Navigant Research Blog

Data Centers and Military Microgrids: The Diesel Dilemma

— October 20, 2017

If something isn’t broken, why try to fix it? This kind of thinking sums up the perspective of many owners and operators of data centers. If they feel comfortable with the technology or solution that has been in place for quite some time, the incentive to enact something new and different is small. As a result, to maintain power for mission-critical loads, data centers have historically relied upon diesel generators linked to lead-acid batteries and (perhaps) dual feeds from two different utilities.

The Uptime Institute has created de facto data center industry standards that range from Tier I to Tier IV, with the latter representing the highest possible resilience. “Human beings have an almost emotional attachment to their diesel generators, as they give data center owners and operators both comfort and a form of insurance,” observed Chris Brown, CTO for the Uptime Institute. He does not see a decline in reliance upon diesel generators. According to Brown, “Engine generator usage will likely hang on, as the emotional tie and the form of insurance will still be present.”

Despite these insights, new data highlights how existing power infrastructure does carry risks for data centers. The average power outage cost for a data center in 2015 was $740,357—a 38% increase in the cost of downtime compared to 2010. Perhaps the most disturbing statistic found in Eaton’s Blackout Tracker Annual Report for 2016 is that the increase in maximum downtime costs rose to $2.4 million.

Military Base Parallels

One analogy to the challenge facing data centers is military bases in the United States. A typical large-scale military base may feature from 100 to 350 backup diesel generators, each hardwired to a single building. In many instances, they are sized at more than 200% of each building’s peak load as a contingency for energy security. Just a simple networking of existing diesel generators into a microgrid can offer cost savings for military microgrids and data centers alike.

A study by Pew Charitable Trusts found, for example, that creating a microgrid instead of relying upon standalone backup diesel generators reduces the cost of resilience by $1 billion or more. Note that the savings vary by region, with the greatest savings for those military microgrids deployed in the PJM Interconnection transmission control area. Yet, when displacing diesel backup generators with 50% diesel/natural gas fuel hybrid microgrid, California military bases boast the largest net savings. With a 50/50 portfolio of diesel/natural gas, microgrids in the PJM territory and the Southeast ironically show an increase in cost on a dollar-per-kilowatt basis if compared to the current reliance upon diesel backup generators. This is largely a result of low diesel fuel prices in those parts of the country, and it arguably points to the need to diversify power generation sources with a microgrid beyond fossil fuels.

Annual Net Cost of Protection ($/kW of Critical Load)

(Sources: Noblis, The Pew Charitable Trusts)

A new report by Navigant Research, Military Microgrids, notes that a key to innovation lies in new business models. The same could also be said for data centers. Data centers like to control their own destiny, which often means they want to own infrastructure. Yet, just like solar leases and third-party power purchase agreements accelerated the solar PV industry at a critical point in time in its development path, similar models could also bring microgrids into the mainstream.

Does such an approach hold promise for state-of-the-art data center microgrids? Schneider Electric would like to find out. Learn more at the upcoming webinar on October 24.

 

Microsoft Deploys Fuel Cells into the Core of World’s First Gas Data Center

— October 12, 2017

Fuel cells have been used to power data centers for years, with players including Apple, eBay, and Equinix all making big investments in the technology. But while most fuel cells power data center facilities from the outside, Microsoft just built a pilot data center with the fuel cells installed right on the racks. This is a shift that could radically simplify future data center infrastructure and improve energy efficiency in these energy-hungry facilities. The big investments noted above notwithstanding, fuel cells have only captured a small fraction of data center market share. New types of deployments like Microsoft’s data center could help drive fuel cells toward the segment’s mainstream.

A Unique Fuel Cell Application

The unique design routes natural gas piping directly to the server racks, which could help eliminate a significant amount of electrical wiring, gear, and controls typical to data centers. A photo from Microsoft’s blog post depicts at least five devices that appear to be fuel cells positioned atop the rack. At an assumed 5 kW-10 kW per rack, the 20 racks likely represent a load of 100 kW-200 kW. The deployment is a good fit for fuel cells since they can be readily scaled in size to match load. That is, a given system can add or remove individual cells or stacks to precisely match demand, a feat not possible with more monolithic alternatives like generator sets (gensets) or microturbines.

There are some potential challenges with this configuration. Installing that much fuel cell support infrastructure (exhaust flue, gas piping, and controls, etc.) could impose significant cost on installations, and maintenance on all those systems could be more taxing than on a single multi-megawatt system installed outdoors. And gas-powered systems generally face the challenge of gas grid outages. Though these are rarer than electric grid outages, they represent a concern—especially in seismic zones like those on the US West Coast. When an outage occurs, many data centers still rely on diesel backup generators since the fuel can be stored onsite. Despite these challenges, this type of deployment shows promise, thanks to ongoing fuel cell technology improvements and the low cost of natural gas.

New Players Enter the Arena

Microsoft mentions project partners McKinstry, a design-build construction firm, and Cummins, an engine and genset manufacturer. Though the fuel cell provider is not noted, Cummins teamed up with UK-based Ceres Power Holdings PLC to develop solid oxide fuel cells for data centers under a Department of Energy (DOE) award in 2016. The award specifies a minimum efficiency of 60% and a capacity of 5 kW scalable to 100 kW. That efficiency is slightly below the 65% (lower heating value) efficiency listed by Bloom Energy, which has largely dominated data center fuel cell deployments to date—though its systems are larger. Regardless of the approach, the high efficiency and consistent energy output of fuel cells is a good match for data centers at large.

While the current design operates on natural gas, a modified future system using pure hydrogen storage could help zero-carbon data centers incorporate intermittent renewable power. That is, the intermittency of renewables like solar PV has historically limited adoption on data center sites, which form a consistent load. If, however, that PV or wind system could generate hydrogen using an electrolyzer in a power-to-gas configuration, the energy could be stored to consistently power the data center via fuel cells. These types of innovations could represent a massive opportunity. According to Yole Développement, data centers used 1.6% of global power production in 2015 and are anticipated to grow to 1.9% in 2020. By any measure, the opportunities in this space loom large.

 

Navigant’s 2017 Mid-Year Energy Market Outlook: Ongoing Drivers and Cutting-Edge Trends in North American Energy Market

— August 31, 2017

Industry trends and uncertainties continue to transform the North American energy market. Examples include increased renewables in the power sector, technological innovation in energy storage, shifting supply and demand patterns in the natural gas market, and environmental policy uncertainty due to the administration change. Navigant’s 2017 Mid-Year Energy Outlook (NEMO) analyzes how these trends and others are expected to affect the energy and capacity mix as well as market prices over the next 24 years.

Energy Demand

The rate of growth in energy consumption and peak demand has decreased in recent years despite an increase in economic growth. The United States and Canada appear to be transitioning from the long-term trend where growth in energy consumption closely tracked economic growth. While NEMO forecasts overall growth in both consumption and peak demand, the levels of growth (as well as energy efficiency and other demand-side resources) vary between regions. For example, Electric Reliability Council of Texas (ERCOT) and parts of Western Electricity Coordinating Council (WECC) are among the faster growing regions in the forecast. However, New York, New England, and PJM are expected to see lower levels of growth, leading to a slowdown in generation additions. This marks a shift in PJM, where coal retirements, the capacity market, and low natural gas prices have driven the construction of many new merchant natural gas combined cycle power plants in recent years.

Renewable Energy Growth

Despite the absence of a carbon policy, Navigant expects that solar installations will continue to grow in North America as costs decline—though not as steeply as in recent history—and as the technology continues to be pushed by state policies and consumers. In 2016, the United States installed 14.8 GW of solar PV projects, second only to China for annual installations that year. The wind forecast is more dependent on the federal Production Tax Credit that is already declining and set to expire by 2020. This has led to a boom in construction that is expected to peak in 2020 (the last year projects can go online and still get 100% of the tax credit) before declining steeply.

The convergence of increasing renewables penetration and declining battery costs indicates that battery storage is likely on the precipice of increased deployment across the electric grid for renewables integration and the provision of ancillary services. For the first time, Navigant’s NEMO includes an energy storage addition outlook. Energy storage is being implemented in areas such as California to meet policy targets without adding significant new natural gas generation. The revenue that storage projects would expect to receive from avoiding curtailment of renewables is not yet enough to cover the overnight cost of storage, though this could change in the future as the costs of storage decline and renewables penetration increases.

Natural Gas Market Transformation

While the power market grapples with the evolving energy generation mix and the associated effects on the grid, the natural gas market in North America continues its own evolution characterized by threshold events. Exports of natural gas have overtaken imports into the country for the first time in 60 years. US natural gas pipeline exports to Mexico have more than quadrupled since 2010. Exports by ship occurred for the first time from the lower 48 states, with the Cheniere Sabine Pass liquefied natural gas (LNG) export facility delivering LNG to the world market in February 2016. From this point forward, at least to the end of the NEMO term in 2040, Navigant expects exports by pipeline and by ship to continue increasing. Exports are anticipated to grow to represent over 18% of the US natural gas market by 2040.

Navigant’s NEMO covers the changing supply and demand dynamics in the natural gas market, continued renewables generation buildout, slowing load growth, the introduction of emerging technologies like storage, and the continued absence of a federal carbon policy. David Walls and Rob Patrylak will present further details on Navigant’s forecast via a webinar on September 13.

 

Natural Gas Demand Response – Exploring Opportunities: Part 4

— August 24, 2017

Coauthored by Brett Feldman

As discussed in earlier blogs (parts 1, 2, and 3), demand response (DR) has been less prevalent in the natural gas industry than in electricity markets due to the lack of clear market signals that would otherwise enable market participants to put a price on deferred natural gas consumption. However, changing market factors are leading to increased interest in the practice. In this blog, we discuss how one company, National Grid, is participating in innovative natural gas DR programs to discern the value of DR to alleviate distribution system constraints.

Getting with the Program: EnerNOC and National Grid Partnership

From 2012 to March 2017, National Grid offered a fuel switching tariff, known as the Temperature Controlled (TC) rate, to industrial, commercial, and institutional customers in Brooklyn and Queens in New York. National Grid partnered with EnerNOC to manage natural gas consumption at approximately 4,000 customer sites in Brooklyn and Queens. EnerNOC provided National Grid with wireless hardware that enabled automated fuel switching at enrolled customer sites. When onsite sensors detect that outdoor temperatures have dropped below a predefined level, the devices automatically shift fuel sources, optimizing fuel use based on weather and availability.

National Grid is now interested in developing a scalable offering that does not require or incentivize the use of backup fuels. It is exploring opportunities to apply targeted DR to understand how such an offering could alleviate physical delivery constraints on its natural gas distribution system. As part of a pilot program in its downstate New York service territory, National Grid is investigating customer willingness to reduce natural gas demand for a specific 3-hour block of time, 6:00 a.m. to 9:00 a.m., during peak morning usage. Unlike the TC, this pilot will not require customers to have a backup system and will not rely on fuel switching to achieve demand reductions. Instead, National Grid will work with customers to understand how they use gas and what usage can be shifted, earlier or later, or reduced to minimize demand during the peak period.

National Grid hopes to learn how reducing demand during periods of peak usage can serve as an alternative to system expansions. It also wants to gain insights into customer willingness to participate in incentivized natural gas demand reduction programs, similar to its electric DR offerings.

“National Grid knows how valuable [DR] can be based on our experience with electric [DR]. We are hopeful that this pilot will demonstrate that same sort of benefits can be achieved for our gas system while offering our customers a new revenue stream and a program that works for how they do business,” says Owen Brady, New Energy Solutions program manager. “National Grid is always seeking innovative ways to optimize operational performance. Unlike the traditional utility business model of installing pipes to address system needs, we see gas [DR] as a non-pipe alternative that will help us make possible the energy systems of tomorrow.”

In Massachusetts, National Grid is implementing a similar pilot program that is focused on conducting market research to ascertain the appetite of firm and commercial customers for natural gas DR. This program is funded by the Massachusetts Department of Energy Resources (DOER) via a grant to the Fraunhofer Center for Sustainable Energy.

Reducing Costs

The absence of a clear price signal is a significant impediment to the adoption of natural gas DR. Yet, these innovative programs demonstrate that natural gas utilities have a strong interest in exploring the promise of natural gas DR to provide a potentially less expensive means of alleviating pipeline constraints at the distribution level.

 

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