Navigant Research Blog

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.

 

New Utility Program Hopes to Stimulate Sustainable Energy Storage Growth

— February 17, 2017

There is considerable debate throughout the energy storage industry about what the optimal location is for energy storage systems (ESSs) to provide the most value. Systems can be installed either behind the meter (BTM) for individual customers, or located strategically on the utility side of the grid. While these two types of systems are typically designed for different purposes, the advances being made in storage software platforms are blurring the lines between these markets and the specific services they are able to provide. A recently proposed energy storage program from utility Consolidated Edison (Con Ed) is hoping to capture the most advantageous aspects of both approaches.

Although BTM energy storage has been a rapidly growing market over the past 2 years, a number of challenges remain that limit growth prospects. One of the major issues is that the value of an ESS varies considerably from one customer to another and across different regions. To realize a solid return on investment from energy storage, customers must have specific load profiles with enough variability to result in high demand charges and the willingness to invest in a relatively new technology. While opportunities to participate in competitive wholesale markets are often touted by vendors, actual revenue streams from these opportunities remain uncertain or entirely unavailable in many areas. As a result, excess storage capacity that could be used for participation in these markets is not built into projects, leaving economies of scale unrealized.

A New Approach

With its newly proposed energy storage program, Con Ed hopes to overcome many of the barriers facing BTM storage while also taking advantage of customer facilities to host new systems. Through this proposal, Con Ed will partner with developer GI Energy to deploy in front of the meter battery ESSs that will be located at customer sites. In exchange for hosting these systems, customers will be paid a set rate for leasing their space. This should make hosting storage a lucrative opportunity for a much greater number of customers, regardless of their energy usage patterns.

The utility believes this program will be able to realize much more value from a battery system compared to customers installing these systems on their own. By leveraging the utility’s support and third-party financing, Con Ed will be able to deploy much larger storage systems resulting in greater economies of scale. Additionally, these systems can be installed in select locations of the grid experiencing capacity constraints or other challenges to allow for the deferral of new infrastructure investments. These systems will also compete to provide services in wholesale markets when available, such as energy arbitrage, capacity, and frequency regulation. While a much greater array of values can be realized from these systems, the host customers still get what they are looking for—reduced energy costs.

Initially this program will seek to deploy four relatively large (1 MW) storage systems in select locations throughout Con Ed’s territory. However, if successful, this program could be expanded to all customers and potentially provide a framework for similar programs in other regions. There remains a number of details to be worked out through this program, including how exactly the systems and the services they provide will be paid for, how various services will be prioritized, and specifically how the utility will select which developers to work with. Despite the uncertainly around a few pieces of the program, Con Ed’s proposal is an innovative approach to stimulating sustainable energy storage market growth for the benefit of all stakeholders.

 

Dwindling Smart Sales Spark All-Electric Shift

— February 17, 2017

I first observed the smart car while traveling through Italy in 2006. Later that same year, the Da Vinci Code debuted back home in the United States, with smart deftly taking a page from Mini Cooper’s marketing playbook (playing starring roles in the likes of The Italian Job and Bourne Identity) by nabbing prime advertising space as Sophie Neveu and Robert Langdon’s escape vehicle. At the time, I considered the idea of this car revolutionary, in that it provided the space savings of a motorcycle partnered with the safety and comfort of a car.

Though the car didn’t seem right for me at the time, I figured if I was in a city my perspective might differ, and I wondered why that car wasn’t yet available in the United States. Two years later, in 2008, smart arrived and netted nearly 25,000 sales. That year was the company’s best in the United States, its second being the year immediately following. However, since 2009, sales have bobbed laggardly between 5,000 and 11,000. In 2013, smart joined the modern plug-in vehicle movement with the electric drive (ED) version of its offering. The ED has done relatively well, accounting for 17% of the brand’s sales since its introduction in the United States. Fast forward to the near future and the ED will likely account for 100% of the brand’s US sales, as Daimler is discontinuing the gas powered version of the vehicle in North America for the 2018 model year.

Gas Power Not So Smart Anymore

For the brand, sales are likely to retreat further. A refresh of the fortwo ED along with the expected range increase will probably encourage greater sales of the ED in 2017 than were witnessed in 2016. But the range increase isn’t substantial next to 2017’s new competitors like the Chevrolet Bolt, the Tesla Model 3, and more. Therefore, sales are unlikely to recapture smart’s small 5,000-11,000 sliver of the market unless a serious range increase or dramatic price cut is on the way for 2018.

Though the move will result in initial losses for the brand, it will likely benefit the parent. To start, sales of the gas-powered smart have receded, with a compound annual growth rate of -14% since 2012. The current low oil price environment isn’t going to change the trajectory here. Add to that the ever increasing range and affordability of plug-in powertrains in the microcar segment, and it was only a matter of time before the gas version could not find any willing buyers.

Additionally, canceling the gas-powered version while there is still some demand will increase the effect the ED has on the Daimler’s Corporate Average Fuel Economy and Zero Emissions Vehicle program compliance efforts. The regulations, designed as both stick and carrot, penalize automakers for noncompliance and reward others for overcompliance. Up to 2025, both programs’ sticks will become increasingly sharp, making the share of plug-ins relative to other powertrains a vital metric by which automakers maintain viability through their highly profitable, less fuel efficient offerings.

 

Carbon Tax Plan Proposed by Climate Leadership Council

— February 15, 2017

Climate change is a big area of political strife. It was during the election and remains so during the opening weeks of the new administration. While the major political parties generally disagree on the issue and the measures necessary for addressing it, climate change is not a partisan topic. On February 8, a group of Republicans proposed a tax on CO2 emissions in exchange for the repeal of other regulations on the industry. The proposal is led by James Baker III, former Secretary of State under President George H.W. Bush, and other members of the Climate Leadership Council. Founded by Ted Halstead, the Climate Leadership Council is an international research and advocacy organization with aims to organize global leaders around new climate solutions based on carbon dividends modified for each of the largest greenhouse gas (GHG) emitting regions.

The Proposal

The Carbon Dividends Plan is based on four main areas:

  • Gradually Increasing Carbon Tax: A $40 tax on every metric ton of CO2 would be imposed and increased steadily over time.
  • Carbon Dividends for All Americans: The estimated revenue of $200 to $300 billion per year generated from this carbon tax would be paid out to Americans through dividend checks, administered by the Social Security Administration. On average, a family of four would receive $2,000 under the plan.
  • Border Carbon Adjustments: The plan proposes border adjustments that would increase the costs of exports and imports to/from countries that do not have a comparable carbon tax.
  • Significant Regulatory Rollback: The majority of the Environmental Protection Agency’s (EPA’s) regulatory authority over CO2 emissions would be phased out, including an outright appeal of the Clean Power Plan (CPP).

The Importance

Many Republications, including President Trump, are publicly opposed to actions on climate change. The Climate Leadership Council is made up of a number of prominent Republications who are not only publicly in favor of action supporting the climate, but also have created a proposal to do so. Besides Baker and Halstead, authors of the proposal include Henry Paulson, Secretary of the Treasury under President George W. Bush; Martin Feldstein, Chairman of the President’s Council of Economic Advisers under President Ronald Reagan; George Shultz, Secretary of State under President Reagan; and N. Gregory Mankiw, Chairman of the President’s Council of Economic Advisers under President George W. Bush.

The Impacts

The plan would repeal the CPP put in place by President Obama to reduce carbon pollution and reduce the EPA’s influence on GHG emissions, and will likely see opposition. However, President Trump already plans to repeal the CPP, and while it is unclear if he will be successful, the Carbon Dividends Plan is not needed to assist in that repeal. While the dividends paid back to consumers help with the increased cost of energy, many can argue this would be better if used for increasing renewable energy. If the proposal is rejected and the CPP repealed without an alternative plan in place, it is unlikely actions on climate change will be taken at a federal level.

In June 2016, the House approved a non-binding resolution condemning the idea of a carbon tax. The measure passed 237-163 and was intended to make it more difficult for those that voted against a carbon tax to do so again. President Trump also opposes a carbon tax, believing that President Obama’s CPP was a regulatory overreach of power. It seems unlikely that the current administration and Republication-controlled Congress would vote in favor of such a proposal, although there is hope that some type of alternative could be offered in its place. No matter what the outcome of the Carbon Dividends Plan, there will be many arguing both for and against it.

 

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