Navigant Research Blog

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.


For Microgrids, It’s Not All About Size

— August 6, 2014

The University of Texas (UT) at Austin claims to have the largest microgrid in the world, with a peak load of 62 MW of capacity, serving 150 buildings.  The combined heat and power (CHP) plant that serves as the anchor is rated at 135 MW.

Leave it to Texas to make such a claim.  It’s not really accurate, but more importantly, it doesn’t really matter.  Bigger is not necessarily better when it comes to microgrids.

On the one hand, economies of scale tend to reduce cost.  But microgrids turn that assumption on its head, since onsite distributed energy resources (DER) reduce the line losses associated with the centralized power plant model.  I tend to agree with Steve Pullins of Green Energy Corporation, who says that the sweet spot for microgrids that incorporate new state-of-the-art technologies such as solar PV, lithium ion batteries, and CHP is between 2 MW and 40 MW.

Define “Big”

About every 6 months or so, I get an email from Craig Harrison, developer of the Niobrara Data Center Energy Park, asking me, “Am I still the largest microgrid in the world?”  The Niobrara proposal, which has increased in size from 200 MW to 600 MW over time (with both a grid-tied and an off-grid configuration now part of the single project), is still in the conceptual phase (you can see elegant renderings of the project provided by CH2M Hill).  In this case, a unique confluence of natural gas supplies and regulatory quirks (which in essence render the project as its own utility) conspire to set the stage for what will probably be (and remain) the world’s largest microgrid.  It’s only a matter of time.

Navigant Research’s Microgrid Deployment Tracker 2Q14 shows that the largest operating microgrid, if measured by peak demand (and not generation capacity), could be Denmark’s Island of Bornholm, which is interconnected to the Nordic Power Pool.  With peak demand of around 67 MW, the advanced pilot project incorporates plug-in electric vehicles (PEVs) and residential heat pumps, along with wind and CHP.

Like Military Intelligence

The microgrid at UT Austin is impressive, given that its origins date back to 1929 and it can provide 100% of the campus’ energy needs.  But it’s really an old school microgrid since it relies upon one source of electricity and thermal energy.  Robbins Air Force base in Georgia claims to have 163 MW of capacity, but it’s powered by large diesel generators, which are less desirable than CHP.  Much more interesting are microgrids that draw upon multiple distributed generation sources, incorporate advanced energy storage, and can sell energy services back to the utility.  The UT microgrid does none of these things.

In my view, a large microgrid is a contradiction in terms.  It’s much better to create multiple microgrids and then operate them at an enterprise level, creating redundancy via diversity of resources and scale, perhaps even mixing in AC and DC subsystems.  To me, a microgrid such as the Santa Rita Jail, which is only 3.6 MW in size but incorporates solar, wind, fuel cells, battery storage, and a host of state-of-the-art energy efficiency measures, is more interesting than the one in Austin.  When it comes to distributed energy, diversity trumps scale.


Defining the New Smart Grid: From Nanogrids to Virtual Power Plants

— July 7, 2014

Nanogrids and microgrids are building blocks that, like Legos, can be stacked into modular structures: in this case, distribution networks that tailor energy services to the precise needs of end-users.  This customization of energy services is clearly the wave of the future; but determining where to draw the line between these two business models can be challenging.

In many ways, nanogrids are just small microgrids that typically serve a single load or building.  They thereby represent a less complex way to manage on-site distributed energy resources (DER).  Ideally, microgrids would be able to serve entire communities, but utility regulations often stand in the way.  These same regulations make nanogrids larger business opportunity today than microgrids, despite their smaller size.

The series of storms and extreme weather that have attacked East Coast grids in recent years has sparked interest in community resiliency initiatives.  New York’s Reform the Energy Vision (REV) initiative is designed to explore how multi-stakeholder community microgrids might provide emergency power to end-users ranging from a private gas station to a municipal fire station (and perhaps a community center emergency shelter).  Connecticut has been struggling with this issue of how best to include both public and private sector end-users, bumping up against the long-standing prohibition of transferring power among non-utilities over public rights-of-way.  To date, only one of the 9 projects approved for funding under Connecticut’s DEEP program is actually up and running, at Wesleyan University.

The Virtual Option

The third smart grid business model that can help build resiliency into power grids is described in Navigant Research’s report, Virtual Power Plants.  A virtual power plant (VPP) is a platform that shares many attributes with the microgrid (and the nanogrid).  In North America, the most common resources integrated into VPPs are demand response systems.  Though VPPs cannot guard against power outages at the customer site, they can play a key role in lowering overall demand on the larger utility grid, thereby stretching scarce resources, directing them to mission critical loads.

The lexicon of organizing structures required to handle the increasing complexity of energy supply and demand is growing.  In order to make sense of this brave, new world in energy, Navigant Research has come up with the following chart highlighting key attributes of three different business models.

 Comparing Nanogrids, Microgrids, and VPPS

(Source: Navigant Research)

Regulators clearly need to revisit regulations standing in the way of community microgrids.  It appears that New York is pioneering this debate, allowing it to surpass California’s position as the leading microgrid market in the country in terms of sheer numbers of projects in the works.  Moving downstream again, it is also important to remember that nanogrids help create smart buildings that, in turn, can also be integrated into VPPs.  These combinations are vital to efforts to harness greater value from DER, thereby increasing energy security.

In the end, it’s not nanogrids, or microgrids, or VPPs, but the deployment of all three in flexible and dynamic configurations that is revolutionizing what was once the staid world of top-down, command-and-control monopoly utilities.


Big Savings from Replacing Diesel with Storage

— July 6, 2014

In my previous blog on diesel and energy storage, I discussed the payback period for energy storage in a remote microgrid.  What is the value of reducing diesel usage in a microgrid, practically speaking?

The table below illustrates the first-year savings of displacing 15% of the diesel generation in microgrids of different sizes using energy storage.  The average installed energy storage cost in this model is $2,112 per kW, and the assumption for the minimum cost of diesel fuel is $1.09 per liter, with the maximum cost in the model averaging $3.27 per liter.  Since the installation of storage is a one-time cost that occurs in the first year, the savings go up after that.

Size Distribution of Deployed Microgrids and First-Year Fuel Savings
at Low and High Diesel Costs: 4Q 2013

ESMG table

(Source: Navigant Research)

According to Navigant Research’s Microgrid Deployment Tracker 2Q14, 231 deployed microgrids have diesel generation capacity.  This means that 38% of microgrids have diesel gensets, and overall, gensets account for 11% of microgrid capacity globally.  Only 40% of the 79 microgrids above 10 MW include diesel generators, and smaller systems are less likely to have diesel generation.  Less than one-third of the microgrids below 500 kW rely at least partially on diesel.

Taking the example of a large microgrid system, because this is where the savings are the greatest, microgrids over 10 MW average 42.7 MW of capacity.

Still Too Costly

Assuming a microgrid does in fact have diesel generation, if a 42 MW microgrid replaced 15% of its total capacity (and assuming at least 15% of that capacity would be displacing diesel gensets) with storage, it could save between $10.9 million and $53.4 million per year after storage costs are recouped.  The total savings for all of the large microgrid systems in Navigant Research’s Microgrid Deployment Tracker would amount to $2.2 billion to $10.8 billion per year in diesel fuel using just 200 MW of energy storage.

So why is storage not more popular in remote microgrids?  Chances are it’s because $2,112 per kW installed is still not competitive in most markets where storage is displacing traditional power generation – even with the benefits of volume manufacturing.  Companies such as Samsung SDI and LG Chem are manufacturing lithium ion cells for the grid at great volume, but it’s still challenging to deliver competitive prices to the customer.  This is because a large portion of costs has nothing to do with the core technology, and instead is related to project management, system design and integration, and installation.  As more companies such as Bosch and Schneider Electric enter the market and bring power electronics and energy management expertise to the storage space, these costs will come down significantly, benefiting the entire supply chain. 


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