Navigant Research Blog

Breaking New Ground While Exploring Value of Energy Storage in Southern California

— June 7, 2016

Cloud ComputingThe closure of the 2,150 MW San Onofre Nuclear Generating Station (SONGS) has left a huge hole in the power supply portfolio that Southern California Edison (SCE) had traditionally relied upon to serve customers. On top of that, the massive leak of methane from the Aliso Canyon natural gas storage facility has further aggravated the electricity supply challenges facing Southern California.

The leak is the largest known leak of methane into the atmosphere in U.S. history. It continues to make headlines, but longer term impacts could still be felt this summer.

Filling the Gaps

“When full, Aliso Canyon has enough natural gas stored to supply fuel to 18 regional power plants located in the Los Angeles basin for 21 days. But it takes 2 to 3 days for that natural gas to get into the basin where it is needed. So when the sun goes down, we can’t get the gas fuel to power plants where it is needed in time,” said Susan Kennedy, CEO of Advanced Microgrid Solutions (AMS), a company that has won a contract with SCE to deploy up to 50 MW of distributed energy storage to help fill regional supply gaps via hybrid electric buildings such as those owned by the Irvine Company.

“One major heat wave this summer could have major impacts, leading to curtailment of electricity service,” a prospect recalling the power outages that plagued California in the 2000-2001 timeframe, when Kennedy, working on behalf of then-governor Gray Davis, had to resort to emergency measures seeking drastic demand reductions in order to keep the lights on. “Few people seem to make the connection between this natural gas supply and our reliable electricity system,” she noted. But Kennedy does. “What we clearly need to get through this summer and into the future is fully dispatchable demand response [DR], the ability to use customer load as a resource in the same way we use supply. Energy storage allows us to create such a resource that also provides economic value for customers, such as the Inland Empire Utility Agency [IEUA].”

Water-Energy Nexus

The agreement with IEUA is addressing the water-energy nexus in California, an issue that is also raising concerns in light of lingering droughts. IEUA has been leading on renewable energy since 2008, with solar, wind, and biogas resources already part of its electric resource portfolio. With the help of AMS and its partner Tesla, these energy storage devices will allow the agency to maximize value to reduce its energy costs by an estimated 10%, or as much as $230,000 annually.

IEUA did not have to pay any upfront capital costs under the terms of the unique contract with AMS. Yet the biggest surprise to emerge in this project was SCE’s flexibility in contracting. The investor-owned utility had to adjust the existing tariff with IEUA in order to bring the energy storage devices online. “There was no template of how to do this,” said Jesse Pompa, a senior engineer at IEUA. “Batteries had never been connected to a grid in this way before. This was indeed a risk for us, and the biggest surprise is that they accommodated us.”

“I have to say, SCE is the most open-minded of all California utilities in viewing energy storage as a grid resource,” added Audrey Lee, AMS’s VP of analytics and design. She noted that the artificial intelligence software that AMS provides enables the fleet of Tesla batteries to provide a firm, dispatchable DR resource to help SCE get through this summer.

 

Do Microgrids Disrupt Traditional Utility Business Models?

— June 2, 2016

GeneratorThe classic storyline surrounding microgrids is that they challenge electric utility monopolies in multiple ways. Up until recently, the vast majority of these systems deployed in North America, currently a global hotspot for microgrids, were developed by third parties. Not only that, they were designed primarily to offer economic and resiliency benefits to consumers, with the interests of the incumbent utilities almost an afterthought.

That simpleminded view of the world is being challenged by the utility distribution microgrid (UDM), a concept first put forward by Navigant Research in 2012. Since that time, the number of utilities exploring opportunities in the microgrid space has grown dramatically.

Microgrids and the Utility

One could argue that microgrids sprung up as a response to customers not getting what they needed from traditional utility service. UDMs turn this premise on its head. They can help utilities manage recent distributed energy resources (DER) employment trends to their advantage. Microgrids owned or operated by utilities can first and foremost serve the distribution, as well as be a platform for new services for customers.

In terms of architecture, UDMs tend to be on the utility side of the meter; the classic prototypes are the installations is being proposed by Commonwealth Edison in Illinois. Yet there are many hybrids under development, some of which aggregate and optimize customer-owned assets that are located behind the meter. Among the examples of the latter are projects by utilities such as Oncor and the Sacramento Municipal Utility District (SMUD).

Perhaps one of the most interesting trends when it comes to UDMs is how the roles of investor-owned utilities (IOU) and publicly-owned utilities (POU) flip-flop over the next decade, especially in the United States. As the chart below illustrates, IOU projects are expected to lead the market until 2021. This is largely because of larger projects; the classic example is San Diego Gas and Electric’s (SDG&E) Borrego Springs microgrid, which now represents 31 MW peak capacity. If measured by sheer numbers, I believe public power microgrids will outnumber their IOU counterparts much sooner.

Fewer Obstacles but a Smaller Scale

Municipal utilities have fewer regulatory obstacles and internal conflicts in pursuing microgrids than IOUs. That said, the scale of their projects will tend to be smaller. Take the case of Alameda Municipal Power, which is in the process designing a microgrid at an abandoned Navy facility located within its service territory and whose initial capacity will likely fall in the 5 to 7 MW range.

Annual UDM Capacity and Revenue, United States: 2015-2024

Peter Microgrid Blog Graph

(Source: Navigant Research)

Keeping pace with the fast and continuously growing microgrid market is no small task. As of April 2016, the Microgrid Deployment Tracker has identified 1,568 projects across the globe representing a cumulative 15,599.7 MW of capacity. These numbers represent microgrids from 119 countries across all seven continents. North America represents over half of the new projects entered, while the utility distribution and remote segments account for almost three-quarters of the new capacity.

Whether examining remote or grid tied microgrids, the role of utility in their deployments and operation will only continue to grow the next decade.

 

 

Tracking Blackouts and Microgrids: Surprises in Both Categories

— May 3, 2016

Power Line Test EquipmentThe East Coast’s power outages have made headlines in recent years. Hurricanes and other bouts of severe weather have spurred on a series of state programs to promote greater resilience of the power grid, steering public dollars to new microgrids that serve communities and critical public purpose assets.

The list of states along the Eastern Seaboard now promoting microgrids keeps growing, with Rhode Island and Washington, D.C. being among the latest to join states such as New York, which just announced that it is now offering $8 million for 8 of the 83 projects originally proposed under its much-ballyhooed New York Prize program. No doubt, New Yorkers feel that they are the center of the universe when it comes to microgrids, but folks living on the West Coast may have a different perspective.

Tracking Blackouts

For example, I was surprised to learn that one of the leading vendors in the microgrid space—Eaton—actually tracks U.S. blackouts nationally, regionally, and by state. Eaton’s Blackout Tracker admits that it might be not complete, but it is the best data available on the duration of blackouts and numbers of customers affected. Similar to Navigant Research’s Microgrid Deployment Tracker, the data is global in scale.

Perhaps the biggest surprise in Eaton’s 2015 summary report is that California had led the nation in terms of power outages since the report was first published in 2008. Between that year and 2014, California experienced 525 power outages; New York was in second place with 399. For 2015, the tracker shows that overall power outages nationwide declined compared to 2014, but the number was still significant at 3,571. The number of customers affected by power outages in the United States also dipped slightly between 2014 and 2015, from 14.2 million to 13.2 million.

As noted in the Eaton report, extreme weather is lengthening the duration of power outages. According to estimates by the Lawrence Berkeley National Laboratory, outages are generally lasting 5%-10% longer over time. A study by the National Renewable Energy Laboratory estimated that power outages cost the U.S. economy as much as $188 billion annually. One could argue these dollars would be better spent investing in microgrids rather than being lost as a drag on the economy.

North America in the Lead

Navigant Research has estimated that the cumulative value of assets deployed within microgrids in North America could exceed $50 billion between 2015 and 2024. The next update of the Microgrid Deployment Tracker to be published in 2Q 2016 shows North America leading the world in terms of total identifiable microgrid capacity (42%) and in operational identifiable microgrid capacity (56%).

The biggest surprise in this biennial tally of global microgrid projects? The leading part of the world for energy storage deployed within microgrids is Antarctica of all places, where 100% of all systems feature energy storage. (Of course, this is an extremely small market in an extremely rugged environment.) The largest growth in terms of project entries among grid-tied microgrid segments is expected to come from utility distribution microgrids, which now represent 15% of all microgrid development activity globally. This is a clear sign that utilities are seeking to reinvent themselves in an era of climate change adaptation, increased reliance upon distributed renewables, and the emergence of new utility business models.

 

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.

SimpliPhi

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.

SparkMeter

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.

Powerhive

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?

 

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