Navigant Research Blog

New Solar Records Bring the Real Energy Transformation into the Light

— June 19, 2018

Not long ago, utilities fought the introduction of renewables into their markets. Then, they didn’t really understand that the real energy transformation we are seeing today is consumer choice, including the potential of full individual energy independence in some markets driven by technology innovation.

Now utilities are exploiting the falling costs of solar to fend off the upcoming competition.

PPA Prices Are Crashing, despite New Tariffs

Despite all the talk about the new import tariffs and their effect on the installed cost of new PV installations, it appears that developers have squeezed procurement costs to continue breaking records for the lowest cost projects in the country. On June 11, Central Arizona Project (CAP), a local utility, signed a 20-year public-private agreement (PPA) with Origis Energy’s subsidiary AZ Solar 1 for a record low $0.0249/kWh.

A new record came only a day later. On June 12, NV Energy managed to break the $0.024/kWh floor, with a 25-year PPA signed for $0.0237/kWh. The Eagle Shadow Mountain solar project will have a total capacity of 300 MW and is being developed by 8minutenergy. This project is part of a 1 GW solar PV procurement process run by NV Energy as part of its strategy to become the first 100% renewable utility in the US. The procurement process also called for 100 MW/400 MWh of battery storage.

Saving the Monopoly

NV Energy’s push for 100% renewables does come with a caveat. The final green light to invest in these projects depends on the result of an energy choice initiative that will be voted on Nevada this year. If it is accepted, the project could be cancelled. NV Energy was also behind another controversial law, which eliminated net metering in the state in 2015.

This is part of a wider trend, where US utilities are increasingly deliberating not between new conventional generation or renewables, but between central or distributed resources. Behind this issue, utilities are also examining control of the end consumers relationship.

Maintaining control of the end user is key as the industry transitions from one in which the value was in the generation and transmission of electricity, to one in which the value will lie on the services that can be provided in addition to electricity.

Central Renewables versus Distributed Renewables

NV Energy understands that—at least in a resource-rich state like Nevada—the future is solar. Consequently, it wants to position itself as a clean and potentially cheap provider of electricity in the state in the eyes of the ballot voters this year. If it succeeds, it might dodge what is the most dangerous bullet for a utility—the opening of the retail market to competition and the potential race to the bottom that could spark. But even if NV Energy succeeds in maintaining its monopoly status, consumers will retain some choice—installing their own solar and producing their own electricity.


China Cuts Solar Subsidy: Investors in Crisis

— June 14, 2018

Subsidy cuts in China have caught global solar investors by surprise this June.

The National Development and Reform Commission, the Ministry of Finance, and the National Energy Administration announced a cut in the national feed-in tariff by ¥0.05 ($0.008) per kilowatt-hour and a reduction of the same amount in subsidies for power generated by large-scale distributed PV projects. Subsidy reductions will not affect power prices for smaller-scale, community-based solar power projects. The Chinese government justified the move, explaining that solar PV has long been commoditized because of reduction in equipment prices and that scaling back on subsidies will reduce overheating in the sector. The joint announcement indicated that the measures are aimed at “promoting the solar energy sector’s sustainable development, enhancing its development quality, and speeding up reduction of subsidies.”

Many agree that the move is the result of recent trade wars with the US administration. January 2018, President Trump announced a 30% tariff on imported solar equipment that will last for at least the next 4 years. This is believed to be in response to anti-dumping measures and to prevent undercuts by Chinese solar manufacturers in the US market.

Can Subsidy Cuts Lead to Grid Parity?

Financial incentives and subsidies have long been the cornerstone of solar investments. On one hand, it provides much-needed economies of scale. On the other hand, it encourages investments by ensuring that PV electricity cost achieves grid parity. As the energy sector was settling down into , technology investments and grid flexibility meant that solar energy could reach grid parity even without financial incentives.

The Chinese renewable industry is one of the front-runners of clean energy projects across EVs, wind turbines, solar panels, and energy efficient appliances. During the last decade, the Chinese government introduced the Solar Roofs Plan for promoting the application of solar PV building, and reintroduced the Golden Sun Project to give 50% of the total investment subsidies to the grid-connected PV power generation project. Increasing domestic and industrial demand, the adoption of EVs, and rising pollution have created an ever-increasing need for solar projects in China.

Thus, subsidy scale-backs have created an uproar in the Chinese market. On June 4, there was a sell-off in Chinese solar equipment stocks. Shares dropped the 10% daily limit for several firms, including Shanghai-listed LONGi Green Energy Technology, Jiangsu Linyang Energy, and Tongwei, and Shenzhen-listed Sungrow Power Supply.

China Will Remain a Renewables Leader, despite Scale Back

Resilience of renewables has been a topic of discussion across many energy forums, and the solar industry is a front-runner in this. Chinese solar power will continue to strengthen its position as a mainstream energy source across both utility-scale and distributed energy generation. Navigant Research’s recent report, Preparing for New DER-Driven Opportunities in the Chinese C&I Energy Market, explores the changes in the Chinese commercial and industrial electricity market and the opportunities this creates for distributed energy resources stakeholders.

The Chinese solar industry is likely to witness a larger number of mergers and acquisitions over the next year, especially among the smaller market participants. While long-term prospects continue to remain positive, the short-term impact will cause a contraction in the overall positive growth trajectory.


It’s Time Critical Infrastructure Had a Standardized, Licensed Spectrum Band

— June 12, 2018

US power utilities are grappling with challenges ranging from growing distributed energy resource (DER) penetration (e.g., solar and EVs), business model disruption, and low to no load growth. Navigant Research has covered the utility business model extensively in its Energy Cloud thought leadership series, and has found that it will shift markedly over the next 10-20 years. A more decentralized and services-centric model will emerge where value is created, not by the delivery of electrons but rather by the provision of services. This shift will bring a multitude of challenges to electric utilities.

To meet these challenges, utilities will need extensive networking capabilities to support applications ranging from visibility into behind-the-meter energy generation to enhanced customer engagement and more. While in the past utilities have tended to build ad hoc, application-specific, silo-based networks using unlicensed or narrowband licensed frequencies, going forward this approach will not suffice.

Critical Networks Stand to Benefit from a Nationwide Licensed Broadband Spectrum

During the next decade, Navigant Research expects the number of connected devices within the average utility to grow by an order of magnitude—at least—and the volume of data coming from each connected device will also climb. At the same time, the number of non-utility connected devices using unlicensed spectrum bands will increase by 400% or more.

The exponentially growing use of unlicensed bands could affect utility network performance and grid reliability. Add in the numerous operating and business model pressures that utilities today face, and it becomes clear that there is a pressing need for a nationwide, standardized licensed spectrum band around which power utilities and other critical infrastructure providers can build their critical networks.

A nationwide licensed broadband spectrum allocation combined with buildouts based on commercial technology standards will ensure that utilities are able to implement the solutions necessary to manage not only reliable and affordable power delivery, but also financial stability in the rapidly changing energy economy.

Utility Networking Technology Selection Map

(Sources: Navigant Research, Electric Power Research Institute)

If utilities and regulatory bodies can work together to rally around a single spectrum band, this would solve an urgent and growing need of the industry and facilitate roaming and cooperation by personnel from disparate utilities. Vendors could then standardize on the band, bringing substantial economies of scale—particularly if the de facto commercial wireless technology standard, LTE, is used.

For more on this topic, read Navigant Research’s new white paper, sponsored by pdvWireless: The Urgent Need for a Licensed Broadband Spectrum Allocation for Critical Infrastructure. The paper describes the critical drivers behind utilities’ need for licensed, standardized broadband spectrum in the US, including DER integration, growing concern over grid resiliency and the increased risk of cyberattack, and the changing requirements that competition places on customer service organizations.


New Trends Point to Virtues of Fuel Cells and Direct Current for Modular Microgrids

— June 12, 2018

The beauty of a microgrid is that it can come in so many sizes. It can also incorporate many different types of distributed energy resources (DER)—from different forms of generation to creative load management and even energy storage—to bridge any gaps in supply or demand.

DER Growing Ever More Popular for Microgrids

Navigant Research has projected that both solar PV and energy storage will emerge as the two most popular DER options over the next decade. Yet, that doesn’t mean other technologies—such as fuel cells—won’t play a growing role in the microgrid universe. Perhaps the company most keen on this market opportunity is Bloom Energy, which ranks in the Top 10 vendors in terms of projects deployed in the forthcoming update to the Microgrid Deployment Tracker. The company has deployed its fuel cells in more than 60 microgrid projects, representing roughly an equal amount of megawatts. But those numbers will increase dramatically in the future.

Earlier this year, Navigant Research estimated growth in all major DER technologies going into microgrids, including fuel cells. Though relatively modest in scale, the microgrid fuel cell market is anticipated to reach nearly $2 billion in annual sales over the next decade.

Annual Fuel Cell Microgrid Capacity and Implementation Spending by Region, World Markets: 2017-2026

(Source: Navigant Research)

Optimizing Fuel Cells

Historically, fuel cells were deployed by market leaders such as Bloom Energy within single resource microgrids for clients such as data centers. These are clients that are extremely conservative in nature and are comfortable with the steady stream of electricity flowing from non-variable onsite generation. Since fuel cells can be fickle when it comes to small deviations in frequency, integrating them into microgrids featuring a plethora of variable renewable energy resources has been problematic. The emergence of lower cost energy storage solutions is beginning to change this basic assumption.

What about Direct Current?

One solid step in the direction of more advanced microgrids is Bloom Energy’s integration of a direct current (DC) bus to create a more modular structure to integrate energy storage devices into its fleet of microgrids. Working with PowerSecure, which was featured in Navigant Research’s recent ranking of microgrid controls vendors, Bloom Energy is rolling out its new DC bus platform for a fleet of microgrids to be deployed at Home Depot stores. Another big win for Bloom Energy was the integration of its new DC bus offering into the new Apple campus in Silicon Valley, whereby 4 MW of fuel cells were integrated into a 5 MWh system with its new platform. The microgrid also features 16 MW of solar PV.

Among the other vendors extolling the virtues of a DC bus are EnSync and Tecogen. The latter has perhaps the first plug-and-play microgrid offering (and also ranks in the Top 10 of vendors regarding numbers of microgrids deployed). Look for a Navigant Research report, Direct Current Distribution Networks, later this year to dig much deeper into the value proposition surrounding DC and the emergence of a modular microgrid movement.


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