Navigant Research Blog

Tracking the Rise of Distributed Energy Resources

— December 21, 2015

While leaders from nearly 200 nations reached a historic agreement in Paris last week to limit greenhouse gas (GHG) emissions, market forces are already driving the growth of distributed energy resources (DER). This rapidly evolving technology landscape is forcing stakeholders throughout the industry to reconsider the structure of the grid itself in addition to the economics of generating, distributing, and consuming electricity.

Utilities and regulators have taken widely differing stances on the deployment of these resources. While some are beginning to embrace the DER trend by developing new products and services and demonstrating the necessary flexibility to evolve, others have been lobbying aggressively to limit or halt their spread. Although all DER represent a shift away from the traditional centralized grid, the potential of different technologies to disrupt the industry varies considerably. While the term disruption can be somewhat vague, in this sense it refers to developments that can alter the relationship between incumbent service providers and their customers or require significant new investments in grid infrastructure. Navigant Research’s recent report, Distributed Energy Resources Global Forecast, explores the growth and impact of DER worldwide.

New Players Emerging

The DER expected to be the most widely deployed over the coming decade are actually those that will cause the least amount of disruption to the industry; demand response (DR) and fossil-fueled generator sets are already widely deployed and have not resulted in significant change in the industry. Equipment to charge electric vehicles (EVs) is expected to be one of the fastest growing DER segments worldwide. This emerging technology is expected to add significant load on the grid and necessitate new business models by both utilities and third parties to effectively manage this new resource, including vehicle-to-grid capabilities. Some utilities have begun experimenting with innovative programs to own new infrastructure and benefit from the integration of EVs.

Disruption on the Horizon

The rapid growth of distributed solar PV is proving to be disruptive to the industry, generating contentious debates over proper compensation for system owners as well as causing a need for new technologies on the grid to help maintain stability. Along with solar PV, the most disruptive new DER technology in the coming decade may be distributed energy storage systems (DESSs). These systems can provide end users with the ability to consume most of the power they generate onsite, lower their bills, and have power available during an outage, among other benefits. Customers empowered with these technologies may have a radically different relationship with their local energy service provider. Several utilities have taken an active role in this growing industry by offering energy storage and solar PV solutions directly to their customers. Energy providers that fail to adapt to new technologies may find their customer base migrating to alternative solutions.

The growth of DER technologies will bring about the need for a greater level of coordination between stakeholders on the grid to enable a two-way flow of energy and services between customers, utilities, and potentially between customers themselves. Known as the Energy Cloud, this concept can lead to the development of new players within the industry, such as the role of a network orchestrator to ensure a balance of supply and demand on the increasingly distributed and complex network. While the future of DER in most areas may rely heavily on new regulatory frameworks, there is no doubt that the ground is shifting under the global industry and the need for new business models is only a matter of time.

 

Climate Risks Provide More Validation for the Energy Cloud

— October 19, 2015

The U.S. Department of Energy (DOE) just released a new interactive map and report highlighting the risks to resilience and reliability of energy supply at a regional scale across the United States. The report highlights projected climate change impacts across seven regions to direct climate change resiliency and mitigation efforts on the most vulnerable components of our energy infrastructure.

The climate projections and potential impacts span across nine segments of the energy sector, including oil and gas exploration and production, fuel transportation, thermoelectric power generation, hydropower, bioenergy and biofuel production, wind energy, solar energy, electric grid, and energy demand. This comprehensive view of climate change impacts across the energy. The threats are prioritized for each region based on the DOE’s analysis, as illustrated in the map below.

Projected Climate Impacts on the U.S. Energy Sector by Region

Casey Oct. Blog

(Source: U.S. Department of Energy)

The climate change-related threats to fuel transport, the grid, and energy demand underscore the importance of investment and commitment to transforming how we think about and use energy. Navigant Research characterizes this necessary revolution of the energy sector as the energy cloud. Profound changes in the technologies that support our use of energy will also transform the nature of the grid, energy assets, and even buildings.

The rapid increase in investment of distributed energy resources (DER), the technology enablement for demand response, and the growing volumes of data associated with the Internet of Things (IoT) is changing the character of buildings. The intelligent building is the framework that helps building owners leverage technology and services to use the expansive data on facility equipment, operations, occupancy behaviors, and other business systems to optimize energy consumption.

Intelligent building solutions are enabling greater integration of control and automation across systems, from HVAC to plug loads, to deliver more strategic and coordinated energy management. The insights from these building energy management systems and industrial energy management systems direct changes in when and how much energy our buildings use.

As climate change impacts continue to threaten our traditional energy industry, intelligent building solutions can usher in a new era in building management. The opportunity is two-fold; first, the technology can restructure building system operations, and second, the software and services can support the change management of people investing in and operating building systems. The technology is available and capable of delivering sophisticated energy management strategies, and the future will be shaped by how software and services help change the mindset and procedures on the human side of the equation.

 

From Grid to Cloud: A Network of Networks in Search of an Orchestrator

— October 8, 2015

Magnifiers_webIn my blog, “The Impacts of the Evolving Energy Cloud,” I discussed how the power sector is undergoing a fundamental transformation. It is transitioning from a centralized hub-and-spoke grid architecture based on large centralized generation assets toward a more decentralized grid with a bigger role for renewables and distributed energy resources (DER). Navigant calls this new grid the Energy Cloud.

Where networks of networks exist, the business model that Wharton School dubbed the network orchestrator has been found to achieve faster growth, larger profit margins, and higher valuations relative to revenue, compared to three other types of business models (asset builder, service provider, and technology creator). The network orchestrator role will capture value by tailoring electricity supply and demand services for a customer, utility, or grid operator. In Navigant’s latest article in Public Utility Fortnightly, we explore how network orchestrators will emerge from the developing Energy Cloud and who might be candidates for such a role.

The New Uber

This week, in an interview with Energy Post, RWE’s Head of Innovation Inken Braunschmidt talked about the different business models that RWE is pursuing to capture an important position in the future energy system in Europe. She states, “In that energy system, it’s much more about sharing … you go onto a platform and say: I have electricity left over from wind or today I want to order some electricity from wind. It will be like ordering Uber.” This is a good example of how a large utility wants to transform its business and build a network orchestrator business model on top of its traditional business models. Many utilities have recently started new businesses, evaluating and making the initial investment in network orchestrator roles in areas like virtual power plants, building energy management systems, microgrids, storage, and others.

Another example this week was General Electric’s (GE’s) announcement of Current, powered by GE, an energy company that integrates GE’s LED, Solar, Energy Storage, and Electric Vehicle businesses to identify and deliver cost-effective, efficient energy solutions to its customers. This is clearly a move to become more of an orchestrator. The new company combines GE’s products and services in energy efficiency, solar, storage, and onsite power with its digital and analytical capabilities to provide customers—hospitals, universities, retail stores, and cities—with more profitable energy solutions.

Since companies employing the network orchestrator business model outperform other types of companies on several significant dimensions, it may only be a matter of time before pure network orchestrators emerge and establish themselves as key orchestrators within the Energy Cloud. As in other industries, Navigant strongly believes that new players will enter this field to become the network orchestrators of the utility industry.

So with that said: Who will be the Uber of the utilities industry? More to come on this soon.

 

5G: What It Is and What It Isn’t

— May 15, 2015

Anyone who follows the communications industry with any regularity has been hearing a lot lately about 5G technology—the amazing next generation of mobile (and fixed) technology that promises ubiquitous, low-latency, high-bandwidth connectivity. 5G will power the Internet of Things and provide always-on coverage for a hyper-connected society. Conceptually, energy cloud connectivity will be a piece of cake for 5G networks. Practically, however, it’s a long ways off.

What Exactly Is 5G?

Good question. The answer is, they’re still figuring it out. “They” being a multitude of organizations and standards bodies worldwide that are currently working independently; once they’ve each come up with working definitions, they will then all need to agree to standards and spectrum alignment issues, among others, before a final answer emerges. But 5G sounds really good on paper, especially the part about less than 1 millisecond (ms) latencies and 1–10 gigabits per second (Gbps) connections. Here are the generally agreed upon working specs for a 5G network:

  • 1–10 Gbps connections to end points in the field (not theoretical maximum)
  • 1 ms end-to-end roundtrip delay (latency)
  • 1000 times bandwidth per unit area
  • 10x–100x number of connected devices
  • 99.999% availability
  • 100% coverage
  • 90% reduction in network energy usage
  • Up to 10 year battery life for low-power, machine-to-machine devices

Cool, right? The problem is that there is currently no way that all of these conditions can be met simultaneously. Rather, certain characteristics will be needed for certain applications, while other characteristics are needed for others. And creating a ubiquitous, less-than-1 ms latency network may simply not be physically possible across large geographies. This is a pretty tall order. Delivering even a few of these goals will be tough while simultaneously reducing network energy consumption by 90.

When Will 5G Really Happen?

It may sound cynical, but it’s unlikely that 5G will become a meaningful communications platform anytime even close to 2020, which is the target date that most standards bodies have set for initial commercial deployments. For years in the nineties, I wrote articles about the zero billion dollar wireless data industry. Following the hype cycle, it took another 15 years before all the necessary components came together and real billions were generated by wireless data. Particularly given the lack of agreement today on the goals and purposes of 5G networks, it will be a decade or more before real-world installations develop. For an excellent overview of the issues and challenges faced in defining and developing the 5G networks of the future, check out this white paper from GSMA.

What Does 5G Mean for Utilities

Over the longer term, 5G infrastructure may power futuristic applications like autonomous driving and virtual reality as well as smart grid applications. But for utilities today, existing communications technology is more than adequate—in places where it’s available.

The bigger challenge for utilities is getting those networks more widely deployed with a holistic strategy for a multitude of energy cloud applications. Monitor the 5G evolution if you’re curious about how engineers plan to defy the laws of physics, but when it comes to your utility’s network, consider the best existing solutions for the smart grid applications of today and tomorrow as you build and extend connectivity throughout the grid.

 

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