Navigant Research Blog

New York’s Grid Restructuring Begins to Take Shape

— November 28, 2016

GeneratorAfter numerous rounds of conferences, discussions, and announcements, concrete results from New York’s Reforming the Energy Vision (REV) initiative have begun to emerge. Despite the initiative’s ambitious goals, limited on-the-ground changes have been made. The recent announcement that Green Charge Networks will deploy a network of 13 MWh of distributed energy storage marks one of the most significant developments to date and adds Green Charge to the growing list of companies driving the initiative.

The REV initiative aims for major reforms to both utility business models and market regulations to enable a transformation to a grid built around distributed energy resources (DER). Near-term targets include allowing for greater use of renewable generation and other DER to reduce emissions, improve the resiliency of the grid, and limit costs for upgrades passed onto customers. New York City and other urban areas face extremely high costs for replacing or upgrading underground electrical infrastructure, hence the initiative’s focus on using local DER.

Ambitious Goals

Perhaps the most notable project through REV thus far is the Brooklyn Queens Demand Management Program. This program seeks to defer a proposed $1.2 billion substation upgrade through a combination of 52 MW of demand reductions and 17 MW of DER investments. Most of the projects supporting this effort involve conventional demand response (DR), energy efficiency, and other demand-side management solutions. Utility Consolidated Edison is also looking at more reliable options, including distributed energy storage and microgrids. It first announced requests for information and proposals in March 2016. Following this request, the first major announcement of new DR capacity was released in August 2016, accounting for 22 MW of peak demand reduction capacity, with payments to providers ranging from $215/kW to $988/kW each year. This announcement is noteworthy for including distributed energy storage from leading providers Stem and Demand Energy.

The program has also established incentives for thermal energy storage, with system vendor Axiom Energy offering subsidized solutions to grocery stores throughout New York city. Through the program, customers can save on their monthly bills by using stored ice to provide cooling for refrigeration at times of peak grid demand rather than compressors; the utility is then able to reduce peak demand in constrained areas. These incentives are expected to result in 6 MWh to 8 MWh of utility-controlled demand reduction capacity.

Building on Success

The announcement for a further 13 MWh of distributed storage capacity from Green Charge Networks further builds on the progress made through the REV initiative. This progress positions New York as a leading state in shaping the structure of the emerging distributed energy ecosystem. A successful transition to a DER-centric grid requires a two-pronged approach. It’s necessary to both facilitate the integration of new technologies and also to reform utility business models so that all stakeholders—including utilities—benefit from the efficiency and resiliency that DER can provide. These recent developments have made New York’s efforts much more tangible, and it will be exciting to see what else the state has in store.


Sweden Looks to Stimulate Residential Storage with New Subsidy

— October 31, 2016

Lithium BatteriesGreater interest in the benefits of distributed energy storage systems (ESSs) is growing out of successful deployments around the world. The leading markets for residential ESSs have all seen some level of government support (typically in the form of subsidies to reduce the upfront investment required). Joining a growing number of countries, the Swedish government recently announced a new subsidy program to support its residential ESS development.

There has been little energy storage market activity in Sweden to date; however, the country has set an ambitious goal to eliminate all fossil fuels used for electricity generation by 2040. Swedish officials hope that much of the new generation capacity will come from solar PV, and distributed ESSs will allow for a smooth integration while improving the Swedish grid’s resiliency. The new subsidy will be among the most generous in the world, covering potentially 60% of the cost to install a system, up to $5,600 per customer. The program is scheduled to run until the end of 2019, with a maximum $19.6 million budget that could result in 3,500 new systems and over 25 MWh of new ESS capacity.

Support Is Key

Residential ESS deployments to date have been heavily concentrated in four countries, each with some level of financial support for the technology. Navigant Research’s recent Residential Energy Storage report explores conditions supporting the market’s growth worldwide.

One of the largest markets to date has been Australia, where the country’s Capital Territory is looking to support 36 MW of new residential ESS capacity. Customers in that state can apply for a subsidy of $527 per kW of a system’s capacity, likely to cover around 20% of upfront costs.

Although the United States is emerging as a leading market for residential ESSs, nearly all systems deployed in the country are located in California. The state’s market is supported by subsidies through the Self-Generation Incentive Program, which was recently reformed and extended through 2019. The program has a  budget of $270 million, 75% of which is set to fund energy storage projects, with 15% specifically reserved for residential systems (less than 10 kw), providing approximately $600 per kWh of storage capacity. So far, the program has supported roughly 1.8 MW of residential ESS capacity, with another 7.5 MW in the pipeline.

Highlighting the geographic diversity of the residential ESS market, the two largest markets to date have been Germany and Japan, both of which have run subsidy programs for several years. After some debate about whether to continue the program, German officials elected to continue subsidizing residential ESSs through the end of 2018. That program may cover approximately 30% of a system’s cost when tied to solar PV.

Japan is home to the most generous residential ESS subsidy worldwide. The country’s Ministry of Economy, Trade, and Industry offers over $9,000 in incentives toward the installation of a lithium ion ESS for homeowners. Notably, this is the only subsidy targeting a specific battery chemistry, as the country looks to become a world leader in lithium ion technology.

Ready to Grow

Subsidies have been key for the residential ESS market to date, as the technology requires further decreases in costs to see widespread adoption. However, most subsidy programs will end before 2020 and are unlikely to be continued if battery system costs continue to fall as expected. Navigant Research expects that the residential ESS market will begin to see much more dramatic growth in the next 2 to 5 years as falling system costs combine with reduced solar PV incentives to greatly increase the value of these systems.


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.


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