Navigant Research Blog

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.

 

Germany’s Progress Doesn’t Match Ambitious Emissions Plan

— April 1, 2016

Springtime landscape over natural oilseed rape fieldGermany, a longtime leader of energy efficiency and renewable energy, is poised for another significant policy move in clean energy with a new proposal that would reduce greenhouse gas (GHG) emission in the country by 95% from 1990 levels by 2050.

Germany’s National Energy Efficiency Action Plan (NEEAP), which is updated every 3 years, already requires stringent energy savings goals as part of the European Union’s (EU’s) Energy Efficiency Directive (EED) for member states. Germany’s current national target set forth in its NEEAP aims to achieve 40% GHG emission reductions from 1990 levels by 2020 and 80% reductions by 2050. Germany’s environment ministry expects to present the new proposal to the cabinet by this summer.

Increase in Emissions

Many countries increased GHG emissions reduction goals prior to or as a result of the Paris Climate Summit in late 2015. Countries were not required to set a specific carbon emissions level, but were instead allowed to create a reduction target and strategy. Germany was not alone in increasing emission reduction targets, but based on the slow progress achieved in recent years, it will be difficult to further reduce emissions.

The country saw increases in emissions in both 2012 and 2013 but did experience a 4.6% reduction in GHG emissions in 2014 compared to the previous year. It has been suggested this decrease can be attributed to the warmer than usual winter weather in Germany during that year. In 2013, Germany’s GHG emissions were the highest of the EU member states, representing 21.17% of the EU’s total emissions. The targets seem almost out of reach without substantial changes in how energy is produced and consumed in the country during the next few years.

Germany’s GHG Emissions

Germany GHG(Source: Clean Energy Wire)

Meeting the Self-Imposed Targets

Germany is not naïve to the fact that it is currently not on track to hit its 2020 reduction targets, let alone the reductions required by 2050. The country is focusing on energy efficiency as a means to achieve these goals. It is expanding power generation from renewables such as solar and wind power, but so far these have proven insufficient to the task. However, renewables accounted for 27.8% of power consumption in the country in 2014, up from 6.2% in 2000.

Self-imposed GHG emissions reduction targets, both in Germany and elsewhere, must be enforced for the policy changes to have an impact. While the country is working to reduce emissions and is optimistic in its ability to reach these targets, its ultimate success (or failure) could largely be influenced by the actions taken in the next few years.

 

Moving Beyond the State of California at CAISO

— December 23, 2015

The California Independent System Operator (CAISO) is one of nine independent wholesale grid operators in North America. Today, roughly two-thirds of the U.S. electrical grid is managed by independent system operator (ISO) entities, which manage and coordinate all generation resources, including the large and rapidly growing amount of variable renewable resources.

California’s recent passage of legislation increasing the target for meeting 50% of total state demand for electricity from renewables by 2030 underscores why the CAISO is moving in new directions that will likely require a name change as it expands its access to out-of-state resources.

ISO Control Areas for North America

Peter CASIO Blog 1

(Source: California Independent System Operator)

Various studies—including one from the Regulatory Assistance Project—confirm that these impartial grid operators lower overall costs of power supplies, as well as enhance the environmental performance of the power sector. With current trends toward coal plant retirements and the subsequent increase in reliance upon variable renewables such as solar and wind power, it turns out, however, that bigger is indeed better.

Since I am a strong advocate for decentralized distributed energy systems such as microgrids, this may seem like an odd argument to make. To put this statement in context, consider the following truism I learned while researching my book on wind power: the larger the control area for a balancing authority such as a utility or an ISO, the less an issue the variability of wind. Why? Chances are that the wind will not all die at once if you can manage this resource over a large swath of wind resource areas. This general axiom also applies to solar energy, though the dynamics are different.

Today, CAISO serves an estimated 35% of the electric load in the West, but this number is expected to grow steadily over the next several years due to the creation of two new organized markets designed to help the state meet its aggressive energy goals, programs highlighted at the recent Paris Climate Summit.

The two recent major market expansions by CAISO are:

  • Energy Imbalance Markets. CAISO is now reaching out to utilities outside of its traditional control footprint to purchase ancillary services. The Energy Imbalance Market (EIM) improves the efficiency of dispatching resources by using devices and sophisticated software systems that analyze the needs of the grid every 5 minutes and automatically find the lowest-cost generation to meet demand. Without an EIM, utilities have to meet demand with resources in their own service areas, which can translate into having to start higher-priced generation or dip into even more expensive energy held in reserve.

CAISO Energy Imbalance Market Participants (Partial List)

Peter CASIO Blog 2

(Source: California Independent System Operator)

  • Regional Energy Markets. An even more dramatic step by CAISO is creation of a fully integrated Regional Energy Market. The control area of CAISO may encompass many new partners. The first step is to integrate with the system resources of PacifiCorp, which has control area of over 11 GW of resources in Oregon, Washington, Idaho, Nevada, and Wyoming. The diversity of resources available in these states, ranging from hydro to wind and fossil fuels, will help diversify the energy economy managed by CAISO. Benefits of this integration include resource procurement savings, lower peak capacity needs, and more efficient unit commitment and dispatch.

Given these looming changes, CAISO will need a new name. This is just speculation, but I would bet it will rebrand itself as the Western Regional Independent System Operator (WRISO) at some point in the future.

 

Solar in the Sahara

— December 7, 2015

Set to become the largest concentrated solar power (CSP) plant in the world, Morocco commissioned the first phase of its Noor-Ouarzazate project in November 2015. This 160 MW installation is just the first of four projects that will constitute the larger 580 MW plant. Located on the edges of the Sahara Desert in Ouarzazate, this project aims to ultimately provide power to up to one million people. Large-scale solar projects such as this can provide an array of benefits to nations across the Middle East & Africa. Along with providing reliable electricity access to developing countries, these types of clean technology projects may help mitigate some of the tension and conflict that persists throughout the region.

Rather than utilizing traditional PV technology, the first three projects will use CSP through parabolic mirrors and a trough system to track the sun across the sky during the day. CSP also comes with the benefit of thermal storage, allowing for the prospect of 24/7 solar energy. This will be supported further by the second phase of the project, Noor 2 (200 MW) and Noor 3 (150 MW), set to come online in 2017. The third phase will consist of a PV power station. This complex will be largest CSP plant in the world upon completion, marking a significant milestone as countries in the region begin to adopt solar into their energy portfolios.

Morocco is taking advantage of any opportunities where the Sahara is concerned. The world’s deserts receive enough solar energy in 6 hours to meet the power demands of humanity for an entire year. How to harness and distribute this energy in a cost-effective manner is a significant challenge. Morocco has been able to pursue this project through a mix of political will and falling solar costs. The Moroccan government is choosing to view climate change as an opportunity and ultimately hopes to use the Noor complex as a means to export electricity across the Middle East and Europe. This path toward energy independence is critical in a region where climate security is expected to pose a major problem in the future. Should this project prove successful, it can provide a template for surrounding nations as they begin their forays into solar. According to the University of Oxford Middle East energy expert Justin Dargin, large-scale integration of renewable energy could significantly reduce the budgetary outlays of countries in the Middle East & Africa, allowing increased funding for social services, infrastructure, and more. This reallocation of funds could be used to address some of the socioeconomic demands highlighted during the Arab Spring.

Morocco has set an ambitious target of generating 42% of its electricity using clean energy sources by 2020. Whether fellow countries in the region will follow suit with similar environmental initiatives is yet to be seen, but the Noor complex is a significant step in advancing large-scale solar integration across the region.

 

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