Navigant Research Blog

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.

 

Saving the Sun for Later: Opportunities and Barriers for Solar PV plus Energy Storage

— June 22, 2017

At the recent Better Buildings Summit, I had the opportunity to moderate a session with Karen Butterfield of Stem, Ben Myers of Boston Properties, and Jessie Denver with the City of San Francisco to discuss their strategies and experiences related to adopting solar PV plus energy storage. It was a spirited discussion and we received in-depth, informed questions from the audience on feasibility, system costs, lessons learned, and how to make the business case for project deployments.

Lessons Learned

Stem opened the session and provided many great lessons learned from its experience to date:

  • Solar PV plus energy storage can be applied to save energy costs and demand charges, but a concise site- and tariff-specific use case is required to make a project work.
  • Robust software is required to integrate building load, solar PV system performance, and battery deployment scenarios to generate cost savings.
  • Utility partnerships can improve project economics and help make the business case.

Boston Properties highlighted that, as part of its sustainability plan, it has installed solar PV at many of its properties across the United States and has reduced its energy charges. The company is now looking at solar PV plus energy storage to guarantee tariff-specific demand charges as well. While Boston Properties has yet to complete a project, it is in the process of negotiating contracts using a solar PV plus energy storage power purchase agreement with a shared demand charge savings component.

Whereas Boston Properties’ drivers were financial and sustainability, the City of San Francisco’s drivers are resilience and sustainability. The city recently won a US Department of Energy SunShot grant to study the feasibility of installing solar PV plus energy storage at critical facilities to provide power in case of an earthquake or another emergency. San Francisco is currently selecting pilot sites and completing its feasibility analysis. As part of the project, the city and its project partners have created a free online tool to help others assess the feasibility of using solar PV plus energy storage for resilience.

Growth of Distributed Solar PV plus Energy Storage

The topics and session discussion at the Better Buildings Summit highlighted several key issues that Navigant sees as important for the growth of distributed solar PV plus energy storage markets:

  • The ability of energy storage software platforms to forecast energy and demand charge savings for anticipated building load and battery deployment scenarios is critical to the business case for these projects.
  • The multitude of regulations and rate structures affecting both solar and energy storage, and their expected evolutions, will increase the value of project design and operating software by helping lower customer acquisition and development costs.
  • As with standalone energy storage deployments, the predictability of costs savings from these projects will further the development of financing innovation to drive the deployment of these technologies.
  • The value of resilience and resulting business case criteria will differ greatly between solar PV plus energy storage customers. For example, the resilience value of solar PV plus energy storage for commercial office building occupants differs from that for a municipality like the City of San Francisco. Building occupants likely have a business continuity plan to address long-term energy outages at their facilities while the city is charged with critical first responder responsibilities in the event of a disaster or emergency.
 

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