Navigant Research Blog

Advanced Energy Market Hits $1.4 Trillion: Part 1

— April 21, 2017

Each year, Navigant Research partners with Advanced Energy Economy (AEE) to quantify the size of the US and global advanced energy market and publish the Advanced Energy Now Market Report. AEE is a national association of businesses and business leaders that share in the vision of “making the global energy system more secure, clean and affordable.”

The report presents revenue data across seven major segments and 41 different subsegments that pulls from 60+ Navigant Research market reports. This is the 6th year the report has been published. In this two-part blog series, some of the most important findings in the report are summarized:

  • Advanced energy is a $1.4 trillion global industry, almost twice the size of the global airline industry, and is nearly equal to global apparel revenue.
  • The US advanced energy industry generates nearly $200 billion in revenue, nearly double beer sales, equal to pharmaceutical manufacturing, and approaching wholesale consumer electronics.

In addition to quantifying the 41 advanced energy subsegments that make up the advanced energy market (each with multiple product categories), the report features 17 trend stories across the seven market segments. These can be rolled up into five overarching trends that are shaping the future of advanced energy. Two of these trends are featured here; the other three are summarized in part two of this blog series:

  • The rise of big data analytics: The use of software engines and algorithms to process and analyze large quantities of data and provide insights into how customers behave is changing the way companies do business across the economy, and energy is no exception. The section, “Big Data Drives Demand-Side Management Innovation,” discusses how, in recent years, utilities and energy efficiency providers have used new data tools (home energy reports, web portals, and mobile apps) to unlock cost and energy savings for customers. The “Energy Use? Yes, There’s an App for That” section profiles energy applications that are targeting the $2.3 billion global residential home energy management systems market. Meanwhile, amid the digitization of energy—which has offered up the Internet of Things, connected devices, smart grid, and even automated vehicles to consumers—new challenges have arisen, including cybersecurity. This is discussed in the “As the Grid Goes Digital, Cybersecurity Gains Importance” section.
  • Hardware cost declines: Advanced energy technology deployment continues to exhibit dramatic growth rates, enabled in large part by cost declines in hardware such as solar PV modules (see “Solar PV Sets New Records Nationally and Globally”), LED lighting, and increasingly, battery technology—with gigafactories being built around the globe to produce these items at scale. The extreme pace of these cost and commensurate price declines have restrained market revenue growth, as outlined in this report. In response to increasing market maturity and tight margins, advanced energy companies in many sectors are undergoing a shift to services, as discussed in the “Lighting as a Service” section. Market consolidation and vertical integration, scaling of manufacturing, and fierce competition are expected to drive further cost reductions in the future.
 

Portland’s New Renewables Leadership Showcased at Historic Montgomery Park Install

— April 18, 2017

An analyst’s job is to look at trends, events, movers and shakers, and data that sometimes all collide into one amazing story. One such alignment occurred on April 14, 2017 at the ribbon cutting of Imagine Energy’s 1 MW rooftop solar PV installation at the Montgomery Park building in Northwest Portland. The layers speak for themselves:

  • Solar Install: 1 MW is the third-largest solar PV installation in Portland, and it will cover 20%-25% of the all-electric historic building’s energy needs. The press release speaks for itself, “After four Historic Reviews, six crane lifts with the largest mobile crane in Oregon, the harshest winter in 40 years, detailed engineering reviews, and a 300-ton crane mobilization to set 150′ solar trusses, the 1 MW solar project at Montgomery Park is complete.” The installation included four EV charging stations, as well.
  • 100 ENERGY STAR Rating for 100th Anniversary: The solar PV installation sits atop the roof of the Montgomery Park building, and there are also three additional structures on Portland’s second-largest office building. Montgomery Park is working toward a perfect ENERGY STAR building efficiency rating of 100 by its 100th anniversary in 2020. Despite its age, Montgomery Park is the fifth most efficient building in Portland, and a score of 100 would make it No. 1!
  • History: Montgomery Park’s owner, Bill Naito, has an amazing personal history. A Japanese American who moved to Utah in high school to avoid internment during World War II, Naito went on to become one of the most prominent developers and civic leaders in Portland’s history. Imagine Energy’s founder, Jonathan Cohen, and his wife, Jessie, are two of the cities’ most active entrepreneurs and owners of other businesses in Portland.
  • 100% Renewable Energy Target: The newly elected mayor of Portland, Ted Wheeler, recently announced that Portland and Multnomah County would target 100% renewable energy for city operations by 2035—joining 25 other US cities in taking the pledge—building upon the city’s climate action plan.
  • Top Solar Drone Video: Navigant Research has covered the use of unmanned aerial vehicles for wind power inspection and for transmission and distribution monitoring. As cool as those are, nothing beats a sweet solar PV installation promo video—and Imagine Energy’s is the best I’ve seen.

While today’s solar market is led by a shrinking number of mega companies, the solar shakeout has created opportunities for small and medium companies to carve out their niche—and work on creative, challenging projects that larger companies might overlook such as the Montgomery Park project.

 

Enel Green Power CEO Puts Cards on the Table

— April 17, 2017

Enel Green Power CEO Francesco Venturini recently wrote a very candid and well-articulated piece on the future of renewable energy, Towards the Next Frontiers of Energy Technologies. It’s rare to see a CEO go beyond the litany of well-trotted renewable energy successes—emphasizing cost declines, deployment surges, and next-generation technologies. European power companies that faced their energy transition far before North America have taken the lead in many respects to shifting their business models and focus for the future. Having worked on projects with a number of these and similar companies on strategies to address this transition, it’s obvious that there is a recurring theme: no one technology or geography will be the perfect solution. The future requires a global, networked approach, and successful companies will need to constantly be taking an “all of the above—and in between” strategy.

CEO Venturini writes: “The final goal is to improve the competitiveness of the renewable sector against the conventional one.”

The Next Frontier

Enel Green Power and its competitors, such as ENGIE, Iberdrola, and others, have all struggled to find robust growth strategies. The energy transition hasn’t been easy, but at this point, there is no other option. More than ever before, it’s really just a matter of time. Looking back at the past 15 years of renewable energy deployment, it becomes clear that the next 15 years are going to be even more revolutionary as companies push the next frontier in terms of scale. CEO Venturini points out Enel’s activity across solar, wind, innovative geothermal plants, hydro, marine, microgrids, and energy storage technologies—and the impending incremental advances. But it is the small stuff that customers won’t be able to see—the really, really small stuff—that will enable the next 15 years of deployments. Digitization, flexibility, and customer choice are the new pillars required for this next phase of growth, which we here at Navigant Research refer to as the Energy Cloud. We track innovative companies exploring this growth phase in our Energy Cloud Company Database.

CEO Venturini points to a few of the key areas Enel Green Power is pursuing in the future—artificial intelligence, robotics, Internet of Things (IoT)—to which I would add predictive algorithms, distributed energy resources management systems, and transactive energy platforms. While these technologies are not going to be visible to customers as they look up at rooftops or along the countryside and shorelines from above—they will be visible on their electric bills. The digital ones and zeros are increasingly the glue that will enable a higher penetration of renewables at scale as fossil fuels shift to a supplementary role.

Exponential Deployments

Although some of the litany will always remain (e.g., the need for supportive policies), the tools required to enable the Energy Cloud are not dependent on tax credits and financial incentives. The tools being developed are enabling access to energy markets and customers under current rules, with existing technology. As rules and regulations catch up, these incremental deployments CEO Venturini describes will turn exponential.

Enel is not alone in this approach—but it is being one of the most vocal—out of necessity.

 

Innovative Pumped Storage Proposals Reveal Complex Costs and Benefits

— April 14, 2017

A number of new pumped hydro energy storage projects have been announced over the past several months that aim to use abandoned mine shafts and tunnels to store vast amounts of energy. Newly proposed projects in both Virginia and Germany now join projects being developed in New York and Wales, with the goal of being the first to reuse decommissioned mining sites. Ranging in capacity from 100 MW to 250 MW, these projects are relatively small compared to many existing pumped storage plants and require more creative design and engineering to capitalize on the existing mine infrastructure. While there are several potential benefits to using existing mine facilities, these projects all face significant challenges and risks.

Seeking Advantages

The most widely deployed form of energy storage globally, pumped storage is a mature technology capable of providing massive amounts of energy storage capacity on the grid. However, the development of new projects has remained challenging due to the need for specific sites with the correct geological and geographic characteristics, lengthy and complex development processes, and environmental impact concerns. By using existing mine shafts rather than building new reservoirs, developers hope to overcome many of these issues.

Projects using abandoned mines do not need to find suitable locations for development, as much of the infrastructure needed for the project—namely mine shafts that can serve as reservoirs and grid connections—may already be in place. This should also help developers avoid permitting and land use issues, as well as opposition from local residential areas that is common with new greenfield pumped storage proposals. Overall, developers believe that the cost to build these projects will be considerably lower than that for traditional pumped storage facilities as a result of the reduced need for major construction and fewer permitting hurdles. Furthermore, developers claim that these projects can significantly boost the economy in surrounding communities, a particularly important consideration in rural areas where mines have closed and reduced employment.

Challenges to Overcome

As with all pumped storage projects, these new proposals face significant challenges. In addition to concerns around the environmental impact of such large projects, the length of time required to commission these systems and the related complexity have been major issues. This is partially due to the need for financial arrangements covering the cost to build, own, and operate such large and costly systems. There are additional challenges facing projects at existing mine facilities specifically, such as the potential for large amounts of iron or other minerals to contaminate water used in the system and damage turbines and other equipment. However, likely the most significant challenge to overcome will be the fact that no facilities of this type have been built before. There will always be the possibility for unforeseen engineering and construction challenges to delay development. For example, the mine reuse project currently furthest along, the Glyn Rhonwy facility in Wales, has been planned since 2006 and is now under construction, but likely will not be operational until 2019.

Although these mine reuse projects hold significant potential for large quantities of low cost energy storage, the challenges may be difficult for some projects to overcome. These challenges will only become more prominent over the coming years as costs for battery storage projects continue their rapid decline. We have already seen massive battery storage projects announced that rival the size of some pumped storage facilities. With battery system costs falling at an average of over 8% per year … will these new pumped storage facilities still be economical after even 5 years of development and construction?

 

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