Navigant Research Blog

Utilities Boost Efficiency with Smart CVR

— March 18, 2014

Dynamically optimizing voltage levels via sophisticated smart grid technologies, smart grid conservation voltage reduction (CVR) continuously reduces energy consumption and demand during peak periods, when electricity prices are inflated and demand may exceed the available energy.  At American Electric Power (AEP) in Ohio, 17 circuits have already been equipped and tested with smart CVR capability, and the initial results were so promising that AEP Ohio is now doubling down on this technology.  Utilidata will deploy its advanced CVR solution on 40 more circuits at AEP Ohio.  Ram Sastry, director of distribution services support at AEP, is confident that smart CVR will give the company’s energy efficiency program a turbo boost.  Also in Ohio, Duke Energy aims to have a systemwide smart CVR deployment (a project called Integrated Volt/VAR Control, or IVVC) in full production by 2015 to reach the state’s energy efficiency and peak reduction targets over the next 10 years.  Duke Energy used a small portion of the $200 million the company received in Department of Energy (DOE) smart grid investment grants to help finance the CVR investments in Ohio, one of many states that now incorporate CVR as an energy efficiency resource.

Untapped Potential

The DOE investment grants, combined with companies’ matching investments, are expected to result in the installation and/or automation of about 18,500 capacitors nationwide between 2009 and 2014, according to a recent presentation from the DOE.  (Automated capacitors play an integral role in most smart CVR projects.)  This is a large sample set of automated capacitors, serving as a nationwide demonstration of smart CVR, spurring osmosis between utilities and capturing interest from the National Association of Regulatory Utility Commissioners.  Not all 18,500 automated capacitors are to be used for smart CVR, but even if they all were, that would represent only enough capacitors to populate a small fraction of all substations and feeder circuits in the United States.  In other words, there’s a large, untapped market for smart CVR.

Government smart grid funding is nearing its end, but manufacturers and vendors of smart grid equipment and CVR software solutions will soon see a nice boost from increased adoption of smart CVR outside of DOE-funded projects.  Navigant Research’s Conservation Voltage Reduction report analyzes the market for smart CVR in North America.  While the market is still forming, revenue from smart grid equipment and software products dedicated to CVR solutions is expected to reach $30 million to $40 million this year.  With an intention to meet efficiency targets, most major utilities are already piloting various CVR control schemes.  As more large-scale deployments are expected to ramp up over the next few years, smart CVR component sales are expected grow into a $100 million market annually by 2017.  Total utility spending associated with smart CVR, including planning, installation and systems integration costs, could easily be 2 to 3 times higher.


DC Systems Boost Renewable Prospects

— December 2, 2013

On November 22nd , the European Energy Commissioner, Günther Oettinger, reaffirmed the European Union’s support for the proposed HVDC supergrid, which will extend beyond the boundaries of the EU.  Oettinger exchanged views about the Norwegian energy policy and EU energy priorities during an annual energy dialogue:  “With its vast hydropower capacity, Norway can also become an important partner in renewable energy, provided the necessary electricity interconnections are built.”

Navigant Research’s new report, High-Voltage Direct Current Transmission Systems, analyzes the global market for HVDC technologies.  An inventory of HVDC systems in construction and those that have been announced or planned is the basis for the forecasts in this report.

New capacity markets are being established in Germany and in the United Kingdom, which initially seemed to scupper proposed international HVDC interconnections.  However, the main objective of these capacity markets is to pay generators to act as backup for intermittent solar and wind assets.  The United Kingdom and Germany are simply preparing for a successful integration of renewables in large scale.

In 2012, the global installed base of offshore wind was 5 gigawatts (GW).  The U.K. government is targeting 18 GW of offshore wind by 2020 (according to the recent third round of offshore wind license announcements), and Germany has set an ambitious goal to install 25 GW of offshore wind by 2030.

Wind-Hydro Synergy  

Because of the potential for synergy between wind and hydropower facilities, many countries are investigating the opportunity to integrate wind and hydropower systems in order to optimize output through coordinated operation.  In general, the goal is to lower the cost of ancillary services required to balance wind intermittency, taking advantage of the inherent storage capability of hydropower reservoirs.

In areas with large hydropower facilities and high penetration of wind, such as in the Pacific Northwest, an oversupply of energy occurs when water flow rates and wind speeds are both high for extended periods during off-peak hours.  That forces the utility to pick between two evils: wind curtailment or spill of water, both of which waste available renewable energy.  Luckily Bonneville Power Authority (BPA) can evacuate 3,100 megawatts (MW) of hydropower from the Columbia River to Los Angeles via the Pacific Intertie HVDC line.  In the spring of 2011, 350 MW of wind energy was curtailed, and in 2012, BPA decided to make a complete upgrade of the Celilo converter station, increasing its capacity to 3,800 MW.

In China

Meanwhile, nearly 200 GW of new HVDC transmission capacity is planned during the next 8 years in China.  Energy from hydroelectric generation in distant inland locations will be tapped and transported to power the big cities along the eastern and southern coast.  The synergistic relation between hydro and wind will further accommodate Chinese wind power expansion.  China is expected be a leading market for offshore wind, with 5 GW by 2015 and 30 GW by 2030.


Great Britain Plan Scuppers Iceland Interconnect

— August 23, 2013

Iceland’s abundant geothermal and hydro resources make it an energy powerhouse. For example, energy-hungry greenhouses can be powered by geothermal energy, producing tomatoes, bananas, and other fruits in a cold climate.  It’s been proposed that Iceland could build out more generating capacity and lay a submarine high voltage direct current (HVDC) transmission line to export clean, low-cost energy to power-hungry cities in Great Britain.

According to Askja Energy, Hörður Arnarson, the CEO of Landsvirkjun (the power company that operates 13 hydropower stations and two geothermal stations across Iceland) said recently that a submarine interconnector to Europe represents “one of the biggest business opportunities Iceland has faced.”  However, Great Britain might take a pass on the opportunity to tap Iceland’s abundant resources.

How About a Datacenter?

On July 12, the U.K. Department of Energy and Climate Change (DECC) published a memorandum that lays out requirements for the geographical location of generating units that can participate in Britain’s Capacity Market.  “It is currently intended to restrict the Capacity Market to units located in Great Britain,” the memo said, “but this is subject to further consideration.”

Evidently the DECC wishes to build out Britain’s own infrastructure of smart grids and renewable generation first. The DECC recently announced plans to roll-out smart meters in 30 million homes. And according to the U.K. government’s Round 3 of offshore wind license announcements, the country aims to have 18 GWs of offshore wind by 2020.

At minimum, this will delay any plans for Iceland to build new generating units and an HVDC interconnector. In the meantime, perhaps Iceland will build more power-hungry datacenters that run efficiently on arctic cooling and cheap, clean energy.


Smart Meter, AMI Benefits in Great Britain

— August 15, 2013

The recent announcement in Great Britain of technology winners in the massive smart meter rollout included some large numbers.  According to the U.K. Department of Energy and Climate Change (DECC):

“Between now and 2020 energy suppliers will be responsible for replacing over 53 million gas and electricity meters.  This will involve visits to 30 million homes and small businesses.”

“Over the next 20 years the installation of smart meters will provide £6.7 billion net benefits to the UK: the programme will cost £12.1 billion and provide £18.6 billion in benefits.”

Let’s take these numbers for a spin.

There are dozens of distinct smart grid functions that boost the operational efficiency of a utility (called a distribution network operator or DNO in Great Britain).  The most established benefit categories of an automated metering infrastructure (AMI) are broadly described as:

1.  Reduction in meter reading legwork and gasoline savings: operational expenditures (OPEX)

2.  Avoided spending on handheld equipment and vehicles: capital expenditures (CAPEX)

The legwork (1) consists of planned and unplanned meter reads that can cost a large U.S. utility $20 to $30 per meter on average per year.  Maintaining or replacing handheld equipment and keeping vehicles on the road (including gas, insurance, and other maintenance) can amount to $5 to $10 per meter per year.

Translated into British pounds (at an exchange rate of $0.65), these savings categories alone could save British utilities and customers approximately £0.9 billion to £1.7 billion per year when the 53 million endpoints have been fully rolled out.  At a fairly conservative discount rate of 6% to 7%, a net present value investment of £12.1 billion would break even in 10 years with £1.7 billion in annual undiscounted savings (~$1.2 billion in annual average discounted savings).

In a conservative business case (utilities tend to be conservative), the lower limit in the range (£0.9 billion) may constitute the majority of the total AMI benefits.  Note here that meter reading, handhelds, and vehicles (1 and 2 above) often make up 80% of quantified benefits.  With £0.9 billion in annual undiscounted benefits (~£0.6 annual average discounted benefits), a £12.1 billion investment takes 20 years to break even.  That seems like long time, even for the most patient of utilities, depending of the useful life of the smart meters.

Therefore, it’s critical that the DNOs immediately plan to take advantage of all the new information that lies in the AMI data to offer time-of-use (TOU) pricing plans.  Given reasonable participation in TOU pricing (20% being the best-in-class target in American utilities), significant electricity usage is likely to shift away from higher-priced rush hours.  In turn, peaking power plant buildouts can be avoided.

Consider this: Dryers alone have a power rating of roughly 4 kW on average.  If some percentage of 30 million new AMI customers do their laundry for half price in the weekend or during other “electric-happy hours,” this could reduce the need for peak capacity in the order of gigawatts and billions.


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