Navigant Research Blog

Off-Grid Markets Foster New Microgrid Business Model Innovation

— April 29, 2016

Power Line Test EquipmentMicrogrids are being developed in mature industrial markets such as the United States to provide premium, high-quality clean power to a broad array of customer segments. Even more dramatic creativity is occurring on the business model front in developing world markets such as India, Africa, and Iraq. Here are three companies moving the needle in terms of technological advances fueling new creative ways to control, finance, and implement microgrids.


The first company is SimpliPhi Power, which got its start in 2002 developing off-grid portable power systems for Warner Brothers and Disney film shoots. The company’s portable power units, called LibertyPaks, were used in locations as diverse as the Amazon and New York City. The company then found a home for its technology with the Marine Corps in forward operating bases in Afghanistan and Iraq, relying upon lead-acid batteries and diesel generators optimized to reduce fuel consumption and save lives.

SimpliPhi has significantly upgraded its technology offering over time. The company now focuses on sophisticated power electronics embedded in its smart inverters to integrate distributed solar PV panels with non-toxic lithium ferrous phosphate batteries, which offer a thermal energy profile that does not require cooling and which reportedly outperformed Tesla’s Powerwall in a head-to-head competition. A school in Tanzania shows an example of the company’s typical installations in the developing world. Perhaps SimpliPhi’s most unique business model is its reliance upon an open source, plug-and-play, low-voltage 48-volt direct current (DC) power network, making its microgrids a nice fit with low-voltage grids throughout the developing world. Few other companies focus on such low-voltage microgrids.


The second company I’d like to reference is SparkMeter, which has a smart meter offering that puts most advanced metering infrastructure (AMI) deployments by U.S. utilities to shame. Lower in cost than the majority of competing metering options and with robust functionality, the combination of hardware and cloud-based interface provides real-time monitoring and adjustments to voltage and frequency issues. SparkMeter offers a platform that that was designed for the off-grid environment, but which can also be deployed in centralized grids. A mobile money or cash-based prepayment system is also integrated into the microgrid platform, allowing vendors to insure cash flows vital to sustainable business ventures in key microgrid markets such as India. The company validates that smart metering is even more important in an off-grid operating environment than in developed economies. Why? In emerging economies, small amounts of electricity are consumed by large numbers of customers with little annual income. It is this kind of technology that is key to making any bottom of the pyramid (BOP) energy access strategy work.


Last, but certainly not least, is Powerhive. With recent investments by the likes of the investment arms of French oil giant Total Energy Ventures and diesel generator manufacturer Caterpillar Ventures, the company has announced plans to develop 100 microgrids serving 90,000 people without electricity. These systems will aggregate up to approximately 1 MW. With plans on the boards for microgrid portfolios that could top 500 MW over the long term, a key to the company’s success has been a pay-as-you-go business model that, like SparkMeter, depends upon mobile phone payment options. Powerhive’s Honeycomb remote monitoring system underpins the pay-as-you go strategy that it first deployed in 2011, which has now emerged as the primary business model for BOP deployments around the world.

All three of these companies highlight the innovation required to create viable sustainable energy projects. How can these lessons be applied to microgrid markets in the developed world?


Public Power + Solar PV + Batteries = Win-Win

— March 10, 2016

Solar heater for green energyThe stars are aligning for distributed energy resources (DER) to play an increasingly important role in providing energy services to consumers. Some see this growth in capacity (coming from devices such as solar PV panels, fuel cells, advanced batteries, and other forms of DER) as the supreme threat to incumbent distribution utilities, echoing the much ballyhooed “utility death spiral” storyline. Others see this evolution as an opportunity for utilities to reinvent themselves, aligning their business strategies and business models with the emerging digital economy.

While it is going to be a bumpy ride into the future, there are signs that it is possible to create win-win scenarios by leveraging the diverse services that energy storage can provide. Advances in software that can optimize DER to provide bidirectional value, along with the bridging capabilities that energy storage brings to the market, can create order out of what would otherwise be chaos.

Is there a way for everyone to come out as winners? The key is in intelligent distribution networks, an ecosystem of solutions that spans concepts such as nanogrids, microgrids, and virtual power plants (VPPs). These three platforms were described in a previous blog. Two companies are proving that the boundaries between these three unique market applications are blurring, thanks to innovative utility business models and the creative aggregation and optimization possibilities attached to energy storage.


PowerStream, the second-largest municipally owned utility in Ontario, Canada, is developing an innovative pilot project that involves 20 residential units, each to be equipped with a 5 kW solar PV array and a 6.8 kW/12 kWh lithium ion battery. The project is designed to enroll homes in select feeders (which may not be adjacent to each other) in order to provide system benefits.

Perhaps the most innovative aspect of the project is the business model dubbed DBOOME (design, build, own, operate, maintain, and energize). Customers have an opportunity to participate in a hassle-free, zero-maintenance solar storage program with an upfront cost to partially cover installation, followed by a nominal monthly service fee for a 5-year program (this DBOOME approach is also the model PowerStream plans to deploy for its microgrid program). In exchange for the customer’s upfront payment and ongoing service fee, PowerStream offers customers significantly reduced electricity bills and resilience.

The key vendor partnering with PowerStream is Sunverge, which provides residential and commercial building-sited energy storage solutions that integrate renewables such as solar PV. Sunverge offers a combination of onsite hardware and cloud-based services that enable remote monitoring and control of nanogrids, aggregating them into VPPs. Sunverge has also partnered with the Sacramento Municipal Utility District, a municipal utility that is using the company’s systems in 34 homes as part of its net zero energy demonstration project. A net zero energy home is one in which a home’s total annual energy use is approximately equal to the amount of renewable energy generated onsite. Each home is a nanogrid located on a single city block that can also island as a microgrid. Sunverge’s business model essentially links the concept of nanogrids to a VPP. All of its systems can be controlled remotely from a central control room and capacity can be offered to distribution grid system operators.

To learn more about how public power utilities and energy storage innovators are forging win-win DER solutions, listen to the Navigant Research Utility-Energy Storage Collaborations webinar on Tuesday, March 15 at 2:00 p.m. EDT.


Microgrids: Pie-in-the-Sky Dreams versus On-the-Ground Realities

— March 4, 2016

multimeterThe hype cycle on microgrids appears to have hit the crescendo level, causing at least one commentator to say “microgrids are the new kale.” This, of course, refers to the trendy vegetable alternative to lettuce and other leafy greens. Others, including many utilities, are still quite skeptical. They don’t see the rationale for third-party microgrids and argue that there are less costly alternatives to boosting resilience and energy security. Of course, many of the same utilities are busy trying to figure out what business model they should pursue so they can capture a portion of the microgrid value stream, whether from their regulated or unregulated business lines.

There is no doubt that significant barriers remain for microgrids to be considered a standard option for adding new capacity and other energy-related services across global markets. Nevertheless, there are certain application segments located within specific geographies where microgrids can make economic sense right now. Sometimes these deployments are dependent upon government incentives or other sources of supplemental funding. However, the number of microgrids being deployed today under a strict business case value proposition is growing.

Myself and others have often extolled the opportunities in the developing world. On paper, these markets look promising. High diesel prices and declining costs of solar PV (and now energy storage) make a microgrid that incorporates renewable energy a no-brainer.

As Justin Guay, climate officer at the Packard Foundation, told me the other day, some of the primary challenges to this market lie with subsidies embedded in the systems for fossil fuels such as diesel. He identifies this among several other issues that erect barriers to energy access in an article for the Huffington Post. “In many ways, enabling access to finance is job number one,” he writes. “Public policy can help address that by defining the rules of the road.” The International Energy Administration (IEA) has estimated that subsidies for fossil fuels globally totaled almost $500 billion in 2014.

Declining Oil Prices

Of course, declining oil prices have also hit this microgrid market. While in Alaska declining oil prices (ironically) threaten funding for climate-friendly renewable energy development for remote communities, in other parts of the world lower diesel fuel prices can pull the rug out from renewable energy economics. Diesel is the primary fuel for power generation in remote locations; prices hit 8-year lows in January of this year.

Yet there are bigger problems, corruption chief among them. Old boy diesel supply networks have created mafia-like arrangements lining the pockets of long-time locals that are threatened by new clean technologies. However, the tide may be turning in countries such as India, one of the most promising of all global markets for microgrids. Along with stripping away direct diesel subsidies, more subtle changes in financial rules may help this chaotic market reach its promise sooner rather than later.

India is an ideal microgrid market due to dense populations and the proliferation of cell phone technology. A series of recent rules creating a digital financial inclusion ecosystem is paving the way for creative business models to support small-scale energy supply entrepreneurs. Other changes in law allow for the shifting of subsidies once flowing to bad investments such as kerosene to instead be channeled into more productive activities, including sustainable energy microgrids. Getting big banks out of the way of mobile money creates a fiscal ecosystem that allows creative enterprises to finance energy access projects, stripping out inefficiency and lowering carbon emissions, all while providing vital healthcare and other services.


Arctic Circle Is Hot Spot for Renewables Innovation

— March 2, 2016

GeneratorThe market opportunity for remote, off-grid power is immense, as verified in a report released late last year sizing this market (including projects that meet Navigant Research’s definitions of both nanogrids and microgrids). According to this analysis, the total value of the assets and services that could flow into this huge global market over the next 10 years could reach more than $200 billion.

As was reported in a previous blog, one could make the argument that Alaska, sitting within the Arctic Circle, is a global leader on remote microgrids, with almost 140 such systems representing over 900 MW of capacity identified in the most recent version of Navigant Research’s Microgrid Deployment Tracker. The vast majority of these remote microgrids incorporate some level of renewable energy. In fact, Kodiak Island reached nearly 100% renewable energy generation during 2014. Several local utilities have set goals ranging from 70%-80% renewable penetration within the next 5-7 years.

It turns out innovation on renewables and remote microgrids is not limited to Alaska. The Alaska Center for Energy and Power (ACEP) is co-leading a new program to be launched this summer for countries whose borders venture into the Arctic Circle. Dubbed the Arctic Remote Energy Network Academy (ARENA) program, this program is a formal project under the U.S. Chairmanship of the Arctic Council, with four of the eight council countries co-leading so far, including Canada, Finland, and Iceland, along with the United States (Alaska). This program is designed to bring together practitioners from throughout the Arctic to learn from one another with the goal of increasing the number of hybrid-renewable energy systems installed across the region. “ARENA is focused on the Arctic now, but we are hoping to expand it to other regions in the future, if we are able to find some partners,” said Gwen Holdmann, ACEP director.

Forefront of Climate Change

As a region, the eight countries representing the circumpolar Arctic are at the forefront of climate change, as measured and expected temperature increases are significantly higher than the national average. Impacts like diminishing sea ice and coastal erosion are becoming common challenges for these frigid and remote communities. However, the Arctic region is also leading the way when it comes to renewable energy development. ACEP estimates that 60% of grid-connected communities across the Arctic produce power from renewable resources (compared to a global average of 22%), including:

  • Finland (39%, biomass)
  • Sweden (48%, hydropower, biomass)
  • Norway (99%, hydropower)
  • Iceland (100%, geothermal, hydropower)

However, approximately half of the populations residing within the Arctic are not connected to a traditional power grid. Instead, they rely on remote microgrids to provide electric power services. This increases the complexity of integrating renewables, particularly at high penetration levels. These systems are among the most sophisticated engineering marvels in the world, providing energy services that are often a matter of life and death.

Countries throughout the Arctic are actively investing in renewable resource development. Perhaps the most fascinating data points come from Russia, a country not often linked with a focus on sustainability. The project pipeline in the country totals over 800 MW of remote microgrid capacity designed to displace pure diesel capacity with some renewables. Last year, a modest 15 MW of wind and solar capacity was brought online by RAO Energy Systems of the East, the state-owned utility that serves parts of Russia within the Arctic Circle. Those numbers are expected to scale up dramatically in the near future, with some 178 distinct projects in the works. At present, Russia also has the largest solar PV array located within the Arctic, a 1 MW system at Bagaday.


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