Navigant Research Blog

In the Energy Cloud, Software Is King

— July 27, 2016

Energy CloudDistributed energy storage systems (ESSs) may present the most challenges and opportunities for both distributed energy resources (DER) developers and grid operators. Recent industry partnerships and product developments are highlighting the growing role that ESSs can play in the emerging Energy Cloud. These new partnerships seek to provide a solution that can make distributed ESSs much more attractive to utilities as an asset, rather than a new challenge to deal with.

The proliferation of DER presents challenges to utilities, which typically have limited visibility and control over the edges of their network. Distributed ESSs can provide the backbone of a highly dynamic and two-way power grid, acting as flexible sources of both load and generation to match intermittent generation with fluctuating demand. However, ESSs on their own can only provide minimal value to the grid; the key is in the advancing software platforms that enable distributed storage to act as the microchip of the Energy Cloud.

Emerging Alliances

While many leading distributed storage vendors have developed their own software platforms to manage an aggregated fleet of systems, several new partnerships are taking software offerings to the next level by bridging the gap between these independent resources and utility control rooms. Distributed storage provider sonnen and grid software provider Enbala Power Networks recently announced an agreement to jointly offer a distributed energy aggregation and control platform to utilities. The companies see utilities benefiting from this offering through an enhanced ability to handle the unpredictability of distributed renewables being deployed on their network. Their solution will also allow for the creation of virtual power plants (VPPs) to help improve overall grid stability and resiliency.

A similar partnership was recently announced by storage vendor Advanced Microgrid Solutions and software provider Opus One. Through the coordination of distributed storage systems and real-time grid level energy management, the companies will offer utilities a greater degree of distribution grid visibility, control, and optimization. This partnership allows each company to focus on its core competencies while offering utilities a solution that solves several of their issues and enables the grid to handle greater amounts of DER.

Software Is Key

These new industry tie-ups support the emerging trend that both energy storage management software and coordinated grid management software will be crucial to establishing a network saturated with DER. As these diverse and often unpredictable resources continue to be installed, it becomes increasingly important for grid operators to have visibility and control over what’s happening at each level of their network. Both utilities and DER vendors recognize that the optimal integration of these new grid assets will require collaboration among various stakeholders.


Residential Solar and Storage Begin to Transform the Grid

— July 6, 2016

Rooftop SolarAs electric grids around the world transition to a more distributed, intelligent, and clean system, markets leading the charge are facing issues that highlight the challenges to come for all.  These early adopter markets, including Hawaii, Australia, California, and Germany, have many similarities, such as relatively expensive electricity and very high levels of distributed solar PV penetration. While numerous studies have looked into the effects that the evolving energy system will have in these locations, a recent study from the Australian Energy Market Operator (AEMO) makes some bold predictions about the impact of residential solar PV and energy storage systems (ESSs) in particular. This year’s is the first AEMO study to take into account both residential energy use and production in estimates of future demand.

A number of factors are converging to drive unprecedented changes to the electricity industry in Australia. The country has some of the highest penetrations of distributed solar PV in the world, with PV systems installed in an estimated 13% of all Australian homes. Additionally, the country is expected to be a leading market for residential energy storage, with 2.4 GW of new capacity forecast to be installed by 2025, according to Navigant Research’s new Residential Energy Storage report.

Changes Ahead

One of the main conclusions from AEMO’s study is that these residential systems can dramatically shift when the grid’s overall peak demand occurs. While traditional peak demand has been on summer days or early in the evening, PV generation will push peak demand later into the evening, after sunset. In fact, the study predicts that the lowest point of net usage may actually become the middle of the day. This transition is already being seen in areas with particularly high PV penetrations, such as South Australia and Queensland. As peak demand is pushed later into the day, the risk of a rapid spike in net load arises as PV generation quickly ramps down in the evening, a demand spike known by many as the duck curve.

These changing demand patterns will bring about a much greater need for system flexibility both from generation sources as well as the demand side. Flexible loads in homes and businesses that can act as solar sponges by absorbing excess PV generation throughout the day will be critical to maintaining system stability and limiting the rapid increase in demand at the end of the day. As discussed in the new Residential Energy Storage report, residential ESSs are an ideal solution to provide the foundation of a home energy management system that maximizes the use of PV energy onsite while also providing a reliable source of ramp control for grid operators.

Exploring Solutions

Australia’s utilities have been working to address these issues and recognize the unique ability of ESSs to solve many of the challenges they face. Electricity providers Ergon Energy and AGL Energy have been actively exploring opportunities to own residential ESSs themselves to ensure the benefits these systems provide are shared between the grid operators and their customers. While these programs offer great potential, and perhaps a glimpse into the future of the electricity system, many questions remain around how the costs for these systems will be allocated and how to maximize the value they provide. Although there are a number of business cases that support distributed ESSs, most focus on only providing a single service. Unlocking the maximum potential will require new levels of collaboration between utilities, regulators, and vendors to capture the complex value streams these systems offer.


California Incentive Updates Recognize Value of Storage

— June 29, 2016

??????????????????California’s Self-Generation Incentive Program (SGIP) has been one of the most successful and contentious programs supporting the deployment of distributed energy resources (DER). The program has generated significant attention in recent years from stakeholders pushing changes to how financial incentives are awarded. As a result of recent controversies and the looming grid stability issues facing the state, the California Public Utilities Commission (CPUC) officially announced modifications to the program late last week.

These reforms include a number of significant changes that regulators believe will better align the program’s goals of reducing greenhouse gas emissions and peak demand, improving grid stability, and supporting technologies that have the potential to enable market transformation without long-term subsidies.

Storage Wins Big

The newly agreed upon rules highlight energy storage systems (ESSs) as a key priority for the program moving forward. Most notably, 75% of the program’s $77 million annual budget will be allocated specifically for ESSs, with priority given to systems tied directly to renewable generation. Within this, a 15% carveout has been mandated for residential ESSs specifically, which to date have struggled to secure incentives. The remaining 25% of the budget will go to generation systems, including wind turbines, gas-powered microturbines, and fuel cells. In response to concerns over single companies monopolizing the submission process and taking up a large percentage of the program’s budget, all awards will now be determined based on a lottery system, with no developer able to claim more than 20% of the total annual incentives.

In addition to ESSs being guaranteed the majority of the program’s funding, the actual incentive rates and how they are determined have also changed and will step down gradually each year. Incentives will now be determined based on the total energy capacity (or watt-hours [Wh]) for each system. This change helps align incentives with a system’s discharge duration, and in turn, its ability to reduce peak demand or shift usage to off-peak times. Furthermore, the CPUC has established separate incentive rates for systems that are also receiving financial support through the Investment Tax Credit (ITC). The initial rate for ESSs not receiving ITC support is now set at $0.50/Wh and at $0.36/Wh for systems that do receive the ITC. All residential systems (<10 kW) will receive the full $0.50/Wh incentive.

The new incentive rates also take into account the duration of each system by assigning decreasing rates based on the number of hours of discharge duration. For example, at a $0.50/Wh incentive level, a 4-hour 10 kW ESS would receive a total incentive of $15,000. $10,000 is awarded for the first 20 kWh of capacity, the first 2 hours of duration at 10 kW. An additional $5,000 would be awarded for the remaining 20 kWh, the second 2 hours of duration at 10 kW at a 50% reduced rate.

Looking Ahead

With an estimated $270 million in funding remaining through 2019 for the SGIP, these newly announced changes could have a major impact on California’s DER markets. Hopefully, the reformed program will support a more diverse and competitive market for ESSs that will result in a greater number of new systems and more rapidly falling costs. The state’s regulators recognize the unique and significant value that ESSs can provide the grid and are working to ensure the technology plays a key role in the evolution of the electricity grid.


Pending Blackouts Highlight Benefits of Energy Storage

— June 2, 2016

Production Plant - NightConsequences of the largest natural gas leak in U.S. history continue to be felt across Southern California. The leak at the Aliso Canyon storage facility in Porter Ranch, California had a major impact on the local environment, forcing thousands of residents to abandon their homes and releasing the equivalent of the annual greenhouse gas pollution of 572,000 cars. While the leak has been stopped, the facility is now out of commission and the region faces a major shortage of natural gas, which could lead to 14 days of blackouts this summer and potentially 9 more in the coming winter unless action is taken.  The situation highlights the danger of relying too heavily on any one source of energy and is accelerating plans to transition to a system based on renewable energy.

What the Grid Needs

The potential blackouts this summer result in part from the shortage of gas supplies to fuel peaking power plants needed when demand spikes on hot summer days. In order to avoid widespread outages, the peak demand on the system needs to be reduced. Reducing the overall peak demand has been a focus of grid operators for year, and a number of solutions, including energy efficiency programs, demand response and energy storage systems, are being employed to meet this challenge. While these solutions all have their downsides (such as a low reliability or high upfront costs), the current situation in Southern California highlights the benefits of distributed energy storage systems in particular.

California is already a leader in the distributed storage market, and the threat of numerous blackouts may result in increased demand for these systems. As explored in Navigant Research’s Solar PV plus Energy Storage Nanogrids report, distributed storage systems can provide backup power during an outage (perhaps indefinitely when paired with solar PV) in addition to reducing electricity bills. While backup power is one of the main drivers of interest in distributed storage, these systems can provide much greater value to the grid as a whole. Storage systems aggregated into a virtual power plant can allow grid operators to reduce demand on the system at peak times, shifting energy usage to maximize the use of solar PV and limiting the need for gas-fired generation.

Central vs. Distributed?

As grid operators in California consider how storage can reduce the risk of blackouts, they are examining one of the key debates in the energy storage industry: Is it better to deploy centralized or distributed storage systems? While some of the issues facing the grid can be solved with centralized storage, distributed systems are being installed in increasing numbers without any action from utilities. Centralized storage systems won’t keep the lights on for customers in the event of a major outage and can take much longer to develop, an important consideration given the immediate need for new resources. Overall, it seems distributed storage systems are in the best interest of the California grid. While some customers get improved resilience, everyone benefits from the improved reliability that comes with these flexible assets on the grid.


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