Navigant Research Blog

Renewable Energy Grows, Large and Small, in Africa

— December 8, 2014

More than two-thirds of the population of Sub-Saharan Africa has no access to electricity – a figure that rises to more than 85% of those living in rural areas.  Those that do enjoy electricity pay some of the highest rates in the world.  Now, though, the opportunity for renewable energy investment in Africa is finally being realized.  Renewable energy growth in Africa has typically been due to investment in large hydropower plants.  The new wave of investment is now happening across the spectrum – including in utility-scale solar PV, wind, geothermal projects (greater than 10 MW in size), and pico solar systems (under 100W) that encompass solar lanterns, task lights, and solar home systems for people who typically earn less than a few dollars per day.

Beyond Johannesburg

At the utility scale, the leading country in Africa for renewable energy deployment is South Africa, where the government’s integrated resource plan may result in nearly 10 GW of solar PV installed by 2030.  With nearly 1.5 GW of solar PV and 2 GW of wind currently installed or in development, following four well-administered auctions, the country is making strong progress.

Kenya, arguably the next leading market, has 750 MW of solar PV and 290 MW of wind approved and in development.  South Africa and Kenya have both seen strong economic growth over the past decade and are typically the landing points for new companies looking to expand in the region.  The opportunity for large-scale renewable energy investment is now expanding to other African countries through similar mandates for integrating large amounts of renewable energy as part of their overall strategies for increasing electrification rates and meeting demand for power that’s crucial for economic development:

  • Rwanda: An 8.5 MW solar PV installation was built by GigaWatt Global Rwanda in Agahozo Shalom Youth Village for $23 million ($2.70/W); in addition, the government has set a 567 MW target for new renewable energy installed capacity by 2017.
  • Tanzania: The government of Tanzania has a renewable energy target of 14% by 2015.
  • Mauritania: 15 MW of solar PV have been installed, and 15 MW are in development.  The government has targeted 40% rural electrification by 2020.
  • Ethiopia: A 20 MW module assembly line was completed in partnership with Sky Energy.
  • Ghana: The government is targeting 10% renewable energy by 2020.

At the Pico Scale

Of course, there will be challenges along the way in executing these targets and ensuring a fair and transparent process for bidding on projects in these countries.  But if the majority of major announcements are realized in the next 6 years, the African solar PV market could see more than 8 GW installed and $23 billion in revenue by 2020.

On the pico solar side, Navigant Research’s report, Solar Photovoltaic Consumer Products, forecasts that the pico solar and solar home system market could surpass 130 MW in annual installations in Africa by 2018, resulting in revenue in the neighborhood of $500 million.  Kenya is the leader here, as well, expected to account for approximately 20% of the African market followed by Tanzania.  Venture investment is now flowing to so-called social enterprises that use for-profit business models to reach reduce poverty and spread electrification.  Pay-as-you-go and mobile phone-based payment systems are expected to be the key to enabling pico solar to scale effectively.

The success of several leading companies – such as D.Light, Barefoot Power, Green Light Planet, M-KOPA, and others – has led to a crowded market in Kenya, in particular, and the need to expand to new markets, including Malawi, Zambia, Rwanda, Uganda, Nigeria, and Zimbabwe, is increasingly on the radar.

Taken together, impressive growth in utility-scale renewables and of pico solar systems in Africa shows that developing countries can forge their own paths, achieving the benefits of electricity without becoming dependent on large, polluting thermal power plants.

 

Small Wind Leases Open Up New Markets

— December 8, 2014

With more than 5 MW of distributed solar PV being installed per day in the United States, third-party-owned (TPO) systems have catalyzed growth in residential and commercial market segments.  Until now, the wind industry has missed out on the immense opportunity offered by customized power purchase agreements and lease options for its customers.  As with TPO solar, wind leases enable customers to start saving money on their electric bills immediately, with little-to-no money down.  The system owner, meanwhile, takes advantage of the federal investment tax credit (ITC), depreciation, and other state incentives.

Based in Brooklyn, New York, United Wind is a developer of small wind projects and is currently offering lease options for 10 kW and 50 kW wind turbines.  The company has focused its efforts in New York, where the New York State Energy and Research Development Authority (NYSERDA) wind incentive can mean up to $40,000 in credits on a 10 kW system, on top of the 30% ITC.  Other companies are also trying to provide financing options for their customers, either directly or through third-party sources, but uptake has been slow.

Slow Off the Mark

According to Navigant Research’s report, Global Distributed Generation Deployment Forecast, 225 MW of small and medium wind (<500 kW) are expected to be installed cumulatively in the United States between 2014 and 2023.  Overall, the small and medium wind market in the United States has been far surpassed by the solar PV market due to rapidly declining costs that small wind has not been able to match.  With state incentives, in regions with strong wind resources, small and medium wind can be more cost-effective than solar PV, but the industry has been on its heels for the past few years.  As key state incentives have expired, a number of companies have gone under.

At the same time, distributed solar PV companies secured hundreds of millions of dollars in investment, established national sales operations, and significantly reduced customer acquisition costs.  The wind lease option is intended to tip the scales back in favor of small wind in key market segments, such as agriculture, manufacturing, municipalities, universities, schools, and hospitals, in places where wind is abundant.

As with solar PV, wind leases will range from 15 to 20 years on average and include guaranteed performance (in kilowatt-hours generated) warranties that include maintenance and insurance – all wrapped into a single payment.  This puts a premium on site assessment, since customers that don’t see cost savings are a risk to default on their payments.

The small and medium wind market needs to prove it can succeed in markets without lucrative state incentives.  The lease model is a great opportunity to move in that direction, but will require significant investment.

 

Itron Utility Week: Beyond Smart Meters

— December 1, 2014

Nearly 1,000 executives from the water, gas, and electric utility industries gathered in San Antonio between October 17 and 24 to discuss “resourcefulness” – Itron’s term for smarter grid, water, and gas utility technology and solutions – and share best practices.  The conference featured a Knowledge Center showcasing the solutions offered by both Itron and its partners, and dozens of panel sessions covering five tracks: Energy Efficiency and Conservation, Data Management & IT, Advanced Measurement & Communications, Smart Grid, and Analytics & Applications.

The opening general session featured a fascinating keynote address by Scott Klososky, principal at Future Point of View, on “Achieving Humalogy” (“digital Darwinism” and how organizations must evolve to stay relevant), and a killer poetry slam by David Bowden entitled
“Dead Leader Walking” – providing a millennial’s take on management (you can watch the keynote here, skip to 1:23:00 to view the slam).

In the Fog

Itron showcased its new grid edge intelligence solution, Itron Riva, at the meeting.  Itron Riva leverages open standards and Cisco’s IOx Fog computing platform to support Internet of Things functionality, including distributed computing power and control and analytics for automated decision-making at the network edge.  Itron Riva also delivers an integrated, hybrid radio frequency/power line communications (RF/PLC) network, which dynamically selects the best network path for the environment.  Itron Riva has been tested and debugged in a Hong Kong deployment with CKP Power.

Itron notes that the hybrid architecture means the system can flexibly switch from the RF solution (in the winter, for example, when foliage isn’t blocking the path) to PLC (in the summer).  The solution is also good for utilities with both rural and urban environments to cover.

At its Alliance Briefing, the president of Itron’s electricity group, Mark de Vere White, shared his insight on how the smart grid market is shaping up.  De Vere White noted that, while the North American market had slowdowns post-American Recovery and Reinvestment Act (ARRA) funding, the company sees that turning around now, and added that managing solar is a high priority.  Globally, Itron is “very optimistic” about 2015 and anticipates smart grid market acceleration in 2016 and 2017.  Itron’s ERDF Linky deployment in France will begin in the second half of 2015.

Spanning the Globe

In the Asia Pacific region, Itron is seeing activity in Australia, New Zealand, Singapore, Thailand, Japan, and Tonga.  De Vere White also noted growing Latin American interest in Brazil, Mexico, Columbia, Ecuador, and Chile.

Other topics emphasized at Itron Utility Week included smart city technology and how smart grids and smart cities intersect (including a presentation by Amy Aussieker of Envision Charlotte), as well as Itron’s new managed services offering, Itron Total Services.

 

South Korea Draws an Ambitious Roadmap for Smart Grids and Smart Cities

— November 12, 2014

South Korea has ambitions to be a world leader in smart grid technology.  The smart grid test bed on Jeju Island has been the proving ground for the technologies, partnerships, and business models required to achieve this goal.  Led by Korea Electric Power Corporation (KEPCO), South Korea’s national power company, the Jeju Island demonstration project involved a wide range of South Korean and international partners.  The project ran from December 2009 until May 2013, had a total budget of around $240 million, and included two substations, four distribution lines, and 6,000 households.  The sub-projects included power grid upgrades, demand response, electric vehicles (EVs), renewable power integration, and new energy market models.

In this regard, Jeju Island mirrors many other smart grid pilots around the world looking at the integration of multiple technologies and new business models, particularly island community smart grid projects such those in Hawaii and Bornholm.

From Islands to Cities

South Korea is different in that the government has now laid out plans to move beyond its initial demonstration project into a wider series of trials and eventually a national rollout of smart grid technologies.  The next phase will involve a series of eight smart grid/smart community projects, to be run between 2015 and 2017.  More impressively, KEPCO has laid out plans to extend these projects into a series of municipal-scale smart grids by 2020.  The final stage of this grand scheme will see smart grid technologies deployed across the whole country by 2030.

The total budget for the pilot projects is $876 million, around $400 million of which will come from central and local governments and the rest from the private sector.  KEPCO alone is investing $155 million.  The government expects the private sector to take the lead in further development from 2018 onward.  As well as smart meters, an EV charging infrastructure, and energy storage, KEPCO is piloting a smart grid station that will provide sophisticated energy management and grid integration for commercial buildings, beginning with up to 220 KEPCO buildings.  It sees these smart grid stations as building blocks for community energy management systems and city-scale energy management.

Big City Vision

These are ambitious plans, and some of the South Korean experts I spoke with at Korea Smart Grid Week were skeptical about the ability of the government, KEPCO, and other stakeholders to meet the proposed timescales.  However, even if those timescales prove challenging, the vision and the roadmap are impressive.  I don’t know of any other country that has laid out a plan of this magnitude that would see smart grid technologies deployed across all of its major cities by 2020.  Such an achievement really would mark South Korea out as a world leader in both smart grid and smart city infrastructure.

 

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