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Welcome to the weekly roundup from the Oxford Martin Programme on Integrating Renewable Energy.
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Clean energy around the globe

2016 was a record-breaking year for global renewable energy capacity additions, but the world spent less money on renewables in 2016 than it did the year before. According to a collaborative study tracking global investments in renewable energy from the UN, the Frankfurt School, and Bloomberg New Energy Finance (BNEF), renewable energy capacity additions totalled 138.5 GW in 2016, up 9% from the 127.5 GW added in 2015. Investors only spent $241.6 billion, though, down 23% from investments in renewables in 2015. The report provides further evidence for the falling costs and grid competitiveness of renewables, leading BNEF to claim that authorities might have to start subsidising natural gas plants to help provide grid reliability.
 
The continued rise of decentralised and variable power generation has prompted the IEA to highlight the need for integrated, local energy solutions comprising a smarter, more flexible power system at a recent annual workshop of the IEA’s Renewable Energy Working Group. The workshop and resulting report also stressed the importance of sustainable cities as the drivers of the shift towards more decentralised power systems, especially as urbanisation rates continue to grow.
 
Cities such as Stockholm, Frankfurt and Seoul have all set ambitious targets for increasing renewable energy capacity and emissions reductions, and in the U.S., Portland, Oregon, announced this week it will aim for 100% renewable power by 2035 and a complete transition to carbon-free energy, including the transportation sector, by 2050. And the Mayor of Chicago, Illinois, announced this weekend that more than 900 city-owned buildings will shift to 100% renewable energy by 2025. The largest municipality in the U.S. to make such a commitment, Chicago’s public buildings used almost 1.8 billion kWh of energy last year (about 8% of the city’s energy use). The city will acquire renewable energy credits, purchase renewable power from utilities and increase on-site generation to offset building demand. 
 
Two other notable U.S. developments in clean energy occurred this week: in California, the California Public Utilities Commission (CPUC) unanimously approved an order to double the state’s Self-Generation Incentive Program (SGIP). The order directs investor-owned utilities to collect $83 million per year through 2019 for the programme, 85% of which will go to funding energy storage projects and 15% for renewable generation projects.
 
In Arizona, Tucson Electric Power filed its 2017 Integrated Resources Plan and signalled that it is working towards a goal of 30% renewable electricity by 2030. The utility believes that grid energy storage systems will decline rapidly in cost, allowing it to add up to 100 MW of storage capacity soon. 
 
In Africa, energy challenges and opportunities are unmatched, and energy policy is starting to move to centre-stage in many African countries. But Africa faces what experts call the energy “tetralemma,” not just the three challenges of the energy trilemma (security of supply, equity and affordability, and sustainability) but also a tough choice of which of these options to pursue while also ensuring energy is able to come online quickly. Due to its “tetralemma,” Africa is at the forefront of developing a hybrid energy supply system, where the grid still plays a significant role but is supported by off-grid households and community microgrids where appropriate, as well as a cross-border supergrid.

Storage

Battery energy storage may be at a ‘turning point’ in the U.S., as utility-scale battery storage installed capacity grew by 221 MW in 2016, according to a recent report from GTM Research and the Energy Storage Association. The fast deployment of long-duration, grid-scale batteries in California, especially, has a number of analysts touting 2016 as a watershed moment for the energy storage sector. Others, however, still believe the true storage revolution has yet to occur as utilities are still figuring out how to better capture the multiple value streams from storage.
 
According to IMS Research, the energy storage market is set to “explode” to an annual installation size of 6 GW in 2017 and over 40 GW by 2022. This is up from just 0.34 GW installed in 2012 and 2013. The near-term potential for energy storage is significant largely due to the declining costs of storage, which McKinsey & Company has predicted could be as low as $160 per kWh by 2025.
 
Rapidly declining prices and the growing market for storage are leading to changes in both the public and private sectors. In the U.S., a new bill being debated in the Vermont legislature would require the state’s Department of Public Service (DPS) to develop policy recommendations and targets to increase storage capacity in the state. Also this week, San Francisco-based Advanced Microgrid Solutions announced a partnership with Wal-Mart to install behind-the-meter batteries at stores to balance on-site energy and provide flexibility to utilities. The partnership includes 40 MWh of projects at 27 Southern California store locations, and it will enable Wal-Mart to shave expensive peaks, smooth out in balances in on-site generation and consumption, and help the company with the largest revenue in the world meet its goal of powering half of its operations with renewable energy by 2025. In this way, Advanced Microgrid Solutions will create what it calls a “hybrid electric building” able to keep its energy costs to a minimum while providing flexibility for utility needs.
 
Another large energy storage project—the latest to be dubbed “Europe’s largest battery”—will be a 50 MWh project from Dutch energy supplier Eneco and Japanese conglomerate Mitsubishi Corporation in Jardelund, Germany. The project will provide frequency regulation to the grid and will be used to replace baseload electricity supplied previously by coal and gas power plants. Construction on the project known as ‘EnspireMe’ will begin this summer in a region with vast amounts of wind power and generation facilities interconnected to the rest of Germany, making it the ideal location for the project. 

The three Ds of energy sector transition

As the global energy sector undergoes fundamental changes, there are three trends that are driving the ongoing transformation of the energy landscape. These are the three Ds of an energy sector in transition: decarbonisation, decentralisation, and digitisation. Decarbonisation is driven by a powerful combination of policy and market forces, the strongest of which have been market changes that are driving wind and solar costs to prices that are competitive and even cheaper than fossil-based generation. Rapid deployment of renewables necessarily decentralises energy systems bringing both challenges and benefits, and many of these challenges will be solved in part by digitisation, which will enable advanced energy management solutions, lower consumer electricity costs, and new business models for electricity generation and consumption.
 
Digitisation was a primary topic of interest at the Energy Thought Summit (ETS17), which brought together energy sector executives and leaders to discuss future power network designs, challenges and solutions. General Electric, the lead sponsor of the event, intends to capitalise on the digitisation of the power grid, which may be one of the largest if not the largest IT play to date. GE Power’s Chief Digital Officer sees the potential for digital transformation across the entire grid, observing that just as Google and Amazon created new businesses when they started following ‘digital exhaust’ (or the data customers created through their browsing and purchasing habits, for example), a similar phenomenon will occur in the electricity sector.

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