Navigant Research Blog

NRG Goes All In on Distributed Generation

— September 6, 2014

One of the largest independent power producer (IPPs) in the United States, NRG, provides power for the wholesale power markets with more than 50 GW of conventional installed capacity.  More recently, under outspoken CEO David Crane, the company has made a name for itself in renewables, with approximately 2.5 GW of solar PV, concentrated solar thermal, and wind capacity.  NRG also made headlines recently with a reshuffling of its business units: NRG Business (focused on conventional wholesale energy including nuclear, coal, and gas power plants), NRG Renew (focused on large-scale renewables), and NRG Home (focused on distributed generation [DG] and energy services for residential customers).

The company has relied on both organic growth as well as a series of acquisitions to fuel its DG offerings, including Dominion Resources and solar PV provider Rooftop Diagnostics, which expands the company’s customer base – particularly in the Northeast – and its expertise in residential systems.  These acquisitions underscore the growing opportunity presented by DG – systems that provide power onsite or at the distribution level of the grid.

Power in the Wild

What’s more surprising is NRG’s acquisition of Goal Zero, a privately held manufacturer of portable chargers and solar PV consumer products. Based in Utah, Goal Zero supplies unique niches of outdoor/off-grid enthusiasts that need power in the remote, challenging regions in which they travel.  The company effectively markets itself like Red Bull, touting the X-Games: “Zero Apathy, Zero Regrets, and Zero Boundaries is our mission. Goal Zero is our name.”  The company’s numerous ambassadors keep it real by leading expeditions to Kyrgyzstan or photographing surfers in Iceland.  They power their laptops with batteries recharged by the Goal Zero portable charger (the Sherpa Power Pack), and they blog at night with light from the Goal Zero solar lantern.  The portable chargers can be charged via car adapters, a wall outlet, or solar panels provided by Goal Zero.

The company’s products are sold through retail partners such as REI, Cabela’s, other sporting goods stores around the country, and online.  And by all measures, to use the vernacular, they appear to be crushing it. With 100 employees, the company ranked #9 on Inc.’s 500 list of fastest-growing private companies in 2013, with 3-year sales growth of 16,981%.

This is a big move for NRG and takes DG to a whole new level.  The appeal to NRG goes beyond the extreme adventure lifestyle to cell phone charging stations (think airports, stadiums, convention centers, malls, etc.) and potentially to off-grid living in the developing world.  I profiled Goal Zero in my Solar Photovoltaic Consumer Products report, along with Oregon’s Grape Solar, which sells similar products.  There I observed that large corporations have been circling the waters to get into the portable power/off-grid lighting niche through acquisition, but I was mostly thinking Panasonic, Schneider, and other consumer electronics companies – not the third-largest U.S. energy IPP.  NRG just went super DG, and we can expect many more to follow suit.

 

Solar PV Helps Eliminate Kerosene Lamps

— August 20, 2014

About 250 million households, representing 1.3 billion people, lacked reliable access to electricity to meet basic lighting needs in 2010, according to the International Energy Agency.  Until recently, kerosene lamps were one of the few options for illumination in communities with household income as low as $2 per day.  Kerosene is highly detrimental to health and the environment, subjecting people to multiple pollutants, including fine particulate matter, formaldehyde, carbon monoxide, polycyclic aromatic hydrocarbons, sulfur dioxide, and nitrogen oxides.  Exposure to these pollutants can result in an increased risk of respiratory and cardiovascular diseases, cancer, and death.  Despite these hazards, kerosene is the leading source of illumination for most people in developing countries.

There’s now growing momentum to displace the estimated 4 billion to 25 billion liters of kerosene used each year, driven by a combination of government policy, clean energy businesses, and investment.  Kenya, Ghana, India, and Nigeria are a few of the countries that have announced initiatives to phase out kerosene and replace it with solar and other clean energy options, as covered in Navigant Research’s report, Solar Photovoltaic Consumer Products.

  • Kenya’s kerosene phase-out program, announced in 2012, aims to eliminate the use of kerosene for lighting and cooking, replacing the fuel with clean energy products.  Norway has pledged $44.5 million toward the initiative.
  • India’s National Solar Mission seeks to achieve 20 GW of solar power by 2022, in part through the installation of rooftop PV systems.  It has also set the specific goal of providing 20 million solar lighting systems in place of kerosene lamps to rural communities, with the goal of reaching an estimated 100 million people.
  • The Ghana Solar Lantern Distribution project provides subsidies to support sales of 200,000 solar lanterns between 2014 and 2016 using money formerly allocated for fuel subsidies.

Kerosene remains the most important lighting fuel for off-grid and under-electrified households and small businesses in Africa, and accounts for approximately 55% of total lighting expenditure for those living on less than $2 per day, according to Lighting Africa.  Kerosene has been increasing as a percentage of household expenditure.  Ted Hesser developed the following chart with data from the United Nations, Saviva Research, World Bank, and the U.S. Energy Information Administration, highlighting the growth in kerosene prices.  Between 2000 and 2012, kerosene prices increased 240% in the developing world, from an average price of roughly $0.50 per liter in 2000 to about $1.20 per liter in 2012.  In high-cost markets – including Burundi, Guatemala, and Panama – kerosene costs can be as high as $1.80 to $2.10 per liter.

Price of Kerosene by Country, Selected World Markets: 2000-2012

 

(Source: Ted Hesser)

Beyond CO2

The climate impact of kerosene lamps has been dramatically underestimated by considering only CO2.  Recent studies estimate that 270,000 tons of black carbon (i.e., fine particulate matter that results from the incomplete combustion of fossil fuels, biofuels, and biomass) are emitted from kerosene lamps annually – leading to a warming equivalent of about 4.5% of U.S. CO2 emissions and 12% of India’s, according to a Brookings Institute study.

The Brookings study points out that kerosene lamps are not the largest emitters of black carbon.  The leading source is residential burning of solid fuel, such as wood and coal for cooking – which emits 6 times more black carbon than lamps.  Similarly, diesel engine black carbon emissions are 5 times that of lamps.

Solar PV and other lower-emissions consumer products, such as improved cook stoves, are making their way to the market through a variety of private, non-profit, and public initiatives.  Education and awareness of the options available to consumers are the biggest challenges to changing the behavior of customers in remote communities.  But the combination of new business models, government leadership, and technical innovation are leading to a growing number of success stories that could lead to significant reductions in black carbon emissions.

 

In Bangladesh, Solar Boom Benefits All

— August 18, 2014

More solar PV systems are installed in Bangladesh than in Germany and the United States combined.  At the end of 2013, Bangladesh had an estimated 2.9 million solar PV systems installed compared to 1.4 million in Germany and 445,000 in the United States.

This is despite the fact that Bangladesh is one of the poorest countries on the planet, with per-capita income of less than $3,000 per year.  In Bangladesh, solar home systems (SHSs) range from 10W to 200W.  Approximately 50% of all systems sold in Bangladesh are between 20W and 30W – roughly 1% of the capacity of a medium-sized residential system in the United States, but enough to power a few compact fluorescent or LED lights, charge a cell phone, or power a radio.  At an average cost of about $230 for a 20W SHS in Bangladesh, an upfront cash payment is out of reach for people who make less than $9 per day.  But thanks to the success of micro-credit programs that made Mohamad Yunus and Grameen Bank household names, SHSs are affordable to all.

Home Systems Multiply

Grameen Shakti, based in Dhaka, is the solar power arm of the Grameen Bank and is the leading SHS installer in Bangladesh, with an estimated 1.3 million installations to date.  These installations represent more than 30 MW of installed capacity.   The model relies on an extensive network of sales agents who can reach remote areas, low interest loans, and numerous grants that provide seed funding.  Grameen Shakti provides free operation and maintenance services for 3 years after installation, with low-cost service options thereafter.

With a strong emphasis on grassroots education, Grameen Shakti has contributed to the industry’s high visibility in Bangladesh, where there are now around 40 providers of SHSs.   The company sells approximately 1000 SHSs per day and is targeting 2 million SHS sales by the end of 2016.

The government of Bangladesh – whose low-lying topography makes it especially vulnerable to the effects of climate change – has set a target of generating 5% of its power from renewable energy sources by 2015 and 10% by 2020.  The pipeline of projects started small, but is now growing considerably.  The country has approximately 10 GW installed capacity, with only 75% of that power actually available at any given time due to grid reliability issues.  That relates to roughly 136 kWh available per capita each year – one of the lowest rates in the world.  Compare that to an average household consumption of 1000 kWh per month here in Portland, Oregon.

Changing the Model

Rahimafrooz Renewable Energy Ltd. (RREL) represents the growing number of hybrid companies with a foot in the SHS market and many others, including agriculture, healthcare, education, telecommunications, rural street lighting, and marketplaces, as well as government and private institutions.  RREL has installed 300 solar water and irrigation pumps, 2 MW of solar rooftop solutions, and more than 100 solar-powered telecom base stations in Bangladesh.

Meanwhile, the company’s not-for-profit venture, Rural Services Foundation (RSF), has disseminated nearly 426,000 SHSs under the Infrastructure Development Co. Ltd. (IDCOL) program, representing more than an estimated 12 MW at the end of 2013.  This makes it the second-largest SHS installer in Bangladesh, behind Grameen Shakti.

As I’ve covered previously in blogs and Navigant Research’s report, Solar PV Consumer Products, countries such as Bangladesh, Kenya, Tanzania, and others are challenging traditional Western perceptions of developing countries and approaches for tackling poverty.   Investors have also taken notice.  Solar’s very favorable current market forces (low cost) and unique advantages in economic development (health benefits and cost savings) can be leveraged to enable the continued expansion of solar PV to even the most remote regions – and the poorest countries.

 

In Africa, ‘Solar-as-a-Service’ Attracts US Dollars

— August 5, 2014

Long the domain of non-profits, church groups, and government programs, off-grid solar in so-called base of the pyramid (BOP) markets has shifted from an aspirational service to big business.  SolarCity, Vulcan Capital, Omidyar Network, and others recently invested $7 million in Off-Grid:Electric, one of Tanzania’s leading residential solar providers, which plans to reach 10 million homes in 10 years.  The investment follows a wave of funding for many similar companies operating in Sub-Saharan Africa and South Asia, which are the biggest markets for pico solar (or solar lanterns) and solar home systems.

Significant reductions in solar PV technology costs have opened up several new markets for solar as a service companies that provide 1 watt to 200 watt solar systems to people who live on as little as $2 per day.  The vast majority of the market is focused on providing lighting, cell phone charging, and power for small direct current (DC) appliances.  Navigant Research’s recently report, Solar PV Consumer Products, provides a comprehensive global look at the three primary segments of the solar off-grid lighting and portable power market: pico solar, solar home systems,  and solar PV generators and kits.  While the technologies behind these innovative products are all very similar, the applications, target markets, business models, and pricing are diverse.  We forecast that the annual market for solar PV consumer products will grow from $551 million in 2014 to $2.4 billion in 2024.

Less Than Kerosene

Up to 1.4 billion people worldwide, including nearly 600 million in Sub-Saharan Africa and 800 million in Asia, are without access to electricity, according to the International Energy Agency.  These populations previously had no choice but to pay high prices for low-quality and polluting fuel-based lighting, such as kerosene lamps.  Due to transportation challenges, kerosene costs as much as 50% more in remote areas than in cities, further contributing to the cycle of poverty.  In addition to providing inadequate illumination, kerosene lamps pose significant health risks.  New advancements in lighting technology have enabled the development of pico solar systems, which are compact, clean, and affordable off-grid lighting and energy products.  Many of these products use solar charging (<10 watt) and light-emitting diode (LED) lighting technology.  As with most renewable energy technologies, solar lighting is typically more affordable compared to conventional lighting primarily from kerosene, but upfront capital costs (even if only $10) can be a challenge to last-mile customers.

Companies such as Off-Grid:Electric are now offering a range of payment options to get around upfront costs, including microcredit, pre-payment options, and innovative pay-as-you-go technologies, which reduce barriers to ownership of solar lighting for rural customers – particularly for larger solar home systems that enable customers to do more than simply recharge mobile phones.

To date, most activity has been in Kenya, but the market in Tanzania has great potential to replicate those early successes, making the Off-Grid:Electric investment a good bet.  The system’s advantages are hard to beat and claim up to 50 times more light service for less than the current daily cost of kerosene. The company’s management team is representative of the growing breed of young, bright, highly skilled social entrepreneurs that are comfortable blurring the lines of traditional private versus non-profit ventures, launching social enterprises that seek to leverage the power of business and profits toward a goal that improves social well-being.

 

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