Navigant Research Blog

Can DER Bring the Cuban Grid into the 21st Century?

— October 18, 2016

Wind and SolarAs national relations with the United States and other nations continue to improve, Cuba is emerging as a potentially lucrative market for renewable and distributed energy development.  The country’s first utility-scale solar PV contract awarded in June 2016 highlights its potential to become a leading market in the Caribbean. The potential for renewables and distributed energy resources (DER) development in Cuba and throughout the Caribbean stems mainly from the region’s extreme dependency on imported fossil fuels. Furthermore, Cuba has a number of very old thermal power plants and decaying grid infrastructure that must be modernized to improve reliability and meet the country’s increasing demand for electricity. Cuba also has significant renewable energy resources and a goal to generate 24% of its electricity from renewables in 2030, up from just 4% today.

Opportunities and Challenges Abound

Improved diplomatic relations are driving rapid changes in Cuba’s economy, including large-scale wind and solar PV facilities already under development. Island electricity grids inherently have less stability than large continental systems and have traditionally struggled to effectively integrate large amounts of renewable generation. As a result, many islands—including Puerto Rico and parts of Japan—require that new large solar plants include a set amount of energy storage capacity. This could likely become a requirement as the Cuban solar market matures. Energy storage both centrally located and distributed in buildings can allow for the stable integration of renewables by smoothing output and controlling ramp rates, as well as optimizing these new resources by aligning renewable output with demand by time shifting energy. Navigant Research’s Energy Storage for Renewables Integration report explores the dynamics for these technologies specifically on islands.

Some of the earliest opportunities for DER development in Cuba may be the island’s numerous tourist resorts. Resorts around the world have demonstrated a willingness to invest in DER to improve the reliability of their power supplies and to develop images as eco-tourist destinations. This can provide opportunities for DER providers focusing on the commercial and industrial sector, particularly companies offering innovative financing programs such as power purchase agreements (PPAs). This model is demonstrated by the power system developed by EnSync Energy (formerly ZBB Energy) for a resort in French Polynesia that includes solar PV, energy storage, a local biofuel generator, and advanced controls for system optimization.

DER Barriers

Despite this potential, a number of barriers still exist in the Cuban DER space. The country’s electricity market remains state-run, along with most of its economy. In order to realize its renewable energy ambitions, Cuba will require foreign investments and technical expertise. The government is already looking at some level of market deregulation that would encourage investment by allowing foreign companies to own energy generation (and potentially storage) projects. These changes could provide a much-needed boost to the market; however, the Cuban market regulators will likely need to further formalize policies to instill confidence in foreign investors and financiers.


Enhancing Grid Resiliency through Collaboration

— September 30, 2016

GeneratorAfter nearly 11 years without a major hurricane in Florida, Hermine hit the gulf coast in early September 2016. While it was a relatively small hurricane compared to others that have hit the region, the storm caused widespread power outages that lasted for over 4 days in some parts of the state. Many areas that saw outages experienced no significant wind damage or flooding, yet were left in the dark due to damaged power lines many miles away. As with most major storms, Hermine served to highlight the fragility of a centralized electricity grid dependent entirely on large-scale generation and long-distance transmission networks. Despite being very susceptible to this type of extreme weather, Florida lags behind other states in efforts to modernize its grid and improve resilience against major storms.

Addressing Outages

The impacts of Hurricane Sandy in 2012 drove many northeastern states to push significant grid modernization initiatives aimed at limiting the potential for outages from future storms. Much of this activity focuses on deploying microgrids—including energy storage and solar PV—to provide backup power to critical facilities including police and fire stations, communications infrastructure, and gas stations in the event of a major grid outage. Given the greater risk of extreme weather in Florida, energy storage and microgrids could provide much more value than in other parts of the country. However, deployments of these technologies in the state have been limited to date.

The rapidly falling costs of distributed energy resources (DER) including solar PV and battery energy storage systems have resulted in utilities around the world looking to both improve grid resilience and customer relationships by offering these new technologies. One emerging opportunity, explored in  Navigant Research’s recent Residential Energy Storage Systems report, includes utilities deploying networks of solar + storage systems for residential customers. These projects have numerous benefits for both utilities and customers, including:

  • Reduced need to upgrade infrastructure to meet peak demand
  • Provide greater visibility into conditions on distribution circuits
  • Easier integration of distributed solar PV systems
  • Enhanced customer engagement
  • Backup power for customers
  • Maximum use of solar PV onsite for customers

Innovative business models are being explored both in the United States and internationally in order to maximize the value of residential DER as utilities recognize both the potential and risks presented by these technologies. Despite the contention surrounding ownership and deployments of DER in many areas, partnerships between utilities, solar PV, and storage providers are emerging as a popular model. Utilities including Consolidated Edison in the United States, PowerStream in Canada, and Ergon Energy in Australia have partnered with leading DER providers to offer combined solar + storage solutions for their customers. Though these offerings are mainly limited to pilot projects, early results have been positive for both utilities and their customers. This type of model could provide a solution to the contention surrounding solar PV development in Florida while also limiting the effects of future storms.


Can Hybrid Projects Usher in the Next Generation of Renewable Energy?

— September 16, 2016

Wind and SolarIndia’s ambitious plans for renewable energy development are faced with a number of challenges. Chief among these challenges is the limited availability of land for wind and solar plants in the densely populated country, as well as the cost and technical challenges of interconnecting projects to the grid. These challenges have driven some developers and equipment manufacturers to explore hybrid renewable energy facilities, combining both wind and solar generation at a single site. This hybrid concept has been explored in other areas with limited land available for new development, most notably in Japan, where a 56 MW hybrid wind and solar project was commissioned in 2014.

Wind and solar development is often limited by the relatively high upfront costs for land acquisition, grid interconnection, and project development. The availability of grid interconnections can prohibit the development of many potential wind and solar sites, and the cost for interconnection often requires developers to build larger-than-ideal facilities. As a result, many of the optimal locations for wind and solar generation have already been developed, particularly in densely populated regions.

Hybrid Wind and Solar

The concept of a hybrid wind and solar project aims to eliminate many of the barriers to development by maximizing the value of a facility to overcome the costs for acquiring land and interconnecting to the grid compared to individual technologies. In the United States and other countries, select areas have already been set aside for renewables development. A hybrid system can allow developers to maximize the megawatts of capacity installed per each acre of available land. In addition to overcoming upfront costs, a hybrid project can take advantage of the complementary generation profiles of wind and solar. Wind is often most productive at night while solar power is naturally only generated during the day. By co-locating these generation sources at a single site, a project can more closely represent a baseload resource on the grid, facilitating easier integration and making the resource more valuable for grid operators. The improved predictability of generation output is further enhanced if an energy storage system is also combined at a single facility. This is exactly the aim of developer Windlab Ltd. for the Kennedy Energy Park it is developing in Queensland Australia. The project, scheduled to come online in 2018, will feature 30 MW of wind, 20 MW of solar PV, and 2 MW of battery energy storage capacity.

This hybrid power plant concept doesn’t stop on land, the Danish company Floating Power Plant is currently testing its hybrid wind and wave power generation platform known as Poseidon in the waters off of Northern Europe. While the concept of hybrid renewable plants holds significant potential, it will have to overcome the existing approach of both developers and utilities to typically work with only a single technology per project. However, as the industry matures and ideal sites become scarcer, the benefits of hybrid projects are likely to increase and these projects may eventually become the norm.


Automakers Expanding From the Garage to the Home with Energy Storage

— September 1, 2016

Lithium BatteriesAs the residential energy storage industry continues to take shape around the world, the landscape of companies involved is becoming increasingly diverse. While the industry is still in nascent stages, the number of new companies entering the market (and their differing backgrounds) is growing. Companies offering dedicated residential energy storage products include battery pack manufacturers, inverter manufacturers, software providers, solar PV vendors/developers, and automotive manufacturers. With the growing popularity of EVs, it comes as no surprise that automakers are looking to leverage their battery expertise to develop complementary products. These companies are eyeing a piece of the residential storage market expected to be worth $5.4 billion annually by 2025, according to Navigant Research’s Residential Energy Storage report.

In June 2016, after months of speculation, automaker BMW officially announced a residential energy storage product featuring the same batteries used in its i3 vehicles. The company joins several of its competitors that have already repackaged their vehicle batteries into home energy products. Fellow German automaker Daimler already offers Mercedes-branded home battery systems, and Nissan offers a similar product through a partnership with energy technology specialist Eaton. These companies are not alone; EV pioneers Tesla and BYD both have dedicated residential energy storage products and are actively working to expand in this area.

Seeking Advantages

Automakers see several advantages as they enter the increasingly crowded market for residential energy storage systems. Customers looking to purchase or lease EVs may be prime candidates for purchasing residential energy systems. The ability to upsell EV customers to also purchase home battery systems could provide a lucrative sales channel with lower customer acquisition costs than competitors. Additionally, automakers are actively working to position themselves within the emerging vehicle-to-grid space. Both BMW and Nissan have announced vehicle-to-grid pilot projects with power providers Pacific Gas & Electric and Enel, respectively. These programs seek to utilize the available capacity in EV batteries and the flexibility of EV charging to help alleviate congestion and reduce peak demand on the grid.

Furthermore, automakers may have a distinct advantage in the coming years through low-cost access to repurposed EV batteries. Some companies have already capitalized on this resource through partnerships with storage project developers to supply these used batteries at a competitive price. According to analysis in Navigant Research’s Alternative Revenue Models for Advanced Batteries report, “the effective energy capacity available from EV [lithium ion] batteries for second-life stationary energy storage system applications is projected to exceed 1 GWh per year in 2022.”

Across the growing energy storage market, new players are entering and looking to leverage their expertise from a variety of complementary industries. Automakers are not alone in having identified the advantages their existing businesses will provide as they compete in the energy storage market. Solar PV providers, energy service companies, and even utilities are all seeking to leverage their customer base and technical expertise to provide the most attractive and cost-effective solutions in this rapidly evolving market.


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