Navigant Research Blog

As Solar Prices Fall, Wind Still Finds a Role in Microgrids

— March 25, 2014

With the steep declines in solar photovoltaic (PV) system prices over the past 5 years, many developers of remote microgrids – systems not interconnected with a traditional utility grid – have begun to shy away from their previous reliance on wind power to lower the systems’ consumption of polluting and increasingly expensive diesel fuel.

As one long-time observer summed up the situation: “The history of the small wind turbine industry is one littered with failures.”  The story of Southwest Windpower is particularly galling.  Backed by investments from General Electric, the company’s tiny turbines were pumped out into the market with little regard for long-term performance.  As a result, many of these extremely lightweight machines, producing less than 2 kW of power each, have stopped working only after a few years.  In some remote island installations, the machines have literally been blown away by hurricanes and other extreme weather events. While some other small wind turbines, such as those of Bergey Wind Power, have had lasting power, many of these typically small, small wind companies have struggled over the past few decades.

Wind in Lonely Turbines

A survey conducted by the Commonwealth Scientific and Industrial Research Organization (CSIRO) of Australia in 2009 claimed that 71% of microgrids included some form of wind capacity.  Given that Australia is one of the global leaders in off-grid wind/diesel systems, it is likely these results were skewed by data weighted too heavily toward off-grid applications.  A more recent analysis performed by Navigant Research found that of those microgrids that included wind power, 67% were installed in remote microgrids.  Interestingly enough, North America is the global leader, due to two states: Alaska and Hawaii.

Remote Microgrid Capacity with Wind Capacity, World Markets: 2Q 2014

(Source: Navigant Research)

Wind has fallen out of favor for at least three reasons:

  • Unlike solar PV, small wind turbines historically have required greater operations and maintenance (O&M) investments.  In many remote locations, local expertise is hard to find.
  • Many remote locations do not benefit from an adequate wind resource assessment.  If you’re constructing a 100 MW wind farm, you can justify the expense of a detailed wind resource assessment.  This is not the case for just one or two wind turbines in a remote microgrid.
  • The variability of wind is immense, requiring a more nimble and sophisticated control system for a microgrid.

Both, Not Either

Despite these negatives, many remote microgrid developers still see value in wind.  In many cases, wind power is still half the cost of solar PV.  In fact, the ideal scenario is not just solar or just wind as renewable options, but both.  The sun shines during the day; the wind often blows at night.  Incorporating both of these renewable resources enables the use of a smaller energy storage device – a technology that is currently often viewed as the weak link among hardware choices for a microgrid due to high cost.

Furthermore, there are many wind turbines that now offer direct drives, eliminating the gearbox that is the most common point of failure, which contributes to high O&M costs.  If such wind turbines can be installed without a crane, as is the case with Eocycle’s, some of the installation headaches also go away.

 

Filling Small Niches, Nanogrids Become Pervasive

— March 21, 2014

If you think the term microgrid is still a bit fuzzy, you’ll be even more puzzled when it comes to the term nanogrids.  While it’s safe to say that nanogrids are smaller than microgrids, there is a major disagreement as to whether nanogrids will scare the hell out of utilities or if they are actually already well-established and can flourish within the current regulatory environment.

The Navigant Research definition of a nanogrid is: A small electrical domain connected to the grid of no greater than 100 kilowatts and limited to a single building structure or primary load, or a network of off-grid loads not exceeding 5 kW, both categories representing devices capable of islanding and/or energy self-sufficiency through some level of intelligent distributed energy resource management or controls.” 

The basic concept behind the nanogrid is simple: small is beautiful.  Nanogrids are modular building blocks for energy services for current applications that range from emergency power for commercial building to the provision of basic electricity services for people living in extreme poverty.  Nanogrids typically serve a single building or a single load.  Because of their simplicity, the technology requirements for nanogrids are less complex (in most cases) than either microgrids or the utility-dominated smart grid.

Tiny Grids, Big Business

Ironically, nanogrids are big business.  While microgrids (as described in Navigant Research’s report, Microgridsexhibit exponential growth and share synergistic properties with many nanogrid segments, substantial deployments of nanogrids are already in place, as they actually face less technical and regulatory barriers than their microgrid counterparts.  For example, Navigant Research’s Nanogrids report finds that the market is already worth $37.7 billion today and it represents capacity almost 10 times larger than the projected size of the current microgrid market.

Lawrence Berkeley National Laboratory (LBNL) asserts that nanogrids never encompass any forms of distributed generation and never interact with the larger utility grid ‑ two criteria that Navigant Research takes issue with.  By that definition, every laptop, every car (even if powered by an internal combustion engine), and every universal serial bus (USB) drive is a nanogrid.

The business case for nanogrids echoes many of the same arguments used on behalf of microgrids.  These small, modular, and flexible distribution networks are the antithesis of the economies of scale that have guided energy resource planning over much of the past century.

Here to Stay

Nanogrids take the notion of a bottom-up energy paradigm to extreme heights.  Yet, one could argue they are less disruptive than microgrids in one very important way.  Since nanogrids are confined to single buildings or single loads, they avoid many of the regulatory challenges that stand in the way of power-sharing microgrids, such as prohibitions regarding non-utilities sending power over public rights-of-way.  In the developing world, nanogrids are often the only pathway to universal energy access, as dispersed residences often preclude networking.  One could also take a contrarian view.  For example, nanogrids foster a more radical shift to direct current (DC) power than microgrids, since their small scale can accommodate low-voltage networking.

Either way, nanogrids are already here to stay.  New forms of distribution networking are clearly on the rise, whether one wants to call such platforms a nanogrid, a microgrid, or something else.

 

Questions on “Dirty Energy” Highlight DC-Based Nanogrids

— February 7, 2014

The United States set a record in 2013 for billion-dollar disasters, according to the Annual Global Climate and Catastrophe Report.  Yet, the $41 billion in economic losses paled in comparison to those of 2012, the year of Tropical Cyclone Sandy ($65 billion in damage) and widespread drought ($30 billion in damage).

These disasters, and the power outages and demand for emergency energy services they entail, are fueling interest in microgrids not only in the United States, but also in the developing world.  But, what if these microgrids, so dependent upon smart inverters, were to accelerate the creation of a new form of dirty electricity – pulsing electromagnetic fields that could grow even more intense as power sources and control technologies increase radio frequencies (RFs)?

Such concerns led to a recent gathering at the prestigious Commonwealth Club of San Francisco, California, at which speakers attempted to articulate the different between a wise grid and a smart grid.  Among the panelists was Dr. Timothy Schoechle, the author of a recent paper entitled Getting Smarter about the Smart Grid and a guest on a radio show I was a part of on KWMR.

The RF Question

The discussion focused on utility deployments of smart meters, as Schoechle observed that these meters often rely on wireless communications that, according to some scientists, jeopardize the health of growing numbers of citizens who have no choice in the matter.  RF waves are ubiquitous, and smart meters are increasing the density of this RF blanket that envelops us – and that has not been subjected to sufficient scientific scrutiny, these critics argue.  At the same time, some assert that smart meters have failed to deliver the purported economic benefits to most consumers.

Ironically enough, during the same week, The World Bank hosted a webinar on the topic of rural electrification that extolled the virtue of wireless telecommunications as a driver of economic livelihood for those living at the bottom of the pyramid.  As pointed out in a previous blog of mine, among the chief drivers for providing more affordable electricity to the poor in the developing world is wireless cell phone technology.  In many places in Africa, Latin America, and Asia, millions of people are more likely to have a cell phone than access to reliable electricity.  Since banks will lend money to large multinationals installing cell phone towers in the middle of nowhere, small local entrepreneurs can then piggy-back on these investments to expand electricity service.

In a sense, this approach is working and is more often than not delivering direct current (DC), which, as Schoechle claimed in San Francisco, is the cleanest form of electricity from an electromagnetic point of view.  In fact, he argues, the best way to deliver what many consider to be the lifeblood of modern civilization is through DC nanogrids – a technology platform that is the subject of my next report.

 

Building the Business Case for Commercial Microgrids

— January 15, 2014

The majority of microgrids that have come online to date – whether grid-connected or off-grid – have been pilot projects or research and development (R&D) experiments.  Now the industry is moving into the next phase of project development, focusing on how to develop projects on fully commercial terms.  It appears that the main technology components have made significant headway, and the keys to future growth now rest with greater creativity in both the public policy and business model arenas.  One pathway that could address the latter is through power purchase agreements (PPAs).

The increasing frequency of severe weather is prompting utilities in the United States and around the world to reconsider their historic opposition to customer-owned microgrids that can disconnect from the larger grid and island, allowing critical mission functions to stay up and running.  Yet, utilities continue to worry about how a proliferation of customer-owned microgrids might complicate their job and whether regulators would instead allow utilities to build, own, or control these microgrids in some sort of coordinated, enterprisewide fashion.

Quantifying Reliability

The modularity of microgrids means this: calculating a return on investment (ROI) is virtually impossible.  Vendors claim paybacks ranging from 2 to 5 years, depending upon the amount of new hardware being deployed and the availability of ancillary service revenue streams.  Realizing greater utilization of existing generators through the networking and sharing of resources enabled by a microgrid leads one to the logical conclusion that microgrids will ultimately lower the cost per kilowatt-hour.  Third-party financing can make an even better value proposition.  Selling demand response (DR) services back to utilities provides yet another boost to the bottom line.

The primary metric that remains a mystery is the value of reliability. Quantifying the benefits of reliability is both art and science.  At this point in time, there are no widely recognized financial metrics to monetize the value of energy security and reliability, the key distinguishing feature of a microgrid network.  Analysis conducted by the National Renewable Energy Laboratory (NREL) in 2012 looked at a military base – Fort Belvoir – and found the value of electrical energy security (VEES) at that site ranged from $2.2 million to $3.9 million annually.  The range reflected the mission of the respective loads within the base and recent performance metrics of each utility.  Since each microgrid is a customized solution, it is also difficult to generalize about any VEES cost advantages such networks can offer compared to a host distribution utility (whose cost of service also varies per geography and utility market structure).

Open is Better

Putting aside for the moment the lack of consensus on monetizing the energy security of a microgrid, what about financing? Can PPAs do for microgrids what it did for solar PV? Companies such as Green Energy Corporation and Leidos are betting on it.

In order for the PPA business model to work, the network controls must be based on a streamlined and open architecture. Given that microgrids are much more complex than a simple solar PV system, companies willing to enter into long-term PPAs must be smart about risk and choose suppliers wisely, favoring simple, elegant controls that do not require ongoing customized engineering every time a new resource is integrated into the microgrid.

Navigant Research is betting on the PPA to help move microgrids into the mainstream in North America, as a new market forecast demonstrates (see chart below.)

Annual Total Microgrid Vendor Revenue by Region, Base Scenario, World Markets: 2013-2020

 

(Source: Navigant Research)

 

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