Navigant Research Blog

Will One Company Conquer the Distributed Energy Space?

— November 25, 2015

I have often suggested that I don’t see any single company ever dominating the distributed energy space with networking platforms such as microgrids. My recent Leaderboard report, which ranks microgrid developers/integrators that offer their own distributed energy resource (DER) controls platform, underscores this point. All 15 companies that were ranked were, at the very least, contenders, with only three emerging as leaders according to the report’s criteria.

Some disagree. After this report was released, General Electric (GE) made a major announcement that raised some eyebrows, launching a new company called Current, an aggregation of existing business units currently valued at $1 billion. Jan Vrins, global energy practice leader here at Navigant, suggested in a recent blog that this move positions GE in a role of the network orchestrator, a business model that may prove to be the most profitable over the long term.

Current is designed to bundle previously disparate business lines offering LED lights, solar PV, energy storage, and electric vehicles into a single startup located within the walls of GE. Many in the industry are curious as to how this will play out, among them yours truly.

Whether talking about microgrids or virtual power plants (VPPs), the other significant development in the DER space is the approval of the merger between GE and Alstom Grid. Why? While GE’s broad suite of products relevant to the microgrid space is impressive, its control platform was not its strongest suit. By incorporating Alstom Grid’s controls, which are repurposed from its platforms used by numerous wholesale grid operators throughout the world, it now has a platform aimed at the VPP portion of the distributed energy value stream, migrating value from distribution level resources up to wholesale operations.

I see GE recent moves aligning more with VPPs—a network orchestrator business model—than microgrids. This is in spite of its major presence in New York, the hotbed for retooling utility business models to allow utilities a greater role with DER aggregation and optimization via community resilience microgrids. Since France, Germany, and Denmark in Europe are the current hotspots for VPPs, the GE-Alstom Grid merger is looking like a potential winner.

Yet there is plenty of competition. Navigant Research’s recently published report, our ninth edition of the Microgrid Deployment Tracker, for the first time tallies up identified microgrid capacity by vendor. Using that metric, ABB comes out on top. The bulk of these projects are remote microgrids in places such as Australia, islands off the coast of Spain, and in Alaska. The same update shows, nonetheless, if one tallies up total projects, it is Schneider Electric that rises to the top. Coincidentally, Schneider Electric ranked first in terms of the Leaderboard report, largely due to its partnership strategy on the controls questions, with firms as diverse as ETAP, Green Energy Corporation, and DONG Energy among its co-innovators.

One also has to admire the breadth of solutions being offered by Siemens. By offering a complete end-to-end solution for microgrids, including financing, and integrating this approach with the vision of smart city infrastructure, Siemens is echoing the idea that microgrids become a complete infrastructure package. The worlds of microgrids and VPPs come closer and closer together over time.

So, the bottom line? I don’t see any one company dominating the microgrid/VPP space anytime soon. GE’s recent moves will go a long way in strengthening its role in the DER space, but it has plenty of competition. Left unanswered at this point in time is whether the network orchestrator role will indeed unlock the revenue streams to allow large technology players to innovate in the increasingly crowded distributed energy market. It looks like GE wants to find out.


Nanogrids vs. Microgrids: Energy Storage a Winner in Both Cases

— October 21, 2015

The business case for nanogrids echoes many of the same arguments used on behalf of microgrids. These smaller, modular, and flexible distribution networks are the antithesis of the bigger is better, economies of scale thinking that has guided energy resource planning over much of the past century. Nanogrids take the notion of a bottom-up energy paradigm to extreme heights. In some cases, nanogrids help articulate a business case that is even more radical than a microgrid; in other cases; nanogrids can peacefully coexist with the status quo.

Despite the bad news here at home coming from NRG, which has now has spun off its distributed solar PV business due to lagging sales, I believe the linking of batteries to distributed solar PV systems is a game changer. The recently published Solar PV plus Energy Storage Nanogrids report shows that this technology represents a less than $1 billion market worldwide today, but this number is expected to grow to $14 billion by 2024, with residential customers leading the market. When it comes to resilience, states such as Massachusetts have already signaled their preference for building-level solar PV plus energy storage nanogrids, since they face less regulatory hurdles than community resilience microgrids.

Ironically enough, the potential loss of federal investment tax credits for solar PV in the United States as early as 2016 and growing utility opposition globally to traditional solar PV support mechanisms such as net metering and feed-in tariffs only help to build the business case for solar PV plus energy storage nanogrids. Why? In order to extract the greatest value from solar PV in the absence of subsidy—whether that be utility demand charge abatement or greater reliability and resilience—will require linking this variable distributed generation to an energy storage system, either in the context of a microgrid or a nanogrid.

The intermittency of solar PV, which can be more extreme than wind on a second-by-second basis, has long been viewed as a drawback to widespread deployment as a substitute for 24/7 fossil fuel generation. Rooftop solar PV in particular can feature capacity factors as low as 20%. If such small systems—whose primary advantage for residential applications is providing financial benefits (offsetting expensive peak grid power)—are coupled with energy storage systems, the value of solar energy is magnified. In essence, it can be stored and then discharged during time periods most advantageous to asset owner. These same storage systems can also offer resiliency benefits when the larger grid goes down.

While the decline in solar PV pricing has been underway for quite some time, it is only recently that batteries—particularly lithium ion—have begun to match solar PV with a similar downward momentum, thereby increasing the appeal of this technology pairing.

Average Installed ESS Cost by Technology, World Markets: 2015-2025

Peter SNANO Blog

 (Source: Navigant Research)

The most radical interpretation of this solar PV plus energy storage nanogrid vision is at the residential level, the application where the nanogrid model is likely to meet opposition from utilities—that is, unless utilities begin offering nanogrid services. So far, utilities in Ontario, Australia, and New Zealand are doing just this (Powerstream, Vector, and Ergon, respectively).

It is safe to say the size of the microgrid market is larger than that of nanogrid due to sheer scale. But microgrids also incorporate combined heat and power and wind, as well as other resources. If we narrowed the comparison to total capacity of just solar PV plus energy storage microgrids versus nanogrids, it is the smaller nanogrid that would likely come out on top today, and perhaps over the long term.


How High Can We Go with Renewable Goals?

— October 19, 2015

California Governor Jerry Brown signed legislation recently that (once again) ups the state’s commitment to renewable energy. This is the third such increase in the state’s Renewable Portfolio Standard (RPS), boosting overall reliance upon renewables such as solar and wind to 50% by 2030.

While other states such as Hawaii and Vermont have approved even higher mandates (100% by 2045 and 75% by 2032, respectively), the sheer size of the California marketand its historical role as a trendsetteris significant.

While these noble goals may raise questions among those worried about aggressive programs to combat global climate change or about impacts on the economy (in terms of higher cost electricity and loss of jobs among traditional resources such as coal), there is really a larger issue. Where will these renewables be located on the grid?

Big goals like these tend to lend themselves to large-scale renewable projects such as wind farms. In the case of California, ambitious goals on renewable procurements have prompted the California Independent System Operator (CAISO) to expand its footprint both north and east, arguing that better coordination among so-called balancing authorities is the best way to increase renewables without requiring expensive fill-in-the-gap resources, such as gas-fired peaking plants. PacifiCorp is among the most noteworthy participants in this expansion of energy imbalance markets.

Into the Wind

This bigger-is-better frame of mind is based on sound thinking on past experience, which verifies that the larger the control area, the less of an issue variability in wind imposes on grid reliability. This makes inherent sense; if the wind suddenly dies down, chances are it is picking up in another location, especially if the balancing authority can mix and match resources over a wide swath of terrain. This is why old-school thinking that dates back to when I first started writing about wind power argued that wind could only supply up to 10% of our power.

Of course, countries such as Denmark have blown these kind of assumptions out of the water (literally). The country currently derives roughly 30% of its total electricity from wind, most now coming from wind turbines placed offshore. At times this year, Denmark produced the equivalent of 140% of its own electricity demand from wind power. Interestingly enough, Denmark has set a goal of 100% renewable energy not only for electricity by 2050, but also for heating and transportation!

Yet, for me, the more interesting trend is not large-scale commitments to wind, but the evolving innovation at the distribution retail-level with, onsite solar PV being increasingly linked to batteries. Let’s call this a bottoms-approach to high renewables reliance (and resilience).

The Frequency and voltage issues are major concerns in Hawaiiwhere the balancing authority is relatively small and isolatedbecome magnified in a microgrid. Distributed energy resources (DER) are on the rise. Solar PV is expected to emerge as the lowest cost resource of all over time. It is not unreasonable to foresee a time when nearly every residence and/or commercial complex will have a default option of onsite solar PV.

These two trends—larger wholesale renewable balancing markets and smaller distributed DER networks such as microgrids—are fueling passionate debates about the best path forward to addressing climate change through increases in renewable energy generation.

We have to harness both simultaneously in order to meet these renewable aggressive goals. Nothing ever goes as planned in this world, especially when it comes to energy (oil pricing being a great example), so we need to hedge our bets.


Pool of Innovators in Microgrid Space Is Diverse, Often Incomparable

— October 5, 2015

Navigant Research’s recently published Navigant Research Leaderboard Report: Microgrid Controls is our first ranking of companies active in the microgrid market. The hardest part of this examination of innovators in this space was leaving so many market movers out, due to the focus on microgrid controls offered up by either developers or system integrators.

What if we were to turn the general assumption for the Navigant Leaderboard format on its head? In other words, why not create an apples-to-oranges listing? I am going to go out on a limb and highlight three companies not included in the Navigant Leaderboard report, but that deserve special mention due to their near-term impacts on the overall global microgrid market, regardless of what their role is. I have previously highlighted two companies, a utility (Commonwealth Edison) and an energy storage and smart grid innovator (S&C Electric) that were not included in the Leaderboard. Both were disqualified for inclusion because the ranking excluded utilities and vendors that primarily focus on energy storage integration.

Here are three other companies not included in the Leaderboard that I would like to highlight, for reasons explained below:

  • Energizing Company: Based in the Los Angeles area, Energizing Company is poised to announce one of the largest grid-connected microgrids in the world. The company sees its role as akin to a movie producer. (Well, what do you expect from a company based near Hollywood?) It doesn’t offer a controls platform and, though a private developer, sees utilities as its primary clients. It seeks to sponsor microgrids utilizing public-private partnerships. The company has fully embraced the concept of utility distribution microgrids with a plan for a microgrid to encompass an entire municipal utility’s service territory, optimized with smart grid technologies. It helps that the community this microgrid will serve is allegedly one of the smartest communities in the world (and I am not talking about IQ, but embedded infrastructure intelligence).
  • PowerStream: Ontario’s second-largest municipal utility, PowerStream, was the first utility in North America to announce a microgrid offering under a business model it refers to as DBOOME—design, build, operate, maintain, and energize. Perhaps the company’s most forward-looking project straddles what Navigant Research would identify as either a series of nanogrids or decentralized virtual power plants. Working with Sunverge—another company Navigant Research views as a microgrid leader—PowerStream will aggregate solar PV and lithium ion battery systems installed in residences in order to provide bidirectional value for customer and utility alike. The utility requires each customer to pony up some of their own money in return for long-term savings and exchanges of bidirectional energy services that serve both residence and utility grid.
  • Win Inertia: Among energy storage vendors active in the marketplace, Win Inertia is one of the most creative. Based in Spain, the company’s project portfolio highlights fascinating applications for hybrid battery solutions, including both alternating current and direct current (AC and DC) systems for electric vehicle (EV) charging, railways, harbors, buildings, islands or renewable integration for, of course, microgrids. Win Inertia has enjoyed 100% revenue growth since its inception and boasts a portfolio of over 15 microgrid-related projects either in operation or under development.

At last count, Navigant Research has profiled more than 50 active companies in the microgrid market, with none of them capturing more than 10% of the total market revenue. This is the status of the market today: there is no clear leader. The three companies profiled on this blog highlight the fact that innovation is coming from a variety of market players, each focused on a different part of the value chain.

Will one company emerge as the clear market leader? Only time will tell.


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