Navigant Research Blog

Gauging the Real Integration Costs of Renewables

— March 29, 2012

The success record of smart grid renewables integration is a mixed bag, with European countries boldly plowing forward while many utilities in the United States exhibit what a former California state regulator called “electrotrophobia” – the fear of change linked to greater reliance upon intermittent renewable energy resources.

Massive amounts of new transmission lines will be necessary in the U.S. to access the best wind resources, yet the biggest buzz is about advances at the distribution level.  The truth of the matter is that the integration of renewables is not a reliability issue, as these resources are integrated around the world at penetration rates 10 to 20 times higher than in the United States, without major catastrophes.  It is really all a matter of costs to ratepayers and of reducing the environmental impacts of the current reliance upon natural gas fired generation — along with a massive build-out of new transmission infrastructure — to solve the integration problems.  As renewable deployments increase, integration costs are expected to go way up (see Figure 1.1 below) – at least from the perspective of U.S.  utilities.

In isolated cases, such as Denmark, real and rapid progress on smart grid renewables integration is already reality.  While Europe (especially Germany and Spain) appears to be in the lead, the U.S.  and Asia Pacific are also making big strides forward.  Instead of integration costs going up with higher solar PV penetrations, smart grid experts in Germany suggest the opposite could occur with the right low-voltage distribution network technology, highlighting the lack of consensus on how increased renewables will impact utilities.

The synergy between smart grid and renewable energy seems intuitive, but where the rubber meets the road, much more validation needs to be done.  Technologies have come a long way over the past five years.  Today microgrids, demand response, and wind and solar forecasting technologies are all reaching commercial status.  As a result, the tools on the grid side to better manage the variability of renewables are now increasingly available.  These technologies will begin displacing the current reliance upon gas-fired generation at the transmission level over the next six years.  This, in turn, will minimize the environmental impacts of grid integration of solar and wind, reinforcing the value of the smart grid.

On the renewables side, equal if not greater progress has been made with new and improved technology and innovative business models.  The fact that state-of-the-art wind turbines and solar PV systems with sophisticated micro-inverters can self-provide many of the ancillary services that utilities and grid operators worry about speaks to how far this industry has come in responding to integration issues.  Determining the business case for the integration of these renewables through the smart grid is, by necessity, a matter of speculation.  Safe to say Pike Research believes the world will be a very different place six years from now.


Inverters Rise to the Challenge of Integrating Renewables

— March 13, 2012

The inverter – a technology with the rather unglamorous job of converting Direct Current (DC) produced by most solar and wind generation assets into Alternating Current (AC) for distribution throughout utility grids – is hardly the object of much love.  It’s traditionally been viewed as necessary component of most renewable distributed energy generation (RDEG), but nothing more.  A decade ago, inverters lacked any communications or larger smart grid optimization capacity.  How the world has changed.

I recently presented at the Inverter and PV System Technology Forum USA 2012 event in San Francisco.  While much of my own research (and presentation) focused on the ability of new inverters to offer the service of intentional islanding necessary for microgrids, I was astounded to learn the full gamut of other smart grid-type services modern inverters can offer.  I already knew about Princeton Power System’s ability to offer demand response, but I didn’t realize that many of the issues that seem to give utilities heartburn in regards to solar photovoltaics (PV) – voltage, frequency and ramping concerns – can now be handled by these inverters and “smart” solar PV systems themselves.

Of course, the functionality of inverters is also dependent upon scale.  Today’s inverter market can be divided up into at three primary categories:

  • Centralized Inverters: A relatively recent phenomenon, these larger scale systems have been propelled by the growth in utility-scale solar PV projects that can now reach 250 MW or even 500 MW in total capacity.  Companies such as SMA of Germany, which has deployed 20 GW of total inverter capacity worldwide and boasts a 35% total inverter market share, is big on this technology.
  • String Inverters: This is the most common configuration, as it can be deployed at a variety of scales and is, generally speaking, the most cost-effective choice.  As the name implies, inverters are linked up in a string, either in parallel or along multiple strings.
  • Micro-inverters: Perhaps the biggest market buzz surrounds these technologies, as they offer the ability to control output, voltage and frequency down to the solar PV panel level.  For example, the company Enphase – which deployed over 1 million micro-inverters in 2011 and has captured 34% of California’s residential market – can monitor the performance of all of its deployments every five minutes through a control center located in Petaluma, California.

Ironically enough, many of the variability problems utilities worry about with increased use of renewables can be mitigated by emerging solar and wind power technologies, with the inverter being one key solution.  However, right now, utilities will not allow inverters to provide many of these services in the U.S.  Markets around the world have yet to mature to create a power quality metric making provision of these services cost-effective for any of the parties involved.

Many of the Germans at the Inverter Forum (and they were in the majority since Germany is the world leader on solar PV) pointed out that the country has experienced no blackouts or major problems even though, on a per-capita basis, there is 10 times as much solar in Germany as in California.

One way Germany is able to address high penetrations of solar PV on feeder lines is that the grid operator can simply curtail solar PV systems below 5 kilowatts (kW) in size.  Interestingly enough, the entire European Union is also abolishing the standard utility protocol of requiring inverters to disconnect from the grid during a disturbance, which removes one of the largest stumbling blocks to microgrid implementations, and maximizes the value of these distributed resources.  The Europeans now see the light.  When will the U.S.  get up to speed and allow solar (and wind) technologies – including inverters – to help solve the grid challenges they allegedly create?


Where the Jobs Will Be

— February 27, 2012

Last month in his State of the Union speech, Barack Obama touted the potential of the clean energy sector as a source of rising employment for the United States.

“We should put more Americans to work building clean energy facilities, and give rebates to Americans who make their homes more energy efficient, which supports clean energy jobs,” the President said.

Plenty of controversy exists over how many jobs emerging cleantech businesses actually generate. “Congress is holding the fate of more than 40,000 jobs in the clean energy industry in its hands – right now – as they hem, haw, and delay deciding whether to renew critical energy financing provisions such as the Production Tax Credit (PTC) for onshore wind, the ‘1603’ grants that have created jobs in the solar sector, access to the Investment Tax Credit (ITC) for offshore wind projects, and credits for efficient manufacturing, homes, and appliances,” wrote Mary Anne Hitt, director of the Sierra Club’s Beyond Coal Campaign, on Huffington Post last week.

The maps below shed a bit more light on the relationship between jobs and investments in clean energy. The first is the well-known Renewable Energy Map, created in 2009 by the Natural Resources Defense Council:

The interactive map shows existing and planned (as of 2009) projects in wind, solar, biofuel, and geothermal power (the image above shows only wind power). The number of projects has increased significantly since then, while the relative geographic distribution has changed little.

The second map was created by Richard Florida, of The Atlantic, and his colleagues Charlotta Mellander and Zara Matheson. It shows the projected percentage increase in blue collar jobs in the United States from 2010 to 2020.

I am not suggesting a direct relationship here, and the data is so complex as to be open to various interpretations. (Is the increase foreseen in the Detroit area, for instance, dependent on a continued resurgence of the U.S. automaking industry?) And, of course, renewable energy projects tend to go where the wind, solar, and geothermal resources already exist. There is, though, a rough correspondence: the highest blue-collar job growth will be in a line roughly tracking the Eastern Seaboard south to North Carolina, in specific pockets along Florida’s Atlantic coast, the Gulf Coast, and across Texas, in a few scattered areas in the inter-mountain West, particularly in Arizona (a fascinating development with strong implications for both political parties), and in parts of central and northern California. The overlay with renewable energy projects is intriguing enough to suggest that, if you’re going to be looking for a working class job in the next eight years, you might want to go where the clean energy investment is going.


Solving Renewable Energy’s Integration Challenge

— February 2, 2012

Judging from industry hype, it might seem that the smart grid will solve virtually all of our problems relating to energy, transportation, and the economy moving forward.  Smart meters, distribution management automation, and other smart grid technologies will not only reduce both customer and utility costs and optimize the power grid akin to an Internet of Energy, but also is portrayed as vital to efforts to increase renewable energy production.

Last month, I attended the “Wind and Solar Integration Summit” in Scottsdale, Arizona, as a starting point for my research on a forthcoming Pike Research report.  There was plenty of discussion about wind and solar forecasting, different types of energy storage, and the different challenges that face regional grid operations across the United States.  Interestingly, I rarely heard the term “smart grid.”

Part of that, no doubt, is because the focus of efforts to date on integrating variable wind and solar power has been at the wholesale, transmission level of grid service, instead of at the distribution level, where smart grids, microgrids and virtual power plants are absolutely vital for integration.  It’s at the wholesale level where the money is right now, integrating bulk renewable energy into so-called organized markets managed by entities known as independent system operators (ISOs).

The summit did provide some good data points, among them the fact that wind integration costs generally run from $3 to $12 per megawatt hour (MWh), which at today’s wind penetration levels adds up to $270 million to $1 billion in just the United States. Less data is available about solar integration costs since utility scale solar PV is a rather recent phenomenon, but one can assume roughly the same order of magnitude.

Iberdrola, the Spanish operator, has more than 3 gigawatts (GW) of wind power capacity in current operation in the Pacific Northwest.  The company is among the leaders in investigating how better forecasting can reduce integration costs.  According to the company, so-called “day ahead” forecasts are already about as accurate as they can get, with error rates ranging from zero to as high as 18% for Iberdrola in the Bonneville Power Administration’s (BPA) grid control area spanning Washington, Oregon, Idaho and Montana.  (The equivalent forecasting error rate for day ahead forecasts in Europe is closer to just 5%, reflecting, perhaps, a more mature technology/policy integration.)

Better Forecasts

The real challenge for wind and solar forecasting is in the “hour ahead” and “intra-hour” data.  Within this forecasting envelope, error rates can exceed 30% for wind power.  The shorter the scheduling interval – e.g., every five minutes, as is the case in Texas – the more accurate the forecast.  (This is one reason why BPA has struggled in the past is that it used to only schedule wind hourly, and even today schedules wind power every 30 to 60 minutes).

Which variable renewable energy technology offers the greatest integration challenge?  While wind power is less predictable than solar power, the output from the utility scale solar PV project can ramp down instantaneously with cloud cover.  In contrast, wind turbine ramps tend to be more gradual due to spinning machinery.

Beyond forecasting, the most heated discussions at the Summit pertained to energy storage.  It became clear that the perception that energy storage was too expensive may not always be true.  Energy storage is not a monolithic resource, but rather an emerging grouping of technologies that can offer long-term and short-term solutions for variable renewable resources.  The cost of a flywheel providing frequency regulation is a completely different animal than a compressed air storage unit offering long-term energy storage.  The storage firm A123, working with AES Storage, has bragging rights to a 32MW storage project offering frequency regulation services in the Pennsylvania-New Jersey-Maryland (PJM) grid control area today, as well as a 12MW spinning reserve service project in Chile, South America.

The most provocative take away from the Scottsdale conference was a recently released study by Alstom Grid that surveys the world about solutions to the challenges of wind integration.  This report actually does reference the smart grid, highlighting the role of demand response, dynamic line ratings and transformer load management as keys to moving forward with planned wind project integration throughout the globe.

The truth of the matter is that the integration of renewables is not a reliability issue, as these resources are being integrated around the world without a smart grid.  It’s really all a matter of costs to ratepayers.  The far larger challenge is at the distribution level, which is where microgrids and virtual power plants come in.  I’ll have more on that topic in a future blog post.


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