Navigant Research Blog

How Will the Developing World Help the Paris Climate Summit Reach Carbon Reduction Goals?

— November 30, 2015

With negotiators gathering in Paris Climate Summit this week, talks will likely be ruled by the need for mega projects of scale to help stem the rise in global temperatures linked to our deep addiction to fossil fuels. Though there is no doubt that developed economies such as Europe will need large offshore wind farms in the North Sea and equally massive solar farms in North Africa to reach existing targets, a much more interesting question is this: How can the developing world contribute, given the fiscal challenges facing the bottom of the pyramid populations?

Scaling Up

A quick answer: Through a major scaling up of both remote microgrids and nanogrids.

In a forthcoming report, Navigant Research forecasts the size for both of these off-grid networking platforms designed to increase renewable energy content for off-grid power. Ironically enough, it is here, in the deep jungles near the Equator or the frozen tundra of Siberia, where renewable energy resources such as solar and wind actually reduce energy costs.

It is estimated that over one-fifth of humankind lacks modern energy services. According to the United Nations, more than 95% of these potential customers live in Sub-Saharan Africa and Southeast Asia, with 78% residing in rural areas. While the cost of providing universal access to the electricity grid and decentralized electrification systems would be in the tens of billions of dollars annually, these costs also represent potential revenue to vendors of microgrid/nanogrid components such as distributed generation, energy storage, smart inverters, and smart meters.

The International Energy Agency (IEA) estimates that by 2020, developing countries will need to double their electrical power output. Demand for energy, especially electricity, is growing much more rapidly in these nascent economies than the rate of expansion of conventional electricity grids in the major industrialized world. All told, the developing nations are expected to represent 80% of total growth in energy production/consumption by the year 2035, according to IEA’s World Energy Outlook. Given the current economic conditions, one could safely assume that the majority of these new power supplies will be produced and distributed via remote microgrids, nanogrids, and other related forms of distributed energy resources rather than traditional hub-and-spoke centralized transmission grid infrastructure. This distributed approach is less risky and incremental, and syncs up with available trends in finance and business models related to power distribution in emerging economies.

Investment Needed

Just how much investment is needed to bring clean energy to the world’s poorest of the poor?

The African Development Bank, for example, aims to mobilize $55 billion in private funding under a New Deal on Energy for Africa program also designed to eliminate Africa’s energy deficit by 2025. Yet this number could underestimate the opportunity just for one continent, since it is based on providing minimal power for things like cell phones, LED lights, and laptops. Experience shows that once electricity is brought to a village, desire rapidly increases for more power.

In Africa alone, Navigant Research forecasts spending will reach more than $8 billion on remote nanogrids for village electrification by 2024. Ironically, it is these smaller systems that are expected to lead the market in Africa, rather than microgrids, due to their simplicity. They translate into not only big business, but a key tool to slow climate change in parts of the world that historically have not been considered major hotbeds for innovation. If we are to succeed in harnessing the power of new technology to slow climate change, I would argue it is in the developing world where that battle will be won—or lost.

 

Nanogrids vs. Microgrids: Energy Storage a Winner in Both Cases

— October 21, 2015

The business case for nanogrids echoes many of the same arguments used on behalf of microgrids. These smaller, modular, and flexible distribution networks are the antithesis of the bigger is better, economies of scale thinking that has guided energy resource planning over much of the past century. Nanogrids take the notion of a bottom-up energy paradigm to extreme heights. In some cases, nanogrids help articulate a business case that is even more radical than a microgrid; in other cases; nanogrids can peacefully coexist with the status quo.

Despite the bad news here at home coming from NRG, which has now has spun off its distributed solar PV business due to lagging sales, I believe the linking of batteries to distributed solar PV systems is a game changer. The recently published Solar PV plus Energy Storage Nanogrids report shows that this technology represents a less than $1 billion market worldwide today, but this number is expected to grow to $14 billion by 2024, with residential customers leading the market. When it comes to resilience, states such as Massachusetts have already signaled their preference for building-level solar PV plus energy storage nanogrids, since they face less regulatory hurdles than community resilience microgrids.

Ironically enough, the potential loss of federal investment tax credits for solar PV in the United States as early as 2016 and growing utility opposition globally to traditional solar PV support mechanisms such as net metering and feed-in tariffs only help to build the business case for solar PV plus energy storage nanogrids. Why? In order to extract the greatest value from solar PV in the absence of subsidy—whether that be utility demand charge abatement or greater reliability and resilience—will require linking this variable distributed generation to an energy storage system, either in the context of a microgrid or a nanogrid.

The intermittency of solar PV, which can be more extreme than wind on a second-by-second basis, has long been viewed as a drawback to widespread deployment as a substitute for 24/7 fossil fuel generation. Rooftop solar PV in particular can feature capacity factors as low as 20%. If such small systems—whose primary advantage for residential applications is providing financial benefits (offsetting expensive peak grid power)—are coupled with energy storage systems, the value of solar energy is magnified. In essence, it can be stored and then discharged during time periods most advantageous to asset owner. These same storage systems can also offer resiliency benefits when the larger grid goes down.

While the decline in solar PV pricing has been underway for quite some time, it is only recently that batteries—particularly lithium ion—have begun to match solar PV with a similar downward momentum, thereby increasing the appeal of this technology pairing.

Average Installed ESS Cost by Technology, World Markets: 2015-2025

Peter SNANO Blog

 (Source: Navigant Research)

The most radical interpretation of this solar PV plus energy storage nanogrid vision is at the residential level, the application where the nanogrid model is likely to meet opposition from utilities—that is, unless utilities begin offering nanogrid services. So far, utilities in Ontario, Australia, and New Zealand are doing just this (Powerstream, Vector, and Ergon, respectively).

It is safe to say the size of the microgrid market is larger than that of nanogrid due to sheer scale. But microgrids also incorporate combined heat and power and wind, as well as other resources. If we narrowed the comparison to total capacity of just solar PV plus energy storage microgrids versus nanogrids, it is the smaller nanogrid that would likely come out on top today, and perhaps over the long term.

 

Village Nanogrids Fuel Mobile Networks

— April 1, 2014

There have been numerous efforts to electrify remote parts of the developing world.  Typically, these have come in the form of philanthropic ventures, with little to no expectation of a return on investment, using distributed energy systems that were often out of touch with the consumers’ energy needs, as well as their capacity to maintain the systems.  As a result, these efforts have been largely ineffective.  More recently, some for-profit companies (mostly mobile network operators) have found that a business case exists for investing in distributed energy for rural off-grid communities – by implementing systems that are much more in tune with customer needs and capabilities.  These systems usually take the form of nanogrids, which are described in the recent Navigant Research report, Nanogrids, and in my colleague Peter Asmus’ recent blog.

For mobile network operators (MNOs) in emerging markets, such as MTN, Vodacom, and Safaricom in Africa and Digicel in Latin America, the challenge is that there are millions of mobile customers without access to the electricity grid; approximately 259 million, according to a recent GSMA report.  For these customers, the cost of charging their phones can represent up to 50% of their total mobile expenditures (airtime plus charging costs), so their phones are only turned on when absolutely necessary, in order to conserve battery life.  Since MNOs make money when the phones are in use, it’s in their interest to make charging convenient and inexpensive enough that conserving battery life becomes an afterthought.  MNOs are quickly finding that distributed nanogrids, such as 10 watt solar home systems (SHS), are the cheapest, most effective way to maximize cell phone usage by existing customers, as well as to bring more customers online.  To stimulate the spread of these systems, MNOs are starting to form commercial partnerships with local vendors of portable solar products.

Friendly Local Utilities

In Uganda, MTN has partnered with Fenix International to provide MTN airtime vendors with a Fenix ReadySet solar-powered battery kit that charges phones and provides LED lighting for the vendor station, allowing them to stay open longer.  The ReadySet has turned MTN vendors into micro-utilities in their communities, creating additional revenue from phone charging and increased mobile money transactions, as well as savings for the vendor from using the LED light.  MTN is also repackaging the ReadySet as the ReadyPay Power System, which is now available to all its customers on a pay-as-you-go basis.  Similarly, Digicel Haiti partnered with Solengy in 2011 to install over 400 solar-powered street lamps and phone charging stations across Haiti.  Each station is operated by an airtime vendor that sets up shop below the LED street light and manages the phone charging service.  Other examples include Vodacom and Mobisol in Tanzania and Safaricom and M-KOPA in Kenya.

Forming the backbone of this transition are pay-as-you-go business models and mobile money, which I’ll explore in my next blog.

 

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.

 

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