Navigant Research Blog

Can DER Bring the Cuban Grid into the 21st Century?

— October 18, 2016

Wind and SolarAs national relations with the United States and other nations continue to improve, Cuba is emerging as a potentially lucrative market for renewable and distributed energy development.  The country’s first utility-scale solar PV contract awarded in June 2016 highlights its potential to become a leading market in the Caribbean. The potential for renewables and distributed energy resources (DER) development in Cuba and throughout the Caribbean stems mainly from the region’s extreme dependency on imported fossil fuels. Furthermore, Cuba has a number of very old thermal power plants and decaying grid infrastructure that must be modernized to improve reliability and meet the country’s increasing demand for electricity. Cuba also has significant renewable energy resources and a goal to generate 24% of its electricity from renewables in 2030, up from just 4% today.

Opportunities and Challenges Abound

Improved diplomatic relations are driving rapid changes in Cuba’s economy, including large-scale wind and solar PV facilities already under development. Island electricity grids inherently have less stability than large continental systems and have traditionally struggled to effectively integrate large amounts of renewable generation. As a result, many islands—including Puerto Rico and parts of Japan—require that new large solar plants include a set amount of energy storage capacity. This could likely become a requirement as the Cuban solar market matures. Energy storage both centrally located and distributed in buildings can allow for the stable integration of renewables by smoothing output and controlling ramp rates, as well as optimizing these new resources by aligning renewable output with demand by time shifting energy. Navigant Research’s Energy Storage for Renewables Integration report explores the dynamics for these technologies specifically on islands.

Some of the earliest opportunities for DER development in Cuba may be the island’s numerous tourist resorts. Resorts around the world have demonstrated a willingness to invest in DER to improve the reliability of their power supplies and to develop images as eco-tourist destinations. This can provide opportunities for DER providers focusing on the commercial and industrial sector, particularly companies offering innovative financing programs such as power purchase agreements (PPAs). This model is demonstrated by the power system developed by EnSync Energy (formerly ZBB Energy) for a resort in French Polynesia that includes solar PV, energy storage, a local biofuel generator, and advanced controls for system optimization.

DER Barriers

Despite this potential, a number of barriers still exist in the Cuban DER space. The country’s electricity market remains state-run, along with most of its economy. In order to realize its renewable energy ambitions, Cuba will require foreign investments and technical expertise. The government is already looking at some level of market deregulation that would encourage investment by allowing foreign companies to own energy generation (and potentially storage) projects. These changes could provide a much-needed boost to the market; however, the Cuban market regulators will likely need to further formalize policies to instill confidence in foreign investors and financiers.


If $9 Billion of Renewable Energy Is Curtailed in 2030, What Opportunities Will Emerge? Part 2

— October 4, 2016

Cyber Security MonitoringThe first part of this blog covered the growing trend of renewables curtailment. This second post will cover the solutions that are turning curtailment from a problem into an opportunity.

Many solutions have been proposed to address the integration of renewables into the energy sector. The first two, transmission upgrades and storage technologies, tend to get a lot of media attention. However, these can be seen as “necessary but not sufficient” options in the race to integrate renewables. Flexible gas generation technologies will also play a growing role in the grid of the future.

Transmission upgrades connect renewables to more loads and diversify generation resources. Germany, with 26% of its generation coming from intermittent sources in 2015, has been building out transmission to connect the windy south of the country to the industrial north. As in many global markets, transmission expansion is subject to NIMBYism, and in Germany’s case is being forced underground, which is more expensive. California, with 14% of its generation from intermittent sources in 2015, may be expanding its independent system operator (ISO) into a regional organization across the climatologically diverse Western Interconnection, though the decision has been delayed for further review. And China, generating just around 3% of its electricity from wind in 2015, still curtailed billions of dollars of wind power in recent years and is quickly pushing to interconnect it with load.

Storage technologies are growing quickly, as well. Hydroelectric storage is a cheap and clean technology that nonetheless sometimes battles drought-related, environmental, and even methane emissions concerns. Batteries, including lithium ion and other types, are rightly making news as costs fall and policies like incentives and storage mandates drive the market toward rapid growth. These and related storage technologies, including compressed air storage, are growing quickly and will become a major part of our electric grids.

Flexible Solutions

Flexible gas-based generation solutions tend to get less media attention but will also be crucially important in the flexibility of the grid.

  • A 2016 National Renewable Energy Laboratory (NREL) report suggested that for California to accommodate 50% of its generation coming from solar PV, a wide range of changes would need to take place. Notably, flexible thermal generators and combined heat and power (CHP) plants were mentioned as a key necessity, even if the amount of energy storage is boosted by more than 10 times what is outlined in the current mandate.
  • A 2015 report by the Union of Concerned Scientists on California’s grid states that under a 50% Renewable Portfolio Standard (RPS) scenario, curtailment could be cut from 4.8% to 3.2% if natural gas resources are able to turn down to half-power.
  • A 2015 report points out that Denmark was able to generate 39% of its electricity from wind thanks in large part to flexible district energy CHP resources. These district energy systems are in some way the core of Denmark’s grid and are expected to become electricity consumers rather than producers during times of high wind generation.
  • A 2016 report funded by the German government suggests that power-to-heat will be more important than batteries in balancing that country’s grid in the future.

Most of these reports suggest that fossil-based sources will fuel this generation, though carbon-neutral biogas and hydrogen are taking strides to catch up too. These gas-based technologies have the dual benefit of boosting grid flexibility while (in most cases) decarbonizing heating, an area of growing concern. As a complement to the transmission and battery storage changes making headlines, these sources are set to become key contributors in the grid of the future.


If $9 Billion of Renewable Energy Is Curtailed in 2030, What Opportunities Will Emerge? Part 1

— September 1, 2016

Cyber Security MonitoringThe intermittent nature of renewables is well established, though hard data on its impact is just now starting to become available. Germany, a world leader in wind and solar, is showing growing levels of curtailment (defined here as the reduction of otherwise scheduled electricity output). As the wind plus solar share of electricity grew from 10% to 26%, the share of curtailed (or wasted) wind plus solar energy grew from about 0.2% to around 1.8%. As seen on the chart below, since 2009, a consistent pattern has emerged relating curtailment to renewable penetration.

Growth of Renewables and Curtailment


 (Sources: AG Energiebilanzen, German Federal Network Agency, Electricity Reliability Council of Texas, UK National Grid, Lantau Group)

Consider if the rest of the world followed this trend line through 2030. The 2016 Renewable Energy Roadmap (REmap) from the International Renewable Energy Agency (IRENA) outlines a feasible path to doubling the share of renewables by 2030. The 40 countries covered represent 80% of global energy consumption. Under the REmap scenario, 60% of global solar plus wind energy would come from countries generating between 20% and 30% of their electricity from such sources, comparable to Germany’s 26% in 2015.

If each country followed the curtailment trend established above, annual curtailment would amount to 128 TWh, or 0.4% of total global generation. This energy is worth $9 billion, assuming a value of $70/MWh, the estimated variable cost of a combined-cycle generator in the United States in 2030. Given the low cost of renewables and compared to the $1 trillion or more in annual savings projected by IRENA, the curtailment may be easily justified.

Caveats and Variations

Even if renewables grow that quickly, there are many caveats to this assessment. Curtailment occurs locally, a nuance that country-level analysis does not capture. Furthermore, there are vast variations among countries in geography, transmission infrastructure, generation mix, market structures, and other variables. Germany’s trailblazing growth has led to some specific growing pains that are being addressed, with major transmission upgrades being built to address the issue. Still, given the poor track record of curtailments in other places with less renewables, curtailment could even be higher. See approximate trends on chart.

China has curtailed 15% of its wind since 2011, worth over $6 billion at the rates above. The Electricity Reliability Council of Texas (ERCOT) cut curtailment from 17% (2009) to 0.5% (2014) with transmission upgrades and market reform, but with just 11% of generation from wind still did “worse” than Germany by not falling below the trend line. With curtailment data just starting to be collected in some regions and the feverish projected growth of renewables, this high-level approximation can outline the potential magnitude of curtailment.

So if $9 billion of energy is curtailed, what opportunities will emerge? The second part in this blog series will cover some of these potential options. Transmission upgrades and storage technologies have been getting a lot of coverage lately, but flexible generation technologies may be even more important to our clean energy future.


Overcoming Hurdles to Monetizing Value Streams from Energy Storage Systems

— August 19, 2016

GeneratorFederal Energy Regulatory Commission (FERC) Order 755 requiring regional transmission organizations (RTOs) and independent system operators (ISOs) to implement a pay-for-performance structure for frequency regulation service has been instrumental in demonstrating the benefits that fast-responding resources like battery energy storage systems (BESSs) can provide to the grid. For example, since Order 755’s implementation, PJM experienced a 30% reduction in overall regulation reserve requirements as more fast-responding resources have cleared the market. However, despite the early regulation successes in PJM, storage directly connected to a distribution system (known as front-of-meter, or FTM) continues to faces uncertainty and barriers in the United States associated with rate treatment.

On another front, energy storage stakeholders now recognize that BESSs connected to the distribution system from behind the meter at a residential and/or commercial & industrial customer’s property can deliver benefits to the host, RTOs/ISOs, and utility distribution system operators. This evolution is driving the development of software and hardware platforms that can analyze, control, and optimize not only a single BESS, but also aggregated BESSs. These advances are now giving rise to energy storage assets that can recognize multiple value streams by stacking grid benefits in virtual power plants (VPPs).

Regulations and Requirements

However, regulatory eligibility and performance requirements for aggregated behind-the-meter battery energy storage assets have not caught up with these technological advances. To date, there has been limited participation by energy storage in demand response markets, and several instances demonstrate how wholesale market rules are missing opportunities for these assets to provide multiple grid benefits. For example, the CAISO Proxy Demand Resource (PDR) prohibits a VPP from providing frequency regulation, even though the systems would be technically capable of doing so. And in ISO-NE and NYISO, Northeast Power Coordinating Council rules prohibit behind-the-meter energy storage from providing spinning/synchronized reserves.

At the Energy Storage North America (ESNA) expo in October, a panel discussion will feature case studies from across the country on the challenges, feasibility, and economics of how single BESSs and VPPs can stack energy storage value streams. Don’t miss out on the conversation—register for ESNA today.


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