Navigant Research Blog

Five Key Smart Meter Markets to Watch

— June 27, 2017

The adoption of smart electric meters by utilities is part of a long-term technology transformation to create a more intelligent grid. While the rate of adoption will vary by region, over time, smart meters will become the norm. In the advanced metering infrastructure (AMI) landscape today, some countries already have nearly full penetration of smart meters (Finland, Italy, Sweden), some are in the middle of large-scale deployments (China, United States), and the remainder are just getting off the ground (Egypt, Malaysia, India). While this industry is in a constant state of change, taking a look at some of the more active markets can help paint a picture of what the future landscape may be. Navigant Research identifies five of these key markets and discusses why market players should be paying close attention.

China, Undisputed Leader in Smart Meter Installations

  • The country has installed over 400 million smart meters through its state-run utilities, State Grid Corporation of China (SGCC) and China Southern Power Grid (CSPG), since beginning the program in 2012. While SGCC will wind down its utilitywide deployment in 2018, CSPG just began commercial deployment in March 2016. Driven by a mix of new (CSPG) and upgraded projects (SGCC), the Chinese smart meter market is expected to continue generating billions in revenue. The interesting question now becomes whether project opportunities will be extended to non-domestic vendors as SGCC begins demanding more advanced replacement units.

United States, Late Adopters Drive Post-Smart Grid Investment Grant (SGIG) Activity

  • Significant market opportunities remain, as the US market reached just over 50% smart meter penetration at the end of 2016. The majority of these project opportunities will be at the cooperative or public utility level, opening the door for cloud computing and managed service providers. Additionally, proven use cases and lessons learned during the SGIG program should help mitigate some of the challenges realized during earlier deployments.

India, Largest Untapped Smart Meter Market in the World

  • While most public distribution companies are still in the pilot project stage, the country’s utilities and government have made clear their goals of installing 50 million smart meters over the next 4 years. Although Navigant Research forecasts a more conservative deployment schedule than current government estimates, robust growth is still expected as the Ministry of Power forms relationships with meter manufacturers and the price of meters falls as a result of high volume purchase orders.

Malaysia, Use Case May Help Support Growth in Southeast Asia

  • When completed, TNB’s nationwide smart meter deployment may be one of the largest of its kind in the world. This project and the utility are significant, with a consumer base of 9.2 million customers and an annual customer growth rate of nearly 4% (more than 300,000 new customers a year). A March 2017 Brand Finance report ranked TNB #24 of Global Top 50 Utility Brands (and the fastest growing).

Egypt, A Chance to Jump-Start the Nascent African Market

  • In August 2015, it was announced that the Ministry had actioned a plan to convert an existing 30 million electric meters to smart meters over a 10-year period; the primary drivers being incorrect meter readings and electricity theft prevention. This target has since been reduced to 20 million smart meters over the next 10 years. Africa needs these types of deployments to get off the ground before regional economies of scale and proven use cases can be realized.

More information can be found in the newly released Navigant Research report, Global AMI Tracker 2Q17, which provides an analysis of global utility smart meter projects.

 

Best Practices for Residential Energy Storage Implementation

— June 27, 2017

A growing number of utilities are exploring opportunities to develop networks of residential energy storage systems throughout their grid. When properly developed, these programs can provide numerous benefits to both utilities and their customers:

  • Reduce peak demand—avoid transmission and distribution upgrades and costly peak generation
  • Integrate higher levels of distributed generation
  • Improve resilience for customers
  • Increase customer engagement and develop new products and services
  • Gain greater visibility into usage behind the meter

Given the multitude of potential benefits, residential energy storage is a growing topic of interest among utilities. Projects launched to date have taken different forms around the world depending on the specific needs of utilities and local market structures, such as those in New York, Vermont, and Australia. Working with a diverse group of utilities, Navigant Research has identified best practices for residential energy storage programs and organized them into three key categories: program design, customer adoption, and implementation.

Program Design

Key to any early stage residential storage initiative is establishing a program that is well-defined but highly flexible. These programs should be developed as if they were full commercial offerings, rather than solely pilot projects, with defined revenue streams and payback/performance targets. As the technology and business model are new to most utilities, it is important to allow for the program to evolve over time based on customer feedback and any technical issues that may arise. Program directors should plan to identify and implement lessons learned as they gain a greater understanding of the impacts and benefits.

Customer Adoption

It is important to ensure that presenting the program to customers is kept simple, as most customers are likely to be unfamiliar with distributed energy storage technologies and their value. Programs should be designed to target existing concerns or desires of customers. For example, many residential customers place a premium on the ability to have backup power. Some early residential storage programs have marketed their offering mainly as a backup power solution to customers. However, the systems will be used primarily as a tool for the utility to reduce peak demand and congestion in certain parts of the grid.

Implementation

When implementing and operating a residential storage network, the focus should remain on having a program that is both well-designed and flexible. By defining the necessary operating parameters and specifications, utilities can select the best vendors and products to meet their requirements upfront, limiting the need to add or change suppliers. A key aspect of this is determining the operating specifications for systems up front, while also planning for them to change over time. For example, identifying what percentage of battery capacity must always be held in reserve in case of an outage to ensure customers have backup power. Additionally, the optimal charging and discharging patterns to align with grid needs in each area is an important consideration. These types of parameters should be determined upfront; however, they are likely to change over time and program operators should have a plan in place to make the necessary adjustments.

The residential energy storage industry is evolving rapidly as new products and business models are developed around the world. New potential revenue streams for these systems, such as frequency regulation, may begin to emerge over the coming years. Ensuring that change and evolution are part of any program upfront will enable utilities to realize the maximum benefits of this technology while reducing the risk of stranding assets.

 

EnerNOC Loses Its Crown as the Last of the Pure-Play Public Demand Response Companies

— June 23, 2017

And then there were none. All the pure-play energy efficiency and demand response (DR) public companies have now been gobbled up by large industry players. First, Comverge went private in 2011 and was recently acquired by Itron. Then Opower was bought by Oracle in 2016. Now EnerNOC has been acquired by Enel Green Power North America (EGP-NA) for $300 million. It was no secret that this was going to happen, as EnerNOC had essentially put itself on the auction block earlier this year. The only suspense was who the buyer would be. I don’t know anyone that had EGP-NA in their betting pool. I saw EnerNOC’s CEO Tim Healy at the Edison Electric Institute’s annual conference in Boston last week, and he did a great job keeping his poker face on.

The likely scenarios seemed to include either being taken private by a private equity company, like what happened with Comverge, or being bought by a large vendor like General Electric (GE) or Schneider Electric. It was not probable that a US utility would be in the mix. But European utilities like ENGIE have been active in getting footholds in the US distributed energy resources (DER) market with more customer-facing solutions. EGP-NA had been one of the quieter ones. By adding the EnerNOC deal to its recent acquisition of energy storage software/project developer Demand Energy, EGP-NA has pushed itself toward the forefront of this market.

A Lot of Opportunity

EGP-NA has no existing DR infrastructure, so there should not be a lot of overlap in terms of personnel or resources. The move should help EnerNOC expand more quickly in the European markets. The press release on the deal quoted Healy as saying, “we look forward to accelerating the growth of our core businesses and to delivering ever more value to our customers as we lead the transition to a more sustainable, distributed energy future.” So it seems like there is a lot of opportunity for EnerNOC to pursue, but it will likely face integration risks as the deal gets consummated.

I am glad that it appears that EnerNOC’s main business and position in the DR industry will continue. I was worried that a private equity firm might pick it apart and sell the pieces. I look forward to seeing the company expand DR further around the globe.

On the downside, I won’t have any more exciting transactions to write about. I guess we’ll have to wait and see if all of these recent deals pan out in a few years or if the next wave of news will be the large players selling the smaller DER players after unsuccessful integration attempts.

 

Saving the Sun for Later: Opportunities and Barriers for Solar PV plus Energy Storage

— June 22, 2017

At the recent Better Buildings Summit, I had the opportunity to moderate a session with Karen Butterfield of Stem, Ben Myers of Boston Properties, and Jessie Denver with the City of San Francisco to discuss their strategies and experiences related to adopting solar PV plus energy storage. It was a spirited discussion and we received in-depth, informed questions from the audience on feasibility, system costs, lessons learned, and how to make the business case for project deployments.

Lessons Learned

Stem opened the session and provided many great lessons learned from its experience to date:

  • Solar PV plus energy storage can be applied to save energy costs and demand charges, but a concise site- and tariff-specific use case is required to make a project work.
  • Robust software is required to integrate building load, solar PV system performance, and battery deployment scenarios to generate cost savings.
  • Utility partnerships can improve project economics and help make the business case.

Boston Properties highlighted that, as part of its sustainability plan, it has installed solar PV at many of its properties across the United States and has reduced its energy charges. The company is now looking at solar PV plus energy storage to guarantee tariff-specific demand charges as well. While Boston Properties has yet to complete a project, it is in the process of negotiating contracts using a solar PV plus energy storage power purchase agreement with a shared demand charge savings component.

Whereas Boston Properties’ drivers were financial and sustainability, the City of San Francisco’s drivers are resilience and sustainability. The city recently won a US Department of Energy SunShot grant to study the feasibility of installing solar PV plus energy storage at critical facilities to provide power in case of an earthquake or another emergency. San Francisco is currently selecting pilot sites and completing its feasibility analysis. As part of the project, the city and its project partners have created a free online tool to help others assess the feasibility of using solar PV plus energy storage for resilience.

Growth of Distributed Solar PV plus Energy Storage

The topics and session discussion at the Better Buildings Summit highlighted several key issues that Navigant sees as important for the growth of distributed solar PV plus energy storage markets:

  • The ability of energy storage software platforms to forecast energy and demand charge savings for anticipated building load and battery deployment scenarios is critical to the business case for these projects.
  • The multitude of regulations and rate structures affecting both solar and energy storage, and their expected evolutions, will increase the value of project design and operating software by helping lower customer acquisition and development costs.
  • As with standalone energy storage deployments, the predictability of costs savings from these projects will further the development of financing innovation to drive the deployment of these technologies.
  • The value of resilience and resulting business case criteria will differ greatly between solar PV plus energy storage customers. For example, the resilience value of solar PV plus energy storage for commercial office building occupants differs from that for a municipality like the City of San Francisco. Building occupants likely have a business continuity plan to address long-term energy outages at their facilities while the city is charged with critical first responder responsibilities in the event of a disaster or emergency.
 

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