Navigant Research Blog

Cautiously, Private Utilities Dip Toes into Microgrid Pool

— December 16, 2014

Lawrence Berkeley National Laboratory statistics show that 80% to 90% of all grid failures begin at the distribution level of electricity service.  While utilities can resolve these issues through a variety of technologies, their historic bias against the concept of intentional islanding – or cutting off certain systems from the wider grid – has precluded them from considering microgrids in the past.

That has changed over the last 3 years.  The extreme storms that pounded the East Coast beginning in 2011 have led the states of Connecticut, Maryland, Massachusetts, New York, and New Jersey to all initiate resiliency programs that promote microgrids as a key element of their strategy.

Unfortunately, the concept of community resiliency or public purpose microgrids often violates utility franchise rules, since power would have to be sent over public rights of ways.  Connecting, for example, a gas station to a high school serving as an emergency shelter and a hospital could get the operator of this impromptu microgrid in trouble.

So, by way of necessity, utilities clearly have to play a role in these kinds of microgrids.  Furthermore, the hype about the utility death spiral is prompting many utilities to examine new regulatory structures and business models to accommodate the growth in third-party distributed energy resources (DER).

The Revolution Will Be Distributed

As a result, Navigant Research has issued a new report, Utility Distribution Microgrids (or UDMs).  While public power UDMs – both grid-tied and remote – are a larger market today and are expected to be in the future than systems deployed by investor-owned utilities (IOUs), the most interesting segment are these latter private systems, due to the regulatory issues they raise and because these large companies tend to move markets.

In conversations with utilities, the messages I’ve heard have changed dramatically.  When I initially researched this topic more than 2 years ago, the biggest concern about microgrids revolved around technology and intentional islanding, a concept that was anathema to utilities whose grid codes were designed to prevent customers from sealing themselves off from the larger distribution grids.  Worker safety, loss of customer load, and stranded investments in centralized generation also came up.

Today, many utilities cite these same issues, but growing numbers realize the DER revolution is picking up momentum and that microgrids that are owned or controlled by utilities could help them fulfill their mission to provide low-cost, reliable power.

Convincing the Regulators

The IOUs exploring microgrids include Arizona Public Service, Consolidated Edison, Duke Energy, NRG Energy, and San Diego Gas & Electric.  The primary challenge for an IOU today in implementing a UDM is justifying a microgrid under traditional rate-based regulation.  How can the utility convince state regulators that investing ratepayer funds into a project that directly benefits a small subset of customers will also benefit the wider customer base?  Even if a valid business case can be made, the typical 3-year rate case state regulatory proceeding business model may retard near-term innovation.

This IOU UDM segment offers the largest potential growth of any UDM segment, since it helps address the need for new technology solutions to address explosive growth in DER.  But it also faces the largest regulatory question marks.

 

Wireless Power Could Transform Smart Building Nanogrids

— October 6, 2014

From mobile phones to Wi-Fi, wireless communications have fundamentally changed human behavior.  As the much hyped era of the Internet of Things looms, the dense, rich communication networks needed seem to only be possible using wireless networks.  Moreover, big data requires ever more data to be collected and shared.  In buildings, this means more sensors and more communications to enable better efficiency.  Though wireless communications are poised to facilitate this transformation, the shift remains tangled in the wired status quo.

In addition to communications, building networks need power to create what Navigant Research has defined as nanogrids, which are, in essence, single-building microgrids capable of aggregating and optimizing distributed energy resources (DER) while increasing resilience thanks to their ability to island during utility power grid outages.  Running power wires to sensors is costly in new construction and prohibitive in most existing buildings.  As a result, it’s not done unless absolutely necessary.  Wireless makes the communication side of the equation easily scalable.  The incremental cost for connecting more sensors is small.  But, if a sensor needs wired power, why would anyone invest in wireless communications?  Power remains the key to unlocking greater data density in smart buildings, and thereby, expanding near-term opportunities for nanogrid applications.

Get Low

One approach to reducing the cost of sensors is lowering the cost of power wiring rather than eliminating the wire all together.  This is accomplished by using low-voltage direct current (DC) power for sensors, controllers, actuators, and even LED lighting.  Low-power DC wiring doesn’t need to be installed by an electrician, reducing the installation cost.  Also, many electronic devices are natively DC-powered.  So alternating current (AC) power must first be converted, resulting in an efficiency loss.  Moreover, onsite generation of power through solar PV panels or wind turbines is typically DC (as are battery storage devices).  So, DC distribution within buildings helps match energy supply with loads (since according to some estimates, 80% of building loads such as LED lighting, laptops, and cellphone chargers are all natively DC).  Low-power DC in buildings can serve as building blocks to nanogrids that tailor energy services to the precise needs of end users.

The push for DC power is being led by the Emerge Alliance, an industry association developing DC power distribution standards for commercial buildings.  A competing solution can be found in Power over Ethernet.  Both solutions can be cheaper to install than a traditional system.  But, though low power is less intrusive than the status quo, wires remain a limiting factor.

Power from High Frequencies

Eliminating all wires is the most elegant solution to enable the transition to more data-rich buildings.  Currently, this is being done either by installing batteries or by harvesting ambient energy to power devices.  Batteries require replacement and, when examined on a cost per kilowatt-hour basis, are very expensive.  They just don’t provide enough benefit to eliminate power wires.  Energy harvesting, on the other hand, eliminates the maintenance requirement but is restricted by the ambient light available.

However, a shift from energy harvesting to wireless power transmission is on the horizon.  Ossia, a tech startup, has demoed its Cota wireless power technology and expects to have commercially available products by the end of 2015.  Cota works by broadcasting radio waves over the 2.4 to 2.485 GHz ISM band (the same as Wi-Fi, ZigBee, Bluetooth, and others) and is capable of transmitting about 1W of power up to 10 meters – enough for a sensor, but not much else.  Even a decade from now, it’s unlikely that wireless power transfer or energy harvesting will be able to provide enough power for anything more than a sensor.  But leveraging big data in buildings requires more sensors, many more than are currently deployed.  Wireless power could be the building block that brings the Internet of Things to smart buildings and hasten the spread of nanogrids.

For a more detailed look at the nanogrid market, please join our free webinar, The Expanding Business of Nanogrids, on Tuesday, October 14 at 2 p.m. ET.  Click here to register.

 

Distributed Generation Leads Microgrid Investment Opportunities

— September 18, 2014

Without some form of distributed generation (DG), the vast majority of microgrids would not exist.  So, it should come as no surprise that such assets represent the single most lucrative microgrid enabling technologies (MET) segment today.

A prime mover technology for microgrids is diesel generators, which are widely deployed as backup emergency power generators thanks to their ability for black-start.  However, they are also often legacy assets upon which microgrids are layered and, more often than not, microgrids are specifically designed to reduce diesel fuel consumption.

In Navigant Research’s report, Microgrid Enabling Technologies, the amount of DG being deployed within microgrids is forecast in terms of capacity and of annual vendor revenue.  If one looks at new capacity additions, diesel generators have captured the largest market share, followed closely behind by natural gas generators (which also serve as the basis for combined heat and power applications).

DG Capacity Market Share in Microgrids: 2014

 

(Source: Navigant Research)

An important caveat on these estimates: only systems that incorporate some level of renewables are included in the tally for remote microgrids.   If one were to include all diesel generators deployed cumulatively, Navigant Research’s data suggests that they would represent more than 65% of total microgrid DG capacity.

Decline of Diesel

Another key assumption moving forward with microgrids is that new diesel capacity will decline over time, given the high cost of fuel, tightening air quality regulations, and the emergence of new power electronics technologies, lessening the need for a fossil prime mover.

While fossil DG capacity is still expected to exceed that of renewable capacity deployed within microgrids in 2014, the higher capital cost attached to solar PV, wind, hydroelectric, and biomass translates into higher vendor revenue per megawatt.  Fossil fuel DG (diesel and natural gas generators plus fuel cells) is expected to represent 58% of total DG capacity in 2014, according to our forecasts; renewables will most likely capture the other 42% of the DG market.   On a revenue basis, however, renewables are expected to capture 23% of total MET vendor revenue in 2014, compared to only 9% for fossil fuel DG.

Notably, the largest category of revenue in 2014 is technologies not actually included in the forecast, since they cannot be quantified on the basis of generation capacity (i.e., smart meters, smart switches, and other distribution or building infrastructure).  The majority of microgrids being deployed today incorporate significant amounts of legacy DG.  (Most of the community microgrids under development in New York and Connecticut add no or very little DG capacity.)  As a result, large investments into integration hardware – distribution infrastructure that cannot be quantified on the basis of generation capacity – represent a large piece of the overall investment pie for these retrofit microgrid projects. But this category is likely to decline as an overall percentage of total vendor revenue by 2023 as renewables, energy storage, and software increase in market share over time.

 

In Bangladesh, Solar Boom Benefits All

— August 18, 2014

More solar PV systems are installed in Bangladesh than in Germany and the United States combined.  At the end of 2013, Bangladesh had an estimated 2.9 million solar PV systems installed compared to 1.4 million in Germany and 445,000 in the United States.

This is despite the fact that Bangladesh is one of the poorest countries on the planet, with per-capita income of less than $3,000 per year.  In Bangladesh, solar home systems (SHSs) range from 10W to 200W.  Approximately 50% of all systems sold in Bangladesh are between 20W and 30W – roughly 1% of the capacity of a medium-sized residential system in the United States, but enough to power a few compact fluorescent or LED lights, charge a cell phone, or power a radio.  At an average cost of about $230 for a 20W SHS in Bangladesh, an upfront cash payment is out of reach for people who make less than $9 per day.  But thanks to the success of micro-credit programs that made Mohamad Yunus and Grameen Bank household names, SHSs are affordable to all.

Home Systems Multiply

Grameen Shakti, based in Dhaka, is the solar power arm of the Grameen Bank and is the leading SHS installer in Bangladesh, with an estimated 1.3 million installations to date.  These installations represent more than 30 MW of installed capacity.   The model relies on an extensive network of sales agents who can reach remote areas, low interest loans, and numerous grants that provide seed funding.  Grameen Shakti provides free operation and maintenance services for 3 years after installation, with low-cost service options thereafter.

With a strong emphasis on grassroots education, Grameen Shakti has contributed to the industry’s high visibility in Bangladesh, where there are now around 40 providers of SHSs.   The company sells approximately 1000 SHSs per day and is targeting 2 million SHS sales by the end of 2016.

The government of Bangladesh – whose low-lying topography makes it especially vulnerable to the effects of climate change – has set a target of generating 5% of its power from renewable energy sources by 2015 and 10% by 2020.  The pipeline of projects started small, but is now growing considerably.  The country has approximately 10 GW installed capacity, with only 75% of that power actually available at any given time due to grid reliability issues.  That relates to roughly 136 kWh available per capita each year – one of the lowest rates in the world.  Compare that to an average household consumption of 1000 kWh per month here in Portland, Oregon.

Changing the Model

Rahimafrooz Renewable Energy Ltd. (RREL) represents the growing number of hybrid companies with a foot in the SHS market and many others, including agriculture, healthcare, education, telecommunications, rural street lighting, and marketplaces, as well as government and private institutions.  RREL has installed 300 solar water and irrigation pumps, 2 MW of solar rooftop solutions, and more than 100 solar-powered telecom base stations in Bangladesh.

Meanwhile, the company’s not-for-profit venture, Rural Services Foundation (RSF), has disseminated nearly 426,000 SHSs under the Infrastructure Development Co. Ltd. (IDCOL) program, representing more than an estimated 12 MW at the end of 2013.  This makes it the second-largest SHS installer in Bangladesh, behind Grameen Shakti.

As I’ve covered previously in blogs and Navigant Research’s report, Solar PV Consumer Products, countries such as Bangladesh, Kenya, Tanzania, and others are challenging traditional Western perceptions of developing countries and approaches for tackling poverty.   Investors have also taken notice.  Solar’s very favorable current market forces (low cost) and unique advantages in economic development (health benefits and cost savings) can be leveraged to enable the continued expansion of solar PV to even the most remote regions – and the poorest countries.

 

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