Navigant Research Blog

What Will the Microgrid of the Future Look Like?

— March 6, 2018

Microgrids have been around for a long time. In the past, the majority were powered up by diesel fuel and often were not connected to a traditional utility power grid. But what will the microgrid of the future look like?

As reported in the last update to the Microgrid Deployment Tracker published in 4Q 2017, the remote microgrid market share for total identified cumulative capacity declined from 45% to 39% in the 2Q 2017 update. This trend is more of a reflection of the grid-tied market picking up momentum than a lack of interest in remote off-grid applications. For comparison purposes, the next largest microgrid market segment in the update is the commercial and industrial segment, which has witnessed a recent surge and which Navigant Research estimates will be the fastest-growing market segment over the next decade.

Primary DER in Microgrids Are Going to Change

Rather than focusing on market segments, what about the types of distributed energy resources (DER) being deployed within microgrids? It should come as no surprise that diesel and natural gas generation still lead the resource mix. Looking into the future, a far different picture emerges.

In the Microgrid Enabling Technologies report published this January, combined heat and power was the leading DER choice in terms of capacity for microgrids on a global basis in 2017, with 655 MW deployed, followed by solar PV (392 MW) and then diesel (385 MW). By 2026, however, the DER landscape shifts, with solar PV jumping to a commanding lead with 3,786 MW annually, followed by energy storage with 3,292 MW. Energy storage boasts the most aggressive compound annual growth rate (CAGR) with 37.4%; solar PV follows at a CAGR of 28.7%.

Investment Spending Predicted to Rise

Implementation spending tracks this capacity growth. All eight DER were profiled in the recent report (which also includes biomass, diesel, hydro, and wind power). This market forecast represented just over $4 billion in investment in 2017. That annual spending increases to nearly $23.6 billion by 2026, a 21.7% CAGR. Solar PV ranks as the top DER investment target for microgrids, with annual spending reaching virtually half of all DER investment by 2026 at $6.7 billion. Energy storage spending follows at $4.5 billion annually in 2026.

Collaboration Expected as Power Sources Diversify

In short, solar PV and energy storage will be the most popular MET options for future microgrids. Yet, the more interesting question revolves around the potential role of fossil generators. One clue comes from companies such as Fairbanks Morse, which now offers a power reliability as a service platform. Rather than view solar and storage as a threat, it is investigating how to collaborate with the industry’s overall shift to the Energy Cloud.

Fairbanks Morse is not the only company exploring how the energy as a service model applies to microgrids. Perhaps the biggest single headline for microgrids in 2018 is the partnership between Schneider Electric, Dynamic Energy Networks, and the Carlyle Group, looking to deploy $500 million in microgrids under a microgrids as a service business model.

Microgrid Evolution Is Just Getting Started

Of course, the energy service approach to microgrids is still in incubation. The key to making this approach work are controllers, the magic sauce, if you will. As DER portfolios become commoditized, the innovation shifts to automation, controls, and software. Who are the leaders in this space? Look for my forthcoming report ranking control providers later this month.

Getting back to my opening question, the microgrid of the future will be more sustainable, ultra-resilient, plug-and-play, financed under an energy as a service business model with private capital, and will include both solar and energy storage.


Postcard from Australia: Audrey Zibelman Interview

— February 27, 2018

As noted in a previous blog, the hiring of Audrey Zibelman, former head of the New York Public Service Commission, as the new CEO of the Australian National Energy Market (AEMO) helped shine a spotlight on innovation occurring down under.

A recent report suggests Australian network operators will pay prosumers $2.5 billion annually for grid services by 2050—if customers stay connected to power grids and policy recommendations are implemented in an integrated fashion.

The following is my interview with Zibelman; look for a new report from Navigant Research on integrated DER in Australia this spring.

Can you compare the status of the market for DER innovation in Australia and New York?

“Australia can lead the world in the innovative integration of distributed energy resources (DER). New York, while having a DER strategy in place as part of the Reforming the Energy Vision initiative, has a different objective to its DER vision—at least in the short to medium term. New York developed its strategy based on market incentives to encourage the uptake of DER. Australia, like California and Hawaii, already has a large proportion of DER, mostly in the form of rooftop PV, so using innovative technologies, concepts, and business models are critical to maintaining secure and reliable power while also empowering consumers.

Australia is at the stage where its had excess rooftop PV generation meet up to 48%, 30%, and 20% of demand in South Australia, the Wholesale Electricity Market (WEM) in Western Australia, and Queensland, respectively, during some periods. This is unprecedented. All three locations provide immediate opportunities to demonstrate DER capabilities. This is something AEMO is planning to take an active role in leading.”

Why should global vendors active in DER management care about Australia?

“There is no shortage of opportunities. AEMO is focused on the effective and efficient integration of DER, and innovative vendors play a key role in this.”

Are there unique challenges in specific regions of Australia?

“We need to have the ability to coordinate DER in aggregate (not just PV) to address system needs. There will be opportunities for businesses to exploit greater periods of negative or near-negative pricing. The WEM in southwestern Australia has the added challenge of being islanded. Queensland has a lot of microgrid opportunities, which are still relatively new in formation.”

Is integration of retail and wholesale markets picking up momentum?

“From a wholesale perspective, we believe resources need to be valued based on their service to the market. We have been public in our view on the need for more flexible, dispatchable resources, and these resources need to be priced accordingly.”

What do you see as the necessary next steps?

“We need effective coordination of DER. We also need to assess efficacy of emergency mechanisms (such as under- and over-frequency load shedding schemes) in systems with high DER. Effective coordination of DER should see a reduction in network fees as DER can offset the need for network augmentation.”

Are there lessons learned from Australia’s remote microgrids that are transferable to where consumers are interconnected to a utility grid?

“We are always keen to learn from what others are doing, and we have been in discussion with Horizon Power about its work. The important thing to remember is that grids are unique—their size, constituents etc. So, we need to be mindful that solutions in one grid won’t necessarily be transferable to another. This is particularly true of utility scale grids. However, microgrids can be of benefit for technical demonstration, and provide useful learning that can be applied to utility scale solutions.”


China Seizing Leadership in Global Solar

— February 8, 2018

In November 2017, I wrote about the surging Chinese solar market. On January 2018, China’s National Energy Administration (NEA) confirmed this trend when it announced that 52.8 GW of solar were installed in 2017. To put this into perspective, this is more than the cumulative solar installed capacity in the US at the end of 2017. At the same time, PV became the technology of choice for the country—at least on installed capacity terms—as in the same period, China only installed 45.78 GW of conventional generation.

China As an Example for Solar Development

With a record year in 2017, China’s cumulative solar capacity reached 130.3 GW, or around 7.3% of the country’s national power generation capacity—3% of it coming from capacity installed in 2017. While this is still far from the levels of conventional generation, it does show the potential of PV to scale quickly and have an effect on a country’s electricity system. After all, China has the largest generating fleet in the world, with close to 1,800 GW of capacity.

Perhaps more surprising about the record installation figure was the take-off of the Chinese distributed solar generation sector. The country continues with the trend shown in 1H 2017 and is estimated to have closed the year at around 20 GW and a massive annual growth of 370% to reach 29.7 GW of cumulative capacity. As explained in November, this rise was caused by a rush to capitalize on highly attractive feed-in tariff (FIT) premiums that expired at the end of 2017.

Duration and Stability Expected

Despite the opportunistic nature of the surge in distributed solar, this sector is not expected to collapse in 2018 (although it might see a fall in new additions). There are several trends that still support the distributed sector. First, the new FIT, although not as attractive as the previous one, is still interesting enough to keep investment in the sector. In addition, the Solar Energy for Poverty Alleviation Program will also support new installations.

Distributed solar has also been beneficial for more fundamental changes in the Chinese electricity sector. The Chinese market is seeing increased competition thanks to China’s power sector reform, now nearly 3 years old, which has included a gradual effort to unbundle retail and distribution business from the large grid companies to varying degrees across provinces. On October 31, 2017, NEA and the National Development and Reform Commission jointly announced a new initiative for Market-oriented Distributed Power Generation as a new part of the power sector reform. The document calls for the creation of platforms that will facilitate electricity trading between distributed generation projects and end users across a local electricity distribution network, starting with large-scale pilots in yet-to-be decided locations. Although it will take time to implement, this initiative should help develop distributed solar installations as behind-the-meter installations will be able to trade their generated electricity freely, paying only distribution network costs, not transmission network costs.


Market Heats Up for IoT Energy Management Solutions

— February 1, 2018

Managing energy grids has grown ever more complex as the number of connecting devices has risen sharply. Millions of two-way communicating smart meters, pieces of advanced substation automation equipment, and distributed generation assets have come online in recent years, creating an intricate Internet of Things (IoT) network that can challenge even the best of grid managers. Connecting all these devices is a challenge, and is by no means trivial.

How Best to Organize and Interpret Data from Connected Energy?

The real test comes when trying to organize, make sense of, and glean valuable insights from the huge data volumes generated by these IoT devices and sensors. From there, the objective becomes turning those insights into useful and lasting applications for today and tomorrow. Solutions vendors have worked hard to meet their grid customers’ need for advanced technological tools to manage the data and applications. Lately, the vendors have developed some new offerings.

Platforms for Smart Cities and Utilities

Landis+Gyr launched its Gridstream Connect IoT platform, which is aimed at utility, smart city, and consumer applications. The platform is designed to integrate a variety of smart devices and utilize various communication protocols, including radio frequency mesh, LoRa, and cellular. The platform’s IPv6-based architecture can work independently with third-party devices and software to control street lights, solar inverters, EV charging stations, environmental sensors, and an array of distribution assets. The overarching idea is to provide utilities a way to leverage sensor technology at the grid edge for smart community and smart home applications, while also laying a foundation for future distribution strategies.

IoT Analytics

SAS and Trilliant joined forces to create a harmonized system that targets analytics for IoT. Under the agreement, SAS will contribute its event stream processing capabilities for structured and unstructured data, and provide machine learning technology for event detection, distributed energy resources optimization, and revenue protection. The SAS pieces will be matched with data from Trilliant’s real-time, multi-technology, multi-application networking platform. The two firms are already working jointly with the town of Cary, North Carolina, where they are in the middle of deploying analytics-based applications for street lighting, with the goal of improving public safety and boosting energy efficiency throughout the town.

Predictive Maintenance Software Solutions

ABB unveiled its Ability Ellipse software solution, which is designed to help utilities take a more proactive approach to predictive maintenance. The Ability Ellipse software unifies the functionality of ABB’s enterprise asset management, workforce management, and asset performance management packages. The software suite enables customers to better optimize asset utilization, and reduce equipment failures and system outages. Ability Ellipse is the latest offering in the firm’s Ability family, which embeds business processes and leverages real-time equipment data and IoT to connect predictive analytics and asset management systems to mobile workers in the field.

And More

These three examples of the latest solutions are by no means the only ones in the market. Competitors like Itron and Siemens come to mind. Yet these latest moves by the above vendors signify that current tools are inadequate to harness the growing complexity of energy grids. As the digital transformation of energy markets continues, grid managers will need these types of advanced software solutions to seize the opportunities awaiting them as they forge the emerging grid of tomorrow. Without them, the opportunities will be lost, or upstarts will move in with advanced tools and disrupt the incumbents.


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