Navigant Research Blog

Storage in the Northwest: Overview of Threats and Opportunities

— October 10, 2017

Last week I had the opportunity to open up day 2 of the Northwest Demand Response + Energy Storage Summit. I gave an overview of what is happening with energy storage in the Pacific Northwest.

What Is the Current Market?

The region has a long history with pumped and dispatchable hydropower, so energy storage is not a new concept. However, battery powered systems are relatively new. Since 2010, many utilities have deployed 22 MW worth of projects for research, development, and pilots. Some of the larger projects include Portland General Electric’s Salem Smart Power Center and Puget Sound Energy’s Glacier Project. In the near term, the region’s pipeline for non-hydro project is small, but several drivers are quickly changing that.

Energy Storage Tracker for Oregon, Washington, Idaho, British Columbia, and Montana

(Source: Navigant)

What Is Driving Growth?

Key drivers for new storage developments include resilience needs, evolving business models, renewables integration, and greater access to financing, but the largest drivers are the following:

  • Policy: In Oregon, House Bill 2193 is requiring all investor-owned utilities (IOUs) to procure at least 5 MWh (but up to 1% of 2014 peak load) worth of energy storage. In Washington, the Clean Energy Fund has sponsored many storage demonstrations and the Utilities and Transportation Commission has directed all IOUs to include energy storage in their integrated resource plans.
  • Improving project economics: Energy storage costs continue to fall and we expect that to continue. Falling costs make energy storage competitive in more and more applications.
  • Customer interest: Customers of all types—from residential to large industrial—are getting interested in energy storage to help manage energy costs, provide resilience, and support sustainability.

What Barriers Does Storage Face in the Region?

Potential barriers that could slow down storage deployment in the region include the following:

  • Business models: Not finding the right regulatory and business models that allow a range of values to be captured for individual projects.
  • Pilots and projects: Poorly executed and evaluated pilots and early projects.
  • Technology issues: Technology—including communications, data gathering and management, and operations—that is not ready for energy storage.

Click here for a copy of my presentation.

 

Utilities Bet on Open Standards for PEV Charging

— August 10, 2017

Electricity as a transportation fuel has only been used in a few mass transit platforms like light rail that are large-scale megawatt consumers. These platforms have highly predictable load patterns, and these electricity consumers are generally visible to utilities because their load is large enough to require utility coordination on infrastructure development. The next step in transportation electrification, happening now, is the advent of light duty, individually owned plug-in electric vehicles (PEVs). This is a step toward less predictable load shapes and less load visibility (not good from a utility perspective), but also one toward increased load and theoretically highly flexible load (which is good).

Understandably, utility interests in this new load have varied largely as a function of expected PEV adoption in a utility’s territory. Since the emergence of mass market PEVs in 2010, many utilities were skeptical of the potential for PEVs, in part because many initial market adoption forecasts turned out to be highly optimistic. However, with over 6 years of market development in the books that have witnessed marked advances in PEV capabilities alongside reduced costs—exemplified by the Chevrolet Bolt and Tesla Model 3—utilities are coming around to the realization that a PEV strategy is a must. The latest example of this need is an investment from Energy Impact Partners (EIP) in the EV charging services company Greenlots.

This investment is an important indicator of utility interests because EIP is a utility investment group that represents a network of 47 utilities in 12 countries and this is its first investment regarding EV charging services. The investment is especially significant because Greenlots, which offers EV charging and energy management solutions, is one of the more vocal proponents of an open standards-based approach to charging network development.

In a sense, Greenlots is championing a system analogous to cell phone services in which the equipment (cell phone) is not tied to a service provider (e.g., Sprint, Verizon, etc.), allowing charging station owners to switch between service providers as they see fit. This is not the way PEV charging services originated. Many early installations were and continue to be tied to a manufacturer’s hardware and management software platforms. When or if these manufacturers fail (as happens with emerging markets), their installed equipment can become ineffective.

Beyond the concern of stranded charging units, the evolution of PEV charging encompasses a variety of services for which no one company is likely to have the best solution. Therefore, vendor lock-in could be detrimental to preventing obsolescence. Equipment-agnostic services can include the dynamic management of PEV load in time with grid operator pricing signals, the discharging of power from vehicle into infrastructure, vehicle energy information interfaces for consumers, and streamlined payment and transaction management systems, among others. Flexibility among major consumers (utilities, energy service companies, and/or property owners) to pick among such solutions can reduce costs while enhancing the ability to share data from multiple services.

 

Consumer Choice in the UK Energy Market: The Year of the Tracker Tariff

— July 11, 2017

A year ago, I wrote a two-part blog post (part one and part two) about the surge in consumer choices in the United Kingdom’s energy market. A lot has happened since those articles were written—the second of which was published on the same day as the Brexit referendum results.

Energy price hikes made headlines over the 2016/2017 winter, as five of the Big Six energy suppliers (EDF, E.ON, SSE, British Gas, Scottish Power, and Npower) raised prices by 8%-15%. British Gas was the only exception, promising to hold prices until at least August 2017. These increases put a political spotlight on energy prices during the country’s general election in June—during which even the Conservative Party (generally associated with free market policies) proposed energy price caps.

The Year of the Tracker Tariff

Although the political debate has not devolved into any specific energy policies yet, small energy suppliers and new entrants (such as Octopus Energy, Pure Planet, and ENGIE) have used the price hikes as an opportunity to launch a new class of energy tariff: the tracker.

Prior to May 2017 (when the first tracker was launched), consumers in the United Kingdom could opt for either a standard variable rate (SVR) or a fixed price rate:

  • SVR: In a SVR tariff, the unit price of electricity can go up or down at any time. The supplier must notify the consumer of price rises (and of any other changes to the consumer’s disadvantage) but the price charged is completely at the supplier’s discretion. This is the most basic offering from energy suppliers and it is usually their most expensive. Consumers usually end up on this tariff after a fixed contract expires.
  • Fixed price rate: In a fixed price tariff, the unit price of electricity is agreed upon at the beginning of the contract and remains fixed for a certain period (often 12 months in the United Kingdom). This fixed price is usually below the SVR.

Energy suppliers have been criticized by Ofgem (the United Kingdom energy regulator) for widening the difference between their best rates and their SVRs. So, in a bid to win consumer’s trust through improved transparency, a few energy suppliers have launched tracker tariffs.

Retail Price Comparison by Company and Tariff Type: Domestic (Great Britain)

(Source: Ofgem)

Tracker tariffs resemble SVR tariffs in that the price the consumer pays for electricity changes with time; unlike SVRs, the price is not discretionary. Instead, it is linked to the average wholesale electricity price on the day of consumption.

The precise structure of the tracker varies from supplier to supplier. For example, Octopus Energy charges a fixed standing charge per day and then the wholesale price plus transmission and distribution costs, other regulated costs, taxes, and a fixed margin per kilowatt-hour consumed. Another supplier, Pure Planet, charges a fixed membership fee that includes all non-energy related costs and then wholesale prices for each kilowatt-hour consumed (100% renewable, in this case). ENGIE, the last of the companies offering tracker rates, has not yet disclosed how its tariff will be structured.

It is too early to judge whether consumers will embrace trackers or if they will prefer the certainty of fixed price rates. Perhaps the majority of consumers simply do not care enough about energy contracts and will continue to pay SVRs. Regardless, trackers are a step toward a residential energy as a service product. This is especially true of Pure Planet’s offering: by incorporating its margin into the fixed component of the bill, it is in a position to offer add-on services that increase comfort—or reduce energy consumption—without sacrificing profit margin.

 

Losing Net Neutrality: End of IoT or Boon for the Edge?

— June 14, 2017

The Trump administration is on the road to making net neutrality a thing of the past. Federal Communications Commission (FCC) leadership are positioning to undo regulations that have laid the foundation for how consumers access the Internet. The risk is that without this regulation, Internet service providers can delineate variable fees and Internet speeds when accessing certain websites as a means of protectionism. In May, FCC Chairman Ajit Pai articulated the administration’s view that Obama-led rules are not protections for online retailers and consumers, but rather, a “bureaucratic straightjacket.” This new FCC-led sentiment and the expectation they will follow through with actions to dismantle net neutrality laws this summer have inspired a Day of Action protest on July 12 with the likes of Etsy, Kickstarter, and Mozilla. Impassioned executives have explained the importance of net neutrality. General Council at Kickstarter stated “A threat to net neutrality is a threat to the free exchange of ideas that creative culture and an informed public rely upon.”

The FCC’s Open Internet Order is the rule supported by the Obama administration in 2015 that protected net neutrality on the precedence of anti-monopoly oversight of the telecom industry. The 400-page tome is dense, but the intention is clear in line one: “The open Internet drives the American economy and serves, every day, as a critical tool for America’s citizens to conduct commerce, communicate, educate, entertain, and engage in the world around them.” Industry concerns are clear. The Republican-led opposition to net neutrality is a paradox; while it may be positioned to eliminate government intervention in commerce, the loss of this regulation will be a direct blow on today’s most vital free market: the Internet.

Hit to IoT?

An article in Wired outlines what the end of net neutrality could mean for the Internet of Things (IoT): “Dismissing the rules could be a big problem for the future of the Internet of Things, since companies like Comcast—which is already working on its own smart home platform—certainly have the motivation to create fast and slow lanes for particular gadgets and services. If your Internet provider can decide which personal assistant or smart home gadgets you can or can’t use, the broadband can dictate the winners and losers in the Internet of Things race. That wouldn’t bode well for competition, innovation, or you.”

Also, Bad for Business?

IoT has become a central theme in the intelligent buildings market. The capacity to deploy low cost devices to gather and communicate near or real-time data has opened the door to innovation in how commercial buildings are managed and even viewed as business assets. IoT intelligent building offerings can reduce energy costs, streamline operations and maintenance, and redefine occupant engagement. Many of the leading offerings deliver value through a core analytics component utilizing cloud computing. The attack on net neutrality could take a blow at the intelligent building in a similar way to the smart home as explained by Wired. However, even if the FCC wins this fight, the future for intelligent buildings is still bright—what may change is who the winners are.

A Boost for the Edge: The Smart Gateway to the Rescue

Large technology players including Cisco, Dell, Intel, and Qualcomm have been making waves in the intelligent market with hybrid offerings that shift the intelligence of the solution to a mix of cloud and edge computing. This delegation of computing can lessen the blow of the FCC’s action and protect the momentum of the intelligent buildings market. The future of IoT and intelligent buildings is contingent on technology partnerships. I would argue that if we lose net neutrality, the role of IT majors in the market may become that much more vital.

 

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