Navigant Research Blog

A Comeback for Community Storage

— August 20, 2014

Two years ago, community energy storage (CES) was heralded as the most promising distributed storage market.  The market subsequently stalled when demonstrations failed to take off.  Originally, most utilities in the United States pared back on ambitious pilots due to high transaction cost.  Although the business-to-business model of community-level systems was appealing, North American utilities struggled to secure permission from homeowners to install systems and transaction costs skyrocketed.  System development for distribution transformers in North America was also costly, and this, combined with the high cost of customer engagement, killed all large-scale projects.

Now this model could be staging a comeback.  Toronto Hydro, along with eCAMION Inc., the University of Toronto, and Dow Kokam LLC, recently installed a CES system at the Roding Arena and Community Centre in Toronto, Canada.  The pilot project will allow Toronto Hydro to monitor the technology and will help validate its benefits to Toronto’s electrical grid.  This system uses 250 kWh/500 kW Dow Kokam lithium polymer nickel manganese cobalt cells, along with thermal management and controls from eCAMION.  The University of Toronto is managing the control, protection, and power management.

Small Is Beautiful

Situating storage near the customer provides several benefits.  First, it allows a utility to correct power quality where it matters most – near the customer.  Community storage can also help utilities maintain service during grid outages, at least for a few hours.  Finally, CES gives the utility information about what is happening at the edge of the grid, which is an important management tool.

More interest is developing in Europe, where distribution system operators are experiencing difficulty with behind-the-meter solar PV and instability from intermittent renewables upstream.  The United Kingdom is especially bullish, with several departments funding community storage.

Sharp Laboratories of Europe was awarded a grant of £396,541 ($661,858) from the United Kingdom’s Department of Energy & Climate Change to develop and scale up a new battery technology for residential energy storage and CES systems.  Electrovaya began delivering systems to Scottish and Southern Energy Power Distribution (SSEPD) in the second quarter of 2014 as part of an order for 25 distributed and independent energy storage systems.  The systems range in energy capacity from 12.5 kWh to over 80 kWh.  SSEPD has a separate community storage demonstration with S&C Electric that consists of three 25 kWh lithium ion units on the low-voltage network.

Europe is emerging as a leader in community storage by launching small pilots to test and prove the concept, instead of ambitious 80-unit projects.

 

Unknowns Narrow for Tesla’s Gigafactory

— July 31, 2014

Tesla Motors announced today that it has started civil engineering work at a site in Nevada for the eventual construction of its Gigafactory – a battery-manufacturing plant that will produce 50 GWh of batteries a year.  Broadcast in a shareholder letter that accompanied Tesla’s quarterly earnings results, the announcement confirmed some rumors but was still extremely short on specifics.   A lot of uncertainties remain about how, where, and by when the Gigafactory will be built.

The first issue is site location.  Tesla has said in the past that it will build the factory in one of five states: California, Nevada, Arizona, New Mexico, or Texas.  It has also said that it will begin development work on more than one site, choosing the eventual location from multiple contenders upon which initial civil engineering work has already been done.  Now we know that the Nevada site outside of Reno is one of those finalists.  Where is/are the other/s?  No word from Tesla on that, but it is pretty easy to identify the five top contenders.  That’s because the Gigafactory will need to be on a main rail line that connects with the company’s Fremont, California automobile factory.  It will also need to be near a large population center in one of those five states.  That leaves the following contenders:

  • Central Valley, California
  • Tucson, Arizona
  • Albuquerque, New Mexico
  • El Paso, Texas
  • Austin/San Antonio, Texas

You can expect the second site to be in one of those areas.  There is still one potential curveball that might come  from Tesla – the possibility that the Gigafactory will be composed of multiple sites: maybe a separator factory in one state, an electrolyte factory in another locale, and a final assembly plant in another.

More to Come

The other piece of interesting information still to be determined is exactly how the Gigafactory will be structured.  No blueprint exists for how to design a factory that is owned by multiple parties: it’s a unique concept that has never been tried before.  One day earlier, Tesla said that Panasonic will definitely be the manufacturing partner for the Gigafactory.  Now the questions are how will the ownership of the site and its equipment be divided, and who will be the other component manufacturing partners? Expect a number of announcements on that end to come out over the next several months.  Among the potential other manufacturing partners that Navigant Research expects to be chosen are a cathode material supplier (such as Nippon Denko or Umicore), a graphite supplier (Northern Graphite, Alabama Graphite), an electrolyte manufacturer (Ube, Sumitomo, or Nichia), and a separator manufacturer (Celgard, Ube, or Toray).  Other materials needed for the batteries, such as lithium carbonate, copper foil, and aluminum casings, will probably be made offsite and delivered by rail.

The final questions are when the Gigafactory will go online and when it will reach full capacity.  Tesla has already said that it hopes that those dates will be 2017 and 2020, respectively, but exactly how the ramp rate works will be interesting to see.  Panasonic has clearly stated that it will invest in the equipment for the factory in a staggered, conservative fashion.  That could lead to a much slower build-up to full capacity than the 3 years that Tesla is claiming.  Regardless of the details of the how, when, and where of the facility, Navigant Research believes strongly that the Gigafactory will be built and will be a successful, potentially revolutionary, manufacturing venture.

 

Big Savings from Replacing Diesel with Storage

— July 6, 2014

In my previous blog on diesel and energy storage, I discussed the payback period for energy storage in a remote microgrid.  What is the value of reducing diesel usage in a microgrid, practically speaking?

The table below illustrates the first-year savings of displacing 15% of the diesel generation in microgrids of different sizes using energy storage.  The average installed energy storage cost in this model is $2,112 per kW, and the assumption for the minimum cost of diesel fuel is $1.09 per liter, with the maximum cost in the model averaging $3.27 per liter.  Since the installation of storage is a one-time cost that occurs in the first year, the savings go up after that.

Size Distribution of Deployed Microgrids and First-Year Fuel Savings
at Low and High Diesel Costs: 4Q 2013

ESMG table

(Source: Navigant Research)

According to Navigant Research’s Microgrid Deployment Tracker 2Q14, 231 deployed microgrids have diesel generation capacity.  This means that 38% of microgrids have diesel gensets, and overall, gensets account for 11% of microgrid capacity globally.  Only 40% of the 79 microgrids above 10 MW include diesel generators, and smaller systems are less likely to have diesel generation.  Less than one-third of the microgrids below 500 kW rely at least partially on diesel.

Taking the example of a large microgrid system, because this is where the savings are the greatest, microgrids over 10 MW average 42.7 MW of capacity.

Still Too Costly

Assuming a microgrid does in fact have diesel generation, if a 42 MW microgrid replaced 15% of its total capacity (and assuming at least 15% of that capacity would be displacing diesel gensets) with storage, it could save between $10.9 million and $53.4 million per year after storage costs are recouped.  The total savings for all of the large microgrid systems in Navigant Research’s Microgrid Deployment Tracker would amount to $2.2 billion to $10.8 billion per year in diesel fuel using just 200 MW of energy storage.

So why is storage not more popular in remote microgrids?  Chances are it’s because $2,112 per kW installed is still not competitive in most markets where storage is displacing traditional power generation – even with the benefits of volume manufacturing.  Companies such as Samsung SDI and LG Chem are manufacturing lithium ion cells for the grid at great volume, but it’s still challenging to deliver competitive prices to the customer.  This is because a large portion of costs has nothing to do with the core technology, and instead is related to project management, system design and integration, and installation.  As more companies such as Bosch and Schneider Electric enter the market and bring power electronics and energy management expertise to the storage space, these costs will come down significantly, benefiting the entire supply chain. 

 

Tesla’s Patent Giveaway Paves the EV Freeway

— June 26, 2014

Tesla’s move to open up its patent portfolio is undoubtedly risky, and it could erode Tesla’s competitive advantage.  But the potential rewards outweigh the risks.  The thinking behind Elon Musk’s move is that by allowing the major automakers to use Tesla’s technology, it will help lead to Tesla’s ultimate goal: a comprehensive network of cars, batteries, suppliers, components, and charging stations that utilizes electricity for transportation.  In other words, since Tesla is one of the top electric vehicle (EV) players currently in the market, the company stands to benefit from a vastly expanded network of EV infrastructure based on Tesla’s technology.  The more people that are connected to a network of vehicles relying on electricity, the better it is for Tesla.

Rivals and Collaborators

BMW and Nissan have already expressed interest in collaborating with Tesla on their supercharger technology to potentially create global vehicle charging standards.  BMW has also reportedly considered lending its expertise in carbon fiber technology in exchange for powertrain development and supporting infrastructure.  A partnership between BMW and Tesla could prove to be very powerful, bringing together the highly successful Model S with BMW’s electric city car, the i3, and its soon to be released i8 plug-in hybrid supercar.  Currently, Tesla, BMW, and Nissan account for roughly 80% of the world’s plug-in electric vehicle (PEV) sales.

Car charging companies are also looking to benefit from the technology transfer, with Car Charging Group, Inc. announcing its intention to integrate Tesla’s EV charging technology into its Blink EV charging stations.  Car Charging Group is one of the largest owners, operators, and providers of EV charging services in the United States and is also the owner of the Blink Network, one of the most extensive EV charging networks.

On the Sidelines

While the patent release by Tesla will surely increase collaboration with the major car manufacturers already producing EVs, it’s much less clear that open patents will move the dial on the major automakers that have largely steered clear of EVs in the past.  Toyota, GM, and several other major players are hedging their bets on EVs, and Tesla’s patent release is unlikely to change their position.

Navigant Research’s report, Electric Vehicle Charging Equipment forecasts that cumulative global sales of electric vehicle supply equipment (EVSE) will reach 25 million units by 2022.  Increased collaboration between the major EV players could lead to this figure being achieved ahead of schedule.

Cumulative EVSE Unit Sales by Region, World Markets: 2013-2022

(Source: Navigant Research)

 

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