Navigant Research Blog

Microgrids Expand Across India

— May 13, 2015

Navigant Research’s data on the microgrid market has historically pointed to North America being the mother lode. The host of state programs supporting community resilience microgrids would seem to confirm this conclusion. But there is a counter argument that the developing world is the best microgrid market, and that’s why SunEdison’s move into northern India is so significant.

I think the Asia Pacific region’s microgrid market is likely to ultimately surpass North America, but not until 2030 or so. Recent data provided by Aalborg University in Denmark shows that China alone is planning on installing 4.3 GW of new microgrid capacity over the next 5 years, which bolsters this opinion. But China’s market is problematic due to the prevalence of nationalized grid companies and other unique vendor challenges.

To the Subcontinent

And then there is India. As one telecom infrastructure provider pointed out, there are more planned telecommunications tower deployments in India as there are in all African nations combined! (These telecom towers often serve as anchor loads for microgrids.) Couple that with a government policy of deregulating all microgrids 1 MW and less, and the stage is set for rapid innovation at the lower end of the microgrid market spectrum.

Back to SunEdison … Working with on-the-ground innovators, such as OMC Power, the company hopes to bring online 5,000 microgrids, ranging from 10 kW to 1 MW, by 2020, providing power to 20 million people. While it’s fascinating that SunEdison is moving into this market, given its success with the power purchase agreement model in mature economies such as the United States, largely through solar PV leasing arrangements, even more interesting is its choice of partners: OMC Power.

Having begun in 2011 by focusing on the concept of bringing power to rural developing nation markets, such as India, employing e-power device business models, OMC Power is now changing its tune.  In the past, the company focused on daily home delivery of solar-charged portable energy products (e.g., LED lanterns); its customers paid the equivalent or less as they had paid for diesel or kerosene. The company financed, built, owned, and operated hybrid off-grid micro-power plants that tap solar, wind, or biofuels to provide alternating current (AC) power to telecom sites and portable direct current (DC) power to local villages.

Finding Scale

According to chief marketing officer Par Almqvist, the company’s new direction is a natural evolution. “Once most communities get power, they want more of it,” Almqvist said in a phone interview.  In order to get to the right price point, it has become apparent to us we need to centralize power production. One must find an efficiency of scale.”

Almqvist still sees a role for e-power products and nanogrids, and in some cases, such options are the only viable path for electrification. Yet to reach scale, other business models must also be deployed. “We have proven that the perception that the bottom of the pyramid is a risky clientele is not necessarily accurate. What we’ve discovered is that, especially in rural northern India, people will pay for what is an essential service, especially when they can save money.”

The benefits go beyond economics. The mix of solar PV and deep cycle batteries will also allow telecomm operators to reduce diesel generation to less than an hour a day. This kind of result prompted the Rockefeller Foundation to announce another program that OMC Power is a part of–this one designed to bring power to 1,000 villages.

 

Social Ridesharing Looks to Avoid Legal Issues

— May 13, 2015

Ridesharing companies like Uber and Lyft have grown quickly despite resistance from some local governments over their legality of operation. To avoid the legal morass, new services, such as BlueNet-Ride, are leveraging social networks and avoiding directly competing with taxi and limousine services.

BlueNet-Ride

Based in Taipei, Taiwan, BlueNet-Ride uses Facebook to connect people interested in attending events. Attendees can carpool or group together to rent a taxi as a means of reducing the cost and emissions of traveling to concerts, sporting, or other events. Created by National Taipei University of Technology Associate Professor of Electronic Engineering Shih-Chia Huang and his students, the service connects Facebook users with friends or friends of friends as a safer alternative to traveling with unknown drivers.

Searching for Riders and Drivers

During an interview in Shenzhen, China, Huang said the backend to the mobile application is an algorithm that searches for people who plan to attend events and maps the distance between driver and passengers, as well as distance to the location. Cab companies participate and offer to drive the groups of acquaintances, or people can offer to drive for free, which avoids the legality of operating an unlicensed taxi service. Ride sharers can volunteer to chip in for gas, and the app has a chat feature so that people can discuss when and where to meet.

Through the free app, commercial drivers can opt to maximize their revenue or drive the shortest distance to be able to serve more customers. A fee of $0.10 is charged by BlueNet-Ride to passengers when they find a ride via a taxi service, and they pay the normal tax fees. Huang received a patent in the United States in 2014 for the ridesharing idea. He has received more than 30 patents in the United States, Europe, Taiwan, and China for a variety of technologies, including mobile applications for gesture recognition, image processing, and liquid crystal display (LCD) modules.

Regulation Woes

The onslaught of ridesharing services such as Uber and Lyft has many state regulators and legislators scrambling on how to regulate the new services. For example, pending bills in Wisconsin and Tennessee would establish rules for companies to pay license fees, as well as background checks for drivers or setting a minimum for liability insurance to be held.

Huang isn’t the only entrepreneur making the friends-to-rides connection. Hitch A Ride is a similar application that connects passengers with drivers via social networks in Australia.

 

Washington Encourages Utilities to Deploy EV Chargers

— May 13, 2015

On May 11, Washington Governor Jay Inslee signed into law a bill titled “Encouraging utility leadership in electric vehicle charging infrastructure build-out.” The law encourages public utilities commissions (PUCs) in the state to set rules for passing along the cost of electric vehicle (EV) charging to all ratepayers if they are requested to do so by investor-owned utilities.

The legislation enables utilities to pass on the cost of EV charging infrastructure as long as the rate increase does not exceed one-quarter of 1 percent. PUCs in other states have varied in their willingness to allow the cost of EV chargers to affect the rate base. For example, in Indianapolis, EV car share service Blue Indy is months behind the original launch date because the PUC there denied a similar request for EV infrastructure investments by the utility.

Washington State Representative Chad Magendanz (R-Issaquah), who sponsored the legislation, said in an email to Navigant that the law was created so that the upfront cost of charging equipment could move from the consumer to the utility. “My vision is for utility customers to be able to simply request an EV Level 2 charging station for their garage, just like they’d request a cable modem installation from the cable company … many of the current obstacles to charging at home or work will disappear.”

Restored Incentive

Washington is expected to have the fourth-most EVs on the road in 2015, according to Navigant Research’s recently published report, Electric Vehicle Geographic Forecasts.

Utilities are well-positioned to own and operate EV charging infrastructure since it increases the market for their product (electricity), and they also need to manage the impact of EV charging on grid stability. However, in many states, laws have prevented them from owning EV chargers, and some states, such as California, have had to revise laws to allow utility involvement.

“HB 1853 essentially restores the incentive a power company would normally have to invest in equipment that would increase its sales, but that we’ve eliminated through conservation programs,” said Magendanz. “Utilities have the expertise and purchasing power to dramatically reduce costs of this essential infrastructure build-out, and can break down barriers to EV ownership in high-density regions.”

The challenge has been for states that are pushing utilities to reduce energy consumption to recognize that transferring oil consumption from transportation into electricity delivered by utilities is economically and environmentally sound policy. States such as Washington that have low carbon intensity for producing energy (only Vermont has a lower carbon intensity, according to the U.S. Energy Information Administration) can see the greatest greenhouse gas savings by encouraging EV adoption.

 

Iowa Key to Biofuels’ Future

— May 12, 2015

With presidential candidates from both parties descending on Iowa to gear up for the 2016 general election, the state is quickly becoming ground zero for the ongoing debate around the future of biofuels in the United States. Earlier this year, Iowa Governor Terry Branstad announced a major new bipartisan campaign called America’s Renewable Future to promote the Renewable Fuel Standard (RFS) in the 2016 Iowa presidential caucuses.

The backbone of the country’s biofuels industry, RFS is an ambitious regulation first introduced under George W. Bush and later revised and expanded in 2007. Iowa has benefited mightily from the mandate, serving up a sea of corn and soybeans, both commodities that have played a crucial role in fueling America’s first-generation biofuels capacity growth. Since the revised standard went into effect, biofuels production in the United States has doubled. According to Navigant Research estimates, first-generation biorefineries concentrated throughout the Midwest currently account for just under half of global biofuels production capacity installed today.

New Reality

For an industry that to this point has enjoyed broad regulatory support across Europe, Brazil, and North America, biofuels are quickly losing momentum.

Although corn starch ethanol and soybean-derived biodiesel have been popular with both political parties over the last decade, times have changed. The price for a barrel of oil today is roughly a third what it was in 2008, when Barack Obama was first elected. Meanwhile, capacity build-out for next-generation facilities has been slow to materialize, resulting in advanced biofuel production totals that significantly trailing targets established under the RFS.

While Branstad’s campaign will focus on the economic benefits associated with biofuels industry development, the number of critics who say the RFS is not working continues to increase. Last month, Jim Stock, former White House economic advisor, released a report that proposes several reforms to RFS. A combination of forces, the report observes, are imposing costs on the market while failing to provide the future benefits associated with domestically produced advanced biofuels.

To put it bluntly, the industry to this point has failed to make the leap from first generation biofuels to next generation alternatives. Facing a similar reality, policymakers in Europe have signed off on reforms that cap the production of first generation biofuels and opted to extend only reforms targeting next generation fuels out to 2020.

Seeking a Niche

Still struggling for traction in a rapidly shifting market, advanced biofuel producers are examining niche opportunities such as biomethane or renewable natural gas (RNG) production and other biofuel applications that can be integrated with the power grid.

Amendments to the RFS last year, for example, have allowed RNG—biogas upgraded to natural gas specs—to count toward cellulosic biofuels quotas in certain applications like fueling an electric vehicle or being consumed as liquid natural gas. In isolated markets like Hawaii, where generation infrastructure includes a high percentage of facilities that burn petroleum products shipped across the ocean, locally grown biofuels can provide a plug-and-play renewable alternative and help the state move toward a proposed mandate of 100% renewables by 2045. Further down the road, algae conversion platforms that utilize carbon dioxide as a feedstock may offer coal producers that face tightening emissions regulations another tool for cleaning up their operations. Both options mitigate the investment needed to replace existing infrastructure.

Meanwhile, back in Iowa, companies are changing course. Fiberight, which sought to build first-of-their-kind facilities converting waste to advanced cellulosic biofuels, recently announced plans to switch to producing biogas. Considering the scale of investment needed to upgrade the power grid, presidential hopefuls may find a willing partner in a biofuels industry grasping for strong market signals.

 

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