Navigant Research Blog

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.

 

Exploring Potential for Integrating Transactive Energy into Virtual Power Plants

— August 4, 2017

The concepts of virtual power plants (VPPs) and transactive energy (TE) are similar in that they place prosumers—formerly passive consumers that now also produce energy—front and center in an emerging market for grid services delivered by distributed energy resources (DER). Both trends are indicative of an electric grid ecosystem that is decarbonizing, decentralizing, and digitizing.

Navigant Research believes that the future of energy rests on the foundation of cleaner, distributed, and intelligent networks of power, what we call the Energy Cloud. The VPP model presents a compelling vision of this future, as does TE. When combined, new revenue streams for diverse energy market stakeholders are inevitable. What portion of the VPP/TE plethora of possibilities will find its way into prosumer pockets?

In a new Navigant Research report entitled VPP Transactive Revenue Streams, I identify six grid services that could be enhanced by integrating TE within the VPP framework. Much more work needs to be done to put money into stakeholder pockets, so I’ve also briefly identified the regulatory challenges that need to be addressed to make these revenue streams real:

  • Localized clean energy: How can previous policy vehicles such as net metering and feed-in tariffs be accommodated or revised (or eliminated altogether) to shift from subsidy schemes to a more transparent market locally, regionally, nationally, and internationally? TE platforms operating within VPPs may be a good starting point.
  • Virtual capacity: Just as consumer supports need to be revisited for solar PV and other distributed generation, so do assumptions governing determinations of resource adequacy for wholesale system planning. Perhaps exit fees and demand charges are obsolete in a DER-rich future. What are new ways to monetize the actual non-generation-related services a power grid provides?
  • Real-time demand response: More sophisticated load-based demand response will be part of the toolkit to displace ramping fossil fuel generators up and down in response to variations in solar and wind. Harvesting load will be one of the key innovations to benefit from TE-based blockchain ledger systems.
  • Fast frequency regulation: While the VPP seeks to provide creative fast frequency response, the sources of such services are still often spread far apart. In an ideal world, localized generation, energy storage, and load could be marshaled to address frequency challenges to the grid. How can we integrate locational benefits in the pricing of such grid services?
  • Smart voltage control: The proliferation of smart inverters onto the grid represent a rich resource portfolio that can be monetized in multiple ways. TE trades would enable a similar value proposition as fast frequency response. The same challenges to pricing locational benefits apply.
  • Big data from small sources: A VPP supported by TE must rely on accurate and timely data, analytics, and insights. While prosumers may not reap large profits from the data they provide via TE, energy service providers and distribution system operators may view this as the largest revenue stream flowing from the digital grid utility transformation.

Do VPPs create opportunities for TE revenue streams or vice versa? Most likely, these two DER platforms will evolve in parallel. DER management systems that can harmonize VPP and TE platforms must incorporate market pricing mechanisms to reflect the changing value of millions of connected endpoints throughout the day. That’s quite the challenge, which also translates into a major revenue stream opportunity for the Energy Cloud ecosystem.

To learn more from two major players active in the Energy Cloud ecosystem—Enbala Power Networks and ABB—tune into the Navigant Research-hosted webinar on Tuesday, August 15 at 2 p.m. EST.

 

Postcard from Hawaii to Nation’s Capital

— June 29, 2017

The mood at the second annual VERGE conference in Honolulu, Hawaii last week was upbeat about the future of clean energy, despite pushback on the US mainland. Apparently, those committed to a clean energy agenda, including the private sector, are more motivated than ever to push forward with aggressive programs to bring renewables resources online. They aim to not only combat climate change, but also create jobs.

Conference attendees clearly supported the supposition that clean energy is here to stay, no matter what might be unfolding in Washington, DC. The proposed dismantling of the federal Environmental Protection Agency’s Clean Power Plan and recent withdrawal of the United States from the Paris Agreement on climate change only seemed to serve as motivation to push forward even harder.

Hawaii’s Renewable Energy Vision

Hawaii is the first (and so far) only state in the United States to commit to a 100% renewable energy future. Governor David Ige of Hawaii didn’t seem to blink in the face of counter currents flowing from the Trump administration. A confessed energy geek, he seemed to take particular delight in the fact that Hawaii has emerged as a key testing ground for bolstering commitments to infrastructure needed to integrate variable renewables for both power and transportation services. Since each island of Hawaii is its own separate electric grid control area and retail costs are high due to such a reliance upon imported sources of fossil fuel, Hawaii is in a unique spot. The economics in the state clearly favor renewable energy.

Industry Momentum Is for Renewables

Even Connie Lau, CEO of Hawaiian Electric Industries, reported that her investor-owned utilities brethren have all bought into the clean energy agenda. If the administrative about-face on clean energy had occurred 8 years ago, then the momentum for renewables and other clean energy may have been halted, but that time has passed. Past government and industry investments have driven down the price of solar PV, wind, and batteries while software innovation to manage such resources has scaled up.

Nevertheless, there are challenges in implementing aggressive clean energy goals. Just look at California, where the state is paying neighboring states to take excess solar production. Many models show that once one reaches 80%-90% renewables penetration, the cost of integration can jump dramatically.

One of the key tools Hawaii will rely upon to reach its 100% renewable energy goal is to integrate devices like energy storage into self-balancing distribution networks such as microgrids. As of now, over 90 MW of new energy storage devices has been authorized by state regulators to be installed among the Hawaiian islands, with the majority of that capacity—70 MW—to be installed in Oahu.

Continuing Conversation

I had the pleasure of helping to run a 4-hour workshop on how to overcome challenges to developing a microgrid at VERGE with cutting edge microgrid market makers such as ENGIE and Spirae. I also moderated a session on how microgrids boost clean energy on islands, with featured speakers from ABB—which is pushing forward with a 134 MW microgrid designed to reach 50% renewable energy on the island of Aruba by 2020—and representatives from Hawaii and the US Navy.

Ironically, there may still be some room for collaboration between Hawaii and Washington, DC in the clean energy space. As I noted in a previous in a previous blog, one area where the interests in promoting national security in DC and a clean energy agenda in Hawaii align is the microgrid space. Watch for a report on that topic later this year.

 

Taking VPPs to the Next Level

— June 20, 2017

The primary goal of a virtual power plant (VPP) is to achieve the greatest possible profit for asset owners—such as a resident with rooftop solar PV coupled with batteries—while maintaining the proper balance of the electricity grid at the lowest possible economic and environmental cost.

The purpose is clear, but getting to this nirvana is not easy. Nevertheless, there are clear signs that the VPP market is maturing. New partnerships are pointing the way for control software platforms that can manage distributed energy resources (DER) in creative ways.

Creating a DERMS for Utilities

Case in point: the recent collaboration between Enbala Power Networks and ABB to create a DER management system (DERMS) platform for utilities. Underpinning this foray into smarter DER controls is the following statistic: more distributed generation (DG) will be coming online in 2017 than traditional centralized generation (coal, natural gas, and nuclear power plants). By 2026, 3 times as much DG will be coming online and sending power into the grid than these traditional centralized power plants. That gap will only widen more over time.

Annual Installed Centralized vs. Distributed Power Capacity, World Markets: 2017-2026

(Source: Navigant Research)

The entire ecosystem of DER, including DG, will need to be managed in new ways if value is to be shared between diverse asset owners and the incumbent utility grid. Utilities are slowly coming to see this as an opportunity rather than a threat. Consider these survey results from January of this year, with over 100 utilities responding. 18% of respondents indicated that they already had a DERMS in place, while 77% said they planned to implement their own DERMS program within the next 36 months. These responses show a majority of utilities today anticipate needing to implement DER control solutions in the near future.

There are many innovators in the VPP space, including Enbala. Along with its new partnership with Swiss industrial grid powerhouse ABB, the company’s recent expansion of its controls and optimization architecture leveraging recent advances in machine learning are helping to push the VPP platform into the mainstream. In the process, Enbala is providing metrics that suggest a promising ROI for VPPs.

Cost of Traditional Power Plants versus VPPs

Here’s a quick comparison. According to the US Energy Information Administration, the cost of building a new coal power plant is approximately $3 million/MW. This capital outlay does not consider the risk of future environmental regulation that may occur over the 20- to 30-year life of the project. While the cost of a new natural gas-fired power plant is much less—approximately $900/MW—that cost still represents a potential future liability. In comparison, the cost per megawatt for a VPP that takes advantage of the diverse set of existing DER assets is approximately $80/MW. Furthermore, the investment in the software and supporting IT infrastructure that creates the VPP does not carry either environmental liability or the risk of stranded investment. The VPP value can only increase over time as new markets emerge for grid services.

In the final analysis, VPPs optimized by smart software controls and new innovative business models such as transactive energy are key to realizing a vision of the future that Navigant has deemed as the Energy Cloud. To learn more, check out the new white paper developed by Navigant Research for Enbala and look for details about the forthcoming webinar on August 15.

 

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