Navigant Research Blog

New Solar Records Bring the Real Energy Transformation into the Light

— June 19, 2018

Not long ago, utilities fought the introduction of renewables into their markets. Then, they didn’t really understand that the real energy transformation we are seeing today is consumer choice, including the potential of full individual energy independence in some markets driven by technology innovation.

Now utilities are exploiting the falling costs of solar to fend off the upcoming competition.

PPA Prices Are Crashing, despite New Tariffs

Despite all the talk about the new import tariffs and their effect on the installed cost of new PV installations, it appears that developers have squeezed procurement costs to continue breaking records for the lowest cost projects in the country. On June 11, Central Arizona Project (CAP), a local utility, signed a 20-year public-private agreement (PPA) with Origis Energy’s subsidiary AZ Solar 1 for a record low $0.0249/kWh.

A new record came only a day later. On June 12, NV Energy managed to break the $0.024/kWh floor, with a 25-year PPA signed for $0.0237/kWh. The Eagle Shadow Mountain solar project will have a total capacity of 300 MW and is being developed by 8minutenergy. This project is part of a 1 GW solar PV procurement process run by NV Energy as part of its strategy to become the first 100% renewable utility in the US. The procurement process also called for 100 MW/400 MWh of battery storage.

Saving the Monopoly

NV Energy’s push for 100% renewables does come with a caveat. The final green light to invest in these projects depends on the result of an energy choice initiative that will be voted on Nevada this year. If it is accepted, the project could be cancelled. NV Energy was also behind another controversial law, which eliminated net metering in the state in 2015.

This is part of a wider trend, where US utilities are increasingly deliberating not between new conventional generation or renewables, but between central or distributed resources. Behind this issue, utilities are also examining control of the end consumers relationship.

Maintaining control of the end user is key as the industry transitions from one in which the value was in the generation and transmission of electricity, to one in which the value will lie on the services that can be provided in addition to electricity.

Central Renewables versus Distributed Renewables

NV Energy understands that—at least in a resource-rich state like Nevada—the future is solar. Consequently, it wants to position itself as a clean and potentially cheap provider of electricity in the state in the eyes of the ballot voters this year. If it succeeds, it might dodge what is the most dangerous bullet for a utility—the opening of the retail market to competition and the potential race to the bottom that could spark. But even if NV Energy succeeds in maintaining its monopoly status, consumers will retain some choice—installing their own solar and producing their own electricity.

 

New Trends Point to Virtues of Fuel Cells and Direct Current for Modular Microgrids

— June 12, 2018

The beauty of a microgrid is that it can come in so many sizes. It can also incorporate many different types of distributed energy resources (DER)—from different forms of generation to creative load management and even energy storage—to bridge any gaps in supply or demand.

DER Growing Ever More Popular for Microgrids

Navigant Research has projected that both solar PV and energy storage will emerge as the two most popular DER options over the next decade. Yet, that doesn’t mean other technologies—such as fuel cells—won’t play a growing role in the microgrid universe. Perhaps the company most keen on this market opportunity is Bloom Energy, which ranks in the Top 10 vendors in terms of projects deployed in the forthcoming update to the Microgrid Deployment Tracker. The company has deployed its fuel cells in more than 60 microgrid projects, representing roughly an equal amount of megawatts. But those numbers will increase dramatically in the future.

Earlier this year, Navigant Research estimated growth in all major DER technologies going into microgrids, including fuel cells. Though relatively modest in scale, the microgrid fuel cell market is anticipated to reach nearly $2 billion in annual sales over the next decade.

Annual Fuel Cell Microgrid Capacity and Implementation Spending by Region, World Markets: 2017-2026

(Source: Navigant Research)

Optimizing Fuel Cells

Historically, fuel cells were deployed by market leaders such as Bloom Energy within single resource microgrids for clients such as data centers. These are clients that are extremely conservative in nature and are comfortable with the steady stream of electricity flowing from non-variable onsite generation. Since fuel cells can be fickle when it comes to small deviations in frequency, integrating them into microgrids featuring a plethora of variable renewable energy resources has been problematic. The emergence of lower cost energy storage solutions is beginning to change this basic assumption.

What about Direct Current?

One solid step in the direction of more advanced microgrids is Bloom Energy’s integration of a direct current (DC) bus to create a more modular structure to integrate energy storage devices into its fleet of microgrids. Working with PowerSecure, which was featured in Navigant Research’s recent ranking of microgrid controls vendors, Bloom Energy is rolling out its new DC bus platform for a fleet of microgrids to be deployed at Home Depot stores. Another big win for Bloom Energy was the integration of its new DC bus offering into the new Apple campus in Silicon Valley, whereby 4 MW of fuel cells were integrated into a 5 MWh system with its new platform. The microgrid also features 16 MW of solar PV.

Among the other vendors extolling the virtues of a DC bus are EnSync and Tecogen. The latter has perhaps the first plug-and-play microgrid offering (and also ranks in the Top 10 of vendors regarding numbers of microgrids deployed). Look for a Navigant Research report, Direct Current Distribution Networks, later this year to dig much deeper into the value proposition surrounding DC and the emergence of a modular microgrid movement.

 

Stop and Smell the Market Indicators

— May 17, 2018

Last month, Philips Lighting revealed its new Philips GreenPower LED toplighting with a light spectrum optimized for cut rose cultivation. The toplighting technology allows growers to increase light levels year-round without increasing heat, which allows for increased yield production. However, the rose market has advanced in recent years to the point that growers are now more concerned with quality of production. Addressing those concerns along with energy efficiency needs, Philips collaborated with research institutes to provide growers with a toplighting spectrum that improves the quality of the roses and is 40% more energy efficient compared to high pressure sodium lighting. While the technology is important for horticulturalists and agriculture research globally, why would a lighting manufacturing giant like Philips focus on grow solutions for roses? The answer is twofold.

The Wall Street of Flowers

The Netherlands is the trade capital of the global rose market and home to the world’s largest flower market, Royal FloraHolland. Every day, 30 million plants and flowers from all over the world are auctioned at Royal FloraHolland, with operations covering over 14 million square feet—equivalent to 243 football fields. Almost half the world’s flowers and plants pass through one of the 11 cooperatively-run regional flower auctions, with buyers and sellers bidding on trading floors just like a typical stock exchange in financial markets. The sheer scale of this market alone gives reason to why manufacturers would want to specialize in lighting solutions for rose cultivation. Yet bidding wars at Royal FloraHolland are just the beginning.

More Competition, More Opportunities

Developing countries in Africa are starting to take up a larger share of the European market for cut flowers and foliage. The CBI Ministry of Foreign Affairs reports that major suppliers Kenya, Ecuador, Ethiopia, and Colombia have seen a 20%-60% growth in exports of flowers and foliage to Europe. Producers in these regions are strengthening their position in global production and trade, mainly due to favorable growing circumstances, rising demand for competitively priced flowers in Europe, and improved transportation. To remain competitive, European growers are looking to advanced lighting solutions for delivering quality, reliability, and consistency in supply. This is why major lighting manufacturers like Philips and OSRAM have noticed and are taking stock in this burgeoning market. Companies may want to tap into this blossoming market as investment opportunities and demand for unique lighting solutions continue to grow out of this competitive space.

For more details, a recent report from Navigant Research, LED Lighting for Horticultural Applications, examines the global market potential for horticultural lighting.

 

Developing Energy Strategies That Can Be Readily Deployed: A Socio-Political Merit Order

— May 1, 2018

This blog post was prepared with contributions from Jan Cihlar

The challenge brought by the energy transition is every bit as political and emotional as it is techno-economic. Yet today almost all energy modelling is based on least-cost optimisation from integrated assessment models for global climate change analyses of national energy strategies. A new approach must be considered, one that takes societal and political preferences into greater consideration: a socio-political merit order.

Limits to Least-Cost Modelling

As consultant to the UK Department of Energy and Climate Change, David MacKay advised against supporting solar PV as it would just add costs to the system: “The only reason that solar got on the table was because of democracy. The MPs wanted to have a solar feed-in tariff.”

Decision-making processes go far beyond the techno-economic reality of the solutions. As Andris Piebalgs, former EU Commissioner for Energy stated: “Energy efficiency involves a lot of nitty-gritty, a lot of incentives, and a lot of regulations. And there’s no ribbon to cut. It’s very important to be able to cut a red ribbon.”

These are both examples of how policymakers deviate from what energy analysis considers the best solution. And they are not alone, public attitudes towards different energy technologies can vary significantly across regions or social segments.

Least-cost optimisation has its merits; our financial resources are limited, and it is valuable to know how certain objectives can be achieved at the lowest costs. But when a rapid transition to a low carbon energy system is necessary, there is a strong case for options and technologies that are well accepted in society by the public, and by companies and nongovernmental organisations.

Enter the Socio-Political Merit Order

Least-cost optimisation for energy strategies can be expanded as a set of new procedures that will allow for a socio-political merit order. Merit is about preferences: preferences of citizens and, none less important, of policymakers and corporate decision makers. The aspects of the merit order include:

  • Financial costs and benefits
  • Environmental impacts
  • Employment and local economics
  • Inertia
  • Perceived risks and trust
  • Cognitive biases
  • Legislation and implementation hassle
  • Last, but not least, the X-factor

Aspects Determining the Socio-Political Merit Order

(Source: Ecofys, a Navigant company)

What Is Already Known about the Socio-Political Merit Order?

The socio-political merit order is dynamic and will vary over time. Yet, there are ways to look inside of this evolving black box—typically with the help of surveys or dialogue processes, and potentially in the near future, by utilising large sets of unstructured internet data.

For instance, we already know that solar and wind energy are most often the winners in public surveys, while coal and nuclear generally are the losers. Less information is available on preferences amongst policymakers. The private sector presents yet another arena; there, decisions are not purely driven by cost-benefit analysis, but also by factors such as public acceptance, non-monetary implementation barriers, and regulatory risks.

Getting to More Robust Energy Visions and Scenarios

With more clarity about individual and societal inclinations, the question will be how to represent these in energy and climate modelling. Converting non-monetary barriers and drivers into cost categories might just miss the point, as it suggests that technology choices are an optimisation problem. More detailed knowledge of social preferences is required, and we need to better understand how the preferences interact with the merit order of actual private and public decision-making. Ecofys, a Navigant company, has already developed a decarbonisation scenario for the global energy system where the initial principles of the socio-political merit order are applied to achieve maximum feasibility. Such approaches can lead to the creation of strategies that have broader citizen support and that can be implemented more rapidly.

 

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