Navigant Research Blog

VERGE Highlights: Lessons Learned from US Navy Microgrids in Hawaii

— June 21, 2018

Hawaii has a deep relationship with the federal Department of Defense (DOD). The bombing of Pearl Harbor in World War II by the Japanese cemented that connection in the minds of Americans.

In last year’s Military Microgrids report, Navigant Research found that military microgrids are likely to reach nearly $1 billion in annual implementation spending by 2026. If what has happened to two of Hawaii’s high profile microgrids is any indication, however, these investments may offer little in the way of actual resiliency.

At the recent VERGE conference in Honolulu, I learned that institutional, cultural, and technological challenges have plagued two microgrids deployed by the US Navy on Oahu. The good news is that lessons learned from two microgrids—part of the SPIDERS program contracts awarded to Burns and McDonnell—are now being applied to a new Pacific Energy Assurance and Resiliency Laboratory (PEARL) microgrid at Pearl Harbor for the Air Force.

Dan Lougen of the Naval Facilities Engineering Command Pacific offered a sobering view on the two SPIDERS microgrids on Hawaii, at a workshop I helped lead. The primary challenge, he said, was teaching 52-year old men new tricks with the advanced technologies that make up today’s modern microgrids.

O&M Costs Lead to Dormant Microgrids

Ross Roley, a contractor with Battelle supporting US Pacific Command’s energy innovation office and operational manager of the SPIDERS program, pointed out in an interview that each of the three SPIDERS microgrids were fully functional when completed, but operations and maintenance (O&M) challenges resulted in all three microgrids lying dormant. For SPIDERS 1 at Joint Base Pearl Harbor Hickam, a password expired and the owner/operators decided not to seek a new one, resulting “in a $4 million asset just sitting there,” said Roley. SPIDERS 2 at Fort Carson, Colorado sat idle for several years waiting for ownership policy to be sorted out. SPIDERS 3 at Camp Smith in Hawaii has run into state environmental compliance issues and is also not currently operational. “I found out O&M is more difficult than construction. The DOD will now need to spend significant dollars to bring Camp Smith back online, but if it had been maintained from the outset, the microgrid could have generated $1 million annually for peak shaving and other grid services,” he said.

Stan Osserman, director of the Hawaii Center for Advanced Transportation Technologies, observed that the SPIDERS projects taught many important lessons. “DoD’s ‘joint’ projects span all military branches, but which service is responsible to pay for ongoing operations wasn’t clear. We also found we needed to allow the prime contractor to have more control over the subcontractors, and we’re addressing both issues in PEARL,” he said.

What Will Keep PEARL and SPIDERS Up and Running?

Then there were technology lessons learned. SPIDERS was touted as being a program to develop a model for wider commercial deployment of microgrids, but all loads were transferred to old school backup diesel generators in the event of an outage. The new PEARL microgrid is designed to run on 100% renewable energy with the help of energy storage mediums including hydrogen, flywheels, ultracapacitors, and batteries. Rather than diesel generators being the primary resource when the power goes out, the PEARL microgrid delegates backup generators as a last resort.

Perhaps the most inspirational message regarding microgrids and the military at VERGE was a presentation by Nathan Johnson, an assistant professor at Arizona State University. He described retraining programs for military veterans to find new jobs in the microgrid industry, including off-grid remote systems for energy access initiatives in the developing world. Perhaps the veterans who make it through Johnson’s microgrid boot camp could return to military service, and help keep these existing SPIDERS microgrids up and running?


New Trends Point to Virtues of Fuel Cells and Direct Current for Modular Microgrids

— June 12, 2018

The beauty of a microgrid is that it can come in so many sizes. It can also incorporate many different types of distributed energy resources (DER)—from different forms of generation to creative load management and even energy storage—to bridge any gaps in supply or demand.

DER Growing Ever More Popular for Microgrids

Navigant Research has projected that both solar PV and energy storage will emerge as the two most popular DER options over the next decade. Yet, that doesn’t mean other technologies—such as fuel cells—won’t play a growing role in the microgrid universe. Perhaps the company most keen on this market opportunity is Bloom Energy, which ranks in the Top 10 vendors in terms of projects deployed in the forthcoming update to the Microgrid Deployment Tracker. The company has deployed its fuel cells in more than 60 microgrid projects, representing roughly an equal amount of megawatts. But those numbers will increase dramatically in the future.

Earlier this year, Navigant Research estimated growth in all major DER technologies going into microgrids, including fuel cells. Though relatively modest in scale, the microgrid fuel cell market is anticipated to reach nearly $2 billion in annual sales over the next decade.

Annual Fuel Cell Microgrid Capacity and Implementation Spending by Region, World Markets: 2017-2026

(Source: Navigant Research)

Optimizing Fuel Cells

Historically, fuel cells were deployed by market leaders such as Bloom Energy within single resource microgrids for clients such as data centers. These are clients that are extremely conservative in nature and are comfortable with the steady stream of electricity flowing from non-variable onsite generation. Since fuel cells can be fickle when it comes to small deviations in frequency, integrating them into microgrids featuring a plethora of variable renewable energy resources has been problematic. The emergence of lower cost energy storage solutions is beginning to change this basic assumption.

What about Direct Current?

One solid step in the direction of more advanced microgrids is Bloom Energy’s integration of a direct current (DC) bus to create a more modular structure to integrate energy storage devices into its fleet of microgrids. Working with PowerSecure, which was featured in Navigant Research’s recent ranking of microgrid controls vendors, Bloom Energy is rolling out its new DC bus platform for a fleet of microgrids to be deployed at Home Depot stores. Another big win for Bloom Energy was the integration of its new DC bus offering into the new Apple campus in Silicon Valley, whereby 4 MW of fuel cells were integrated into a 5 MWh system with its new platform. The microgrid also features 16 MW of solar PV.

Among the other vendors extolling the virtues of a DC bus are EnSync and Tecogen. The latter has perhaps the first plug-and-play microgrid offering (and also ranks in the Top 10 of vendors regarding numbers of microgrids deployed). Look for a Navigant Research report, Direct Current Distribution Networks, later this year to dig much deeper into the value proposition surrounding DC and the emergence of a modular microgrid movement.


Does the Telecom Market Point to the Best Way to Grow the Microgrid Market?

— June 7, 2018

Thomas Chadwick is the 52-year-old CEO of GI Energy, a Chicago-based company of roughly 30 people. GI Energy is working to implement lessons learned from the entry of telecoms into the staid electric utility industry by creating new microgrid development business models. A recent big microgrid project win in San Francisco and a majority stake investment by a Shell Energy affiliate have put the small company on the map.

Chadwick’s most radical idea? The auctioning of specific service territories to microgrid developers within a regulated market environment. He believes this approach would scale up the microgrid industry at a rate similar to what happened with mobile phones. “The pace of adoption of mobile phone technology is something microgrid developers can only dream about today,” he said in a recent phone interview. Chadwick observed that the curve of acceptance of mobile phones over a 20-year period beginning in 1985 led to near universal market adoption. “Even a goat herder today in Tanzania also has a mobile phone,” he noted.

Spurring Investment via Auctioning Licenses

“What we had in the 1980s were sleepy incumbent utilities that had not changed much in at least 50 years,” said Chadwick, referring to then dominant landline phone utility providers. “What I see today is spookily similar in electricity markets.” The auctioning of licenses for different mobile phone frequencies directed capital markets to invest in the upgrading of telecommunications infrastructure. As a result, he detailed, money flowed to building new networks, manufacturing more advanced equipment, advanced software, and the operators themselves.

What enabled this regulated model to work, as opposed to the more competitive approach extolled by many microgrid participants, was that in exchange for exclusive franchises, market participants agreed to a new regulatory environment. Sound familiar? This was the basic tradeoff brokered by Samuel Insull more than 100 years ago in Chicago that gave rise to the utility monopolies microgrids are helping to dismantle today.

Yet, there is a key difference today: a centralized monopoly versus a distributed model, the Energy Cloud. “It’s all about the consumers and how to make new technology attractive to them,” Chadwick continued. While consumers paid a little above the going rate for fixed-line service in the beginning, ultimately the marginal cost differential for mobile phones dropped to zero. The idea of auctioning off portions of the existing utility service territories may scare electric utilities. Nonetheless, Chadwick notes that under the telecom model, these incumbents were also allowed to bid for frequencies.

Winning in San Francisco

While the chances of Chadwick’s proposal moving forward are questionable in the near term, his company is not standing still. GI Energy’s most impressive accomplishment to date might be its winning bid for a real estate redevelopment project sponsored by FivePoint Holdings at the Hunters Point shipyard in San Francisco. GI Energy offered a unique blend of solar PV, energy storage, wastewater treatment facilities, and utility-scale geothermal to win the eco-district project.

Though there is no natural gas in the mix on this project, GI Energy believes one of its key competitive advantages is the ability to provide long-term and transparent pricing on natural gas. Multinational oil & gas company Shell views natural gas as a bridging fuel to a renewable energy future. Shell Energy is also active in California’s community choice aggregation movement, which is waking up to microgrids.

This Hunters Point project, which will include approximately 10,500 new residences, represents a new trend in the commercial and industrial microgrid market: a focus on new real estate developments. I discussed this topic at the Realcomm conference in Las Vegas.


New Community Business Models and Flywheel Concept Launched for Microgrids in California

— May 10, 2018

Much of the innovative development of microgrids in the US has been on the East Coast. It is spurred on by extreme weather events and corresponding state government initiatives designed to boost resiliency. However, California—a longtime pioneer of microgrids featuring high penetrations of renewable energy—is plowing fresh ground in both new business models and enabling technologies for microgrids.

Westward Expansion 

The California Energy Commission’s most recent foray into helping the state meet its renewable energy and greenhouse gas reduction targets included the recent awarding of over $51 million to 10 microgrid projects. However, another program focused on the broader concept of advanced energy communities is planting seeds that may help address thorny regulatory issues while also introducing a novel energy storage technology.

The novel business model is being deployed in Lancaster, California, which is one of many communities in California taking advantage of a community choice aggregation (CCA) law passed back in 2002. Since California’s initial foray into retail deregulation and customer choice ended in the so-called Enron disaster in 2001, the only way for residential customers to choose new power supplies was either to install rooftop solar or be part of a CCA. I played a small role in helping create the state’s first CCA in Marin County, which has now expanded to adjacent jurisdictions. The following figure shows the status of this movement. Orange areas represent currently operating CCAs, green areas represent regions where program launches are expected in 2018, and blue areas represent programs in exploratory phases.

Map of California CCAs: Operating, Current, and Proposed Development

(Source: Local Energy Aggregation Network)

CCAs are somewhat limited in what they can do in creating community microgrids, since the incumbent investor-owned utility still controls the distribution grid. In Lancaster, the CCA serves as the single point of governance for a microgrid designed to serve 75 new homes known as Avenue I. In this example, 450 kW of rooftop solar PV systems, EVs, and a 1.4 MWh of centralized energy storage system are the key building blocks. The design of the system incorporates a new flywheel technology. While microgrids have deployed flywheels in the past, especially in Australia, where they were historically used to inject short bursts of power to help manage variable wind with diesel generators in remote applications. This flywheel from Amber Kinetics of Fremont, California is instead being deployed within a grid-connected context for long-duration energy applications, thereby storing solar energy for up to 4 hours.

CCAs at Work

“We think this is a scalable model for affordable housing,” said Brett Webster, project manager with the consulting firm Energy Solutions. Only a handful of affordable housing microgrids exist globally: 2500 R Street project in Sacramento and Marcus Garvey Village in New York City are perhaps the most noteworthy. In Lancaster’s case, carbon is reduced by 70% and onsite sources provide 77% of local consumption at a cost of 13 cents/kWh.

The flywheel purports to be cheaper than the Lithium-ion (Li-ion) batteries that appear to be taking over the microgrid market. They are manufactured from steel, which lowers manufacturing costs, and they do not represent fire hazards, which to date have limited Li-ion battery installations in many dense urban environments due to local fire codes.

Whether the CCA structure propels community microgrids forward remains to be seen, as most are focused on low cost wholesale renewable supplies. Once the microgrid is completed, the results from Lancaster could spark a change in that status-quo thinking.


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