Navigant Research Blog

Pool of Innovators in Microgrid Space Is Diverse, Often Incomparable

— October 5, 2015

Navigant Research’s recently published Navigant Research Leaderboard Report: Microgrid Controls is our first ranking of companies active in the microgrid market. The hardest part of this examination of innovators in this space was leaving so many market movers out, due to the focus on microgrid controls offered up by either developers or system integrators.

What if we were to turn the general assumption for the Navigant Leaderboard format on its head? In other words, why not create an apples-to-oranges listing? I am going to go out on a limb and highlight three companies not included in the Navigant Leaderboard report, but that deserve special mention due to their near-term impacts on the overall global microgrid market, regardless of what their role is. I have previously highlighted two companies, a utility (Commonwealth Edison) and an energy storage and smart grid innovator (S&C Electric) that were not included in the Leaderboard. Both were disqualified for inclusion because the ranking excluded utilities and vendors that primarily focus on energy storage integration.

Here are three other companies not included in the Leaderboard that I would like to highlight, for reasons explained below:

  • Energizing Company: Based in the Los Angeles area, Energizing Company is poised to announce one of the largest grid-connected microgrids in the world. The company sees its role as akin to a movie producer. (Well, what do you expect from a company based near Hollywood?) It doesn’t offer a controls platform and, though a private developer, sees utilities as its primary clients. It seeks to sponsor microgrids utilizing public-private partnerships. The company has fully embraced the concept of utility distribution microgrids with a plan for a microgrid to encompass an entire municipal utility’s service territory, optimized with smart grid technologies. It helps that the community this microgrid will serve is allegedly one of the smartest communities in the world (and I am not talking about IQ, but embedded infrastructure intelligence).
  • PowerStream: Ontario’s second-largest municipal utility, PowerStream, was the first utility in North America to announce a microgrid offering under a business model it refers to as DBOOME—design, build, operate, maintain, and energize. Perhaps the company’s most forward-looking project straddles what Navigant Research would identify as either a series of nanogrids or decentralized virtual power plants. Working with Sunverge—another company Navigant Research views as a microgrid leader—PowerStream will aggregate solar PV and lithium ion battery systems installed in residences in order to provide bidirectional value for customer and utility alike. The utility requires each customer to pony up some of their own money in return for long-term savings and exchanges of bidirectional energy services that serve both residence and utility grid.
  • Win Inertia: Among energy storage vendors active in the marketplace, Win Inertia is one of the most creative. Based in Spain, the company’s project portfolio highlights fascinating applications for hybrid battery solutions, including both alternating current and direct current (AC and DC) systems for electric vehicle (EV) charging, railways, harbors, buildings, islands or renewable integration for, of course, microgrids. Win Inertia has enjoyed 100% revenue growth since its inception and boasts a portfolio of over 15 microgrid-related projects either in operation or under development.

At last count, Navigant Research has profiled more than 50 active companies in the microgrid market, with none of them capturing more than 10% of the total market revenue. This is the status of the market today: there is no clear leader. The three companies profiled on this blog highlight the fact that innovation is coming from a variety of market players, each focused on a different part of the value chain.

Will one company emerge as the clear market leader? Only time will tell.


Market Players Split on Energy Efficiency Opt-Out Program Options

— August 31, 2015

Walmart and a group of large energy users within Florida have proposed an opt-out option to Florida’s Energy Efficiency and Conservation Act. The proposal would allow these large companies to opt out of paying the energy conservation charge. This action would separate these payments and the demand-side management programs, which are both part of the Energy Efficiency and Conservation Act. As the Orlando Sentinel reports, Kenneth Baker, a senior manager at Walmart, stated: “We tend to pay into the rebate program … much higher numbers than we get back in rebates. I think that some of the money that we’re now spending on rebates could go towards other energy-efficiency measures.” Walmart is arguing it would have a better impact on energy efficiency measures if it were allowed to take control of these programs—and not be confined by the Energy Efficiency and Conservation Act.

Opt-out options of similar programs have been implemented in other states, with an Opt-Out Eligibility put forth by the utility and approved by the utilities commission. In order to opt out of the program in North Carolina, for example, a company must implement alternative energy efficiency measures.

The states that do not offer self direct and opt-out programs include Alabama, Alaska, California, Connecticut, Delaware, Washington, D.C., Florida, Georgia, and Hawaii. In Texas, clients develop their own energy efficiency plans if desired and are responsible for the financial impact associated with them. While self direct and opt-out programs have been implemented in other states, there is little information on the successes and failures of such programs.


According to Energy Manager Today, Duke, Florida Power & Light (FPL), Tampa Electric, and Gulf Power all oppose the proposal. Their arguments against the proposal are increased costs to small businesses and residential customers. All businesses and residents have the potential to benefit from the programs via the lowering of utility rates, which would be limited if the proposal passed. According to the Tampa Bay Times, FPL argued, “The proposals are self-serving and discriminatory because the thresholds would benefit only select customers.” It would be a detriment to small businesses and residential customers to allow Walmart and other large companies to opt-out of energy efficiency programs. There are no regulations stopping large energy users from investing in additional energy efficiency programs on their own.

If the Public Service Commission in Florida agrees to allow Walmart and other large energy clients to opt out, it seems likely they would provide a self direct program as an alternative, which is common in many other states. While the self direct programs require these companies to provide their own energy efficiency programs, this still leaves the issue of higher costs to small businesses and residential clients who do not qualify to opt out.

The commission is waiting for staff recommendations before making its decision, which will most likely happen in September.


This Land Is a Demand Response Land for You and Me

— June 26, 2015

Just like the old folk song, June has been a good month for demand response (DR) from California to the New York Island. First, the California Independent System Operator (CAISO) released a proposal to allow aggregated distributed resources to bid into its markets, potentially as early as next year. Then, the New York Public Service Commission (NYPSC) approved all of the plans of the state’s utilities (aside from Consolidated Edison [ConEd]) to commence DR programs this summer. The programs are modeled on ConEd’s existing suite of DR programs.

CAISO found a way to introduce a new acronym, distributed energy resource provider, or DERP, into the industry lexicon. The proposal lays out a framework for allowing aggregated resources of at least 500 kW to participate in the market. There is also a requirement that any aggregations serving more than a single grid pricing point must be limited to a single type of technology. Metering has been one of the hurdles to DR participating in CAISO markets because the system requires generation-scale monitoring. The new rules would allow DR to be aggregated via the Internet, providing for a broader range of resources to be brought to market with less cost. DERP aggregators will be a scheduling coordinator metered entity, which will avoid “having each sub-resource in a DERP aggregation engaged in a direct metering arrangement with the CAISO,” according to the proposal. Access to ancillary markets, however, will still require resources to allow constant monitoring by CAISO. CAISO’s board is set to consider the proposal in July, but would need approval from the Federal Energy Regulatory Commission (FERC) before it can move ahead with the plan.

Meanwhile, in New York …

A week later across the country, NYPSC gave the green light for the upstate investor-owned utilities to follow ConEd’s lead and offer distribution-level DR programs to their customers starting this summer, a very quick turnaround time. This order is one of the early wins of New York’s Reforming the Energy Vision proceeding to transform the utility model in the state. The programs have three basic types: a peak shaving program to be called on a day-ahead basis when demand is expected to hit the summer peak; a local distribution reliability program to be called on as needed for localized issues; and a direct-load control program that lets customers install a device that can be controlled by utilities to control loads to compensate for system stress. Customers can take part in the programs individually or through an aggregator. This summer, the utilities are prioritizing areas that offer the greatest benefits at the lowest costs, based on factors including system stress and local distribution constraints for the year. All of the DR programs will be available starting next summer.

So, while the DR community continues to wait for the Supreme Court’s ruling on FERC Order 745 on DR compensation, the states are pushing the DR agenda ahead rather than waiting for direction from the feds.


The Customer Interface in the Cloud

— May 12, 2015

As described in Navigant Research’s recent white paper, The Energy Cloud, the power grid is undergoing a fundamental transformation to a decentralized architecture. This shift will bring profound changes to traditional stakeholder relationships. Specifically, the broad array of residential consumers—most of whom are beholden to their utility service providers and lumped together as a monolithic entity in traditional rate design—are emerging as one of the key underlying drivers of this change.

For utilities and stakeholders responding to this shifting market, early battles are being waged to lock-in consumer engagement. As Tesla’s recent Powerwall announcement demonstrates, in this emerging landscape, brand matters. Interface matters. Ultimately, as described in a recent article in Intelligent Utility, future customer engagement strategies will have to be diverse, flexible, and multichanneled. But above all, these strategies must seek to facilitate a connection between the residential consumer and the products and services they demand.

Prosumer Defection

Empowered by greater access to tools and direct marketing from intrepid companies, residential customers are exercising more control over their electricity usage and spending and over when and what type of power they buy. In some cases, these consumers are demanding the ability to self-generate and sell onsite power back to the grid. The dramatic rise of solar PV has demonstrated that, at the right price, consumers will embrace choice and ownership over their energy consumption patterns.

A growing minority of energy prosumers, meanwhile, are cutting out the utility entirely. As zero-energy homes demonstrate, when the capabilities of rooftop solar and other distributed energy resources (DER), energy efficiency improvements, and home energy networks are integrated, the resulting network can render the traditional utility-customer relationship obsolete. When aggregated across a distribution network, utilities take notice—which is exactly the scenario described in the Rocky Mountain Institute’s Economics of Grid Defection report.

Renew and Replace

Customer empowerment is not unique to the power sector. As markets mature, the industrial model of companies owning and people consuming is often undermined by technology innovation. This typically results in a power shift in favor of customers. In the power sector, companies like NRG Home are positioning for just this scenario.

While the initial adoption phase of customer empowerment has ushered in a broad transformation on the grid through energy efficiency and DER, the next phase, replacement, will bring about a far more profound shift. Ford’s Model T proved that customers were willing to embrace the automobile over horse and buggy, for example. As disruptive as this was, the next hundred years proved that customers will exercise greater scrutiny and demand for product diversification, giving rise to a $1 trillion dollar industry.

During this replacement phase, companies invest to compete both for existing customers and for the customers of competing entities. They refine their product lines and cater to increasingly specific segments of the market. Some bundle services to drive value. Others sell no tangible products at all and instead provide access or an interface.

Who Needs Products?

Meanwhile, residential consumers are moving beyond the static behaviors accounted for in traditional utility rate design. Regardless of the market or circumstances, over time, consumers become more sophisticated and knowledgeable about the products they consume. They exercise greater scrutiny around quality and sourcing. They seek value and convenience. Eventually, they come to expect that technology will cater to their preferences.

Ultimately, presented with more choice with respect to price, quality, attributes, and features, consumer’s preferences and demands begin to define product lines. It’s the coming replacement market for demand-side energy solutions. In the home, for example, consumers have responded to product diversification in seemingly banal appliance markets like washers and dryers and more recently thermostats and smoke alarms.

It takes a long time to break down something as longstanding—and with as many private sector and government interests—as the power sector. But as the emerging energy cloud demonstrates, it’s happening; people are opting for more control over their energy dependence.

As customer engagement strategies mature in the energy cloud, there are important lessons to glean from the fast-expanding sharing economy where consumer entrepreneurs are competing with well-established entities. Interestingly, some of the fastest-growing companies facilitating these transactions—Uber, Facebook, Alibaba, and Airbnb—own no products at all.


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