Navigant Research Blog

Making More with Less: Maximizing Generation in Lower Wind Resources Regions

— September 26, 2017

Wind turbine manufacturers are constantly evolving their turbines to maximize power output in areas of lower wind speeds, which opens much more geography for wind projects. A simple metric for quantifying wind resource areas for turbines is specific rating (or specific power). Specific power is the ratio of a turbine’s rated power output in watts to its swept area in square meters. A turbine with a higher specific power is designed for areas with high wind resources and vice versa. Higher specific power indicates that a turbine can generate more power with less swept area (i.e., a smaller rotor diameter). These turbines need high winds to adequately perform. Otherwise, capacity factors and associated power output are too low to make the turbine cost-effective. If the average winds are not sufficient for high specific power turbines, a turbine with a lower specific rating will be used. For developers and owners looking to find the right turbine for their location, it’s all about finding the right balance based on wind resources. For example, a 2 MW turbine with a 90-meter rotor might produce 6 GWh with an average annual wind speed of 7 m/s. A 120-meter rotor turbine with the same rating would produce 8.5 GWh in the same conditions. The 120-meter rotor turbine will be more expensive to manufacture, transport, and install, so the higher power output comes at a price—but the tradeoff can be worth it.

Changing of the Times

There are four different classes of wind turbines based on average annual wind speed, among other parameters: I, II, III, and IV. Two decades ago when wind energy costs were high, typically only wind farms in high wind resources regions with Class I turbines made economic sense. As wind costs continue dropping, wind turbine OEMs are prioritizing Class II and Class III turbines. According to the US Department of Energy’s 2016 Wind Technologies Market Report, the average wind class for turbines in the United States shifted from 1.2 in 2000 to 2.7 in 2016. As noted in the figure below, the average specific power of installed turbines in the United States has plummeted in the last 20 years, dropping from almost 400 W/m2 to 230 W/m2. Typically, a Class I turbine has a specific power of 400 W/m2 or higher. Class II turbines will be between 300 W/m2 and 400 W/m2 and Class III between 200 W/m2 and 300 W/m2. Class III turbines are the popular choice around the globe and have been for several years now.

Average Specific Power, United States: 1998-2016

(Source: Office of Energy Efficiency and Renewable Energy)

Navigant Research’s Wind Turbine Order Tracker follows the average specific power for turbines to be used in upcoming projects. Major turbine OEMs like Vestas and Siemens (now Siemens Gamesa Renewable Energy, or SGRE) have seen dropping specific powers. The average specific power for Vestas turbines dropped from 297.3 W/m2 in 1H 2016 to 250.9 W/m2 in 1H 2017. In the latest version of the Tracker to be published next month, Vestas, SGRE, Nordex, Senvion, and GE have specific ratings between 240 W/m2 and 270 W/m2. Class III turbines account for over 90% of the turbine capacity awarded between January and June 2017, and less than 2% went to Class I turbines. Clearly, the times have changed in the wind industry and low wind resources are no longer a deal breaker for potential wind sites. As costs continue to drop and technology improves, project developers and owners will continue to gain what they didn’t have much of 20 years ago: options.


Corporate Renewable Energy Goals Stimulate Solar, Wind Demand, and Business Models

— May 4, 2017

Large retailers, data centers, manufacturers, and even government facilities are among the growing number of entities shifting away from the standard electricity model where utilities decide the generation source and technology for consumers. As the costs of wind and solar energy continue to decline, owners of these energy-intensive buildings are taking advantage to meet their renewable energy goals. The combination of these two factors has led to the manifestation of corporate procurement as a major driver in the deployment of renewable energy, forcing utilities to continuously adapt to meet a wide range of consumer needs.

Leading companies such as Microsoft and Google paved the way early on for renewable energy procurement, but more and more companies are joining in. Notably, the online retail giant Amazon is building (and has built) wind and solar farms in North Carolina, Texas, Virginia, Ohio, and Indiana as part of its goal to achieve 100% renewable energy usage. Worldwide, nearly 20 GW of corporate renewable energy procurement contracts have been signed to date, with 240 Fortune 500 companies now having set renewable energy goals.

Achieving Renewable Energy Goals

Making things more interesting are the growing number of methods companies use to meet their formidable renewable energy targets:

  • Physical power purchase agreements (PPAs) were the preferred method for many years; a third-party developer would install, own, and operate a solar PV system (often onsite) and sell that energy to a company at a fixed price.
  • Financial or virtual PPAs are becoming more common. A utility or independent renewable developer sells power from wind or solar into the wholesale energy market at an agreed upon price via a third party (in this case, the companies looking to fulfill renewable energy targets). The company gets credit for bringing renewable energy to the grid and can count this toward its goals without directly sourcing its energy from renewables. Amazon’s 80 MW solar farm in Virginia operates under this structure through a deal with Dominion Energy.
  • Utility tariffs or green tariffs are agreements between a company and utility to purchase renewable energy from a specific facility in the utility’s service territory instead of negotiating a PPA directly with the developer. Google and Duke Energy announced a partnership under this arrangement.
  • Exiting the utility entirely is another method, though it is uncommon. Companies that are able to exit can separate from the utility entirely and purchase energy from private providers. MGM Resorts International and Wynn Resorts recently announced their plans to part ways with the local utility, NV Energy.

Favorable Future for Aggressive Movers

Looking ahead, it’s still to be determined if any one procurement method will emerge as the preferred path to meeting renewable energy goals, and it is unclear how utilities will respond. The demand doesn’t seem to be waning: Google, a leader in procured renewable energy, announced a plan to be 100% renewable powered on a real-time basis. To meet these bold targets, companies will need to continue to be creative in coming up with arrangements that work for both sides. Competitors are becoming more aggressive in this expanding space, and the evolution of this nuanced renewable energy application will be one to watch for the foreseeable future.


Home Energy Management Is the Tip of the Home Automation Spear

— April 27, 2017

Anyone who has recently swiped through the App Store could tell you that home energy management (HEM) apps have become as ubiquitous as instant messenger apps. While these energy saving apps can’t put your face on a cute dancing dog (and Millennials may not be as interested), they do have the ability to monitor, schedule, and reduce appliance energy consumption. Mobile solutions for HEM are continuously evolving and companies are trying to expand to new niches of the fledgling industry. But HEM is really only the tip of the larger home automation spear.

Power to the People

One of the core tenets of Navigant Research’s Energy Cloud framework is that the electricity industry of the future needs to be customer centric—which means access to data at any time from any device. The market for these applications has grown as customers have become increasingly aware of the capabilities, convenience, and savings the apps can provide. The global market for residential HEM systems has grown nearly 1300% since 2011, up to $2.3 billion in 2016.

Energy Management Giants Are Acquiring HEM Startups

But few companies are solely focused on HEM. Many smart home/home automation/security companies offer some energy management solution. It is increasingly common for small startups focused on HEM to be quickly acquired by larger companies looking to expand their reach across the Internet of Things (IoT) market. Devices such as smart thermostats are increasingly being bundled as connected home solutions, and as these solutions become more affordable and mainstream, energy management is expected to see increased uptake. Take, for example, the recent activity among several HEM companies:

  • Comcast recently completed its acquisition of iControl Networks, an IoT technologies and connected home security company. Comcast specifically went after the Converge business whose platform powers Xfinity Home.
  • As covered by my colleague Paige Leuschner, Google, Apple, and Samsung have all launched forays into devices that will give them a window into HEM and the full home energy automation market.
  • Startups are also getting involved in the energy app space. Eyedro, a software and electronics design company based in Ontario, Canada, offers an electricity monitor that provides real-time data via a web portal and mobile app called MyEyedro. Toronto-based Wattsly, a personalized energy butler mobile app, offers a tagging feature that allows users to tap a point on their energy usage Smart Graph. It also enables tagging activities like laundry, which helps the app generate advice for further savings and challenge homeowners to be more efficient.

Fortunately for customers, as HEM capabilities are expanding, the costs of HEM and home automation devices and solutions are dropping. Creativity and competition provide an optimistic outlook for the HEM market, and adoption is expected to continue to grow over the next decade as a result. Navigant Research projects the HEM market will reach $7.8 billion annually in 2025.


Who Will Lead the Lighting as a Service Charge?

— April 25, 2017

The rapidly evolving lighting industry has recently given birth to a new and exciting development—lighting as a service (LaaS). The manifestation of lighting controls services to optimize lighting use is helping customers save energy and money. The emergence of the LED system as a major technological player in the lighting world has opened the doors to countless opportunities for efficiency and cost reduction by tapping into the Internet of Things (IoT) world. These two stories have led to the development of a new industry: third-party management of lighting systems, otherwise known as LaaS. Management services include technical, maintenance, financial, and many other lighting services.

LaaS Revenue Is Expected to Triple by 2025

The underlying technological advancement that has made the new industry possible is connected or smart lighting. The ability to communicate with a lighting network allows users to control and optimize their lighting use on the fly. Opportunistic companies and startups have caught on to this trend and have begun to offer third-party lighting management services. The LaaS industry is just starting to make waves in the industry. However, it’s expected to become a booming business over the next decade. LaaS generated $35.2 million in revenue in 2016. By 2025, it’s expected reach $1.6 billion.

As the LaaS industry is still in its infancy and a clear market strategy has yet to be established, there haven’t been any companies that have emerged as LaaS-focused companies. Most projects to date have been pilots and test cases. Thus, it has mostly been the larger incumbents that have paved the way in this fledgling industry:

  • Current, a startup within lighting heavyweight GE, is wrapping data and digital solutions around lighting upgrades with optional financing to provide a full suite of LaaS possibilities. It recently partnered with AT&T on a massive smart cities venture.
  • Enlighted, a Sunnyvale, California-based startup, has developed a LaaS platform that combines sensors, analytics, and controls. Unlike other LaaS competitors, Enlighted does not use this platform to sell lighting hardware. Instead, the company partners with luminaire manufacturers, facilities management companies, and electrical contractors to create an ecosystem of lighting systems.
  • Several other companies are exploring the LaaS space, including Philips, Siemens spinoff OSRAM, and Acuity. Acuity has made a number of acquisitions in the last few years in order to facilitate its expansion into the IoT market. These companies are still just testing the LaaS waters at this point.

The Race for the Best Marketing Strategy Is On

It appears that the trail for LaaS will be set and guided by the larger lighting incumbents. The window for small startups to emerge as leaders in the growing industry is shrinking, but opportunities are still available. Lighting giants such as GE and Philips sell through the facilities department of a company. If a solution is found that goes beyond building operations and is sold directly to the IT department, that could certainly cause a large enough shakeup in the market to influence decision makers and unseat the incumbents.

This is more easily said than done. There are no signs that this is being taken on by any new or established companies. LaaS is a new and exciting industry that is still very much in flux. The first company able to hone in on an effective market strategy will have the chance to grab the LaaS industry by the reins and lead it in exciting new directions.


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