Navigant Research Blog

Innovative Residential Solar PV Offering Designed to Increase Customer Retention

— March 13, 2018

In July 2017, I highlighted how innovative UK residential solar PV plus energy storage products were being brought to the residential marketplace. These kinds of new, customer-focused solutions are at the heart of Navigant Research’s new Utility Customer Solutions Research Service, which is focused on new solutions and business models for utilities and technology companies to meet new utility customer expectations.

Residential utility customers in Texas are now seeing another innovative business model being rolled out to take advantage of Electric Reliability Council of Texas’ power market rules and intense solar irradiance. This new Texas solar business model will be featured, among others, in my upcoming Navigant Research report, Maximizing the Residential Energy Customer Experience with Emerging Solutions.

The Texas model is an example of how the emergence of distributed energy resources and software innovation can come together to meet customer needs. Navigant Research envisions that these types of business model innovations will become more common to meet the needs of the utility residential customers of the future.

A New Model for Consumer Agreements

Sunrun and Think Energy, Engie’s retail choice electricity and energy services provider in the US, have partnered to offer a unique financed residential solar PV product. Due to local grid rules, there are no consistent solar PV net-metering policies to reimburse customers or solar PV asset owners for excess solar PV power provided to the grid. However, Sunrun and Think Energy created a virtual net-metering credit that residential property owners can apply toward their electricity bill for exported power. This new model allows Sunrun and Think Energy to save the customer money while engaging with a customer for a long-term, 20-year solar PPA agreement, rather than the typical short-term retail choice electricity procurement contract.

Traditional retail electricity choice sales in deregulated electricity markets has increasingly become more like non-energy e-commerce transactions. Many e-commerce transactions with high customer acquisitions have well-documented challenges to remain profitable. Think Energy is partnering to save customers money by going solar with no out of pocket expenditures while reducing its own customer acquisition by keeping the customers it has under a long-term agreement. Sounds like a winning approach across the board.


Changing Building Codes Are the Latest Proof of the Distributed Energy Revolution

— March 8, 2018

The distributed energy resources (DER) revolution is underway, and there are signs all around us. Readers of this blog have seen discussion of distributed PV, energy storage, microgrids, and similar technologies grabbing ever wider bandwidth in trade journals, social media, and popular news outlets.

Building codes just may be the latest proof of the dramatic shift to distributed energy. The 2017 version of the National Electrical Code (NFPA 70), the most widely adopted electrical construction standard on the planet, has a total of five new articles (or sections)—and four of those five are directly related to DER, as shown in the table below. Since the code’s key purpose is for electrical safety and fire protection, the addition of these articles reflects the need for setting safety standards among these fast-deploying technologies.

The addition of four articles is significant. Over its 120-year history, the code had accumulated eight articles related to DER (including generators, fuel cell systems, EVs, and the like), so this adds a notable 50% increase. Watch for changes to existing articles and more hybridized, interactive DER, and standard DER-related articles in subsequent versions.

New Articles Added to the National Electrical Code 2017

(Source: National Electrical Code)

Going beyond Code Requirements

Beyond just making safe and code-compliant equipment, DER vendors need to proactively address the concerns of building officials, fire marshals, and other authorities charged with protecting public safety. Since many codes are updated on a 3-year cycle—an eternity in the current wave of innovation—some products are invented and may have multiple generations before technical committees can officially weigh in. This author has heard an initially skeptical building official consider approving a fuel cell on a parking structure express concerns with “the thermal power plant on the roof” (the project was approved). Lithium ion battery storage installers (and lead-acid before them) have spent years educating fire officials on safety measures and operating procedures for their equipment. Vendors of newer technologies often learn from those that went before. But in most cases a proactive, trailblazer approach pays dividends.

One example of a DER technology overcoming safety concerns is the case of distributed PV in California. While not strictly building code related, California’s Rule 21 interconnection requirements were recently significantly updated to reflect growing trust of grid-tied inverters like those used in PV systems. Whereas inverters were formerly required to immediately shut off at the slightest sign of grid trouble or outage (for safety reasons), new smart inverters are allowed and able to stay operational under a much wider set of circumstances. This was as much a function of increased trust of the technology as it was a need to not have megawatts worth of generation going offline after each slight blip in frequency or voltage.

Industry Recommendations

Codes and similar regulations are important—they can encourage or limit technology deployment, effect installation costs, and even determine the number of hours a system can provide usable power (e.g., California’s Rule 21 for PV). Thus, it pays for vendors to take an active approach in educating city officials and first responders, and to be active in code development cycles. The relative infancy of the DER revolution means more growing pains likely lay ahead. Since DER are not yet truly ubiquitous, a proactive approach by vendors is a wise investment.


What Will the Microgrid of the Future Look Like?

— March 6, 2018

Microgrids have been around for a long time. In the past, the majority were powered up by diesel fuel and often were not connected to a traditional utility power grid. But what will the microgrid of the future look like?

As reported in the last update to the Microgrid Deployment Tracker published in 4Q 2017, the remote microgrid market share for total identified cumulative capacity declined from 45% to 39% in the 2Q 2017 update. This trend is more of a reflection of the grid-tied market picking up momentum than a lack of interest in remote off-grid applications. For comparison purposes, the next largest microgrid market segment in the update is the commercial and industrial segment, which has witnessed a recent surge and which Navigant Research estimates will be the fastest-growing market segment over the next decade.

Primary DER in Microgrids Is Going to Change

Rather than focusing on market segments, what about the types of distributed energy resources (DER) being deployed within microgrids? It should come as no surprise that diesel and natural gas generation still lead the resource mix. Looking into the future, a far different picture emerges.

In the Microgrid Enabling Technologies report published this January, combined heat and power was the leading DER choice in terms of capacity for microgrids on a global basis in 2017, with 655 MW deployed, followed by solar PV (392 MW) and then diesel (385 MW). By 2026, however, the DER landscape shifts, with solar PV jumping to a commanding lead with 3,786 MW annually, followed by energy storage with 3,292 MW. Energy storage boasts the most aggressive compound annual growth rate (CAGR) with 37.4%; solar PV follows at a CAGR of 28.7%.

Investment Spending Predicted to Rise

Implementation spending tracks this capacity growth. All eight DER were profiled in the recent report (which also includes biomass, diesel, hydro, and wind power). This market forecast represented just over $4 billion in investment in 2017. That annual spending increases to nearly $23.6 billion by 2026, a 21.7% CAGR. Solar PV ranks as the top DER investment target for microgrids, with annual spending reaching virtually half of all DER investment by 2026 at $6.7 billion. Energy storage spending follows at $4.5 billion annually in 2026.

Collaboration Expected as Power Sources Diversify

In short, solar PV and energy storage will be the most popular MET options for future microgrids. Yet, the more interesting question revolves around the potential role of fossil generators. One clue comes from companies such as Fairbanks Morse, which now offers a power reliability as a service platform. Rather than view solar and storage as a threat, it is investigating how to collaborate with the industry’s overall shift to the Energy Cloud.

Fairbanks Morse is not the only company exploring how the energy as a service model applies to microgrids. Perhaps the biggest single headline for microgrids in 2018 is the partnership between Schneider Electric, Dynamic Energy Networks, and the Carlyle Group, looking to deploy $500 million in microgrids under a microgrids as a service business model.

Microgrid Evolution Is Just Getting Started

Of course, the energy service approach to microgrids is still in incubation. The key to making this approach work are controllers, the magic sauce, if you will. As DER portfolios become commoditized, the innovation shifts to automation, controls, and software. Who are the leaders in this space? Look for my forthcoming report ranking control providers later this month.

Getting back to my opening question, the microgrid of the future will be more sustainable, ultra-resilient, plug-and-play, financed under an energy as a service business model with private capital, and will include both solar and energy storage.


States Ring in 2018 with Offshore Wind Momentum

— March 6, 2018

2018 feels like a turning point for the “always about to take off but just not quite yet” US offshore wind market. First, the degree to which the US market lags Europe can’t be overstated. In 2017, the US wind market saw no new capacity installed. Meanwhile, also in 2017, Europe’s first offshore wind farm was decommissioned because it was too old to continue operating. The 4.95 MW Vindeby using 11 Bonus 450 kW turbines was commissioned in 1991 and operated for 26 years. Europe also commissioned 3,148 MW from 560 turbines spread over 17 wind farms, bringing cumulative capacity to over 15,700 MW.

The US is at least formally in the game, with one 30 MW project brought online in 2016. The next project, however, is likely to be commissioned in 2019 or 2020 at the earliest. Nevertheless, a number of major announcements in early 2018 from New Jersey, New York, and Connecticut show the US market slowly building inevitable momentum to soon see year-over-year steady installations beginning in the mid-2020s.

New Jersey

In New Jersey, Governor Phil Murphy signed an executive order on January 31 calling on the state’s Department of Environmental Protection and the Board of Public Utilities (BPU) to reach a goal of 3,500 MW of offshore wind energy by 2030. The first step in this process involves BPU formulating and administering a competitive power contract auction for a first 1.1 GW stage. Planning and coordination with neighboring states, such as New York, will also be ramped up. Some of the early stage has already been set up for development in New York, with Statoil having secured an offshore wind site lease of 321 km2 that could support over 1,000 MW of wind. This was through the federal government’s Bureau of Ocean Energy Management, which to date has awarded site leases capable of producing over 15,000 MW.

New York

On January 29, in his annual State of the State Address, New York Governor Andrew Cuomo announced that the New York State Energy Research and Development Agency (NYSERDA) would administer two power contract solicitations in 2018 and 2019 as a first 800 MW stage toward achieving the 2.4 GW goal he announced in last year’s address. NYSERDA has filed a white paper with the Public Service Commission laying out seven procurement options.


Connecticut also announced offshore wind ambitions in late January. It released a request for proposals (RFP) for new clean energy, including offshore wind that can produce 825,000 MWh/year, which represents around 200 MW or more of offshore wind. Rhode Island also issued a renewables RFP on February 6. It is not specific to offshore wind but it includes offshore in the list of resources to be considered. These early 2018 announcements come just after Massachusetts launched an auction for 800 MW of offshore wind in late 2017, the winners of which are likely to be chosen before the end of 2018.

States Aside, General Electric Makes Headlines

Meanwhile, US-based General Electric announces it is committing $400 million to the engineering, testing, and supply chain necessary to build a 12 MW turbine prototype in 2019 that will be 267 meters tall (853 feet) and will have a 220 meter rotor (721 feet) enabled by 107 meter (351 feet) long blades. As the US market grows, turbine supply will no longer be solely dominated by the European turbine vendors.


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