Navigant Research Blog

California Bills Shape New Energy World

— September 16, 2013

Cross_Gatel_webCalifornia governor Jerry Brown is likely to sign two key pieces of legislation this fall that will have a strong impact on two technologies influencing energy markets globally.

The first bill is AB 327, which addresses the topic of net metering for rooftop solar photovoltaic (PV) systems and residential rate reform.  Net metering allows owners of small solar PV systems to use the grid as a giant battery, shifting any excess generation to the grid for use by other utility customers, and then taking back energy from the grid when the sun isn’t shining.  I tackled this topic in January as the legislative cycle began, highlighting utility complaints that, as more and more customers generate their own power using net metering, the costs of maintaining the power grid that benefits us all are spread across a smaller and smaller set of customers without solar PV.

Here are the primary aspects of AB 327 that could create a seemingly unlimited market for not only solar PV, but all forms of renewable energy:

  • Removes the scheduled suspension on net metering that was to go into effect at the end of this year
  • Eliminates uncertainty over how the current net metering cap is calculated, and provides a framework for permanently removing the net metering cap altogether
  • Removes the current 33% ceiling on the state’s Renewable Portfolio Standard, which, in essence, means there is also no cap on California’s wholesale renewable energy supplies

Pacific Gas & Electric, with a nation-leading 90,000 customers taking advantage of net metering, supported AB 327, as did the solar lobby and ratepayer advocates, but only after a series of last minute amendments brokered, in part, by the governor’s office.  What makes this legislative consensus even more amazing is that California has among the most liberal net metering laws in the country.  The battle over net metering is still brewing across the United States, but this California deal may take some of the some of the acrimony out of the debate, and point a path forward for compromise.

The other bill worth noting heading for Gov. Brown’s signature this month is SB 4, which addresses natural gas fracking, which has helped provide a huge supply of low-priced natural gas but, according to critics, also poses environmental risks.  Just as utilities have attacked net metering, the American Petroleum Institute has sought to undermine RPS laws, arguing that they increase costs to consumers and favor renewable sources over natural gas.  Natural gas prices have doubled in California in the last year, which, coupled with tighter limits on emissions of carbon due to the state’s climate change law, led to a 70% increase in wholesale energy prices in California.  Only time will tell how the combination of new fracking regulations and removal of any prescribed limit on retail and wholesale renewables will impact California’s energy market.  My prediction?  Growth in microgrids and other smart grid solutions will continue, as clearly the current status quo will no longer do.


Concentrating Solar Thermal Market Losing Steam?

— September 9, 2013

Many in the cleantech industry 5 years ago (myself included) believed that concentrating solar thermal electric (CSTE) technologies represented the only way to get to competitive solar electricity pricing in the near term.

Very smart people saw the same opportunity in 2008:

“With the current plants, those in construction, those under consideration, and the pace of development, it is clear that some tens of gigawatts (GW) of cumulative production over the next decade – possibly as much as 50 GW – of concentrated solar power (CSP) capacity will be installed by 2020.”

By the end of 2013, only roughly 3 GW of CSTE will be installed worldwide, and only 1-2 GW is expected to be added annually through 2018.  Meanwhile, in 2018, more than 60 GW of solar PV will be installed in that year alone, according to Navigant Research’s recently released Solar PV Market Forecast report.

Drying Up in the Desert

Visions of mega-projects in the Mojave Desert, which at one point reached 24 GW on U.S. Federal Bureau of Land Management property alone, have seemingly evaporated.  Plans for similarly ambitious installations throughout North Africa and the Middle East have progressed slowly.  The first phase of a targeted 500 MW CSP plant is expected to come online in 2014 in Morocco.

To be sure, some impressive projects have moved forward in the United States, including a 377 MW project being built in partnership with Brightsource, NRG, and Google in the Mojave Desert that will be the largest solar thermal facility in the world when completed at the end of the year.  However, the industry is clearly not reaching its full potential.  There are a number of reasons for this.

The economic crisis crippled project financing in leading markets such as Spain and the United States, and environmental concerns over transmission lines and water usage have cast a shadow over promising projects in the U.S. Southwest.  Political turmoil has delayed project planning in the Middle East.  Natural gas prices have fallen precipitously in the United States (although, they’ve rebounded somewhat in the last year), while, at the same time, the rapid price decline of solar PV modules has enabled both utility-scale and distributed solar projects to come online more quickly and affordable than anticipated.

Focus on Value

This has forced many CSTE developers to focus on the key value that the technology brings to the table, namely hybrid and storage applications.  Utilities, including Florida Power & Light and Tuscon Electric Power, have experimented with integrating solar thermal technology into existing (or co-located with) natural gas-fired plants.  In 2011, GE announced a hybrid natural gas solar thermal plant in Turkey with target for completion in 2015.  But the market for these applications has not taken off as expected either.

The benefits of storage are more appealing since the use of molten salt and other thermal storage technologies enables greater flexibility in dispatching power to the grid.  A recent NREL study found that the value of CSTE with storage is $32/megawatt-hour (MWh) to $40/MWh higher than the value of a solar PV plant.

Brightsource expects the global market for CSP to be approximately 30 GW by 2020, with growth from the Americas, China, Middle East, North Africa, and South Africa.  That’s highly optimistic.  Even though the two are not mutually exclusive, CSTE is expected to remain only a fraction of the solar PV market for the foreseeable future.


Wind Power is Killing Birds and Bats – So What?

— August 2, 2013

That wind farms kill birds and bats is not news.  Nevertheless, a recent study by S.K. Smallwood, has gained attention recently for finding that estimates of mortality rates may be understated.  Smallwood’s conclusions have been overstated in the press – cited as another reason to mistrust renewable energy.  In the wind industry and in wildlife protection circles – among the experts, in other words – the findings are less alarming.  Two reasons stand out: a) the number of birds killed by wind power generation is minimal compared to other sources of human-caused bird kills, and b) the wind industry continues to collaborate with wildlife agencies to create solutions that will further minimize windmills’ affects on wildlife.

To put things into perspective, Smallwood’s estimate of 573,000 bird kills at wind farms (based on 2012 wind energy levels) pales in comparison to other human-caused bird deaths. In 2002, the U.S. Fish and Wildlife Service estimated the following numbers of annual bird deaths from human causes:

  • Hundreds of millions of deaths (estimates vary widely) from collisions with buildings
  • 4 to 50 million deaths from collisions with communication towers
  • 174 million deaths from collisions with  transmission lines
  • 60 million deaths from collisions with cars
  • 72 million deaths from pesticide poisoning
  • Up to 2 million deaths from oil and wastewater pits
  • 39 million deaths due to cat predations

These figures are now outdated, and have likely increased, further dwarfing bird kills at wind farms.  Additionally, wind power generation poses much less risk to birds than other forms of energy generation.  It’s estimated that, in 2006, fossil-fuel power plants were responsible for 14.5 million bird deaths.

Night Off

Because wind power is a safer alternative for wildlife compared to other sources of energy, wildlife agencies and protection groups have been working with the wind industry for years to minimize impacts to all wildlife at wind farms while promoting wind energy development.  These efforts resulted in the 2012 U.S. Fish and Wildlife Service Land-Based Wind Energy Guidelines, which describes best practices for siting and surveying wind farms.  What’s more, wind developers are encouraged to take preemptive actions to avoid harming wildlife, such as siting farms as per the USFWS Guidelines, purchasing incidental take permits if there is an unavoidable risk of harming protected wildlife, and other mitigation strategies for potential impacts.  Even when all of these have been considered, deaths still occur, and some wind developers are taking matters into their own hands to minimize bird and bat kills.  Since finding a dead endangered Indiana bat at the company’s wind farm in 2011, Duke Energy pauses operation of the wind farm from dusk to dawn during the bat’s migration season to avoid future fatalities.  Other wind developers are now curtailing operations at wind farms when bird or bat migration is occurring.

Wind farms, however, are not excluded from wildlife laws, contrary to the thoughts of some. If wind developers choose to move forward without taking the above-mentioned precautions and the death of a protected species occurs, an investigation and lawsuit are possible.  This has occurred over the deaths of bald and golden eagles and Indiana bats on numerous occasions.

Birds and bats are being killed at wind farms, but not nearly to the same extent of other anthropogenic causes.  All forms of power generation are dangerous for wildlife.  Wind power is just less so.


Case Builds for Storage + Solar

— July 16, 2013

A few weeks ago, Germany announced a subsidy for energy storage systems paired with distributed PV, or ESS+PV.  In a blog on the details of this subsidy and others like it, I explained why it was important for the market.  What hasn’t been clear is why a government would be keen to encourage ESS+PV in the first place, or how the business case for this type of storage would work.

From a grid operator perspective, ESSs for PV are desirable because distributed PV strains the distribution system, which is the responsibility of the distribution system operator (DSO).  However, because distributed PV is sold to the building owner, the business case for ESS+PV centers around the retail electricity customer.

The business case for energy storage systems paired with distributed PV will be built on three market factors that are unrelated to DSOs:

  • The retail electricity rates paid by commercial, industrial, and residential customers, and whether there are time-of-use (TOU) or dynamic pricing schemes for these customers
  • The feed-in tariff (FIT) for distributed PV, along with the degression profile of the FIT
  • Any adoption subsidies that are valid for ESSs

In general, industrial and commercial customers pay less for electricity per kilowatt-hour (kWh) than residential customers.  These customers frequently also benefit from FITs for small-to-medium solar PV installations.  Since the linchpin of the business case for ESSs with distributed PV is a high retail electricity rate relative to a lower FIT, the business case for ESSs with distributed PV is much weaker for these types of customers than for residential customers.

As a result, for commercial and industrial (C&I) customers, the value of ESSs with PV would only be applicable in markets where C&I customers are burdened by excessive or high-demand charges or time-of-use (TOU) charges.  Thus, lower retail electricity rates for C&I customers, relative to residential customers, limits the value of ESSs with PV.

The best markets for ESS+PV will be those that have all three key drivers: high retail electricity rates (particularly relevant if there is dynamic pricing), a FIT for solar PV that is either lower than the retail electricity rate or is quickly approaching parity with the grid, and an adoption subsidy either for ESSs or ESSs and PV together.  Most markets will have two out of three factors – making a strong business case for ESS+PV.


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