Navigant Research Blog

Tracking Blackouts: Validation That C&I Microgrids Are the Next Big Thing?

— April 10, 2018

A number of reports tracking power outages in the US have been released this year. These reports underscore why this country continues to be the global leader on grid-tied microgrid capacity, according to Navigant Research’s Microgrid Deployment Tracker. These statistics also show why commercial and industrial (C&I) customers have emerged as the fastest growing microgrid market segment globally.

Eaton Blackout Tracker Results

Eaton, a leading microgrid solutions provider, releases its annual Blackout Tracker every year. The data for 2017 revealed a few surprises. The US sustained 3,526 blackouts in 2017 that interrupted grid delivery of power services to an aggregate population of 36.7 million. The average power outage averaged 81 minutes of down time. While the total number of overall outages in 2017 was 9% less than in 2016, the number of people affected by these blackouts more than doubled. This seeming dichotomy can be explained by the longer term and wider geography of major blackouts occurring last year due to extreme weather hitting Florida, Texas, and Puerto Rico (along with wildfires hitting California).

As noted in a previous blog, the state that features the most power outages is California. No doubt, part of this is due to sheer size. Nonetheless, the state has had the dubious distinction of taking top honors for blackouts for the ninth year in a row. Top identifiable causes were weather and falling trees followed by failing equipment and human error. All 50 states were affected by power outages, with the average cost at $100,000 per hour. One of the most expensive costs incurred by a single C&I customer was Delta Airlines, which lost $50 million due to an outage at the Atlanta, Georgia airport.

Ranking All 50 US States by Number of Blackouts: 2017

(Source: Eaton Blackout Tracker)

S&C Electric Results

S&C Electric, a leading company active in utility distribution microgrids, released its own analysis focusing explicitly on C&I customer blackouts in the US. Some 251 companies representing operations including manufacturing, data centers, and healthcare, among others, responded to this survey conducted in 4Q 2017. Here are some of the highlights rendered from this research:

  • 41% of respondents claimed the average power outage was up to one hour of time, while 26% said one hour or more.
  • In terms of frequency, just under half (49%) said they experienced one or more power outages every year; 21% said once a month or more (see the figure below).
  • In the past 12 months, 84% of respondents recalled some form of power outage.
  • Longest duration power outages were reported in the manufacturing sector with 58% reporting outages of an hour or greater.
  • Productivity loss was the main impact upon C&I customers experiencing power outages (76%).
  • On a regional basis, the longest power outages occur in the South, with 62% of respondents being affected by a power outage lasting more than 1 hour.

US C&I Outage Frequency by Region: 2017

(Source: S&C Electric)

What Does This Mean?

What basic insights can one glean from this analysis? While initially laggards, C&I microgrids are now picking up momentum and will continue to grow at a fast pace not only in the US, but globally. The S&C Electric report supports this view as 71% of respondents say they own or plan to develop alternative energy sources to supplementing their utility power supplies. From a microgrid market perspective, even more important is that 70% see power reliability as an existing cause for concern, and 40% would pay a premium to improve it.

 

The Vulnerable Electric Grid Might Be Tougher Than You Think

— April 10, 2018

The ongoing struggle to keep the US electric grid safe from attacks can seem like a losing proposition, especially given recent reports of Russian-sponsored hacking attempts and a serious warning about increasing vulnerability. However, there are quieter accounts of progress among those working to keep the grid safe.

Berkeley Lab Threat Detection Tool

One is a 3-year project led by Berkeley Lab researchers and supported by several key partners that features a new tool to detect cyber-physical attacks. The researchers designed a new architecture that combines a micro phasor measurement unit (μPMU) that captures data about the grid’s physical state with information from commonly used SCADA monitoring systems. Together, the combined data provides real-time feedback about grid performance through a redundant set of measurements with high fidelity. The idea is to bridge the gap between the physical world and the cyber world and find discrepancies that could indicate certain types of attacks are underway against grid components.

The Department of Energy (DOE) supported Berkeley Lab project is moving to the technology transfer stage, with the team preparing a final report and meeting with industry stakeholders to introduce them to this novel security framework. Partners on the project included EnerNex, EPRI, Riverside Public Utilities, and Southern Company.

Insurance Model to Protect the Grid?

In what seems like a stretch, two University of Wisconsin-Milwaukee researchers are investigating the potential of a new insurance model aimed at motivating utilities and regulators to invest more in cybersecurity assets. The idea is to support utilities implementing high cybersecurity tools with lower insurance premiums, and to penalize those with low cybersecurity processes with higher premiums. The two have funding from the National Science Foundation to build predictive models in a project that blends several disciplines, including electrical engineering, computer science, actuarial science, and statistics. More to come on this front, for sure.

Going Retro for Grid Security?

Meanwhile, there is a move in Congress to support older style tools to help safeguard the grid. The retro effort comes in the form of a senate bill that, if passed, would direct the national laboratories to partner with private companies to identify analog approaches that do not rely on digital infrastructure or tools. According to senators supporting the bill, the idea springs from the 2015 cyber attack on Ukraine’s energy grid in which operators restored power relatively quickly using human-powered or analog systems instead of digital. The bill is not without critics, one of whom claims it is a mistake to look backward for answers such as the ones proposed, though he applauds the focus being placed on enhanced security.

So the Grid Could Be Okay?

The takeaway from these disparate and under-the-radar efforts should be a sense of calm that not all is doom and gloom when it comes to grid security. The grid might be tougher than you think. The good guys are working on new solutions, too (be sure to check out Navigant Research’s recent report, Managing IoT Cybersecurity Threats in the Energy Cloud Ecosystem). Some solutions might have limited effects, like going retro, but there is hope future attacks will be countered with robust defenses that thwart attacks and keep the grid safe.

Power Standards Lab μPMU

Note: Developed at Power Standards Lab under a project led by Berkeley Lab and funded by DOE’s ARPA-E program, µPMUs are designed to increase situational awareness at the power distribution grid level.

(Source: Power Standards Lab)

 

Off-Grid Offerings Aim to Keep Utilities Ahead of New Competition

— November 9, 2017

Over the past several years, the falling costs for solar PV, energy storage systems (ESSs), and other distributed energy resources have prompted some industry observers to predict the major threats to the utility business model would be driven by increasing numbers of customers generating their own power. This prediction has proven to be premature and not a serious concern for many utilities. The costs and complexity required for customers to truly become independent of their local electricity provider remain too high. However, some utilities with largely rural and remote service territories face unique challenges to provide reliable and affordable service to their customers. Select providers around the world have begun exploring opportunities to offer off-grid energy systems directly to customers in an effort to reduce costs while establishing a new segment of their business.

Examples Around the World

In the US, Vermont-based utility Green Mountain Power claims to be the first in the country to actively help its customers go off-grid with combined solar PV and energy storage offerings. With a high percentage of rural customers, long feeder lines, mountainous terrain, and frequent blizzards, the company faces higher costs to reliably serve each customer. A key aspect of Green Mountain Power’s offering is selling its customers the Tesla Powerwall residential storage system through a well-established partnership with the EV and stationary storage provider. To reduce the energy required by these customers, the utility provides energy efficiency retrofits and home automation controls. It also supplies backup generators to ensure electricity is always available.

On the opposite side of the world, one of New Zealand’s largest electric distribution companies is facing similar challenges and has established its own off-grid program. Powerco has begun constructing several all-in-one microgrid energy systems for customers in remote parts of the country. The company’s offerings include solar PV, energy storage, and backup generators configured to meet a customer’s year-round energy needs. Powerco has partnered with US-based ESS provider SimpliPhi Power to offer its modular 3.4 kWh lithium ion battery units. The utility has determined that these off-grid energy systems are more cost-effective than having to extend the reach of the centralized grid by just 2 km, with an added benefit of reducing fossil fuel consumption and providing greater reliability for customers.

Avoiding Threats 

As explained by my Navigant colleagues in a 2016 article, threats to the utility business model have evolved into something far more pernicious in the past 3 years. Solar PV, ESSs, and other individual technologies are increasingly combined into complex hybrid energy systems driven by evolving technology platforms to meet the energy needs of end customers. These developments have resulted in previously unheard of competition in the market from cable and telecom companies, solar PV providers, home security firms, and large tech companies.

Utilities Facing Increased Competition at the Edge of the Grid

(Source: Navigant Research)

Utilities such as Green Mountain Power and Powerco recognize these threats and are attempting to get ahead of the competition posed by new energy service providers. These companies recognize that they must be innovative with their offerings to keep pace with the demands of customers and the industry’s technology-driven evolution. By encouraging customers to adopt new technologies and go off-grid on their own terms, utilities can establish a profitable extension of their business while forging stronger relationships with customers.

 

Innovative Business Models Required to Drive Microgrids for Resilience

— October 17, 2017

The devastation caused by recent hurricanes in the Caribbean and southern United States has focused attention on the potential benefits of microgrids and local power generation. With widespread power outages and major damage to grid infrastructure, the opportunity to rebuild electrical systems with a more distributed and resilient architecture has never been clearer. Navigant Research’s new report Energy Storage for Microgrids highlights some the developments taking place in this emerging market along with the challenges that must be overcome to capitalize on the full potential of these technologies. The report explores innovations in business models that will be key to the growth of microgrids and distributed energy over the coming years, particularly in markets with significant financial constraints.

Protecting and Improving

Microgrids equipped with distributed energy storage, solar PV, and other forms of distributed generation can greatly enhance the resilience of the electrical system by preventing damage to a single portion of the grid from causing massive outages. This capability would be especially beneficial for islands such as Puerto Rico and the US Virgin Islands, which face frequent hurricanes capable of destroying transmission and distribution lines. In a centralized grid system, although power plants may still be operational after a storm, the energy they generate will be unable to reach customers. Microgrids with localized energy storage and generation are less susceptible to storm damage and can be brought back online more quickly, without damage in one area preventing service from being restored elsewhere. Furthermore, under normal conditions, microgrids provide numerous benefits to the grid by operating both independently and in a coordinated fashion to maximize the use of renewable energy without affecting grid stability.

Leveraging Financial Innovation to Drive Growth

Since microgrids are a relatively new technology platform, two major challenges that hold back new projects are the limited number of standardized solutions (despite some early plug-and-play offerings) and the limited financing options that reduce upfront investments and risks for customers. In the case of Puerto Rico and other islands with significant financial constraints, innovative business models will be critical for microgrids to spread.

Business model and financing innovations have been key drivers of growth in the solar PV industry over the past decade. Many of these same concepts are being applied to microgrid and distributed energy storage projects with the goal of negating the perceived risk of investing in new technologies. Some of the new models shifting risk and upfront investment away from customers include: power purchase agreements and leases with owner financing, software, energy as a service, and design, build, operate, and own models. New business models are being driven by the growing number of companies that leverage their backgrounds to provide microgrid solutions, including utility subsidiaries, energy service and technology providers, solar PV developers, and building energy management and controls providers.

Creating Opportunities

While the distributed energy industry races to help communities recover from recent disasters, it is critical that new technologies capable of reducing the effect of future storms be implemented. However, overcoming the lack of familiarity with these new systems and relatively high upfront costs will be a major challenge. The most successful companies in this industry will be those that can unlock the potential of new business and financing models to reduce the risk and upfront costs to customers. This ability to leverage private investment in infrastructure will be particularly important as countries with limited resources look to recover from massive damage while preventing similar issues in the future. In a webinar later this month, Navigant Research will explore the role of microgrids for improving resilience in another high profile area: data centers.

 

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