, Rochelle, moved to Philadelphia to advance their education, and Fernands took a temp job at Peco.
Electricity markets at that time were undergoing deregulation, and Peco assigned Fernands to its new Customer Choice unit to advise independent power producers how to navigate the retail frontier, which had been previously off-limits to competitive suppliers.
It was a providential assignment, and Fernands found a new mission.
“I realized, OK, maybe I should try being more entrepreneurial here,” he said. Taking the advice of a mentor at Peco, Fernands quit the temp job and set up an outside consultancy to advise independent power producers with whom he had built relationships.
His company, Customized Energy Solutions Ltd. (CES) has become an international firm with 253 employees, most of them based in Philadelphia, and generates more than $40 million in annual revenue. Fernands, 50, a Massachusetts native, is chief executive and president.
CES has expanded beyond offering advice, to acting on behalf of energy producers. It remotely monitors and operates generators and energy storage sites across the country from its Center City headquarters. It provides back-office functions like billing for retail energy suppliers.
Fernands likens it to FedEx, which promises to provide logistics advice to clients, and then actually performs the service.
“We can give good consulting and then, sort of like the FedEx of the energy business, we help people to do it,” he said. Where’s the best place to build a solar array to connect to the grid? When’s the best time to operate a battery storage unit?
CES occupies a place in the energy world, invisible to most retail customers, where power producers, regional grid operators, and local distribution companies like Peco intersect.
The firm plays a critical function as an intermediary for renewable energy suppliers that are taking on a bigger role in response to climate mandates. As more renewable power comes on line, it increases the importance of energy storage devices like batteries and flywheels that can capture intermittent solar and wind energy and send it out onto the grid when customers need it the most. It’s similar to conducting an orchestra, where CES instructs a hydro plant to crescendo, or a gas turbine to back off.
From a control room in the firm’s headquarters at 1528 Walnut St., where the firm occupies the top four floors, CES operators monitor or actively manage about 250 different energy projects across the country — renewable generators, traditional fossil fuel producers, and energy storage projects.
With a click of a mouse, a CES operator can instruct one of his dozen or so LED monitors to display a live video of the water level at a hydroelectric dam in Virginia, or to call up the real time output from the Block Island Wind Farm in New England, the nation’s first commercial offshore wind project for which CES manages its transactions with the regional power grid.
“We see tremendous opportunities in offshore wind,” said Fernands. “We’re helping them to bid into the market, do outage management, and planning — how do you do forecast for wind so you can schedule it, and how do you do manage it in real time?” CES has two meteorologists on staff to forecast weather impacts on wind and solar output, as well as customer demand during spells of extreme heat and cold.
Altogether, CES helps manage projects that produce about 12 gigawatts of power — that’s more juice than Public Service Electric & Gas Co., the region’s largest electric utility, sends out to customers on a peak summer day. CES is communicating with all seven regional power grids, including PJM Interconnection Inc., the Audubon, Pa., grid operator that manages energy flows in Pennsylvania, New Jersey, and 11 other states and the District of Columbia.
“Our largest asset count right now is solar,” Brandon McGee, the CES director of market operations, said on a tour of the control room. “We have like 80 something solar sites. It’s followed by wind, and battery is rapidly growing after that as well.”
Battery storage is at the center of CES’s latest green energy project. The firm plays a supporting role in partnership with Green Mountain Power, Vermont’s largest electric utility, and Tesla, which sells a residential lithium-ion backup battery system called the Powerwall.
Green Mountain has installed more than 3,000 Tesla Powerwalls in Vermont homes since 2017. The Powerwalls are primarily residential backup power systems, but can also be instructed to discharge power onto the power system during peak demand periods, boosting electricity supply.
The utility’s latest experiment takes that role one step further, to instruct residential batteries to discharge or draw power on very short notice — two seconds — to maintain voltage balance on the grid. This function, called frequency regulation, is critical to keeping the lights from dimming, and it is a service for which grid operators pay a premium. The role was traditionally performed by fossil fuel producers, including coal plants, but will increasingly fall to batteries as fossil fuel plants retire.
CES’s software serves as the link between the New England power grid and the individual Powerwalls, sending signals to the devices to increase or decrease output, in seconds. The Vermont pilot project will explore whether the deployment of hundreds or thousands of synchronized residential battery systems has an advantage over using large utility-scale battery installations.
“We view that as sort of where the future is,” Fernands said about electricity storage systems.
Green Mountain pays residential customers $13.50 a month to use their battery systems for frequency regulation, and promises not to drain the batteries when severe weather is predicted and the backup capacity might be needed.
“It is a first to be able to pull together the stored clean energy, distributed in small amounts in homes across Vermont and help balance the grid this way,” said Kristin Kelly, a Green Mountain spokesperson. She said the utility was introduced to CES several years ago when it hired the Philadelphia company to help manage a large-scale battery system linked to a solar farm.
CES is also involved with a project at the University of Delaware, exploring the use of battery systems at electric vehicle car-charging stations in a grid-support role. The University of Delaware has also pioneered research into using the batteries of electric vehicles for grid support.
A big part of the firm’s business now is built on a software-as-service model, in which it hosts applications developed by its own team and makes them available to customers on the internet. Fernands said the firm employs about 50 tech professionals.
The firm acquires new customers largely by referrals, he said. It also operates in five foreign countries: Canada, Mexico, India, Japan, and Vietnam.
Fernands was so serious about his 2010 expansion into India that he, his wife and their three children moved from their home in Haddonfield to Pune, India, for a year to better understand the country’s needs. The Indian subsidiary now has 75 employees, and it operates a test lab researching how to extend battery life.
One of its projects is exploring how to improve charging times for the lead-acid batteries used in electric auto rickshaws, the three-wheeled vehicles that are ubiquitous on the subcontinent.
In 2016, CES acquired Powerit Solutions, a Seattle company that helps businesses reduce energy costs by curtailing power consumption during peak periods, a practice known as demand response.
Through all the years of his firm’s growth, Fernands said he has not lost sight of his initial aim when he went off to Bible school in 1992. His faith is right out there in CES’s mission statement, which includes an unusual proclamation: “Through all things, we desire to honor God and our clients through the quality of our services and solutions.”
“I put that in there and it was not a particularly bold thing to do in the beginning because no one reads your mission statement when you’re a one-guy consulting company,” Fernands said. “But we’ve kept it as part of our mission and really emphasize that we want to promote economic development, our clients and honor God and that’s important for how we do work.”
Fernands said the company employs “people of all different religions and no religion at all,” but for him, conducting himself according to his Christian faith is a critical part of the company’s success. “As a company, we haven’t taken some of the shortcuts that others in our industry have, you know, Enron being the poster child for some of that.”