Navigant Research Blog

CHP, Solar PV Move Microgrids into the Mainstream

— October 16, 2012

Microgrids are really just miniature versions of the larger utility grid, except for one defining feature: when necessary, they can disconnect from the macrogrid and can continue to operate in what is known as “island mode.”  Because of this distinguishing feature, microgrids can offer a higher degree of reliability for facilities such as military bases, hospitals and data centers, which all have “mission critical” functions that need to continue to operate no matter what.

Along with enhancing reliability, microgrids serve another useful function: they can help the larger grid stay in balance.  As the world moves toward an energy system that looks more and more like the Internet, with two-way power flows thanks to growing reliance upon on-site sources of distributed generation (DG), this increasingly dynamic complexity requires new technology.  But some forms of DG – especially variable renewable resources such as solar or wind — create a greater need for smart grid solutions, such as microgrids.  For example, recent trends in declining prices for solar photovoltaic (PV) systems certainly increase the need for aggregation and optimization technologies.  Why? Distributed solar PV systems can create frequency, voltage, and other power-quality challenges to overall grid operations.

But how much solar PV will actually be deployed within microgrids over the next 6 years all around the world? This is one of the questions addressed in my latest report, Microgrid Enabling Technologies.

Anchor Resource

In order for a microgrid to continue operating in island mode, it has to include some form of on-site power generation.  Without DG, a microgrid could not exist, so these DG assets are the foundation of any such localized smart grid network.

The ideal anchor resource for any microgrid is actually combined heat and power (CHP); a total of 518 megawatts (MW) of CHP capacity that will be deployed in microgrids this year.  This technology leads all forms of microgrid DG deployments today and will continue to hold the edge by 2018 (with 1,897 MW, representing more than $7 billion in annual revenues)  Given that it is a base load electricity resource that also provides thermal energy, today’s microgrid CHP capacity is the largest of any DG option besides diesel generators.

The bulk of CHP installations are with grid-tied systems within institutional campus environments.  The current low cost of natural gas in North America translates into the ability for microgrids to provide lower cost energy services than the incumbent utility grid.  For example, the University of California San Diego microgrid is saving over $4 million annually thanks, in large part, to on-site combustion of natural gas.

Still, Pike Research believes that declining solar PV costs will be one of the largest drivers for microgrids worldwide, and in terms of numbers of new installations, solar PV will be the market leader.  (CHP will lead in terms of total capacity due to the relative scale of CHP systems compared to solar PV.)  With the price of solar PV reaching grid parity in key markets by 2014 and 2015, the variability of this DG resource will necessitate a greater reliance upon energy storage (as well as the networking function of microgrids).  All told, this microgrid solar PV market adds up to almost $2 billion globally by 2018.

Total Microgrid Distributed Generation Vendor Revenue, Average Scenario,
World Markets: 2012-2018

(Source: Pike Research)

If one also includes distributed wind and fuel cells in the overall microgrid DG mix, this segment of microgrid enabling technologies is, by far, the largest target of new investment: 3,978 MW of new generation capacity valued at more than $12.7 billion (see the chart above).


New Converter Reduces CHP Emissions

— June 11, 2012

Although intransigent utilities are frequently cited as one of the most important barriers to the spread of distributed combined heat and power (CHP), such as systems for homes or businesses, there are other, more practical barriers too.  One of these is emissions.  People do not like to breathe nitrogen oxide (NOx) and carbon monoxide (CO) from CHP systems, especially in dense urban areas where air quality is already an issue.  Other barriers include cost, efficiency, project overhead, and in some cases, technological readiness.

These are significant barriers to entry, and although CHP makes a great deal of sense, it’s not surprising that we have not seen this market transform the energy generation paradigm from centralized to distributed.

There is new light on the horizon, however.  A combined heat and power company based in Massachusetts has developed a new type of catalytic converter.  A catalytic converter is a device that uses a chemical reaction using a catalyst (typically a precious metal such as platinum, palladium, or rhodium) to transform noxious byproducts from combustion (CO and NOx) into less noxious byproducts (such as CO2 and water).  In simple terms, a catalytic converter rearranges atoms between molecules so that the resultant outputs are more “desirable.”  If you have used a device with an engine lately (a car, a forklift, a bus, etc.), chances are it had a catalytic converter as part of the exhaust system.

The company, Tecogen, has a patent pending on a two-phase catalytic converter process that significantly increases the amount of NOx and CO the converter captures.  The converter does this by rapidly changing the temperature of the exhaust as it passes from the first reaction to the second.  The result is that the emissions from a natural gas engine CHP system are on par or lower with similar-sized fuel cell systems.  To put it another way, the system has met strict Southern California air quality standards.

Why is this important for the industry? First, it opens markets to engine-based systems that would otherwise be excluded because of strict emissions standards.  Second, the CHP market, particularly at the commercial and residential levels, is still nascent.  Any improvement in the market position of one technology is good for the industry as a whole.  This is not a zero-sum game.  Finally, this development is important for the industry because it is a simple, elegant, and relatively inexpensive solution.

To be clear, this type of catalytic converter does not make an engine-based CHP system more efficient.  Instead, it just does a better job at capturing the NOx and CO generated by the reaction inside the engine.  This is an important distinction to make when comparing a Tecogen system with, say, a fuel cell system.  A fuel cell system will generate fewer emissions because the reaction generating energy is more efficient (in this case, the reaction is an electrochemical one instead of combustion, like you would find in an automobile).  Barring an improvement in engine design, this will always be the case.


The Corn Ethanol Empire Strikes Back

— June 8, 2012

In recent weeks, Gevo flipped the switch on its first commercial-scale facility making advanced biofuels and renewable chemicals.  Retrofitting a brownfield ethanol facility in Minnesota to produce isobutanol from corn starch, a chemical that packs more energy than conventional corn-starch ethanol, the development may signal the beginning of the next wave of bioenergy innovation.

Principally designed to do one thing – ferment large quantities of corn starch into millions of gallons of ethanol – first generation production facilities are inefficient energy users and produce a great deal of waste.  Retrofitting first generation ethanol facilities, which are prodigious consumers of electricity and water, is proving to be a bankable (read: “capital light”) strategy for ramping up production of biofuels while reducing the industry’s environmental footprint.

In a typical ethanol retrofit, innovative conversion processes and technologies are “bolted onto” existing assets to create an integrated biorefinery.  Modeled after petroleum refineries, integrated biorefineries use biological matter to produce a range of end-products: transportation fuels, chemicals, and heat and power.  These facilities are designed to be more efficient, sustainable, and profitable than first generation corn-starch ethanol refineries.  Gevo’s 12 million gallon per year facility is just one of several integrated biorefineries arising from the ashes of first generation ethanol.

Accounting for around 10% of U.S. liquid fuel consumption in the transportation sector, corn starch-derived ethanol is a well-entrenched juggernaut in the global alternative energy landscape.  As discussed in Pike Research’s Biofuels Markets and Technologies report, the United States currently leads all countries in ethanol production with nearly 13.9 billion gallons per year in 2012 (Brazil is next with an estimated 7.3 billion gallons).  The industry grew 720% between 2000 and 2010, with strong foundational support from an even stronger agricultural lobby.  From a pure growth perspective, it has been hailed as the most significant success story in American manufacturing.

But despite ethanol’s rapid rise in the United States, the industry has faced significant backlash in recent years.  This opposition has stoked heated debate both inside and outside the industry.  From contributing to increases in food prices, causing indirect land use change (ILUC), and exacerbating efforts to reduce greenhouse gas (GHG) emissions, first generation ethanol has become a punching bag for environmentalists and tech-oriented clean energy enthusiasts alike.

Policy momentum has shifted as well.  The revised Renewable Fuel Standard (RFS2) administered by the Environmental Protection Agency (EPA) capped corn starch-derived ethanol at 15 billion gallons per year, shifting support to advanced biofuels derived from cellulose and other non-food resources.  VEETC, a key tax credit that played an instrumental role in the industry’s growth over the past decade, lapsed in 2011.

Lacking goodwill and facing a sluggish economy, growth within the industry has dropped off considerably in recent years from its 2008/2009 high.

Despite a precipitous drop-off in plant construction, existing ethanol facilities in the United States could provide fertile ground for the next wave of clean energy expansion.  With an estimated $45 billion in subsidies granted by the U.S. government over the past 30 years and more than $30 billion worth of steel already sunk by major players like Valero, ADM, and POET, the greatest near-term biofuels opportunity is likely to lie in brownfield plant conversions and retrofits rather than greenfield builds.  Gevo’s recent success suggests that we are likely at the bottom of this next innovation cycle.

As I’ll highlight in Pike Research’s upcoming Scaling the Bio-Based Economy webinar, emerging business models are demonstrating that existing ethanol assets provide a platform for the integration of a host of Smart Energy technology systems.  Bio-digesters, for example, can process waste streams into biogas for onsite power generation and process wastewater.  Companies like Lanzatech and algae producers such as Algae-Tec are seeking to prove that the waste carbon dioxide produced by ethanol facilities can be used to produce advanced biofuels and renewable chemicals.  Meanwhile, the integration of combined heat and power (CHP) technology offers plant managers the ability to consume energy more efficiently.


Energy and the Home in 2012

— December 27, 2011

It’s the time of year for predictions for the coming 12 months.  From my current research into the residential combined heat and power (CHP) market, one of the key trends that has come up again and again is increasing energy efficiency in the home.  Traditionally this was all about insulation, but now we are moving to a far more holistic view of energy production and consumption in the home.

In Germany, 2012 will see the relaunch of the Mini-KWK-Impulseprogramm, according to an article in the Süddeutsche Zeitung.  Little detail has so far been released on the new program, apart from the initial budget of 20 million Euros. 

Assuming the resurrected 2012 version of the residential CHP subsidy program is somewhat similar to the original it is worth outlining here the salient points of the original.

The so called “Mini-KWK-Impulseprogramm” explicitly covers CHP in the residential sector, specifying CHP systems under 50kWe in size.  Adopters of prototypes cannot be in receipt of subsidy money from this program – they must be commercial.

In terms of subsidy available for the installation of small CHP, Table 3.1 is taken from information from the German government outlining two tiers of subsidy.

In addition, the adopters of the systems must go through one of the many local German energy companies such as Stadtwerke Karlsruhe and Stadtwerke Mainz.  The larger national utilities such as EnBW and EWE were not eligible for this program. 

Moving Down Under, December saw the launch of the draft Australian Energy White Paper, which again focuses on energy efficiency in the home.  Here, though, solar power is the technology of choice – for producing electricity for the home and for heating.

Two examples from very different sides of the planet, and two different approaches, one technology agnostic and one far more prescriptive.  What they have in common is the attitude that we, the resident, can do a lot more to increase the efficiency of the spaces we occupy.  Not only will this cut bills, but it will also help reduce emissions from the residential sector. 


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