Navigant Research Blog

Make or Break Time for Concentrating Solar

— March 28, 2012

The San Luis Valley in southern Colorado is a place of desolate beauty, roughly the size of New Hampshire, the driest high-elevation area in the United States.  It’s also becoming a proving ground for both wind and solar power projects, some of them of vast scale.  This week the Saguache County Board of Commissioners voted to issue a permit for a sprawling solar power facility that would generate 200 megawatts (MW) – three times the electricity of the three solar plants already existing in the Valley.

The San Luis project, being developed by Santa Monica, Calif.-based SolarReserve, is also noteworthy because it uses concentrating solar technology, which uses arrays of sun-tracking mirrors, known as heliostats, to amplify and focus the sun’s energy onto a fluid – water or molten salt – that is heated to make steam.  Covering 4,000 acres, SolarReserve’s plant will include two 656-foot towers surrounded by 1,700 acres of heliostats.  Although SolarReserve has a contract with Xcel Energy for 100 MW of transmission capacity on a nearby Xcel power line, it has not yet found a buyer for power from the complex.

A technology with potential advantages over conventional, photovoltaic-based solar power, concentrating solar power (CSP) has not yet fulfilled its promise and may be reaching a make-or-break phase in its development.  The San Luis Valley announcement came just as an auction was scheduled to sell off the assets of Maricopa Solar, a pilot CSP project built by Stirling Energy Systems, which went bankrupt last September.  The fact is that CSP, besides being a more potent form of energy collection, presents certain disadvantages as well, the most obvious being that many CSP systems require copious amounts of water to cool the mirrors and lenses – a significant downside in a desert environment like the San Luis Valley or like California’s Mojave Desert, the setting of the 392 MW Ivanpah plant being built by BrightSource Energy.  Dry cooling systems are becoming more prevalent, but are also more expensive.

BrightSource was also in the news this week as it filed for an initial public offering in which it plans to raise $182.5 million. Backed by Google and by power producer NRG Energy, BrightSource is also the recipient of a $1.6 billion loan guarantee from the U.S. Department of Energy – a fact that could become politically inconvenient once it’s a publicly traded company with millions in shareholder cash.  BrightSource already has 13 contracts to sell power to utilities including PG&E Corp. and Edison International.  The IPO is scheduled for mid-April, according to Bloomberg.

Several other companies including Acciona SA of Spain, German tech giant Siemens AG, and ABB Ltd. of Switzerland are trying to bring CSP to market.  Some of these companies recently launched a trade group called the Concentrating Solar Power Alliance to “educate” (i.e., lobby) U.S. regulators and lawmakers on the benefits of CSP technology.  By the time the nascent industry gathers in San Diego for the 4th annual Concentrating Solar Thermal Power conference, on April 18th and 19th, the near-term prospects for CSP are likely to be clearer.


A Road Warrior’s Guide to Smart Grid Security Conferences

— March 27, 2012

This time of year I often wake up thinking, “What city is this and where am I sleeping tonight?”  Last year I attended 15 smart grid conferences – probably five more than I needed to.  The trick is to find the ones with useful and unique content, and with a wide range of attendees.  Unless I pay attention to what I’m doing, I’ll see the same speakers giving the same presentations several times in quick succession.  That’s a depressing use of time away from home.

Here are some of my strategies for selecting conferences to attend.  They may work for you as well:

  • First, obviously, understand why you attend conferences at all.  For me as a research analyst, good networking is paramount.  Your needs may be different.
  • Have one or two Old Faithful conferences – events where you trust that the host will attract useful speakers, topics, and attendees.
  • Government-sponsored events can offer interesting speakers who may only be approved to speak at their events.
  • Attend some vendor-sponsored events.  The typical attendee at a vendor conference has little use for abstract discussions.
  • Do not attend too many conferences with similar speaker lists.

Some of the conferences I’m looking forward to in the next couple of months:

  • GridSec, March 27-29 in Irving, Texas (Dallas area).  Somewhat of an ‘old home week’ for me – a good place to catch up with many industry colleagues.  I will moderate two panel sessions.  Also this is the one conference during 2012 that I can attend without boarding an airplane.
  • ABB Automation and Power World, April 23-26, Houston, where I will lead two cyber security sessions.  This will be my first time attending an ABB conference.  I plan to spend a lot of time with my mouth shut, learning.
  • Industrial Control Systems Joint Working Group (ICS JWG), May 8-9, Savannah, Georgia.  Hosted by the U.S. Department of Homeland Security (DHS) and perhaps the only cyber security conference where you’ll see the FBI speak.  Registration is free, so if you live in the U.S. it’s a chance to see your tax dollars at work.

If you attend any of these events please find me and let’s have a chat.  You can always see which conferences I or the other Pike Research analysts will be attending on our Industry Events page.  If you haven’t already checked out that page, I will warn you – there is a lot of information.  Primary research is our currency, and, like any currency, we want as much as we can get our hands on.


Military Could Lead in Commercializing Clean Transportation

— March 27, 2012

The Department of Energy (DOE) loan program aimed at commercializing clean transportation technologies has been taking hits from all sides recently.  Loan recipients such as Fisker Automotive and Ener1, who have either had problems meeting deadlines or gone into bankruptcy, have become targets of opponents of subsidies for clean transportation.

Most recently, companies that have either been denied DOE loans (such as Carbon Motors) or have given up pursuing loans (Chrysler and Bright Automotive) have complained that the complexity and shifting milestones of the loan process did not give them a chance to be successful.  The fundamental flaws in the loan process are outlined in Earth2Tech’s Katie Fehrenbacher’s must read article.

I’ve also heard complaints about the political nature of DOE loans from industry sources who allege that campaign contributions and prior business relationships have influenced who gets a loan and who is left out.

A more basic question needs to be raised: should companies such as Tesla and Fisker that have been targeting very pricey vehicles that don’t scale to mass markets be eligible for DOE loans at all? It’s a long road from making a few luxury cars to the mass commercialization of EVs, so it’s not surprising that there have been some abandoned vehicles along the way.

DOE officials seem to have swallowed the applicants’ assumptions for the size of the markets and how quickly vehicles based on new technologies can be sold in volume.  Fisker, for example, planned on selling 15,000 Karmas, at nearly $100K a pop, per year.  That’s not realistic, especially when you consider that competitor Tesla Motors has sold less than 3,000 vehicles during its entire existence, and is considered a success.

Instead of supply-side funding, the federal government would get a much better return on its greenbacks if the demand side were addressed, starting with the government itself.  Rather than guessing what consumers will want in an EV, the military and other government fleets can specify exactly what they need, and select the most qualified companies to build them.  The government would no longer be preemptively picking winners and losers; instead, the joint forces of the DOE and the Department of Defense can work with the private sector to create vehicles and technologies that can become more easily commercialized.  (Ever heard of the jeep?)

The military is the very definition of the early adopter market that can afford to pay a premium for cutting edge technology before it goes mainstream.  And even if the price per vehicle is high, the government would still own a fleet of advanced vehicles that serves its purpose, which would be much more preferable to taxpayers than a stack of IOUs from defunct or struggling companies.

For example, the military’s research branch (TARDEC) has been working on the Advanced Vehicle and Power Initiative, a plan that would electrify its non-tactical vehicle fleet during the course of the next 20 years.  These vehicle-to-grid (V2G)-ready cars and trucks would give power back to the grid, and would enable the nation’s military bases to use much higher percentages of renewable power.  This plan for electrifying the fleet of nearly 200,000 would cost less ($4.6 billion) than the DOE has spent on transportation loans and research in development during the past three years, would reduce oil imports, and make the bases less vulnerable to attacks since they would be producing their own power and have energy storage at the ready.

The Obama administration appears to be realizing the greater return on investment of advancing clean transportation and clean tech in general through the military as outlined in the President’s recent state of the union address and budget proposals.  At the recent ARPA-E conference in Maryland, former president Bill Clinton, Deputy Secretary of Defense, Ashton Carter and ARPA-E Director, Arun Majumdar all called for greater collaboration between DOD and DOE to enable technologies that reduce fossil fuel consumption to become commercially viable.  As the nation’s largest single consumer of energy, the DOD can also provide critical input into the basic research that also needs continual funding.


Comverge Agrees to a $49 Million Buyout

— March 27, 2012

The news that Comverge has accepted a private equity buyout of roughly $49 million does not come as a surprise to anyone who has been watching this company over the last couple of years and hearing rumors about its financial and resource problems.  According to The Wall Street Journal, a recent filing with the Securities and Exchange Commission reported that Comverge’s independent auditor had expressed serious doubt as to whether the company could continue to operate due to lack of cash flow and debt-related issues.

The buyout by the private equity firm H.I.G. Capital will address these immediate financial and liquidity problems, allowing Comverge to continue its operations and to execute its strategic plans.  H.I.G. Capital is offering Comverge shareholders $1.75 a share well below its 52-week high at $5.09.  The Comverge board has approved the definitive agreement, which enables the company to seek other offers during a so-called 30-day “go-shop” period. As of the close of trading on March 26, the stock was up at $1.79 indicating that investors are expecting a higher offer.

Despite its financial woes, Comverge still runs a viable demand response (DR) business.  As one of the largest curtailment service provider (CSP) and outsourcer of residential DR programs in the country, Comverge had $136.4 million in annual revenues in 2011, representing a 14% increase from the previous year’s revenue of $119.4 million. Moreover, the company added more than 800 new megawatts (MW) under management and increased adoption of its enterprise software platform, IntelliSOURCE, with 22 utilities.  Comverge was also chosen by Gulf Power to double the country’s largest residential dynamic pricing program from approximately 8,000 to an expected 16,000 participants over the next four years.  Perhaps most important was Comverge’s recent $27 million international deal with Eskom, the largest electricity provider in Africa, to create and co-manage its first open market for DR resources.

Despite these achievements, which resulted in the company’s best performance ever, it was apparently not enough.  As Comverge’s president and chief executive officer, R. Blake Young, noted on March 15:  “Despite the strongest operational and financial performance in the company’s history, we still require capital to fund our operations, and the Board and management are working diligently on strategic alternatives for obtaining the required capital and financing.”

Pike Research does not believe that Comverge’s financial issues mean that the DR market is in trouble.  Some observers have claimed that the major CSPs are reaching their saturation level, having to seek new market opportunities in order to continue to grow their business. This does not indicate a lack of interest among end-users to participate in DR programs.  Indeed, both Comverge and EnerNOC have been able to increase their customer base as well as MW under management in 2011.  Although it may become tougher to recruit new customers once the low-hanging fruit is picked, there is still ample opportunity in the United States and in other countries to grow a DR business.  Let’s not forget that DR is more than just curtailing loads during peak events; it can accomplish a lot more as it addresses all the different ways that a utility, grid operator or CSP balances supply and demand of electricity by responding to the needs of the grid.  And with the increasing application of automated DR (Auto-DR) by utilities around the world to make it more cost-effective, more reliable, more predictable, and easier to  execute demand response than ever before, the growth prospects look strong.


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