Navigant Research Blog

Why California Will Lead the World on Microgrids

— March 25, 2013

Connecticut boasts the nation’s first law promoting the creation of microgrids.  But that small state is focused on microgrids that would run on fossil fuels, providing fuel cell companies with new markets for their products.  In California, the primary drivers for microgrids are aggressive plans for renewable energy deployment, both at the wholesale level and at the distribution level.  As a result, two of the state’s investor-owned utilities (Southern California Edison and San Diego Gas & Electric) view microgrids as a potential remedy for a future power grid that could be much less robust than today’s – one that is highly susceptible to swings in solar and wind power production and corresponding voltage spikes and sags.

The Microgrid World Forum, which took place in Irvine, California, provided further evidence that the Golden State may soon emerge as the hottest market for this technology platform in the United States and perhaps the world.  Bob Foster, chair of the California Independent System Operator (CAISO), which manages the state’s high-voltage power grid, noted that “microgrids are the answer” to the following challenges facing the world’s 9th largest economy:

  • A state Renewable Portfolio Standard (RPS) that requires 33% of the state’s total electricity comes from large-scale renewable resources by 2020
  • Regulations forcing the retirement of “once through cooling” fossil plants that pepper California’s 840-mile-long coast and that could help integrate variable renewables
  • The nation’s highest per capita deployment of distributed solar photovoltaic (PV) systems (in San Diego)

California is also expected to lead the United States in deployments of electric vehicles (EVs), with as many as 200,000 on the road by 2020 – each representing the equivalent load of one and half homes.

Consumer Benefits

As a new report entitled Market Data: Microgrids from Navigant Research points out, North America is expected to lead the global market for microgrids over the next 7 years.  Already, California hosts many leading microgrids in the region, including the ones at the University of California-San Diego and the University of California-Irvine.

Total Microgrid Revenue by Region, Average Scenario, World Markets: 2013-2020       


(Source: Navigant Research)

A former executive at Southern California Edison (SCE), Foster stated that, “Consumers must benefit financially from reducing their energy costs.  We want to meter everything, that’s the goal, and have state ratepayers pay as they consume.  If they don’t go down that path, utilities as we know them are dinosaurs.”  Unfortunately, microgrids face challenges in California that include strong resistance to dynamic pricing from the California Public Utilities Commission (CPUC), just one testament to an opaque state regulatory process.  California has four major state entities governing energy, and they often conflict over the best way to achieve aggressive policy goals.

Foster acknowledged that it may take another decade for the regulations to align for microgrids.   “Today’s California wind fleet often generates at peak capacity at 1 a.m. in the morning,” he pointed out.  “These facilities and sometimes get paid not to generate!”  Nevertheless, by 2020, he forecasts that the state’s EV fleet will be soaking up this clean capacity, and early investments in renewable and transmission capacity will start to pay off.  In the end, Foster concluded, what California’s microgrids need  is an innovative financial model for microgrids – “something similar to what the solar lease model did for solar PV.”


Simplicity, Lower Prices Keys to EVSE Sales Growth

— March 25, 2013

More than 7.5 million plug-in electric vehicles (PEVs) will be sold between 2013 and 2020, according to Navigant Research forecasts.  All of those vehicles need to be charged somewhere, which is why the electric vehicle (EV) charging supply equipment market has attracted more than 120 companies, large and small.

These vendors would like each new PEV owner to buy a home charging unit.  Due to a variety of factors, though, the percentage of consumers that choose to do so in future years will shrink.  According to Navigant Research’s 2012 Electric Vehicle Charging Equipment report, the portion of PEV buyers that will purchase a residential charging station will fall from 63% in 2013 to 47% in 2020.  The primary factors influencing this decline include:

  • Increasing sales of plug-in hybrid vehicles (PHEVs) with smaller battery packs that can be fully charged via a standard 110-volt outlet overnight
  • A greater share of PEV owners living in multi-unit dwellings without dedicated parking spots
  • Increased reliance on workplace and other public charging

As the relative sales of residential electric vehicle supply equipment (EVSE) go down, sales of commercial (non-residential) EVSE will by necessity rise.  The chart below illustrates that annual global sales of commercial EVSE will grow to more than 1.5 million units annually while residential EVSE sales will rise to less than 823,000 units.

Residential and Commercial EVSE Unit Sales, World Markets: 2013-2020


                                                                                                 (Source: Navigant Research)

To reach the forecast volume of residential EVSE sales, the cost of purchasing and installing a home charger must go down.  We are starting to see residential EVSE priced in the $600 to $650 range for basic units; the average selling price should fall below $500 by 2016.

Simplify, Please

EVSE maker AeroVironment is reducing the immediate financial impact of buying and installing a residential EVSE by working with dealers to bundle the EVSE cost into the vehicle’s purchase cost.  Through the program, dealers approve potential customers for financing above the price of the vehicle and the EVSE, warranty, and installation costs are added as a capital item.  AeroVironment is launching the program with dealers selling the Nissan LEAF and will expand it to dealers of other brands over time.  The company expects the installation to take 4 days or less, including the time for an inspection.  AeroVironment will also be busy installing residential EVSE in California.  The California Energy Commission recently granted AeroVironment $2 million to install 770 residential EVSEs across the state.

Depending on which state or city an EV owner resides, the permitting process can be a lengthy and onerous process for purchasers and electrical contractors.  According to Navigant Research’s recently published Electric Vehicle Supply Equipment Permitting report, some regions allow a permit to be filed online and offer same-day inspections.  In other places, differences in city and county rules can significantly slow the process.  Currently, very few states have attempted to standardize the process.  Yet, for sales of EVSE to grow as forecast, more states will have to simplify the process.


BMW i3 Will Offer a New EV Experience

— March 25, 2013

For some time, BMW has been promising to launch the i3 in 2013.  At the 2013 Geneva Motor Show, the company unveiled a three-door version, the i3 Concept Coupe.  It will be one of the first production vehicles to be made using BMW’s new modular electric architecture.  The standard version is expected to cost around €40,000 (about $52,000) when deliveries start in November, which is at the upper end of the current 3-series price bracket.  It should be eligible for government electric vehicle (EV) incentives, such as the U.S. federal tax incentive of $7,500, though the vehicle has not yet been formally tested and approved.

The BMW i3 has some interesting differences from most of the other EVs on the market.  Most volume-selling EVs and hybrid electric vehicles (HEVs), such as the Toyota Prius, the Nissan LEAF, the Mitsubishi i-MiEV, and the Renault ZE range, are designed for economical motoring and as such are front-wheel drive.  The i3 is rear-wheel drive, as is the Tesla Model S, which coincidentally also has a list price of about $52,000 (with a 40 kWh battery pack).  The focus for BMW remains on driving enjoyment and the target customer will be those who appreciate the BMW brand image and want to switch to clean fuel.

A Spare Engine in the Boot

Research carried out by BMW over the last few years has led to the conclusion that a 100-mile range is optimum for the majority of people, and most can get by recharging only every second or third day.  Those that regularly need a daily range greater than this would be better off, for now, buying a car with an efficient internal combustion engine.  It’s good to hear an OEM publicly acknowledge that its EV is not trying to appeal to everyone.  However, BMW has introduced a number of features to address range anxiety.

One factor is the dynamic range calculation from the integrated navigation and telematics system that takes into account current traffic and the topography of the roads ahead.  Selected drive mode and average driving style are also factored in, and nearby charge stations can be identified and potentially reserved if necessary.  The i3 also offers LED lighting (inside and out) and a climate control system that uses a heat pump principle to warm and cool the interior – measures that BMW says results in 30% energy savings in city driving when compared to conventional electric heating and lights.

But the most interesting optional extra is the range-extender feature, a built-in 600cc motorcycle engine with a 2-gallon fuel tank.  This will give owners peace of mind that they will not be stranded by making available an additional 80 miles of range after the battery runs out of energy.  The feature, which takes up a part of the luggage space, is expected to be priced at about €3,000 ($4,000).

While initial purchase price remains the main obstacle to major growth in EV sales, range anxiety is still one of the primary concerns of the car buying public.  BMW has addressed these concerns in its design, but the most effective solution is better education about the realities of owning an EV.  At the start of the testing run by BMW with its ActiveE and Mini E vehicles in Asia Pacific, Europe, and the United States, more than 70% of users said that access to public charging stations was very important to them.  In actual practice, however, public infrastructure was used for less than 10% of all charging.


As Gas Wells Multiply, So Do Fracking Studies

— March 22, 2013

Ernest Moniz, President Obama’s nominee to become Secretary of Energy, encountered a minor tempest this week when environmentalists unearthed a 2011 MIT study on natural gas production and fracking, which Moniz led as the head of MIT’s Energy Institute.  The study, which concluded that the potential environmental damage from fracking is “challenging, but manageable,” was conducted by a team that included two researchers with ties to the oil and gas industry.  The White House quickly defended Moniz as an independent scientist, and the controversy is unlikely to keep Moniz from succeeding Stephen Chu atop the Energy Department.

Independent or not, the MIT report now rests on a shelf that groans under the weight of fracking studies and reports that multiply almost as fast as the natural gas wells themselves.  The latest version, which heavily favors the natural gas rush, comes from the University of Southern California and the Communications Institute, an L.A. think tank, and was “funded in part by a grant from the Western States Petroleum Assn.,” reports The Los Angeles Times.

There are plenty of examples of counter-studies detailing the horrors of fracking.  The granddaddy of anti-fracking reports was produced by Robert Howarth of Cornell in 2011, and concluded that over the long term, “shale gas is worse than conventional gas and is, in fact, worse than coal and worse than oil.”

Howarth’s gloomy findings have been disputed by studies from “the Environmental Defense Fund, the National Resources Defense Council, the Council on Foreign Relations, the Energy Department and numerous independent university teams, including a Carnegie Mellon study partly financed by the Sierra Club,” noted Forbes contributor Jon Entine.

Another 5 Years

In New York, a highly touted report from the Geisinger Health System is “likely years away,” the project’s leader acknowledged recently.  New York lawmakers and Governor Andrew Cuomo are in a struggle over limitations – or an outright ban – on fracking in the state, which overlies parts of the vast Marcellus Shale formation, which some geologists believe holds enough shale gas to provide U.S. electricity needs for a century or more.  New York’s review of the social and environmental effects of fracking is now in its fifth year, with no end in sight.

So proliferative is the research on fracking that the industry is in danger of being “entombed” by endless “iterative studies,” wrote a commenter on The Motley Fool, a stock-trading website.  Some supporters have had enough: University of Oklahoma professor David Deming, who has a rich history of provocative statements dismissing the concepts of peak oil and renewable energy, declared recently in a Wall Street Journal editorial that the oil and gas industry needs to man up and emulate the NRA by forcefully confronting its critics and “seizing the moral high ground.”

“The fossil-fuel industry—which could be the most powerful lobby in Washington—is hopelessly ineffective and self-defeating,” Deming moaned.

No Stopping

That is manifestly false – Steve Coll’s book on Exxon Mobil, Private Empire, provides 600 pages of evidence that the oil majors are among the most powerful entities on earth, often functioning as quasi-governments, for both good and ill, in the countries in which they operate.

At any rate, the thousands of pages of research on the effects of fracking scatter, for now, like confetti on the tracks as the locomotive of the natural gas boom thunders past.  That train is not slowing down soon.  Rather than taking an adversarial stance to regulators and environmental groups, natural gas producers could reduce their costs and risks by cooperating with regulators, being transparent about the chemicals they inject underground, and sharing infrastructure in areas with multiple producers.  Those are the conclusions of, you guessed it, a study by Accenture.

There are efforts afoot to do just that.  The Pittsburgh-based Center for Sustainable Shale Development is working on a new set of standards for the industry that would include a certification process to verify that producers are operating in environmentally safe and socially responsible ways.  As my colleague Dave Hurst reports, the Center has been set up by a group of organizations across the energy spectrum, including Chevron, Shell, the Clean Air Task Force, Consol Energy, the Environmental Defense Fund, Group Against Smog and Pollution, Heinz Endowments, and the William Penn Foundation. Lawrence Livermore National Laboratory is helping to develop the technical standards.  Such cooperation offers a much more productive approach than burying your opponents in a blizzard of conflicting studies.


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