Navigant Research Blog

Is Mobility Key to Unlocking the Maximum Value of Energy Storage?

— December 27, 2017

The ability of distributed energy resources, including energy storage systems (ESSs), to defer investments in new transmission and distribution (T&D) infrastructure has emerged as one of the most attractive uses of the technology. Navigant Research has covered this topic in recent reports, including Energy Storage for Transmission and Distribution Deferral and Non-Wires Alternatives. In some cases, ESSs and other technologies can be used to entirely avoid the need for infrastructure upgrades, though these situations are rare. Most energy storage projects providing these services are designed to defer infrastructure upgrades for a period of 3-6 years on average. A deferral period of this length typically results in costlier T&D projects being profitably deferred with energy storage.

ESS vendors have worked for years to develop mobile storage technologies with the aim of overcoming this barrier and opening a much larger addressable market for potential T&D deferrals. While an ESS project may only defer T&D investments for 3 years, the storage system itself will last much longer. In theory, moving an ESS from one location to another every few years will allow for numerous T&D projects to be deferred and will maximize the value of a single storage system. The challenge with this concept has traditionally been designing a hardware platform capable of being moved from one location to another with relatively low costs, while not damaging sensitive batteries and power electronics. The maturation of the storage industry over the past few years has resulted in new designs for mobile ESSs that can be efficiently moved from site to site.

ESS Solution Product Testing

Con Edison in New York was one of the first utilities in the US to launch a project testing mobile ESS solutions. The mobile systems for this pilot project are designed to optimize existing T&D assets, defer investments and upgrades, and support the grid during emergencies or in response to unanticipated events. When not needed by the utility, the ESSs will be located at the Astoria generation plant, owned by project partner NRG Energy. At this facility, the systems can participate in the New York Independent System Operator (NYISO) markets for frequency regulation, operating reserves, and day-ahead or real-time capacity.

Con Edison and NRG Deployable Storage Asset      

Source: Consolidated Edison

The concept of mobile energy storage is quickly gaining traction in the industry. New Jersey-based startup Power Edison has developed integrated ESS products designed from the ground up for mobility, which it claims can significantly lower the cost of transportable storage. The company’s products come preconfigured in shipping containers, with power ratings from a few tens of kilowatts to several megawatts. The systems are specifically engineered to handle vibrations, changing environmental conditions, and other disruptions due to transportation with a custom-built trailer that can protect sensitive hardware components and not void vendor warranties.

ESS Solutions Add Value

A growing number of utilities have expressed interest in these innovative ESS solutions; however, questions remain around the true cost to move systems from one location to another and the potential effects to system hardware. The upfront costs for mobile ESSs are typically much higher than a standard stationary system due to the need for custom-built enclosures, battery mounting hardware, and trailers. Despite these challenges, mobile ESSs present a major opportunity to enhance the value and flexibility of energy storage on the grid.

 

Energy Storage Association Offers a Call to Action for New Policy

— December 14, 2017

In collaboration with Navigant Research, the Energy Storage Association (ESA) recently published its latest white paper, 35×25: A Vision for Energy Storage, analyzing the evolving needs of the electric grid and the market drivers powering rapid energy storage industry growth. The study introduces the current state of the industry along with a vision where widespread storage deployments result in major economic, environmental, and social benefits.

Key to the paper’s findings is a call to action section outlining policies and programs being implemented around the country to support the growth of the industry. Over the coming years, changes in both government and regulatory policies will have a substantial effect on how the market develops and at what scale. Players in the market should ensure they fully understand the changes that may be coming and how they will shape future opportunities.

ESA’s call to action highlights considerations and actions for both legislators and industry regulators that seek to capitalize on the multitude of benefits provided by energy storage. For legislators, there are four primary categories of initiatives being explored that offer both direct and indirect support as follows:

  • Energy storage impact studies: A strong understanding of the benefits of energy storage is a great first step, allowing local stakeholders to quantify the impacts of storage deployments, such as upfront and ongoing expenses, grid operating cost savings, improved reliability, emissions reductions, and job creation. 
  • Procurement targets or mandates: Multiple states have implemented targets that serve to clarify long-term policy objectives for the industry, spurring action from utilities and providing operational experience for stakeholders. 
  • Incentive programs: Including subsidies, grants, and tax credits, which lower the costs for new storage projects to accelerate market growth and establish a sustainable local industry. 
  • Clean energy standards: A clean energy standard, or clean portfolio standard, is similar to a renewable portfolio standard; however, it often has a broader focus. States including Connecticut and Vermont have implemented standards to ensure storage is compared side-by-side with other resources in planning processes and require electricity providers to implement new technologies.

Many of the legislative actions taken to support energy storage, such as subsidies and procurement mandates, have received significant media attention. However, in many cases, the local regulators have more influence over a market’s growth. Out of an obligation to protect ratepayers and oversee utility investments, regulators must work collaboratively with all stakeholder groups to facilitate constructive dialogue around the deployment and integration of storage systems. ESA’s white paper outlines steps that can be taken by regulators as follows:

  • Clear rules regarding storage: Do current regulations adequately account for energy storage participation? If not, work with utilities, industry participants, and research organizations to better define participation methods and strategies for new technologies.
  • Updated modeling in proceedings: Many of the modeling tools used in integrated resource planning proceedings today lack sufficient granularity and an evaluation methodology that properly incorporates energy storage. For example, models for storage should assess the effect of deployments at specific locations and over sub-hourly time intervals.
  • Streamlined interconnection standards: Despite efforts, current interconnection procedures often pose a significant barrier to new entrants. Streamlining interconnection processes is critical to enable grid modernization.
  • The effects of rate design: New rate structures that accurately reflect the locational and time-based costs and benefits of integrating distributed energy resources, including energy storage, should be explored.

At this stage, it is critical that industry participants with in-depth knowledge on the true costs and benefits of energy storage technologies participate in policy development to ensure a level playing field is created. Along with greater detail on the policy initiatives listed above, ESA’s white paper quantifies the diverse benefits of energy storage and how this disruptive technology can transform the electricity industry.

 

Off-Grid Offerings Aim to Keep Utilities Ahead of New Competition

— November 9, 2017

Over the past several years, the falling costs for solar PV, energy storage systems (ESSs), and other distributed energy resources have prompted some industry observers to predict the major threats to the utility business model would be driven by increasing numbers of customers generating their own power. This prediction has proven to be premature and not a serious concern for many utilities. The costs and complexity required for customers to truly become independent of their local electricity provider remain too high. However, some utilities with largely rural and remote service territories face unique challenges to provide reliable and affordable service to their customers. Select providers around the world have begun exploring opportunities to offer off-grid energy systems directly to customers in an effort to reduce costs while establishing a new segment of their business.

Examples Around the World

In the US, Vermont-based utility Green Mountain Power claims to be the first in the country to actively help its customers go off-grid with combined solar PV and energy storage offerings. With a high percentage of rural customers, long feeder lines, mountainous terrain, and frequent blizzards, the company faces higher costs to reliably serve each customer. A key aspect of Green Mountain Power’s offering is selling its customers the Tesla Powerwall residential storage system through a well-established partnership with the EV and stationary storage provider. To reduce the energy required by these customers, the utility provides energy efficiency retrofits and home automation controls. It also supplies backup generators to ensure electricity is always available.

On the opposite side of the world, one of New Zealand’s largest electric distribution companies is facing similar challenges and has established its own off-grid program. Powerco has begun constructing several all-in-one microgrid energy systems for customers in remote parts of the country. The company’s offerings include solar PV, energy storage, and backup generators configured to meet a customer’s year-round energy needs. Powerco has partnered with US-based ESS provider SimpliPhi Power to offer its modular 3.4 kWh lithium ion battery units. The utility has determined that these off-grid energy systems are more cost-effective than having to extend the reach of the centralized grid by just 2 km, with an added benefit of reducing fossil fuel consumption and providing greater reliability for customers.

Avoiding Threats 

As explained by my Navigant colleagues in a 2016 article, threats to the utility business model have evolved into something far more pernicious in the past 3 years. Solar PV, ESSs, and other individual technologies are increasingly combined into complex hybrid energy systems driven by evolving technology platforms to meet the energy needs of end customers. These developments have resulted in previously unheard of competition in the market from cable and telecom companies, solar PV providers, home security firms, and large tech companies.

Utilities Facing Increased Competition at the Edge of the Grid

(Source: Navigant Research)

Utilities such as Green Mountain Power and Powerco recognize these threats and are attempting to get ahead of the competition posed by new energy service providers. These companies recognize that they must be innovative with their offerings to keep pace with the demands of customers and the industry’s technology-driven evolution. By encouraging customers to adopt new technologies and go off-grid on their own terms, utilities can establish a profitable extension of their business while forging stronger relationships with customers.

 

Innovative Business Models Required to Drive Microgrids for Resilience

— October 17, 2017

The devastation caused by recent hurricanes in the Caribbean and southern United States has focused attention on the potential benefits of microgrids and local power generation. With widespread power outages and major damage to grid infrastructure, the opportunity to rebuild electrical systems with a more distributed and resilient architecture has never been clearer. Navigant Research’s new report Energy Storage for Microgrids highlights some the developments taking place in this emerging market along with the challenges that must be overcome to capitalize on the full potential of these technologies. The report explores innovations in business models that will be key to the growth of microgrids and distributed energy over the coming years, particularly in markets with significant financial constraints.

Protecting and Improving

Microgrids equipped with distributed energy storage, solar PV, and other forms of distributed generation can greatly enhance the resilience of the electrical system by preventing damage to a single portion of the grid from causing massive outages. This capability would be especially beneficial for islands such as Puerto Rico and the US Virgin Islands, which face frequent hurricanes capable of destroying transmission and distribution lines. In a centralized grid system, although power plants may still be operational after a storm, the energy they generate will be unable to reach customers. Microgrids with localized energy storage and generation are less susceptible to storm damage and can be brought back online more quickly, without damage in one area preventing service from being restored elsewhere. Furthermore, under normal conditions, microgrids provide numerous benefits to the grid by operating both independently and in a coordinated fashion to maximize the use of renewable energy without affecting grid stability.

Leveraging Financial Innovation to Drive Growth

Since microgrids are a relatively new technology platform, two major challenges that hold back new projects are the limited number of standardized solutions (despite some early plug-and-play offerings) and the limited financing options that reduce upfront investments and risks for customers. In the case of Puerto Rico and other islands with significant financial constraints, innovative business models will be critical for microgrids to spread.

Business model and financing innovations have been key drivers of growth in the solar PV industry over the past decade. Many of these same concepts are being applied to microgrid and distributed energy storage projects with the goal of negating the perceived risk of investing in new technologies. Some of the new models shifting risk and upfront investment away from customers include: power purchase agreements and leases with owner financing, software, energy as a service, and design, build, operate, and own models. New business models are being driven by the growing number of companies that leverage their backgrounds to provide microgrid solutions, including utility subsidiaries, energy service and technology providers, solar PV developers, and building energy management and controls providers.

Creating Opportunities

While the distributed energy industry races to help communities recover from recent disasters, it is critical that new technologies capable of reducing the effect of future storms be implemented. However, overcoming the lack of familiarity with these new systems and relatively high upfront costs will be a major challenge. The most successful companies in this industry will be those that can unlock the potential of new business and financing models to reduce the risk and upfront costs to customers. This ability to leverage private investment in infrastructure will be particularly important as countries with limited resources look to recover from massive damage while preventing similar issues in the future. In a webinar later this month, Navigant Research will explore the role of microgrids for improving resilience in another high profile area: data centers.

 

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