Navigant Research Blog

New Projects Put Colorado’s Energy Storage Market in the Spotlight

— June 19, 2018

In a blog earlier this year, I covered the record-breaking low prices our local utility Xcel Energy had received for new solar, wind, and energy storage projects here in Colorado. We’ve recently seen two major developments for regulations and new projects that are quickly turning the state into one of the country’s hottest markets.

New Regulations Driving Utility Interest

Following a bill passed in March by the state legislature recognizing customers’ rights to install energy storage, a new bill was signed in early June to support the development of large-scale storage in Colorado. House Bill 18-1270, also known as the Energy Storage Procurement Act, directs the Colorado Public Utilities Commission to “create conditions” that facilitate the procurement of energy storage technologies to help address the grid’s peak demand issues, improve reliability, and avoid more costly and disruptive infrastructure investments. With this ruling, the state legislature has recognized the cost-effectiveness of energy storage compared to other resources in reducing the operational cost of the grid while improving reliability.

Xcel Leading the Way with Wind and Solar Plus Storage

While many utilities throughout the world have chosen to pursue investments in renewable generation and energy storage long after being directed by regulators, Xcel announced its preferred Colorado Energy Plan Portfolio (CEPP) on June 8. The utility intends to dramatically reduce its use of coal generation in favor of flexible natural gas, wind, solar, and energy storage. It is capitalizing on the falling costs of these technologies and the abundance of flat, open land with world-class solar and wind resources throughout its service territory. This announcement represents the aggressive push to transition to a cleaner, more locally based energy system for which many of us in Colorado have been waiting.

Specifically, Xcel plans to add approximately 1,100 MW of utility- and third party-owned wind generation in the Colorado Eastern Plains. These resources will be developed based on the unprecedented low pricing in the utility’s recent all-source solicitation announced in January 2018. Wind projects were bid on a levelized cost basis for as low as $11/MWh. However, since low cost wind power is well-established in the state, the big story in Xcel’s latest announcement is the adoption of large-scale solar plus storage projects. The recently bid solar plus storage projects included prices as low as $30/MWh, among the lowest seen anywhere in the world.

Preferred CEPP Generation Locations

(Source: Xcel Energy)

Based on the project map above released by Xcel, Pueblo County will be the epicenter of this new solar development. The county will host the state’s largest solar plus storage project, a 250 MW solar PV plant paired with 125 MW of energy storage capacity. A second, slightly smaller project will also be developed in the area, with 200 MW of solar capacity and 100 MW of storage. Xcel’s third solar plus storage project is planned for developed north of Denver, with 110 MW solar and 50 MW of energy storage.

Low Prices Spurring Action

While they may not come online until late 2022, these new projects will establish Colorado as one of the most advanced markets in the country for large-scale renewables and energy storage. Xcel’s actions highlight the potential advantages for investor-owned utilities that choose to pursue investments in energy storage. Storage prices have fallen far enough to make the technology and economical investment competitive with other resources. Xcel is moving quickly to ensure it capitalizes on this new local resource.


New Florida Generator Law Presents Opportunity for Behind-the-Meter Flexible Generation

— June 5, 2018

Governor Rick Scott recently signed bills into law that require all of Florida’s 3,774 nursing homes and assisted living facilities to have emergency backup power. The bills were first proposed in response to the tragedy in the aftermath of Hurricane Irma, when 12 residents lost their lives at one facility from heat-related symptoms. Thanks to new flexible generation business models, generators could be deployed to these sites in a way that could both generate additional revenue and provide elderly residents with even more reliable backup power than traditional standby generation.

Natural Gas Backup Generation Increasingly Attractive

The new bills require 48-96 hours of fuel to be stored onsite, though pipeline natural gas is exempt. This is in part thanks to the natural gas grid’s high reliability, which a 2013 MIT study pegged at around 99.999% in non-seismic areas, much higher than the electric grid. But natural gas is increasingly attractive for other reasons, too.

Natural gas gensets, while more expensive upfront than their diesel counterparts, tend to have lower emissions and levelized costs of energy. With about half the greenhouse gas emissions and far lower criteria pollutants, natural gas gensets allow for cleaner local air and are generally subjected to less air permitting scrutiny. Natural gas gensets can avoid the complex storage tanks of diesel generators. And when used for more than backup generation (as explained below), their levelized cost of energy can be lower than that of diesel gensets.

New Standby Generator Business Models Unlock Revenue Potential

Value stacking is a buzzword in distributed energy today, and it remains so for a reason. From the genset perspective, companies like PowerSecure, Enchanted Rock, and edgeGEN have been deploying gensets behind the meter at commercial and industrial sites. These gensets can provide backup power in an outage along with other services like peak shaving, demand response, and more to utilities and grid operators. Combined with third-party financing, these value-stacking flexible generation business models bring backup generation at steeply discounted costs to facilities managers that would not otherwise be able to provide them. As an important bonus, such operations can exercise generators at a much higher cadence than typical maintenance schedules, a practice that has been proven to enhance availability across fleets of generators.

Calls for Backup Power Present Opportunities

The Florida facilities, which include thousands of sites and hundreds of megawatts of capacity, could present a unique opportunity to deploy generators creatively like this—in microgrids with other distributed energy resources (DER) or even in a virtual power plant (VPP). In the VPP example, a network orchestrator that coordinates operations could enable thousands of generators to become a controllable power source ready to provide grid services for the 95%-plus of the time they are not otherwise being used. As a regulated electricity market not part of a regional transmission organization, Florida may not be the likeliest place for a major VPP—though nearly anything is possible in today’s rapidly changing regulatory environment. New calls for backup power like this present ever more opportunities to leverage the new connectivity, controls, and business models that make onsite generation smarter.


Toronto Is Getting Its Master’s Degree in Cities

— May 29, 2018

Toronto is going back to school. In March, the University of Toronto (U of T) approved its newest discipline, the School of Cities—which is aimed at addressing complex urban challenges such as traffic congestion and affordable housing. The program is one of the first of its kind in the world, and it will serve as a hub for innovative interdisciplinary urban research, education, and engagement. More than 220 faculty members at U of T conduct urban-focused research, representing over 40 academic departments such as engineering, architecture, urban planning, and public health.

Headlined by speakers such as Dan Doctoroff, CEO of Sidewalk Labs (an Alphabet company), U of T’s School of Cities program hosted an inaugural session on May 15 called Toronto: Towards a Smart and Inclusive City-Region. The session brought together urban thought leaders, policymakers, planners, business leaders, and entrepreneurs to exchange ideas on ways to meet the challenges of city building while ensuring that smart cities are also inclusive cities.

Inclusivity a Major Focus

Several speakers at the session noted how strong city leadership and vision are crucial to ensuring that smart city development reflects the socioeconomic conditions of the city. Sidewalk Labs touted its deep commitment to inclusive cities, referencing its spinoff company Cityblock Health—which aims to help low income Americans access health services. The company also outlined how automated vehicles (AVs) tie into its broader vision for inclusivity. Sidewalk Labs is targeting a 40%-50% reduction in annual family income expenditure on vehicles by offering shared AV services—providing citizens with increased opportunity to access transportation. More public and open space would also be enabled through AVs, with a significant reduction of land needed for parking.

An Ambitious Project

Sidewalk Labs’ ambitious project in Toronto has brought considerable attention and excitement to the city, as well as skepticism. Citizen concerns around data, privacy, and business models have been well documented. Doctoroff shared more details on how data will likely be used, Sidewalk Labs’ support for open data, and its commitment to data security. Information was also provided on the company’s projected business model and areas where it expects to make a return on its investment:

  • Property: Real estate value in Quayside is expected to increase over time.
  • Technology: The technology it develops is expected to scale to the larger Toronto area and other cities in Canada and around the world.
  • Next-generation infrastructure: Sidewalk Labs will potentially arrange and manage next-generation infrastructure services.

A Welcome Development, but Some Concerns

U of T’s new School of Cities is a welcome development that helps fills a void in contemporary academia. Cutting-edge research and collaboration will be needed to help solve the world’s most complex urban issues. Look for more universities to follow suit with similar programs in the coming years.

Sidewalk Labs utilized U of T’s inaugural session to continue its concerted effort to address data and privacy concerns. The company recently released its Responsible Data Use Policy Framework, which builds on Canadian privacy laws and recent recommendations by national and provincial Canadian privacy regulators. To win the support of Torontonians, Sidewalk Labs will need to continue to demonstrate and more effectively communicate to citizens that data from the project will be anonymized, open, secure, and not used for advertising.


Learning from Facebook’s Mistakes

— May 17, 2018

For those of us who abstain from social media, the ongoing scandal with Cambridge Analytica has validated this decision to opt-out. However, the decision to opt-in or opt-out of data collection and still be able to use Facebook is not available. The Facebook and Cambridge Analytica debacle shines a light on the issue of collecting data from unassuming consumers and on how that data is used and manipulated. No matter how policymakers respond to this event, their decisions will have wide-reaching implications for all data-sharing industries, especially for the Internet of Things (IoT) ecosystem.

Can Lawmakers Bring Clarity to Data Collection Ethics?

Data protection laws in the US are relatively new and continue to evolve on an ad hoc basis in response to ongoing data hacks and security breaches. Addressing these issues requires a more sophisticated regulatory environment that considers how data is being collected and used. This brings up an ethical concern—when a company’s profitability depends on sharing user information, the ethics of data collection become muddled. Lawmakers in Europe are some of the first to respond to these issues. In April, the EU’s General Data Protection Regulation (GDPR) was finally approved after 4 years of preparation and debate. GDPR will replace the EU’s Data Protection Directive 95/46/EC and will take effect May 25, 2018. Changes to the directive include extending the law’s jurisdiction to apply to all processors of personal data, regardless of whether the processing takes place in the EU or not.

Laws like GDPR will have a significant impact on the data-sharing industry, especially for businesses that rely on tracking consumer behavior through IoT-enabled devices. These laws require that companies clearly and succinctly spell out their intentions for data collection in their user agreement contracts. Ensuring that all parties clearly understand the service terms strengthens conditions for consumer consent and gives consumers more control over their personal data. The policy’s push for greater transparency may force some businesses to rethink their approach to data collection. Manufacturers of smart devices are thus encouraged to move away from long terms of service and instead, provide real-time information with opt-in choices.

Industries Must Build Trust with Consumers

Informing consumers on how their data will be collected and used will help to alleviate privacy concerns and build trust. As technology continues to advance in making phones, cars, and buildings smarter, it’s important for businesses operating in these data-driven industries to build a trusting consumer base. Doing so will enhance the competitiveness of those buildings as customers will be more willing to consent to new user agreements. Manufacturers of smart devices can avoid making the same mistakes as Facebook by taking note from the EU and being more transparent in their user agreement contracts. Both providers and consumers of smart devices stand to benefit from stronger protections to prevent future abuse.


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