Navigant Research Blog

Microgrids: The Golden Ticket for Advanced Batteries?

— June 10, 2012

Discussions about markets for advanced batteries – everything from electric toothbrushes to grid storage, and the various consumer-facing products in between – are some of the most interesting conversations we have at Pike Research.  End markets may exist somewhere, but the pathways these technologies will take remain unclear. Will they be lithium ion? Flow batteries?  We’re not sure. So, as we do with many cleantech technologies, we look to the U.S. military for guidance.

Microgrids have been floated as one pathway advanced batteries might take to achieve electricity grid integration.  In Texas, the Army’s Ft.  Bliss installation is now home to a 100 kW (20 kWh) lead acid battery system that is seamlessly integrated with the base’s microgrid.  The installation, and particularly the inclusion of the battery system, is as much about security for the U.S. military as it is about generating a return on investment.  The advantage of batteries is that they can address multiple applications – supply security, frequency regulation, and renewables integration.  While microgrids offer unique control over systems or islanding capabilities, batteries enhance these features and provide avenues to other revenue streams.

Utility procurement of advanced batteries may be a few years off while companies pursue a “wait-and-see” approach, but microgrids – either on islands, off-grid, or for niche applications – could provide a near-term testing ground.  Microgrids may ultimately be where advanced batteries meet the smart grid.  For example, the Jeju Island smart grid project in South Korea will integrate community and residential energy storage as part of a microgrid on the northeastern part of the island.

Pike Research’s upcoming report on advanced batteries for utility-scale applications broadens the discussion on the microgrid opportunity for advanced batteries.  We anticipate the discussion growing over the next year.


Evolving Microgrids: What About Utilities?

— June 5, 2012

Pike Research has issued separate reports on three leading microgrid segments: campus environment; military and remote/off-grid systems.  A forthcoming report on “utility distribution microgrids” (UDMs) continues this trend of deeper analysis of specific microgrid segments, but also takes a broader look at how advances in distribution and substation automation are laying a foundation for utilities to play a much more fundamental role in future microgrid deployments.  UDMs are not exactly analogous to “community/utility microgrids,” yet there is significant overlap and synergy between these two segment designations.  Though already somewhat dated due to a surge of recent development activity, the following chart from Pike Research’s comprehensive look at all five microgrid segments published in early 2012 presents a good snapshot of where the overall market is going.

Interviews with leading companies involved with microgrids suggest that most utilities are still scratching their heads, trying to make sense of a very different world, with the microgrid perhaps a symbol of radical changes that could, if utilities fail to adapt, lead to their demise.

As vendors such as S&C Electric point out, the decline in prices for distributed renewables – especially solar photovoltaics – and for advanced energy storage is spurring greater interest in microgrids. Other major companies, such as Intel, a member of the EMerge Alliance, are also interested in the concept, though the semiconductor giant’s strategy likely stems from its growing interest in direct current (DC) applications.  Those applications are potentially relevant to both large commercial complexes, such as data centers, and to power generation in the developing world, where alternating current (AC) power grids are often missing.

Among the U.S. utilities that have seen the light in terms of microgrids are San Diego Gas & Electric, (SDG&E) American Electric Power (AEP), Sacramento Municipal Utility District, DTE Energy, and Consolidated Edison.  The prime obstacle to UDMs in the U.S. has nothing to do with technology.  In regulated markets such as the U.S., investor-owned utilities (IOUs) typically have to go before public utility commissions to justify costs they pass on to ratepayers.  These rate cases are typically three-year funding cycles.  To date, few – if any — companies have demonstrated the costs and benefits of UDMs. As a result, the business case for UDMs is not yet fleshed out.

Among the other barriers to near-term deployment of UDMs are utilities’ cultural bias against intentional islanding, their fear of loss of native customer loads, and the lack of clear controls technology emerging from a crowded field of competitors.  Utilities such as SDG&E and AEP will be armed with data that will reveal whether or not a value proposition can be made for UDMs.  Since microgrids come in so many sizes with so many different generation sources operating in so many different geographies, cost/benefit calculations will be extremely site-specific.


Microgrid Boundaries Continue to Blur

— May 29, 2012

Wrapping up the latest update to the Pike Research Microgrid Deployment Tracker, which was published earlier this month, I had a very simple insight: What is and what is not a microgrid is really in the eye of the beholder.

The U.S. Department of Energy (DOE), guided by the perspective of academics from the University of Wisconsin and big thinkers at DOE’s Lawrence Berkeley National Laboratory, came up with a long-worded definition: “A group of interconnected loads and distributed energy resources (DER) with clearly defined electrical boundaries that acts as a single controllable entity with respect to the grid [and can] connect and disconnect from the grid to enable it to operate in both grid-connected or island mode.”

To large extent, Pike Research adheres to this definition, but with one major exception.  One segment of microgrids included in our Tracker update is “remote microgrids,” networks of distributed resources that are not interconnected with a larger utility grid, primarily located in the developing world.

All told, Pike Research identified 87 new microgrids either planned, proposed or in current operation which now total over 2,574 MW in planned or operating capacity.  This compares to 1,626 MW of planned and operating capacity identified in the Pike Research 4Q11 update, a 63% capacity increase.

I had lunch with Gary Seifert, a business development executive at OSIsoft, at the recent OSIsoft Users Conference in San Francisco.  He opened my eyes to the perspective of a company whose data management systems are vital for the University of California-San Diego’s microgrid, whose 42 megawatts (MW) of total capacity generate over 84,000 data streams through the company’s “PI” system, a volume of data that keeps growing and can reach 100 bits per second.

From a company such as OSIsoft, the islanding requirement to define a microgrid is largely a false one proliferated by academics.  In the real world (I am paraphrasing here) it’s the organization, optimization and visualization of data for customers that really constitutes a microgrid.  “Don’t tell some of these military bases that they don’t have a microgrid if they cannot fully island yet,” he warned.

Data Architecture for UC-San Diego Microgrid

(Source: OSIsoft)

Seifert made a convincing case that the islanding threshold for a microgrid may be too stringent.  Nevertheless, Raj Chudgar, vice president of smart grid/microgrids for Power Analytics – whose modeling software is layered on top of OSIsoft’s PI system at UC-San Diego – claimed that only 5% to 10% of the projects listed in Pike Research’s MGDT published in the 4th quarter of 2011 met his vision of what constituted a bona fide microgrid.  Since his firm’s software is among the most sophisticated available, this assessment did not surprise me.  (Chudgar was a panelist on our May 22 webinar, “Renewable Energy Integration.”)

Outside the Lines

Indeed, not all of the projects profiled in the Tracker database meet the Pike Research and/or DOE definitions of a microgrid.  Some projects were included due to their noteworthy features and/or key contributions to the development of technologies critical to the success of the overall microgrid market.   Yet Pike Research still uses the ability to safely island as the key distinguishing feature for microgrids for very practical reasons.  If we followed the OSIsoft view, it would be impossible to track all projects labeled a “microgrid” due to the sheer numbers.

This is an even larger concern with remote systems.  Therefore, Pike Research screens these microgrid projects according to the following criteria: (1) inclusion of a renewable energy generation resource; (2) some network controls that allow for optimization of generation, loads and (in most cases) some form of energy storage.

At present, Pike Research does not include remote Direct Current (DC) telecommunications towers in this database.  These systems number in the hundreds of thousands, and so would be virtually impossible to track on an individualized basis.  Furthermore, Pike Research generally looks for a microgrid to feature at least two generation sources, two different buildings (and usually some human occupants of these building structures) as basic criteria for a microgrid.  As this market matures, these rather artificial screening functions may be revised.  The lines between microgrids, virtual power plants and smart grid renewables integration will continue to blur, making market segmentation of the microgrid market increasingly difficult.


New Pathways for Advanced Batteries in the Southern Hemisphere

— May 25, 2012

According to the Pike Research Energy Storage Tracker, there are over 6,000 megawatts (MW) of grid storage installed in the Southern Hemisphere, most of which is traditional pumped storage.  Likely market suspects populate the list of installations – including Australia and South Africa – but the Tracker doesn’t tell the whole story of the role electricity storage can play in emerging markets like Chile, South Africa, and island nations across Southeast Asia.  Nor does it highlight the budding business case for battery storage in these emerging markets.  The debate around economic growth, utilization of domestic resources, and clean electricity generation presents an interesting opportunity for electricity storage, particularly advanced battery storage, in markets where grid conditions are unreliable, economic growth is unrelenting, and commitments to resource conservation are on the rise.  The value proposition of advanced battery storage – which is, to be sure, unproven at this time – could give emerging markets in the Southern Hemisphere inroads to the broader utility market globally.

With growth rates over 3% in the last several years, both Chile and South Africa have navigated the global financial struggle relatively well.  A handful of other countries display the same market conditions as Chile and South Africa.  Each serves as a driver for economic growth in its respective region and is building industries that support global infrastructure and commerce.  Meanwhile, utilities in both Chile and South Africa increasingly struggle to keep the lights on.  Here is where the evolving debate around economic growth and resource utilization could lead strategies for expanding the power sector, the lifeblood of economic growth, to a pivot point.

Innovations in solar, wind, and transmission infrastructure have expanded the menu of power generation options from which emerging economies can choose.  The economic development model, on the other hand, hasn’t changed significantly, leaving bulk energy generation, whether from fossil fuels or renewable sources, as the primary solution to accommodating rising electricity demand.  But the forces of social change, new financing models, and global drivers for cleaner environments have the potential to drive forward new power sector paradigms.  If the building blocks of the future grid in Chile and South Africa were distributed solar and advanced batteries instead of coal-fired power plants and long-distance transmission lines, the resulting power sector could exploit local, renewable resources and deliver them efficiently.

Distributed generation and advanced battery storage present a unique value proposition to both developed and developing countries in economic transition.  Likewise, these new power sectors could be ripe for additional technological innovation in 21st century, while preserving local landscapes, natural resources, and indigenous ways of life.

Ultimately, countries like Chile and South Africa present ideal conditions for dispelling preconceived notions about the market barriers to advanced batteries in the utility industry – high CAPEX, lack of empirical operations data, and unclear value streams.  But much of this potential hinges on the path the governments in Cape Town and Santiago take for power sector development.


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