Navigant Research Blog

Can Hybrid Projects Usher in the Next Generation of Renewable Energy?

— September 16, 2016

Wind and SolarIndia’s ambitious plans for renewable energy development are faced with a number of challenges. Chief among these challenges is the limited availability of land for wind and solar plants in the densely populated country, as well as the cost and technical challenges of interconnecting projects to the grid. These challenges have driven some developers and equipment manufacturers to explore hybrid renewable energy facilities, combining both wind and solar generation at a single site. This hybrid concept has been explored in other areas with limited land available for new development, most notably in Japan, where a 56 MW hybrid wind and solar project was commissioned in 2014.

Wind and solar development is often limited by the relatively high upfront costs for land acquisition, grid interconnection, and project development. The availability of grid interconnections can prohibit the development of many potential wind and solar sites, and the cost for interconnection often requires developers to build larger-than-ideal facilities. As a result, many of the optimal locations for wind and solar generation have already been developed, particularly in densely populated regions.

Hybrid Wind and Solar

The concept of a hybrid wind and solar project aims to eliminate many of the barriers to development by maximizing the value of a facility to overcome the costs for acquiring land and interconnecting to the grid compared to individual technologies. In the United States and other countries, select areas have already been set aside for renewables development. A hybrid system can allow developers to maximize the megawatts of capacity installed per each acre of available land. In addition to overcoming upfront costs, a hybrid project can take advantage of the complementary generation profiles of wind and solar. Wind is often most productive at night while solar power is naturally only generated during the day. By co-locating these generation sources at a single site, a project can more closely represent a baseload resource on the grid, facilitating easier integration and making the resource more valuable for grid operators. The improved predictability of generation output is further enhanced if an energy storage system is also combined at a single facility. This is exactly the aim of developer Windlab Ltd. for the Kennedy Energy Park it is developing in Queensland Australia. The project, scheduled to come online in 2018, will feature 30 MW of wind, 20 MW of solar PV, and 2 MW of battery energy storage capacity.

This hybrid power plant concept doesn’t stop on land, the Danish company Floating Power Plant is currently testing its hybrid wind and wave power generation platform known as Poseidon in the waters off of Northern Europe. While the concept of hybrid renewable plants holds significant potential, it will have to overcome the existing approach of both developers and utilities to typically work with only a single technology per project. However, as the industry matures and ideal sites become scarcer, the benefits of hybrid projects are likely to increase and these projects may eventually become the norm.


Europe’s Energy Transition Megatrends and Tipping Points, Part VI: New Entrants and Converging Industries

— September 6, 2016

SmartCityJan Vrins coauthored this post.

In our initial blog on Europe’s energy transition, we discussed seven megatrends that are fundamentally changing how we produce and use power. This blog discusses how converging industries and new entrants are changing our industry, specifically focusing on smart cities as a key area where this convergence and disruption is occurring at an accelerated pace. Finally, we will discuss what this means for the many market players that want to participate and survive in the Energy Cloud.

Our latest white paper describes how changing customer needs, evolving policy and regulation, and accelerating technology innovation and integration drives a more sophisticated two-way grid platform and a rapidly evolving ecosystem. Smart cities—dynamic, localised platforms that recombine technologies and services around energy, transportation, and data communication—provide fertile testing grounds for the industry incumbents and disruptors going after the nearly $1.3 trillion of forecasted new annual industry revenue by 2030 globally.

What’s Happening?

Europe’s focus on the interdependent goals of creating a low-carbon economy, ensuring energy security, and enabling competitive energy markets make it a test bed for many of the developments associated with the energy transition. This is reflected in the European market’s attraction for players across the energy value chain, including many new entrants who see an opportunity to disrupt the traditional utility industry and take market share away from incumbent utilities.

The role of energy companies, including utilities, network operators, and oil & gas companies, is being transformed by a series of fundamental shifts, including the following:

  • Energy consumption and GDP growth: Although population and GDP growth (at a slower pace) drive growing energy demand, the trend line between GDP and energy consumption growth has been broken in absolute terms in EU countries. Primary energy consumption in the EU countries was almost the same in 2013 as in 1990 according to the European Environment Agency (albeit partly as a result of economic recession). This dynamic puts pressure on all players in the energy sector. Utilities with no or limited customer growth see their overall revenue declining. Utilities that still see customer growth are reporting that demand (and revenue) is not growing at the same pace. This is creating an unsustainable situation: utilities with flat or declining revenue yet growing costs to serve their customers and maintain the grid.
  • Impacts of climate change: In an earlier blog, we discussed the impacts of the growing number of policies and regulations to reduce carbon emissions. It is clear that this impact is being felt, as Europe is on target to meet its 2020 goals for renewable energy and carbon emissions reductions. However, member states now face the challenge of meeting more challenging new targets if they are to make progress towards the grand goal of making Europe a low-carbon economy by 2050. In the meantime, cities and large corporations are not waiting—they are setting their own sustainability targets and investing in programs that reduce their carbon footprint. Power generators, network operators, and energy retailers are all active in this transformation but also face significant, and in many cases unknown, challenges as they try to understand the new demands placed on their businesses and operations.
  • Big power to small energy and the rise of the prosumer: Commercial, industrial, public sector, and residential energy consumers are all becoming more actively engaged in energy management and energy generation. More and more customers are choosing to install distributed energy resources (DER) on their premises. DER solutions include distributed generation, demand response, energy efficiency, distributed storage, microgrids, and EVs. Europe is expected to have the greatest percentage of new DER capacity deployed compared to centralised generation throughout the next decade. New energy retailers are also taking advantage of these changes and the development of smart energy applications and online service models to provide more innovative and lower-cost solutions for customers. These new entrants are further challenging the established position and profitability of the incumbent players.

How Industry Giants Are Responding

As a consequence of these changes, electricity utilities are under pressure. As revenue declines, costs are increasing due to needed investments to provide safe, reliable, and affordable power while also supporting an emerging, cleaner, and more distributed and intelligent grid that is required to provide needed flexibility. Therefore, utilities are looking for new revenue streams and thinking through new business models that will create shareholder value going forward. Oil & gas companies, under additional pressure because of the continued low oil price, are looking for ways to survive by taking out costs, reducing their upstream capital investments, and shutting down unprofitable assets. However, their long-term future also requires them to find new opportunities to grow revenue and shareholder value in new energy businesses.

Both utilities and oil & gas companies are looking to turn the challenges of the energy transition into their advantage through entry into new markets and the delivery of new energy platforms and services. Total’s Chairman and CEO Patrick Pouyanné has stated that the company’s goal “is to be in the top three global solar power companies, expand electricity trading and energy storage and be a leader in biofuels.” Meanwhile, French energy giant, Engie (formerly GDF Suez) has been investing heavily in renewables and storage technologies, developing its energy services business, and establishing its Cities of Tomorrow programme to target the growing smart cities market.

European utilities have also been embracing DER and developing alternative business models to capitalise on new technologies and the changing resource mix. This is especially true in Germany, where there are high levels of DER, and utilities like RWE and E.ON have begun transforming their business into a more capital-light, DER-based model by shedding centralised generation assets and positioning themselves as enablers and integrators of new DER resources. For example, RWE has invested in and formed a rooftop solar partnership with German solar developer Conergy and is white labelling Sonnenbatterie’s behind-the-meter battery systems for solar-equipped German homes. As DER penetration in Europe accelerates, we see more value in moving from generation to distribution and beyond the meter.

Energy market incumbents are developing strategies to position themselves as the leading force in creating the new order. At the same time, other players—from giants in the transport, IT, telecommunications, and engineering sectors to energy service and technology startups—are looking to increase their share of these emerging opportunities. For example, Europe is seeing the emergence of a new class of DER aggregators aiming to take advantage of these new technologies and the utilities’ evolving business models. LichtBlick, Caterva, Next Kraftwerke, and Ampard are just a few of the companies establishing virtual power plant business models to provide additional value from the integration of DER into the European grid. Many other, much larger players also see the potential in brokering the new relationships emerging between energy companies and their end customers.

Cities at the Heart of the Energy Transition

The continuing interest in developing smart cities is closely aligned to the transformation in the energy market and provides an important example of how the energy landscape is evolving. More than any other region, Europe has recognised the importance of smart city developments to its energy transition programme. Cities are examining the sources and efficiency of their energy to reduce their greenhouse gas emissions and energy costs. In the process, cities are becoming more ambitious and proactive in setting energy strategy. They are seizing opportunities to work with utilities and other stakeholders to create new urban energy systems. The emerging vision is of a smart city with integrated large- and small-scale energy initiatives, including major infrastructure investments, citywide improvements in energy efficiency, and distributed energy generation.

Across the continent, city leaders have been signing up for ambitious carbon emissions targets and are taking an active role in encouraging utilities and other players to support their strategies. Stockholm and Copenhagen have led the way with plans to become carbon-free cities, and many more cities are now following their path. Frustrated at the slowness of the change they are seeing, some cities are even taking matters into their own hands and looking at re-municipalisation of utilities or the creation of new city energy companies. Hamburg, for example, took back control of the city’s energy in 2014. In the United Kingdom, Bristol and Nottingham have established new city-owned energy companies, and the new Mayor of London has made a strong commitment to a new energy policy for the capital.

Utilities are responding to these challenges by working closely with cities and communities to develop new energy models. Alliander, for example, has been a long-standing supporter and investor in the ambitious Amsterdam Smart City programme. E.ON has been working with smart cities in order to test integration of its smart grid solutions that enable more effective energy management and integration of DER. In Malmo, Sweden, the utility and the city signed an agreement to adapt the entire Hyllie district of Malmo to a climate-friendly energy supply. By 2020, the entire district’s electricity, heating, and cooling will be powered exclusively by renewable resources and energy recovery.

Another aspect of Europe’s urban agenda that is having a strong influence on the energy sector is the focus on sustainable transportation. The European Union has put the triple play of energy, transport, and information and communications technology (ICT) at the heart of its innovation programme for cities. Reducing emissions from transportation is the next critical frontier in the decarbonisation of the European economy—electrification of heat and transport pose the most obvious options for sustainable demand growth in the present market. Europe has arguably the strongest level of utility engagement in developing EV charging services. Utilities and energy companies such as Germany’s RWE, Italy’s Distribuzione, Ireland’s ESB, and the Danish utilities SEAS-NVE, SE, NRGi, EnergiMidt, and Energi Fyn have all funded charging deployments or invested in companies that deploy chargers. For example, Danish company CLEVER is owned by the five largest utilities in Denmark and operates a network of several hundred EV supply equipment (EVSE) stations throughout Denmark; the company is now branching out into other geographic markets. Enel has developed an interoperability platform and is aggressively deploying charging stations, with more than 2,000 deployed across Italy.

So What Does This Mean?

The next decade will see a reshaping of the European energy sector to meet the needs and challenges of a low-carbon economy. We have already seen some of the industry’s largest players moving quickly to expand their capabilities and services to meet these new requirements.  As discussed in Part IV of this series, further diversification and mergers and acquisitions are inevitable as players look to gain a footprint in emerging services and exploit new energy technologies.

Energy companies also need to broaden their partnership network, working with those in the public services, transportation, infrastructure, and ICT sectors to deliver the integrated capabilities needed to make the energy transition a reality. They also need to create new relationships with their customers, as they too become partners as much as end consumers. The industry giants of today are using their resources as some of the biggest companies in the world to engineer this energy transformation and to meet future shareholder interests. They will need to continually reinvent themselves and become broader and more adaptable energy companies able to protect existing revenue streams and seize new opportunities. However, not all bets will pay off. We will inevitably see some wrong turns in this process of adaptation and the eventual winners may well be those who learn quickest from their mistakes.

This blog is the sixth in a series discussing how industry megatrends will play out across Europe as well as at the regional and country levels. Stay tuned for our next blog in this series focusing on customer choice and changing customer demands.

Learn more about our clients, projects, solution offerings, and team in our Navigant Energy Practice Overview.


Do Water and Electricity Mix?

— July 21, 2016

Plant - WaterThe water-energy nexus is the interaction between energy, water, and all the aspects of generation and distribution that are involved with each. Many times, this nexus is used to describe the amount of energy used to distribute water and wastewater between water treatment facilities and end uses. This energy use is by no means small. In the United States, energy generated for water ranges from around 4% to 19%; California alone consumes 19% of its electricity for water and wastewater. Variations in energy generation are caused by geographic differences; hilly regions need to expend more energy to pump water across variations in altitude, and arid areas pump source water from aquifers deep underground.

Another aspect of the water-energy nexus is the amount of water it takes to produce electricity. Certain generation types (such as hydroelectric) have an obvious liquid component, but others are less apparent. New innovations in renewable energy, while still consuming water, help to preserve the resource by utilizing more region-specific energies.

A Flood of Electricity Generation

In Hawaii, an ocean thermal energy conversion (OTEC) plant recently began operations. This OTEC plant draws in warm surface water from the ocean, vaporizing ammonia and spinning a turbine, which generates electricity. The ammonia is condensed by water extracted from deep in the ocean. Other types of OTEC plants do not use ammonia at all, but utilize vaporized ocean water to power the turbine. This is the first plant of its kind in the world, though it is worth noting that the United States has been researching OTEC technologies since 1974. Makai Ocean Engineering and the Hawaii Natural Energy Institute developed this 100 kW facility as a way to test the OTEC process, and the plant produces enough energy to power 120 Hawaiian homes for a year.

For cities farther from the water, solar power might seem like the way to go. However, to get the most out of solar, many plant operators are turning to auxiliary steam components. For example, the Ivanpah Solar Power Facility in the Mojave Desert of California utilizes heliostat mirrors to focus sunlight on solar power towers. These towers are heated by the solar energy, and steam is created to drive a steam turbine. The combination of steam power and photovoltaics makes this plant one of the largest solar installations at 377 MW capacity. In addition, its air cooling system means that other than the water used to generate energy, the plant uses 90% less water than other solar thermal technologies with wet cooling systems. However, there are drawbacks to solar power at this concentration. On May 19, 2016, one of the solar generating towers at Ivanpah caught fire due to improperly tracking mirrors that focused sunlight on the wrong part of the tower. There have also been reports of effects on wildlife, such as birds and tortoises. The issues in the development of high intensity renewable energy must be ironed out before these types of plants become widespread.

Renewable energy is important, and not just for the conservation of fossil fuels. Well-integrated renewable energy will utilize the natural resources of the region to produce sufficient electricity without wasting scarce ones. Traditional electricity production uses large quantities of water, but renewables (even those designed specifically to utilize water) can help conserve this. Producing energy may be a very water-intensive process, but many innovations in electricity production hold the promise that this market is becoming less thirsty.


New Distributed Energy Services Model Targets Large Corporate Energy Users

— June 9, 2016

AnalyticsThis past week, MGM Resorts and Wynn Resorts announced they will pay exit fees to Nevada Power to allow them to purchase wholesale power on their own. To do so, MGM and Wynn will pay $86.9 million and $15.7 million in fees, respectively, to ensure their decisions are ratepayer-neutral. MGM Resorts indicated that important drivers behind its decision to leave Nevada Power included not only the desire to reduce its energy spending, but also to procure more renewable energy to meet its customers’ desire for environmentally sustainable travel destinations.

Given these developments, it is reasonable to wonder what type of energy companies might be best poised to help companies analyze and execute similar strategies. Further, Navigant is watching closely to see if this kind of disruptive customer choice will spread to other utility service areas and emerge as one of the megatrends discussed in Jan Vrins’ Take Control of Your Future  blog series.

An Integrated Approach

One recently formed company that appears poised to meet the turnkey energy needs of customers like MGM Resorts and Wynn Resorts is Edison Energy. Edison Energy, part of the deregulated service offering of Edison International, has recently assembled several acquisitions under a single banner that can support an integrated approach to energy procurement (renewable or otherwise) through the use of energy efficiency and distributed renewable generation paired with battery energy storage. The companies under the Edison Energy banner include:

  • SoCore Energy, a distributed solar storage developer that helps commercial and industrial companies and rural cooperatives to develop onsite solar storage, energy efficiency, and demand response solutions.
  • Eneractive Solutions, a full-service energy services company that develops and executes energy efficiency projects at colleges, universities, schools, data centers, and other commercial and industrial sites.
  • Delta Energy Services, a custom energy consulting services firm that focuses on energy management strategies, energy procurement, and enterprisewide energy data management for large commercial and industrial energy users.
  • Altenex, which provides renewable energy advisory and procurement services focused on long-term power purchase agreements for renewable energy on behalf of large corporate clients with significant sustainable energy commitments.

At Navigant Research, we see battery energy storage as a key unifying technology that will position energy efficiency, demand response, and onsite distributed generation technologies like these to take advantage of new virtual power plant software and power market rules driving distributed energy resources business models. New turnkey offerings addressing the needs of large corporate entities like what Edison Energy is now doing along with new efforts by GE Current and Duke Energy Renewables should be watched closely as large corporate energy users look to chart new courses to take control of their future  and meet their sustainable energy needs.


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