Navigant Research Blog

Power-to-Gas Comes to North America

— August 14, 2014

Ontario has emerged as hub of clean energy innovation.  The province rapidly changed its energy mix from coal to renewables in the past 10 years, and Ontario’s latest Long-Term Energy Plan, finalized in 2013, calls for 50 MW of energy storage to be procured in 2014.  Ontario is also home to several innovative storage companies, including Electrovaya, Temporal Power, Hydrostor, and Hydrogenics.

In addition to the 50 MW storage plan – split between 35 MW announced earlier this year and 15 MW slated for the second half of 2014 – Ontario also has a number of storage demonstrations underway.  A 250 kWh/500 kW lithium ion community storage system is being tested by Toronto Hydro, and Temporal Power has two projects: one for wind integration with Hydro One, and one for frequency regulation developed by NRStor.  Hydrostor is testing a 4 MWh/1 MW demonstration facility to showcase the firm’s underwater compressed air system, 80 meters underwater.

First the Old World

In addition to batteries, compressed air energy storage, and flywheels, Ontario is adding hydrogen energy storage.  Hydrogenics has announced a 2 MW power-to-gas project in Ontario as a part of the 35 MW procurement.  Power-to-gas systems use surplus electricity and an electrolyzer to generate hydrogen for direct injection into the natural gas grid, or to generate hydrogen and then syngas for direct injection into the natural gas grid.  Ancillary benefits include using the electrolyzer for demand response (including frequency regulation).

In Navigant Research’s recent white paper, The Fuel Cell and Hydrogen Industries: 10 Trends to Watch, one of the trends examined is power-to-gas.  Specifically, the white paper suggests that the power-to-gas concept will be proven in Europe.  In the near term, Navigant Research estimates a $100 million market for power-to-gas in Europe in 2015.

Navigant Research forecasts that the market for power-to-gas in Europe will grow to as much as 665 MW in 2018, representing $850 million in revenue.  This base scenario equates to 4% of the wind capacity to be installed in Europe that same year, with a total installed capacity by 2018 equivalent to 1.9% of the installed capacity of wind from 2014 to 2018.

Although North America has a smaller grid system and the advantage of cheap natural gas – which makes it difficult to make a business case for any alternative technology to gas turbines – there is clearly room for power-to-gas.  Hydrogenics intends to find out how much.

 

In Asia, Wind Industry Picks Up Again

— August 6, 2014

The wind power market in Asia is normally quiet during summer, but this year is different.  Recent policies and new developments in China and India have delivered a very strong signal that Asia`s two largest wind power markets are ready to pick up the pace again.

China’s wind industry has been constrained the past few years by power transmission bottlenecks and high wind-power curtailment rates.  Figures released by China’s National Energy Administration (NEA) in July, however, show that the situation is improving, especially since the ultra-high-voltage Hami-Zhengzhou transmission line was connected.  In the first half of 2014, 6.32 gigawatts (GW) of wind power capacity has come online, up 31% from the same time in 2013, and the wind curtailment rate fell to 8.5%, 5.14% lower than the first 6 months of 2013.  It won`t be a surprise if this year China surpasses the record of 18.9 GW of new capacity that it achieved in 2010.

Survival of the FITtest

Another positive sign for the Chinese wind industry is that the NEA released its long-awaited feed-in tariff (FIT) for offshore wind in June.  Although the FIT is valid only for projects commissioned before 2017, and is not applicable for the four offshore projects included in the first offshore concession program, it provides certainty for near term investment.

According to Navigant Research’s annual wind power market report, World Market Update 2013, China will add 96 GW of new wind capacity over the next 5 years.

At the Offshore Wind China 2014 conference in Shanghai, many developers and turbine venders complained that the temporary FIT is too low and is not flexible to reflect differences in geographic location and wind resources.  While those are valid claims, I personally believe that NEA has learned from the “blind” investment that Chinese onshore wind experienced in the past and is working deliberately to introduce a low FIT so that only developers who have strong technical, engineering, and financial background and a sound project pipeline can take the necessary risks.  That’s the right way to minimize upfront risks and to secure a strong and stable offshore wind market in the long run.  Currently, there are six offshore wind projects totalling 784 megawatts (MW) under construction in China and another six projects totalling 1,350 MW that have been approved and are ready to be built.  It is likely that around 2,500 MW offshore wind capacity could be in operation by the end of 2016.

Restoration in India

In India, Asia`s second largest wind market, its Finance Minister has just announced the plan for the restoration of accelerated depreciation, an incentive was originally introduced back in 1990 but stopped in March 2012.  This tax savings supported private-owned projects that account for the majority of wind project installations in India.  At the historical rate of installation in India, AD is expected to create around 1,000 MW of wind power installations per year.  If the depreciation holds up, Navigant Research`s forecast for India in 2014, of 2,500 MW, is certainly achievable.

In short, it’s expected that India and China combined will account for at least 40% of global wind power installation in the next 5 years – a great contribution to reducing carbon emissions worldwide.  For a more detailed examination of the global wind power market, please join us for our webinar, “The State of the Global Wind Energy Industry,” on August 12 at 2 p.m. EDT.  Click here to register.

 

For Microgrids, It’s Not All About Size

— August 6, 2014

The University of Texas (UT) at Austin claims to have the largest microgrid in the world, with a peak load of 62 MW of capacity, serving 150 buildings.  The combined heat and power (CHP) plant that serves as the anchor is rated at 135 MW.

Leave it to Texas to make such a claim.  It’s not really accurate, but more importantly, it doesn’t really matter.  Bigger is not necessarily better when it comes to microgrids.

On the one hand, economies of scale tend to reduce cost.  But microgrids turn that assumption on its head, since onsite distributed energy resources (DER) reduce the line losses associated with the centralized power plant model.  I tend to agree with Steve Pullins of Green Energy Corporation, who says that the sweet spot for microgrids that incorporate new state-of-the-art technologies such as solar PV, lithium ion batteries, and CHP is between 2 MW and 40 MW.

Define ‘Big’

About every 6 months or so, I get an email from Craig Harrison, developer of the Niobrara Data Center Energy Park, asking me, “Am I still the largest microgrid in the world?”  The Niobrara proposal, which has increased in size from 200 MW to 600 MW over time (with both a grid-tied and an off-grid configuration now part of the single project), is still in the conceptual phase (you can see elegant renderings of the project provided by CH2M Hill.) In this case, a unique confluence of natural gas supplies and regulatory quirks (which in essence render the project as its own utility) conspire to set the stage for what will probably be (and remain) the world’s largest microgrid.  It’s only a matter of time.

Navigant Research’s Microgrid Deployment Tracker 2Q14 shows that the largest operating microgrid, if measured by peak demand (and not generation capacity), could be Denmark’s Island of Bornholm, which is interconnected to the Nordic Power Pool.  With peak demand of around 67 MW, the advanced pilot project incorporates plug-in electric vehicles (PEVs) and residential heat pumps, along with wind and CHP.

Like Military Intelligence

The microgrid at UT Austin is impressive, given that its origins date back to 1929 and it can provide 100% of the campus’ energy needs.  But it’s really an old school microgrid since it relies upon one source of electricity and thermal energy.  Robbins Air Force base in Georgia claims to have 163 MW of capacity, but it’s powered by large diesel generators, which are less desirable than CHP.  Much more interesting are microgrids that draw upon multiple distributed generation sources, incorporate advanced energy storage, and can sell energy services back to the utility.  The UT microgrid does none of these things.

In my view, a large microgrid is a contradiction in terms.  It’s much better to create multiple microgrids and then operate them at an enterprise level, creating redundancy via diversity of resources and scale, perhaps even mixing in AC and DC sub-systems.  To me, a microgrid such as the Santa Rita Jail, which is only 3.6 MW in size but incorporates solar, wind, fuel cells, battery storage, and a host of state-of-the-art energy efficiency measures, is more interesting than the one in Austin.  When it comes to distributed energy, diversity trumps scale.

 

In Africa, ‘Solar-as-a-Service’ Attracts US Dollars

— August 5, 2014

Long the domain of non-profits, church groups, and government programs, off-grid solar in so-called base of the pyramid (BOP) markets has shifted from an aspirational service to big business.  SolarCity, Vulcan Capital, Omidyar Network, and others recently invested $7 million in Off-Grid:Electric, one of Tanzania’s leading residential solar providers, which plans to reach 10 million homes in 10 years.  The investment follows a wave of funding for many similar companies operating in Sub-Saharan Africa and South Asia, which are the biggest markets for pico solar (or solar lanterns) and solar home systems.

Significant reductions in solar PV technology costs have opened up several new markets for solar as a service companies that provide 1 watt to 200 watt solar systems to people who live on as little as $2 per day.  The vast majority of the market is focused on providing lighting, cell phone charging, and power for small direct current (DC) appliances.  Navigant Research’s recently report, Solar PV Consumer Products, provides a comprehensive global look at the three primary segments of the solar off-grid lighting and portable power market: pico solar, solar home systems,  and solar PV generators and kits.  While the technologies behind these innovative products are all very similar, the applications, target markets, business models, and pricing are diverse.  We forecast that the annual market for solar PV consumer products will grow from $551 million in 2014 to $2.4 billion in 2024.

Less Than Kerosene

Up to 1.4 billion people worldwide, including nearly 600 million in Sub-Saharan Africa and 800 million in Asia, are without access to electricity, according to the International Energy Agency.  These populations previously had no choice but to pay high prices for low-quality and polluting fuel-based lighting, such as kerosene lamps.  Due to transportation challenges, kerosene costs as much as 50% more in remote areas than in cities, further contributing to the cycle of poverty.  In addition to providing inadequate illumination, kerosene lamps pose significant health risks.  New advancements in lighting technology have enabled the development of pico solar systems, which are compact, clean, and affordable off-grid lighting and energy products.  Many of these products use solar charging (<10 watt) and light-emitting diode (LED) lighting technology.  As with most renewable energy technologies, solar lighting is typically more affordable compared to conventional lighting primarily from kerosene, but upfront capital costs (even if only $10) can be a challenge to last-mile customers.

Companies such as Off-Grid:Electric are now offering a range of payment options to get around upfront costs, including microcredit, pre-payment options, and innovative pay-as-you-go technologies, which reduce barriers to ownership of solar lighting for rural customers – particularly for larger solar home systems that enable customers to do more than simply recharge mobile phones.

To date, most activity has been in Kenya, but the market in Tanzania has great potential to replicate those early successes, making the Off-Grid:Electric investment a good bet.  The system’s advantages are hard to beat and claim up to 50 times more light service for less than the current daily cost of kerosene. The company’s management team is representative of the growing breed of young, bright, highly skilled social entrepreneurs that are comfortable blurring the lines of traditional private versus non-profit ventures, launching social enterprises that seek to leverage the power of business and profits toward a goal that improves social well-being.

 

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