Navigant Research Blog

Buy a Car, Get a Solar Array

— July 29, 2014

BMW Canada is betting that electric vehicle (EV) drivers want to further reduce their carbon footprint by going solar.  The company’s new electric i3 comes with an added purchase incentive for Canadians: a 10% discount on a home solar system (only available in Ontario, Quebec, and British Columbia).  BMW partnered with Toronto-based PURE Energies, which will provide the solar home evaluations, panel installation, and relevant paperwork.

BMW Canada’s e-Mobility Specialist, Blair Dinsdale, stated in a press release that the solar energy offer “was designed to cover the exact amount of power you would use in the car, based on sun access in Canada.”  According to PURE Energies, a 6 kW system (24 panels) in Canada produces roughly 7,000 kWh of electricity per year.  The BMW i3 gets an estimated 100 miles of range per 27 kWh of electricity, as per the U.S. Department of Energy.  Thus, with a 6 kW solar system, a homeowner could drive the i3 nearly 26,000 miles per year exclusively on home-produced solar energy.

A Literal Sunroof

A February 2014 survey conducted by the Center for Sustainable Energy in California found that 32% of EV owners in the western United States already have solar panels on their homes.  While parts of Canada do not enjoy abundant sunshine, the province of Ontario does offer a feed-in tariff program to help offset the lack of year-round solar energy.

Although combining solar with EVs is not new, the move by BMW to offer direct discounts on a home solar system is a first for the industry, and a smart one.  According to Navigant Research’s 2013 Energy & Environment Consumer Survey, 79% of Americans have an overall positive impression of solar energy and 61% share the same impressions for EVs.  While not all consumers of EVs purchase the vehicle for environmental reasons, the ones who do place great importance on where the electricity to power the car comes from.  And, as you’d expect, EV owners align very closely with solar buyers from a demographic perspective.

Combining solar with EVs makes so much sense that several automakers are now showing prototype EVs with solar panels directly integrated onto the roof of the vehicle.  The Ford C-Max Solar Energi and the Sunswift eVe have built-in rooftop panels.  If BMW’s approach proves successful, we could see Tesla and SolarCity creating similar offers in the future.  For more information on solar and EV synergy, check out Navigant Research’s research brief, Solar and Electric Vehicle Cross-Marketing Strategies.

 

From NRG, a Solar Storm

— June 12, 2014

According to David Crane, NRG Energy’s outspoken CEO, residential solar power will be cost-competitive with retail electricity in about 25 states next year.  As a result, NRG is making some big moves in residential solar installation and financing.

In March, NRG announced that it is acquiring Roof Diagnostics Solar (RDS), which is the eighth-largest residential solar installer in the United States, employing 475 people.  NRG already has a small but growing residential solar installation and financing business called NRG Residential Solar Solutions (RSS), which mainly consists of licensed dealers and operates in Arizona, California, Connecticut, Hawaii, Maryland, Massachusetts, New Jersey, New York, Texas, and Vermont.  RSS has a fleet of several thousand residential systems installed, but it hit a sales plateau in 2013.  The company showed that it’s serious about becoming one of the largest solar installers and financiers in the United States by acquiring RDS, which will be rolled into RSS.  NRG hopes to maintain its existing installer network despite some channel conflicts with RDS, which operates in New Jersey, New York, Massachusetts, and Connecticut and has expansion plans for California.

Undercutting the Customer

NRG is also planning to eventually use the growing underground network of pipes that delivers gas to about half the homes in the United States to complement its residential solar business.  According to Crane, the company wants to provide customers with fuel cells and microturbines, which produce electricity from gas, to fill in the gaps of solar generation.  Plus, NRG is dabbling in energy storage and microgrids on Richard Branson’s Necker Island.

In some cases, NRG is making bets against its traditional customers (and its own traditional business).  It has become the largest power provider to U.S. utilities, with 25 GW of natural gas power plants, 13 GW of coal generation, 448 MW of wind farms, and 1.2 GW of utility-scale solar systems.  Some of this power goes to NRG’s own service territory, but more than half of the company’s revenue comes from power sales to other utilities on the wholesale market.  With its 47 MW of distributed solar panels on rooftops, NRG is actually undercutting the business of the utilities it serves.

A Lot to Lose

Why is NRG pursuing such an aggressive strategy?  As the largest power generator in the United States, NRG has a lot more to lose than transmission and distribution (T&D) oriented utilities with the proliferation of distributed generation (DG).  DG directly affects NRG’s bottom line, since every kilowatt-hour not provided by the company is a kilowatt-hour that’s costing NRG revenue.  This doesn’t affect utilities that are focused on T&D as much, since they’re still providing the same interconnection services (at least for the time being).  As a power provider, it’s in NRG’s interest to own as much of the utilized generation capacity as possible – and that now includes DG capacity, especially when you consider that DG output is always utilized due to policies like net metering.

Having an aggressive strategy also seems to be part of having David Crane as a CEO.  According to Crane, future power customers will be able to disconnect from the grid as they use residential solar coupled with energy storage and a gas-powered fuel cell or microturbine to provide for their own power needs.  This was the subject of Navigant Research’s recent webinar, The Energy Cloud.  Crane is positioning NRG to be the supplier of solar arrays, fuel cells, and microturbines to power customers in this age of grid obsolescence.  It’s remarkable to see a utility betting on the grid’s eventual obsolescence, but it’s important to note that within that framework, NRG is still maintaining its core business as a power provider.

 

Solar PV Becoming Miners’ Friend

— May 12, 2014

At the Zwartkop Chrome Mine, near Thabazimbi, South Africa, mining company Cronimet Chrome SA has established a technological innovation – not below the ground, but above it.  To help power the mine, Cronimet installed a hybrid solar-diesel system that includes 4,158 solar photovoltaic (PV) panels, producing 1.8 GWh of electricity – about 60% of the mine’s power.  According to a report released by Carbon War Room in March, the Cronimet system will not only reduce fuel costs and carbon emissions for the mine, but also has the potential to “power local communities and improve the local economy.”

Like natural gas and wind power, solar PV and mining are becoming odd bedfellows – seemingly incongruent players in the energy landscape that are increasingly being paired to create win-win situations for each party.  Solar PV is increasingly being utilized to reduce the costs and lower the environmental damage of extracting coal and other minerals.  Chile, South Africa, and Australia are three of the leading countries where solar PV is being installed on mining operations, due to the remote location of the mining sites, unreliable (or nonexistent) electricity from the grid in the mining area, and the heavy use of diesel gensets in every aspect of mining operations.  Navigant Research’s Renewable Energy in the Mining Industry report forecasts that renewable technologies will supply between 5% and 8% of the world’s mining industry power consumption by 2022.

Winning Combination

The world’s largest solar PV company, U.S.-based First Solar, is now aggressively targeting diesel replacement solutions for African mines.  The company acquired Solar Chile, a Chilean project development company with a pipeline of 1.5 GW of solar PV, in 2013.  Much of this pipeline is in the Atacama Desert region, which boasts some of the highest solar irradiance in the world.  Combining high solar irradiance and high cost of electricity is a recipe for solar company success.  First Solar says its levelized cost of electricity is as low as 7 cents per kWh in such places – making it competitive with grid prices without subsidies.

In Australia, First Solar says it expects to develop as much as 200 MW of capacity for the mining industry over the next 3 years.  First Solar’s Sydney-based vice president of business development for Asia Pacific, Jack Curtis, tells Bloomberg News that mines are not as profitable as they used to be, meaning cost control is a bigger concern, and solar PV can be a hedge against volatile fuel costs.

Similar to wind, the solar PV market of today has evolved into a sophisticated global industry and has distanced itself in some ways from the us versus them approach of renewables and fossil fuels.   There can be synergies, albeit uncomfortable ones.

 

Hungry Solar Developers Look to Booming South Africa

— May 8, 2014

South Africa leads the renewable energy market in Africa.  The country has established a target of nearly 3.7 GW of renewables installed by 2030; in November 2013, it completed its third round of bids under the Renewable Energy Independent Power Producer Program, bringing the country to 86 MW of solar operating and nearly 1.5 GW in development.  The program provides power purchase agreements (PPAs) over 20 years with the country’s primary utility, Eskom, for projects up to 75 MW.  In the third round of bidding alone, the country procured 787 MW for wind projects, 450 MW for solar PV, and 200 MW of concentrating solar power (CSP).  There were also bids for 16.5 MW of biomass and 18 MW of landfill gas power.  Not bad for one of the top coal-producing countries in the world.

As is common practice with bidding processes for any large infrastructure projects, the government included a local content requirement (LCR).  In the third round of bidding, the LCR was increased to 45% and, in a unique twist, the local company had to have a black South African shareholder majority.  Together, these requirements were expected to reduce the attractiveness to foreign companies and increase bid prices – both of which proved untrue.  The average price for solar PV projects dropped from around $3.50/W in the first round to less than $2.50/W in the second and third rounds.  This is competitive with solar being installed anywhere in the world today.

Open and Fair, Mostly

This is largely because the companies bidding include leading international project developers, such as Spain’s Abengoa, Italy’s Enel, China’s Longyuan Power, Norway’s Scatec, and SunPower Corporation (where France’s Total is now the majority shareholder).  China’s Trina Solar and U.S.-based First Solar are also active in South Africa.  While the market has either slowed down or become saturated in their home countries, international players are looking to emerging markets to grow sales.  This is a strong indicator of the hunger level of international power producers and the mature state of the solar PV industry in South Africa.

Bidders reported that they were generally pleased with the transparency of the process, typically a gripe when operating in emerging markets, including much of Africa.  There were construction delays for the first two rounds of projects and delays in announcing the third round of preferred bidders due to the overwhelming number of applicants – but these are to be expected as the country gets its first gigawatt under its belt.

The question is whether this apparent success can be replicated in other African countries.  Large-scale solar PV projects are operational in Reunion (15.6 MW), Mauritania (15 MW), and Cape Verde (5 MW), with a number of projects on the continent in development – notably Rwanda, with 8.5 MW.  Kenya, Tanzania, Nigeria, and Ghana are other countries with strong prospects and abundant activity in both on-grid and off-grid solutions.

 

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