Navigant Research Blog

Signposts Along California’s Distributed Generation Corridor

— March 24, 2015

Driving south on the Interstate 5 corridor from the Oregon border to the San Francisco Bay Area, you can see numerous renewable energy projects off I-5. These projects stand as modern signposts to the maturity of—and transition in—the U.S. clean tech industry. Five years ago, renewable installations were mostly limited to remote, utility-scale wind farms in Tehachapi and along the Altamont Pass. While utility-scale installations continue to grow, there is now also a strong focus on distributed generation: solar, wind, fuel cells, and generator sets located directly onsite or on the distribution grid.

The United States is expected to be a leading market for distributed generation, with more than 250 GW installed cumulatively between 2015 and 2023, according to Navigant Research’s report Global Distributed Energy Deployment Forecast. The sites discussed below are some of the most visible installations along the drive down to the Bay Area. They represent the focus on distributed generation today and in the years to come.

Signposts

As you drive through the city of Red Bluff, you see a 1-MW General Electric (GE) wind turbine installed at the Wal-mart distribution center. Wal-mart is the leading consumer of solar PV among U.S. retailers, with 105 MW of installed capacity, twice as much as the second-leading company, Kohl’s, with 51 MW. Big box retailers have installed more renewable energy than tech companies have and are a coveted prize for installers looking for big customers.

If you take the shortcut from I-5 to 505 South, toward San Francisco, it connects to 80 West in Fairfield/Vacaville, where a 1.1 MW solar PV installation at the North Bay Regional Water Treatment Plant is installed. With large energy consumption, water treatment facilities are costly for cities to operate, leading to attractive payback rates.

Renewa-Beer

When you drive further, the Budweiser plant catches your eye right off the freeway, with 3 MW of wind power located onsite. The plant also uses solar and bio-energy recovery systems. These systems combined produce approximately 30% of the plant’s power onsite. Belgium’s InBev may have offended the cultural sensibilities of some Americans when it acquired Anheuser Busch in 2008, but it used American turbines–GE 1.6-MW units.

One of the other noticeable aspects of the drive through California, particularly in Davis and Sacramento, is tract housing developments, where residential solar PV is increasingly prevalent. The residential solar PV market in California has nearly doubled in each of the last 3 years thanks to growth in the solar lease model.

California is expected to continue to lead the way in distributed generation, with systems increasingly utilizing energy storage. Though these storage systems won’t all be visible along the road, they will help more renewables capacity to come online, making the drive more scenic each year.

 

Investors Driving Energy Access Markets

— March 24, 2015

One of the signs of an industry that’s coming of age is when there are enough investors actually attending a conference that you can put investors in the title. Such was the case for the second annual Energy Access Investor Conference in London. Jim Rogers, former Duke Energy CEO, was the keynote speaker this year, adding some utility industry credit to the event.

When I talk to people about the opportunity for solar lanterns and solar home systems (1 W-200 W) for people making less than $2 a day, I usually receive a combination of blank stares and befuddled looks. But 2014 was a breakout year, and this innovative industry is expected to continue expanding in 2015. According to Navigant Research’s report, Solar Photovoltaic Consumer Products, annual revenues for pico solar and solar home systems are expected to grow from $430 million in 2014 to $1.3 billion in 2024.

2014 Highlights

A couple of highlights from 2014:

  • Public and private investment in off-grid lighting surpassed $80 million.
  • Big names entered the market, including SolarCity, Vulcan, Omidyar Network, Schneider, and DFJ.
  • Platform companies emerged, including d.light, Barefoot Power, Greenlight Planet, and others.
  • Markets such as Bangladesh continued to grow even as incentives continued to wind down.

The Year Ahead

Looking ahead in 2015, I expect to see four major trends. First, consolidation will become more common as the larger players continue to gain market share. Second, existing companies will need to expand into new markets, particularly as Kenya, India, and Bangladesh become increasingly saturated. Third, mobile payment and monitoring systems, such as M-KOPA, will gain traction and increasingly become standard in products. Fourth, direct current consumer products, such as fans, radios, refrigerators, TVs, and other appliances specifically designed for less than 200W solar home systems, will grow in popularity.

With any luck, the fifth major trend will be less befuddled looks on people’s faces when I discuss the innovation and economic opportunity in some of the world’s most remote markets.

 

Distributed Solar PV Poised to Reach Its Potential in Africa

— December 9, 2014

According to the International Monetary Fund, 7 of the world’s 10 fastest-growing economies are located in Africa.  While Cairo, Egypt, was the only city in Africa to have a population exceeding 10 million in 2010, seven cities across Africa are expected to achieve this level by 2040.  Rapid urbanization means that more than 100 African cities are projected to exceed 1 million inhabitants by 2040.  Such levels of urbanization and economic growth have forced local utilities to acquire new, primarily large-scale power projects.  Utilities are primarily calling for large scale natural gas power plants and renewable energy projects (led by solar PV and wind),  as evidenced by the booming South African renewables market.

Over time, however, there will be growing opportunity for smaller-scale distributed renewable energy projects in the 1 kW to 1 MW range.  Growth in this power class is led by government agencies that are electrifying health clinics and schools, often with international donor support. This is likely going to continue to be the case for at least the next 5 years. According to Navigant Research’s report, Global Distributed Generation Deployment Forecast, annual capacity additions of distributed solar PV in Africa are expected to grow from 10.9 MW in 2014 to 56.5 MW in 2023.  Agriculture, hotels, extraction industries, water pumping, telecom applications, and growing consumer markets in Africa will result in distributed solar PV growth across the region.  Cumulative distributed solar installed capacity during this time will reach 332.2 MW, representing less than 5% of the total installed solar PV capacity in Africa in 2023.

Immense Opportunity

Urban residential will be the last segment to catch on in urban African communities, primarily due to the combination of a small middle class, a lack of awareness among potential customers, and a lack of financing options.  Several experienced engineering firms, particularly in Kenya, are targeting distributed solar customer segments.  And while there is significant buzz about microgrids in the region, in particular, these projects have not yet developed at the anticipated rate.  That will change if innovative companies, such as PowerHive, Access Energy, and PowerGen, are able to successfully scale up current microgrid efforts and attract further investment.  In Kenya, there are a number of creative mid-sized projects, including solar-wind hybrid systems, ranging from 10 kW to 300kW.  In general, the opportunity for distributed renewables is immense, and the field is wide open – provided companies (and investors) are patient enough to deal with potentially problematic African bureaucracies.

Patient Yet Determined

The engineering firms and developers offering these solutions are working with utilities and regulators to create a more conducive environment for this small-to-mid-scale market segment in urban and off-grid settings.  Compared to utility-scale installations by larger international companies that hire workers for a short period and do not have a continued presence, the distributed market segment will have the most impact from a job creation and sustainable development perspective.

These companies tend to be staffed with very determined people who have made progress in very uncertain and often frustrating circumstances.  They’re becoming more organized and lobbying for a more favorable regulatory environment – including more robust net metering policies, feed-in tariffs, and, in general, more freedom to operate.

Equally critical, however, is education among financiers (and customers) on how to finance small-to-mid-sized solar PV systems.  Similar to the diversity among U.S. state policy and public utility commissions, pathways for growth will differ for each country in Africa.  Those that are willing to stay the course and weather the frustrations of operating in uncertain political and regulatory environments stand to profit  and, in the process, contribute to the establishment of the local industry over the long term.

 

Renewable Energy Grows, Large and Small, in Africa

— December 8, 2014

More than two-thirds of the population of Sub-Saharan Africa has no access to electricity – a figure that rises to more than 85% of those living in rural areas.  Those that do enjoy electricity pay some of the highest rates in the world.  Now, though, the opportunity for renewable energy investment in Africa is finally being realized.  Renewable energy growth in Africa has typically been due to investment in large hydropower plants.  The new wave of investment is now happening across the spectrum – including in utility-scale solar PV, wind, geothermal projects (greater than 10 MW in size), and pico solar systems (under 100W) that encompass solar lanterns, task lights, and solar home systems for people who typically earn less than a few dollars per day.

Beyond Johannesburg

At the utility scale, the leading country in Africa for renewable energy deployment is South Africa, where the government’s integrated resource plan may result in nearly 10 GW of solar PV installed by 2030.  With nearly 1.5 GW of solar PV and 2 GW of wind currently installed or in development, following four well-administered auctions, the country is making strong progress.

Kenya, arguably the next leading market, has 750 MW of solar PV and 290 MW of wind approved and in development.  South Africa and Kenya have both seen strong economic growth over the past decade and are typically the landing points for new companies looking to expand in the region.  The opportunity for large-scale renewable energy investment is now expanding to other African countries through similar mandates for integrating large amounts of renewable energy as part of their overall strategies for increasing electrification rates and meeting demand for power that’s crucial for economic development:

  • Rwanda: An 8.5 MW solar PV installation was built by GigaWatt Global Rwanda in Agahozo Shalom Youth Village for $23 million ($2.70/W); in addition, the government has set a 567 MW target for new renewable energy installed capacity by 2017.
  • Tanzania: The government of Tanzania has a renewable energy target of 14% by 2015.
  • Mauritania: 15 MW of solar PV have been installed, and 15 MW are in development.  The government has targeted 40% rural electrification by 2020.
  • Ethiopia: A 20 MW module assembly line was completed in partnership with Sky Energy.
  • Ghana: The government is targeting 10% renewable energy by 2020.

At the Pico Scale

Of course, there will be challenges along the way in executing these targets and ensuring a fair and transparent process for bidding on projects in these countries.  But if the majority of major announcements are realized in the next 6 years, the African solar PV market could see more than 8 GW installed and $23 billion in revenue by 2020.

On the pico solar side, Navigant Research’s report, Solar Photovoltaic Consumer Products, forecasts that the pico solar and solar home system market could surpass 130 MW in annual installations in Africa by 2018, resulting in revenue in the neighborhood of $500 million.  Kenya is the leader here, as well, expected to account for approximately 20% of the African market followed by Tanzania.  Venture investment is now flowing to so-called social enterprises that use for-profit business models to reach reduce poverty and spread electrification.  Pay-as-you-go and mobile phone-based payment systems are expected to be the key to enabling pico solar to scale effectively.

The success of several leading companies – such as D.Light, Barefoot Power, Green Light Planet, M-KOPA, and others – has led to a crowded market in Kenya, in particular, and the need to expand to new markets, including Malawi, Zambia, Rwanda, Uganda, Nigeria, and Zimbabwe, is increasingly on the radar.

Taken together, impressive growth in utility-scale renewables and of pico solar systems in Africa shows that developing countries can forge their own paths, achieving the benefits of electricity without becoming dependent on large, polluting thermal power plants.

 

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