Navigant Research Blog

Village Nanogrids Fuel Mobile Networks

— April 1, 2014

There have been numerous efforts to electrify remote parts of the developing world.  Typically, these have come in the form of philanthropic ventures, with little to no expectation of a return on investment, using distributed energy systems that were often out of touch with the consumers’ energy needs, as well as their capacity to maintain the systems.  As a result, these efforts have been largely ineffective.  More recently, some for-profit companies (mostly mobile network operators) have found that a business case exists for investing in distributed energy for rural off-grid communities – by implementing systems that are much more in tune with customer needs and capabilities.  These systems usually take the form of nanogrids, which are described in the recent Navigant Research report, Nanogrids, and in my colleague Peter Asmus’ recent blog.

For mobile network operators (MNOs) in emerging markets, such as MTN, Vodacom, and Safaricom in Africa and Digicel in Latin America, the challenge is that there are millions of mobile customers without access to the electricity grid; approximately 259 million, according to a recent GSMA report.  For these customers, the cost of charging their phones can represent up to 50% of their total mobile expenditures (airtime plus charging costs), so their phones are only turned on when absolutely necessary, in order to conserve battery life.  Since MNOs make money when the phones are in use, it’s in their interest to make charging convenient and inexpensive enough that conserving battery life becomes an afterthought.  MNOs are quickly finding that distributed nanogrids, such as 10 watt solar home systems (SHS), are the cheapest, most effective way to maximize cell phone usage by existing customers, as well as to bring more customers online.  To stimulate the spread of these systems, MNOs are starting to form commercial partnerships with local vendors of portable solar products.

Friendly Local Utilities

In Uganda, MTN has partnered with Fenix International to provide MTN airtime vendors with a Fenix ReadySet solar-powered battery kit that charges phones and provides LED lighting for the vendor station, allowing them to stay open longer.  The ReadySet has turned MTN vendors into micro-utilities in their communities, creating additional revenue from phone charging and increased mobile money transactions, as well as savings for the vendor from using the LED light.  MTN is also repackaging the ReadySet as the ReadyPay Power System, which is now available to all its customers on a pay-as-you-go basis.  Similarly, Digicel Haiti partnered with Solengy in 2011 to install over 400 solar-powered street lamps and phone charging stations across Haiti.  Each station is operated by an airtime vendor that sets up shop below the LED street light and manages the phone charging service.  Other examples include Vodacom and Mobisol in Tanzania and Safaricom and M-KOPA in Kenya.

Forming the backbone of this transition are pay-as-you-go business models and mobile money, which I’ll explore in my next blog.

 

Utilities Enter the Era of Distributed Generation

— March 31, 2014

From the “Internet of energy” to the “utility death spiral,” the causes and effects related to the distributed generation (DG) transformation go by many names.  Faced with what is increasingly recognized as DG’s inevitability, utilities and the companies that supply DG technologies are faced with the difficult challenge of defining viable business models in a multi-dimensional technology landscape.

Former Energy Secretary Steven Chu and outspoken NRG CEO David Crane have loudly pointed out the futility of business-as-usual thinking in the face of DG’s advance.  It’s a mistake to think the power sector is oblivious to the changes enveloping it, though: most utilities do not actually have their heads in the sand, as recent headlines suggest.  According to Utility Dive’s 2014 State of the Electric Utility survey, 67% of U.S. utility professionals believe their company should take a direct role in supplying DG to their customers ‑ either by owning and leasing distributed assets or by partnering with established DG companies.  At the same time, key suppliers like GE, recognizing a dawning opportunity, are positioning themselves for growth.

Tip of the Iceberg

Although solar PV has provided a blueprint of sorts, a suite of technologies – collectively called distributed energy resources (DER) – is primed to usher in a reimagining of DG’s value proposition.  Composed of renewable and fossil-based generation, diverse fuel sources like the sun and biogas, power generation and storage assets, and applications from microgrids to combined heat and power (CHP), DG’s multi-dimensionality suggests that existing business models are just scratching the surface.  An estimated 37 million homes in the United States, for example, now have natural gas lines running directly to them, which opens up the possibility of micro-combined heat and power and fuel switching.

For utilities, the challenge is fairly straightforward.  Demand-side generation is leading to death by a thousand cuts, as the cost of maintaining and operating the grid is spread over a gradually declining revenue base due to eroding customer demand.

In its widely-cited Disruptive Challenges report, published in 2013, Edison Electric Institute lists the financial risks created by DG: declining utility revenues, increasing costs, and lower profitability potential.  Simply charging higher rates – one solution offered by the most entrenched utilities – risks accelerating the revenue ”death spiral,” as rising rates make it increasingly attractive to adopt otherwise expensive DG technologies.  Recent experiences across Europe have demonstrated that utilities must adapt (see RWE) or risk obsolescence, at least in the traditional revenue sense.

Transforming is Grand

On the supplier side, companies like GE are positioning for what is an inevitable expansion of DG globally.  The company announced last month the creation of a new business unit called GE Distributed Power, targeting the global distributed power opportunity.  Merging three existing business lines – Aeroderivative Gas Turbines, Jenbacher Gas Engines, and Waukesha Gas Engines – GE will invest $1.4 billion to combine formerly niche generation products into a cohesive distributed power offering.

The move coincides with the publication of a recent white paper, “The Rise of Distributed Power,” in which GE forecasts that distributed power will grow 40% faster than overall global electricity demand between now and 2020.  The trend, according to GE, is nothing short of a “grand transformation.”  The company estimates that globally, about 142 gigawatts (GW) of distributed power capacity was ordered and installed in 2012, compared to 218 GW of central power capacity.

Four key trends are driving the distributed power transformation, according to GE: the expansion of natural gas networks; the rise of transmission infrastructure constraints; the growth of digital technologies; and the need for grid resiliency in the face of natural disasters.  While these trends are playing out in the U.S., GE’s efforts are focused primarily on the fast-growing Asia Pacific market and the expansion of natural gas.

Big in Bangladesh

The momentum behind DG is especially strong in the developing world, where electricity demand outstrips the pace at which centralized power stations and transmission infrastructure can be financed and built.  The IEA estimates that in 2009, 1.3 billion people lacked access to electricity, representing around 20% of the global population.  A significant proportion of this population lives in Asia Pacific.

While the DG era represents a degree of complexity that has yet to be fully grasped, initiatives from both utilities and their suppliers point to increasing acceptance of its inevitability.

 

As Solar Prices Fall, Wind Still Finds a Role in Microgrids

— March 25, 2014

With the steep declines in solar photovoltaic (PV) system prices over the past 5 years, many developers of remote microgrids – systems not interconnected with a traditional utility grid – have begun to shy away from their previous reliance on wind power to lower the systems’ consumption of polluting and increasingly expensive diesel fuel.

As one long-time observer summed up the situation: “The history of the small wind turbine industry is one littered with failures.”  The story of Southwest Windpower is particularly galling.  Backed by investments from General Electric, the company’s tiny turbines were pumped out into the market with little regard for long-term performance.  As a result, many of these extremely lightweight machines, producing less than 2 kW of power each, have stopped working only after a few years.  In some remote island installations, the machines have literally been blown away by hurricanes and other extreme weather events. While some other small wind turbines, such as those of Bergey Wind Power, have had lasting power, many of these typically small, small wind companies have struggled over the past few decades.

Wind in Lonely Turbines

A survey conducted by the Commonwealth Scientific and Industrial Research Organization (CSIRO) of Australia in 2009 claimed that 71% of microgrids included some form of wind capacity.  Given that Australia is one of the global leaders in off-grid wind/diesel systems, it is likely these results were skewed by data weighted too heavily toward off-grid applications.  A more recent analysis performed by Navigant Research found that of those microgrids that included wind power, 67% were installed in remote microgrids.  Interestingly enough, North America is the global leader, due to two states: Alaska and Hawaii.

Remote Microgrid Capacity with Wind Capacity, World Markets: 2Q 2014

(Source: Navigant Research)

Wind has fallen out of favor for at least three reasons:

  • Unlike solar PV, small wind turbines historically have required greater operations and maintenance (O&M) investments.  In many remote locations, local expertise is hard to find.
  • Many remote locations do not benefit from an adequate wind resource assessment.  If you’re constructing a 100 MW wind farm, you can justify the expense of a detailed wind resource assessment.  This is not the case for just one or two wind turbines in a remote microgrid.
  • The variability of wind is immense, requiring a more nimble and sophisticated control system for a microgrid.

Both, Not Either

Despite these negatives, many remote microgrid developers still see value in wind.  In many cases, wind power is still half the cost of solar PV.  In fact, the ideal scenario is not just solar or just wind as renewable options, but both.  The sun shines during the day; the wind often blows at night.  Incorporating both of these renewable resources enables the use of a smaller energy storage device – a technology that is currently often viewed as the weak link among hardware choices for a microgrid due to high cost.

Furthermore, there are many wind turbines that now offer direct drives, eliminating the gearbox that is the most common point of failure, which contributes to high O&M costs.  If such wind turbines can be installed without a crane, as is the case with Eocycle’s, some of the installation headaches also go away.

 

Filling Small Niches, Nanogrids Become Pervasive

— March 21, 2014

If you think the term microgrid is still a bit fuzzy, you’ll be even more puzzled when it comes to the term nanogrids.  While it’s safe to say that nanogrids are smaller than microgrids, there is a major disagreement as to whether nanogrids will scare the hell out of utilities or if they are actually already well-established and can flourish within the current regulatory environment.

The Navigant Research definition of a nanogrid is: A small electrical domain connected to the grid of no greater than 100 kilowatts and limited to a single building structure or primary load, or a network of off-grid loads not exceeding 5 kW, both categories representing devices capable of islanding and/or energy self-sufficiency through some level of intelligent distributed energy resource management or controls.” 

The basic concept behind the nanogrid is simple: small is beautiful.  Nanogrids are modular building blocks for energy services for current applications that range from emergency power for commercial building to the provision of basic electricity services for people living in extreme poverty.  Nanogrids typically serve a single building or a single load.  Because of their simplicity, the technology requirements for nanogrids are less complex (in most cases) than either microgrids or the utility-dominated smart grid.

Tiny Grids, Big Business

Ironically, nanogrids are big business.  While microgrids (as described in Navigant Research’s report, Microgridsexhibit exponential growth and share synergistic properties with many nanogrid segments, substantial deployments of nanogrids are already in place, as they actually face less technical and regulatory barriers than their microgrid counterparts.  For example, Navigant Research’s Nanogrids report finds that the market is already worth $37.7 billion today and it represents capacity almost 10 times larger than the projected size of the current microgrid market.

Lawrence Berkeley National Laboratory (LBNL) asserts that nanogrids never encompass any forms of distributed generation and never interact with the larger utility grid ‑ two criteria that Navigant Research takes issue with.  By that definition, every laptop, every car (even if powered by an internal combustion engine), and every universal serial bus (USB) drive is a nanogrid.

The business case for nanogrids echoes many of the same arguments used on behalf of microgrids.  These small, modular, and flexible distribution networks are the antithesis of the economies of scale that have guided energy resource planning over much of the past century.

Here to Stay

Nanogrids take the notion of a bottom-up energy paradigm to extreme heights.  Yet, one could argue they are less disruptive than microgrids in one very important way.  Since nanogrids are confined to single buildings or single loads, they avoid many of the regulatory challenges that stand in the way of power-sharing microgrids, such as prohibitions regarding non-utilities sending power over public rights-of-way.  In the developing world, nanogrids are often the only pathway to universal energy access, as dispersed residences often preclude networking.  One could also take a contrarian view.  For example, nanogrids foster a more radical shift to direct current (DC) power than microgrids, since their small scale can accommodate low-voltage networking.

Either way, nanogrids are already here to stay.  New forms of distribution networking are clearly on the rise, whether one wants to call such platforms a nanogrid, a microgrid, or something else.

 

Blog Articles

Most Recent

By Date

Tags

Clean Transportation, Electric Vehicles, Energy Management, Energy Storage, Policy & Regulation, Renewable Energy, Smart Energy Practice, Smart Grid Practice, Smart Transportation Practice, Utility Innovations

By Author


{"userID":"","pageName":"Distributed Generation","path":"\/tag\/distributed-generation","date":"4\/17\/2014"}