Navigant Research Blog

Eastern Approaches to Smart Grid Development

— November 20, 2014

Japan and South Korea have emerged as leaders in smart grid technology development and deployments.  On a recent trip to East Asia, I noted some similarities and some marked differences between the two countries’ approaches and styles.

At Korean Smart Grid Week in Seoul, I spoke about global demand response (DR) trends.  The Expo hall for the conference was as big as any I’ve seen, including large players like Korean Electric Company (KEPCO), Samsung, and LG exhibiting enormous booths and showing off cutting-edge technologies.  There were also a plethora of smaller companies and startups displaying their innovations to challenge the status quo and create the next-generation electric grid.

Next, I traveled to Jeju Island, the so-called “Hawaii of Korea.”  I got to enjoy the palm trees and volcanic landscape only by bus as we traveled to the Smart Grid Information Center, where KEPCO laid out its vision of the grid of the (not too distant) future.

Then we caught a quick ferry ride to tiny Gapa Island, which is only about 1 square mile in size but has an immense amount of solar, wind, and energy storage packed into a microgrid test bed, complete with a state-of-the-art operation center.

All of the Above

Next I embarked for Tokyo.  Japan is undertaking an “all of the above” energy strategy after the Fukushima Daiichi nuclear accident in 2011.  Restarting the country’s nuclear plants is still on the table, but Japanese companies and government agencies are also deregulating the retail electricity market and designing opportunities for renewables, energy efficiency, DR, and energy storage.

Both countries, and the companies within them, have a laser focus on energy storage as a key solution, which is not surprising given their level of technological advancement.  Grid-scale energy storage is still a few years away in the United States, but Japanese and South Korean vendors are intent on leapfrogging Western suppliers and exporting their expertise.

Hare and Tortoise

The two countries’ business cultures, however, are quite divergent.  South Korean companies tend to take an aggressive, American-style approach to forming a plan, executing on it, and tweaking it along the way.  For instance, the country opened its DR market in November after a relatively short design phase, and U.S. provider EnerNOC has already entered the fray.

Japan, on the other hand, has been studying DR for a few years and it will take a couple more years of pilot programs until the market is ready.  Japanese firms tend to take a much more measured approach to development, trying to perfect the model before setting it free.  In the long term, both methods may work; but in the short term, the real action is in South Korea.

These developments are outlined in the new Navigant Research report, Demand Response for Commercial & Industrial Markets.  The report was actually published while I was abroad, so it includes updates from the trip.


Non-Profit Solar Offers Hope for Developing Economies

— July 31, 2014

At the Lungra Health Clinic in the remote western region of Nepal, overhead lights now illuminate the operating room for the first time.  Midwives at this facility are grateful that they no longer have to use flashlights held between their teeth to deliver babies.  The recent installation of an off-grid solar PV system allows the healthcare providers at the Lungra Health Clinic to work through the night and store lifesaving medications and vaccines.

During the coming decades, developing countries will represent some of the most lucrative markets for solar PV.  Many of the largest global solar companies are devoting significant resources to understanding and developing products for these markets.  Moreover, the people who live in these areas will benefit from solar development more than developed world consumers.  In developing countries, solar power is often not a replacement for conventional grid power; it’s the only source of electricity available.

Some of the same factors that make these areas attractive for solar development, though, also create obstacles.  The lack of basic infrastructure, absence of established electricity markets, and spotty government policies to incentivize development make doing business in these areas extremely difficult.

Seeding Solar

A possible path forward to address many of these challenges has emerged from a global solar leader, SunEdison, which has helped launch a non-profit organization called SunFarmer.  The mission of this organization is “to make solar power accessible to the 300,000 hospitals worldwide that lack access to reliable energy.”  Using seed money from SunEdison combined with private donations, SunFarmer has already installed off-grid PV systems at six health clinics in Nepal, including in Lungra.

SunFarmer covers the upfront cost of installing the system and collects rental payments from the local organizations over a set period – until the initial investment has been paid off.  All rental payments are then recycled to install more systems where they are needed most.  SunFarmer uses only high quality components and provides operations, maintenance, and monitoring services throughout the life of the project.

While the obvious benefits of providing clean and reliable electricity to those who need it most is SunFarmer’s primary motivation, these ventures deliver additional value to the parent organization, SunEdison.  Establishing viable businesses in a mountainous and poor country like Nepal requires trial and error.  The SunFarmer program will provide valuable insights and experience for SunEdison with minimal risk as it attempts to expand its international footprint into more challenging, emerging markets.

Extreme Renewables

Once developers have established a viable solar business model, local stakeholders – including electricity users, grid operators, policymakers, and commercial lenders, all of whom are essential to a truly sustainable market – will enter the market.  The risk of lending to the first solar project or signing the first power purchase/lease agreement is much higher than in subsequent deals.  SunFarmer will work with local residents to educate them on the technical aspects of distributed solar generation.  The ultimate goal is to give locally owned solar companies firsthand technical experience with installing and maintaining remote power systems.

It will be interesting to see if this type of program is replicated by other large renewable energy providers looking to establish a presence in emerging markets.  Pioneering non-profit renewable energy ventures can create goodwill for the parent company, as well as an opportunity to put its technical expertise and business model to the test in the most challenging environments.


Southeast Asia: Laggard or Promising Challenger in the Smart Grid World?

— June 9, 2012

Recently, I returned to Bangkok so I could participate in one of the largest regional conferences, Metering, Billing / CRM ASIA 2012.  The conference was designed to provide industry and market insights for metering stakeholders in Asia.  Participants examined the status of regional metering, reviewed metering strategies and plans, and looked at case studies of successful industry projects from various angles.  Most participants represented either Asian or international utilities and included key solution providers involved in metering, billing, and IT and data management for power utilities.

If I had to choose one phrase to illustrate my impression of the conference, I would say that it was “up-to-date”; it covered the key parts of smart metering in Southeast Asia (SEA), offering many opportunities for sharing knowledge.  Participants in the event could find realistic approaches for tackling the challenging issues facing smart meter deployments and get ideas for overcoming barriers.  Those are probably the common goals of industry leaders in the region.  Presentations and discussions covered crucial and key issues such as ”what is important to keep in mind when deploying meters?”  The exhibitors and market stakeholders at the event were passionate in their discussion of these issues.

At the conference, I presented Pike Research’s view on smart grid and meters, in a presentation entitled Southeast Asia Smart Meter Market Overview, including market forecasts for smart meter penetration rates.  I also moderated a roundtable session for smart grid leaders that included seven panelists from SEA utilities, who discussed their current status regarding smart meter uptakes and market challenges.  Key points from that roundtable discussion follow.

Conventional wisdom suggests that smart grids and smart meters are a viable option for the developing world.  That is partly true, at least at present and over the next couple of years.  Through my participation at the conference and talking with many participants, I had an opportunity to expand my perception of the market as well as my views.  SEA countries aspire with similar urgency to smart grids and AMI in their aging grids because they are driven by common social and economic purposes.

In recent years, SEA has continually demonstrated economic growth and urbanization.  Given its huge potential and its continuing growth, a large part of SEA’s growing electricity demand mirrors the region’s urbanization and increased industrialization.  Those factors have a direct impact on SEA’s growing need for electric power.

Yet, nations in the region face the dual challenges of underdeveloped electric infrastructure and power grids, as well as a lack of capital and technologies to make advances in power grid services.  As of now, SEA governments and industries find themselves struggling to keep pace with the new trends in global clean energy development while they actively address the need for sufficient electricity.  Their intentions to upgrade their power grids are surely sincere.  Not surprisingly, some emerging countries such as Thailand, Malaysia, Indonesia, and the Philippines have recently been driving concrete national roadmaps that embrace smart grids.  Their intention to adopt these roadmaps is primarily based on managing power more efficiently and effectively.  With the advent of a robust grid communications infrastructure, additional intelligence can be deployed throughout the grid, for example, with AMI, whereby customers make decisions about energy consumption.

Yet, challenges still exist.  Most of the region’s developing nations face a lack of electric power sources and aging and inefficient grid infrastructures.  Rural electrification has been an important factor in the policies of these nations as they attempt to improve living conditions for people in remote areas by increasing food production, developing agro-industry (and other types of industry), providing lighting to rural residents, and generally stimulating productive activities.  Multiple sources of capital and technology assets are necessary for upgrading and meeting demands – and those are the factors most lacking for these nations.

Also at the roundtable, I learned about some of the driving forces behind Southeast Asia’s smart grid appetite.  Utilities in the region are pursuing fragmented and different goals depending on how far along their national grids are in pursing smart grids or smart meters, or both.  Overall, utilities and market stakeholders in the region are pursuing one (or both) of the following:

  1. Energy efficiency focus (such as load balancing and efficient grid management)
  2. Revenue protection focus (such as theft prevention and reduced billing errors with smarter metering solutions) in their frameworks, in association with conceptual and functional models in smart grids.

Pike Research will soon publish a new report on “Smart Grid in Southeast Asia” in which I scrutinize market and business issues, barriers and challenges, technology issues, and detailed country status and smart grid/meter deployment plans, including market forecasts from 2011 to 2020.

Southeast Asia is no longer a benchwarmer and will make its best effort to drive a “smarter” grid infrastructure.


Hawaii Becoming a Test Bed for Clean Technology

— March 1, 2012

Earlier this month, the government of Hawaii and Korean partners (the Republic of Korea Ministry of Knowledge Economy and the Korea Smart Grid Institute) signed a letter of intent to pursue mutual interests in smart grid development in the Hawaiian Islands.  While the project scope and specific practices for the Hawaii project are not clearly defined in the announcement, it’s safe to assume that projects included in the Jeju Island smart energy program, including smart meters, renewable energy development, and electric vehicles, would be implemented in Hawaii.

Hawaii comprises more than 120 scattered islands and is far from the nearest mainland (1,860 miles).  Electricity is expensive, and Hawaii is the most fossil fuel-dependent state in the nation.  Thus, the need for switching to renewable sources of energy is as much an economical imperative as it is an environmental one for the islanders.

With regards to policy, Hawaii is deeply committed to developing a clean-energy economy.  The island state has made great progress in aligning regulatory policies with clean energy goals; encouraging development of next generation, clean energy technologies; and deploying renewable generation and grid infrastructure.  As a result, the state has been building energy efficiency, increasing photovoltaic capacity, and creating green jobs.  The following figures show how much Hawaii has been deploying clean-energy technologies relative to the other 49 states.

Further, the state has bold goals: to achieve 70% of its energy from renewable sources by 2030.  Hawaii aims to serve as a clean energy model for the U.S. and for the world. As the graph below indicates, 66 renewable energy projects are currently in progress and more are in development in bio-energy, geothermal, hydro, solar, and wind, etc.

I’ve written several blogs about the Jeju projects.  As of now, over 170 Korean companies are engaging in specific projects, including advanced metering infrastructure (AMI), electric vehicles, solar and renewable generation, and energy storage test beds.  In the case of AMI, 6,000 household are participating in a smart meter test. The Ministry of Knowledge and the Smart Grid Institute are leading the project with investments totaling more than $240 million between 2009 and 2013.

In fact, South Korea is an exceptional country. With a sole utility service provider – KEPCO – and its current advanced electricity grid capabilities, South Korean camps are targeting oversea markets, rather than domestic markets, from the first phase.  Focusing on overseas smart grids markets will help Korean players find more lucrative opportunities.  Thus the partnerships with Hawaii should help Korean providers gauge their current capabilities by applying Jeju’s outcomes in a similar environment in the United States.  Jeju and Hawaii both have clean, year-round, and renewable energy resources, including abundant sun and wind.  Tourism is the major industry in both places, and Hawaii and Jeju both hope to maintain their unique ecosystems with clean energy sources.

Japanese partners already initiated a joint U.S.-Japanese smart grid demonstration project in November, 2011 on Maui. Those two projects with Asian players could make progress to achieve Hawaii’s goals.


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