Navigant Research Blog

Hydrogen in Microgrids: Diverse Business Models Begin to Emerge

— September 7, 2017

Hydrogen has long held promise as an energy carrier, though electrolyzer and fuel cell technologies have so far not broken into the mass market—largely due to high costs and infrastructure challenges. As those technologies continue to get cheaper and more efficient, they present intriguing possibilities for hydrogen in one unexpected application: microgrids.

Microgrids, whether grid-tied or remote, rely on local power generation. While solar PV, wind, and other renewables capture many headlines, fossil-fueled distributed generation (DG) accounts for more capacity than any other—40% of the total—among the microgrids tracked in Navigant Research’s Microgrid Deployment Tracker 2Q17. Fossil-fueled DG is often selected since it can provide dispatchable power for long periods and can generally store energy-dense fuel onsite. These facts also hold true for hydrogen. For longer duration storage, hydrogen often outperforms batteries by a significant margin without the emissions associated with fossil fuels.

Emerging business models are setting the stage for hydrogen to play multiple and significant roles in microgrids. Some of these business models are briefly described below.

Remote Microgrids: Hydrogen Displacing Diesel

A new Chilean microgrid developed by Enel, with support from Electro Power Systems (EPS), is showing that hydrogen can fill the same role as diesel, but without the emissions associated with the latter. Remote microgrids have historically depended on diesel gensets, often because many days’ worth of fuel can be stored onsite. While batteries are generally too expensive for multiday storage durations, hydrogen tanks can be easily scaled, independent of the peak power demand.

According to EPS, this type of model is quickly becoming commercially viable. Some reasons include capital and operating cost declines, tighter emissions regulations across the globe, and an eagerness to bypass the diesel value chain across hazardous terrain in remote areas.

Microgrids Exporting Hydrogen

The developers of the Stone Edge Farm microgrid in California had a challenge: despite having excess onsite electricity production from PV and other sources, they faced hurdles in exporting that power in an economically viable way. For example, some of the hurdles to exporting into the California Independent System Operator (CAISO) market include reaching the minimum threshold of 0.5 MW and meeting the ISO’s resource implementation requirements, which include building an onsite meteorological station and control platform. Since these presented significant barriers, the developer looked to another product to export from the microgrid: hydrogen. A bank of onsite electrolyzers turns excess electricity into hydrogen, which then fuels the onsite Toyota Mirai fuel cell vehicles and can also feed the microgrid’s fuel cell bank to generate power.

Islands: Hydrogen as Local Energy Commodity

Many islands are dependent on diesel fuel for both transport and electricity, since it has historically been the cheapest large-scale energy carrier available. However, in places like Hawaii, the appeal of hydrogen is growing thanks to concern over climate change and a growing need to store the high output of intermittent renewables—often using power-to-gas schemes (for more information, see Navigant Research’s Power-to-Gas for Renewables Integration report). In addition, the captive nature of the vehicles helps alleviate the infrastructure problem since relatively few stations are needed. ENGIE, a member of the Hydrogen Council, has been bullish on hydrogen as a future fuel. The company is helping to build an island microgrid based around hydrogen technologies near Singapore. More projects are sure to be announced as the technologies continue to improve.

Thanks to cheap renewables and improving electrolysis technology, hydrogen’s outlook is getting better. Due to the challenges with major fueling infrastructure rollouts, Navigant Research anticipates that hydrogen development will be focused in small geographic areas through 2020. Fitting, then, that hydrogen should find a foothold on the small scale of microgrids.

 

Energy Access Continues to Attract Power, Internet, and Tech Giants

— June 12, 2017

Recent moves by some of the largest energy and Internet companies in the energy access space highlight the social and economic allure of providing electricity to remote, typically rural, communities in developing countries. More than 1 billion people have unreliable access to electricity and are reliant instead on harmful and expensive sources of lighting such as kerosene and diesel. Growing public and private investment in the sector continues to grab headlines—and increasingly ambitious roadmaps—but it remains to be seen how these projects will pan out. A round up from the past few months indicates the growing momentum:

  • In March, ENGIE signed three partnerships in Indonesia for microgrid and renewable energy development agreements to develop, co-finance, build, operate, and maintain microgrid and other renewable energy projects worth up to $1.25 billion over the next 5 years. As part of the agreement, ENGIE partnered with microgrid developer Electric Vine Industries to target 3,000 villages in the province of Papua over a 20-year period—reaching an estimated 2.5 million people and requiring $240 million over the next 5 years. The announcement is an exciting development that, if realized, could make a significant contribution to the country’s Bright Indonesia rural electrification program targets Papua as a priority area for increasing its electrification rate from 85% in 2015 to 97% over the next 3 years.
  • In April, founding partners Allotrope Partners, Facebook, and Microsoft launched the Microgrid Investment Accelerator (MIA) at the annual United Nations Sustainable Energy for All Forum. According to the press release, “This first-of-its-kind energy access financing facility seeks to mobilize ~$50 million between 2018-2020 to expand energy access to communities that currently lack reliable access to modern energy services in India, Indonesia and East Africa.” The MIA seeks to accelerate energy access microgrids through an ecosystem approach to finance—leveraging grant and concessionary finance from foundations and development finance institutions to mobilize private sector capital into renewable energy microgrid projects. With Internet and tech giants involved, others are likely to join; a solicitation to developers is slated for summer 2017.
  • Pay-as-you-Go (PAYG) is an Internet of Things (IoT) off-grid lighting solution that is gaining traction. PAYG enables rural, typically off-grid, customers to pay for electricity service in the form of a 1W-5W lantern or 10W-200W solar home system—or as part of a remote microgrid using their mobile phone. M-KOPA, Angaza, BBOXX, and others have been successful in expanding distribution of lighting products that are monitored and paid for via their cellular-enabled payment platforms.
  • Providing high-level context on the direction of energy access globally, the recently released State of Electricity Access Report 2017 provides an up-to-date look at how countries and governments are faring in the race to meet the sustainable development goal of universal access to electricity by 2030. The report underscores the importance of the integrated public-private approach being taken by ENGIE, Enel, MIA, and others that have operated in the energy access sector over the past year.

Taken together, these recent announcements showcase how rising connectivity—and in many cases, incomes—are attracting investment activity in the energy access sector.

 

Microgrids or VPPs or Both?

— April 25, 2017

What’s the difference between a microgrid and a virtual power plant (VPP)?

I like to say that there’s a 75% overlap between microgrids and VPPs. What they have in common is the aggregation and optimization of distributed energy resources (DER). Where they differ is that a microgrid has a confined network boundary and can disconnect from the larger grid to create a power island. In contrast, VPPs can stretch over much wider geography and can grow or shrink depending upon real-time market conditions.

The DER portfolio in a VPP is as equally diverse as a microgrid. Yet, the primary value proposition for a VPP is that the services from these DER assets flow upstream to a utility or transmission grid operator; services are not sealed off into an island from the larger grid.

Once I go through this standard definitional description, the most common follow-up question is: Which of these two distribution networks represents the best opportunity for vendors over the next decade? While pundits like to pick winners and losers, I see future growth globally for both microgrids and VPPs.

Four Examples of Energy Cloud Innovators

Four companies active in what Navigant Research has dubbed the Energy Cloud—which encompasses both microgrids and VPPs—will share the stage at an upcoming panel at the fourth annual Microgrid Innovation Forum taking place in Washington, DC on May 16.

Navigant Research uses the term Energy Cloud to describe transcendent changes sweeping over the electric utility industry. Rather than bigger is better, which drove utility planning for over a century, the shift is toward smaller and smarter DER portfolios. While increasing complexity in energy management, the evolution of a collective Energy Cloud also promises a more dynamic energy market in which buyers and sellers engage in transactive energy.

Each of these four companies has a slightly different take on the Energy Cloud:

  • Sunverge: This San Francisco-based solar PV and energy storage innovator is focused on VPPs that aggregate the DER installed at residences to provide value to utilities. Its recent initiative to sell its software independent from its hardware components speaks to the value of its software.
  • Enchanted Rock: This Texas company offers a fresh take on microgrids. Focused on ultraclean natural gas generation, the costs of its microgrids are so low that cost-conscious commercial and industrial customers are jumping on board. The key part of its value proposition, however, is wholesale market participation revenue.
  • Enbala Power Networks: Ranked No. 1 by Navigant Research in last year’s Navigant Research Leaderboard Report: Virtual Power Plant Software Vendors, this Canadian company is hardly standing still. It has integrated machine learning principles into its new product architecture while also partnering with to develop a DER management system solution for utilities.
  • Blue Pillar: With its focus on Internet of Things (IoT) data management, this Washington, DC-based company’s claim to fame is the ability to bring networks of DER online quickly. Its approach is cost-effective due to the ability to squeeze more value out of existing asset base.

I think the VPP epitomizes the value of Energy Cloud trends since it addresses the so-called utility death spiral head on. If a residential home with solar PV and a battery are part of a VPP aggregation, the home can have it both ways. It can reduce its own energy costs while also contributing to the reliability of the larger utility grid.

The Energy Cloud is all about creating new relationships between and the grid. Which of these four companies do you think will have the greatest future impact?

 

Public Power + Solar PV + Batteries = Win-Win

— March 10, 2016

Solar heater for green energyThe stars are aligning for distributed energy resources (DER) to play an increasingly important role in providing energy services to consumers. Some see this growth in capacity (coming from devices such as solar PV panels, fuel cells, advanced batteries, and other forms of DER) as the supreme threat to incumbent distribution utilities, echoing the much ballyhooed “utility death spiral” storyline. Others see this evolution as an opportunity for utilities to reinvent themselves, aligning their business strategies and business models with the emerging digital economy.

While it is going to be a bumpy ride into the future, there are signs that it is possible to create win-win scenarios by leveraging the diverse services that energy storage can provide. Advances in software that can optimize DER to provide bidirectional value, along with the bridging capabilities that energy storage brings to the market, can create order out of what would otherwise be chaos.

Is there a way for everyone to come out as winners? The key is in intelligent distribution networks, an ecosystem of solutions that spans concepts such as nanogrids, microgrids, and virtual power plants (VPPs). These three platforms were described in a previous blog. Two companies are proving that the boundaries between these three unique market applications are blurring, thanks to innovative utility business models and the creative aggregation and optimization possibilities attached to energy storage.

Winners

PowerStream, the second-largest municipally owned utility in Ontario, Canada, is developing an innovative pilot project that involves 20 residential units, each to be equipped with a 5 kW solar PV array and a 6.8 kW/12 kWh lithium ion battery. The project is designed to enroll homes in select feeders (which may not be adjacent to each other) in order to provide system benefits.

Perhaps the most innovative aspect of the project is the business model dubbed DBOOME (design, build, own, operate, maintain, and energize). Customers have an opportunity to participate in a hassle-free, zero-maintenance solar storage program with an upfront cost to partially cover installation, followed by a nominal monthly service fee for a 5-year program (this DBOOME approach is also the model PowerStream plans to deploy for its microgrid program). In exchange for the customer’s upfront payment and ongoing service fee, PowerStream offers customers significantly reduced electricity bills and resilience.

The key vendor partnering with PowerStream is Sunverge, which provides residential and commercial building-sited energy storage solutions that integrate renewables such as solar PV. Sunverge offers a combination of onsite hardware and cloud-based services that enable remote monitoring and control of nanogrids, aggregating them into VPPs. Sunverge has also partnered with the Sacramento Municipal Utility District, a municipal utility that is using the company’s systems in 34 homes as part of its net zero energy demonstration project. A net zero energy home is one in which a home’s total annual energy use is approximately equal to the amount of renewable energy generated onsite. Each home is a nanogrid located on a single city block that can also island as a microgrid. Sunverge’s business model essentially links the concept of nanogrids to a VPP. All of its systems can be controlled remotely from a central control room and capacity can be offered to distribution grid system operators.

To learn more about how public power utilities and energy storage innovators are forging win-win DER solutions, listen to the Navigant Research Utility-Energy Storage Collaborations webinar on Tuesday, March 15 at 2:00 p.m. EDT.

 

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