Navigant Research Blog

Renewable Energy Grows, Large and Small, in Africa

— December 8, 2014

More than two-thirds of the population of Sub-Saharan Africa has no access to electricity – a figure that rises to more than 85% of those living in rural areas.  Those that do enjoy electricity pay some of the highest rates in the world.  Now, though, the opportunity for renewable energy investment in Africa is finally being realized.  Renewable energy growth in Africa has typically been due to investment in large hydropower plants.  The new wave of investment is now happening across the spectrum – including in utility-scale solar PV, wind, geothermal projects (greater than 10 MW in size), and pico solar systems (under 100W) that encompass solar lanterns, task lights, and solar home systems for people who typically earn less than a few dollars per day.

Beyond Johannesburg

At the utility scale, the leading country in Africa for renewable energy deployment is South Africa, where the government’s integrated resource plan may result in nearly 10 GW of solar PV installed by 2030.  With nearly 1.5 GW of solar PV and 2 GW of wind currently installed or in development, following four well-administered auctions, the country is making strong progress.

Kenya, arguably the next leading market, has 750 MW of solar PV and 290 MW of wind approved and in development.  South Africa and Kenya have both seen strong economic growth over the past decade and are typically the landing points for new companies looking to expand in the region.  The opportunity for large-scale renewable energy investment is now expanding to other African countries through similar mandates for integrating large amounts of renewable energy as part of their overall strategies for increasing electrification rates and meeting demand for power that’s crucial for economic development:

  • Rwanda: An 8.5 MW solar PV installation was built by GigaWatt Global Rwanda in Agahozo Shalom Youth Village for $23 million ($2.70/W); in addition, the government has set a 567 MW target for new renewable energy installed capacity by 2017.
  • Tanzania: The government of Tanzania has a renewable energy target of 14% by 2015.
  • Mauritania: 15 MW of solar PV have been installed, and 15 MW are in development.  The government has targeted 40% rural electrification by 2020.
  • Ethiopia: A 20 MW module assembly line was completed in partnership with Sky Energy.
  • Ghana: The government is targeting 10% renewable energy by 2020.

At the Pico Scale

Of course, there will be challenges along the way in executing these targets and ensuring a fair and transparent process for bidding on projects in these countries.  But if the majority of major announcements are realized in the next 6 years, the African solar PV market could see more than 8 GW installed and $23 billion in revenue by 2020.

On the pico solar side, Navigant Research’s report, Solar Photovoltaic Consumer Products, forecasts that the pico solar and solar home system market could surpass 130 MW in annual installations in Africa by 2018, resulting in revenue in the neighborhood of $500 million.  Kenya is the leader here, as well, expected to account for approximately 20% of the African market followed by Tanzania.  Venture investment is now flowing to so-called social enterprises that use for-profit business models to reach reduce poverty and spread electrification.  Pay-as-you-go and mobile phone-based payment systems are expected to be the key to enabling pico solar to scale effectively.

The success of several leading companies – such as D.Light, Barefoot Power, Green Light Planet, M-KOPA, and others – has led to a crowded market in Kenya, in particular, and the need to expand to new markets, including Malawi, Zambia, Rwanda, Uganda, Nigeria, and Zimbabwe, is increasingly on the radar.

Taken together, impressive growth in utility-scale renewables and of pico solar systems in Africa shows that developing countries can forge their own paths, achieving the benefits of electricity without becoming dependent on large, polluting thermal power plants.

 

Small Wind Leases Open Up New Markets

— December 8, 2014

With more than 5 MW of distributed solar PV being installed per day in the United States, third-party-owned (TPO) systems have catalyzed growth in residential and commercial market segments.  Until now, the wind industry has missed out on the immense opportunity offered by customized power purchase agreements and lease options for its customers.  As with TPO solar, wind leases enable customers to start saving money on their electric bills immediately, with little-to-no money down.  The system owner, meanwhile, takes advantage of the federal investment tax credit (ITC), depreciation, and other state incentives.

Based in Brooklyn, New York, United Wind is a developer of small wind projects and is currently offering lease options for 10 kW and 50 kW wind turbines.  The company has focused its efforts in New York, where the New York State Energy and Research Development Authority (NYSERDA) wind incentive can mean up to $40,000 in credits on a 10 kW system, on top of the 30% ITC.  Other companies are also trying to provide financing options for their customers, either directly or through third-party sources, but uptake has been slow.

Slow Off the Mark

According to Navigant Research’s report, Global Distributed Generation Deployment Forecast, 225 MW of small and medium wind (<500 kW) are expected to be installed cumulatively in the United States between 2014 and 2023.  Overall, the small and medium wind market in the United States has been far surpassed by the solar PV market due to rapidly declining costs that small wind has not been able to match.  With state incentives, in regions with strong wind resources, small and medium wind can be more cost-effective than solar PV, but the industry has been on its heels for the past few years.  As key state incentives have expired, a number of companies have gone under.

At the same time, distributed solar PV companies secured hundreds of millions of dollars in investment, established national sales operations, and significantly reduced customer acquisition costs.  The wind lease option is intended to tip the scales back in favor of small wind in key market segments, such as agriculture, manufacturing, municipalities, universities, schools, and hospitals, in places where wind is abundant.

As with solar PV, wind leases will range from 15 to 20 years on average and include guaranteed performance (in kilowatt-hours generated) warranties that include maintenance and insurance – all wrapped into a single payment.  This puts a premium on site assessment, since customers that don’t see cost savings are a risk to default on their payments.

The small and medium wind market needs to prove it can succeed in markets without lucrative state incentives.  The lease model is a great opportunity to move in that direction, but will require significant investment.

 

As Demand Soars, Construction of LNG Terminals Booms

— November 24, 2014

International marine construction companies are seeing a bonanza of new projects as countries around the world approve massive new terminals for liquefied natural gas (LNG) – for imports in most cases, and for exports from North America, Australia, and some Southeast Asian countries.  Altogether, this frenzy of port building could amount to hundreds of billions of dollars over the next decade as seaborne trade in LNG climbs to meet spiraling demand, particularly in the energy-hungry countries of China, India, and other Asian nations.

Total deliveries of LNG were flat in 2013 compared to 2012, according to the BG Group, but this masks pent-up demand, as producers in the United States are ramping up export capacity and importing countries are scrambling to build import terminals.  BG Group forecasts that worldwide LNG demand is expected to increase at a rate of 5% annually through 2025, with much higher rates in the developing countries of Asia.

North America

In September, the U.S. Federal Energy Regulatory Commission (FERC) gave final approval to the Cove Point LNG facility, overruling the objections of environmental groups and bringing to four the number of U.S. export terminals officially approved and under construction.  All told, 14 terminals are seeking approval by federal regulators in the United States, on the Gulf Coast, the East Coast, and the Pacific Northwest.  The Northwest facilities, in particular, face fierce opposition from environmentalists opposed to the increased fracking that large quantities of U.S. exports will entail.  With big potential markets waiting not only across the Pacific, but also in Europe, U.S. oil & gas companies and their representatives in Washington, D.C. are eager for more export capacity to come online.  There are also at least a dozen LNG terminals proposed along the coast of British Columbia.

Europe

With unrest in Ukraine giving rise to fears of disruptions of natural gas supplies from Russia, which provides 30% of Europe’s natural gas, European governments and companies are scrambling to build new import facilities.  Paradoxically, with international supplies limited and with Japan, which relies more heavily on imported natural gas for its energy supply than any other country, soaking up much of the available supply at inflated prices, imports to Europe have declined in the last couple of years.  The Gate terminal on the North Sea coast near Rotterdam was built with the support of the Dutch government to maintain the Netherlands’ status as a regional gas hub.  It is now running at 10% of capacity, according to The Economist.

Nevertheless, imports from the United States are sure to increase, and the European Union sees the construction of new import terminals as a critical matter of regional energy security.  Lithuania, for example, is due to open a massive new floating terminal this year or in early 2015.  New terminals are especially important along Europe’s vulnerable southeastern coast, as currently countries in the area are essentially captive customers to Russia’s Gazprom.

Amos Hochstein, the acting U.S. special envoy and coordinator for international energy affairs, testified recently before the Senate Foreign Relations Committee, saying that “[there is a] critical need for Europe to improve its energy infrastructure by constructing new pipelines, upgrading interconnectors to allow bidirectional flow, and building new LNG terminals to diversify fuel sources … We support proposals to build LNG terminals at critical points on European coasts, from Poland to Croatia to the Baltics.”

Asia

The biggest building boom is underway in China, where three import new terminals came online in 2013 and at least two more are expected begin operation before the end of this year.  Already, half of the world’s capacity for regasification (the conversion of LNG to conventional natural gas, for transport by pipeline) is located in Asia.

“China’s imports of liquefied natural gas (LNG) are growing at a record pace,” reported Reuters earlier this year, “as it aims to use cleaner fuels to cut smog in big cities, creating a powerful new source of demand that has the potential to reshape the market for the super-chilled gas.”  China’s LNG imports grew 35% in the first quarter of this year compared to the same period in 2013.

Meanwhile, new production is emerging from Southeast Asia, particularly in Indonesia and Papua New Guinea.  Also, Singapore, which sits at the mouth of the Strait of Malacca, through which passes more than half of the world’s seaborne LNG, has formed ambitious plans to be the LNG trading hub for Southeast and East Asia.

These LNG terminals tend to cost around $10 billion apiece.  It’s a good time to be in the business of building them.

 

With New Plant, Alevo Claims Major Battery Advances

— November 10, 2014

Swiss manufacturer Alevo has launched a new battery and grid storage division in North Carolina that it promises will lead to hundreds of megawatts worth of battery-based grid storage projects.  The U.S. subsidiary hopes to manufacture its formulation of lithium iron phosphate (known in the industry as LFP) batteries in the 3.5 million square foot Concord, North Carolina factory.

Alevo’s battery chemistry is not new – there are dozens of LFP manufacturers (most based in China) cranking out hundreds of megawatts of batteries for portable power and grid storage applications.  However, Alevo claims that its formulation of the chemistry (primarily its secret electrolyte additives) will enable its LFP batteries to last as long as 43,000 cycles of full discharge.  If such a cycle life is proven in the field, this chemistry will represent the most durable lithium ion (Li-ion) battery available today.

An Impressive Debut

Alevo also claims that it uses a non-flammable electrolyte, which makes its battery less prone to catching fire than most grid storage batteries.  Although the company won’t discuss manufacturing costs, LFP batteries have relatively cheap material inputs, opening up a potential path toward low-cost cells.

During the unveiling ceremony at the Concord plant (complete with a drawing back of the curtains on stage, swirling searchlights, and wolf whistles from the employees that packed the audience – all for a 20-foot shipping container), the air-cooled battery bank was displayed, along with its Parker Hannifin inverter and fire detection and suppression equipment.  Alevo also highlighted its big data and analytics capabilities, which it says are needed to help deploy and optimize the energy storage system.

While Alevo seems to have plenty of capital behind it (Reuters reported that Swiss investors have put up more than $1 billion), as well as several global partnerships, it has significant challenges ahead.  The most important of these focus on the battery cells themselves: real-life durability and manufacturing cost.

Two Challenges

On the durability front, Alevo’s internal accelerated testing of 43,000 deep discharge cycles is indeed impressive.  But accelerated testing is an imperfect science.  Batteries tend to perform very differently in the real world over the course of decades, as opposed to laboratory benchmark tests that model expected long-term battery durability.

As for manufacturing costs, Alevo has a hard mountain to climb to learn how to become a battery manufacturer, especially with the challenges that LFP technology brings to the factory.  Unlike other Li-ion chemistries, LFP requires very finicky vacuum technologies that make large-scale manufacturing hard to do efficiently.  Many other LFP manufacturers have assumed cheap manufacturing costs only to find that the chemistry left them with much higher costs, lower yields, and more failures than expected.  While other cobalt-based Li-ion chemistries have higher costs for material inputs, the manufacturing processes are much simpler and easier to scale.  Alevo’s claims are impressive; proving them will be another matter.

 

Blog Articles

Most Recent

By Date

Tags

Clean Transportation, Digital Utility Strategies, Electric Vehicles, Energy Technologies, Finance & Investing, Policy & Regulation, Renewable Energy, Smart Energy Program, Transportation Efficiencies, Utility Transformations

By Author


{"userID":"","pageName":"Smart Energy Program","path":"\/tag\/smart-energy-program?page=3","date":"5\/27\/2018"}