Navigant Research Blog

As Coal Declines, Low-Emissions Engine Plants Spread

— December 22, 2014

In September, the world’s largest reciprocating engine power plant was completed in Jordan.  IPP3, as it’s called, has 38 Wärtsilä 50DF engines, with a total capacity of 573 MW in the extreme desert conditions of Jordan.    The plant uses tri-fuel engines that can run on natural gas, heavy fuel oil, and light fuel oil.  They can start and ramp up to full capacity in less than 10 minutes, and they can do this multiple times a day without any maintenance cost impact.

The modular nature of the plant also allows it to operate at peak efficiency (45%-50%) across its entire output range by shutting down individual engines as needed and leaving others at high load.  In addition, the plant will enable Jordan’s existing turbine plants to operate more efficiently, as they will be used for baseload while IPP3 fills in the gaps where there is fluctuation in demand.

Reliable, Flexible, and (Relatively) Clean

IPP3 is fitted with a nitrate (NOx) control system for reducing emissions and meeting strict environmental health and safety guidelines set by the International Finance Corporation.  The plant follows international requirements for sulfides and particulates as well, and it is expected to produce 35% fewer carbon emissions than an existing steam turbine plant would if both used heavy fuel oil.  IPP3 will also have a close to zero usage of water once gas is employed as fuel, minimizing its environmental footprint.

So what makes this plant important?  It’s important because before IPP3, Jordan’s utility professionals had never contemplated the installation of a reciprocating engine plant, preferring to generate baseload power through combined-cycle gas turbine (CCGT) facilities, which have peak efficiencies of 55% to 60%.  It’s also important because many utility professionals around the world, not just in Jordan, are looking for a solution that is reliable, offers fuel and operational flexibility, is quick-starting and efficient across a wide range of loads, and consumes less water and produces fewer emissions.

Reciprocal Benefits

And, as in Jordan, many other utility professionals are choosing reciprocating engines.  Wärtsilä alone has been installing an impressive number of large gensets recently.  For example, a 175 MW gas engine plant was completed by Wärtsilä in South Africa for Sasol, one of the country’s largest industrial companies, in December 2012.  The company is also in the process of building the 200 MW Pesanggaran Bali power plant, which will be the largest engine-based power plant in Indonesia when it is completed in 2015.

In the United States, Wärtsilä has been contracted to supply a 56 MW Smart Power Generation power plant in Oklahoma, and the company is expected to install a 50 MW plant in Hawaii on the island of Oahu, pending approval of the Hawaii Public Utilities Commission.  There is also a 225 MW plant being proposed in Texas and, reportedly, another 225 MW plant already under construction in Oregon.  All of the plants in the United States will be used to balance wind and solar generation on the grid.  With cheap natural gas, emissions standards, and the grids around the world becoming increasingly unstable, it appears that reciprocating engines’ stock is on the rise.

For more detail on the future of reciprocating engines, please see Navigant Research’s report, Natural Gas Generator Sets.

 

Alaska Leads the World in Microgrid Deployments

— December 17, 2014

Many utilities view microgrids as a threat, due to intentional islanding and/or the effects of reduced customer load on long-term revenue projections.  However, a small but growing number of utilities view the microgrids they own and operate – known as utility distribution microgrids (UDMs) – as the next logical extension of their efforts to deploy smart grid technology.  As I’ve noted earlier, the developed world can learn interesting lessons in this field from the developing world.

Navigant Research’s new report, Utility Distribution Microgrids, shows that the total UDM market represents over $2.4 billion of economic activity today, with the bulk of this investment flowing into projects located in the Asia Pacific region.  As noted in an earlier report, Microgrids, North America is the overall market leader.  Yet, when it comes to utilities, both Asia Pacific and Europe are ahead in near-term deployments and related implementation revenues.  All told, under the base scenario, Navigant Research expects the UDM market to reach $5.8 billion in annual revenue by 2023, growing at a compound annual rate (CAGR) of 10.2%.

However, there’s one important exception to this market generalization: Alaska.

Across the Tundra

“Over the last decade, Alaska has quietly emerged as a global leader in the development and operation of microgrids,” declared Gwen Holdmann, director of the Alaska Center for Energy and Power at the University of Alaska Fairbanks, in a recent interview.  A particular focus has been hybrid conventional-renewable-storage systems, networks that have “logged more than 2 million hours of continuous operating experience for these types of systems,” according to Holdmann.  The state boasts a portfolio of somewhere between 200 and 250 permanently islanded microgrids ranging from 30 kW – about the size of a city block – to large remote hydro systems over 100 MW in size.  These microgrids, many in operation for over 50 years, provide electric power service exclusively to isolated rural populations.  Total capacity exceeds 800 MW, the largest installed base of microgrids in the world today (though China may overtake Alaska by the end of next year).

Holdmann clearly takes pride in what Alaska has accomplished with these scattered, isolated hybrid power systems, which tap fuels as diverse as wind, solar, hydro, biomass, and tidal currents, along with diesel.  While other pundits may point to New York, California, or Hawaii as the centers of North American microgrid development, Alaska has been developing cutting-edge microgrids for quite some time.  “The State of Alaska alone has invested over $250 million in developing and integrating renewable energy projects to serve these microgrids, – far more per capita than any other state in the country,” Holdmann said.

Integration Experts

The advent of advanced technology deployment to these rural systems has forced Alaska utilities and developers to become expert in microgrid development and operation.  By far the greatest challenge was, and remains, the high-penetration integration of intermittent renewables, such as solar, wind, and hydrokinetic, with traditional diesel or natural gas fueled electric power generation.  Nevertheless, Alaskans have repeatedly achieved higher renewable penetration levels than nearly any other place in the world, under incredibly harsh conditions, including daylight hours that shrink to a couple hours a day in the winter and winds that can exceed 100 miles an hour – enough to literally tear apart many conventional wind turbines not designed to stand up to such speeds.

Many Alaskan utilities have set up voluntary goals to reach 70% or 80% renewable penetration within the next 8 to 10 years.  Kodiak Electric Association, which serves Kodiak Island on the southern coast of Alaska, reports that it has achieved 99.7% renewable energy penetration so far in 2014, using a hybrid wind/hydro/diesel/battery/flywheel microgrid.

Mainland U.S. utilities could learn a lot from the innovators up north, where the smart grid is already delivering on the promise of a more cost-effective and sustainable power grid today.

 

Are Corporate Clean Energy Initiatives Real?

— December 10, 2014

In November, Amazon made a commitment to power its infrastructure with 100% renewable energy over the long term.  Among tech companies, Amazon is late to the game in announcing its sustainability goal; Apple, Google, and Facebook had already released similar pledges over the past few years.  Although cloud computing is more environmentally friendly than previous computing technologies, according to Amazon, a “significant amount of unused server capacity and wasted energy consumption” still occurs when powering data center infrastructure.

Since 2008, businesses and corporations around the world have begun to more actively pursue sustainability initiatives.  Between 1992 and 2012, the number of corporations worldwide issuing corporate social responsibility (CSR) reports jumped from 26 to around 7,500.

Fortune 500 Leads the Way

Many of the leaders in corporate sustainability are part of the Fortune 500.  In 2013, 43% of Fortune 500 companies had established goals for greenhouse gas (GHG) reductions, energy efficiency, renewable energy, or some combination of the three, and 60% of Fortune 100 companies had set sustainability targets.  Although large corporations have made progress in establishing sustainability initiatives, only 75 of the Fortune 500 had specific energy efficiency targets in place by 2013.  GHG reduction targets made up the greatest share of climate and energy initiatives.

Companies with long-standing commitments to reducing energy use have already seen energy and dollar savings from these initiatives.  Walmart, for example, laid out plans in 2013 to save $1 billion globally per year through energy efficiency and renewable energy programs.  The company has a long-term aspirational goal to achieve 100% renewable energy.  In the shorter term, by the end of 2020, Walmart aims to reduce emissions intensity by 30% from 2010 levels and produce or procure 7 billion kWh of renewable energy worldwide.

The Trouble with Long Term

Kohl’s is another leader in corporate sustainability efforts.  It has been implementing green building methods since 2005, and it had 432 LEED-certified stores as of June 2014, representing a full 37% of the company’s 1,160 stores across the United States.  The 432 stores represent a total floor space of 35,616,240 square feet.  Kohl’s plans to reduce absolute emissions and emissions intensity on a per-square-foot basis by 20%, both by 2020, compared to 2010 levels.

Although the growing prevalence of CSR and sustainability goals is encouraging, broad long-term goals have raised concern from some environmental groups.  Setting goals without defined milestones makes it more difficult to hold companies accountable for the clean energy initiatives they have in place.  Many companies, Amazon included, have not specified a roadmap to achieve their energy goals – an obvious next step to ensure those goals are achieved.  Publicly committing to a clean energy future is only a first step.

 

Distributed Solar PV Poised to Reach Its Potential in Africa

— December 9, 2014

According to the International Monetary Fund, 7 of the world’s 10 fastest-growing economies are located in Africa.  While Cairo, Egypt, was the only city in Africa to have a population exceeding 10 million in 2010, seven cities across Africa are expected to achieve this level by 2040.  Rapid urbanization means that more than 100 African cities are projected to exceed 1 million inhabitants by 2040.  Such levels of urbanization and economic growth have forced local utilities to acquire new, primarily large-scale power projects.  Utilities are primarily calling for large scale natural gas power plants and renewable energy projects (led by solar PV and wind),  as evidenced by the booming South African renewables market.

Over time, however, there will be growing opportunity for smaller-scale distributed renewable energy projects in the 1 kW to 1 MW range.  Growth in this power class is led by government agencies that are electrifying health clinics and schools, often with international donor support. This is likely going to continue to be the case for at least the next 5 years. According to Navigant Research’s report, Global Distributed Generation Deployment Forecast, annual capacity additions of distributed solar PV in Africa are expected to grow from 10.9 MW in 2014 to 56.5 MW in 2023.  Agriculture, hotels, extraction industries, water pumping, telecom applications, and growing consumer markets in Africa will result in distributed solar PV growth across the region.  Cumulative distributed solar installed capacity during this time will reach 332.2 MW, representing less than 5% of the total installed solar PV capacity in Africa in 2023.

Immense Opportunity

Urban residential will be the last segment to catch on in urban African communities, primarily due to the combination of a small middle class, a lack of awareness among potential customers, and a lack of financing options.  Several experienced engineering firms, particularly in Kenya, are targeting distributed solar customer segments.  And while there is significant buzz about microgrids in the region, in particular, these projects have not yet developed at the anticipated rate.  That will change if innovative companies, such as PowerHive, Access Energy, and PowerGen, are able to successfully scale up current microgrid efforts and attract further investment.  In Kenya, there are a number of creative mid-sized projects, including solar-wind hybrid systems, ranging from 10 kW to 300kW.  In general, the opportunity for distributed renewables is immense, and the field is wide open – provided companies (and investors) are patient enough to deal with potentially problematic African bureaucracies.

Patient Yet Determined

The engineering firms and developers offering these solutions are working with utilities and regulators to create a more conducive environment for this small-to-mid-scale market segment in urban and off-grid settings.  Compared to utility-scale installations by larger international companies that hire workers for a short period and do not have a continued presence, the distributed market segment will have the most impact from a job creation and sustainable development perspective.

These companies tend to be staffed with very determined people who have made progress in very uncertain and often frustrating circumstances.  They’re becoming more organized and lobbying for a more favorable regulatory environment – including more robust net metering policies, feed-in tariffs, and, in general, more freedom to operate.

Equally critical, however, is education among financiers (and customers) on how to finance small-to-mid-sized solar PV systems.  Similar to the diversity among U.S. state policy and public utility commissions, pathways for growth will differ for each country in Africa.  Those that are willing to stay the course and weather the frustrations of operating in uncertain political and regulatory environments stand to profit  and, in the process, contribute to the establishment of the local industry over the long term.

 

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