Solar & Wind Responsible for Record 95% of US Generation Capacity Additions in the 1st Quarter, 2018, With Significant Implications for Industry Participants

Solar & Wind accounted for (wait for it) 95% of all new electricity generation capacity additions in the first quarter of 2018! This is unbelievable. With recent solar prices less than coal & nat gas, this trend will continue, with significant implications for legacy industry participants, including power companies, service and equipment suppliers, and utility companies.

 New Capacity Addition Shares by Technology.  Source: Solar Energy Industry Association

New Capacity Addition Shares by Technology. 
Source: Solar Energy Industry Association

The shift of the US electricity generating system away from legacy generation technology to renewable energy sources is continuing apace, with significant implications, including:

(1) New construction of coal, natural gas and nuclear power likely to limited to severe niches driven by unique system needs. Companies involved in new power plant design, engineering, permitting, suppliers, construction and financing will be significantly negatively impacted going forward.

(2) Existing operation of the electric grid, specifically the reduction of annual operating hours on natural gas, coal and nuclear power plants due to integrating zero marginal cost renewables into the economic dispatch paradigm. Legacy power plant owners and operators will see reduced returns on their existing operations and financials.  The trend is inexorable and will be very painful for many companies that are unable to accelerate increasing the mix of renewables in their operations and balance sheets. 

(3)  Grid operators will be challenged with the shifting operating demands and economics associated with high penetrations of renewables on the grid.  New technical solutions will need to be identified and incentivised, such as battery energy storage systems, expanded demand management initiatives, and new and expanded rate options for customers. 

(4) Utility companies will also have to purposefully integrate these massive changes taking place into their strategic plans, understanding that accelerating cost reductions in solar energy will enable greater penetration of customers that are self-generating.  With reductions in load growth and expanding off-network peak power mitigations taking place, transmission and distribution utility companies are losing their primary source of earnings growth, namely expanding their rate base. 

NRStor Signs 42 MWh MOU for Storage in Ontario with IHI Energy Storage

#EnergyStorage #Ontario NRStor signs MOU w/IHI Energy Storage for 42 MWh of behind the meter C&I storage for 8 projects in Ontario worth ~$15 million. Storage driven by Global Adjustment Charge, function of coincident peak demand for C&I customers.  Large C&I customers may also be able to benefit from time shifting hourly demand leveraging their energy storage asset. Small and mid-sized C&I customers may also be able to generate additional value by time shifting their demand on TOU rates.   http://bit.ly/2NwVZQO

IHI_container_Fall1.jpg

Amhil installs 2.34 MW/4.7 MWh BESS for Demand Response & Demand Charge Reduction

#EnergyStorage #DemandResponse Amhil North America, Mississauga, Ontario, is deploying a 2.34 MW/4.7 MWh energy storage system to expand demand response participation w/EnerNOC & reduce demand charges. Financed by EnerNOC parent Enel X  http://bit.ly/2zLstVF 

Amhil is a food packaging manufacturer with a manufacturing operation in Mississauga, Ontario.  They have been participating in demand response with EnerNOC since 2010.  They have also been a customer of Enel X, a subsidiary of Enel, which provides energy services.  In 2017, Enel acquired EnerNOC.

Velerity Insight - The accretive value of the Enel acquisition of EnerNOC is apparent in this deal.  Amhil was both a customer of EnerNOC and Enel X.  In this particular case, the battery energy storage system, with an installed cost of approximately $1.8 million is being engineered, installed, financed and operated by Enel X, and is generating two separate value streams.  One value stream is expanded participation in the demand response program operated by EnerNOC.  The second value stream is Amhil's reduction of their demand charges by limiting their peak power consumption on a monthly basis.  Enel X has entered into a shared savings contract with Amhil.  

It is estimated that these two value streams will reduced Amhil's electricity costs by 20%.  

Solar/Storage Microgrids for Energy Cost Reduction

#EnergyStorage #FlowBattery #Vanadium @CellCubeEnergy installs 1st of 2 long duration flow battery systems for a solar storage microgrid in Victor, NY. Will be used to reduce peak demand charges, self-consumption of solar energy, & resilience w/microgrid. https://read.bi/2ua8tGQ

O'Connell Electric is installing two CellCube systems at their facility in Victor, New York,, as part of testing and evaluating system integration and performance.  O'Connell plans on integrating two CellCube systems as part of a solar/storage microgrid system.  The system will generate benefits for O'Connell by (1) reducing their peak demand charges; (2) enabling self-consumption from the energy generated by their solar system; and (3) Providing energy during outage events.  

O'Connell is also planning on representing the CellCube line of products in the Northeastern United States, and has an interest in fully understanding the performance and capabilities of the system before offering it to their customers.  

Velerity Insight - The system O'Connell is implementing is ground breaking in its configuration, technology choice and application.  Most innovative is O'Connell's leveraging multiple value streams to extract the most value from their investment. With an eight hour flow battery, O'Connell will be able to reliably reduce their peak energy use and reduce their demand charges.  For commercial customers, demand charges can represent up to 30% of their monthly electric bills, even more when solar is installed. 

The second opportunity to derive value from the flow battery is to keep solar generated electricity from going on to the grid.  Depending on the net metering contract under which O'Connell is operating, the value of solar electrons that escape onto the grid are typically compensated at less than retail value.  Accordingly, keeping those electrons close to home, for self-generation, is more valuable than exporting them to the grid.

The third value being provided by the flow battery is to provide backup power during outages.  A fourth value, which has not been identified, is for O'Connell to go on a time of use rate, and then to time shift the use of stored energy from low value time periods to high value time periods.  The use of long duration storage to provide multiple value streams for end-use customers is the true innovation of this configuration.  

 O'Connell Electric's Headquarters in Victor, New York with a solar/storage microgrid.

O'Connell Electric's Headquarters in Victor, New York with a solar/storage microgrid.

CellCube's 8 Hour Flow Battery Enters the German Storage Market

#EnergyStorage #FlowBattery @CellCubeEnergy CellCube Energy delivered its first 8 hr duration vanadium energy storage system to the German municipal utility Gelsenwasser for their EnerPrax project in the Saerbeck Bioenergy Park  https://read.bi/2L71xAL  

Velerity Insight - The town of Saerbeck in Germany, with 7,500 residents, has set a target of being net energy zero by 2030. As part of that goal, they have installed 9 MW of solar on their roofs, built several biogas plants, put in a renewable district heating system, installed a solar farm and built a series of of wind turbines, and installed an electric vehicle charging station.  Future plans include installing a district geothermal heating system and advanced storage capabilities. 

The town has repurposed a 90 hectare former army depot into an energy park, integrating wind, solar, bioenergy and energy storage.  The town has installed a CellCube vanadium flow battery energy storage system to test and evaluate long term storage, targeting eight hour storage.  The pressure is on globally to test and evaluate the opportunity to use energy storage to release generation and transmission and distribution pressures associated with high penetrations of variable renewable energy systems. 

The second phase of the energy storage industry, running roughly from 2000 to 2015, has been dominated by energy storage systems for providing ancillary services, mostly frequency regulation.  The third phase, from 2015 to perhaps 2020, has been dominated by energy storage systems used for helping commercial and industrial customers reduce their peak demand charges.  The fourth phase of energy storage is likely to be the installation of energy storage systems coupled with solar energy systems in residential, commercial and utility-scale applications to monetize stranded electrons. 

The fifth phase of energy storage is the integration of energy storage to time shift power on the grid, enabling high penetration of variable renewable energy without requiring conventional generation resources.  This scenario requires low cost long duration energy storage solutions, which does not exist, and which will be a major focus of investment, research and development over the next ten to fifteen years.  Flow batteries represent an important technical advance and are likely to play a very important part in the time shifting market for energy storage systems.  The Saerbeck deployment of the CellCube vanadium flow battery system represents an important point along the line of long duration storage development.

Pic_Gemeinde_Saerbeck_160307_web.jpg

Triple Play: Wind/Solar/Storage Optimization at the Kennedy Energy Park in Australia

#EnergyStorage : Australia continues to push the envelope on market opportunities for storage w/the solar/wind/storage Kennedy Energy Park w/ 43.5 MW of wind, 15 MW of solar & 2 MW/4 MWh of Tesla Powerpacks. Referred to as "Near Baseload" power, they are leveraging the synergistic balancing between daytime solar & nighttime wind, and using energy storage to smooth out the three technologies "clip the peak" & dispatch during times of high demand.  http://bit.ly/2zd30E7 

Velerity Insight: Increasing penetration of variable renewable energy resources is creating concerns on the part of grid operators and other industry observers and participants on issues regarding grid stability and economics.  These concerns in some cases are chimera's where utility companies are concerned about incursive impacts on their core business models with serious and potentially severe financial implications.  Increasing DER penetration also is having real and devastating impacts on the economic viability of extant generation assets and future plans for generation investment, both fossil and non-fossil.  

In Germany, for example, the growth in renewable energy resulted in reduced annual operating hours for natural gas based generation resources, resulting in significant financial losses for both EON and RWE.  Over the time period from January, 2008 to now, RWE lost 85.04 billion Euros in value (a 77.63% drop) and EON lost 85.04 billion Euros in value (an 80.17% drop). These losses are devastating to utilities, illustrative of the existential threat facing utility companies around the world associated with increasing penetration and economic competitiveness of renewable energy resources. 

Changes in grid economics are forcing utility companies to implement a range of both defensive and offensive tactics. A number of utility companies are increasing their participation and investments in unregulated renewable energy projects, while other utilities are focusing on strengthening their positions as regulated distribution companies.

The Kennedy Energy Park in AUstralia is 50% owned by Toyota and Tokyo Electric Power Company (TEPCO), illustrating how established energy and transportation companies are participating in high growth business opportunity associated with the great energy transformation. 

 Tesla Powerpacks Staged for Installation at the Kennedy Energy park in north Queensland, Australia.

Tesla Powerpacks Staged for Installation at the Kennedy Energy park in north Queensland, Australia.

JLM Energy Introduces Solar Panel Mounted Phazr MicroStorage

#EnergyStorage : JLM Energy introduces Phazr MicroStorage solar panel integrated microstorage product. Capacity from 495 to 990 watt-hours. Installed with Enphase microinverters. Installed cost higher than single battery solution. http://bit.ly/2u0KNDN 

Velerity Insight:  The emergence of panel-mounted microstorage follows the design principle of integration and simplification, shifting on-site labor to the factory floor.  The principal is to simplify installation requirements and reduce in-the-field labor costs. Part of the basis can also harken to driving cost benefits from higher volume manufacturing of smaller systems.   It can also simplify the customer purchasing decision, as there is no requirement for installing inverters or battery energy storage systems within the residence or commercial facility.  

As currently configured, a microstorage system can be beneficial in smaller scale installations, where the home owner can beneficially shift three to five kWh from low value/high solar production times to later in the day peak times. 

The downside is that the cost of microstorage on an installed basis can be close to twice the cost of a comparable central battery energy storage system., roughly $1,700/kWh as compared to $850/kWh.  These numbers are for a Powerwall installation, modelled at the lowest installation cost basis. 

For smaller systems, the installed costs are comparable, thus providing an opening for the microstorage solution.

 Phazr MicroStorage

Phazr MicroStorage

Arizona Public Service Issues rfp for 106 MW of Storage

#EnergyStorage : Arizona Public Service issues RFP for approximately 106 MW of energy storage (~$100 million) to connect to existing APS solar systems to store peak solar production & feed it to customers during peak demand. Here is the link to the rfp: bit.ly/APS_Storage_RFP

Velerity Insight: The importance of this rfp is the application, time shifting stored energy from  peak solar production to peak customer demand.  This is one of the more challenging business cases for energy storage from an economics perspective, as historically, the combination of the pricing spread combined with annual hours of operation are typically insufficient to support the capital carrying cost of the the energy storage system. 

What makes this case different? APS is regulated and vertically integrated.  The cost of the energy storage system will likely be borne by ratepayers, with the justification being system resilience, reaching renewable energy goals, and evaluating the use of storage to reduce peaking plant operation, including reducing environmental impacts.  It may also be that in the case of APS, they are facing stranded electrons from peak solar production, with curtailment hours increasing in step with increases in solar penetration. They also may be facing significant peaking requirements and high peaking power costs.  

 APS Deploys 4 MW of Energy Storage as Part of their Distributed Solar Study

APS Deploys 4 MW of Energy Storage as Part of their Distributed Solar Study

Critical Role of Natural Gas in Meeting Electricity Demand with Intermittent Wind and Solar Resources

Natural gas is playing an increasingly critical role in keeping grids stabilized around the world with increasing penetration of intermittent wind and solar powered generation sources.  Even with the advantageous cycling available with natural gas power plants, however, many grid operators are implementing additional grid stabilization strategies including Power Curtailments, Negative Energy Pricing and Electricity Trading, in addition to available hydro pumped storage and run of river strategies.

In 2012, wind powered generation met thirty-five percent (35%) of the generation resources called upon in Denmark, and contributed a maximum forty-five percent (45%) in September.  From a capacity perspective, Denmark's wind turbines hit a capacity level greater than the country's peak requirement, 3.8 GW wind production versus 3.5 GW demand on March 11, 2013.  In order to meet the variable production dynamic associated with wind power, the Danish grid operators implemented a series of tactics, including wide swings in electricity trading, both imports and exports, as well as calling upon dynamic dispatching of natural gas generation resources.  The Denmark grid has six interconnection points with European grids, facilitating their trade in electricity, supporting both system stability objectives and economic objectives.

In Germany, several notable data points have been achieved with solar power and wind power.  On May 25, 2012, Germany hit a peak in solar generation capacity of 22.15 GW, producing 189.24 GWh on that day, contributing fourteen percent (14%) of the country's total electricity requirement.  Germany added 1,008 new turbines in 2012, connecting an additional 2,439 MW in new wind capacity to the grid.

From a recent report by the Fraunhofer Institute, solar power plants produced 27.9 TWh in 2012, reaching a 5% share of the gross electricity production of 560 TWh.  Wind turbines produced a total of 45.9 TWh in 2012, reaching an 8.2% share of the country's gross electricity production.  Accordingly, solar and wind production together 73.8 TWh, representing 13% of the country's total electricity production. 

Also from the Fraunhofer report referenced above, the chart below provides details on Germany's electricity production for December, 2012.  One can observe in the chart the excessive variability in renewable energy resources, and the compensating for renewable intermittency by ramping both natural gas and hard coal generation resources, while essentially base-loading nuclear and soft coal resources.

It can be observed that natural gas is lower in the merit order loading for economic dispatch relative to coal and nuclear resources, and is called upon extensively to dynamically balance supply and demand.