Navigant Research Blog

Why Does Diesel Win in Places like Puerto Rico? It’s 9,000 Times Better Than Solar PV by This Metric

— December 12, 2017

In the aftermath of natural disasters like Hurricane Irma, there is much talk about how renewables are the ideal backfill to replace and modernize electric grids. Indeed, renewables like solar PV and wind, along with energy storage, grab headlines due to their falling costs, low lifetime carbon emissions, and general excitement about their deployment and future potential. Why, then, was the largest immediate post-storm addition a pair of 25 MW diesel-fired turbines installed by APR Energy?

Compactness Is Key

In addition to dispatchability and fast install (the plant was operational in 15 days), a key factor is energy density, defined here as daily energy output per acre of plant area. By Navigant Research numbers, combustion turbines like the ones installed by APR can produce as much as 6,200 MWh in a day using 1 acre of land. Compare that to solar PV, which is smaller by a factor of 9,200; based on National Renewable Energy Lab data, solar PV can be expected to produce about 0.67 MWh in an acre. The figure below indicates energy density by corresponding bubble size. The numbers vary by project, but the contrast is stark. Reciprocating generator sets (gensets) are compact, more distributed than the turbines, and a key part of the recovery (with the installation of 375 generators noted by this article). There are also headlines citing fast installation of renewables in microgrids, a clear trend of the future. Still, many of the high output, dense systems tend to be based around fossil fuels.

Energy density has two components. Power density (along the vertical axis) indicates the footprint needed for energy production in any instant of time. Combine that with the second component—capacity factor, along the horizonal axis—and fossil-fueled generation can look exceptionally appealing thanks to its availability nearly 24/7. A crucial advantage is the system’s dispatchability, the ability to provide power on demand.

Energy and Power Density by Technology: Daily Delivered Energy (MWh) in 1-Acre Footprint,
North America: 2017

*Assumes 6-hour (150 MWh) battery discharges 80% of capacity, once daily.

**Equivalent hours/day at max output, assuming consistent demand for power.

Sources: Bloom Energy, Caterpillar, General Electric, National Renewable Energy Laboratory, NGK

Island nations are often constrained on space and need to fit generation among existing infrastructure—especially after a disaster. Many are among the most cramped on Earth, with Japan, Taiwan, the Philippines, Puerto Rico, and many Caribbean nations falling in the top one-sixth of all countries by population density. Though rooftops are available for solar PV, they can be small and may need retrofits. Offshore wind is quickly becoming more appealing, too (though if the grid goes down, it can’t provide onsite, distributed power).

Hybrid Systems Hold Promise

While diesel has the advantage of compactness and dispatchability, it is also expensive, challenging to transport long distances, and emits lots of greenhouse gases and other criteria pollutants like NOX and particulate matter. Natural gas holds many of the same advantages while avoiding many of the cons of diesel; where it is available, it often outperforms diesel. Dual-fuel turbines and gensets can be even more attractive—the Puerto Rico turbines produce power at 18.15 cents/kWh on diesel and less on natural gas when it’s available.

Still, natural gas faces similar hurdles to those noted for diesel (albeit lower ones). In many cases, the optimal system is hybridized—relying on a mix of fossil fuel and renewables. Despite all the buzz around solar, storage, and other renewables, reliance on only those technologies is often cost prohibitive. Hybrid microgrids based around diesel or heavy fuel oil generation can often see fuel savings of 10%-30% or more with the addition of new technologies like solar PV, wind, and storage.


Californian and National Policies Could Shape Future Value Stacking for Distributed Natural Gas

— December 5, 2017

Distributed natural gas generation (DNGG) has significant potential for disruption in the electric sector thanks to improving generator technologies, cheap fuel, and the global trend toward decentralized systems in need of dispatchable power. Navigant Research has identified DNGG as a significant trend of the future, and various legislative and regulatory actions continue to affect this often overlooked but critical solution ecosystem. On the surface, some of these regulatory decisions appear as setbacks, and issues at the federal level remain unresolved. Yet, this key enabling technology for the Energy Cloud will continue to show growth due to underlying benefits dependent upon government subsidies. Some of the recent actions are discussed below.

California AB 36: This bill, which proposed to expand California’s fuel cell net energy metering (FC-NEM) program to include other efficient DNGG technologies, was vetoed by Governor Brown. The governor cited recent changes to the program and wanting to assess their effectiveness first. The goal of the bill was to make the FC-NEM program (with its 500 MW cap) technology agnostic and available to other technologies that meet certain emissions criteria. The decision keeps the larger cap exclusive to fuel cells. In a separate fuel cell development, new California projects have slowed in 2017 after new minimum biogas requirements were instituted in the Self-Generation Incentive Program.

California AB 1400: This bill, which prohibits recipients of microgrid funding from using those funds for diesel generators, was signed into law by Governor Brown in October. Though not exactly related to natural gas, this law continues a California lawmaking trend in aiming to limit carbon emissions—in this case as it relates to microgrids funded by the state’s Electric Program Investment Charge (EPIC) program. DNGG is not currently affected by this new law. These developments take place during a time of surging microgrid activity in California, with highlights including an active $44.7 million grant funding opportunity from the California Energy Commission and an active microgrid research roadmap.

Federal Investment Tax Credit: This credit for fuel cells, microturbines, and combined heat and power was a long-standing tax credit that expired at the end of 2016. House Bill HR 1, a tax bill, includes an extension for this credit, which if passed would provide a boost to these predominantly natural gas-fueled technologies. Note that the bill does not include this provision as of this writing. According to Navigant Research estimates for fuel cells, the credit is worth about $0.02/kWh throughout the system lifetime, which can significantly affect the economics of such systems.

Such policy developments have the potential to for significant effects on this dynamic industry. As renewables and storage receive significant governmental support, the relative merits of distributed natural gas will continue to be debated and judged. Regardless of the level of direct support of technologies like fuel cells, generator sets, and microturbines, the fundamental drivers of DNGG point toward a bright future.


Microsoft Deploys Fuel Cells into the Core of World’s First Gas Data Center

— October 12, 2017

Fuel cells have been used to power data centers for years, with players including Apple, eBay, and Equinix all making big investments in the technology. But while most fuel cells power data center facilities from the outside, Microsoft just built a pilot data center with the fuel cells installed right on the racks. This is a shift that could radically simplify future data center infrastructure and improve energy efficiency in these energy-hungry facilities. The big investments noted above notwithstanding, fuel cells have only captured a small fraction of data center market share. New types of deployments like Microsoft’s data center could help drive fuel cells toward the segment’s mainstream.

A Unique Fuel Cell Application

The unique design routes natural gas piping directly to the server racks, which could help eliminate a significant amount of electrical wiring, gear, and controls typical to data centers. A photo from Microsoft’s blog post depicts at least five devices that appear to be fuel cells positioned atop the rack. At an assumed 5 kW-10 kW per rack, the 20 racks likely represent a load of 100 kW-200 kW. The deployment is a good fit for fuel cells since they can be readily scaled in size to match load. That is, a given system can add or remove individual cells or stacks to precisely match demand, a feat not possible with more monolithic alternatives like generator sets (gensets) or microturbines.

There are some potential challenges with this configuration. Installing that much fuel cell support infrastructure (exhaust flue, gas piping, and controls, etc.) could impose significant cost on installations, and maintenance on all those systems could be more taxing than on a single multi-megawatt system installed outdoors. And gas-powered systems generally face the challenge of gas grid outages. Though these are rarer than electric grid outages, they represent a concern—especially in seismic zones like those on the US West Coast. When an outage occurs, many data centers still rely on diesel backup generators since the fuel can be stored onsite. Despite these challenges, this type of deployment shows promise, thanks to ongoing fuel cell technology improvements and the low cost of natural gas.

New Players Enter the Arena

Microsoft mentions project partners McKinstry, a design-build construction firm, and Cummins, an engine and genset manufacturer. Though the fuel cell provider is not noted, Cummins teamed up with UK-based Ceres Power Holdings PLC to develop solid oxide fuel cells for data centers under a Department of Energy (DOE) award in 2016. The award specifies a minimum efficiency of 60% and a capacity of 5 kW scalable to 100 kW. That efficiency is slightly below the 65% (lower heating value) efficiency listed by Bloom Energy, which has largely dominated data center fuel cell deployments to date—though its systems are larger. Regardless of the approach, the high efficiency and consistent energy output of fuel cells is a good match for data centers at large.

While the current design operates on natural gas, a modified future system using pure hydrogen storage could help zero-carbon data centers incorporate intermittent renewable power. That is, the intermittency of renewables like solar PV has historically limited adoption on data center sites, which form a consistent load. If, however, that PV or wind system could generate hydrogen using an electrolyzer in a power-to-gas configuration, the energy could be stored to consistently power the data center via fuel cells. These types of innovations could represent a massive opportunity. According to Yole Développement, data centers used 1.6% of global power production in 2015 and are anticipated to grow to 1.9% in 2020. By any measure, the opportunities in this space loom large.


Hydrogen in Microgrids: Diverse Business Models Begin to Emerge

— September 7, 2017

Hydrogen has long held promise as an energy carrier, though electrolyzer and fuel cell technologies have so far not broken into the mass market—largely due to high costs and infrastructure challenges. As those technologies continue to get cheaper and more efficient, they present intriguing possibilities for hydrogen in one unexpected application: microgrids.

Microgrids, whether grid-tied or remote, rely on local power generation. While solar PV, wind, and other renewables capture many headlines, fossil-fueled distributed generation (DG) accounts for more capacity than any other—40% of the total—among the microgrids tracked in Navigant Research’s Microgrid Deployment Tracker 2Q17. Fossil-fueled DG is often selected since it can provide dispatchable power for long periods and can generally store energy-dense fuel onsite. These facts also hold true for hydrogen. For longer duration storage, hydrogen often outperforms batteries by a significant margin without the emissions associated with fossil fuels.

Emerging business models are setting the stage for hydrogen to play multiple and significant roles in microgrids. Some of these business models are briefly described below.

Remote Microgrids: Hydrogen Displacing Diesel

A new Chilean microgrid developed by Enel, with support from Electro Power Systems (EPS), is showing that hydrogen can fill the same role as diesel, but without the emissions associated with the latter. Remote microgrids have historically depended on diesel gensets, often because many days’ worth of fuel can be stored onsite. While batteries are generally too expensive for multiday storage durations, hydrogen tanks can be easily scaled, independent of the peak power demand.

According to EPS, this type of model is quickly becoming commercially viable. Some reasons include capital and operating cost declines, tighter emissions regulations across the globe, and an eagerness to bypass the diesel value chain across hazardous terrain in remote areas.

Microgrids Exporting Hydrogen

The developers of the Stone Edge Farm microgrid in California had a challenge: despite having excess onsite electricity production from PV and other sources, they faced hurdles in exporting that power in an economically viable way. For example, some of the hurdles to exporting into the California Independent System Operator (CAISO) market include reaching the minimum threshold of 0.5 MW and meeting the ISO’s resource implementation requirements, which include building an onsite meteorological station and control platform. Since these presented significant barriers, the developer looked to another product to export from the microgrid: hydrogen. A bank of onsite electrolyzers turns excess electricity into hydrogen, which then fuels the onsite Toyota Mirai fuel cell vehicles and can also feed the microgrid’s fuel cell bank to generate power.

Islands: Hydrogen as Local Energy Commodity

Many islands are dependent on diesel fuel for both transport and electricity, since it has historically been the cheapest large-scale energy carrier available. However, in places like Hawaii, the appeal of hydrogen is growing thanks to concern over climate change and a growing need to store the high output of intermittent renewables—often using power-to-gas schemes (for more information, see Navigant Research’s Power-to-Gas for Renewables Integration report). In addition, the captive nature of the vehicles helps alleviate the infrastructure problem since relatively few stations are needed. ENGIE, a member of the Hydrogen Council, has been bullish on hydrogen as a future fuel. The company is helping to build an island microgrid based around hydrogen technologies near Singapore. More projects are sure to be announced as the technologies continue to improve.

Thanks to cheap renewables and improving electrolysis technology, hydrogen’s outlook is getting better. Due to the challenges with major fueling infrastructure rollouts, Navigant Research anticipates that hydrogen development will be focused in small geographic areas through 2020. Fitting, then, that hydrogen should find a foothold on the small scale of microgrids.


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