Navigant Research Blog

Signposts Along California’s Distributed Generation Corridor

— March 24, 2015

Driving south on the Interstate 5 corridor from the Oregon border to the San Francisco Bay Area, you can see numerous renewable energy projects off I-5. These projects stand as modern signposts to the maturity of—and transition in—the U.S. clean tech industry. Five years ago, renewable installations were mostly limited to remote, utility-scale wind farms in Tehachapi and along the Altamont Pass. While utility-scale installations continue to grow, there is now also a strong focus on distributed generation: solar, wind, fuel cells, and generator sets located directly onsite or on the distribution grid.

The United States is expected to be a leading market for distributed generation, with more than 250 GW installed cumulatively between 2015 and 2023, according to Navigant Research’s report Global Distributed Energy Deployment Forecast. The sites discussed below are some of the most visible installations along the drive down to the Bay Area. They represent the focus on distributed generation today and in the years to come.

Signposts

As you drive through the city of Red Bluff, you see a 1-MW General Electric (GE) wind turbine installed at the Wal-mart distribution center. Wal-mart is the leading consumer of solar PV among U.S. retailers, with 105 MW of installed capacity, twice as much as the second-leading company, Kohl’s, with 51 MW. Big box retailers have installed more renewable energy than tech companies have and are a coveted prize for installers looking for big customers.

If you take the shortcut from I-5 to 505 South, toward San Francisco, it connects to 80 West in Fairfield/Vacaville, where a 1.1 MW solar PV installation at the North Bay Regional Water Treatment Plant is installed. With large energy consumption, water treatment facilities are costly for cities to operate, leading to attractive payback rates.

Renewa-Beer

When you drive further, the Budweiser plant catches your eye right off the freeway, with 3 MW of wind power located onsite. The plant also uses solar and bio-energy recovery systems. These systems combined produce approximately 30% of the plant’s power onsite. Belgium’s InBev may have offended the cultural sensibilities of some Americans when it acquired Anheuser Busch in 2008, but it used American turbines–GE 1.6-MW units.

One of the other noticeable aspects of the drive through California, particularly in Davis and Sacramento, is tract housing developments, where residential solar PV is increasingly prevalent. The residential solar PV market in California has nearly doubled in each of the last 3 years thanks to growth in the solar lease model.

California is expected to continue to lead the way in distributed generation, with systems increasingly utilizing energy storage. Though these storage systems won’t all be visible along the road, they will help more renewables capacity to come online, making the drive more scenic each year.

 

Investors Driving Energy Access Markets

— March 24, 2015

One of the signs of an industry that’s coming of age is when there are enough investors actually attending a conference that you can put investors in the title. Such was the case for the second annual Energy Access Investor Conference in London. Jim Rogers, former Duke Energy CEO, was the keynote speaker this year, adding some utility industry credit to the event.

When I talk to people about the opportunity for solar lanterns and solar home systems (1 W-200 W) for people making less than $2 a day, I usually receive a combination of blank stares and befuddled looks. But 2014 was a breakout year, and this innovative industry is expected to continue expanding in 2015. According to Navigant Research’s report, Solar Photovoltaic Consumer Products, annual revenues for pico solar and solar home systems are expected to grow from $430 million in 2014 to $1.3 billion in 2024.

2014 Highlights

A couple of highlights from 2014:

  • Public and private investment in off-grid lighting surpassed $80 million.
  • Big names entered the market, including SolarCity, Vulcan, Omidyar Network, Schneider, and DFJ.
  • Platform companies emerged, including d.light, Barefoot Power, Greenlight Planet, and others.
  • Markets such as Bangladesh continued to grow even as incentives continued to wind down.

The Year Ahead

Looking ahead in 2015, I expect to see four major trends. First, consolidation will become more common as the larger players continue to gain market share. Second, existing companies will need to expand into new markets, particularly as Kenya, India, and Bangladesh become increasingly saturated. Third, mobile payment and monitoring systems, such as M-KOPA, will gain traction and increasingly become standard in products. Fourth, direct current consumer products, such as fans, radios, refrigerators, TVs, and other appliances specifically designed for less than 200W solar home systems, will grow in popularity.

With any luck, the fifth major trend will be less befuddled looks on people’s faces when I discuss the innovation and economic opportunity in some of the world’s most remote markets.

 

Net Metering Fight Comes to New Mexico

— January 8, 2015

The fight over solar interconnection and net metering – a topic I’ve covered previously in several blogs (here, here and here) – has come to my home state.  In a rate case filed in December, Public Service of New Mexico (PNM) asked that customers with their own solar generation capacity solar customers be charged $6 per kilowatt (kW) of capacity, per month, beginning in 2016.  It also proposed that “banking” of excess power sold back to the utility be discontinued; this means that rather than selling back excess kilowatt-hours (kWh) generated in March for top dollar in July, solar customers will receive the net value of the energy in the same month that it’s generated.

Girding for a Fight

Solar industry advocates suggest that the plan will severely dampen demand.  New Mexico has abundant sunshine, but a relatively poor economic base, and solar adoption in the Land of Enchantment has been lower than one might expect.  According to IREC, New Mexico ranked 9th nationwide in total PV installations, with 257 megawatts (MW), at the end of 2013.  With accelerating economic recovery and the expiration of federal tax credits just 2 years away, New Mexico is poised for strong growth in 2015-16.

And that’s why PNM is making this move now.  Its argument that non-solar customers are increasingly subsidizing solar customers has merit, and growth in installations is only going to cost PNM more as it not only loses revenue from solar customers, but also must invest in its grid to support increased two-way electricity flow and changing load profiles.

Hitting Home

I’ve studied the proposal with more than just professional interest.  I recently got a quote for a solar array on my own home, in southern New Mexico, and while PNM isn’t my utility, El Paso Electric, my local provider, will surely be watching the proceedings closely.  Here’s my take on the situation, both as an analyst and as a potential solar customer.

First, $6/kW is fairly substantial, from a solar customer’s point of view.  PNM says that the average New Mexico system in its territory is 3-5 kW, but solar installers suggest that recent installations average 6 or 7 kW.  In order to serve my 2,800 square foot home, a 10kW system was proposed.

So while PNM says its fee would average $18-$30/month, my own system would cost $60/month under the PNM proposal.  That would extend the payback period for my system from 8 years to 11 years.  But, unless I sell my house in the next 10 years, it’s still a good investment.

The solar industry, however, doesn’t agree.  A recent article in the Albuquerque Journal offered detailed numbers to illustrate how PNM’s fees will change the solar equation to the point where consumers are better off sticking with the utility.

Payback Period

There are some flaws with this analysis, however.  First, solar panel prices have been falling dramatically, and should continue to do so for many more years.  So the math outlined in the Journal, based on current prices, will likely become moot in another year or two.  Second, the article fails to ascribe value to the fact that once the system is paid for, the homeowner pays only the connection fee to the utility.

In my case, the average monthly bill would fall from $223 (today) to $60.  Call it a $200 per month saving to account for rate increases.  Even with PNM’s proposed connection fee, the system will easily last long enough to support the investment –.

New Mexico’s installed base of solar systems is likely to double or triple over the next decade.  It’s not reasonable to expect utilities to interconnect these customers for free, pay them peak prices for non-peak production, and spread those and other costs over the shrinking base of rate payers.  But I do think it’s reasonable to question the $6/kW figure and ask PNM to justify it—especially since Arizona’s compromise plan last year came in at a far lower level.

 

How Green Is My Casino?

— December 21, 2014

On a recent trip to Las Vegas, I found myself wondering just how much energy is being consumed compared to other cities around the country.  It doesn’t take much research to grasp the enormous amount of energy needed to power all the neon, slot machines, sound systems, sportsbook TV screens, and massive air conditioners required to make the desert city an international tourist destination.  While recent efforts by resorts to “green” their operations have made an impact, they don’t address the root of the problem.  Sin City is unique in its geographic location – which provides both challenges and opportunities to operate a sustainable energy system.

Can’t Take the Heat

Las Vegas’ desert location would be very uncomfortable throughout the summer without modern air conditioning.  This presents significant challenges to resort designers who must overcome the desert sun to provide comfortable environments across millions of square feet.  At the scale of an individual hotel room, this challenge is easier to understand.  Large floor to ceiling windows are quite popular in the city but allow tremendous amounts of heat to enter the room.  Simply installing automatic blinds or smart glass windows could dramatically reduce this effect.

Although HVAC systems have been a target of recent conservation efforts, older hotels rely on outdated systems.  The New York, New York hotel I stayed in had only a very basic analog thermostat with simple controls and no ability to schedule.  Innovations to improve the efficiency of commercial HVAC system are discussed in Navigant Research’s report, Advanced HVAC Controls.  Perhaps the most effective addition to this hotel would be the installation of advanced occupancy sensors.  Visitors in Las Vegas often spend long periods of time outside of their hotel rooms.  In many cases, lights are left on and cooling systems set at full blast while a room is unoccupied for hours.  Occupancy sensors, integrated with a more intelligent building management system (BMS), could dramatically reduce the amount of energy used by each hotel room.  This could be an extremely beneficial investment for hotels that must absorb the cost of energy used by their guests.  Solutions to improve efficiency in hotels are explored in detail in Navigant Research’s recent report, Energy Management in the Hospitality Industry.

Untapped Resources

While the natural environment of southern Nevada poses challenges to conserve energy, it also provides vast untapped potential to generate it.  The Hoover Dam has enabled dramatic growth in Las Vegas over the years, although it currently provides barely 20% of the city’s peak energy needs.  As noted in a recent blog by my colleague Mackinnon Lawrence, recent droughts threaten the reliability of this resource, as well as the viability of fossil fuel plants requiring large amounts of water to keep cool.  A quick glance out my hotel room window revealed a massive casino roof – a perfect spot for a solar array totally unutilized.  Satellite images of the city show that this is very common and little to no solar power is installed on roofs of power-hungry mega-resorts.

For a city that receives intense sunshine nearly year-round, this is a huge opportunity to generate clean and affordable power.  And efforts are underway to take advantage of the clean energy resource available to the city.  This past summer, MGM Resorts announced a partnership with NRG Energy to install a massive rooftop solar array at the Mandalay Bay Resort.  The 20,000 panel, 6.2 MW installation is expected to generate nearly 20% of the Mandalay Bay’s power demand.  This project represents an important step in the right direction; hopefully, it will inspire others in the city to fully utilize the natural resources available to them.

 

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