Advanced batteries are consistently heralded as a future panacea for cleantech, without which renewables will remain niche applications and a distributed grid architecture will never materialize.  To a large extent, though, advanced batteries remain materials science experiments, more commonly found in labs than on the grid.  Likewise, the pace of innovation seems slow, especially in a world accustomed to advancing at the pace of Moore’s Law.  But if advanced batteries became the focus of consumer demand (from individuals, households, commercial buildings, and utilities), and the process of innovation became a conversation between materials science and real-world needs, we could see a dramatic acceleration of this market.

Consumer electronics brought lithium-ion batteries to the forefront of public awareness, making battery life and replacement a central issue for makers of smartphones and tablet computers.  Users consistently challenge the cycle life and functional limits of their devices, which has begged a targeted response from battery vendors.  The industry’s advances over the last 20 years have been generated through interaction with the physical world and the marketplace.  The challenge with larger format batteries, particularly for grid-scale applications, is how to get early versions of these systems deployed and interacting with the physical world.

Grid-scale demonstrations are costly and can be controversial, depending on the source of the funding.  In the United States, this work has largely been done by the Department of Energy.  Deploying advanced batteries in remote microgrids or in conjunction with distributed solar PV, though, could drive these technologies in the same fashion that consumer electronics drove the evolution of lithium-ion batteries, through smaller deployments visible to consumers.  The industry would benefit from a larger number of deployments, a broader variety of end-use applications displayed, and economies of scale that would begin to bring costs down.

This scenario might not be that far from reality: the competition on cost between diesel fuel and solar PV now makes distributed solar a more attractive investment than diesel generators.  According to McKinsey, the cost of power coming out of diesel generators ranges from $0.30 to $0.65 per kilowatt-hour.  Solar PV can now produce power for about half that cost.  In niche applications such as uninterrupted power supply in emerging economies, rural electrification, and island power, there is a clear economic case for deploying solar PV, which becomes a dispatchable, high-quality resource when paired with battery storage.

These small-scale deployments would provide the industry with another source of product feedback on technical integration with renewables, demonstrate potential revenue models, and ultimately generate larger demand for advanced batteries.  Microgrids are also a popular new technology for U.S. military applications, a historically strong contributor to advanced technology innovation.

As noted earlier by my Pike Research colleagues, the massive power outage in India that left over 370 million people in the dark in late July could open up opportunities for cleantech in booming South Asia.  It could also help make India one of the world’s top hotspots for remote microgrids.

Remote microgrids can serve as the anchors of new, appropriate scale infrastructure, a shift to smarter ways to deliver humanitarian services to the poor.  That’s why financial support for remote microgrids has come from the United Nations, the U.S. Agency for International Development (USAID), and non-government entities such as the Clinton Climate Initiative and the Bill Gates Foundation.  Even Greenpeace has endorsed the concept, with a report extolling a bottoms-up distributed renewables strategy to export surplus solar power out of the Indian state of Bihar via microgrid networks.

Clearly, relying upon centralized coal plants to fuel India’s expanding economy is not a viable solution.  As climate change expert Joe Romm points out in a blog on The Energy Collective, mobile phone towers powered by off-grid renewable energy sources may be pointing the way toward viable energy supply solutions for India.

Just as the developing world leapfrogged landlines – the equivalent of today’s centralized transmission grid – to move directly to mobile and wireless telecommunications, it may skip to distributed microgrid networks (the analogue of cell phones), rather than building out massive long-distance transmission networks.  More importantly, from an environmental point of view, these remote systems will not rely on diesel power generation, the default source of power throughout much of the developing world.

At present, entrepreneurs view India as an attractive market since all microgrids under 1 megawatt (MW) in size are deregulated, which means that these systems can be developed by the private sector with a minimum of government red tape.  Among the leading innovators is Simpa Networks, which has developed a “pay-as-you-go” business model that allows villages looking for simple systems to power lighting and mobile device-charging services.  Billing its service as a “progressive purchase,” the firm relies upon smart meters to measure consumption.  Customers purchase power in much the same way millions of cell phone users buy prepaid cards.  The difference is that customers are slowly investing in their own solar PV systems, which are typically paid off within 3 to 5 years.

One of the first microgrids to be deployed in India to service more affluent customers was installed by smart meter vendor Echelon for the Palm Meadows Community in Hyderabad, India.  This 86-acre gated community with 335 homes and residential services offers another peek into the future for India.  The community ties into the grid at a dedicated substation and sources energy in bulk from the utility.  While the community still runs primarily on diesel generators, a pricing plan can reduce consumption to help respond to peak demands.  The microgrid will also incorporate solar PV into rooftops that will feed energy back into the grid, creating a solar infrastructure with payback options.

Early on the morning of July 30^th, India experienced its worst power outage in nearly a decade as electricity supply was down for more than 8 hours to more than 370 million people, a number greater than the population of the United States.  The consequences of rising electricity demand and weak electricity infrastructure are now fully on display, as India attempts to identify the cause of the outage and develop a solution to prevent future widespread outages.  There are myriad technical solutions in development across the globe – smart energy, smart grid, and smart industry technologies and strategies – that India may now feel a more pressing need to adopt.

The power industry’s role in supporting economic development is unparalleled.  In India, the power outage in the north affected agricultural operations in Punjab, telecommunications and commuter services in New Delhi, military operations in Kashmir, and water treatment services in Uttar Pradesh, one of the most densely populated regions in the world.  What’s at stake are the food and water supplies to millions of people, the security of those people, and millions of dollars in gross domestic product.

As the real consequences of this power outage continue to emerge, this debacle is likely to become an impetus for Indian politicians to more aggressively pursue energy infrastructure development.  India faces the problems characteristic of other emerging economies – particularly power theft, heavy dependence on coal and other thermal resources, and a fragile power grid.  In the case of this power outage, rising electricity demand and coal shortages proved to be too stressful for the existing infrastructure.  With India’s electricity demand expected to rise five-fold to six-fold in the coming decades, according to the International Energy Agency (IEA), and GDP growth rate forecast to stay above 6% in the coming years, this is increasingly a liability for a country that has never been known for building and maintaining state-of-the-art infrastructure.  India needs a flexible grid infrastructure that can accommodate growth and encourage resource diversity.  Solutions such as advanced battery storage, distributed solar, and microgrids (India is already home to 17 microgrid installations) can provide such flexibility and diversity.  In the coming years, India will be a hotbed for such technologies.  Pike Research forecasts strong growth in many emerging sectors (solar, energy storage, and electrified transportation) in emerging markets, including India.

The power outage in India is a reminder that cleantech market development is not just about the growth and advancement of new technologies and markets; it’s also about new energy development strategies for emerging economies.  The distinct conditions and challenges faced by emerging markets such as India, China, and Brazil provide lessons for the broader market and may ultimately drive cleantech market expansion.

The value proposition for microgrids at the residential community level is becoming increasingly clear to companies such as Gen110, a power purchase agreement (PPA) solar company based in San Francisco.  The company sees dollar signs that increase in direct proportion to proposed utility rate increases.  The company’s ultimate goal: funding microgrids through the PPA model that has driven down the price of solar photovoltaics (PV), whose price has plunged over the last three years.

Who is Gen110’s top target?  Pacific Gas & Electric, which has proposed a series of rate increases to cover upgrades costs to its transmission and distribution (T&D) system for electricity as well as its much maligned natural gas network.  All told, the investor-owned utility claims ratepayers could see an increase of an average of 15.6% by 2016 if the PG&E proposal is adopted by the California Public Utilities Commission (CPUC).

The pitch companies such as Gen110 make is, Why not skip out on paying for these utility upgrades to the T&D system, and just lock into steadily declining solar photovoltaic (PV) technologies?  These costs make up roughly two-thirds of the typical residential customer bill.  By locking in price certainty with a solar PV PPA today, one can skip out on the inevitable rate increases that ratepayers will face as our aging grid infrastructure is upgraded into the 21^st century.

From a societal benefits point of view, one could argue about the efficacy of such a sales pitch, particularly if one works for a regulated utility.  If widely successful, the Gen110 model could lead to a death spiral for utilities, as a shrinking customer base incurs higher and higher fees to pay for a grid infrastructure that ultimately serves us all.

Yet, there’s also a radically different point of view on microgrids.  Instead of viewing microgrids as the enemy, a few brave utilities – among them San Diego Gas & Electric, American Electric Power, and the Sacramento Municipal Utility District – are developing their own microgrids.  Interestingly enough, a recent analysis by Lawrence Berkeley National Laboratories (LBNL) sheds some light on why.

According to LBNL, the features of a microgrid that have the largest impacts on economic benefits for all stakeholders (including utilities) include the following: whether combined heat and power (CHP) is included in the generation mix; what specific combination of distributed energy resources (DER) sources were integrated (i.e., fossil fuels versus renewables); the mixture of loads (including whether loads were dispatchable or critical loads); power market characteristics (ancillary services, time-of-use pricing, etc.); grid-connected or remote application; and the capability of seamless transfer to island mode.

Who Benefits?

In order to calculate stakeholder economic benefits, LBNL assumed a typical, large, Canadian, semirural feeder, with 10 MW peak load and 6.2 MW average load.  Three scenarios were analyzed: 1) base case (in which no distributed resources or microgrid was installed in an existing distribution feeder); 2) DER only (with no microgrid functionality); and 3) full microgrid, in which DER and microgrid hardware are both installed, with full islanding capacity.  The outcomes examined and quantified by LBNL were the following:

• Reduced electricity purchased
• Investment deferral
• Reduced greenhouse gas emissions
• Increased reliability

DER Only & Full Microgrid Scenario Stakeholder Benefit Tallies

(Source: LBNL)

The distribution network operator – i.e., the distribution utility – received the smallest benefit of microgrids deployed on a feeder line among primary stakeholders; however, its economic benefits increased with a microgrid overlay if compared to the pure distributed energy resource base case scenario.  It’s noteworthy that the microgrid case increases overall stakeholder benefits by more than $100,000 annually and boosts utility benefits by more than 50%.

In the final analysis, microgrids – whether developed by utilities or customers or independent developers – may be the end goal of what a smart grid is all about.  A forthcoming Pike Research report on utility distribution microgrids will reveal some surprising trends in this dynamic space.