Navigant Research Blog

Microgrid Controllers Emerge at Key Industry Crossroads

— April 10, 2018

To many, the mystery behind the curtain of what is and what is not a good microgrid controller may feel a little like the Wizard of Oz. Often referred to as the “black box” or the “secret sauce” of what makes a microgrid work (or not), the number of companies with automation and control products keeps increasing (though casualties also litter the vendor landscape). But determining how these controllers compare, and what exact hardware and software components make them tick, remains opaque. Is it smart inverters, digital relays, or SCADA systems—or the even more nebulous world of software?

Navigant Research has just published its latest Leaderboard report on microgrid controllers. Among the vendors that ranked in the top five was Siemens, the German industrial giant. A Microgrid Knowledge survey has also shown that, among 21 candidates, Siemens was the most recognized company associated with microgrids.

A Confluence of Energy Storage

The company recently made two important moves designed to increase its microgrid market share. It has formed a new partnership with AES to offer energy storage solutions, creating a new global company called Fluence. Though this partnership is more focused on larger-scale energy storage projects, virtually every microgrid coming online today has some form of energy storage. In fact, Navigant Research expects that the revenue opportunity of energy storage in microgrids will feature a compound annual growth rate of 37.4% over the next decade, reaching an annual implementation spend of $4.5 billion by 2026. Fluence boasts some impressive credentials: 56 energy storage projects either operating or awarded in 15 countries with a total capacity of 485 MW. How this new strategic partnership will influence the microgrid market remains to be seen.

Better To Be Simple

Siemens has also released a new, lower cost microgrid controller product—SICAM Microgrid Controller—which is, in essence, a microgrid in a box for grid-tied applications. The company sees value in offering a simpler control offering for microgrids that are smaller in scale and less focused on sophisticated market exchanges, moving closer to a plug-and-play solution. I have long argued that the microgrid market may grow faster if there is a shift away from complex engineering projects in the 50 MW, 100 MW, or 200 MW range, focusing instead on 1 MW and below projects and allowing cloud-based software systems to aggregate these microgrids into a virtual power plant. Companies such as Spirae have articulated this approach, stripping out excessive engineering costs that can often kill a project’s viability.

The Bronzeville Project

In late March, Siemens announced a new project that shows that—despite its new plug-and-play, lower cost microgrid controller offering—the company also sees a market in its more sophisticated software solutions. After lengthy regulatory and legislative delays, the Bronzeville microgrid on the south side of Chicago is to be rate based by Commonwealth Edison. This project will rely on Siemens’ microgrid solution, its Microgrid Management System software, which will be used to optimize a cluster of two microgrids. The purpose of the project is to use advanced algorithms to implement controls for a microgrid serving over 1,000 customers, including critical facilities such as the Chicago Police Department headquarters, while interacting with the long-standing microgrid at the Illinois Institute of Technology.

A new energy storage powerhouse partnership, a new lower cost control option, and a project demonstrating the ability of its software to manage multiple microgrids show that Siemens is reinventing itself, as are its utility partners.


Flow Batteries Under Fire: What’s Happening?

— April 5, 2018

There has been an uptick in news surrounding flow batteries over the past year. On the positive front, ESS, Inc. recently raised $13 million in funding from investors and announced that it will deliver two of its systems to chemical manufacturer BASF. On the negative front, Vizn Energy scaled back its business, citing the loss of one its leading investors.

Navigant Research expects flow batteries to be a major competitor to lithium ion (Li-ion) for both front-of-the-meter and behind-the-meter applications in the next several years. In fact, Navigant Research expects them to be the fastest growing electrochemical energy storage device over the next 10 years. However, short-term hurdles still exist. In this blog, I’m discussing some of the major issues.

Cost and Use Case

CAPEX of flow battery systems compared to Li-ion batteries is higher. The cost over the lifetime of the storage asset is heavily dependent on the type of applications the device will serve. We see flow batteries being utilized for long duration energy applications (over 4 hours) as opposed to short duration power applications (less than 4 hours). As their discharge duration is directly correlated with the amount of electrolytes stored in the tank, the levelized cost of energy decreases as the discharge duration increases. At present, we generally see advanced energy storage being deployed for use cases less than 4 hours. Consequently, Li-ion batteries can provide the same services that flow can at a lower CAPEX.

Component and material costs are also an issue. Current commercial flow battery chemistries are limited to vanadium-based and zinc-based chemistries. Their redox pairs yield competitive but lower power densities compared to Li-ion. Exploring different chemistries that yield higher power density and are safer, engineering better separator and electrode materials and architectures to improve chemical conversion, and decreasing other balance-of-system costs are key to improving the competitiveness of flow batteries in the current energy storage market.

Project Timelines

From signing letters of intent to the ribbon cutting of the system, Li-ion batteries are deployed on increasingly shorter timelines relative to other advanced battery technologies. This is because they have been studied more by both the public and private sectors and are well understood. Flow battery systems can be a bit bulkier and require special permitting by players across the value chain. Most customers are not as educated on flow systems compared to Li-ion or lead-acid batteries. Consequently, it is difficult to convince flow battery customers (utilities and C&I customers, mostly) to invest when they can purchase a Li-ion system at a lower CAPEX and have the system up and running faster.

Economies of Scale

Most commercial flow battery vendors outsource component manufacturing to other companies and assemble the final product in house. The demand for flow batteries has not yet boomed, and companies have not found a need to scale up production. As medium- to long-duration markets begin to open for flow batteries as they did for other types, manufacturing synergies will be developed and consequently drive the price down.

How Do Companies Plan for Success?

Going forward, it is increasingly important that flow battery companies continue to educate customers on the benefits of deploying these systems while continuing to improve on the issues outlined above. Being able to back up the 20-year warranty that most commercial flow battery vendors offer will be contingent on these improvements. Because of this, we see the players best positioned to deploy these systems in the short term as large companies that have other business units and resources to support their flow battery business. This way, if business slows or fails, the company will not be set back significantly.


Can Colorado Become the Next Big Energy Storage Market?

— March 29, 2018

Having covered the energy storage industry for several years it’s exciting to see my home state, Colorado, making headlines. Aside from a handful of older pumped hydro plants, the storage industry is nascent in Colorado due to a combination of cheap electricity, relatively low demand charges, and little regulatory support. The state has emerged as an attractive market for both wind and solar generation projects, and energy storage has entered the state’s energy planning in a big way. State-level policies and new storage projects are shaking up the market at all levels.

Policies Supporting Growth

Colorado’s first energy storage-specific legislation likely will go into effect this year thanks to Governor John Hickenlooper signing SB 18-009 into law. The bill concludes that customers have a right to interconnect and use batteries without restrictions. The uptake of residential energy storage has been slow in Colorado, partially due to the relatively high permitting and interconnections costs charged by utilities. The bill aims to reduce these barriers and allow customers to benefit from the resiliency and cost savings that can be provided by residential storage.

New Projects and Procurements Highlight Colorado’s Potential

While the prospects for residential storage are improving in the state, recently announced projects have shown that utility-scale energy storage is already viable. In late 2017, northern Colorado utility cooperative United Power announced it will build and own a 4 MW/16 MWh battery energy storage system. What’s unique about this project is the utility’s plan to share the benefits with its customers through an innovative community energy storage program. Commercial and industrial customers can buy into the project for a certain number of kilowatts, and have their peak demand and associated charges be reduced by that amount. For the utility, the real value lies in reducing its overall peak demand, and the charges it pays to the regional wholesale supplier. United Power estimates that its investment can be fully repaid in 7-8 years with a 10% return.

The most noteworthy and well-publicized development in Colorado’s storage market was the announcement from the state’s largest power provider, Xcel Energy, that it received record-breaking low bids for new solar, wind, and storage capacity. Through its all-source solicitation, Xcel received bids for projects offering some of the lowest prices ever seen for wind, wind plus storage, solar, solar plus storage, and all three resources combined in a single project. The following table shows the total bids and median prices received.

Xcel Energy 2017 All-Source Solicitation Bid Summary, Renewables and Energy Storage

(Source: Xcel Energy)

These record low prices highlight the growing maturity of combined renewables plus storage projects, and the relatively low cost to add storage to wind or solar projects as system integration expertise has improved. Although the specific proposed projects and the companies bidding have been kept confidential, the details provided by Xcel list standalone battery storage projects up to 150 MW capacity with a duration of 10 hours. These projects included a rumored bid by Tesla for a 75 MW/300 MWh battery plant—which would be its largest. This wave of recent action on policies and new projects has put Colorado on the map as one of the most attractive states for new storage developments.


The US ITC Was Reinstated for Fuel Cells: Is It Enough to Recharge the Industry?

— March 20, 2018

In an 11th hour move, the US federal Investment Tax Credit (ITC) was reinstated for certain orphaned generating technologies in February’s congressional tax bill. Among the technologies extended, fuel cells have the highest incentive: as much as 30% of the system cost can be taken as a tax credit. For stationary systems made by the likes of Bloom Energy, Fuel Cell Energy, and Doosan, the credit can be worth around $0.02/kWh on a levelized cost basis—a significant amount that can decide whether a project gets built.

Will it be enough to reignite an industry that largely treaded water in the US in 2017? That depends on whether industry players can address certain key issues.

Capital Costs Must Be Lowered

The high capital costs of fuel cells remain the biggest hurdle to mass adoption. Installed capital costs vary widely but typically range from about $4,000/kW to $8,000/kW. By contrast, turbines, microturbines, and reciprocating gensets are significantly cheaper per kilowatt—as low as $1,000 or less for certain gensets and turbines. Fuel cells make up for this with high efficiency, but that advantage is hobbled in a world of low natural gas prices. Cost declines in recent years have been promising, but more must be done. Incentive certainty should help drive investment, volume, and thus economies of scale, but more must be done with manufacturing process improvement and the use of lower cost assemblies and materials.

Flexibility and Load Following Must Be Improved

The US electrical grid is experiencing increasing volatility thanks in part to fast growth among intermittent renewables. This has led to demand for flexible, dispatchable technologies like battery storage. The higher temperature fuel cells popular in the +500 kW range tend not to follow load well. This is a disadvantage, especially for applications like microgrids that value islanding from the grid. Pairing the fuel cell with battery storage (a la Bloom Energy) can help overcome this lack of flexibility

Carbon Emissions Still Represent a Liability

Despite super-low levels of criteria pollutant emissions, fuel cells using natural gas still emit carbon dioxide. This can be a significant liability when compared with, for example, the emissions-free PV-plus-storage systems that continue to fall in price. Though fuel cell emissions per megawatt-hour tend to be lower than most electrical grids right now, those grids are focused on decarbonizing. This is of special interest among corporate buyers thinking increasingly about sustainability. Low carbon fuels like biogas are a key decarbonizing pathway. Some programs, like California’s SGIP, encourage biogas market transformation by requiring increasing amounts of biogas in covered systems. Using biogas as a fuel is a strategy for fuel cells to compete better on system carbon emissions.

Fuel Cell Technology Needs More than Just the ITC

The reinstatement of the ITC gives a welcome boost to the stationary fuel cell industry in the US. It lowers both uncertainty and costs to the end user, and enhances economies of scale. But more yet is needed to truly scale the industry. Cost cuts have been aggressive in recent years but must continue. The ITC is scheduled to phase out over 5 years, dropping to 22% before ending in 2022, giving fuel cell companies a clear timeline for hitting lower cost targets. Pairing up with other dispatchable technologies like batteries may help fill the gaps in load following capability. And to limit carbon emissions, alternative fuels like biogas and green hydrogen will become increasingly important fuels. Fuel cell technology still shows great promise, but there is much yet to be done.


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