Navigant Research Blog

Can Solar Make an Impact on the Transportation Market? Part 2

— September 5, 2017

After a few conversations with Scott Shepard about PV systems in EVs, I began to come around to his view that solar is too expensive and the roof space too limited to make a solar-equipped EV work at the mass market scale. But then I read about another PV in transport project that made economic sense: Indian Railways’ newly launched solar diesel multiple unit (DEMU) trains. A total of 16 300W solar modules are installed on each coach on the train for ₹9 lakh ($13,950 or $2.9/W). The Indian Institute of Science estimates that the annual energy yield in a solar rail coach will be between 6,820 kWh and 7,452 kWh. This could displace 1,862 liters of diesel, saving around $1,650 per year at $0.88/liter diesel.

Lessons Learned

I see two key elements that make the project work. The first lesson from India is that solar in transport makes more sense when it is displacing liquid fuels rather than electrons. Going back to the Prius example from the first blog in this series, if the solar roof was available in Toyota’s non-plug-in version of the car, its economic effect would be significantly better. If a non-plug-in version of the Prius could run for 2,190 km per year on only solar, it could save about 150 liters per year, which would have a value of around $180 per year (using Japan’s gasoline price in July 2017). The investment in a solar roof could break even within the lifetime of the car, so the current cost of the add-on could be justified.

The second lesson is the use of off-the-shelf modules. In this way, the project benefits from the economies of scale that PV systems are famous for. It would be difficult to use off-the-shelf modules in cars, but if Toyota introduced the solar roof in all its Prius cars (for example), it could increase the production rate of solar roofs for the Prius from a couple of thousand per year to about 350,000 per year (global Prius sales in 2016). Modules with similar high efficiency cells in the wholesale market sell for about $0.50/W (i.e., $90 for the 180W used in the Prius).

Most of the costs arise from integrating the PV cells into the roof of the car. These costs could decline significantly due to economies of scale as well. If Toyota could cut costs to those of the train company ($540 for 180W already installed in the car, including inverters and other costs), the breakeven period would be about 2.5 years. Slashing costs would make a solar roof a no-brainer (especially for consumers like me who would be able to drive the car without ever using a charging point or stopping at a gas station).

Interesting Niche

This would open an interesting niche for solar companies. If all the EV and hybrid EV cars sold globally in 2017 (expected to be between 3 million and 4 million) had a 180W roof, an additional 840 MW (an extra 1%) could be added to global solar PV demand. But solar roofs need a champion to push them into the mass market in the same way Tesla pushed EVs away from the margins. My last blog discussed two startups that are exploring this niche. However, traditional manufacturers could do the same to differentiate their brand and cars from the competition. Toyota is an obvious choice given its brand association with hybrid cars, but other manufacturers could step in. For example, Volvo could be a great candidate since it is hybridizing all its models.

 

Can Solar Make an Impact on the Transportation Market? Part 1

— August 31, 2017

People have dreamed of solar-powered vehicles for decades. The first World Solar Challenge race occurred in 1987 and the first American Solar Challenge (then called Sunrayce) was held in 1990.

Thanks to improvements in solar costs and the EV value chain, the dream is closer to reality. Two startups (Sono Motors in Munich, Germany and Lightyear in Eindhoven, the Netherlands) have projects underway. Sono Motors successfully crowdfunded more than half a million dollars in September 2016 and revealed its first car on July 27, 2017: the Sion. According to Sono, the Sion will cost between $13,200 and $17,600 depending on the battery size and will run without refueling for around 30 km with a 1 kW solar system. It will be available in 2019.

Lightyear is an unofficial spinoff from Solar Team Eindhoven. This team built the Stella and Stella Lux solar racers—both winners of the Bridgestone World Solar Challenge Cruiser Class. The cruiser class replicates traditional cars, with seating space for four people. Lightyear has been taking preorders since June 29, 2017 for €119,000 ($138,000). The car is expected to offer a range between 400 km and 800 km and travel between 10,000 km and 20,000 km per year in low irradiation areas (e.g., United Kingdom and the Netherlands)—charging only with its PV system.

Today’s Solar-Powered Vehicle Option

A solar-powered vehicle option is available on the market today. Toyota’s latest Prius Prime Plug-in Hybrid offers an option in Japan to add a 180W solar roof that charges the main battery. Toyota claims that the roof will give the car a maximum solar rage of 6 km in Japan, which is a country with medium irradiance levels. The option to add the solar roof costs $2,500, which adds 5%-10% to the vehicle price. This seems expensive given the savings it provides compared to buying electricity from the grid that costs below $70 per year, even with the high electricity prices in Japan. From a convenience point of view, the system might make more sense for people without parking at home and short daily drives. My daily commute is around 4 km, which means that if I had the Prius Prime Plug-in Hybrid with the 180W solar roof add-on, I could drive mostly electric all year without visiting a charging point. It is still an expensive feature, however, which is why most mobility analysts—like my colleague Scott Shepard, who analyzes the EV market—have been skeptical about the idea of putting solar and EVs together. Yet, other automakers are exploring the PV-EV connection, as well. Audi has just announced it will unveil a prototype EV with solar panels on the roof to extend the vehicle range.

Despite the skepticism, one successful solar-powered vehicle project exists. Part 2 of this blog series will look into Indian Railways’ newly launched solar diesel multiple unit trains.

 

Making the Case for Short-Term Solar Forecasting in Plug-and-Play Remote Microgrids

— August 25, 2017

The microgrid market is tilting toward solar PV generation as a preferred resource. This is especially the case within the context of remote microgrids due to the economic advantages these systems present from an ongoing operations and maintenance perspective. A concentrated effort to move closer to plug-and-play microgrids is also underway, with a variety of vendors touting this approach.

One can make the case that displacing high cost diesel fuel with fuel-free solar is a valid value proposition on paper. However, a variety of ancillary technologies can also be integrated into a remote microgrid setup to transfer this concept into economic savings in the field. Such integration could displace as much diesel as possible while also limiting wear and tear on fossil fuel generators and batteries. Yet, the hype surrounding the dynamic duo of solar plus storage is obscuring the fact that different tools can help build a market for microgrids, including short-term solar forecasting.

A Game Changer in Australia

The Commonwealth Scientific and Industrial Research Organization (CSIRO) of Australia has helped develop a plug-and-play microgrid offering that marries low cost short-term solar forecasting with load optimization and diesel scheduling innovations. The game changer is the ability to integrate low cost short-term solar forecasting into remote microgrids featuring ever increasing solar PV penetration over time, with early tests showing a 97% reduction in high ramp rate events and fuel savings of almost 8%.

Solar forecasting falls into two categories: long term and short term. Long-term forecasts look out over a period of time (such as a week) to optimize resource scheduling. This forecast is more relevant to grid-connected solar PV resources. Since these forecasts look out over a longer-term time horizon, error rates tend to be lower because the forecasts are far less granular than short-term solar forecasts.

Remote microgrids cannot sell any services back to a grid operator; thus, the prime focus for remote microgrids featuring high penetrations of solar PV is short-term solar forecasts. Fluctuations at this scale can lead to blackouts or inefficient use of scarce and expensive diesel fuel.

According to the analysis Navigant Research performed for CSIRO, it appears the key to commercial success of short-term solar forecasting is minimizing capital cost and error rates. One could argue that short-term solar forecasting should be the first response to managing the variability of solar energy, since it is far less costly than major hardware investments like advanced batteries.

Short-Term Forecasting Adds Value

The short-term solar forecasting technology embedded in the plug-and-play microgrid solution from CSIRO is well-suited to Australia. It also offers other forms of value. For one, it can be used in the planning process to shape the initial design. First Solar claims it can get within 1% accuracy of annual energy estimates from available solar resources, but the company has difficulty sizing batteries properly since short-term solar power production is too variable. The technology being developed by CSIRO can address this gap, developing better estimates of required capital costs during the design phase for better battery sizing.

Finally, short-term solar forecasting technology can also be an important tool utilized outside of a remote microgrid application such as in the case of virtual power plants (VPPs). Australia is emerging as a hotspot for VPPs, too. In fact, CSIRO is sponsoring a free event focused on VPPs on December 1. Australia just may be the center of digital grid innovations.

 

Enterprisewide Financing Innovation Needed to Drive Energy as a Service Delivery

— July 5, 2017

In my most recent blog post, I examined how corporate commercial and industrial (C&I) energy and sustainability managers, after years of having no say in how they procure energy, are choosing to apply new technology and business model innovations to meet sustainability needs. Navigant Research anticipates these needs will contribute to the emergence of new energy as a service (EaaS) solution offerings and deployment models underpinned by financing innovation and a desire by customers to avoid spending capital on energy projects. I will highlight how these EaaS solutions and deployment models are brought to the market in an upcoming Navigant Research report titled Energy as a Service.

Currently, C&I customers attempting to implement energy efficiency and/or distributed generation projects are already using EaaS solutions, typically from pure-play solutions providers. For example, solar PV developers use project finance instruments such as solar power purchasing agreements, while energy efficiency implementers can deploy shared cost savings-based energy services performance contracts. Both EaaS financing instruments allow customer to implement projects without deploying their own capital. But until recently, there were fewer options for customers to deploy EaaS using financing innovation on an enterprisewide basis.

Enterprisewide Financing Innovation

One deployment model that is poised to drive the growth of EaaS solutions is called the outsourced managed energy services agreement (MESA). In a MESA, customers with large portfolios of small and medium-sized C&I buildings will look to outsource their entire management operations for a fixed annual payment over an extended period. The MESA concept shown below highlights how this type of EaaS deployment model might work.

Basic MESA Structure

(Source: Wilson Sonsini Goodrich & Rosati)

At the heart of a MESA is a turnkey EaaS provider with deep project development and technology expertise across multiple EaaS disciplines. These vendors will also have the capability to deploy financing innovation to overcome customer simple payback capital deployment hurdles. The MESA concept allows the EaaS provider to assume turnkey responsibility for enterprisewide energy management, including utility bill payment, in exchange for a series of annual creditworthy payments over 10, 15, or more years based on the customer’s historic energy management costs. This approach allows the MESA provider the flexibility to pursue energy retrofits or solar PV deployments under long-term financing arrangements should the customer lack the expertise, risk appetite, time, or capital to do so themselves.

As several of my recent blogs have highlighted, the need for interested EaaS stakeholders to create and apply financing innovation is critical to the deployment of new distributed energy resources. The MESA is a prime example of an innovative financing approach that can be applied on an enterprisewide basis to meet the customer needs to reduce energy spend and lower greenhouse gas emissions while overcoming the capital deployment and technical expertise barriers they face.

 

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