Navigant Research Blog

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?

 

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.

Winners

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.

 

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