Navigant Research Blog

Utilities Embrace Innovation at EUW, but Struggle with Culture

— November 25, 2015

There was a palpable buzz at European Utility Week in early November centered around change, innovation, and outsiders. For instance, one of the crowded presentations I witnessed was Neil Pennington’s talk about smart thermostats. Dr. Pennington, the director of innovation for RWE npower in the United Kingdom, noted that smart thermostats are a logical first step, but utilities should consider going beyond these devices and offer products and services that are highly personalized, connected, and automated. Move outside the heating, ventilation, and air conditioning (HVAC) system, he says, and think about home security and customer lifestyles if you want to succeed as an innovator.

Pennington’s message was effective. It generated some enthusiastic questions, and people in the audience were hungry for insights into how to engage customers in new and effective ways.

Other vendors and presenters at this trade show, which set records for attendance (some 9,000 visitors from 77 countries), offered similar stories about innovation and change. Joris Jonker, one of the founders of residential energy management company Quby, told me his company’s offering was gaining traction as a dashboard for the home, and that Netherlands-based utility Eneco would be installing 1 million units over 2 years. Indeed, Eneco has embraced Quby’s solution so much that it acquired the firm just ahead of the trade show. Eneco’s move demonstrates it is no longer business as usual for some utilities.

Other discussions included the outsiders, or non-utility companies like Google (or Alphabet, Google’s parent company), and how these firms might alter the utility game. Might Google, or perhaps Apple, or an unknown startup move aggressively with a customer-centric and data-driven business model to disrupt the utility status quo? Possibly, but others were not so sure, saying it would be hard to disrupt the incumbents, especially for smaller players. Still, the question about potential disruption sparked debate.

Beyond these change and innovation issues, several other themes played out at the show. The smart cities concept is gaining wider attention (as my colleague Eric Woods so aptly demonstrated in sessions he moderated), with companies like Itron and Sensus touting their capabilities in this area. And, of course, the Internet of Things (IoT) concept seemed to be on just about everyone’s lips. In that vein, one company that stood out was Sigfox, a French firm promoting its unique cellular communications technology that is designed for low-throughput connectivity among IoT devices. Very buzzy.

But for all the talk about innovation and change, there was an interesting poll conducted among attendees that revealed an Achilles heel for the utility business: an ongoing lack of innovation. The poll asked “What is the biggest threat to the utilities?” The results of the unscientific survey among about 400 people were:

  • Falling/flat demand: 6%
  • Revenue loss/distributed solar: 12%
  • Challenge Renewable/Integration: 12%
  • Regulatory/Policy uncertainty: 23%
  • Lack of “innovation culture”: 46%

So a key takeaway for me from the Vienna conference was that while there is a welcome mat set out for change and plenty of talk, true innovation is still some ways off. And the staid utility culture in Europe is ripe for a shake-up, internally, externally, or from both perspectives.


All’s Quiet on the DR Front, but a Storm Is Brewing

— October 7, 2015

Another ho-hum summer for demand response (DR) has concluded as September comes to a close. The last two summers have been light in regards to the need to activate DR resources for most of North America. The East Coast had a second consecutive relatively mild season, with no true heat waves until September. Even Texas, which saw record heat this summer, did not require a large amount of DR to support its grid through peaks. The lone exception is drought-stricken California, which needs all the help it can get to meet its energy and water needs.

This reality lies in stark contrast to the summers of 2012 and 2013, when the weather was hot, new peak load records were hit, and DR was utilized multiple times in markets across the United States. The past couple of years have gained notoriety for needing DR in the winter due to the polar vortex of 2014 and for ever constraining natural gas pipelines as the amount of gas-fired generation grows. It appears that the expansion of energy efficiency programs and solar photovoltaic installations have permanently lowered peak load growth in many regions, diminishing the need for peak support but potentially raising new needs to firm up new load shapes.

This lull just may be the calm before the upcoming storm, however. There was no lack of activity in the court system regarding DR this summer as the actual DR resources sat idly by. One small issue that surprisingly arose was the U.S. Environmental Protection Agency’s (EPA) Reciprocating Internal Combustion Engine National Emission Standards for Hazardous Air Pollutants (known as RICE NESHAP). In 2013, the EPA issued a rule that allowed backup diesel generators to participate in emergency DR programs for up to 100 hours per year. Some states and generator groups appealed this ruling (for different reasons), and in May 2015, the U.S. Court of Appeals threw out the EPA’s rule and told the agency to go back to the drawing board. The EPA has been granted a stay, so its existing rule can remain in place until it comes up with a new one, but the situation has created uncertainty for the 20% or so of DR that utilizes diesel generation.

However, the real fireworks will come on October 14, when the U.S. Supreme Court hears arguments on the case regarding the Federal Energy Regulatory Commission’s (FERC) Order 745 on DR compensation. The two issues at stake are whether DR should get compensated the same as generators in the wholesale energy markets, and, more significantly, whether DR should be allowed to participate in wholesale markets at all. FERC, EnerNOC, and a plethora of state agencies and other DR providers will line up on one side of the aisle, while generators and hardcore economists line up on the other. This could be the heaviest hitting we see until Super Bowl 50 next year.

It’s not too often that someone covering something as esoteric as DR gets to go to the Supreme Court, so I can’t pass up the chance. I will be reporting and live tweeting from the hearing (@BfeldmanEnergy) as much as is allowed and access provides. It promises to be the most riveting courtroom drama since Tom Brady’s hearing against the NFL in the Deflategate saga. I promise not to draw any unflattering courtroom sketches of FERC chairman Norman Bay or anyone else involved.


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.


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