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Continuing its explosive growth, the U.S. solar industry had a record-shattering year in 2013.
According to GTM Research and the Solar Energy Industries Association’s Solar Market Insight Year in Review 2013, photovoltaic installations continued to proliferate, increasing 41 percent over 2012 to reach 4,751 megawatts. In addition, 410 megawatts of concentrating solar power came on-line.
Solar was the second-largest source of new electricity generating capacity in the U.S., exceeded only by natural gas. Additionally, the cost to install solar fell throughout the year, ending the year 15 percent below the mark set at the end of 2012.
At the end of 2013 there were more than 440,000 operating solar electric systems in the U.S. totaling over 12,000 megawatts of photovoltaics (PV) and 918 megawatts of concentrating solar power (CSP).
FIGURE: New U.S. Electricity Generation Capacity, 2012 vs. 2013.
Source: GTM Research, FERC
The U.S. installed 2,106 megawatts in the fourth quarter alone, 44 percent of the annual total. This makes Q4 2013 by far the largest quarter in the history of the U.S. market, surpassing the second-largest quarter by 60 percent.
“Perhaps more important than the numbers,” writes Shayle Kann, Senior Vice President at GTM Research, “2013 offered the U.S. solar market the first real glimpse of its path toward mainstream status. The combination of rapid customer adoption, grassroots support for solar, improved financing terms and public market successes displayed clear gains for solar in the eyes of both the general population and the investment community.”
“Today, solar is the fastest-growing source of renewable energy in America, generating enough clean, reliable and affordable electricity to power more than 2.2 million homes -- and we’re just beginning to scratch the surface of our industry’s enormous potential,” said Solar Energy Industries Association (SEIA) President and CEO Rhone Resch.
“Last year alone, solar created tens of thousands of new American jobs and pumped tens of billions of dollars into the U.S. economy. In fact, more solar has been installed in the U.S. in the last eighteen months than in the 30 years prior. That’s a remarkable record of achievement," he added.
California continues to lead the U.S. market, accounting for more than half of all U.S. solar installed in 2013. In fact, the state installed more solar last year than the entire United States did in 2011. Despite installing the second-most PV in 2013 with 421 megawatts, Arizona didn’t live up to its 2012 total of 710 megawatts.
On the other side of the spectrum, North Carolina, Massachusetts and Georgia had major growth years, installing a combined 663 megawatts, more than doubling their combined total from the year before. On the whole, the top five states (California, Arizona, North Carolina, Massachusetts and New Jersey) accounted for 81 percent of all U.S. PV installations in 2013.
GTM Research and SEIA forecast another strong year in 2014, with 26 percent growth in the U.S. solar market. This will bring annual installations up to nearly 6 gigawatts, and the cumulative total will be just shy of the 20 gigawatt milestone.
Key Findings of the Report:
Purchase the report or download the free executive summary here. Want to hear from the authors? Register for SEIA and GTM Research's free U.S. Solar Market Insight webinar taking place on Thursday, March 6 at 1 p.m. EST.
Solar microinverter and integrated AC module enabling startup SolarBridge just raised $42 million from strategic and venture investors.
I have been attempting to recruit VC investors to speak at the annual Greentech Media Solar Summit, and this usually game group has been avoiding me like a dinner check at The Village Pub. Where is the love for solar, cleantech venture investor class? Don't let speed bumps like Solyndra, MiaSolé, Nanosolar, or SoloPower dampen your enthusiasm for the sector. In case you haven't heard, companies like SolarCity and Vivint are acquiring hardware startups. Solar powerhouses like SunPower and First Solar are strong-margin, profitable businesses, and the U.S. and global solar market is setting records and kicking ass. SolarBridge competitor and market leader Enphase is a case study in creating a new market sector. SolarCity and solar-adjacent Tesla have made fortunes for their equity investors, LPs, and shareholders by selling great products to consumers. Solar is experiencing sustained, big, global growth with innovation up and down the value chain while serving trillion-dollar sustainability markets. Yet investors remain pathologically wary.
Where was I?
Oh yeah, at least not SolarBridge's investors. They're game.
Led by strategic investor Constellation Technology Ventures (of Exelon subsidiary Constellation, a retail electricity provider), this Round E for the Austin, Texas-based SolarBridge also included existing investors Shea Ventures, Rho Ventures and Prelude Ventures. Michael Smith, Constellation's VP and chief of Constellation Technology Ventures, has been added to SolarBridge's board of directors. Exelon Corporation is the leading competitive energy provider in the U.S., and Shea Ventures is part of Shea Homes, the largest private homebuilder in the U.S.
We spoke with Michael Smith of Constellation Technology Ventures. He notes that the VC arm of Constellation makes investments in energy startups that complement or disrupt their existing business. The company already has a very diverse C&I solar business, and it sees the SolarBridge integrated microinverter as having better reliability and power electronics than the competition. Smith also views the integration of the unit by the module vendor as a strength, and characterizes the AC module as "game-changing" as the solar market continues to mature.
The startup has raised a total of more than $105 million in VC.
Craig Lawrence, the VP of marketing under new CEO Bill Mulligan, told GTM yesterday that the new funding will be used to develop a large sales and marketing effort, as well as "bulking up in R&D."
Lawrence notes that the "competitive and regulatory landscape [for inverters] is going to get pretty treacherous." He said that the firm is developing next-generation features to meet new utility "command and control" features imposed by CPUC Rule 21. Lawrence spoke of the need for the inverter to provide control over reactive power and ramp rate. He said that a number of other microinverter vendors are not prepared for these requirements.
SolarBridge's panel and integration partners include SunPower, BenQ Solar, Hareon, Mage Solar and ET Solar. The recent GTM Research report The Microinverter and DC Optimizer Landscape 2014 provides detailed information on SolarBridge's price-per-watt selling prices and notes that the company's "cost structure is still the highest in the market, which is a bad place to be in the solar industry."
The report estimates 2013 shipments for SolarBridge at roughly 100,000 units, stating: "The company believed that there was a significant pocket of demand on the premium end of Enphase, with customers willing to pay a premium for a product with enhanced reliability." Enphase is the market leader and shipped 1.6 million microinverters in 2013.
SolarBridge has had some success in Australia's strong residential sector, where its reliability story plays well in a market rife with less reputable vendors.
SolarBridge now has a substantial war chest and the chance to scale in 2014. The company's chief claim remains its reliability. According to Lawrence, "We have a product that is best in class" and "a full solution." He added that SolarBridge will "sell and win" when competing against Enphase on reliability, and suggested that SunPower's extensive vetting of the SolarBridge technology attests that its design "eliminates reliability risks."
If you're a venture investor smart enough to still be interested in solar and would like to speak to 400 high-level execs on "tackling solar soft costs" at GTM's Solar Summit in Phoenix next month, contact firstname.lastname@example.org.
Silver Spring Networks (SSNI) has been saying for some time that its smart meter networks can be used to link all kinds of “smart city” devices, including streetlights. On Thursday, it announced its first project on that front -- a 75,000-streetlight deployment with long-time customer Florida Power & Light that connects to, and enhances, the network it’s already deployed for FPL’s 4.5 million smart meters.
The deployment in the Miami-Dade County region isn’t the first smart streetlight project for Silver Spring -- the Redwood City, Calif.-based company is networking about 20,000 streetlights in Copenhagen, and is doing a pilot project in Paris. Nor is it the first such project of its kind in North America -- grid networking vendors including Echelon, Sensus and others have been deploying digital sensor and control networks for years now.
But it is the single largest public lighting network to be deployed in North America, and notably, the first to ride on the same network used for smart metering, according to Sterling Hughes, Silver Spring’s senior director of advanced technology.
That means that each networked light will serve a dual purpose for the utility, he said -- first, to remotely control lighting, detect outages and diagnose what parts are needed to replace them, and second, to extend and strengthen the wireless mesh network they connect to.
“To them, a street light is just another sensor on the network,” he said. FPL manages about 500,000 streetlights across its service territory, and they run on the same grid infrastructure that powers homes and businesses, making them useful sources of data pertaining to outages and restorations.
Beyond that, “the lighting serves as a perfect canopy to strengthen the network,” he said. That’s an important consideration for a mesh-based wireless topology, in which each node in the system serves as a link to every other node as they move data from endpoints to the collectors that connect to utility control centers. FPL has been using its Silver Spring network to connect distribution automation systems, detect outages and analyze data streams for grid health insight, and is looking at specific network improvements to come as part of its addition of 75,000 street light nodes, Hughes said.
Putting together a network node that can figure out what's wrong with an HID lighting ballast system at the same time it helps grid operators triangulate faulty transformers isn't a simple task. "You’d be amazed how much engineering and sensoring goes into lights," he said. Silver Spring is leaning on the help of a number of smart lighting technology providers it has partnered with over the past year or so to do this kind of work. It's also tapping the capabilities of its SilverLink Sensor Network, which allows its networking nodes to be programmed as "virtual sensors" to parse and prioritize certain data for different operations, he said.
This combination of lighting maintenance and operational improvements and smart grid network enhancements put FPL’s new project in a different category than most of the other smart streetlight projects we’ve seen deployed to date. One key difference is that FPL’s project doesn’t include changing over streetlights to LEDs, Hughes said.
Almost every “smart” streetlight project to date has been driven by the business case of LED replacement, which pays off in lower energy consumption, longer lifespan and reduced maintenance costs. Having digitally controllable LEDs in place has, in turn, justified the expense of wirelessly connecting them, as has been the case in Silver Spring’s projects in Copenhagen and Paris.
“LEDs definitely provide a kicker on the business case,” Hughes said, while networking non-LED streetlights hasn’t penciled out on its own in most cases. But with Silver Spring’s smart meter network in place, “adding one more application onto that network doesn’t add a ton of costs” for FPL.
Hughes estimated that Silver Spring’s U.S. utility customers collectively own, manage or operate about 6 million streetlights, in conjunction with city and county governments. Now we’ll see if any of them see the same value in leaping from smart meters to streetlights.
SolarCity, the country’s biggest solar PV installer, and Tesla Motors, the country’s biggest electric vehicle maker (and soon to be the country’s biggest advanced battery manufacturer), could be the utility industry’s worst nightmare.
Consider the threat represented by two fast-growing companies, combining forces to bring energy independence to utility customers via mass-market battery-backed solar systems. It’s a transformation that strikes at the heart of the “we make it, you buy it” electric utility business model that has kept the grid humming and modern industrial society running for the past century.
But looked at another way, the SolarCity/Tesla solar-energy storage push could be seen as a solution to a host of utility and grid challenges. That’s because SolarCity’s small but growing number of energy storage installations aren’t just a lot of relatively tiny batteries, backing up lots of relatively tiny solar PV systems, in isolation from the grid.
Instead, they’re more like a “fleet” of energy assets, complete with the on-site digital controls and real-time communications systems required to enlist them into a host of grid needs -- if, that is, the regulatory and business models to make it worthwhile for customers and utilities alike can be put into place.
That’s how Eric Carlson, SolarCity’s senior director of grid integration, described the company’s approach to solar-storage integration in a recent interview. Right now, the company’s residential battery installations are meant for emergency backup, while its commercial installations are for demand peak shaving -- functions that aren’t directly tied to grid or utility imperatives.
“What we’ve built, though, is really a general purpose energy storage system,” he said, consisting of a set of lithium-ion batteries provided by Tesla, with both high power and deep-cycling capabilities. That could be a valuable resource for a whole host of grid functions, if it’s connected to the IT infrastructure to make use of it -- and SolarCity just happens to have that infrastructure in place.The network effect for distributed solar-battery systems
“Every single solar system we’ve installed -- and now, every single battery system we’ve installed -- has one of these gateways,” he said, referring to a configuration that includes a fairly powerful computer, networked to SolarCity’s central cloud-based server infrastructure. These gateways have the ability to collect data and interact with the inverters that turn PV and battery DC power into grid-ready AC power, he noted.
Right now, SolarCity uses those gateways to collect interval data from its PV systems, as well as customer energy consumption and power quality data, he said. “We typically collect it in fifteen-minute intervals, but in many cases, we also collect it in much faster intervals, and we have real-time links with these systems,” via a combination of broadband and cellular connections, he said.
That’s not necessarily how most solar installers operate, he added. While most PV systems come with some kind of metering and communications attached, they tend to be single-purpose devices, meant to collect energy data for net metering or off-site troubleshooting of system performance.
Indeed, SolarCity’s decision to install more powerful computing platforms at each customer site could be seen as overkill, in terms of what that computing power is worth today. SolarCity has been tapping its fleet of smart solar home data collection devices to assist in various research projects, such as the 2010 California Solar Initiative project that got it started installing Tesla batteries in SolarCity-equipped homes.
But once it’s in place, the technology opens up a whole range of grid-facing applications that require near-real-time communications and on-site digital controls to handle. “It’s really [about] knowing the right algorithms to put on that general-purpose computer, and designing a system that’s flexible and future-upgradeable. That’s something we’ve spent a lot of time on as a company,” he said.
And that means that “what we’re deploying today is, I’d say, not significantly limited in future applications. We see solar plus storage as being able to replace much of the need for other pieces of grid infrastructure.”A long list of grid needs to be met
For example, “Why build a fossil-fuel-fired peaker plant, when you can build solar plus storage instead?” he asked. That could allow utilities and grid operators to enlist these systems to help solve problems that the growth of distributed PV is creating, such as the infamous “duck curve” that predicts big drops in midday electricity demand when solar is generating the most, and an unprecedented ramp-up in evening demand when solar drops away and people return home from work.
Linking demand-side resources like smart thermostats and load controls at each home could increase the value of those distributed assets, he added. That’s the idea behind SolarCity’s proposal for Southern California Edison’s “Living Pilot” project, which is seeking ways to bring local resources to bear in making up for a host of grid needs in the wake of the closure of gas-fired power plants and the loss of the San Onofre nuclear power plant.
California regulators are struggling to come up with ways to enlist distributed solar PV systems in helping to solve these new challenges. “There’s a lot that needs to be discussed, both at the CPUC and at the ISO, about how customer assets can participate in wholesale market services,” Carlson said. “But from a technical perspective, I’d say that as long as we have a real-time link to each system and computing intelligence,” it should be doable.
On the highly localized scale, SolarCity is looking at how a combination of energy storage and distributed controls could help mitigate the impacts of high-penetration solar on distribution grids through its SolarStrong program with the U.S. Army, he said.
AB 327, the California law passed last year that sets up a process for the state to reconfigure the net metering regime that pays solar-equipped customers and companies like SolarCity for the electricity they generate, will also require utilities to incorporate distributed generation into their distribution grid planning. “We’re looking forward to that public discussion” to see how SolarCity’s capabilities can be put into play on that front, said Carlson.
Another important innovation on the technology side will be “turning solar inverters into what we call 'smart' inverters,” he added. California is once again taking a lead in pushing grid-interactive functions into the inverters that connect solar PV systems to the grid. “We want to get those features out into the field in every inverter possible, as soon as possible,” Carlson said.An uncertain future for grid-ready distributed energy
These concepts aren’t unique to SolarCity -- in fact, they’re a part of the plans of a host of solar-storage startups, utility pilots, regulatory proceedings and cutting-edge research projects, all looking at how to solve the challenge of integrating distributed generation into the grid.
But SolarCity is one of the few entities with enough solar systems deployed that are capable of being networked to start testing propositions like these on a wide scale. If Tesla’s plans for a battery Giga factory play out, it will soon have a source of mass-market batteries to deploy as well.
This confluence of factors could give SolarCity the heft to take on California’s investor-owned utilities in an ongoing dispute over how battery-backed solar systems should be allowed to connect to the grid. Since last year, the state’s big utilities have been blocking net metering applications for customer-owned systems like these, claiming they could store grid electricity and feed it back under the guise of green, solar-generated power -- a situation that Elon Musk, Tesla’s CEO, called “crazy” in a recent California Public Utilities Commission appearance.
At the same time, SolarCity and the rest of the solar industry are facing their own challenges in how they’re going to transition from the incentive-driven market that’s allowed them to grow as much as they have so far. Federal investment tax credits for solar systems expire at the end of 2016, and net metering programs in states from Arizona to North Carolina are under attack from conservative activists and utilities that want to reduce payments or add new fees to solar-system owners’ bills.
On the storage incentive front, it’s worth noting that SolarCity’s big foray into customer-sited batteries has been largely bankrolled by California’s Self-Generation Incentive Program, which pays for roughly one-third of the cost of installed systems. California’s massive new grid storage mandate could boost the market for customer-sited storage, but the rules for how that’s going to happen are still being worked out.
Just how future grid services could help replace incentives like this is a huge open question for SolarCity, as well as the utilities and regulators the company is working with. What’s clear is that each side needs the other -- and that the terms for how energy-enabled consumers and traditional utility ways of doing business will have to change.
“If it benefits people, we can help them manage generation, help them manage energy storage, and help them manage loads if they’re dispatchable and controllable,” Carlson said. “But it really does come down to setting the value to the utility.”
Speaking at a recent energy innovation summit in Washington, D.C., William Caesar, an executive at Waste Management, declared that a lot of inventors and entrepreneurs are "screwed."
While the inherent challenges of building a company or commercializing a new technology certainly aren't news to startups, the context of Caesar's comments is notable.
Since 2007, Waste Management has made over two dozen investments in companies developing new recycling techniques, biofuels, chemicals and plasma gasification technologies. But with "no successes" so far, the company is restructuring its portfolio, divesting from some startups and looking to technologies that are closer to commercial scale.
If a massive waste services corporation with strong technical expertise, deep sales channels, and a market capitalization of $21 billion can't bring an innovative startup to scale, who can?
With only a handful of successful public exits in the cleantech space, a lot of entrepreneurs are looking to corporate partnerships or full-on acquisitions as an attractive opportunity to scale. Google's recent $3.2 billion acquisition of Nest was seen as the pinnacle of this trend -- a progressive corporate tech leader flush with cash buys an innovative startup and helps it attempt to take over the world of home automation. Could a startup ask for more?
But that acquisition was unique. Nest and Google already have a very similar culture and vision. And although hardware is central to Nest's business, its path to scale is far less capital-intensive than your typical cleantech company. Heck, some observers aren't even convinced that the Google-Nest partnership is a cleantech play at all.
The reality for most startups is that they won't be the next Nest -- they'll likely end up like CSP developer eSolar, or like the enhanced geothermal companies Potter Drilling and AltaRock.
Those three companies collectively pulled in tens of millions of dollars in R&D support from Google back in 2007 as part of the RE<C Initiative. But Google eventually ditched that strategy because the engineering and capital needs were too much to support. Like Waste Management, Google decided to invest in energy companies that were already close to commercial scale.
Anecdotes don't prove a trend. However, the data shows that this experience is common across the entire sector.
Last year, the Cleantech Group put out a report analyzing the relationships between cleantech startups and corporate investors. The group analyzed 86 corporate deals with cleantech startups over the last decade and found that distressed exits for both partnerships and direct investments were more common than successful ones, as this figure shows.
The report offers a fairly intuitive take on why startups and large corporations don't always succeed together: different cultures, timescales, approaches to leadership and growth strategies are all potential points of conflict.
"Almost by definition, startups are willing to assume risks that their far more mature brethren would shun," write the authors. "Corporates are often willing to engage in disruptive early-stage R&D efforts, but moving such R&D out of the lab and into full-scale growth mode is typically seen as far more difficult in a corporation facing conflicting objectives and internal competition for corporate budget."
And when it comes time to face those difficulties when attempting to truly scale, clashes over risk acceptance can be a problem: "Startups are typically singularly focused and thus also risk a far more binary outcome between success and complete failure. The personalities of the executives and the employees best equipped to handle such binary outcomes are less likely to be successful in a more structured corporate environment."
This isn't to say that startups engaging with corporates on R&D, joint ventures or equity investments are destined to fail. Pulling in a corporate investor can be critical for companies seeking new sales channels, validation of their technology or trying to get a better sense of what's happening in the market. However, as corporations fill in the gap left by traditional venture capitalists pulling out of capital-intensive cleantech, positive results are far from assured.
"There is not one silver bullet to developing a successful corporate relationship -- in short, it’s complicated. Corporate partnerships can be mutually beneficial to all parties, but simply having a partnership does not necessarily equate with success," concluded the authors.
Finding a corporate investor can be a big step for startups. But that doesn't insulate them from eventually getting "screwed" by market realities or poor matchmaking.
The deployment of distributed solar has the potential to force drastic changes to the electric utility industry. Changes in rate structures, government and utility incentives, customer loyalty, consumerization of supply, and consumption of power are being discussed in a variety of states with growing rates of solar penetration, such as Arizona and Hawaii.
These large, business-defining discussions steal the spotlight in the news and at industry conferences, often pushing the more technical questions and obstacles to utility engineers to figure out. GTM recently launched the Grid Edge Executive Council to tackle these issues and more.Traditional planning and engineering analysis
Targeting feeder improvements as a means of expanding capacity for distributed solar in a cost-effective and technically sound manner is a labor- and cost-intensive process. Traditional engineering analysis lacks the kind of robust modeling of distribution laterals and secondary distribution necessary to understand the effects of customer-connected generation. Instead, most utilities model feeders beyond the distribution substation as a singular fixed load source or series of load sources with little or no dynamic nature.
Historically, planning and modeling of system power flow models aggregated the expected or measured load at the primary level, only separating load sources when equipment such as reclosers, capacitors, voltage regulators, or automated switches were added to primary distribution.
Such systems would be used to model worst-case scenarios under peak loading, zero load, fault conditions, and other factors. Engineers use software to run scores of static safety and stability scenarios to test various equipment configurations, select equipment, and determine the effect of various shifts in load patterns or construction. This process of scenario testing has traditionally been performed before construction, during periodic feeder upgrades, and when extensions or new construction adds to the feeder’s load.
Using modern distribution management system power flow models, loads can be broken out by distribution transformer. This has extended engineering and simulation analysis software visibility to the secondary transformer. To simulate the secondary, utilities continue to apply static rule-of-thumb voltage drops that provide little insight into loading conditions or solar feed-in to a secondary bus.
When new generation is added to the transmission and sub-transmission grid, more diligent engineering analysis studies are undertaken. For large solar arrays (those <300 kW), utilities assess whether a distribution or transmission line can handle the new generation by running specialized interconnection studies, which often cost more than $10,000.
These studies require the services of specialized utility engineers or outside consultants to collect both paper and digital records for the feeder and local substation, evaluate completeness, gather additional information, and improve the model, as well as to provide scenario and/or simulation testing on the effect of connecting the array on a feeder. Finally, these experts test and select potential upgrades, such as mitigation equipment (such as static VAR compensators or battery storage systems) or traditional feeder upgrades (such as reconductoring or installing a larger secondary transformer).What makes distributed solar different?
Due to their size, distributed solar plants do not require (and indeed, cannot economically pay for) this level of detailed study. To date, utilities have typically created conservative penetration limits for small-scale solar systems on a feeder. The intermittent nature, clustered deployment, and uncertain future of customer adoption of these systems creates dynamic conditions over the course of seconds, minutes, days, seasons, and years. Scenario-based studies that are periodically performed over the many decades that feeders remain in service are not capable of cost-effectively modeling the effect of each installation of an additional solar plant on a feeder.What utilities need to do
In order to effectively customize the process of analysis for smaller systems, components such as engineering analysis software, simulation software, and the systems and foundational data that inform them, must be improved.
Utility modeling and simulation software has to move down to the level of the customer premise, providing utilities with the ability to cluster solar or other resources on a secondary bus to determine the effect of these resources on the customer’s power quality. This effect will have to be modeled not only in static scenarios, but also in dynamic time-series simulations that have adjustable units of analysis that can potentially evaluate the status of the system during every second or even sub-second periods during a full year. Historical data SCADA, weather data, and interval data from AMI could be useful in this process to increase the accuracy of these simulations.
An accurate view of the as-built distribution system is absolutely necessary to effectively model the interactions of many types of equipment together on a feeder. This requirement for clean data is potentially the most difficult, time-consuming, costly, and frustrating to fulfill. This process involves improving data capture and integrity in planning and GIS systems and detailed, continuous updating and review of GIS data to ensure the as-built environment is correctly represented in simulation software.
Lastly, the basic models for various dynamic equipment (such as smart inverters, battery storage, grid power electronics, etc.) have to continue to evolve. Today, most of these models lack the degree of accuracy necessary to simulate the effects of placing multiple devices on a single feeder. Efforts to improve these models continue in the realm of open-source analysis and simulation solutions such as OpenDSS and GridLAB-D.
If adopted, these improvements will allow the use of what-if simulations that examine the effects of additional deployment of a variety of traditional or intelligent equipment.Utilities are on the forefront
Select utilities around the country are beginning to integrate more advanced analysis and simulation software through efforts to improve open source tools such as GridLAB-D and OpenDSS. American Electric Power is working with Battelle to enhance the modeling of dynamic resources such as solar and closed-loop conservation voltage reduction on distribution feeders using GridLAB-D as the foundational software.
Source: GTM Research
Other notable efforts are underway with simulation and power flow modeling vendors to develop new and more effective simulation packages for designers and distribution engineers. In North Carolina, the proliferation of solar has pushed Duke Energy Carolinas to make use of the distribution simulator within its distribution management system to perform what-if simulations. This system has been used to model the short- and long-term effects of various solar adoption scenarios on the stability of distribution feeders, as well as on Duke’s North Carolina territory. Sacramento Municipal Utility District and Pepco have taken a different approach, using data from a variety of sources to build and test fast-power-flow engines that simulate the conditions encountered when new renewable generation is added to the grid.
These projects, coupled with others at Baltimore Gas and Electric and Detroit Edison, are taking the first steps toward embracing distributed energy resources. Such systems perform MV and LV network modeling to enable improved new and existing planning and design of distribution systems.A vision of the future
As these systems and their underlying models improve and deepen, regulated utilities are beginning to provide customized generation zoning services for customers. With this service, utilities have an inherent advantage due to their knowledge of their own distribution grid and strengths in safety. These systems could also permit utilities to better identify and understand the effect of equipment or system changes that can be made to increase the carrying capacity on distribution feeders. This will not only empower customers looking to install distributed energy resources and ensure system stability, but will also provide utilities with an effective means of quickly adjusting to changing legislative and regulatory policies that seek to accurately value customer-sited resources.
Source: GTM Research
Ben Kellison is a Senior Grid Analyst at GTM Research. For more information on next-generation utility services, business models and distributed renewable integration, join Ben and the rest of GTM Research at Grid Edge Live on June 24-25.
Greentech Media got an early look at GE's new space frame wind turbine tower in advance of the technology's official debut at next week’s European wind industry conference.
The space frame advances the potential of GE to deliver taller towers capable of more power production at a lower cost.
GE's enclosed-lattice, five-legged space frame prototype, sited at the company's Tehachapi, California facility, is 97 meters tall with a "brilliant" GE 1.7-megawatt, 100-meter rotor turbine on top. GE will introduce a 139-meter-tall space frame for its 2.75-megawatt, 120-meter rotor turbine on March 11 at the European Wind Energy Association conference.
A space frame is a three-dimensional structure built on struts that are locked together. These structures can accommodate very heavy weights with limited materials and supports.
Open-lattice towers were used for early utility-scale wind turbines, often with poor results. Bolts frequently rattled loose, leading to structural failures, and birds took up perches in the structures, leading to significant rates of avian mortality.
In searching for a way to cut costs, GE engineers returned to the lattice concept. But the space frame eliminates danger to avian species by enclosing the lattice with a translucent, non-weight-bearing, UV-protected PVC-polyester fabric coating.
The new design also uses splined bolts, which eliminates the risk of structural failure, according to GE's general manager of wind products, Keith Longtin.
The overarching trend in "the wind industry is higher hub heights,” Longtin said. “But tube towers scale poorly, because increasing load and material requirements do not pay off in increased output.”
GE’s R&D goal is to scale up towers and keep costs down. The space frame’s 10-meter-diameter base will allow a 120-meter-tall tower to use 20 percent to 30 percent less steel than a traditional 100-meter-tall tube tower, because the broader base means less support is needed from the tower walls.
Another benefit of the larger tower base is that advanced power electronics and battery storage capability can be housed inside and protected from weather and vandalism.
Because the space frame narrows at the top, it can interface with any nacelle without structural alterations.
One of the two key design parameters of the space frame, Longtin said, was limiting all of the parts to the 40-foot size of a standard shipping container so all of the pieces of a tower can be delivered by long-haul trailers. That should have a significant impact on transportation logistics.
Turbine manufacturers now deliver tube towers in three 30-meter-long, 60-ton sections. It requires special vehicles, elaborate planning and permitting and, often, police escorts.
The space frame will arrive in shipping containers. On-site assembly will replace complex transport logistics. It took about 30 days to assemble the Tehachapi prototype, but Longtin believes the average assembly time can be four days.
The other key design parameter was that the fastening system needed to be maintenance-free. The space frame’s splined bolts, once inserted, essentially function like rivets. They have long been the standard, maintenance-free fasteners used in bridges, aircraft carriers, and skyscrapers. Accelerated testing by GE engineers and third-party labs validated the maintenance-free durability of the GE splined bolts.
The cost savings from the space frame will be site-specific, Longtin explained. Savings from reductions in materials, shipping time and costs may be offset by increased on-site labor and time.
Because the space frame’s economic advantages will be greater for taller towers, Longtin expects the balance to come out strongly in GE’s favor in heavily forested places like Sweden, where the rotor needs to be above the treetops, and in places like northern Germany and the U.S. Southeast, where economically viable wind speeds are found higher in the sky.
An alternate strategy for cutting costs is substituting concrete for steel at the tower’s base. That can be cost-effective if a project is near a concrete source, Longtin acknowledged. But many are not.
Siemens, one of GE’s biggest competitors, introduced a bolted steel design aimed at reduced costs for towers as tall as 140 meters in 2011. It offered many of the space frame’s advances. Bent steel plate shells and other parts can be delivered to the project site by standard trucking for on-site assembly with maintenance-free bolts. A broader base provides increased stability.
The concept, developed with Denmark’s Andresen Towers, has apparently failed thus far to penetrate the marketplace to a significant degree. Requests for information from Siemens about the bolted steel design’s commercialization went unanswered. Queries to wind industry professionals turned up no awareness of the Siemens design. As with the space frame, success for the Siemens concept is probably likely to occur when there is greater demand for taller towers.
GE is presently working with ARPA-E on a truss-structured, fabric-covered turbine blade that can be shipped in containers and assembled economically onsite -- even as they continue to get bigger. These advances show that even in a maturing industry like wind, there are still plenty of logistics and costs to attack.
Editor's note: That's intrepid reporter and tower climber, Herman Trabish, once again risking life, limb and syntax to bring you the high-altitude clean energy news.
As expected, 2013 was yet another record year for solar in the U.S. With 5.1 gigawatts of PV and CSP coming on-line, the solar industry was the second-largest source of new electricity capacity behind natural gas.
But how long will it continue?
With the tax credit expiration looming, conflicts over net metering, and a brewing solar trade war, it is far from assured that this boom will go on forever. This week, we’ll talk with Rhone Resch, president of the Solar Energy Industries Association, about how the industry is positioning itself in the face of these challenges.
Then, we’ll talk about Opower’s coming IPO and ask what it will take for the company to continue dominating the efficiency sector. In our final segment, we’ll look at whether the “energy crisis” episode in season two of the Netflix series House of Cards is at all based in reality. (Note: there will be minor spoilers.)
The Energy Gang is produced by Greentechmedia.com. The show features weekly discussion between energy futurist Jigar Shah, energy policy expert Katherine Hamilton and Greentech Media Editor Stephen Lacey.
There is a wave of consolidation and shifting alliances underway in the U.S. residential solar market. We've seen market leader SolarCity on an acquisition spree, and Vivint is in a fierce personnel and turf battle with the market leader. Last month Sunrun acquired REC Solar's residential group. There seems to be a move toward vertical integration. Here's some recent news from official and unofficial sources.Sungevity moves toward Clean Power Finance platform, PPAs, Yelp help desk
The most recent dynamic in this market involves Sungevity, the Oakland-based solar financier and lead generator, and Clean Power Finance, the solar loan and deal platform. It's not a vertical integration move.
According to sources, Sungevity is moving some of its leasing business to the turnkey Clean Power Finance finance and deal platform. Sungevity is also moving to offer a power purchase agreement. Currently, most of Sungevity's leasing finance comes through dedicated tax equity funds with a sponsorship model that requires Sungevity to contribute to the financing, a less-than-optimal use of venture investor equity funding.
Sources close to the deal have suggested that the sponsorship equity model is expensive for Sungevity, while CPF needs to offset some of its losses from the SolarCity-Paramount deal.
According to sources close to CPF, the company is budgeted to complete 16,000 deals in 2014 -- a massive level of growth over last year's 8,200 deals. CPF completed about 4,500 deals in 2012. It was suggested that CPF makes $2,400 per deal. CPF has not verified these figures.
We have also learned that Sungevity has some issues with finance timing. According to sources, a very significant number of solar systems are installed on customer rooftops but are not yet energized because Sungevity does not have the funding. We understand that this is not uncommon, as banks might just do one tranche per month for their customers, so Sungevity's customers might have to wait a month. It is an easier situation to manage if there are multiple open funds.
A few reviews on Yelp (one example is below) bolster the claim that sales reps are telling customers that Sungevity is waiting for financing. I contacted this Yelp reviewer, Scott R.D.
He wrote that Sungevity informed him that it was "waiting for approval of [its] 'financing partners.' That was going to be a few weeks. This was a day or two after they put the equipment on my roof. It is pretty much ready to go, except for wiring into our electric panel. He said that would only take a few minutes and they would do it right before inspection. I've spoken with my assigned project manager and Sloane Morgan, Customer Experience Officer." Scott also pointed out that "[t]he lease agreement states that they will not put equipment in until they have approval of their 'financing partners.'" He was sent a $100 gift card for his trouble late last week.
Sungevity has plenty of positive reviews on Yelp as well. Stephen Lacey's story on the best and worst Yelp reviews of solar installers goes into detail on the topic. He also notes that "it's important to look at a reviewer's full history before making a judgment."Vivint secures an additional $280 million in tax equity funding
Vivint, the second-largest solar installer in the U.S., didn't disclose the terms or source of its three new equity transactions, which will enable the funding of $280 million worth of solar systems. Vivint gained more than $700 million in residential solar financing last year.
"In 2013, we grew our customer base by nearly 300 percent with our past fundraising efforts," said Greg Butterfield, CEO of Vivint Solar, in a release.
Vivint Solar expects to open up 30 new offices this year.RGS Energy and Mosaic launch home solar loan
RGS Energy (RGSE), a solar installer and financier, has partnered with Mosaic, an online solar investment platform, to launch a home solar loan product. RGS Energy aims to offer the loan to California homeowners starting in the first half of 2014. Mosaic's online platform will offer opportunities to invest in the solar loans to qualified investors.
Billy Parish, Mosaic’s president and co-founder, told GTM, "The loan is a great new option for homeowners who want to go solar. Mosaic’s Home Solar Loan [requires] zero dollars upfront and simple low monthly payments, comparable to most leases. At the end of the loan term, the homeowner has increased their home value and gets free energy for up to 25 more years."
According to the VP of GTM Research, Shayle Kann, "The market share of third-party ownership has largely leveled off over the past six months, and we expect to see increasing availability and attractiveness of residential solar loan products this year."
Screenshot of Yelp review of Sungevity
Here's a residential solar roundup from January.
This week, GTM Research and SEIA released the Q4 2013 U.S. Solar Market Insight report. The infographic below highlights some key findings from the year-in-review report.
Want more data and insight? Both the full report and free executive summary are available for download today.
After years of working in the first-of-a-kind deployment phase, grid energy storage vendors are looking for repeat business.
That’s the message coming from AES Energy Storage, which on Thursday announced what it’s calling its Advancion energy storage offering -- a prepackaged, modular system that’s meant to challenge the grid storage status quo. This “fourth-generation” version of its technology combines new core integration partners, new ownership models, and a new business case: replacing gas-fired peaker plants.
AES Energy Storage is already a leader in battery-based grid storage, with 174 megawatts of systems deployed, and a potential 1,000 megawatts more in development. But in the six years since it initiated its first large-scale grid storage project, the company has refined the way it ties together batteries, inverters, grid electronics and the software that manages their interaction with the grid, according to AES president Chris Shelton.
That work includes the opening of its Battery Integration Center in Indianapolis, where the company has spent the past nine months or so working to certify its first two integration partners, he said. They’re big ones: Korean lithium-ion manufacturer LG Chem, which is supplying the batteries for Southern California Edison’s 32-megawatt Tehachapi wind power storage project as well as for the Chevy Volt, and U.S.-based inverter maker Parker Hannifin.
That list is set to grow in the coming months. “Since then, we’ve introduced new suppliers into the integration center and are working with them right now,” he said. This kind of pre-integration work is critical to moving from a project-engineering approach for each new storage deployment, to something that could be considered a “product,” replicable at different scales for different grid needs, he said.
That includes the flexibility to scale from tens to hundreds of megawatts, and to provide energy durations ranging from thirty minutes to four hours or more, Shelton said. “When we combine that with our control system, we get a great finished product for the grid,” he added.
And, unlike all of AES’ existing storage deployments, its new product can now be owned by a third party. That’s an important step that could help boost sales to renewable energy project developers that want to incorporate the system into the overall project costs, to maximize the return from tax incentives, or to meet emerging requirements for storage-backed solar and wind project emerging for island grids like Puerto Rico and Hawaii.
Finally, Shelton described the company's updated “control system that does the aggregation of the components, as well as the market-facing application logic,” he said. This new iteration of AES’ Storage Operating System already supplies customers with a suite of energy market interfaces for services like frequency regulation, renewable energy smoothing and other storage functions.
Now, with markets from California and New York to Germany and Italy starting to expand the range of grid services they’re willing to consider for energy storage, AES is explicitly pitching Advancion’s ability to replace gas-fired peaker plants.
Energy storage advocates have been promoting the value of batteries as a peaking resource, noting that they’re able to absorb as well as inject power, and respond much more quickly to changes on the grid.
They’re also far more flexible in terms of scaling to meet grid needs. While peaker plants don’t get much smaller than 50 megawatts or so, battery systems can be deployed in smaller and cheaper increments, then scaled up over time.
In economic terms, Shelton said that its battery systems are targeting a capital cost of $1,000 per kilowatt or less for a deployment built to stand in for a peaker plant. That’s compared to costs of about $1,350 per kilowatt that have been paid to recent gas-fired peaker plant projects in California, he said.
Because peaker plants are procured years ahead of time to prepare for projected grid needs, it’s hard to predict how or when energy storage alternatives will get a chance to bid themselves in as challengers for this role. But there’s little reason to fear that large-scale energy storage projects that provide much faster-acting services like frequency regulation or wind and solar power balancing couldn’t manage the relatively simpler task that peaker plants serve, he said.
In the meantime, “the mandate of folks spending billions of dollars on peaking plants is dependability and cost-effectiveness,” Shelton said.
A few years ago, passing energy benchmarking rules was considered a significant leap forward in efficiency policy. Benchmarking is still in its infancy in the U.S., but some early movers, like Washington, D.C., are already looking far beyond gathering Energy Star scores.
The nation’s capital was the first city in the U.S. to pass benchmarking goals, and it just released its second year of public disclosure data from the district’s energy benchmarking ordinance. In 2012, Greentech Media compared some of the initial results with New York City, which also requires public disclosure of benchmarking data.
At the time, New York seemed to have a more comprehensive plan of attack for its lowest-performing buildings. But Washington, D.C.’s achievements in recent years cannot be overlooked.
Here are five ways that Washington is getting things done (at least in energy efficiency).Sustainable plan for D.C.
Washington, D.C. released a comprehensive sustainability plan in February 2013 that includes a section on the built environment. The plan calls for a 50 percent cut in greenhouse gas emissions and energy consumption in the city’s building stock.
The district’s Green Building Advisory Council is currently hashing out the details of a new green construction code and launching a green building fund grant program. “The ultimate goal of greening the codes is to make high performance construction more mainstream -- and to eventually get to the point where we don‘t have to call it green anymore,” the report states. “When we achieve this goal, one milestone of the district‘s green building leadership will be achieved.”Leading the way in benchmarking
Washington, D.C. was the first jurisdiction in the U.S. to require both public and private buildings of a certain size to disclose energy performance. The trend has caught on, with several large cities and a few states also passing benchmarking rules.
Some studies have found benchmarking can cut energy use by up to 7 percent, just by making owners more aware of how the building is performing and pointing out anomalies that need to be corrected, but it is still too early to see if those savings will remain consistent across various cities.
Benchmarking is just one energy efficiency domain in which Washington has made significant gains. The city leads the nation in LEED-certified square footage per capita. Cities like New York and Chicago may have far more LEED buildings overall, but Washington, D.C. is the only municipality with more than 100 square feet of LEED space per capita.
Although it is about more than just energy efficiency, the adoption of LEED often signals the importance of sustainability measures to the public and to private stakeholders that seek out the rating. In that respect, Washington, D.C. has come a long way in a short period of time. At the end of 2011, there were 236 LEED-certified projects covering nearly 44 million square feet in the district. One year later, that figure grew by about 50 percent, with 110 more buildings that equated to more than 25 million square feet.
Washington, D.C. also comes in near the top for the number of Energy Star-certified buildings per capita, and that figure has been growing rapidly. The district is second only to Los Angeles in Energy Star-certified buildings per capita. From 2011 to 2012, Energy Star certifications jumped from 127 to 185 buildings, with an increased square footage of nearly 50 percent, according to the report.
The increase in Energy Star buildings is not surprising, however, as the benchmarking rules require building owners to use the U.S. EPA’s Energy Star Portfolio Manager tool for public disclosure. Buildings that cannot receive an Energy Star score can use a metric known as weather-normalized source energy use intensity, or EUI. Early results suggest that, at least in Washington, D.C., benchmarking is saving energy. The Department of General Services reduced energy savings on average of 7 percent from 2010 to 2012, and private buildings dropped energy use by 6 percent.20 percent in 20 months
As part of Sustainable D.C., Washington has set a goal of reducing the energy use in more than half of its 30-million-plus square feet of municipal facilities by 20 percent in 20 months.
The project is about halfway completed, and according to Sam Brooks, associate director of energy and sustainability for D.C.’s Department of General Services, “It’s going awesome. There are some really fun days. There are some really infuriating days.” It is hard to find someone as enthusiastic about energy efficiency and building data as Brooks, but he is also brutally honest about the challenges of not only achieving the goals, but actually making them an ongoing part of operations.
“We’re trying to re-imagine how you do energy efficiency. Operational inefficiency is more difficult to nail down,” he said. Each building has its interval meter data, consisting of about 35,000 weather-normalized data points per year, which are delivered by Lucid’s Building OS. “The data has been a game-changer for us,” he added, but it still amounts to little more than turning things on and off.
Still, though turning devices on and off and correcting for mistakes in basic building operations schedules may sound like a one-off success in terms of cutting energy use, Brooks contends that the constant stream of data is empowering. “The transparency of information is transformational,” he said. “It’s giving facility managers' tools to address the inefficiency.”
The district is backing that up by doubling down on training facility managers and giving them tablets to make it easier to track the information provided. Measurement and verification is built into the system, and the city is working on aligning energy consumption with billing so that agencies can see the energy savings reflected in their budgets.Focus on schools
A 2012 report described schools, one of the largest components of Washington, D.C.'s building stock, as “the district’s most challenging buildings group.” This year, the city launched the D.C. Green Schools Challenge to bring educators, students and facilities managers into the energy efficiency conversation. The inaugural competition is targeting more than 100 schools in the district.
The K-12 schools in Washington currently use 9 percent more energy than the national average for schools. Although the figure needs improvement, it is still far better than the 42 percent more that the district’s fire departments and police stations use compared to the national average. Still, D.C. schools' rate of energy use was already 4 percent better in 2012 than it was in 2010.
Brooks said that there is about $15 million available for retrofits in the city’s building stock, much of which could go to schools. There is also a competition for students to prepare and submit energy efficiency retrofit projects to the city for consideration. By making energy efficiency a part of the ongoing conversation with schools, Brooks is confident that the gains achieved will not fade when the competition is over. “If you get on the scale every day and track your results against your peers, your efforts will be extremely effective,” he said.Getting Pepco on board
When the city first envisioned its program to cut energy use 20 percent in 20 months, time was of the essence to start collecting data. But getting access to interval data was not as easy as the city would have hoped. Although Pepco, the utility that serves the area, had deployed smart meters, it still took six to eight months of wrangling to get the data from the utility.
Fast-forward nearly a year, and the city has worked hard to ensure that each building manager or owner does not have to go through as much wrangling as it once did. In the most recent report, the city noted that Pepco is providing aggregated whole-building electricity consumption data where five or more accounts are present.
Now, the utility is working with the District Department of the Environment and the U.S. Department of Energy’s Better Buildings Data Access Accelerator. As part of that partnership, Pepco has committed to provide direct upload of data to Energy Star Portfolio Manager by the end of 2014. In 2014, whole building data will be required for benchmarking.
The focused effort on providing detailed data and institutionalizing energy-efficiency measurement and verification is starting to pay off, even though the challenges are significant. Also, as more cities move beyond benchmarking, intra-city competition will continue to heat up.
“We’re making a core hypothesis that the radically transparent nature of [building energy] information is transforming [city buildings],” said Brooks. And even though some of it is just turning things off, “It’s all really challenging,” he said of rethinking energy efficiency for the entire city -- adding that sometimes, “It’s laughably difficult.”
A recent survey identified aging infrastructure as the most common concern that is keeping electric utility professionals up at night.
Perhaps they should rest a little easier.
That’s not to say that replacing old equipment won’t be a growing cost for utilities in the years ahead, says Willis, but the experience will be more like wading through quicksand than falling off a cliff.
“It is the biggest manageable problem they have,” according to Willis. The key word is “manageable.” Willis says utilities that steadily and systematically identify, then refurbish or replace problem equipment -- regardless of age -- will find a financially sustainable path.
Since the late 1990s, there’s been growing alarm within the electric utility industry about the age of infrastructure. Willis makes the case that much of that fear is misdirected or misinformed.
It’s true that many of the cables, poles, transformers and circuit breakers that make up the U.S. electricity grid are approaching 40 or 50 years in service, but that doesn’t mean a disaster is imminent, he says.
“There is no sudden crisis looming in the future, no decade when failure rates blow up and system and business performance plummets,” Willis wrote in an article published in the March 2012 volume of the journal Natural Gas & Electricity. “Aging infrastructures do not create catastrophes.”
That’s because equipment failure rates increase very gradually over time. The statistical odds of a breakdown increase each year, but there is no cliff at the half-century mark, Willis said.
What's more, a piece of equipment that is still in place and operational at 50 years is probably a survivor. It’s probably been well made and well maintained, which improves its odds of lasting another twenty or 30 years.
One example Willis cites is a system in the Northeast U.S. where the average life of a distribution pole is 56 years. However, poles that surpass that mark stand, on average, for another nineteen years. Some even last a total of 75 to 85 years.
The answer isn’t for utilities to start replacing equipment from oldest to newest, Willis asserts, but rather to take a more strategic approach that recognizes age is only one indicator of the infrastructure’s reliability.
He advises companies to use software to track equipment performance and identify patterns and potential problems before something fails.
“Ideally, we can identify the equipment that is going to become a bad actor -- old or new -- just before it does and get it out of there,” says Willis. Another option is to refurbish it to extend the equipment’s life.
Creating that type of system will require utilities to spend a little more money on software and staffing, but it will also save companies the cost of replacing some equipment simply because it’s old.
The recent survey, conducted by Utility Dive and distributed to more than 500 utility professionals, showed aging infrastructure was by far the most common response when participants were asked to name the most pressing challenge facing their utility. Forty-eight percent chose old infrastructure, while less than one-third selected distributed generation, regulatory models or flat demand growth.
Willis says the aging infrastructure problem will “gradually get a bit worse for many years to come,” but it’s not the kind of thing that should cause lost sleep among utility professionals.
According to Willis, “The thing that ought to keep them up at night is [the question]: 'Will there even be a need for my type of company twenty years from now?'”
Last night, Greentech Media, Solar One and NYC ACRE hosted this year's first Clean Energy Connections event in the 2014 series, The Expansion of Distributed PV in the Age of the Grid Edge, live from the Jerome L. Greene Performance Space in New York City.
The theme of this year’s series is the grid edge, which GTM views as the setting for the potential transformation of the electric grid. Last night's discussion was about solar, distributed generation, and its impact on the grid.
Rick Thompson, Greentech Media founder and President, set the stage with some background on the concept of the "grid edge," a term coined by the GTM Research team. The grid edge is the zone of the grid most impacted by increased rooftop solar and distributed generation -- and the "two-way flows" of power mentioned by ConEd's Margarett Jolly. Thompson spoke of the increased dynamism on the grid edge caused by distributed generation, the inherent intermittency and unpredictability of PV, the need for resiliency in the face of emergencies, and an available energy-centric IT set, as well as the changing nature of the electric utility. (True grid modernization is happening at the edge of the grid, and we're the first to cover it in depth. Join us at Grid Edge Live to be a part of the transformation.)
The grid edge cube presented by Thompson (with a nod to the seven-layer OSI stack) is a detailed model of the system that divides into a utility-facing side, a customer-facing side, and a set of applications and new business models riding on top.
(Click to enlarge)
Each of the evening's panelists had a different view about the changing nature of the utility in the face of PV and DG.
Ben Kellison, smart grid senior analyst for GTM Research, moderated the panel, and he was joined by Margarett Jolly, Director of Research & Development at Consolidated Edison; Shaun Chapman, Director of Policy and Electricity at SolarCity; Stacey Hughes, Chief Marketing Officer at Sunlight General Capital; and Naimish Patel, CEO of Gridco Systems.Grid edge opportunities and challenges
GTM's Kellison asked the speakers to share what excited them and what concerned them about the grid transition that is currently underway.
As an engineer, ConEd's Jolly said she is excited about two-way flows on the grid and determining how best to manage them. But she was concerned that the "technology can't keep up with two-way flows."
SolarCity's Shaun Chapman said he was concerned about climate change, but excited about the chance to innovate our way out of it. Complaints, he said, could be directed to his twitter handle @sunrun (which might be flooded, given the evening's lively performance by Chapman).
Stacey Hughes of Sunlight General Capital said that she is excited about just how much capital there really is available for solar and DG projects. Her concern is that investors want to know what they're getting with DG projects, and regulatory shifts don't fit with twenty-year project finance predictability horizons.
Naimish Patel at Gridco, a startup developing hardware and software to improve grid resiliency and reliability, is excited about "the continually improving economics" and "innovations in financing mechanisms" that create a clear path to grid parity for distributed generation. He also suggested that after 100 years, we are finally seeing the emergence of a "different use case" for the grid -- customers are becoming suppliers. Patel's concern is maintaining the grid with its new two-way power flow, as well as the economic implications for all grid customers as more customers begin to self-generate and go off-grid.Investor attitude
Hughes of Sunlight General Capital noted that what gets "investors to part with their money" are not the big questions of grid transformation, but rather the "relatively safe" nature of solar investments. She said investors are "still waiting to see what happens" in this "nascent industry" before really jumping in. She said that unfortunately, "every commercial sale has its own credit quality," which is why her firm restricted its business to municipal projects like schools and other public-private projects.Two-way power flow and energy storage
Gridco's Patel noted that for the last century or so, electrical distribution engineering design rules have been based on the assumption that power flows in only one direction. In striving to keep voltage within the ANSI range, Patel suggested that design rules have to change in this new era of two-way power flow.
Patel noted that voltage spikes from solar or distributed generation can be mitigated by making conductors thicker, or, in the same vein, by increasing the size of transformers. Active elements such as capacitor banks can also be engaged. The problem is that reconductoring is expensive, as is replacing transformers. Mechanical solutions like capacitor banks and voltage regulators "are simply not able to keep up."
What's needed, said Patel, is a way to regulate voltage on the distribution line within the ANSI range without moving parts. (Coincidentally, that's exactly what Gridco does.)
Patel spoke of the utility death spiral scenario: as increasing numbers of customers invest in DG and consume fewer kilowatt-hours, the burden of the cost goes to those who are not adopting DG. He said, "Even if the amount of kilowatt-hours changes, the grid is still needed and still costs the same." He pointed out the lack of sustainability of a situation where non-adopters are subsidizing DG adopters, with costs being socialized "in the wrong direction."
Storage will help, said Patel, but the challenge with any storage technology is that batteries and the like "don't benefit from a Moore's law" type reduction in cost and efficiency. Instead, cost reduction comes only from increases in volume, and thus it becomes a "bootstrap problem." SolarCity's Chapman suggested that there might be a potential battery partner for SolarCity that could help make energy storage economically viable. Patel said it will still be "some time" before storage gets "deployed deeper in the grid." He noted that it made sense from a higher level, and he expressed his hope that the "unnamed company" could "drive the learning curve."
Grid modernization is happening at the edge of the grid, and GTM is the first to cover it in depth. Join us at Grid Edge Live to learn more and be a part of it.
Rick Thompson defines the grid edge here:
That’s why a new Series C investment in industry leader d.light is worth paying attention to. This latest (and largest) investment in off-grid solar sends a message about the ability of companies in this space to raise serious investment.
Talk to anyone paying close attention and they’ll likely agree that the off-grid solar space is ready to break wide open. In recent months, off-grid solar provider BBOXX announced a $2 million Series A from Khosla Impact. Shortly after, Persistent Energies led the first investor exit the space has seen.
Now the solar lighting company d.light has enticed a serious lineup of investors, including DFJ, Omidyar Network, Nexus India Capital, Gray Ghost Ventures, Acumen Fund and Garage Technology Ventures into an $11 million Series C round.
This investment brings d.light's total raise to $40 million, while also helping cement its industry leadership. That alone is great news for the space, but it’s worth paying attention to who was involved. DJF is no lightweight. With investments ranging from Tesla to SolarCity, the firm has been involved in some of cleantech's most exciting and innovative companies. The fact that the firm is paying attention to this sector is a positive sign for both d.light and other startups developing off-grid solar solutions.
“We are seeing an enormous growth opportunity to provide clean, affordable solar light and power products to the relatively untapped markets of the developing world, and to make a positive impact on the lives of so many underserved consumers," explained Mohanjit Jolly, DFJ's managing director.
That growth is evident in d.light’s sales numbers. The company has sold 6 million solar power products, serving as living proof that solar power is transformative, even at watt scale. Indeed, small is big.
In addition, Omidyar Network managing partner Matt Bannick will now join the d.light board. This is a vote of confidence in the company that may help rally the much-needed pool of capital that social impact investors command. This set of nimble "speedboat" investors can help pave the way for the larger debt investments (the "supertankers" of the finance world) that will be required to truly scale the space.
D.light’s latest raise signals that something big may be brewing. As companies slowly but surely raise the capital they need to light people’s lives, we are facing the real possibility of meaningfully addressing energy poverty. Growth rates now resemble mobile phone expansion in its early days -- and if the market continues to expand, an end to energy poverty could come faster than anyone could have expected. For the billions around the world who are living in the dark, it couldn’t happen a moment too soon.
Justin Guay is associate director of the international program at the Sierra Club.
Despite the theoretical demand for grid-scale energy storage, in the real world, it has proven to be a difficult commodity to value. But whether it be by PUC mandate or by forward-thinking utilities, we've seen a small surge of energy storage solicitations that can be read as part of an attempt to figure out where energy storage fits into the grid and how to pay for it.
These RFPs are a strong indicator of how and where utilities value energy storage.
Last June, the PUC asked California's big three investor-owned utilities to procure 1.3 gigawatts of energy storage by 2020, along with setting market mechanisms to launch the procurement process. One of the mechanisms is managing smartly crafted utility RFPs and RFQs that search for qualified vendors, clearly define the problem at hand, and provide a fair and reasonable return for storage vendor and utility.
Five recent North American energy storage offers are summarized below.Kauai Island Utility Cooperative energy storage RFP
KIUC just issued an RFP meant to provide solutions "to enable further solar penetration." Solar accounted for over 5 percent of Kauai’s annual electricity production in 2013, and that percentage is set to rise to 16 percent.
According to the utility, "KIUC’s grid has a typical daytime electrical demand of 55 MWac to 65 MWac. With 21.1 MWac of solar PV in service, solar contributes as much as one-third of Kauai’s daytime demand during periods of clear sun."
The cooperative utility has identified several of the chief challenges created by this level of solar penetration:
The RFP document describes the current state of affairs on Kauai:
KIUC is currently using a combination of batteries and conventional generating units to mitigate the high variability caused by existing solar systems. Specifically, KIUC uses a baseload gas turbine (GE LM2500) in combination with four cycling marine diesels (Wartsila TM620) in droop control to respond to the majority of ramp events. KIUC also uses three 1.5 MW / 1.0 MWh battery systems to handle the most extreme ramp events. The batteries operate in frequency and voltage droop control and are not currently used to limit ramp rates coming out of the 6 MWac solar project. In other words, the full, unmitigated output of the 6 MWac solar project is fed directly into the KIUC grid, the gas turbine and diesels complement the ramp events, and the batteries only respond during the most severe ramp events. Each of these assets has its place -- the conventional units are slower to react than the batteries, but they can provide a much longer response. The batteries can perform the smoothing function quite well, but the more cycles they are called upon to provide, the less overall life they have.
The document also mentions the issue of over-generation:
KIUC’s primary need is to be able to store over-generation during the midday hours in order to avoid curtailment of low-cost renewable energy. KIUC’s secondary need is to be able to dispatch stored energy to assist conventional units in meeting the significant ramp event that will occur each afternoon as the system load heads toward the daily evening peak, i.e., an over 40 MW increase in approximately 4 hours. Yet another need is to be able to shave the evening peak, which is currently the highest cost period to generate power.
KIUC "understands that the cost of energy storage systems can be greatly reduced by incentives that are tied to renewable energy projects, and will therefore consider projects that offer dispatchable renewable energy (i.e., solar plus energy storage) under a PPA arrangement."Ontario searches for 50 megawatts of energy storage
Ontario's proposed energy storage procurement framework specifies that 50 megawatts of energy storage will be included in procurement processes by the end of 2014 and stresses the learning process involved in this new technology. "The OPA and IESO will work closely together throughout the procurement phases to maximize learning about energy storage services in the Ontario context," according to the RFP. The initial phase of procurements will focus on reliability services.
The Ontario solicitation, like the SCE offer, homes in on specific substations or circuits that are congested or "within areas with rapidly changing transmission flows."
The 50-megawatt Southern California Edison Los Angeles Basin Energy Storage RFQ reveals a California utility industry getting its head around deploying big energy storage. The SCE solicitation was notable for the effort taken to identify the true value of grid-scale energy storage. In the words of John Zahurancik, VP of Deployment and Operations at AES Energy Storage, "The Edison RFQ is the first formal recognition by a state that [energy storage] absolutely has value."
Praveen Kathpal, AES Energy Storage's VP of market and regulatory affairs, said that the RFQ is oriented toward local capacity requirements in the Los Angeles Basin -- a capacity alternative offering in which "energy storage can perform the same functions as building a new peaking power plant." Zahurancik observed that California and SCE have structured the offer so that storage can be treated similarly to a preferred resource like demand response or energy efficiency.
But "energy storage is new for all of us," said Rosalie Roth, Sr. Contract Originator and Energy Storage Product Lead at SCE, during a webinar to support the solicitation. As to what type of technology SCE is looking for, Roth said, "Show us what you've got." She noted, "This RFQ is complex -- it's going to be a challenging solicitation." She said that all qualified resources are encouraged to participate and communicate, adding, "We are figuring it out along the way."More than 20 megawatts in California's desert
Imperial Irrigation District (IID), a municipal utility that provides power and water services to about 150,000 residential, commercial, and industrial customers in the southeastern part of California's desert, just took a step toward deploying energy storage with the issuance of QR 123, the start of a solicitation for what will eventually be 20 megawatts to 40 megawatts of battery storage.
The utility wants "respondents to design, engineer, procure and construct a utility-scale energy storage project," and the solicitation specifies that it is a "battery" storage project. That implies that flywheels, portable CAES and rail cars need not apply.
This solicitation is very broad in asking that the project "accommodate, at a minimum, the following operational characteristics":
At this stage, the utility is simply looking at vendor qualifications and getting input from companies including A123 Systems, Black & Veatch Renewables, Borrego Solar Systems, Clairvoyant Energy, Coachella Energy Storage Partners, EnerVault, Prudent Energy, S&C Electric, Stem and Tenaska Solar Ventures.
According to the solicitation, respondents should have experience in "generation projects, transmission grids, balancing authority area, and interconnected power systems" and an understanding of "power flow, voltage profile, line flow, transmission flow, transmission losses, generation patterns, renewable intermittency, regulation criteria, operating reserves criteria, NERC and Federal Energy Regulatory Commission (FERC) reliability requirements."New York City's energy storage incentive
New York City utility Con Edison has submitted a proposal to furnish 100 megawatts of load reduction measures that include energy storage, demand response and energy efficiency.
The new incentives for energy systems that provide summer on-peak demand reduction are $2,600 per kilowatt for thermal storage and $2,100 per kilowatt for battery storage systems, with bonus incentives for projects larger than 500 kilowatts. Incentives will be capped at 50 percent of the project cost.
The proposed New York City incentive bears some resemblance to California's Self-Generation Incentive Program, a subsidy established by California's PUC to support existing and emerging distributed energy resources, which provides one-time, upfront rebates for distributed energy systems installed on the customer's side of the utility meter. In California, qualifying technologies include wind turbines, fuel cells, and associated energy storage systems.
GTM Research’s recent report, Grid-Scale Energy Storage in North America 2013: Applications, Technologies and Suppliers, pinpoints the most promising energy storage applications, geographic markets and market segments and profiles over 150 companies active in the North American storage industry, including 25 that are particularly well positioned to succeed. More details are available here.
Green Charge Networks, the startup that’s putting batteries in commercial buildings to help shave utility bills and balance the grid, has just joined a small but growing roster of energy storage players trying out a model that’s helped solar PV hit mainstream and which could push energy efficiency to much broader markets: no-money-down financing.
On Tuesday, Green Charge and partner TIP Capital announced a $10 million fund aimed at giving customers a free installation of the startup’s GreenStation battery-plus-energy-management system, then paying off the cost through utility bill savings. The program is part of TIP Capital’s broader offering for fixed-rate monthly financing payments for lighting retrofits, HVAC upgrades, and other qualified energy-efficient projects -- now including energy storage.
Vic Shao, CEO of Green Charge, said the company is targeting 5 megawatts of installations by year’s end, up from 1.5 megawatts as of this week -- a figure that’s grown by 400 kilowatts just in the past month. Customers include 7-Eleven stores, Walgreens drug stores and an Avis rental car location in New York. The company also added a UPS distribution facility to the list last week.
Since its 2008 founding, Green Charge has tapped $12 million in stimulus grants, as well an undisclosed amount of funding from investors including ChargePoint founder Richard Lowenthal, to build out its demonstration projects with New York utility Consolidated Edison. Using systems that range from 30 kilowatt-hours to 300 kilowatt-hours in size, it's been able to deliver average utility bill reductions of 15 percent or more, and with three years of data behind them, "we know they work," Shao said.
Now, either with new customers or “with customers that we already have, we can go ask them to do mass deployment. Instead of a couple, two or three at a time, we want to start doing the next hundred,” he said. “That’s really the aim for this project fund.”
It’s a similar move to that made by Stem, another fast-growing batteries-for-buildings startup with about 6 megawatts of systems installed so far, mostly in California. In October, Stem launched a $5 million fund with Clean Fleet Investors to boost installations of its own building energy storage systems, and expects to bankroll about 15 megawatts of storage systems through it.
Both companies are pushing a model that’s already helped companies such as SolarCity, Sunrun, Clean Power Finance, Vivint and SunPower create a booming new market for solar PV by offering low or no-cost installation, then securing repayment streams from customer energy savings, net metering payments, tax credits and other sources.
That solar boom, in turn, is helping to drive growth for batteries to help commercial buildings incorporate their own solar power into energy management. Indeed, SolarCity and cousin company Tesla Motors in December launched their own energy storage financing program, targeted at commercial buildings, to bolster their long-running pilot program putting batteries into solar-equipped homes.
But solar isn’t necessary for customer-sited energy storage to pay for itself. What’s really driving the first wave of building battery systems are demand charges. Those are the portions of utility bills that building owners pay when their total electricity consumption hits or exceeds certain thresholds at any moment in time. Because these “peaks” are hard to monitor or predict, they’re hard to prevent -- and in certain markets, like California or New York, they can add up to a significant portion of overall utility bills.
GTM Research predicts the U.S. market for distributed energy storage will grow at a 34 percent cumulative annual growth rate to reach 720 megawatts by 2020, driven largely by the demand charge business case, but also boosted by solar integration needs. For example, customers who installed solar PV to reduce energy consumption, but then get moved into rate structures that emphasize demand charges, may want to add batteries to put that solar power to use in capping consumption peaks.
Green Charge CEO Shao noted that the company is working with one undisclosed customer that's combining its battery system in the cost of a solar system receiving the 30 percent federal Investment Tax Credit for solar projects. That's an additional boost to state grants available in California -- and soon to come in New York -- that help pay for distributed energy systems including storage.
Other customers are backing up plug-in electric vehicle chargers, which can add huge spikes to power consumption that need flattening out, he said. EV chargers are another big capital expense ripe for financing, as ChargePoint is doing under a $100 million fund with Key Equipment Finance.
But perhaps the most interesting aspect of Green Charge’s partnership with Michigan-based TIP Capital is in how it brings a new quantity to the energy efficiency field, Shao said. While traditional efficiency retrofits are focused on reducing total energy consumption, they may leave out the matter of peak usage, demand charge costs, and other costly pieces of the utility bill puzzle.
Green Charge and other building-installed battery systems provide “what we call power efficiency -- it’s perfectly complementary to what TIP Capital does today with energy efficiency,” he said. “They target kilowatt-hours, and we target kilowatts.” In markets like California, where energy rates have slowly declined while demand charges have risen, that’s a natural addition to energy efficiency offerings -- and one that could give building-based battery systems an additional path to market through traditional efficiency retrofit and energy services players.
Indeed, Shao has written a white paper on the subject of power efficiency, calling it the "next frontier" in energy efficiency savings. A host of startups and giant energy services companies are creating new financing models for energy efficiency, in hopes of surmounting existing economic barriers and opening broader and deeper markets for their services. Perhaps it's time to start adding new terms like "power efficiency" to the lexicon.
In the past, energy was seen simply as an input that was hard to measure in detail and always ended in a high cost. That perception has changed, and energy is now an entity that is deeply understood and can be managed in a methodical way.
Much of what led to this shift in thinking is the big data movement. Data is more available, granular and affordable to store in large quantities. This opens all kinds of doors when it comes to analysis. Technology can be used to sift through reams of data to pull precise, customized findings far beyond what anyone has been able to do in the past.
The energy efficiency marketplace has seen this shift to data-driven insights reach an inflection point over the last few months, especially in the residential space. From Google's $3.2 billion purchase of Nest Labs and the recent IPO filing of residential energy efficiency powerhouse Opower, to Box's recent shift toward data-crunching and Oracle’s big buy of data management leader BlueKai, there is clear validation that this market is ripe for huge growth in data-driven solutions.
These companies have cracked the code on the value of data, understanding that the real value drivers lie beyond the data itself. It is now time to apply that same deep-data thinking to compel utilities, building owners and individual property managers to change their behavior and realize the huge energy savings potential in the commercial sector.Make data tangible: Providing actionable insights
In order to propel change, utilities and building operators must be able to see beyond basic consumption data or analysis. When asked why they have not yet addressed energy efficiency, many people respond that they simply don't know where to start.
There are "best practices" published daily, but those long laundry lists can be daunting and seem unrealistic when it comes to execution in a single building, much less across a whole city or portfolio of buildings. In order to make energy efficiency a priority, turning complex data analysis into simple, actionable insights is a necessary step.
Providing a building operator or energy manager with information not only about spikes in their data consumption, but also about the ways in which they can reduce those spikes and realize savings, is a first step toward mass energy efficiency adoption.Make data personal: Customization at scale
While providing actionable insights is important, making sure those insights are customized for each and every building also helps drive energy efficiency. Telling energy managers that they are in need of new light fixtures as opposed to telling them they need five new lights on floor 14 can be the difference between them just nodding and actually acting. The more specific and customized a report can be, the better chance there is that report recipients will fix problems and lower energy consumption.
While data provides the raw foundational information, it is the unique algorithms and remote technology that allows for customized analysis at scale. At FirstFuel, we analyze all sorts of data, including weather information, insights from Google Earth, and, of course, data from the buildings' meters. However interested and intrigued our customers have been by the data and analysis, the real reason they’ve valued our solution is because we can use it to execute mass customization and one-to-one relationships with their customers and buildings.Make data normal: Creating standards
Most utilities and building operators rely on the expertise of individual auditors to analyze their buildings’ energy use. While this can provide a snapshot into the building's energy efficiency, it can be limiting. Think of it as a photo as opposed to a video: you can only gather the details that exist at that one moment in time.
With today's advanced computing technology, it's now possible to offer that rolling "video" view of energy consumption by remotely analyzing building data in near-real time. Not only does this help eliminate the one-day-only view that often comes with in-person audits, but it also aids in standardizing energy use measurement and ensuring that all buildings are evaluated fairly in a way that's comparable. It also helps provide those utilities and their commercial customers with the information they need to make adjustments that will realistically help reduce energy consumption and realize savings.
"Big data" continues to be a buzz phrase today, and every industry is talking about how data can help improve operations and reduce costs. In energy, that data has existed for a while now. The real game-changer is implementing deep data analysis that takes those massive amounts of data and uses it as the basis for actionable, customized insights.
We have seen the momentum in the residential energy space, and the commercial energy sector is poised to experience a potentially larger impact. The more we can gather from data to inform future activity, the better positioned we will be to cut energy costs and reduce our carbon footprints. This has been an exciting start to the year for the energy efficiency market, and here at FirstFuel, we can't wait to see what the future holds.
Swapnil Shah is CEO of FirstFuel, a demand-side data analytics company.
Can't join us in person? Watch the livestream of this event below.
In President Obama’s State of the Union address in January, he noted that “Every four minutes, another American home or business goes solar; every panel [is] pounded into place by a worker whose job can't be outsourced.”
That figure, which came from GTM Research, is good news for clean energy and green jobs advocates, but it is also an increasing challenge to the existing electric grid and the business model that sustains it.
The challenges are playing out across the nation and the globe as utilities contend with net metering and begin to invest more in distribution automation as certain parts of the distribution network have to manage far more variability from rooftop solar photovoltaics than they ever had before.
To discuss the challenges and promise of distributed PV for the power system, Greentech Media, Solar 1 and NYC ACRE will host the first event of the Clean Energy Connections series for 2014, The Expansion of Distributed PV in the Age of the Grid Edge, on Tuesday, March 4, 2014, from 7:00 p.m. to 9:00 p.m. at the Jerome L. Greene Performance Space in New York City.
The theme of this year’s panels is the grid edge, which GTM sees as the setting for the imminent transformation of the electric grid. As new distributed energy generation collides with existing business and regulatory models in the power sector, a stable transition to a next-generation electricity system depends on harmonizing grid modernization and customer evolution.
GTM Research has found that more distributed solar has been deployed in the past 2.5 years than in the 50 years prior, and there will be another doubling of capacity over the next 2.5 years.
That growth is driven by falling costs for solar PV coupled with new financing models. To discuss the current trends and what they mean for utilities, customers and the solar industry, Ben Kellison, smart grid senior analyst for GTM Research, will be joined onstage by Margarett Jolly, Director of Research & Development at Consolidated Edison; Shaun Chapman, Director of Policy and Electricity at SolarCity; Stacey Hughes, Chief Marketing Officer at Sunlight General Capital; and Naimish Patel, CEO of Gridco Systems.
Solar PV is just one of the technology disruptions that is happening at the edge of the electric grid. Smart digital electric meters are also delivering new streams of data to utilities, which must find a way to store it, secure it and leverage it for operations and consumer benefits.
All types of buildings, from skyscrapers to individual homes, are becoming smarter and more automated, increasing the opportunities for buildings to interact with the grid in demand-side management programs.
Energy storage, in the form of both grid-scale and smaller behind-the-meter systems, is increasingly being deployed, even though cost remains an issue. More storage offers many benefits for the grid, as well as posing challenges for utilities that could see their customer base shrink further.
The event about the effects of solar PV on the grid is open to the public. General admission is $25, and student admission is $10. Advance registration is required at www.cleanecnyc.org. If you cannot join the discussion in person, Greentech Media will stream the event live at www.greentechmedia.com and questions can be submitted via Twitter @CleanECNYC with hashtag #CleanNRGx.
And if you can’t make the first Clean Energy Connections event on March 4, check out the rest of the schedule for 2014.
Watch the livestream of the event here:
Tweet questions @CleanECnyc with #CleanNRGx
The German mega-utility RWE provided another dismal reminder today of the painful transition European power companies are undergoing.
According to 2013 financial results, the utility lost more than $3.8 billion last year as it cycled down unprofitable fossil fuel plants due to sliding wholesale prices. The yearly loss is actually quite historic; it's RWE's first since 1949 when the German Republic was formed.
This follows poor earnings news from Vattenfall, a Swedish utility with the second-biggest generation portfolio in Germany, which saw $2.3 billion in losses in 2013 due to this same "fundamental structural change” in the electricity market.
The problem is well documented: high penetrations of renewables with legal priority over fossil fuels are driving down wholesale market prices -- sometimes causing them to go negative -- and quickly eroding the value of coal and natural gas plants. At the same time, Germany's energy consumption continues to fall while renewable energy development rises.
RWE's CEO Peter Terium called it "the worst structural crisis in the history of energy supply."
To make matters worse for utilities, their commercial and industrial customers are increasingly trying to separate themselves from the grid to avoid government fees levied to pay for renewable energy expansion. According to the Wall Street Journal, 16 percent of German companies are now energy self-sufficient -- a 50 percent increase from just a year ago. Another 23 percent of businesses say they plan to become energy self-sufficient in the near future.
It's a real-world example of the "death spiral" that the industry has so far only considered in theory: as grid maintenance costs go up and the capital cost of renewable energy moves down, more customers will be encouraged to leave the grid. In turn, that pushes grid costs even higher for the remainder of customers, who then have even more incentive to become self-sufficient. Meanwhile, utilities are stuck with a growing pile of stranded assets.
When unveiling today's dismal earnings, RWE's Terium admitted the utility had invested too heavily in fossil fuel plants at a time when it should have been thinking about renewables: "I grant we have made mistakes. We were late entering into the renewables market -- possibly too late."
As power company executives collectively gnash their teeth, green energy advocates are praising the tumultuous shift these utilities are enduring. Although both sides disagree on the ultimate value of the outcome, the underlying situation is undebatable: Germany is in the midst of a massive "structural" change that is ripping gaping holes in the traditional utility business model. And now the cash is bleeding faster than ever.
In a shareholder document from last September, the German utility EnBW illustrated how bad the bleeding has gotten. EnBW has the fourth-biggest generation pipeline in the country, and has been forced to make a serious shift in its own strategy.
The first graph shows how far forward prices for conventional power plant generation have plummeted since 2011. As the profitability of fossil fuel plants continues to fall, EnBW concluded in a strategy document that it needs to "develop new business models...without delay."
EnBW offered another snapshot of how bad things are getting for utilities. These two graphs show the gross margins from coal plants (clean dark spread) and gas-fired plants (clean spark spread) after accounting for fuel purchasing and carbon allowances. Both have taken a serious hit, but natural gas has fared worse as fuel costs remain high and market prices for power fall.
Do these graphs remind you of anything?
Europe's biggest utilities are falling down a rabbit hole and could soon find themselves swimming in a pool of their own tears. Many of them already are.
Over the last five years, the top twenty utilities in Europe have lost half their value. Recent poor financial results, stranded assets and mass selloffs of power plants highlight how tough things have gotten for power providers. But there are signs of change.
In its own strategy document, EnBW made a simple declaration about its future: "Conventional business models of larger power supply companies no longer work."
By 2020, the utility plans to cut its electricity generation and trading business by around 80 percent. It will try to make up for the decline by investing further in wind power, transmission and distribution projects to connect renewables, and by working on the consumer level to implement services like home automation.
Ben Kellison, GTM Research's senior grid analyst, said EnBW's approach "provides a window into one possible path in which the value of energy trading and peaker plants systematically erodes, pushing large utilities into more service-oriented work."
RWE is also headed in this direction. That utility, which is Germany's second-biggest, said last fall that it was planning to divest many of its large-scale fossil fuel plants and implement a "prosumer" business model to help integrate renewables projects. These emergency declarations are the only way some big power companies can ensure their future.
The German experience is just the beginning of a long, tumultuous shift for the broader utility sector. But it highlights the question: will American utilities soon deal with the same issues? With much lower penetrations of distributed renewables and less aggressive promotion laws, the U.S. power sector won't face the same kind of violent death spiral in the near term. But the same forces driving change in Europe are starting to raise concerns within the utility sector here.
There's a scene in Alice's Adventures in Wonderland when the Mock Turtle and the Gryphon ask about Alice's exploits. She replies: "It's no use going back to yesterday, because I was a different person then."
That may be how some utilities in Europe are feeling now -- finally reaching the point of no return where looking back is not an option.
American utilities have the benefit of learning from that first-mover experience. Will they use it to land safely in a wonderland of distributed generation and consumer empowerment? Or will they fall down the rabbit hole, not knowing where they're headed until its too late?
Those are the questions we'll be asking at Greentech Media's Grid Edge Live conference this summer. Come join us.