Navigant Research Blog

US Wind Market Installs 8.2 GW in 2016

— February 22, 2017

The United States had a strong year for wind energy capacity installation, with 6,478 MW commissioned in 4Q 2016. This capped off a total of 8,203 MW total for the year, according to the 4Q 2016 market data recently released by the American Wind Energy Association.

In 2Q 2016, Navigant Research forecast that final 2016 capacity additions were likely to be 8,200 MW, representing its most accurate annual capacity forecast to date. Navigant Research forecasts that there will be 45 GW of total new wind installations between 2017 and 2023, assuming there are no changes to the existing Production Tax Credit (PTC) phaseout timeline.

Key Takeaways of 2016

Total cumulative wind energy capacity installed in the United States now stands at 82,183 MW, with more than 52,000 wind turbines operating in 40 states. Nineteen states commissioned a total of 47 projects during the fourth quarter. Texas led with 1,790 MW, followed by Oklahoma (1,192 MW), Kansas (615 MW), North Dakota (603 MW), and Iowa (551 MW).

Texas continues to lead the nation with 20,321 MW of installed capacity, the first state to pass 20,000 MW. This success is thanks to a combination of energy demand, strong wind resources, a relatively easy development environment, and Texas’s proactive and massive expansion of transmission capacity. In 2016, Oklahoma surpassed California to become the third-ranked state in the nation with over 6,600 MW of installed capacity, and Kansas surpassed Illinois as the fifth-ranked state with more than 4,400 MW.

The United States also commissioned its first offshore wind project during the fourth quarter, the 30 MW Block Island wind project off the coast of Rhode Island. Among other offshore developments was an auction conducted just before the end of the year and won by Norway’s oil giant Statoil with its offer to pay the US Department of the Interior $42.5 million to lease an area of ocean off Long Island, New York. The space could be used to support more than 1 GW of offshore wind, providing validation of offshore wind’s future in the United States.

Market Developments

There are now 10,432 MW under construction and 7,913 MW in advanced development in the US wind market, a combined total of 18,344 MW of wind capacity. The industry also qualified significant additional project capacity for the full value of the PTC at year-end through safe harbor and physical construction without finalizing project capacities. This means substantial wind project capacity has until the end of 2020 to be commissioned.

Out of the 8,203 MW installed in 2016, Vestas (43%) and GE Renewable Energy (42%) led in market share, followed by Siemens (10%), Gamesa (4%), and Nordex USA (1%). Goldwind, Vensys, and Vergnet each composed less than 1% share. This is the first time in history that Denmark-based Vestas surpassed US-based General Electric in a given installation year. One likely reason is Vestas’ major commitment to siting its supply chain in centrally located Colorado, providing potential cost reductions relative to General Electric (which assembles its nacelles in Pensacola, Florida, requiring further transport to the major centrally located state markets).

Project developers signed 816 MW of power purchase agreements (PPAs) during 4Q 2016, contributing to a total of 4,040 MW of PPAs signed during 2016. Utilities and rural electric cooperatives represent 56% of total project capacity contracted (2,266 MW) during 2016. For the year, non-utility purchasers had 39% of the remaining capacity contracted (1,574 MW). Of the 8,203 MW commissioned during 2016, 67% of that capacity has a PPA or Public Utility Regulatory Policies Act contract in place. The remaining capacity is under utility or direct ownership (12%), has a merchant hedge contract in place (12%), or is fully merchant (9%).

 

Plug-and-Play Microgrids Are Building Momentum

— February 17, 2017

GeneratorThe concept of plug-and-play microgrids is picking up momentum. But like the term microgrid itself, plug-and-play means many different things.

To a software company such as Spirae, the plug-and-play concept is all about enabling software (the topic of a recent Navigant Research white paper and webinar). According to Spirae, configurable microgrids and the need for standardized projects of similar scale are necessary for the microgrid market to scale up. The diversity of services a microgrid could provide hinges on flexible software configurations.

In a similar vein, Blue Pillar is marketing itself as an Internet of Things (IoT) solutions provider. It was ranked as the top company globally in terms of identified microgrid deployments in Navigant Research’s Microgrid Deployment Tracker last year. The company claims it can bring a microgrid online in a matter of months thanks to its rich library of data pertaining to different types of distributed energy resources (DER).

Many Different Labels

Interestingly enough, to software companies such as Spirae and Blue Pillar, the term microgrid is too limiting for what they do. For Blue Pillar in particular, its controls platform spans smart buildings to virtual power plants (VPPs) and could also be considered simply a DER management system (DERMS) solution. As Spirae has argued, these different labels—microgrid, IoT, VPP, DERMS—really don’t matter from a software perspective. The key to unlocking value that may be hidden within DER is a shift away from complex customized engineering to a more standardized and modular approach. Think like Uber, but deliver like Comcast.

To ABB, a plug-and-play microgrid is instead a hardware offering in the form of a containerized solution. These microgrids, primarily designed for rugged, off-grid applications, can be put together like Lego blocks and reach a scale of up to 5 MW. Beyond that size, ABB admits the microgrid becomes overly complex, requiring customized engineering.

ABB is fairly unique among the long list of multinationals seeking opportunity in the microgrid space with both a distributed controls approach and a focus on off-grid projects, where the company believes the value proposition is clearest. For example, in Australia or Alaska, the business case for renewables does not depend upon renewable portfolio standards, net metering, or carbon reduction targets.

Increasing Modularity

Taking the concept of modularity in microgrids even further from a hardware perspective is startup ARDA Power, which extolls the virtues of direct current (DC) microgrids. The beauty of DC is that not only does it allow a project design to reduce power conversion devices, which simplifies design and islanding, but it is also much easier just to plug in other DC devices such as solar PV and batteries, two technologies poised to increase as a portion of the microgrid resource mix in the future.

The first company to offer a plug-and-play microgrid was Tecogen with its combined heat and power units. It recently upgraded, with the ability to plug in solar PV or batteries on a DC bus, creating a hybrid alternating current (AC)-DC microgrid. Yet another company touting a plug-and-play microgrid solution is SparkMeter, which offers low-cost but incredibly robust metering solutions for energy access solutions in the developing world. Ironically enough, one can make the argument that metering is even more important in these kilowatt-scale systems, where payment for energy services is vital for business cases.

From hardware to software, AC to DC, combined heating and power to smart meters, the plug-and-play concept appears to be all the rage in the microgrid space.

 

New Utility Program Hopes to Stimulate Sustainable Energy Storage Growth

— February 17, 2017

There is considerable debate throughout the energy storage industry about what the optimal location is for energy storage systems (ESSs) to provide the most value. Systems can be installed either behind the meter (BTM) for individual customers, or located strategically on the utility side of the grid. While these two types of systems are typically designed for different purposes, the advances being made in storage software platforms are blurring the lines between these markets and the specific services they are able to provide. A recently proposed energy storage program from utility Consolidated Edison (Con Ed) is hoping to capture the most advantageous aspects of both approaches.

Although BTM energy storage has been a rapidly growing market over the past 2 years, a number of challenges remain that limit growth prospects. One of the major issues is that the value of an ESS varies considerably from one customer to another and across different regions. To realize a solid return on investment from energy storage, customers must have specific load profiles with enough variability to result in high demand charges and the willingness to invest in a relatively new technology. While opportunities to participate in competitive wholesale markets are often touted by vendors, actual revenue streams from these opportunities remain uncertain or entirely unavailable in many areas. As a result, excess storage capacity that could be used for participation in these markets is not built into projects, leaving economies of scale unrealized.

A New Approach

With its newly proposed energy storage program, Con Ed hopes to overcome many of the barriers facing BTM storage while also taking advantage of customer facilities to host new systems. Through this proposal, Con Ed will partner with developer GI Energy to deploy in front of the meter battery ESSs that will be located at customer sites. In exchange for hosting these systems, customers will be paid a set rate for leasing their space. This should make hosting storage a lucrative opportunity for a much greater number of customers, regardless of their energy usage patterns.

The utility believes this program will be able to realize much more value from a battery system compared to customers installing these systems on their own. By leveraging the utility’s support and third-party financing, Con Ed will be able to deploy much larger storage systems resulting in greater economies of scale. Additionally, these systems can be installed in select locations of the grid experiencing capacity constraints or other challenges to allow for the deferral of new infrastructure investments. These systems will also compete to provide services in wholesale markets when available, such as energy arbitrage, capacity, and frequency regulation. While a much greater array of values can be realized from these systems, the host customers still get what they are looking for—reduced energy costs.

Initially this program will seek to deploy four relatively large (1 MW) storage systems in select locations throughout Con Ed’s territory. However, if successful, this program could be expanded to all customers and potentially provide a framework for similar programs in other regions. There remains a number of details to be worked out through this program, including how exactly the systems and the services they provide will be paid for, how various services will be prioritized, and specifically how the utility will select which developers to work with. Despite the uncertainly around a few pieces of the program, Con Ed’s proposal is an innovative approach to stimulating sustainable energy storage market growth for the benefit of all stakeholders.

 

Dwindling Smart Sales Spark All-Electric Shift

— February 17, 2017

I first observed the smart car while traveling through Italy in 2006. Later that same year, the Da Vinci Code debuted back home in the United States, with smart deftly taking a page from Mini Cooper’s marketing playbook (playing starring roles in the likes of The Italian Job and Bourne Identity) by nabbing prime advertising space as Sophie Neveu and Robert Langdon’s escape vehicle. At the time, I considered the idea of this car revolutionary, in that it provided the space savings of a motorcycle partnered with the safety and comfort of a car.

Though the car didn’t seem right for me at the time, I figured if I was in a city my perspective might differ, and I wondered why that car wasn’t yet available in the United States. Two years later, in 2008, smart arrived and netted nearly 25,000 sales. That year was the company’s best in the United States, its second being the year immediately following. However, since 2009, sales have bobbed laggardly between 5,000 and 11,000. In 2013, smart joined the modern plug-in vehicle movement with the electric drive (ED) version of its offering. The ED has done relatively well, accounting for 17% of the brand’s sales since its introduction in the United States. Fast forward to the near future and the ED will likely account for 100% of the brand’s US sales, as Daimler is discontinuing the gas powered version of the vehicle in North America for the 2018 model year.

Gas Power Not So Smart Anymore

For the brand, sales are likely to retreat further. A refresh of the fortwo ED along with the expected range increase will probably encourage greater sales of the ED in 2017 than were witnessed in 2016. But the range increase isn’t substantial next to 2017’s new competitors like the Chevrolet Bolt, the Tesla Model 3, and more. Therefore, sales are unlikely to recapture smart’s small 5,000-11,000 sliver of the market unless a serious range increase or dramatic price cut is on the way for 2018.

Though the move will result in initial losses for the brand, it will likely benefit the parent. To start, sales of the gas-powered smart have receded, with a compound annual growth rate of -14% since 2012. The current low oil price environment isn’t going to change the trajectory here. Add to that the ever increasing range and affordability of plug-in powertrains in the microcar segment, and it was only a matter of time before the gas version could not find any willing buyers.

Additionally, canceling the gas-powered version while there is still some demand will increase the effect the ED has on the Daimler’s Corporate Average Fuel Economy and Zero Emissions Vehicle program compliance efforts. The regulations, designed as both stick and carrot, penalize automakers for noncompliance and reward others for overcompliance. Up to 2025, both programs’ sticks will become increasingly sharp, making the share of plug-ins relative to other powertrains a vital metric by which automakers maintain viability through their highly profitable, less fuel efficient offerings.

 

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