Navigant Research Blog

Postcard from Puerto Rico

— November 1, 2017

It has been more than a month since Hurricane Maria swept through Puerto Rico. The majority of this US territory remains without reliable electricity and is facing a crisis of unprecedented proportions. The lack of power in Puerto Rico, as well as the hurricanes that struck Florida and Texas, have turned up the heat on utilities, regulators, and the federal government regarding how best to rebuild power grids for greater resilience to protect against future outages during natural disasters.

While companies such as Tesla proclaim that Puerto Rico provides the perfect opportunity to deploy solar PV plus energy storage microgrids to rebuild regional power supplies, others argue the quickest way for restoration lies with fixing the traditional hub-and-spoke centralized transmission grid. Where does the truth stand? As is often the case, somewhere between these two extremes. Though I personally would invest more heavily into microgrids, I would not restrict them to solar energy because hurricanes can both damage and limit power production. Nonetheless, wind-powered mobile microgrids were part of the immediate response, smart dual-fuel generators should also be vital parts of the microgrid solution mix.

Can Lessons from the Military Rebuild Puerto Rico?

There are some important lessons that Puerto Rico can benefit from if it listens to the US military, a key responder to the crisis in Puerto Rico.

As I noted in a recent blog, the US Department of Defense (DOD) and data centers have been wrestling with how to maintain uptime while scaling back its reliance upon diesel generation. In a new Navigant Research white paper sponsored by Schneider Electric, I argue that innovative business models, such as microgrids as a service, may be the ticket to transforming industries reluctant to embrace distributed energy resources (DER) innovations. Likewise, military bases are following similar pathways forward, eliminating capital costs and financing upgrades through energy efficiency savings. Case in point is the Marine Corps Logistics Base in Albany, Georgia, which is the DOD’s first net zero energy military base.

The military microgrid market was viewed as an early adopter before budget issues helped stall the market. While a uniquely US market in terms of adoption for stationary bases, its effect is global since the DOD has sites scattered across the globe. Forward operating bases and mobile tactical microgrids can operate as standalone systems or interconnect with traditional grids and have been featured in recent conflicts in both Afghanistan and Iraq. A new report from Navigant Research notes that momentum for DOD microgrids is picking up.

Military Technology – Civilian Implications

The DOD has played a remarkably consistent role in commercializing new technologies that provide tremendous social benefits within the larger civilian realm. The Internet, created by the Defense Advanced Research Projects Agency (DARPA) in 1969, is perhaps the most ubiquitous of the DOD’s contributions to consumer markets. Along with accelerating the commercialization of traditional manufactured products such as aircraft, the DOD has also pushed the envelope on IT. These advances have been vital to all smart grid platforms, including microgrids.

Hurricanes and related rain and wind do pose challenges to all forms of power supply, including microgrids. Yet, developing a distributed and diverse portfolio of resources is always the best bet, whether one is talking about the wholesale or retail delivery system (note that Cuba’s reliance on microgrids limits outages compared to its Caribbean neighbors). While the Trump administration favors traditional energy pathways, the DOD has forged new ground in DER. One option for Puerto Rico could be to carve out a lead role for the DOD in rebuilding its power system, showcasing lessons learned from both domestic bases and remote power bolstering national security, while at the same time delivering the humanitarian services so direly needed by the local population.

 

Storage in the Northwest: Overview of Threats and Opportunities

— October 10, 2017

Last week I had the opportunity to open up day 2 of the Northwest Demand Response + Energy Storage Summit. I gave an overview of what is happening with energy storage in the Pacific Northwest.

What Is the Current Market?

The region has a long history with pumped and dispatchable hydropower, so energy storage is not a new concept. However, battery powered systems are relatively new. Since 2010, many utilities have deployed 22 MW worth of projects for research, development, and pilots. Some of the larger projects include Portland General Electric’s Salem Smart Power Center and Puget Sound Energy’s Glacier Project. In the near term, the region’s pipeline for non-hydro project is small, but several drivers are quickly changing that.

Energy Storage Tracker for Oregon, Washington, Idaho, British Columbia, and Montana

(Source: Navigant)

What Is Driving Growth?

Key drivers for new storage developments include resilience needs, evolving business models, renewables integration, and greater access to financing, but the largest drivers are the following:

  • Policy: In Oregon, House Bill 2193 is requiring all investor-owned utilities (IOUs) to procure at least 5 MWh (but up to 1% of 2014 peak load) worth of energy storage. In Washington, the Clean Energy Fund has sponsored many storage demonstrations and the Utilities and Transportation Commission has directed all IOUs to include energy storage in their integrated resource plans.
  • Improving project economics: Energy storage costs continue to fall and we expect that to continue. Falling costs make energy storage competitive in more and more applications.
  • Customer interest: Customers of all types—from residential to large industrial—are getting interested in energy storage to help manage energy costs, provide resilience, and support sustainability.

What Barriers Does Storage Face in the Region?

Potential barriers that could slow down storage deployment in the region include the following:

  • Business models: Not finding the right regulatory and business models that allow a range of values to be captured for individual projects.
  • Pilots and projects: Poorly executed and evaluated pilots and early projects.
  • Technology issues: Technology—including communications, data gathering and management, and operations—that is not ready for energy storage.

Click here for a copy of my presentation.

 

Energy Storage to Optimize and Advance CHP Generators

— August 31, 2017

Energy storage is often associated only with the integration of renewable energy. However, recent market developments have highlighted the potential for storage to optimize both existing and new fossil fueled generators. While large-scale pumped hydro energy storage has been used on the grid for decades, those systems were rarely tied directly to any generation plants. A recent storage project built by General Electric in California is evidence that the falling costs for battery storage are opening opportunities to improve the efficiency and flexibility of existing generators.

There are attractive advantages for energy storage to optimize generators at a smaller scale. Gas-powered combined heat and power (CHP) systems are becoming increasingly popular due to the improved efficiency these systems offer customers that need a reliable supply of both heat and electricity. Because of the varying energy needs of these customers and the dynamics of CHP systems operation, there is frequently an overgeneration of either electricity or heat. This energy is often wasted, as establishing contracts that export excess energy is costly and challenging. Both thermal and electrical energy storage systems can greatly reduce wasted energy when tied to CHP systems and can provide attractive ROI for customers.

Industry Actions

Several recent acquisitions in the industry have emphasized this dynamic. In a recent blog, my colleague Adam Forni discusses these developments and the efforts of generator manufacturers to expand their offerings and participate in the emerging Energy Cloud. Notable recent investments in storage providers include Wärtsilä’s purchase of Greensmith and Aggreko’s acquisition of Younicos.

In both cases, incumbent generator providers moved to acquire storage companies focused on the software and controls required to optimize storage systems and integrate them into electricity markets. These tie-ups are mutually beneficial, as the storage providers gain access to new sales channels and potential new customers. The generator providers are likely focusing on developing the capabilities to integrate storage into their offerings and utilize new combined solutions to provide energy and capacity services in competitive electricity markets. The additional revenue generated by these grid services can greatly improve the overall economics of new storage and microgrid projects, including those that expand the capabilities of existing generators.

Into the Future  

The move toward microgrids and local power systems to improve the resilience of energy supply is an important driver for the integration of energy storage with conventional generators. Navigant Research’s recent Market Data: Combined Heat and Power in Microgrids report anticipates that 11.3 GW of new CHP capacity will be added in microgrids around the world over the next decade. The addition of these systems presents a major opportunity for both thermal and electrical energy storage to improve overall efficiency. Through the integration of energy storage and the sophisticated software platforms used to connect to energy markets, large amounts of new distributed energy capacity will become available on the grid.

 

Tesla and Storage Industry Take Up Another Challenge to Strengthen the Grid

— August 3, 2017

In September 2016, the massive blackout that hit South Australia cut electrical service to roughly half of the state’s 1.7 million residents for anywhere from 4 to 48 hours, putting grid reliability and renewable energy in the spotlight. Following that event, Tesla CEO Elon Musk claimed that large-scale energy storage could have prevented the disaster, promising that his company could build 100 MW of energy storage in just 100 days or it would be free. While this was seen by many as an attempt to get energy storage in the conversation about grid upgrades, it has now been announced that Tesla won a competitive solicitation to build a 100 MW storage facility.

Tesla’s new project will be located at the Hornsdale Wind Farm currently being built by French firm Neoen. The project will have a 100 MW power output with 129 MWh of storage capacity using Tesla’s lithium ion Powerpacks. The system will be used to smooth the output of the wind farm, shift energy to align with grid demand, and provide reserve capacity for the grid that could theoretically prevent future blackouts as both a source of system inertia and system restart services (in other words, a blackstart).

Major Challenges

Tesla faces some major challenges to build this project in such a short period. If successfully operational within 100 days, it would be one of the few 100 MWh-scale storage systems in the world commissioned in less than 4 months. These records were recently set last year when several large storage projects were built in response to California’s Aliso Canyon natural gas leak to provide emergency reserve capacity.

The key challenges noted by companies that developed the Aliso Canyon response projects involved supply chain and logistics and the overall orchestration/coordination of the project. However, Tesla may have advantages in logistics, as it is a vertically integrated provider of battery systems, which will reduce the time required to order both batteries and balance of system components. Given its recent expansion of manufacturing capacity, it is possible that the company already has many of the modular Powerpack systems built and ready to ship to support this project.

Once the batteries and all necessary components have arrived onsite, the coordination of such a large and complex engineering project is no small feat. Few projects of this scale and type have been built. As with many large storage projects, the experience is a first for local contractors providing engineering and construction work, which can delay the process.

Major Impact

If the project is successfully developed on time, it will represent another milestone, proving the maturity of the energy storage industry. The relatively short timeframe needed to build new large-scale storage projects gives the technology a major advantage over alternatives such as thermal power plants and transmission and distribution infrastructure. A shorter development period allows for shorter planning cycles for utilities, allowing them to quickly respond to changing grid conditions.

This project represents the first major competitive win for Tesla’s large-scale storage business in the Australian market. However, Tesla is not alone in developing massive storage plants in Australia. The Lyon Group recently announced its third solar plus storage project in the country, bringing its total pipeline of projects in development to 640 MWh. However, many stakeholders still question the economic viability of these storage projects, and regulatory rules are still evolving in Australia and other markets around the world. Despite the concerns, these projects are evidence that energy storage is starting to play a major role in the global electricity industry, with large-scale projects able to solve grid issues faster than conventional systems.

 

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