Navigant Research Blog

Canada Looks to the Grid for Emission Reductions

— January 4, 2012

Last month, as the international climate change talks in Durban, South Africa wound up, Canada invoked the country’s legal right to leave the Kyoto Protocol.  Canadian officials cited several reasons for their departure from the accord; the main reason is that Canada is seeking to avoid the financial penalties from its failure to comply with its stated targets for reductions of carbon emissions.  Canada’s representatives have also indicated that Kyoto is irrelevant without the participation of two of the largest polluters: China and the United States.

That argument aside, as oil prices continue to rise over time and the opportunity cost of domestic consumption increases, Canada may decide to maximize the country’s oil exports at the expense of domestic use.  According to the U.S. Energy Information Agency, the country’s 175.2 billion barrels of proven reserves of oil put Canada behind only Saudi Arabia and Venezuela, and it is the only non-OPEC member in the top five.  That means that the global market for oil exports may give Canada an economic reason to reduce the use of fossil fuels, and thus emissions, within its own borders.  Canada, along with other petroleum-exporting countries will simply export a larger proportion of oil along with the emissions they produce.

In terms of electricity generation, Canada’s vast hydroelectricity generation capacity and pumped storage reserves are often cited as the reason why further improvements in emissions are not economically viable.  Cheap, low-carbon hydro prices many other cleantech options out of the market.  For that reason, one opportunity for Canada lies in ensuring the stability of the electrical grid as a system.  The provinces of British Columbia and Ontario have been especially aggressive in introducing the types of market drivers that encourage distributed storage, although without any obvious overall intent.  These drivers include dynamic pricing, distributed solar PV incentives, and plug-in vehicle programs.

For example, in Ontario (a partially deregulated market), there are three different time-of-use prices: 6.2¢ per kilowatt-hour (kWh) for off-peak, 9.2¢/kWh for mid-peak, 10.8¢/kWh for on-peak – and these prices are reviewed every May 1 and November 1 by the Ontario Energy Board (OEB).  British Columbia, and more specifically BC Hydro, is testing smart meters, dynamic pricing schemes, and demand response schemes (hot water heaters and thermostats) in an effort to understand how consumers use and respond to these peak-shaving measures.

Because of Canada’s position as a net energy exporter, and the country’s diverse energy resources (including hydro), any improvements to emissions on the grid side will be limited to incremental improvements in the grid.  Distributed storage is a good option for optimizing an existing system – such as the Canadian grid – bit by bit, and kilowatt-hour by kilowatt-hour.

 

New Opportunities for Microgrids in 2012

— January 3, 2012

The global market for microgrids, and other forms of aggregation and optimization for distributed energy resources, made some major leaps forward during 2011. While not the commercial opportunity being hyped by some organizations such as the Galvin Electricity Initiative, this smart grid network platform is coming of age, especially in the U.S., due to two major developments.

The first was the adoption of standards for safe islanding by the Institute of Electrical Energy Engineers (IEEE) in July 2011, which should accelerate the shift from pilot validation projects to fully commercial microgrid ventures. Since 2009, a handful of large projects have come on line, especially in California – as platforms for aggregation of distributed renewable resources – and in New York, with combined heat and power (CHP) units as anchor technologies.

Second, a series of Federal Energy Regulatory Commission (FERC) orders – 719, 745, and 1000 – takes steps toward harmonizing innovation occurring independently at the wholesale and retail market levels. Demand response (DR) is seen as a stop-gap resource whose role will expand in markets characterized by volatility, high demand peaks, and lack of new transmission level generation capacity. Microgrids are now being viewed as the ultimately reliable DR resource, since islanding securely takes load off of the utility grid.

The recently updated Pike Research Microgrid Deployment Tracker 4Q 2011 identified over 100 more microgrids than previously highlighted, representing more than 300 megawatts of planned or operating additional capacity, primarily in the remote microgrid segment.

Pike Research’s new report, Remote Microgrids, highlights the fact that this remote sector represents the largest potential investment and revenue, a market currently valued at $3 billion and projected to grow to over $10 billion in the average scenario forecast by 2017. These figures reflect the fact that remote microgrids require the build-out of new renewable distributed energy generation facilities, whereas many of the grid-tied microgrids previously profiled by Pike Research only derive revenues from networking and optimization of existing generation assets.
Pike Research has also identified four sub-segments of the remote microgrid market, which is further commercialized than other segments, but heretofore sorely lacking in available data:

  • Village Power Systems: Perhaps the largest number of remote microgrids operating today would fall into this category, though data is extremely scarce due to the small scale of such projects and to the fact that most installations are located in Asia. According to leading purveyors of this remote microgrid sub-segment, the average village power system has a capacity of 10 kW. It typically provides power to a medical clinic, school, and/or community center in the center of the village.
  • Weak Grid Island Systems: To a purist, microgrids that have any linkage to a larger grid would not be considered “remote.” From the Pike Research perspective, these systems belong in the remote microgrid camp since the underlying assumption is to design and operate a power system as if the larger grid is not there. Weak grid island systems could represent an even bigger opportunity than the campus environment and military microgrid sectors that have been featured by Pike Research in previous microgrid segment reports.
  • Industrial Remote Mine Systems: This sub-segment of the remote microgrid market is the least mature, but also boasts the highest growth rates due to a groundswell of interest in shifting to more sustainable energy strategies for sites controlled by large multinationals. Globally, nearly 75% of existing mines are remote operations, though very few deploy renewable energy generation.
  • U.S. Mobile Military Microgrids: This last category of remote microgrids is the least developed, but has the most policy and financial support from the U.S. Department of Defense. At present, these systems are being deployed in pilot projects in combat missions at FOBs in Afghanistan and other remote DOD sites. They are included in this report because many mobile systems will likely become village power systems to serve humanitarian services once U.S. troops pull back from combat zones such as Afghanistan.

And while Africa and the rest of the developing world are ideal markets for remote microgrids, Comverge, the struggling demand response provider, ended 2011 with a bang when it announced a major deal with South African provider Eskom, one of the largest utilities on the continent. With DR technology now spreading more rapidly throughout the world, new synergies between microgrids, DR and virtual power plants will certainly emerge.

 

A Tale of Two Utilities

— January 3, 2012

As the new year dawns, a look at two U.S. utilities paints a contrasting picture in terms of customer engagement during a smart meter deployment. San Diego Gas & Electric (SG&E) has traveled a relatively smooth road as it nears the end of its installation of 1.4 million smart meters. Meanwhile, Pacific Gas & Electric (PG&E) has endured a bumpy ride as it continues with its smart meter rollout which has involved upgrading more than 8.8 million electric and gas meters. The California-based operator plans to wrap up its smart meter program in 2012, when the total will reach nearly 10 million endpoints.

Focusing on just customer engagement, SDG&E has set a high bar in its efforts by putting customers first and not just in words alone. According to the Smart Grid Consumer Collaborative (SGCC), the San Diego operator:

  • Sent customer service representatives into the field to handle complaints
  • Trained entire staff on smart meters
  • Addressed complaints quickly
  • Identified old meters that were running slowly and called relevant customers one week later to explain potential bill increase
  • Sampled customer reactions with a door-to-door survey
  • Responded to emotional complaints with empathy as well as factual argument

As a result, while SDG&E received a few statements of health concerns, some high bill complaints, and requests for an opt-out option, the California Public Utilities Commission received far fewer complaints from SDG&E’s customers than PG&E’s.

By contrast, PG&E’s rollout was noted for the following, again according to the Consumer Collaborative:

  • PG&E was early to deploy advanced metering infrastructure (AMI), but did not initially take significant steps to educate or inform customers
  • After receiving complaints, the utility developed an AMI marketing, education, and installation notification campaign
  • PG&E hired 165 call center employees to handle AMI-related inquiries

Despite the operator’s revamped customer engagement policy, some customers have continued to oppose the smart meter program. PG&E recently asked the California PUC for permission to give customers an opt-out option, and the PUC is expected to issue its decision on the matter in the coming weeks. So, this shows some progress on the part of PG&E as it tries to be more flexible in its dealings with customers.

The point here is not to pile on PG&E – its own customers and the California PUC, among others, have done that well enough. PG&E deserves credit for being a pioneer with its smart meter deployment, and it has taken its share of arrows in doing so. But PG&E made a fundamental mistake early on: Not making customer engagement its top priority, and instead pushing ahead with its initial “our way or the highway” attitude. Not a good plan, especially as connected consumers have new online tools for organizing complaints, as we noted in our recent report, Social Media in the Utility Industry. PG&E seems to be on the right track for now, and we will continue to monitor this major utility as it moves ahead with its smart meter deployment in 2012. Other utility managers, meantime, should learn from past mistakes and keep customer engagement the top priority as they roll out smart meter projects.

 

Group Buying Comes to Residential Solar

— January 3, 2012

As I mentioned in an earlier blog post one of the key drivers for community and residential energy storage is distributed solar photovoltaics (PV).  Although the typical assumption is that the market for distributed solar power will be driven by economic incentives for residential generation, one factor often ignored is how impractical or challenging installing solar PV at a home can be for a homeowner.  For homeowners, understanding the economic benefits and vetting individual vendors and installers can be a daunting process.

One organization working to remedy this is One Block Off the Grid (1BOG), which is attempting to adapt the group-buying concept for consumers installing solar power systems.  Group-buying has taken off with several well-known deal sites (Groupon, LivingSocial) offering discounted deals on goods and services.  While the idea of a middleman who connects a vendor with a customer is a cornerstone of business-to-customer strategy, 1BOG takes this concept further.  The company is one part advisor, one part matchmaker, and one part dealmaker.

The purpose of 1BOG is to educate and advise potential residential solar PV adopters on the benefits and drawbacks of installing solar power systems (including rebates, other incentives, and return on investment).  Once clients decide whether or not to go forward with a project, they can then take advantage of a promotional deal on a system that suits them.

Installers and vendors benefit because participation in 1BOG differentiates them from the crowd of other businesses in the space.  Customers benefit by understanding the practical and financial implications of installing solar PV in their homes.

1BOG is not the only model for this type of service.  Community-based models such as the Mt. Pleasant Solar Cooperative in Washington, D.C. are less business-driven but operate on similar principals: education and facilitation.  In the case of the Mt.  Pleasant neighborhood, two neighbors’ struggle through the process of installing solar PV on their homes led them to found an association to give other neighbors an easier path to opting into solar.  The cooperative is one of eight covering various neighborhoods in Washington.

Where this gets interesting for energy storage is that 1BOG concentrates its efforts (and consequently, group buying discounts) in specific, geographically bounded markets.  Similarly, community co-ops do the same by virtue of their association-based models.  Although this is a natural model for residential PV diffusion, it’s also likely to wreak havoc with low voltage networks.  Therein lies the opportunity for energy storage technology.

 

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