Navigant Research Blog

High-Voltage Transmission System Landscape Undergoes Dramatic Change

— June 24, 2014

The high-voltage transmission system (HVTS) landscape can only be described as vast and evolving, as the forces of modernization, urbanization, and industrial expansion are transforming the power grids in Asia Pacific, Middle East, Africa, and Latin America.  In my forthcoming report, High-Voltage Transmission Systems, I explain why each of these regions represents a tremendous opportunity for the seven major HVTS technologies and why the market is expected to grow strongly.  These HVTS technologies include:

  • High-voltage direct current (HVDC) systems
  • High-voltage alternating current (HVAC) systems
  • Submarine and superconducting cables
  • Flexible AC transmission system (FACTS) solutions
  • Asset management and condition monitoring (AMCM) systems
  • Supervisory control and data acquisition (SCADA) systems
  • Substation automation (SA) systems

Both Europe and North America are clearly more mature markets.  Aging infrastructure and the adoption of utility-scale wind and solar generation will drive the reconfiguration of the HVTS network in those regions, likely creating many new opportunities.

Tectonic Shifts

The increasing investment from the private sector is exemplified by Berkshire Hathaway’s rebranding of MidAmerican Energy Holding Co. as Berkshire Hathaway Energy.  The Electricity Transmission Texas (ETT) partnership, which combines Berkshire Hathaway Energy and transmission system operator American Electric Power, demonstrates the foresight needed to invest in these large-scale infrastructure projects and points to financial markets seeing long-term opportunity in the next generation of the HVTS network.

The HVTS market has a history of epic mergers, such as Alstom and Schneider Electric acquiring parts of Areva and General Electric’s (GE’s) takeover of Alstom, that point to a shifting landscape of HVTS players.   From a technological standpoint, we are seeing the beginning of a new era where the Internet of Things (IoT) hits the HVTS market full force with inexpensive, easy-to-install wireless and remote sensors and cloud-based computing resources that use complex analytics and machine-learning algorithms to manage all aspects of the HVTS.  Indeed, the HVTS roadmap will be an interesting and profitable journey over the next decade and beyond.

 

With Alstom Bid, GE Steps Up T&D Competition

— April 30, 2014

The news that General Electric’s (GE’s) $13 billion bid to acquire Alstom SA has been accepted by Alstom’s board – coupled with Siemens AG’s announcement that they are considering a counterbid  – represents a clash of titans in the global marketplace for electricity generation and transmission and distribution (T&D).  For the last decade, that market has been led by three companies: ABB, Alstom, and Siemens.  GE, a huge global corporation with multiple business lines across finance, healthcare, and electric T&D, has focused its T&D business primarily on generation, digital energy software solutions, and some high-voltage system components, such as series compensation (SC) devices used to correct voltage loss and other instabilities on the electric transmission grid.

In 2012, GE announced a joint venture partnership and equity position in XD Group, a Chinese heavy industrial manufacturer that sells a full range of T&D equipment, substations, transformers, and high-voltage direct current (HVDC) transmission lines.  The deal not only opened up the booming Chinese T&D market to GE, but also allowed the company to white-label XD’s T&D system equipment for resale in other regions.  In my discussions with the Big 3 (ABB, Alstom, and Siemens) vendors at the recent Institute of Electrical and Electronics Engineers (IEEE) T&D systems trade show in Chicago, they mentioned that GE has become a significant competitor, signaling that the market structure has now morphed into a Big 4.

Mind the Gaps

However, I also saw that there are significant gaps in GE’s technical product lines and global manufacturing and installation capabilities, which need to be filled.  For example, flexible alternating current transmission systems (FACTS) solutions for voltage drop and power quality on transmission lines represent a $4 billion dollar market that continues to grow annually.  GE has traditionally provided SC solutions, but not the faster-responding static VAR compensator (SVC) and static synchronous compensator (STATCOM) solutions that are now being adopted as the aging transmission grid is being upgraded.  The Alstom acquisition is the perfect solution for filling that gap, as Alstom SA has manufacturing, design, and installation capabilities for SVCs and STATCOMs in North America, Europe, and Asia Pacific.  A broader discussion of this market and the FACTS technologies can be found in Navigant Research’s recent report, Flexible AC Transmission Systems.

At the time of this writing, it appears that the GE offer will be approved by the French government, and that Siemens is preparing a counteroffer.  ABB’s CEO has stated that his company will not enter this fray, but I am certain that ABB’s internal analysts are running the numbers and assessing the opportunity.  In this ongoing clash, the Big 4 all have a long-standing history of growth through acquisition.   However this works out, we can expect the market to sooner or later be whittled down to the Big 3 again.  These developments will definitely add color to my upcoming report on high-voltage transmission systems, which will be released later in 2Q.  Stay tuned.

 

The FACTS about Distributed Wind and Renewable Generation

— March 4, 2014

Since the mid-1990s, during my annual pilgrimage to DistribuTECH, I’ve always picked up a new emerging trend or a newly released technology.  This year’s show in San Antonio, Texas was no different.  I went to Texas to learn more about flexible AC transmission system (FACTS) technologies and had the opportunity to talk to many of the major vendors and some interesting new companies.  My focus started with traditional FACTS technologies (i.e., series compensation [SCs], static VAR compensators [SVCs], and static synchronous compensators [STATCOMs]).  These are almost always complex engineered systems designed to correct voltage drops in long-distance, high-voltage AC lines to perform power factor correction in areas where generation stations have been retired.

Smaller-scale SVC and STATCOM technologies were typically used to correct voltage sag, power factor, and flicker at large industrial sites such as steel mills, large-scale mining, crushers, pumps, and other inductive loads.  At DistribuTECH, vendors like S&C Electric, ABB, and AMSC talked about the use of D-SVCs and D-STATCOMs to stabilize the megawatts produced by distributed renewable sources on the edge of the grid.  These new, downsized versions of transmission grid-scale SVC and STATCOM technologies are now being modularized in familiar 8’ x 40’ containers that can be delivered quickly for any application, sometimes coupled with modular battery storage, to smooth out the intermittency of distributed renewables.

Small and Scattered

This move to smaller-scale distributed FACTS solutions has other implications as well: they can be added quickly to both transmission and distribution substations, with minimal space requirements. They can also be deployed near the edge of the grid at distribution substations or even on local feeders where renewables and electric vehicle charging installations are stressing the local grid in ways that were not imagined when the distribution grid was originally installed.  Startup companies like Varentec Inc. are now introducing pole-mounted mini-FACTS systems.  These systems are wired into the transformer with wireless communications, enabling edge-of-grid corrections in near real-time, far beyond the local centrally controlled substation.

When I started my latest research on FACTS technologies, I imagined that they would be limited to the big iron at thousands of high-voltage transmission system substations where SC, SVC, and STATCOM technologies have been traditionally used.  It was eye-opening to see the emergence of FACTS technologies deployed on the distribution-level grid, where they are opening significant new markets for both traditional and emerging FACTS vendors.  Transmission system designs and technologies are covered in detail in Navigant Research’s report, High-Voltage Direct Current Transmission Systems.  In addition, recent Navigant Research reports, such as Emerging Wind Markets Assessment and Distributed Solar Energy Generation, cover the rapid adoption of distributed renewables in all regions of the world.  Over the next year, our Smart Utilities team will release a series of in-depth reports on the high-voltage transmission grid, starting with my upcoming report, Flexible AC Transmission Systems, which is expected to be released in 2Q 2014.

 

Under Pressure, Utilities Look to Self-Healing Grids

— January 7, 2014

The weekend before Christmas, one of my longtime neighbors cornered me and posed a number of questions regarding the impact of distributed renewables on the reliability of the local electric distribution grid.  The conversation suggested that utility customers are increasingly concerned with grid reliability issues, driven by media coverage of global climate change, natural disasters, presidential speeches, and financial investment.  In fact, the technologies and the breadth of the self-healing grid continue to change, as they have over the past 20 years or so.

Whether caused by global climate change or regional mega storms, the winter storm damage and outages across New England, as well as major damage to the transmission and distribution grid in New Jersey and New York due to Tropical Cyclone Sandy, have accelerated public awareness that the power grid could go down for days.  Suddenly, the need for a resilient, self-healing grid has become urgent.  And lurking in the background is the question of how capital-intensive grid improvements will be funded in this post-stimulus grant era.

Hardware to Software

In New Jersey, the damage to the grid was so extensive that PSE&G, the state’s largest publicly owned utility, said it will request rate case funding for the Energy Strong program, a 10-year, $3.9 billion proposal to protect and rebuild utility transmission and distribution systems.  In New England during November 2013, ISO New England released its Regional System Plan, which includes a wide range of transmission and distribution grid improvements that will be rate-based in future years.

A recent study on cleantech investment trends indicated that early- and mid-stage VC investments have moved away from smart grid equipment and smart metering to focus on the devices and analytics software necessary for resilient, self-healing grid systems – not only for transmission and distribution, but also for integrating distributed renewables and supporting storage devices at the edge of the grid.  These investments will ultimately take full advantage of new developments in big data analytics and the huge volume of information that will become available on the Internet of Things.

When the president of the United States talks about the self-healing grid in his 2013 State of the Union address and a widely followed investment website like The Motley Fool points to self-healing grids as a “Big Smart-Grid Investment Idea for 2014,” maybe it’s time to take a closer look.  Upcoming reports from Navigant Research will examine many of these technologies in 2014 ‑ including my next report, Flexible AC Transmission Systems.

 

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