Navigant Research Blog

Distributed Generation Leads Microgrid Investment Opportunities

— September 18, 2014

Without some form of distributed generation (DG), the vast majority of microgrids would not exist.  So, it should come as no surprise that such assets represent the single most lucrative microgrid enabling technologies (MET) segment today.

A prime mover technology for microgrids is diesel generators, which are widely deployed as back-up emergency power generators thanks to their ability for black start.  However, they are also often legacy assets upon which microgrids are layered and, more often than not, microgrids are specifically designed to reduce diesel fuel consumption.

In Navigant Research’s report, Microgrid Enabling Technologies, the amount of DG being deployed within microgrids is forecast in terms of capacity and of annual vendor revenue.  If one looks at new capacity additions, diesel generators have captured the largest market share, followed closely behind by natural gas generators (which also serve as the basis for combined heat and power applications.)

DG Capacity Market Share in Microgrids: 2014

 

(Source: Navigant Research)

An important caveat on these estimates: Only systems that incorporate some level of renewables are included in the tally for remote microgrids.   If one were to include all diesel generators deployed cumulatively, Navigant Research’s data suggests that they would represent more than 65% of total microgrid DG capacity.

Decline of Diesel

Another key assumption moving forward with microgrids is that new diesel capacity will decline over time, given the high cost of fuel, tightening air quality regulations, and the emergence of new power electronics technologies, lessening the need for a fossil prime mover.

While fossil DG capacity is still expected to exceed that of renewable capacity deployed within microgrids in 2014, the higher capital cost attached to solar PV, wind, hydroelectric, and biomass translates into higher vendor revenue per megawatt.  Fossil fuel DG (diesel and natural gas generators plus fuel cells) is expected to represent 58% of total DG capacity in 2014, according to our forecasts; renewables will most likely capture the other 42% of the DG market.   On a revenue basis, however, renewables are expected to capture 23% of total MET vendor revenue in 2014, compared to only 9% for fossil fuel DG.

Notably, the largest category of revenue in 2014 is technologies not actually included in the forecast, since they cannot be quantified on the basis of generation capacity (i.e. smart meters, smart switches, and other distribution or building infrastructure).  The majority of microgrids being deployed today incorporate significant amounts of legacy DG.  (Most of the community microgrids under development in New York and Connecticut add no or very little DG capacity.)  As a result, large investments into integration hardware – distribution infrastructure that cannot be quantified on the basis of generation capacity – represents a large piece of the overall investment pie for these retrofit microgrid projects. But this category is likely to decline as an overall percentage of total vendor revenues by 2023, as renewables, energy storage, and software increase in market share over time.

 

For Microgrids, It’s Not All About Size

— August 6, 2014

The University of Texas (UT) at Austin claims to have the largest microgrid in the world, with a peak load of 62 MW of capacity, serving 150 buildings.  The combined heat and power (CHP) plant that serves as the anchor is rated at 135 MW.

Leave it to Texas to make such a claim.  It’s not really accurate, but more importantly, it doesn’t really matter.  Bigger is not necessarily better when it comes to microgrids.

On the one hand, economies of scale tend to reduce cost.  But microgrids turn that assumption on its head, since onsite distributed energy resources (DER) reduce the line losses associated with the centralized power plant model.  I tend to agree with Steve Pullins of Green Energy Corporation, who says that the sweet spot for microgrids that incorporate new state-of-the-art technologies such as solar PV, lithium ion batteries, and CHP is between 2 MW and 40 MW.

Define “Big”

About every 6 months or so, I get an email from Craig Harrison, developer of the Niobrara Data Center Energy Park, asking me, “Am I still the largest microgrid in the world?”  The Niobrara proposal, which has increased in size from 200 MW to 600 MW over time (with both a grid-tied and an off-grid configuration now part of the single project), is still in the conceptual phase (you can see elegant renderings of the project provided by CH2M Hill).  In this case, a unique confluence of natural gas supplies and regulatory quirks (which in essence render the project as its own utility) conspire to set the stage for what will probably be (and remain) the world’s largest microgrid.  It’s only a matter of time.

Navigant Research’s Microgrid Deployment Tracker 2Q14 shows that the largest operating microgrid, if measured by peak demand (and not generation capacity), could be Denmark’s Island of Bornholm, which is interconnected to the Nordic Power Pool.  With peak demand of around 67 MW, the advanced pilot project incorporates plug-in electric vehicles (PEVs) and residential heat pumps, along with wind and CHP.

Like Military Intelligence

The microgrid at UT Austin is impressive, given that its origins date back to 1929 and it can provide 100% of the campus’ energy needs.  But it’s really an old school microgrid since it relies upon one source of electricity and thermal energy.  Robbins Air Force base in Georgia claims to have 163 MW of capacity, but it’s powered by large diesel generators, which are less desirable than CHP.  Much more interesting are microgrids that draw upon multiple distributed generation sources, incorporate advanced energy storage, and can sell energy services back to the utility.  The UT microgrid does none of these things.

In my view, a large microgrid is a contradiction in terms.  It’s much better to create multiple microgrids and then operate them at an enterprise level, creating redundancy via diversity of resources and scale, perhaps even mixing in AC and DC subsystems.  To me, a microgrid such as the Santa Rita Jail, which is only 3.6 MW in size but incorporates solar, wind, fuel cells, battery storage, and a host of state-of-the-art energy efficiency measures, is more interesting than the one in Austin.  When it comes to distributed energy, diversity trumps scale.

 

New Book on Renewables Integration Causes a Stir

— August 5, 2014

Having authored four books on energy topics in a previous life, I know how it feels to wonder if anyone is ever going to read a book once one hands over the draft to the book publisher.

That’s why I am happy to report that a new book authored by Dr. Lawrence Jones, vice president for utility innovation and infrastructure resilience for Alstom Grid Inc., is making waves.  Jones readily admits that his book, Renewable Energy Integration: Practical Management of Variability, Uncertainty and Flexibility in Power Grids, could not have been written a decade ago.

“10 years ago, when one would discuss renewable integration, there were nightmare scenarios by many skeptics.  Stories of how the entire grid was going to collapse due to renewables.  Literally, some people were saying it was going to be doomsday for the grid as we know it,” Jones reflected during a phone interview.

While one might still hear that solar and wind power are next-to-impossible to manage, “you don’t hear that from grid operators today,” Jones said.

Technical Yet Readable

Jones actually dedicated this book to grid operators around the globe, many of which contributed chapters.  “They really are the unsung heroes and heroines,” he said.

This book evolved out of the work Jones did for the U.S. Department of Energy, which surveyed the best practices of 33 grid operators from 18 countries that managed 72% of the world’s installed wind capacity.  Navigant Research drew on this survey in a report I authored in 2012 on smart grid renewables integration.

Jones found 60 volunteers, among them friends and colleagues at utilities and in academia, as well as analysts and consultants, to contribute chapters on topics such as:

  • Multi-dimensional, multi-scale modeling and algorithms for integrating variable energy resources in power networks: challenges and opportunities
  • Intentional islanding of distribution network operation with mini hydrogenation
  • Every moment counts: synchrophasors for distribution networks with variable resources

The Further Details

The book is not for the faint of heart, but you don’t have to be an engineer to understand it, either.  In fact, virtually every section of the book ends with a case study to provide real-world examples of what otherwise might seem to be theoretical or abstract engineering concepts that could make heads spin.

It’s rare that such a technical book would receive such rave reviews from industry leaders affiliated with organizations like the United Nations, the World Business Council on Sustainable Development, and the Center for Strategic & International Studies.  “There is already talk about a second edition, as we had to omit some key themes,” he enthused.  “For example, we never really got into the economics of renewable integration.  In 2 years’ time, we should have much better real world data on integration costs and benefits, for both utility scale and distributed wind and solar plants, and can therefore dive into those nitty-gritty details.”

 

Defining the New Smart Grid: From Nanogrids to Virtual Power Plants

— July 7, 2014

Nanogrids and microgrids are building blocks that, like Legos, can be stacked into modular structures: in this case, distribution networks that tailor energy services to the precise needs of end-users.  This customization of energy services is clearly the wave of the future; but determining where to draw the line between these two business models can be challenging.

In many ways, nanogrids are just small microgrids that typically serve a single load or building.  They thereby represent a less complex way to manage on-site distributed energy resources (DER).  Ideally, microgrids would be able to serve entire communities, but utility regulations often stand in the way.  These same regulations make nanogrids larger business opportunity today than microgrids, despite their smaller size.

The series of storms and extreme weather that have attacked East Coast grids in recent years has sparked interest in community resiliency initiatives.  New York’s Reform the Energy Vision (REV) initiative is designed to explore how multi-stakeholder community microgrids might provide emergency power to end-users ranging from a private gas station to a municipal fire station (and perhaps a community center emergency shelter).  Connecticut has been struggling with this issue of how best to include both public and private sector end-users, bumping up against the long-standing prohibition of transferring power among non-utilities over public rights-of-way.  To date, only one of the 9 projects approved for funding under Connecticut’s DEEP program is actually up and running, at Wesleyan University.

The Virtual Option

The third smart grid business model that can help build resiliency into power grids is described in Navigant Research’s report, Virtual Power Plants.  A virtual power plant (VPP) is a platform that shares many attributes with the microgrid (and the nanogrid).  In North America, the most common resources integrated into VPPs are demand response systems.  Though VPPs cannot guard against power outages at the customer site, they can play a key role in lowering overall demand on the larger utility grid, thereby stretching scarce resources, directing them to mission critical loads.

The lexicon of organizing structures required to handle the increasing complexity of energy supply and demand is growing.  In order to make sense of this brave, new world in energy, Navigant Research has come up with the following chart highlighting key attributes of three different business models.

 Comparing Nanogrids, Microgrids, and VPPS

(Source: Navigant Research)

Regulators clearly need to revisit regulations standing in the way of community microgrids.  It appears that New York is pioneering this debate, allowing it to surpass California’s position as the leading microgrid market in the country in terms of sheer numbers of projects in the works.  Moving downstream again, it is also important to remember that nanogrids help create smart buildings that, in turn, can also be integrated into VPPs.  These combinations are vital to efforts to harness greater value from DER, thereby increasing energy security.

In the end, it’s not nanogrids, or microgrids, or VPPs, but the deployment of all three in flexible and dynamic configurations that is revolutionizing what was once the staid world of top-down, command-and-control monopoly utilities.

 

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