Navigant Research Blog

Scotland Exemplifies European Energy Transition with Tidal Generation

— September 26, 2016

Energy CloudImagine a landscape dotted with wind turbines and homes supporting rooftop solar—that’s what  I noticed during a recent trip to Scotland. What I couldn’t see was power being exported to the grid through offshore tidal stations. Nova Innovation has succeeded in deploying the world’s first fully operational array of tidal power turbines in the Bluemull Sound, which are now successfully feeding electricity to local Shetland homes. The project began in March 2016, when the first in a series of three turbines was deployed. When the second turbine was deployed and activated in late August 2016, the project became the first offshore tidal array in the world to actually deliver electricity to the grid.

Scotland has had its fair share of failed attempts in the marine power industry, including the collapse of two wave power companies, Pelarmis and Aquamarine. However, the country has some of the most powerful tides in Europe, and Nova Innovation’s achievement shows promise for further development of tidal power as a renewable generation source.

Energy Transformation

Scotland’s recent success in tidal generation also highlights the region’s dedication to distributed energy resources (DER), renewables, and adapting to a transforming energy industry. A recent series of blogs highlights Europe as a region helping to lead the way in a changing energy environment, and arguably transitioning faster than anywhere else in the world. The megatrends that are revolutionizing the way power is produced and used in Europe include shifting power-generating resources to renewables, new market entrants focused on investing in renewables, DER, and energy management, and the power of consumer choice as demands change among customers who want to control their electricity usage and decide what power to purchase.

Navigant expects DER to grow more than 5 times faster than new central station generation in the next 10 years in Europe; its uptake is anticipated to be widespread and one of the most disruptive factors affecting the grid. Additionally, utility-scale and distributed renewables are expected to account for 50%-100% of generation, with net new capacity currently reaching virtually 100% renewables.

Europe is a vibrant and fertile market for DER and renewables, from small generation pilots in Scotland, to cities like Copenhagen and Munich committing to 100% clean energy, to growing carbon emissions reductions policies and regulations that affect the entire European Union. This is a region dedicated to transitioning in a changing energy environment, and it’s worth following along as its energy future develops.


Plug-and-Play Microgrids, Here and Now

— September 22, 2016

Power Line Test EquipmentOne of the primary challenges facing the microgrid market today is the perception that each project is unique and therefore requires significant customized engineering. In fact, dozens of microgrids never seem to make it past the feasibility analysis phase due in part to this predicament.

While it is true that very few microgrids are exactly alike and therefore the idea of cookie-cutter configurations seems next to impossible, there are vendors now offering products and services that are moving the market much closer to a plug-and-play paradigm.

Case in point: Tecogen. The company manufactures the InVerde, a small natural gas engine often deployed as a modular 100 kW combined heat and power (CHP) unit that comes embedded with the Consortium for Electric Reliability Technology Solutions (CERTS) islanding software. String a few of these CHP units together (as the Sacramento Municipal Utility District has done) and presto—you now have a simple microgrid. The inverter that comes with the InVerde technology enables islanding and can support multiple generators on the same microgrid, each one acting autonomously to maintain power quality by responding to load changes, managing voltage sag, and regulating current.

Energy Ecosystem

Navigant Research does not consider a single InVerde unit a microgrid, since it is powering up a single building and is only 100 kW in size. We would instead categorize such systems as nanogrids. However, even multiple InVerde units are not considered microgrids by some entities, among them the New York State Smart Grid Consortium. Regardless of what one calls such systems, nanogrid, microgrid, or whatever else, they do represent part of a new Energy Cloud 2.0 distributed energy resources (DER) ecosystem.

The argument that Tecogen is not a microgrid market maker is being challenged by a new product offering, the InVerde e+, which allows for the integration of both energy storage and solar PV (or small wind) into a single controllable entity by virtue of direct current (DC) bus. With this recent upgrade, Tecogen’s claim to enabling truly plug-and-play microgrids seems quite valid—and even more compelling.

In the United States, CHP (and the ability to create thermal energy) is key to the economic value proposition for microgrids. In fact, the ideal resource mix for a microgrid in the United States today is CHP, solar PV, and a lithium ion battery. If sized strategically, this microgrid configuration can be cheaper than utility costs in California and much of the East Coast today.

Tecogen’s InVerde units boast an impressive list of features, among them emissions equivalent to that of a fuel cell, 33% electrical efficiency (and 81% total energy efficiency), and the lowest installation costs of any comparable technology in its class. The biggest surprise? The cost of microgrid controls—embedded in each CHP unit—is zero.

Marketplace Gains

Even before the recent new offering, Tecogen had made impressive gains in the marketplace. It ranked fourth in terms of total installed microgrid projects globally in the latest version of Navigant Research’s Microgrid Deployment Tracker. In last year’s Leaderboard report ranking microgrid developers/integrators that offered their own controls platform, the company ranked fifth.

Tecogen is not the only vendor moving the market toward plug-and-play and interoperability. Spirae and Blue Pillar have made important strides in this direction from an independent controls perspective. In addition, Duke Energy’s Coalition of the Willing is also moving forward to develop a common interoperability framework for microgrids, focused on so-called Open Field Message Bus (Open FMB) communication standards.


Europe’s Energy Transition Megatrends and Tipping Points, Part VIII: Building a Competitive Advantage in the Emerging Energy Cloud

— September 12, 2016

AnalyticsIn our initial blog in this series, Take Control of Your Future – Megatrends Part I, we discussed seven megatrends that are fundamentally changing how we produce and use power. In this blog (Part VIII), we will discuss the emerging Energy Cloud, how this is driving the energy transition in Europe, and how utilities can build competitive advantage.

What’s Happening?

There is widespread consensus that a historic transformation of the utility industry is now well underway, and Europe is leading the way. From the move to cleaner generation resources to the prolific rise of distributed energy resources (DER) to customer empowerment to digitisation efforts across the value chain, disruptive changes are transforming the way power is produced and consumed. The result is an increasingly intelligent grid that is cleaner, more distributed, flexible, and efficient. We call this the Energy Cloud.

In the Energy Cloud, as described in Navigant’s Navigating the Energy Transformation white paper, changing customer needs, evolving policy and regulation, and accelerating technology innovation and integration will drive the creation of more distributed transactions and dynamic business models, a more sophisticated two-way grid platform, and a rapidly evolving ecosystem. Sitting on the cusp of major market evolution, innovation is accelerating beyond one-off, standalone technologies (e.g., renewables) and the pairing of these technologies (e.g., solar plus storage) toward the orchestration of complex ecosystems of technologies working in concert to deliver more flexible, responsive, and customer-centric services. Moving beyond siloed technologies, for example, ongoing digitisation efforts are laying the foundation for dynamic platforms that combine technologies and services like integrated DER (iDER), smart cities, Internet of Things (IoT), and transactive energy. These platforms provide fertile testing grounds for industry incumbents as well as disruptors and are expected to result in €400 billion (~$446 billion) in new annual industry revenue by 2030 in Europe. This future state is no longer a question of if, but rather, when—and more importantly, how.

The Energy Cloud


(Source: Navigant)

A 2030 Energy Cloud Scenario

European utilities are at various stages of integrating distributed generation (DG), demand response, energy efficiency, EVs, and electric storage. Navigant expects this trend to accelerate. Based on our forecasts, DER is expected to grow more than 5 times faster than new central station generation in the next 10 years in Europe. That makes DER one of the most disruptive factors affecting the grid today and into the future. Under an aggressive scenario, we describe a transformative Energy Cloud ecosystem in 2030 as follows:

  • Utility-scale and distributed renewables account for 50%-100% of generation; DER uptake is widespread, accounting for a vast majority of new build capacity.
  • Annual industry revenue reaches more than $1 trillion in Europe in 2030, resulting in more than $8.7 trillion in cumulative revenue generated between 2016 and 2030 across the region. Digital innovations (i.e., information and operations technology, data analytics, and connectivity) account for more than one-fifth of total revenue generation.
  • Revenue across the electric value chain shifts significantly downstream toward the edge of the grid and beyond (customer side of the meter). Revenue and cost allocation of generation and supply and new energy services effectively swap. Cost and revenue of distribution and customer energy management represent more than half of revenue allocation across the value chain.
  • Grid boundaries are expanded, integrating the existing infrastructure with behind-the-meter building energy networks and community-scale nanogrid and microgrid infrastructure, as well as supergrids linking power networks that extend across geographic regions well beyond traditional state-nation boundaries.
  • The distributed, intelligent grid gives way to a neural grid that is nearly autonomous, self-healing, and leverages innovations in artificial intelligence and cyber-physical systems (i.e., IoT, self-driving EVs, and the smart grid). The application of blockchain technology gives rise to peer-to-peer power exchanges and transactive energy.

How to Build Competitive Advantage

The most critical part of the Energy Cloud transition is balancing ongoing investments in the core grid and additional dynamic platforms that support new technologies, products, and services. Over time, the total volume (and with that, revenue) that flows through the core centralised assets will decrease. These assets will increasingly become at risk of being stranded, and they may become obsolete or financially unsustainable. Asset owners must plan now to mitigate this risk to minimise the cost to incumbent utilities, customers, and society.

Utilities play a key role in this transition. They must integrate new platforms, technologies, products, and services with the existing infrastructure, transforming their organisations into network orchestrators so that the full value of distributed energy is captured while the impact of stranded assets is understood and managed. Existing planning mechanisms, like strategic plans (with typically a 5-year horizon) and integrated resource plans (typically 30 years), are insufficient. A medium-term strategic identity and growth plan (10-15 years) and an agile Energy Cloud Playbook (6-12 months) are needed to pinpoint the trends, opportunities, and threats and introduce new technologies and business models that address merging markets and client needs.

To help navigate our clients in this changing landscape, Navigant has developed an Energy Cloud Playbook. The first step in the Energy Cloud Playbook is an assessment of your current status and level of preparedness. Navigant’s multifaceted iDER Maturity Model provides an assessment of a utility’s progress in DER integration capability. We start with a blueprint for what a fully integrated DER system looks like, and then define five levels of iDER maturity based on that blueprint. We will assess your strategy, organisation, and operations against these maturity levels.

iDER Maturity Model


(Source: Navigant)

Final Advice: Take Control of Your Future

No two markets are alike, and the Energy Cloud transformation will play out differently across European countries, reflecting unique on-the-ground realities. While not all strategic pathways to navigate this transformation will be appropriate (or even successful) for all players across all markets, those that already acknowledge the complexity of the challenge ahead have an advantage. Facing more uncertainty, industry stakeholders—and utilities in particular—will need to adopt a more agile mindset to maneuver their organisations and position for long-term success.

After assessing your iDER maturity, current and future state, and benchmarking it against your peers, an integrated DER strategy, architecture, and roadmap needs to be developed. Through pilot and demonstration projects, your strategy, go-to-market approach, and business case assumptions will be tested, after which viable and market-ready products and services will be implemented. Stakeholder engagement and change management are key to get the right level of buy-in and develop the organization. Measuring and verifying the actual value of the new products and services will be the basis for adjustment of the strategy and fine-tuning of your Energy Cloud Playbook.

Energy Cloud Playbook


 (Source: Navigant) 

In Closing

The tipping points are clear and the megatrends discussed cannot be underestimated. We are only at the beginning. These trends are accelerating transformation in the energy industry, enabling the entry of new players, putting pressure on incumbent players, and altering traditional strategies and business models. We will likely enter into a 20-year period of uncertainty, trial and error, successes, and many failures as we figure out ways to transform our power generation, delivery, and consumption systems to an orchestrated, agile, open, and efficient Energy Cloud platform. Organisations will need to adapt, and there will be winners and losers as this transformation takes shape.

Navigant’s advice to senior leadership of energy companies is to take an integrated, holistic view of the opportunities and challenges that are flowing from these megatrends. To help you, Navigant has developed the Energy Cloud Playbook, which describes the steps you should take. Only then will you be able understand the full impacts and path forward. And that is the only way you can really take control of your future.

Navigant is at the forefront of what is happening in our industry. We collaborate with our clients to help them navigate the rapidly changing energy landscape. Learn more about our clients, projects, solution offerings, team, and the Energy Cloud Playbook at


Europe’s Energy Transition Megatrends and Tipping Points, Part VII: The Power of Customer Choice and Changing Demands

— September 9, 2016

Energy CloudJan Vrins coauthored this blog.

In our initial blog on Europe’s energy transition, we discussed seven megatrends that are fundamentally changing how we produce and use power. Customer choice and rapidly changing customer demands are one of the megatrends driving Europe’s energy transition. In this blog we discuss how utilities and new entrants are competing for customers and market share through new energy products and services, as well as how they are implementing new business and revenue models in search of growth and shareholder value. We also discuss a path forward, which we call the Energy Cloud Playbook.

What’s Happening?

Whether residential, commercial, or industrial, more customers want to control their electricity usage and spend, as well as when and what type of power they buy. Historically, customer choice was restricted to switching suppliers. However, the European market is rapidly changing, and utilities will have to prepare themselves for far more complex customer demands and relationships. For example, many customers now want the ability to self-generate and sell that power back to the grid. Many European homeowners have installed rooftop solar and are interested in storage. Additionally, despite the reduction of subsidies in some countries, overall distributed energy resources (DER) will continue to grow in the long term. On the commercial and industrial side, large corporations like IKEA, BMW, Metro AG, Unilever, Swiss Re, Roche, Aviva, and others are increasing their focus on sustainable energy solutions. The key question moving forward is who will capture the value of more local (distributed), broader, energy management and individualized energy—the incumbents or the disruptors?

Increasing Competition

The European power markets are struggling to balance the requirements to reduce prices, invest in renewable generation, secure supply, and improve the customer experience. European electricity customers pay some of the highest prices in the world, yet many customers receive substandard service from their current utility provider. The move toward a single European energy market is the cornerstone of EU energy policy; thus, there is an expectation that power markets will become more competitive, not less. Competition has many consequences for a utility’s customer relationships, which can directly affect the utility’s business model. However, it is not the only factor: consumers are becoming increasingly aware of the financial and environmental cost of their power consumption. They are also increasingly expecting better, more personalised service from suppliers. As a result, customers will engage with the power industry in new ways, demand new services, and seek out alternative suppliers and options (like self-generation, energy management, etc.).

A New Deal for a New Breed of Customer

The European Union wants to put consumers at the heart of the power market. In the second half of 2016, a set of legislative proposals for a new energy market design will be published. This new deal for energy consumers is based around three pillars: saving money through better information, a wider choice of actions when participating in the power market, and maintaining the highest level of consumer protection. The market design will enable customers to actively participate in the market, adapt their consumption according to the requirements, create clearer bills, and accurately compare prices to improve switching rates. The European Union also reiterated its desire to tackle the issue of residential price regulation that hampers competition. Finally, the market design will try to remove barriers stopping customers from generating their own power and selling excess generation back to the grid.

Commercial and industrial (C&I) customers are central to Europe’s transition to a low-carbon economy. Many corporations have incorporated sustainable energy consumption within their corporate responsibility agendas. For example, Swedish furniture retailer IKEA plans to completely shift to renewable energy by 2020 and will invest up to €1.5 billion (~$1.7 billion) in wind and solar energy as part of its new safeguard nature strategy. The company does not rule out becoming a net energy exporter, potentially selling the surplus of energy to suppliers or customers.

Most customers—both residential and commercial—who generate their own power will do so with solar PV (potentially combined with storage). Until a few years ago Europe dominated the market for solar PV installations, driven largely by a range of different subsidies. These subsidies have largely been removed, and the market has flattened. However, we could be witnessing a short-lived consolidation period for solar: the market could soon pick up as the cost continues to decrease and if current import tariffs on cheap Chinese panels are lifted.

Other DER will further transform the way customers consume power. Locally available battery storage will help customers become more self-sufficient; EVs will dramatically change how, when, and where customers use energy; and peer-to-peer trading networks will help customers decide to whom they will buy or sell their power.

A New Business Model for the New Deal

These new customer demands are already reshaping the utility market. The more forward-thinking utilities are making significant investments into new business models, and competition is increasing. Time is running out for the less adventurous: smart metering will be a reality in the majority of European countries by 2020. Those companies that have prepared for a more connected, digital, and personalised customer relationship will be at an advantage against those that have not.

One of the most significant business model changes is the shift from a commodity-based supply business to an energy service provider. Many utilities have expanded their product offerings beyond the regulated power supply model and broken into new areas—smart home technologies, boiler maintenance or replacement, insurance, home appliances, and security systems are just some of the services offered. One other important area is the relatively new phenomenon of broadband and other communications services. Dutch utility Delta sells broadband, fixed-line, and pay TV services alongside power and gas.

The market is not immune to new entrants. Some telecommunications companies such as Croatia Telecom are now bundling energy with their more traditional services. Other telecoms, such as Deutsche Telekom and O2, are heavily investing in smart home technologies. New models of buying power—including collective switching groups and energy cooperatives—are appearing. In the United Kingdom where the model of municipal-owned utilities was scrapped years ago, councils are setting up their own energy businesses to offer low-cost power to their citizens.

Battle for the Grid’s Last Mile


(Source: Navigant Research)

Competition will not end there, as many companies will likely enter the market with radically new business models. For instance, as solar PV and battery storage technologies become cheaper and more efficient, many customers could be taken completely off-grid by new entrants. Retailers, technology companies, and telecoms are also looking at smart home technologies that could ultimately cut utilities out of many customer relationships.

New Business Models Need Better Customer Understanding

As new technologies—smart meters, EVs, distributed generation, energy storage, and smart home devices—proliferate and mature, so will the opportunity to develop deeper and more complex relationships with customers. However, as these opportunities grow so does the threat from competition. To create the right products and services and market them in the most effective way, utilities must better understand their customers’ needs. New technologies will bring deep insights into each customer’s requirements. By using advanced analytics, utilities have a unique opportunity to put the voice of the customer at the heart of their business planning.

What Does All This Mean for Utilities?

Utilities have to adapt. Customers will look for better, greener, and cheaper alternatives, and more and more of these alternatives are becoming available. What’s more, the fight for large C&I customers is going to change dramatically. If only a small percentage of large C&I customers switch over to local distributed generation and energy management solutions, current suppliers and network operators will be in trouble. This will affect their revenue streams, roles, and the cost versus value of the centralised managed grid.

Facing declining revenue as customers consume less and produce more of their own power, utilities are confronted with potential stranded generation (and eventually transmission and distribution) assets. This makes it even harder to make large investments aimed at improving reliability and resilience in their current grid while also making it more intelligent. Utilities also have to make investments in developing DER capabilities, offerings, and businesses.

Given these challenges, utilities must play both defence and offense. An updated defensive strategy requires suppliers to engage with customers to understand their changing demands regarding price, sustainability, and reliability. They also have to continue to improve customer service at the lowest prices possible. Network operators must engage with regulators to find equitable ways to charge net metering customers for transmission and distribution services that fairly address the cost to serve. They have to continue to improve grid reliability at the lowest cost possible and streamline asset management and operations, while also developing utility-owned renewable assets to appeal to environmentally conscious customers.

Playing offense is even more important. Suppliers must create new revenue streams through the development of new business models, products, and services. They also have to transform their organisations and culture in order to fully integrate sales, customer service, and operations. Network operators must upgrade the grid and operations to facilitate the integration of DER and explore new revenue streams as a network orchestrator.

There is no going back to the old ways of doing business. Utilities must lead—by playing both defence and offense—or they run the risk of being sidelined.

Utilities conducting strategic planning must embrace an agile mindset focused on achieving two objectives: accelerating the time to market readiness and reliably producing high quality results. This will be crucial to remaining competitive, as value moves down the value chain and barriers to entry are decreased/eliminated. The opportunity lies in continuously shaping DER portfolios, embracing the rise of the digital prosumer, and capitalising aggressively on platform opportunities for unbundled solutions. We believe that utilities must begin transforming their operations and business models today by simultaneously pursuing risk mitigation capabilities and making bold bets on potentially high-growth product offerings. In our newest white paper, we describe how businesses develop and implement a strategic identity and growth plan (10-15 years), as well as an agile Energy Cloud Playbook (6-12 months) that will help them navigate the path forward and take control of their future.

This is the seventh in a series of posts in which we discuss each of the power industry megatrends and impacts (“so what?”) in more detail. Our next blog will cover the emerging Energy Cloud. Stay tuned.

Learn more about our clients, projects, solution offerings, and team in our Navigant Energy Practice Overview.


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