Navigant Research Blog

Natural Gas – Boon or Bane for Smart Energy?

— May 16, 2012

The first Pike Research Smart Energy Annual Report is due out soon (Q2 of 2012), and in it Pike Research calculates the size and value of the global smart energy market in 2011.  We define smart energy as “the range of efficient technological options available to providing electricity in a distributed fashion, either for local use or for grid support,” covering renewable energy, biopower, energy storage and advanced conversion technologies such as fuel cells and CHP technology.  But we don’t cover developments in the natural gas market.  Why? Because it remains unclear whether the developing natural gas market in the US will harm or help the smart energy market.

Daniel Yergin in his article for CNN is cautiously optimistic that in the US natural gas will not crowd out the developing renewable energy market, but will more likely replace and then displace coal and nuclear for power production.  In Europe I believe that governments are starting to move away from the dash-to-gas due to the increased geopolitical tensions caused by the location of most of natural gas reserves.  In Austria, for example, the region of Güssing has a policy of 100% renewable, locally produced, power.  As I covered in the past in an article for Fierce Energy, this includes 50 MWs of distributed fuel cell power using locally produced biogas.  The United Kingdom has taken a slightly different approach, and has to date limited the use of hydraulic fracturing, or “fracking,” due to the increased incidences of minor earthquakes in the vicinity of a nuclear waste storage facility.

But how will the surge in natural gas supplies affect the overall smart energy paradigm – the production, storage and use of efficient, distributed power?  From my own personal perspective it’s likely to be a good thing.  Over three quarters of all fuel cell systems deployed today use either natural gas or a form of fuel in which natural gas is the main component.  The addition of natural gas-powered fuel cells will in some cases help a renewable installation in the same grid system win contracts, as it can guarantee steady, predictable baseload power.  A win-win surely and a prefect example of the systems based approach that we see rapidly developing in the smart energy market.

One scenario we could see developing is utilities providing smart energy systems, rather than electrons and heat, where a package that combines a natural gas-fuelled fuel cell, solar and wind capacity, and an advanced battery for hydrogen-based storage are deployed together in a turn-key system.  This could be everything from 1-5-kilowatt (kW) systems for homes right up to 50-100 megawatts for communities or towns.  Joining the dots in this way will increase the overall efficiency of the power and heat production network, and emissions will decrease.  So, note to self: Next year in the 2013 Smart Energy Annual Report – include natural gas.


Will EPA’s Tough New Coal Rules Survive?

— May 8, 2012

Aiming to reduce greenhouse gas (GHG) emissions from coal-fired power plants, the Environmental Protection Agency (EPA) recently released its “new source performance standard” to sharply limit such emissions from coal plants that will be built in the future (the standard does not apply to plants constructed in the next 12 months).  The new rules will allow existing coal plants to continue to operate, though EPA could eventually issue standards to reduce carbon pollution from these plants, too.

In June 2011, the Supreme Court declared that the EPA has the authority to curb greenhouse gas (GHG) emissions under the Clean Air Act.   While the EPA determines new source standards, it shares the responsibility to do so with the states for existing sources.

The “new source performance standard” requires that new plants meet a specified emissions rate that is both technically feasible and economically viable. Although the standard does not dictate which fuels a plant can burn, it essentially requires that new coal plants cut CO2 emissions by 50% to match emissions from natural gas plants.

Coal power plants are the nation’s largest source of GHG pollution, emitting almost 1.9 billion tons of CO2 equivalent into the air every year.  Nevertheless, the EPA continues to be challenged by various political groups and factions of the coal and power industries who are determined to derail its new standard.  Some claim that EPA’s rules will cause power shortages and blackouts, but the Department of Energy has concluded that the nation’s need for increasing supplies of electricity can be met by a combination of renewable resources, natural gas plants, and much improved energy efficiency measures and demand response systems in commercial, industrial, and residential sectors.  The tools to meet our growing appetite for electricity are available; the question is whether the tough new limits on new coal plants will survive.


Europe’s Severe Energy Burden

— April 11, 2012

Countries in the Organization for Economic Cooperation and Development – i.e,. the developed world – will be decoupling economic growth from energy consumption over the next 25 years or so.  Non-OECD countries, in contrast, will be responsible for most of the increase in energy consumption globally, and the most important driver for this increase will be economic growth.  Burgeoning middle classes in many of the non-OECD countries will adopt energy-intensive lifestyles similar to those found in high-income economies.  The absolute cost of energy is bound to increase over time, and the burden on infrastructure will expose frailties in grid infrastructure that were easy to ignore before.  The end of the world is nigh.

Or maybe not.  Economies such as Germany, France, the United Kingdom, and the rest of Western Europe fall into the OECD classification, along with other major economies such as Japan, Australia, Korea, Canada and the United States.   These countries make up a staggeringly large percentage of the wealth in the world, and the majority of these countries are planning to use less energy  The key to doing less with more is to improve efficiency and energy storage improves the efficiency of the grid as a system.  Therefore, in the broad terms, the answer to the question “Why do we need storage?” is illustrated by the chart below.

Europe, or more specifically, the European Union is in an even more difficult position than North America or OECD Asia thanks to the federation’s 20/20/20 initiative – and even more ambitious targets are on the table for 2050.  Truthfully, EU policymakers have seen the writing on the wall in terms of non-OECD economies’ voracious appetite for energy over the next 10 to 40 years.  Resources will become scarcer, efficiency will be king, and energy diversity will mean energy security.

In true European Union fashion, the Commission gives a guideline for Europe to follow and then works with individual countries to develop specific targets for each nation that take into account that country’s resources.  Once targets are agreed upon (or rather, negotiated), it’s up to each national government to decide how to reach the targets.  It comes as no surprise, therefore, that there are such great disparities between countries and targets.

Countries such as Sweden will rely heavily on biomass whereas Germany and Denmark will rely significantly on wind and even solar.  Hydro will undoubtedly play a large role in reaching the 20/20/20 targets, which will include a significant amount of pumped storage.

Some of these projects will expand upon existing hydro and pumped storage installations.  However, hydro and pumped storage still require a long lead time for permitting – we would expect that a quarter to a half of the capacity additions for hydro and pumped storage will in fact be in the form of upgrades of existing facilities.  Thus, solar and wind (along with other renewables) will continue see significant uptake, as it’s easier to add incremental capacity to these resources.

The chart below shows the stark difference in the renewables burden on each country within the EU.  Countries such as Sweden and Latvia stand out because of their impressively high renewables burden.  However, the greatest opportunity for energy storage will be provided by the countries that show the highest disparity between 2008 shares and 2020 shares.  These include Belgium, Denmark, Germany, Ireland, Greece, Spain, France, Italy, Cyprus, Malta (N.B. small island nations present their own special value proposition for energy storage), the Netherlands, and the United Kingdom.

Europe’s energy burden is severe, but as a result, the continent will lead the way in innovation.  Europe has been known to take the long view on economic issues, and the 20/20/20 initiative is a classic example of ambitious, long-term policymaking.  Other major economies plan on time horizons ranging from every two years (the United States) to every five years (China); in many cases, this does not give the market the clear signals investors require in order to invest in long-term projects.  One of the benefits of Europe’s energy burden is that it gives the cleantech industry a clear signal that Europe is open for business.


Denmark Aims for 100% Renewables by 2050

— April 3, 2012

For such a small country, Denmark certainly knows how to do sustainable energy in a big way.  Late last month the Danish Parliament passed the most ambitious renewable energy goal in the world.  By 2050, the country’s entire economy will be powered by renewable energy.  Given Denmark’s reliance on variable wind power, in order to accomplish this goal the smart grid will need to play an increasing role in aggregating and optimizing the country’s energy resources.

Already, Denmark obtains more than 25% of its electricity from wind power.  Under the new commitment from the Danish government, 35% of the country’s energy will come from renewable sources by 2020, with roughly half of that coming from wind power.  It’s important to note that this 100% renewable goal applies to Denmark’s entire energy supply, not just electricity, and therefore also includes heating, all industrial activity, and transportation.

One could clearly argue that Denmark is in a unique position due to its compact size and community-owned wind, combined, heat & power (CHP) and district heating and cooling networks, which provide a cultural ecosystem of support for sustainable energy strategies and stakeholder buy-in.  (One rarely hears of any NIMBY protests against wind power here!) The goal of 100% renewable energy is also matched with specific policies (and funding) attached to specific wind projects both onshore and offshore.

The country will, by necessity, lead the way with smart grid aggregation and optimization networks such as microgrids and virtual power plants (VPPs).  In order to accommodate larger penetrations of renewable energy, the Transmission System Operator (TSO) is redesigning its market dispatch rules accordingly.  Under the current system, only accepts power bids from power producers of at least 10 megawatts (MW) in size, and load forecasts are updated every 15 minutes.  Under the proposed new real-time market being rolled out, there will be no size limit on scheduled resources, and prices will be updated every five minutes, opening up the door to distributed energy resources – including demand response — that can respond quickly to price signals.

The country has laid the foundation for this new aggressive renewable energy policy by moving forward with trend-setting smart grid renewables integration projects rivaled only by Germany in terms of scale and ambition (my next blog post will cover Siemens and VPPs.)  In 2011, – with significant help from Spirae, an innovative software/hardware provider based in Colorado – completed a cutting edge R&D project with major ramifications for renewables integration: a 65MW VPP, commonly referred to as the “Cell Controller Project.”  It consists of distributed wind and CHP units owned by farmers and village heating districts, and will be operated by

This successful R&D experiment set the stage for an even more cutting edge VVP project of similar size (67 MW) that involves PHEV and residential heat pumps, along with wind and CHP on the Island of Bornholm – the European Union’s smart grid-renewable energy smart grid showcase.  Residents there are already receiving bill credits when the grid operator uses the batteries in plug-in hybrid electric vehicles (PHEVs) as short-term storage to help firm up wind power.

Also known as the “Bright Green City” project, this Bornholm VPP is being developed with DONG Energy with a goal of obtaining 76% of its total electricity from renewables by 2025, with 90 MW of wind power is planned to be added to the existing 30 MW in current operation.   An additional 5 MW of distributed solar PV is also on the drawing boards for Bornholm.   PHEVs are a key part of this greening of local infrastructure effort, leading some observers to come up with a new acronym:  an Electric Vehicle VPP or EV-VPP.   In a partnership to be launched in 2012 with the EV battery provider Better Place, DONG Energy hopes to roll out this EV-VPP throughout Europe.


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