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

The International Renewable Energy Association (IRENA) believe that falling costs and technological innovation mean that solar PV could increase six-fold by 2030 to 1760GW, accounting for 7% worldwide power generation (up from 1.2% in 2015). The report, "REthinking Energy 2017: Accelerating the global energy transformation” suggests that while the 60% decline seen in levelised cost of electricity (LCOE) for utility-scale solar between 2010 and 2015 is a primary driver behind global market expansion, the innovation in technology development and continuing economies of scale are what could propel it forward as a global power source. 

Renewable energy auctions are also helping to push solar developments, especially after the World Bank-backed auction in Madhya Pradesh state in India earlier this month produced record low bids of $0.05/kWh. In Saudi Arabia bidders are being invited to present their offers to the country’s first renewable energy tender (and first stage of the nation's plan to develop 10GW of renewables by 2023) stimulating economic development in clean energy. And in Europe, the trend of allocating renewable capacity through competitive auctions may spur developers to increase project scale to save on maintenance and grid connection costs.

In South Africa tensions seem to be running high as Eskom fail to comply with president Jacob Zuma’s address, where he stated that the utility would sign all outstanding power purchase agreements (PPAs) with renewable producers. While the utility "is not a policy-maker and has no legal authority to negotiate tariffs with preferred bidders” according to the South African Renewable Energy Council (SAREC), Eskom has yet to indicate compliance, and reports are emerging that they will only sign if costs of connections are increased or renewable tariffs are capped. 

And in the US Scott Pruitt, head of the US Environmental Protection Agency (EPA), has made it clear that he intends to get rid of the Clean Power Plan, giving states back their autonomy and insisting that environmental laws do not lend themselves to a “one size fits all model”. The US Energy Information Administration (EIA) expects coal to regain it’s top place in the nation’s generation mix by 2019 (and retain this into the 2030’s) if the Plan is repealed, but clean energy advocates are hopeful that renewable energy will thrive regardless, due to strong state policies around renewable energy (such as mandates for 100% clean energy in Hawaii and California) and the relative economics of coal compares to natural gas, wind and solar. 

Financing clean technology

In addition to the advantageous economics of solar PV in recent years, standardised PPA contracts have supported investment in the resource by providing investors confidence in evaluating projects, resulting in an at-scale financing asset that has driven the growth of the industry. In a similar fashion, new standardised contracts around battery storage is supporting financing in this space, according to a recent research brief "Financing Advanced Batteries in Stationary Energy Storage”. In particular, demand charge shared savings agreements, in which financing parters depend on a portion of cost savings from tariff-specific demand charge reductions to recover costs, and demand response energy services agreements, in which utilities compensate third party virtual power plant owners (i.e. of aggregated battery storage assets) for providing system capacity and storage services, are helping to overcome some of the roadblocks for financing energy storage projects and may lead to the financing innovation needed to drive widespread deployment of energy storage technology.

Storage and other technologies that can deliver greater flexibility into the grid may become critical to support energy security and keep costs of integrating renewables to a minimum as renewable energy penetration increases, according to a report published this week by the UK Energy Research Centre (UKERC). In an update to their 2006 study, the recent report finds that costs to support the integration of renewables in the UK could be in the order of £10/MWh, however estimates vary substantially based on system flexibility, resource mix, and geographical factors. There is also no clear way to determine total system costs for integrating renewables, as costs come from a variety of factors (including raising reserve requirements, maintaining capacity to meet peaks, strengthening transmission networks, curtailment, load factor and efficiency of conventional plants, and changes in system inertia) which overlap and trade off against one another, meaning that a whole systems approach to exploring cost impacts of renewables is required. So while there is no one clear answer to determine what costs will be, a key message for policy makers is to focus on delivering smart and flexible systems to support integration of variable resources at the lowest cost.

Centrica Innovations - a new venture recently launched by Centrica - aims to "identify, incubate and accelerate the development of new energy-related technologies” and support innovation throughout the company by investing £100 million over the next 5 years in energy technology start up companies. Scouts will be placed in key technology hubs around the world, and in-house innovations will be supported by the venture, to embed an “innovative culture” across the company’s operations.

The Scottish government have released £11 million in funding in the second pilot phase of Scotland’s Energy Efficiency Programme (SEEP), to support local authorities test new energy saving measures for homes, community groups, and businesses. 

And a new report from the World Wildlife Foundation and sustainability alliance ISEAL urges businesses across the world to contribute toward reaching the Sustainable Development Goals (SDGs) agreed at COP21. Energy consumption - including supply chain consumption - is a central tenet to support sustainability outcomes, and the report warns that the majority of businesses still need to join the leading companies who have made strong commitments to address climate change.

Storage

Following from the recently published study in Nature Energy suggesting that coupling solar with behind the meter storage could increase energy consumption and carbon emissions, another new study looks at the economics of the pairing, challenging work from the Rocky Mountain institute predicting that solar-plus-storage will reach grid parity and support grid defection. Recent work by Hittinger and Siddiqui from the Rochestor Institute of Technology simulates 1020 homes across the US in both grid defecting and grid tied scenarios. The authors show that a $2/watt grid-tied solar system with net metering makes financial sense in many locations, but going off grid increases the levelised cost of electricity by $0.23/kWh on average, more than doubling the cost of electricity for an average home. Without net metering, the study found that the high capital cost of batteries still outweighs the value of curtailed power, though the authors do acknowledge that lower panel and storage prices could make grid defection more attractive, assuming that utilities do not adapt their business models.

At the utility scale there are some concerns about the cost of storage too, as the Connecticut Department of Energy and Environmental Protection denies two pilot projects. While the benefits storage provides is appreciated by many utilities, the upfront ($5.6 million and $13 million for the two pilots) and ongoing costs were deemed to be too high for the flexibility benefits they would deliver. 

However, other utilities have found the benefits to outweigh the costs, particularly in California where storage capacity is ramping up quickly. The state has the largest storage mandate nationally, and is also relying on storage to cover shortfalls following the Aliso Canyon methane leak in 2016. PG&E have now brought a 0.5MW/2MWh storage facility online in Browns Valley, which closely follows two 80MWh projects for SCE, and two projects totalling 150MWh for SDG&E. 

According to DNV GL, the key to unlocking the potential of community based grid connected storage systems is to take a multi-stakeholder approach, allowing different parties to benefit from the batteries simultaneously. While community storage is on the utility side of the meter, and could support grid operators to balance systems, there is not yet a business case for their deployment. However, regulatory changes as well as collaborations between stakeholders such as network operators, energy suppliers and customers, could support the “stacking” of multiple benefits to boost the business case. The group is beginning an examination of social and economic benefits of community battery systems, and aims to develop a framework document by September 2017.  

In Australia the residential scale solar plus storage market grew by over 1000% in 2016. According to the SunWiz “2017 Battery market report”, 5% of PV systems sold had battery storage included, and the growth is expected to continue due to the declining costs of storage, the high prices of electricity in Australia, and the long hours of sunshine. 

The demand side

Storage is also capable of playing a strong role in the demand side. Green Charge Networks are installing a 1MW/2MWh storage system in Pacific Union College in California to reduce costs incurred from demand charges. Instead, the battery system will be charged during low peak periods and used to prevent spikes in power drawn from the grid, delivering an anticipated savings of $800,000 over 10 years.

In Ohio, the University of Toledo is undertaking a project with the Department of Energy’s Pacific Northwest National Laboratory to explore the potential for optimising building-grid interactions. The project will track a 1MW solar array and battery storage on campus, as well as price points and grid conditions to automate interactions between the building and the grid.

In Australia, the Distributed Energy Exchange – or deX - was launched this week to allow homeowners with solar panels and batteries to trade their electricity in a digital marketplace. The aim is to reduce energy costs, drive investment in renewable energy, stabilise the electricity grid and buffer it against surges in demand; if a particular line becomes overloaded, deX enables households to participate in an automated fashion to support grid needs. Household batteries are linked to the exchange via a system that communicates with the marketplace in real time, seeking incentives for the household system to participate in. Two pilot projects of around 5000 households each are being launched to demonstrate the technology. 

However, the Sunshine tariff project, rolled out in Cornwall over summer 2016 by Western Power Distribution (WPD), Wadebridge Renewable Energy Network, Tempus Energy and Regen SW, suggests that homeowners are not able to shift enough demand to offset the need for grid upgrades in the area. Participants were given a smart meter and reduced energy tariff of 5p/kWh between 10am-4pm compared to 18p/kWh for the rest of the day, and on average shifted 10% of their demand compared to a control group. Some customers were also given automation technology, and these customers shifted 13% of their consumption, compared to 5% of those without. While this is promising, the program also encountered a number of barriers. WREN struggled to get households to sign up to participate, and those who did through they were shifting demand more than they actually were. Consequently, the energy shifted wasn't enough to convince WPD to provide an offset grid connection to WREN for a 4MW solar farm they had hoped to connect to the network. 

While automation technologies did show some promise in the trial, a new report from the Buildings Performance Institute Europe (BPIE) suggests that no member states in the European Union are fully prepared to take advantages of the benefits of smart building technologies that enable buildings to interact with energy systems and deliver flexibility by producing, storing, and consuming energy. The report notes that if the building stock is to contribute significantly to reducing carbon emissions, "the built environment must undergo a deep transformation and become both smart and efficient."

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