Navigant Research Blog

Younicos, Samsung Build Battery Parks in Germany

— June 2, 2013

The motto of Berlin-based microgrid vendor Younicos is “Let the fossils rest in peace.”  In a previous blog, I discussed the practical viability of creating 100% renewable energy systems, including microgrids.  Younicos is among the companies that purport to be able to create such systems, thanks to the robustness of its smart bi-directional inverter, which eliminates the need for a fossil prime mover within a microgrid, and to careful selection of appropriate energy storage technologies.

While the company’s microgrid efforts are focused primarily on remote systems ‑ such as the 3 MW pilot project on the Portuguese island of Graciosa, designed to achieve 75% renewable generation ‑ the company has also recently marked several major milestones with grid-tied applications, some of which also feature the ability to disconnect from the wider grid.

Younicos has already deployed a 1.2 MW battery park for the Swedish utility Vattenfall in Berlin, which has been providing grid balancing services since December 2012, the first grid-tied system prequalified to provide frequency response in Europe.  Frequency response is a vital ancillary service in regions where the high penetration of renewables places stress on power quality.  This initial hybrid battery park project relies upon both sodium sulphur and lithium ion battery technologies.

Replacing Fossil Fuels

Last month, on Earth Day, the company announced a major partnership with Samsung SDI to deploy Samsung’s lithium ion battery in projects with an exclusive system integrator agreement for grid-tied battery parks in Germany, Austria, Switzerland, and other European markets.  With Samsung SDI providing a unique 20-year performance guarantee, the new partnership will soon have bragging rights to the first standalone 5 MW/5 MWh battery park in Germany for WEMAG, a municipal utility serving West-Mecklenburg that currently relies upon wind and solar for 80% of its power generation.  Ideal for addressing the volatile nature of distributed renewables that rely upon feed-in tariffs, the system is expected to be commissioned in June 2014.

This enhanced battery park will be able to not only adjust the frequency of the utility grid, but also provide voltage control, black starts, and short circuit power, services previously provided inefficiently by fossil generation sources.  In fact, the battery parks can respond to grid signals in less than 10 milliseconds, which is 3,000 times faster than conventional approaches.

According to Samsung and Youncios, the ideal size for these battery parks is actually 10 MW/10 MWh, and they can be financed solely on the basis of revenues from frequency regulation and other ancillary services.  This is yet another new business model for smart grid/microgrid applications, providing further evidence that high-penetration renewable energy systems are grounded in real demand from emerging markets for grid reliability services.


Energy Storage Gets a Boost in California

— June 2, 2013

Upfront capital expense is often cited as the most important barrier to adoption of energy storage – particularly for business and residential customers.  Technology vendors tend to clamor for adoption subsidies and bemoan the dearth of incentives on offer for energy storage.

One market with strong subsidies for energy storage is California.  The state encourages the adoption of wind up to 3 megawatts (MW), together with energy storage systems (ESSs) up to 3 MW, through the state’s Self-Generation Incentive Program (SGIP).  According to the SGIP, “advanced energy storage” systems “convert electricity into another form of stored energy and then convert [it] back to electricity at another time.”

ESSs became eligible for SGIP incentives in 2009.  The storage must be coupled with an eligible technology, currently limited to fuel cells and wind turbines, and must be able to discharge at rated capacity for a 4-hour period, minimum.  Unfortunately for electrolyzer companies, hydrogen is ineligible.

The minimum system size is 30 kilowatts (kW) for the generation capacity, and the advanced storage system may be no larger than the rated capacity of the generation asset.  Smaller systems within the 30 kW to 1 MW power rating are preferred, and these have the highest subsidy per watt.  Advanced storage systems from 30 kW to 1 MW receive a $2 per watt incentive, which is prorated at $1 per watt from 1 MW to 2 MW systems, and down to $0.50 per watt from 2 MW to 3 MW.

A Bigger Slice

Since 2009, ESSs have gone from representing a tiny fraction of the SGIP to a significant investment on the part of California.  In 2009, one application out of 30 was for energy storage, representing 8% of the capacity funded and 5% of the total subsidies awarded.  By 2012, advanced energy storage represented 83% of applications (out of 590 applications total).

California is one of four markets that offer a subsidy for adopting energy storage.  The other four are New York, Germany, and Japan.  California has one of the longest-running programs, and is also one of the broadest.  Energy storage is taking a bigger and bigger piece of the pie where the SGIP is concerned – even though the average size of the projects is relatively small.

As is evident from the chart below, the budget for the SGIP varies wildly.  However, between California’s AB2514 (which effectively provides an renewable portfolio standard for energy storage) and the SGIP, which provides a funding mechanism to ease the financial burden of adopting storage, California is well positioned to benefit from energy storage.

SGIP Spending by Technology and Advanced Energy Storage Capacity, California: 2009-2012

Energy Storage Gets a Boost in California

(Source: Navigant Research)


Microgrid Merger Highlights New Business Models

— May 28, 2013

The market for microgrids is attracting increasing attention from a variety of institutions, ranging from state governments such as New York, which is requiring an islanding functionality for new combined heat and power (CHP) facilities funded by the New York State Energy Research & Development Authority, to the World Bank, which is seeking clarity on new business models that wrap remote microgrids around cell phone towers popping up in Africa, India, and the rest of the developing world.

One of the least noticed, but significant, developments in the microgrid arena for North America, the global hot spot for grid-tied microgrids, is the recent merger between Horizon Energy Group and Green Energy Corporation.  While large players such as General Electric, ABB, Siemens, and Lockheed Martin – just to name a few – tend to grab the headlines, I find the smaller players in the space the most interesting.  Why?  Unburdened by selling legacy systems, they can come to the microgrids controls challenge with a fresh approach.

Shipyard Grid

Both Horizon Energy (including its sister company Horizon Microgrid Solutions) and Green Energy Corporation have been working out a software-as-a-service concept for microgrids, so the merger makes sense.  Furthermore, both companies are committed to an open source controls platform.  Perhaps the most unique differentiator for the new combined company is its application of the power purchase agreement (PPA) model that has fueled the recent boom in solar photovoltaic (PV) systems to microgrids.

The vast majority of microgrids tracked in Navigant Research’s Microgrid Deployment Tracker are either funded by government agencies or academic institutions as R&D projects, or by the asset owners themselves.  The newly expanded Green Energy Corporation will instead serve as an integrator/developer, absorbing any performance risk for the microgrid while taking care of the financing.  The combined company claims in excess of 15 projects on the drawing board, with one 11-megawatt (MW) project in Connecticut under current development that incorporates diesel, CHP, solar PV, small wind, and advanced energy storage, and which will save significant money over the long run.

Savings for Connecticut Shipyard Microgrid

(Source: Horizon Energy)

I had lunch with Steve Pullins, a microgrids guru and the former president of Horizon Energy Group, at an Infocast microgrid conference occurring in Arlington, Virginia on April 29th.  Unlike some firms quickly expanding their portfolios of microgrids by focusing on high value aggregations of existing fossil assets, such as Blue Pillar, his efforts with Horizon have focused on retrofits that green up operations and also rely upon sales of ancillary services to utilities as part of the business model.  Pullins claims the sweet spot for grid-tied microgrids is 2 MW to 40 MW.  Anything smaller, and microgrids don’t really pencil out – unless they focus on renewables.

While it may seem counter intuitive, Pullins claims the lack of maintenance and ongoing fuel risk exposure with diesel generators or natural gas-fired capacity adds uncertainty and cost over the 20- to 25-year life of the microgrid PPA.  With solar or wind and storage, the operating costs are minimized for projects as small as 500 kW.



Davids, Goliaths Collide in the Fuel Cell Industry

— May 28, 2013

The fuel cell industry has seen numerous tie-ups, acquisitions, and investments in the last 6 months.

This industry covers a huge range of applications across the stationary, portable, and transportation sectors, so trying to discern broad industry trends is a bit of a fool’s errand.  Nevertheless, two things jump out about these moves, and they tell two very different stories about the state of fuel cell markets.

One is the strength of the “pure play” fuel cell companies over the large multinationals.  Ballard, Plug Power, and ClearEdge are all focused exclusively on fuel cell technologies, in contrast to UTC and the auto OEMs.  Large companies would seem to be at an advantage in an emerging market because they have the resources to wait for the market to develop.  In my analysis of EV charging equipment vendors, for example, I noted the strength of the large multinationals who are able to wait out the early days of the electric vehicle supply equipment (EVSE) market while demand ramps up.

Pay to Quit Playing

But the pure play companies are rather more, ahem, motivated to find a way to make the market work, and will tend to be more flexible and nimble.   In the case of ClearEdge, you have a very small fish swallowing up the fuel cell assets of a very big fish, UTC Power.  Even odder, United Technologies was so anxious to shed its fuel cell business that UTC actually paid ClearEdge to take it.  It seems that UTC simply lost patience with the slow development of its two target markets, prime power and buses.  (UTC’s bus business thus far is a casualty of this deal, as it does not appear to fit into ClearEdge’s business plan and, to date, there has been no announcement of a buyer.)

One conclusion here is that whether a large conglomerate persists in an emerging market depends on whether it sees the new technology business as complementary to its core business.  In the case of multinationals in the EVSE market, EV charging becomes one more offering in its portfolio, serving its existing customer base.  For UTC, although the company had long-standing expertise in fuel cell technology, executives are increasingly focused on its aerospace, elevator, and cooling products.

The second story is about another group of large multinationals – the automakers.  Practically speaking, it is challenging for a dedicated fuel cell manufacturer to compete in the passenger car market – just look at the troubles that battery vehicle companies have had.  The global auto companies are able to spread their bets among a range of clean technologies.  However, they are finding the pathway to a cost-competitive FCV challenging to navigate.  Thus Daimler’s partnership with Nissan and Ford, which will allow the companies to order components at much higher volume and spread their costs among more vehicles.  Unfortunately, Daimler has also pushed back its commercialization date from 2015 to 2017.  Let’s hope that this deal, along with the Toyota-BMW and Volkswagen ones, does not turn out to be a paper-only partnership that never sees real products introduced.

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