Navigant Research Blog

The Energy Cloud: Is Australia Supplanting New York as Global Leader?

— March 13, 2017

The fact that Audrey Zibelman is leaving her top position at the New York Public Service Commission to become CEO at the Australian National Energy Market (AEMO) is just one sign that the world’s eyes are increasingly turning to the land down under for inspiration and innovation when it comes to an emerging Energy Cloud future.

The slow pace of New York’s Reforming the Energy Vision (REV) process should really come as no surprise. Trying to create new business models for an electric utility industry that existed as a monopoly for over a century is not easily done within just a few years. Zibelman was the perfect person to jump-start this effort, given her previous posts at Viridity Energy and PJM. Now someone else will need to finish the job.

A New Playground

In what can be seen as symbolic shift, Zibelman’s new job in Australia reflects something keen observers have noted for quite some time. Australia—once seen as a backwater that only provided fertile ground for off-grid microgrid innovation—is now also emerging as a playground for new business models spanning the entire nanogrids-microgrid-virtual power plant (VPP) spectrum.

This continent continues to lead with major innovations in remote microgrid management, as evidenced by the forward-looking work of utilities such as Horizon Power. Yet, what is just as fascinating—if not more so—are multiple projects pushing the envelope in new business models that epitomize the type of innovation occurring within the VPP space. Consider these two examples:

  • AGL Energy Limited, partnering with Sunverge of San Francisco—a leading energy storage and VPP firm—announced a 5 MW VPP last year that will aggregate 1,000 homes equipped with solar PV panels and batteries. The $20 million project will allow homeowners to save on their electricity bills while also contributing valuable peaking capacity to the grid in South Australia.
  • A new Distributed Energy Exchange is being created that will help facilitate similar programs on an ongoing basis, allowing for widespread adoption of VPPs. The new exchange is designed to tap spare capacity, especially from hybrid solar PV/energy storage nanogrids, that can then contribute to the creation of VPPs. Among the leading innovators behind what has been described as a new digital marketplace is Greensync.

At present, roughly 16% of Australian power supply comes from solar PV, a much higher percentage than New York or even California. The distributed battery storage market also grew 1,000% between 2015 and 2016, according to a recent report, with total capacity representing 50 GWh.

Microgrid Capacity

According to project data collected in Navigant Research’s Microgrid Deployment Tracker, Australia ranks third in terms of total project capacity (operating, under development, and proposed projects). Within the United States, New York ranks fourth in terms of identified capacity, but first in terms of total number of projects. Of course, this is partially a result of the over 80 projects proposed under the New York Prize program, of which only a portion will actually come online.

Top 10 Countries by Total Microgrid Power Capacity, World Markets: 4Q 2016

(Source: Navigant Research)

Curious about the details of microgrids in Australia or New York? Navigant Research now offers a data services platform where a client can custom sort data for the projects in any other part of the world. Data can also be sorted by technology—such as microgrid with lithium ion batteries—or by vendor, segment, or country.

 

Plug-and-Play Microgrids Are Building Momentum

— February 17, 2017

GeneratorThe concept of plug-and-play microgrids is picking up momentum. But like the term microgrid itself, plug-and-play means many different things.

To a software company such as Spirae, the plug-and-play concept is all about enabling software (the topic of a recent Navigant Research white paper and webinar). According to Spirae, configurable microgrids and the need for standardized projects of similar scale are necessary for the microgrid market to scale up. The diversity of services a microgrid could provide hinges on flexible software configurations.

In a similar vein, Blue Pillar is marketing itself as an Internet of Things (IoT) solutions provider. It was ranked as the top company globally in terms of identified microgrid deployments in Navigant Research’s Microgrid Deployment Tracker last year. The company claims it can bring a microgrid online in a matter of months thanks to its rich library of data pertaining to different types of distributed energy resources (DER).

Many Different Labels

Interestingly enough, to software companies such as Spirae and Blue Pillar, the term microgrid is too limiting for what they do. For Blue Pillar in particular, its controls platform spans smart buildings to virtual power plants (VPPs) and could also be considered simply a DER management system (DERMS) solution. As Spirae has argued, these different labels—microgrid, IoT, VPP, DERMS—really don’t matter from a software perspective. The key to unlocking value that may be hidden within DER is a shift away from complex customized engineering to a more standardized and modular approach. Think like Uber, but deliver like Comcast.

To ABB, a plug-and-play microgrid is instead a hardware offering in the form of a containerized solution. These microgrids, primarily designed for rugged, off-grid applications, can be put together like Lego blocks and reach a scale of up to 5 MW. Beyond that size, ABB admits the microgrid becomes overly complex, requiring customized engineering.

ABB is fairly unique among the long list of multinationals seeking opportunity in the microgrid space with both a distributed controls approach and a focus on off-grid projects, where the company believes the value proposition is clearest. For example, in Australia or Alaska, the business case for renewables does not depend upon renewable portfolio standards, net metering, or carbon reduction targets.

Increasing Modularity

Taking the concept of modularity in microgrids even further from a hardware perspective is startup ARDA Power, which extolls the virtues of direct current (DC) microgrids. The beauty of DC is that not only does it allow a project design to reduce power conversion devices, which simplifies design and islanding, but it is also much easier just to plug in other DC devices such as solar PV and batteries, two technologies poised to increase as a portion of the microgrid resource mix in the future.

The first company to offer a plug-and-play microgrid was Tecogen with its combined heat and power units. It recently upgraded, with the ability to plug in solar PV or batteries on a DC bus, creating a hybrid alternating current (AC)-DC microgrid. Yet another company touting a plug-and-play microgrid solution is SparkMeter, which offers low-cost but incredibly robust metering solutions for energy access solutions in the developing world. Ironically enough, one can make the argument that metering is even more important in these kilowatt-scale systems, where payment for energy services is vital for business cases.

From hardware to software, AC to DC, combined heating and power to smart meters, the plug-and-play concept appears to be all the rage in the microgrid space.

 

Military Microgrids Could Be a Winner under New Trump Administration

— February 6, 2017

President Donald Trump’s preference for traditional energy fuels such as oil and natural gas—as well as large centralized coal plants—is clear. Yet, recent trends point to rapid growth in small, distributed energy resources (DER). These DER technologies range from rooftop solar PV panels to new kinds of batteries and from wind turbines to fuel cells. They become optimized by IT and software into smart networks such as microgrids and virtual power plants.

Navigant Research estimates that between 2014 and 2023, different forms of distributed generation (DG) will displace the need for more than 320 GW of new large-scale power plants globally. New DG capacity additions are expected to exceed new centralized generation capacity additions by as early as 2018. Nearly $2 billion is forecast to flow into the global market for DER over the next 10 years.

A Revival?

Despite what might seem to be a collision course between shifting US energy priorities and technology trends, there is a market where DER and other Trump priorities align: military microgrids. Don’t forget Trump is also focused on bolstering the US military as part of a strategy to address the threat of terrorism, so funding levels for the federal Department of Defense (DOD) may increase.

Interestingly enough, the nation’s new Secretary of Defense James Mattis has revealed that he is a big fan of microgrids, particularly those that integrate solar PV. Mattis’ point of reference is combat conditions, where high mortality revolved around supplying fossil fuels to combat missions in Iraq and Afghanistan. Also a factor is the value of reducing necessary fuel transport for forward operating bases and portable tactical microgrids. These perspectives could help revive a microgrid segment that has been lagging lately.

Challenges Remain

The combination of tight federal DOD budgets, complicated and bureaucratic procurement protocols, and a market closed to many microgrid innovators all combined to stain what was once seen as one of the best opportunities for microgrid development in the United States. As a result, many leading microgrid vendors that focused on the military segment 5 or 6 years ago turned their sights elsewhere, frustrated by the slow pace of development, complex contracting challenges, and the failure to integrate renewable energy purchasing with onsite base resilience priorities.

Other microgrid market segments, including community resilience and utility distribution microgrids, have received far more attention. Prime reasons being new state programs offering funding (such as in Connecticut) and a growing list of utilities investigating the microgrid opportunity, among them ComEd, Oncor, Duke Energy, and Con Ed. While high profile efforts to reinvent utilities such as New York’s Reforming the Energy Vision (REV) have achieved much attention, they have also been bogged down due to the challenge of negotiating new business models while delivering new kinds of grid services. (The departure of Audrey Zibelman, current chair of the New York Public Service Commission, for a new position as CEO of the Australia Energy Market Operator now raises questions about the prospects of such community-utility microgrid partnerships, as well.)

The Promise of Increased Efficiency

A study released earlier this month by Pew Charitable Trusts claimed that the US military could save $1 billion through the incorporation of microgrids, shifting away from a reliance on standby diesel generators. A good portion of these savings are based on increased efficiency through the better system management possible with a microgrid. Substituting natural gas for diesel and incorporation of solar PV are also part of the savings equation. Look for a renewed push on military microgrids over the next 4 years, both in the United States and abroad.

 

Winter Season Builds Business Case for Storage, Virtual Power Plants in California

— January 9, 2017

AnalyticsA little over a year ago, the underground Aliso Canyon natural gas storage facility began leaking. While the primary concern was how methane emissions might jeopardize public safety, this event also created a crisis in energy supply in Southern California. As it turns out, it became the largest methane leak in US history. By some estimates, the leak had a climate change impact equivalent to burning 1 billion gallons of gasoline. The value of the leaked natural gas has been estimated at more than $21 billion.

However, the leak from the gas field, which supplied fuel for a fleet of fossil fuel plants serving as one of the backbones of the regional power supply, also created an ideal market opportunity. The only way to fill in the gaps opened by the leak was through distributed energy resources (DER) that could be mobilized in short order. Among the innovative solutions are virtual power plants (VPPs) enabled by energy storage.

Distributed Solutions

The state moved swiftly. The California Public Utilities Commission (CPUC) made a bold decision, calling for a wide range of DER in late May. Fortunately, Southern California Edison (SCE) and industry providers were positioned to move fast, since contracts were already in place for over 260 MW of energy storage, 5 times the amount SCE had been required to purchase.

Last month, Stem was among the first vendors to deliver aggregated behind-the-meter, commercial-scale storage services. It was the first to pass eligibility tests for SCE’s local capacity requirements. The company has now dispatched the first of many distributed energy storage projects, all of which contribute to its forthcoming 85 MW fleet for SCE, arguably the largest mixed-asset VPP in the world.

The speed and scale for delivering products such as demand response (DR), energy storage, and VPPs are important, as the energy demands of the winter months place an extra burden on utilities for reliable energy supply across the country. Already, independent grid operators such as PJM are revising DR products in lieu of the shortage created by the so-called polar vortex 2 years ago. PJM’s new capacity performance product has created controversy, but its intent is to make DR a year-round resource. Integrating energy storage into such resources can help make that goal feasible. (Last December, the CPUC also strengthened its commitments to DER as a key solution set for year-round reliability.)

Ranking Vendors

Navigant Research released a Leaderboard report late last year ranking VPP software vendors. As an analyst, there is no better way to win friends (and create enemies) than to create a ranking of vendors. Another Navigant analyst wondered why Stem has not on the list. Needless to say, one could make an argument it belonged in the ranking; other vendors also protested their exclusion.

The truth of the matter is that the overlap is increasing between energy storage, DR, and VPP Leaderboards, so this latest ranking was limited to four energy storage firms in order to limit eligibility (with quotas also established for large technology vendors and pure-play software companies). Preference was given to those firms whose software managed onsite solar PV with batteries and loads at the distribution level and then aggregated these into VPPs. Stem is a VPP innovator, but its business model had focused more on demand charge abatement for commercial buildings without onsite distributed generation. Thanks to its abovementioned engagement with SCE, Stem is now certainly on my radar when it comes to VPPs and energy storage, joining a growing list of innovators.

 

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