Navigant Research Blog

With Renewables Revolution Comes Industry Debate

— June 15, 2015

Alongside the renewables revolution, the energy industry has found itself in the midst of a substantial debate.  And this is not just in a technical sense; it’s in an economic and existential sense, as well.  The technical considerations of integrating renewables can be highly variable from one geography and transmission and distribution (T&D) network to the next. Similar to economics, which are also bound tightly to policy, the existential debates have been grounded upon anything from environmentalism and perceptions to differing levels and sources of information, etc.  Because of this complexity, I do not envy those bodies currently tasked with pulling together an effective plan of attack to promote and support integration of renewables and distributed energy resources (DER).

The first need to address is gaining a stronger understanding of what is occurring at the edge of the distribution grid from an electrotechnical perspective in real time or near real time, or establishing highly comprehensive network monitoring and accurate situational awareness.  This is then followed by implementing appropriate and cost-effective control and support solutions. It sounds easy, but it is far from it. Traditionally, the sector of the distribution grid past the distribution substation has not been monitored and controlled according to actual conditions—at best, assets have been programmed to react according to sensed or forecasted conditions. The concept of developing a real-time model of more centralized parts of the network is only something that has been achieved in the past decade.

But grids that have high penetration of DER and renewables require comprehensive monitoring and situational awareness right down to the resource itself—that eerie last mile of the grid.  This is because the intermittent nature of renewables and the presence of bidirectional power can easily disturb voltage profiles, creating issues with stability and capacity in the distribution network.  The utility needs to be able to sense these disturbances before it can figure out how to cope with them.

As an analyst for the energy and utilities industry, I have watched renewables and DER-enabling technologies over recent years as they’ve transgressed from theoretical to real, tested, and in a growing number of cases, proven as effective.  Recently, the information, operational, and communications (IOC) technology sectors have produced a number of unique offerings for real-time network monitoring and situational awareness.

Diverging Perspectives

In the running for success, there seem to be two general schools of thought—the centralized enterprise approach, filled by distribution management system vendors, and a school of more alternative solutions that can act as distributed standalone systems or can sit on top of an enterprise system.  A commonality between both categories is that they largely revolve around the integration of a greater number of devices (both DER and new networked equipment such as sensors and power electronics), and they rely on big data analytics to develop situational awareness in an unpredictable DER environment.

The key difference is that one simultaneously manages the utility network as a whole—a highly complex process—but one that has the potential to optimize goals across the organization.  The other one acts as a standalone solution that is isolated to a smaller number of use cases depending on technological and organizational needs and can be a much smaller overall investment that achieves required results—but there is so much gray area surrounding the efficacy of each approach.

Navigant Research’s recent report, Grid Edge Intelligence for DER Integration, provides an overview of these different technology segments and competitive analysis for different companies involved in the fast-growing market for technologies that integrate DER.

 

Dispatches from the National Town Meeting on Demand Response

— June 4, 2015

One year after the U.S. Court of Appeals’ decision to strike down Federal Energy Regulatory Commission (FERC) Order 745 and question FERC’s jurisdiction over demand response (DR), the DR community appeared alive and well at the 12th annual National Town Meeting on DR in Washington, D.C. There was a plethora of enthusiasts, including utilities, regulators, and vendors, talking about drivers for DR and how the industry could progress in a post-745 world should the Supreme Court uphold the lower court’s decision.

The event kicked off with a roundtable of state regulators discussing DR and, more broadly, electricity industry transformation based on distributed energy resources (DER). Michael Picker, president of the California Public Utilities Commission, compared the DR industry to the telecommunications industry by talking about how incumbent communication providers lost 40% of their landline base and the world transitioned to a mobile model. The dialog was past the utility death spiral concept, but it indicated that the reality of stagnant or decreasing load and customer-side energy solutions will have to be addressed. The big chicken-and-egg question was whether regulatory change or business model change needs to come first, and little consensus was reached.

Changes Ahead

Following the regulators, a panel of utility executives outlined their opportunities and pain points from the changing landscape. Interestingly, when given a list of disruptive technologies to rank, energy storage and solar came out on top, while DR was on the bottom. DR is seen more as a positive force and tool for the utility to manage the grid and engage customers. One theme that arose is that utilities will need to add new skills to their workforce as the business shifts from strictly a wires and hardware model to more software, information technology, and customer outreach.

One other major area of focus was New York’s Reforming the Energy Vision (REV) proceeding. REV has gotten a lot of attention since it was launched a year ago, but now people want to know where the rubber will hit the road. It appeared that speakers who are involved in REV had a bit of trouble really explaining the market transformation that is espoused. That doesn’t mean that important changes won’t occur, but as the rest of the country watches REV proceed, it will learn what to emulate and what to avoid.

These issues and other drivers and barriers to DR are discussed in Navigant Research’s new Demand Response Enabling Technologies report. By the time the National Town Meeting comes around next year, the Supreme Court will have decided DR’s fate one way or another … and hopefully it won’t make for an unlucky 13th gathering.

 

The Comms Are the Cloud

— May 14, 2015

The Internet of Things (IoT). Smart grids. The energy cloud. What do all of these have in common? In order to achieve their promise, ubiquitous, high-speed, high-bandwidth communications networks will be needed. The energy cloud, as described in Navigant Research’s white paper, is expected to radically change the electric power industry over the coming decades. The energy cloud will emerge as the old-school, centralized monopoly utility model transforms into a decentralized, intelligent, two-way grid where utilities, markets, and prosumers transact in real-time for a cleaner, more efficient, reliable, and cost-effective energy industry. The potential in the long run is huge.

But today, adequate, ubiquitous communications that meet utilities’ needs for smart grid technology simply haven’t been widely deployed. Even in North America and Europe, where smart grid efforts have been underway for a decade or more, the infrastructure in place to transport all of that valuable data to the systems and devices that need it is, at best, a patchwork quilt of legacy and newer technologies, deployed in an ad hoc manner. The energy cloud won’t become a reality until seamless, high-speed, interoperable communications networks are present gridwide.

Utilities struggle with their communications networking strategies, even as the media waxes enthusiastically about the IoT and the coming nirvana of 5G technology; the recently announced mega-merger between Nokia and Alcatel-Lucent has been attributed to the marriage of the advanced wireless and wired communications that 5G capabilities will demand. But 5G networks are a decade away; a bit of a reality check is in order. Here’s the good news—and the bad news—about communications and the energy cloud.

The Good News

Perhaps the best news for vendors and service providers is the massive demand for utility communications that the energy cloud will engender. Navigant Research estimates that communications gear for basic smart grid communications technology will be a $30 billion opportunity over the next decade.

Communications Node Revenue by Region, World Markets: 2014-2023

Blog chart - RE(Source: Navigant Research)

 

This is likely conservative, based on expectations for deployment of advanced metering infrastructure (AMI), distribution automation and substation automation technology, and on the leading communications technologies used today—microwave, 900 MHz mesh, cellular, etc. (Detailed forecasts can be found in Navigant Research’s report, Smart Grid Networking and Communications.)

Additive to the infrastructure markets included in this forecast will be service fees collected by comms providers, independent network providers (see PDVwireless), networks for electric vehicle charging networks, connected solar panels, and more.

Remember the cell phones of the nineties? The novelty of being able call someone from outside of the home or office? That’s where we are today in terms of smart grid connectivity and applications. We can measure power consumption thanks to smart meters; we can monitor grid devices thanks to new sensor technology. That visibility provides a wealth of knowledge to grid operators—it’s great!

Now think about the explosion of applications—and revenue—that smart phones combined with 4G networks has allowed. That’s where the energy cloud is heading.

The Bad News

Solving the problem of ubiquitous connectivity—with low latency, high bandwidth, and seamless interoperability—is no small task.  Utilities tend to invest in the lowest cost connectivity solution for the application at hand. Once an AMI network is in place, utilities then begin to think about ways to leverage those networks. Now that we can connect to the meter, we could try (insert the smart grid application du jour here)! But all too often, the network in place wasn’t configured with that application in mind. Existing networks can be a serious limiting factor to cutting-edge smart grid applications. But those sunk investments have to be depreciated and a new rate case may be many years away.

Cautious Optimism

Despite the challenges utilities face in developing holistic, long-term, gridwide communications strategies, it will happen. It will take years—maybe decades—but the energy cloud revolution is already underway. Build the comms, and the energy cloud will come.

 

EnerNOC Rides the Tesla Wave

— May 13, 2015

Tesla’s announcement on April 30 of its stationary storage product has been treated like the biggest energy news since Edison invented the lightbulb. Elon Musk’s cult of personality has captured the world’s attention, and anything he says gets extreme coverage. That’s not to say that there is no substance behind Tesla’s developments or that they won’t lead to changes in the industry. At the very least, the attention raises the profile of the normally staid energy world, which should benefit all players in the space.

One company that caught the Tesla wave was EnerNOC, which announced a partnership with Tesla’s new commercial and industrial storage offering. EnerNOC’s stock jumped over 20% after the news hit. That’s the short-term bump that such notoriety can lead to. I spoke with Micah Remley, EnerNOC’s senior vice president of product, to learn about what the company sees as the real benefits of this relationship.

Enhanced Intelligence

Basically, Tesla will provide the storage hardware to a facility and EnerNOC will provide the software smarts to tell the unit when to charge or discharge in an optimal manner. The software does this by taking in signals from inside the building and from external markets and figuring out how to gain the most financial benefit on an ongoing basis. Remley said that the Tesla unit has some smarts as a standalone unit, but the gains from EnerNOC’s software should outweigh the costs. When asked about the potential economic impact on EnerNOC’s business from this relationship, Remley said it is too early to measure as the partnership is still in its pilot phase. But it does not appear that this will add significantly to the bottom line in the near term.

I spoke with EnerNOC’s CEO Tim Healy at the company’s analyst conference back in November 2013, when the company launched its foray into the energy intelligence software space. I asked him if he planned on getting more into the hardware side with topics such as combined heat and power, solar, and storage; Healy said EnerNOC is clearly focused on the software side of things. It appears the company has found a way to keep to that mantra while not letting the proliferation of distributed energy resources pass it by.

Back to Earth

EnerNOC struck a similar deal with SunPower in the solar space in March that didn’t get nearly as much attention as the Tesla deal. From EnerNOC’s standpoint, things like solar and storage are just new endpoints that can be integrated into its existing software that has mainly been developed for demand response purposes. This move represents an important diversification strategy as competitors offer holistic solutions, customers demand central control systems for all of their various resources, and regulators in states like New York and California attempt to add value to all types of new technologies and market structures.

EnerNOC’s stock has come back down after the Tesla hype, but the partnership strategy should benefit the company in the long term.

 

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