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If $9 Billion of Renewable Energy Is Curtailed in 2030, What Opportunities Will Emerge? Part 2

— October 4, 2016

Cyber Security MonitoringThe first part of this blog covered the growing trend of renewables curtailment. This second post will cover the solutions that are turning curtailment from a problem into an opportunity.

Many solutions have been proposed to address the integration of renewables into the energy sector. The first two, transmission upgrades and storage technologies, tend to get a lot of media attention. However, these can be seen as “necessary but not sufficient” options in the race to integrate renewables. Flexible gas generation technologies will also play a growing role in the grid of the future.

Transmission upgrades connect renewables to more loads and diversify generation resources. Germany, with 26% of its generation coming from intermittent sources in 2015, has been building out transmission to connect the windy south of the country to the industrial north. As in many global markets, transmission expansion is subject to NIMBYism, and in Germany’s case is being forced underground, which is more expensive. California, with 14% of its generation from intermittent sources in 2015, may be expanding its independent system operator (ISO) into a regional organization across the climatologically diverse Western Interconnection, though the decision has been delayed for further review. And China, generating just around 3% of its electricity from wind in 2015, still curtailed billions of dollars of wind power in recent years and is quickly pushing to interconnect it with load.

Storage technologies are growing quickly, as well. Hydroelectric storage is a cheap and clean technology that nonetheless sometimes battles drought-related, environmental, and even methane emissions concerns. Batteries, including lithium ion and other types, are rightly making news as costs fall and policies like incentives and storage mandates drive the market toward rapid growth. These and related storage technologies, including compressed air storage, are growing quickly and will become a major part of our electric grids.

Flexible Solutions

Flexible gas-based generation solutions tend to get less media attention but will also be crucially important in the flexibility of the grid.

  • A 2016 National Renewable Energy Laboratory (NREL) report suggested that for California to accommodate 50% of its generation coming from solar PV, a wide range of changes would need to take place. Notably, flexible thermal generators and combined heat and power (CHP) plants were mentioned as a key necessity, even if the amount of energy storage is boosted by more than 10 times what is outlined in the current mandate.
  • A 2015 report by the Union of Concerned Scientists on California’s grid states that under a 50% Renewable Portfolio Standard (RPS) scenario, curtailment could be cut from 4.8% to 3.2% if natural gas resources are able to turn down to half-power.
  • A 2015 report points out that Denmark was able to generate 39% of its electricity from wind thanks in large part to flexible district energy CHP resources. These district energy systems are in some way the core of Denmark’s grid and are expected to become electricity consumers rather than producers during times of high wind generation.
  • A 2016 report funded by the German government suggests that power-to-heat will be more important than batteries in balancing that country’s grid in the future.

Most of these reports suggest that fossil-based sources will fuel this generation, though carbon-neutral biogas and hydrogen are taking strides to catch up too. These gas-based technologies have the dual benefit of boosting grid flexibility while (in most cases) decarbonizing heating, an area of growing concern. As a complement to the transmission and battery storage changes making headlines, these sources are set to become key contributors in the grid of the future.


If $9 Billion of Renewable Energy Is Curtailed in 2030, What Opportunities Will Emerge? Part 1

— September 1, 2016

Cyber Security MonitoringThe intermittent nature of renewables is well established, though hard data on its impact is just now starting to become available. Germany, a world leader in wind and solar, is showing growing levels of curtailment (defined here as the reduction of otherwise scheduled electricity output). As the wind plus solar share of electricity grew from 10% to 26%, the share of curtailed (or wasted) wind plus solar energy grew from about 0.2% to around 1.8%. As seen on the chart below, since 2009, a consistent pattern has emerged relating curtailment to renewable penetration.

Growth of Renewables and Curtailment


 (Sources: AG Energiebilanzen, German Federal Network Agency, Electricity Reliability Council of Texas, UK National Grid, Lantau Group)

Consider if the rest of the world followed this trend line through 2030. The 2016 Renewable Energy Roadmap (REmap) from the International Renewable Energy Agency (IRENA) outlines a feasible path to doubling the share of renewables by 2030. The 40 countries covered represent 80% of global energy consumption. Under the REmap scenario, 60% of global solar plus wind energy would come from countries generating between 20% and 30% of their electricity from such sources, comparable to Germany’s 26% in 2015.

If each country followed the curtailment trend established above, annual curtailment would amount to 128 TWh, or 0.4% of total global generation. This energy is worth $9 billion, assuming a value of $70/MWh, the estimated variable cost of a combined-cycle generator in the United States in 2030. Given the low cost of renewables and compared to the $1 trillion or more in annual savings projected by IRENA, the curtailment may be easily justified.

Caveats and Variations

Even if renewables grow that quickly, there are many caveats to this assessment. Curtailment occurs locally, a nuance that country-level analysis does not capture. Furthermore, there are vast variations among countries in geography, transmission infrastructure, generation mix, market structures, and other variables. Germany’s trailblazing growth has led to some specific growing pains that are being addressed, with major transmission upgrades being built to address the issue. Still, given the poor track record of curtailments in other places with less renewables, curtailment could even be higher. See approximate trends on chart.

China has curtailed 15% of its wind since 2011, worth over $6 billion at the rates above. The Electricity Reliability Council of Texas (ERCOT) cut curtailment from 17% (2009) to 0.5% (2014) with transmission upgrades and market reform, but with just 11% of generation from wind still did “worse” than Germany by not falling below the trend line. With curtailment data just starting to be collected in some regions and the feverish projected growth of renewables, this high-level approximation can outline the potential magnitude of curtailment.

So if $9 billion of energy is curtailed, what opportunities will emerge? The second part in this blog series will cover some of these potential options. Transmission upgrades and storage technologies have been getting a lot of coverage lately, but flexible generation technologies may be even more important to our clean energy future.


Stationary Fuel Cell Prices Falling Faster Than Wind, Close to PV

— August 1, 2016

CodeMany fuel cell manufacturers are stealthy about their costs and prices, protecting the data like it is intellectual property. But new data from Japan’s ENE-FARM program confirms what other analyses have shown: fuel cells are showing consistently steep cost declines as production increases.

Most technologies exhibit a similar cost decline pattern. For every doubling of cumulative installed capacity, a commensurate decline in cost is realized due to improvements in manufacturing, supply chain efficiencies, and economies of scale. Plotted on a log-log chart, this curve forms a straight line called the learning or experience curve, and the slope is correlated with the rate of cost decline. For these 0.7 kW proton exchange membrane (PEM) micro-combined heat and power fuel cells, the learning rate is 17.2%, a number in agreement with the 20% found for larger-scale fuel cells. These rates beat the 12% of wind power and approach the 23% of PV (based on global values from this meta-study). Japan’s Ministry of Economy, Trade and Industry also released price goals for ENE-FARM in 2019. If met, these goals will continue the trend and bring the unsubsidized payback period down to around 7 years, which could mean broad adoption in the target residential market. Europe has its own similar program ramping up as well, while the United States and South Korea are more focused on larger-scale fuel cells.

Unsubsidized Price and Capacity of ENE FARM PEM Fuel Cells, Japan: 2006-2019


(Sources: Navigant Research; Imperial College London; Ministry of Economy, Trade and Industry)

Note that the ENE-FARM data is based on prices, not costs, and that the underlying marginal profitability of these units (produced mainly by Panasonic and Toshiba) is unknown. In addition, fuel cell systems have some components that are already mature and which may limit opportunities to squeeze out costs. Regardless, relative to PV and wind, fuel cells are far less commercially mature and are likely to fall faster in the near term. Each doubling in capacity becomes increasingly difficult for mature technologies. For example, at the end of 2015, wind had an installed base of 434 GW and solar PV had an installed base of 230 GW. This accounts for around 12% of global generating capacity, and even with the current fast growth rates, it is clear that future doublings will take even longer. Meanwhile, fuel cells (which have around 1 GW installed capacity) have the potential for greater price declines as adoption grows. As prices fall, these continuous output sources will become more attractive to a growing host of markets in the coming years.


Roller Coaster Summer Continues for Fuel Cell Incentives

— June 21, 2016

HydrogenRobust incentives in places like Germany, Japan, and the United States have expanded the market for stationary fuel cells over the past decade. Within the United States, recent changes to major incentive programs hint at the future of the industry.

The California Public Utilities Commission recently proposed changes to the Self-Generation Incentive Program (SGIP). If approved at the Commission’s June 23 business meeting, the wide-ranging changes would substantially restructure the program. Two key changes would specifically affect natural gas generation technologies such as fuel cells, microturbines, and generator sets. First, energy storage projects would be allotted 75% of program funds, with the remaining 25% going to generation projects, including natural gas projects, wind turbines, and others. This would be a strong pivot toward storage over generation since these categories account for 4% and 96%, respectively, of $1.1 billion in historical incentives paid. Second, beginning in 2017, natural gas projects would need to use a minimum of 10% biogas, increasing in steps to 100% in 2020. The changes are intended to strike “the right balance of the program’s goals of reducing [greenhouse gases] GHGs, providing grid support and enabling market transformation.”

The federal Business Energy Investment Tax Credit (ITC) has been another important incentive, offering as much as a 30% rebate on fuel cells and other energy technologies. Wind and solar won big with the December 2015 extension, though fuel cells and other natural gas technologies were passed over and currently expire at the end of 2016. However, recent comments from congressional leadership indicate that an extension for the overlooked technologies is likely this year and may even be approved as part of the Federal Aviation Administration (FAA) authorization bill, which has a deadline of July 15.

So the news for fuel cells is mixed, with California likely offering smaller incentives than in the past but the ITC likely extending beyond 2016. The goals of such programs are ever changing, though in most cases, increasing focus is placed on GHG reductions. California’s biogas requirement cuts emissions and could thus be good for the industry, provided biogas can be viably sourced in the quantities required.

Successful incentives should ultimately render themselves unnecessary by driving down costs. Fuel cell costs have been falling, though not at the rate of some other technologies like PV. The winners will be those that can creatively cut the costs of manufacturing, installation, and financing to make the systems cost-competitive with other electricity sources. Despite the GHG emissions associated with natural gas fuel cells, current developments play a role in a zero-emissions future. Today’s natural gas fuel cell research can be directly applied to the hydrogen fuel cell, a key emissions-free and dispatchable energy resource that can complement the mix of renewables that will power our future.


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