Navigant Research Blog

Offshore Wind Farm a Milestone for New England Energy

— May 18, 2015

At an industrial facility in Rhode Island, work has finally begun on what will likely be America’s first offshore wind farm. Originally proposed in 2008, Providence-based company Deepwater Wind’s project has overcome significant headwinds to receive permits, sign power purchase agreements, and finally begin construction. Made up of only five turbines, work on the relatively small project comes at a time when New England’s energy future faces uncertainty. The region generates almost no energy locally, being dependent primarily on natural gas and coal imports from other parts of the country. As a result, consumers are susceptible to volatile rates due to severe weather and supply constraints. A proposal to expand natural gas pipelines represents one way forward for the region, while the wind farm on Block Island represents a very different path.

As a former resident of Block Island, I have been intently following the progress of this project since its initial announcement. While working on the ferry to the mainland, I spent many hours on a nearly empty ship hauling truckloads of diesel fuel to be burned at the island’s one power plant. It comes as no surprise that island residents have to pay some of the highest electricity rates in the country, around $0.50 per kWh. These rates are significantly higher than even Hawaii, where expensive electricity has set off a rush of solar PV and other local energy generation.

Looking Ahead

The wind farm is a crucial component of Block Island’s energy future. Deepwater Wind claims that once operational, the farm could reduce island electricity rates by nearly 40%. Many island communities around the world have recently initiated ambitious plans to wean themselves off imported fuels completely by integrating locally generated energy. Local energy storage has been an important aspect of many islands’ plans to reduce dependence on imported energy, as discussed in a recent post by my colleague Anissa Dehamna. A great example of this can be found on Kodiak Island in Alaska. Global power electronics provider ABB worked with the local electric cooperative to install both battery and flywheel-based energy storage systems to help stabilize the output from the island’s wind turbines, and to store excess power generated at night to be used at times of high demand. The addition of energy storage on Kodiak Island has enabled up to 100% penetration for renewable energy and greatly reduced diesel consumption.

The development of the wind farm on Block Island will present great opportunities to demonstrate the value that other clean energy technologies can provide. The island is an interesting case due to the dramatically smaller population outside of the summer months. There are only around 1,000 year-round residents on the island, meaning demand for electricity most of the year is only a fraction of summer demand. For most of the year, the 30 MW output from the wind farm will be far more than is needed to power the island. By integrating local energy storage, the island could easily be a net exporter of energy through the soon-to-be-built transmission line connecting the mainland while only ever using locally produced clean energy. This can provide substantial benefits to residents through lower electricity rates and a much cleaner, more reliable power system.

 

Distributed Energy Storage, Low-Cost Financing a Powerful Combo

— April 14, 2015

Leases and third-party ownership models have helped the global solar PV market grow dramatically in recent years, and now they’re spreading to the energy storage market. ViZn Energy Systems recently announced that it will offer a similar financing program from LFC Capital, Inc. for ViZn’s distributed energy storage systems. While several companies, including CODA Energy, Stem, and Green Charge Networks, offer leases that feature a shared savings model on energy storage systems for commercial and industrial (C&I) customers in the United States, ViZn’s offering will be the first to target larger facilities (system capacities of 80–500 kWh of storage) with a different leasing model that aims to be more beneficial to customers.

ViZn takes responsibility for the system performance and the risks associated with its relatively new zinc/iron flow battery technology. This move demonstrates full trust in the system’s ability to greatly reduce a customer’s energy bills. The leasing program, available for C&I projects combining ViZn’s energy storage with solar PV and/or cogeneration energy systems, is designed to eliminate construction-period financing costs and simplify the installation process. In contrast to complex and lengthy power purchase agreements (PPAs), LFC’s 3-page lease will be familiar to customers accustomed to leasing general business assets and provide them with a predictable low-cost of ownership in 6 or 7 years.

Fees and Incentives

The primary benefit from using ViZn’s system will be ongoing cost savings from reduced demand charges and energy management expenses. Pairing storage with onsite solar PV can improve the economics of both systems by minimizing the consumption of grid power during peak demand periods, as well as hedging against any future net metering restrictions or export limitations. ViZn has also designed its systems to participate in ancillary service markets by aggregating its fleet of distributed storage systems to act as a single, dispatchable resource.

While the leasing program is available nationwide, ViZn anticipates most of the uptake to come from states with high electric rates and strong local incentive programs, such as California, Texas, and several states in the Northeast. The leasing program is not available for use outside the United States at this time. However, with prototype systems already running in the United States and Europe, the company is well-positioned to move into new markets in the coming years.

Innovative financing solutions can be an important component driving an emerging market to further growth. It will be interesting to see if this business model is adopted by other players in the storage industry, and what impact it may have on the market.

 

Energy Storage Diversity Highlights Regional Differences

— April 14, 2015

As the global energy storage industry continues to take shape, clear differences between regions are emerging. These differences reflect of a number of factors in each area, including electricity market structure, local manufacturing expertise, industrial and energy policies, and geographic characteristics. These factors have significant influence on the diversity of energy storage technologies being deployed in each region. Navigant Research’s Energy Storage Tracker 1Q15 tracks all storage projects around the world, allowing for deep insights into the impacts that market structure and policies have on each region’s market and technological diversity.  

Map of Energy Storage Technology Diversity (Number of Deployed Technologies), World Markets: 1Q 2015

North America is the most technologically diverse region for energy storage in the world, with 19 different technologies (20 including pumped storage) currently installed. This is a result of agencies and favorable policies in North America that are focused on encouraging innovation, such as the United States’ Advanced Research Projects Agency-Energy (ARPA-E) program, as well as various state policies. The U.S. federal government supports technological diversity through the Department of Energy (DOE) Loan Programs Office, which provides secure, competitive financing for innovative clean energy projects that utilize a new or significantly improved technology. As a result of these factors, lithium-ion (Li-ion)-based storage systems (the most popular globally) only account for 12% of deployed systems in North America and 13% of the regional pipeline, which includes projects utilizing 15 different technologies.

Local Specialties

Due to local manufacturing and engineering specialties, batteries are the primary choice for energy storage in Asia Pacific, making the region less technologically diverse than North America or Western Europe. Regulatory policies tend to favor domestic technologies and manufacturers. Notably, Japanese sodium sulfur (NaS) battery manufacturer NGK Insulators has benefited from close relationships with many utilities, resulting in an installed base of over 360 MW in the region. Given recent safety concerns regarding NaS systems and the opening of new markets, domestically produced Li-ion systems now lead the Asia-Pacific region. This is also a result of the region’s grid resiliency efforts (particularly in Japan), which encourage the adoption of smaller distributed storage systems, an ideal application for Li-ion systems. Overall, Li-ion-based systems represent 76.6% of the pipeline for the Asia Pacific region.

The technological diversity of Europe’s energy storage industry falls in between North America and Asia Pacific. Europe has a much greater diversity of market rules and policies compared with other regions. In general, European policies favor innovative/foreign technologies more than in Asia, and as a result there are eight different technologies in the European project pipeline.

Regional View

Germany, the leading market in Europe, has policies and market conditions (e.g, a high penetration of distributed solar, net metering restrictions) that favor distributed energy storage. As Li-ion systems are ideally suited for distributed installations, those batteries have begun to lead the German market despite a relatively diverse base of deployed technologies.

The Energy Storage Tracker explores the global energy storage landscape by tracking projects deployed and planned around the world. Navigant’s project database allows for in-depth analysis of regional markets to understand the impact of policy on technological diversity. Technological diversity can be a key indicator of the overall health of a market and the opportunities for innovative or foreign companies to compete.

 

To Spread, Energy Storage Needs Hybrid Solutions

— March 4, 2015

Imagine a single energy storage system capable of serving all potential needs, from a short burst of high power to keeping the lights on for many hours. Such a system could greatly improve the overall economics of energy storage by removing limitations on the amount of revenue a single system can generate.

This is the focus of several leading companies that are looking to develop hybrid energy storage solutions, combining multiple different technologies in a single system. Energy storage technologies all have their ideal applications; some, such as flywheels, ultracapacitors, and certain lithium-ion chemistries are best at delivering high power over shorter periods of time. Others, such as compressed air and flow batteries, are ideally suited for applications that require a lower level of power to be delivered over a longer period of time. Combining technologies into a single system with the flexibility to perform multiple tasks, could greatly improve not only the economic returns on investment, but also the overall lifetime of storage systems.

Life Extension

Many hybrid energy storage systems are currently available or have already been deployed. Power grid giant ABB has been actively developing its flywheel business and is looking to hybrid systems to fully realize the benefits that flywheels can provide. The company has installed a hybrid flywheel/battery system on remote Kodiak Island, in Alaska. In this installation, two 1 MW flywheels handle the grid’s frequency regulation and high power needs, while the batteries provide the energy density required to fill in the gaps of local wind power generation. As short duration/high power needs are more frequent, this hybrid system reduces the number of times the batteries must be discharged, greatly extending the overall life of the system.

Hybrid systems involving ultracapacitors are also finding promising applications. A leading company in this space is the Spanish firm Win Inertia, which has partnered with ultracapacitor manufacturer Maxwell Technologies to offer an integrated hybrid storage system. The ultracapacitors handle the frequent, intense power requirements, allowing the batteries to be discharged less often. This allows the optimal use of high energy density storage technologies, as well as a rapid response to short term issues. Win Inertia is primarily focusing on the software, controls, and system-integration challenges to make this technology as effective as possible.

Beyond Single Applications

Integration with existing electrical grids presents a major software challenge for energy storage system integrators. When multiple types of storage technologies are integrated into a single system, these challenges become even more complex. The overarching goal of energy storage system integration is to ensure the longevity of a system and its constant availability in the market, thus maximizing the return on investment for system owners.

If these challenges can be overcome, the potential for hybrid storage systems is enormous. Standard storage systems are often designed for only one application, for example frequency regulation, which limits the potential revenue they can generate. Hybrid systems with the ability to meet multiple grid needs and capture multiple revenue streams can be much more economical. While advanced hybrid storage systems are only beginning to emerge, they could one day lead the energy storage market.

 

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