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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

China plans to invest over US$100 billion in wind power facilities from 2016 to 2020. However, it faces major challenges due to inadequacies in existing power operation and management systems in meeting new generation requirements, restraints in economic efficiency due to higher costs of wind than traditional fossils, and lack of policy and market support to grow the sector. To overcome these, the wind power development plan intends to:

  • Improve development and utilisation of wind resources in underserved regions.
  • Increase efficiency through restructuring networks so that wind power is available in regions where supply is lower than demand, and supporting demand response and grid interconnection initiatives.
  • Drive technological innovation and establish world class R&D and manufacturing facilities to improve quality of wind power development.
The nation is also pushing the solar agenda, and according to Bloomberg New Energy Finance are more likely to commission high-quality, large-scale solar plants in 2017 than standard ones, in an attempt to boost performance and encourage R&D.

While developments in China are looking positive for the clean energy agenda, it’s not so clear how things might pan out in the US. Since Trump took power he’s been pursuing a worrying agenda. Federal agencies have been directed by the White House to put a hold on all new regulations, including four new efficiency regulations, until the incoming administration has the leadership in place to approve the work. The Environmental Protection Agency has put a freeze on all grants and contracts, including task orders and work assignments. And most content from the Department of Energy’s home page was removed, though the DOE has assured that nothing was deleted and all the content is still available via drop down links.

However, the Trump administration’s infrastructure priority plan includes seven (of 50) projects focussing on the electricity sector, largely to support grid modernisation, interconnection, wind energy, and storage:
  • #9: The Plains and Eastern transmission lines, which aim to move wind power from the Oklahoma panhandle to load centers in Tennessee;
  • #12: Hydroelectric Plants operated by the U.S. Army Corps of Engineers, many of which are slated for upgrades;
  • #16: The TransWest Express Transmission line, which would deliver renewable energy produced in Wyoming to load centers in California, Nevada and Arizona;
  • #17: The Chokecherry and Sierra Madre wind projects, an up-to 3,000 MW wind energy project in Wyoming;
  • #20: The Atlantic Coast Pipeline, a multi-utility project that would transport gas from West Virginia down through North Carolina;
  • #21: The Champlain Hudson Power Express, a hydropower project that could bring up to 1,000 MW of clean power to the New York metro, and;
  • #49: Energy Storage and Grid Modernization in California, which highlights the mitigation efforts taken during the Aliso Canyon natural gas shortage.

While all this points to uncertainty for the future of the power sector - especially if the Clean Power Plan is scrapped in favour of the America First Energy Plan and coal plants get a new lease on life - there are some other trends at play pointing to decentralised and decarbonised grids.

Renewables are at grid parity and prices continue to fall. The levelised cost of energy for wind and solar sit at $32-62/MWh and $48-56/MWh respectively, both lower than that of natural gas. And the SunShot Program goal of reaching $1 per watt for solar by 2020 has been met three years early. Wind and solar accounted for over half of new generation capacity added in the US in 2015, and are expected to keep growing regardless of the Clean Power Plan.

Low prices for gas and renewables together with stagnant load growth have suppressed wholesale power prices, putting coal and nuclear baseload plants at risk of retirement. And energy storage is become a viable replacement for fossil fuel peaker plants, as demonstrated by actions following the Aliso Canyon methane leak last year. 

States are leading the way on a clean energy transition, which is pushing grid operators to devise strategies for integrating renewables into their grids and carbon pricing into their market structures. As federal decarbonisation initiatives diminish, the role for states becomes increasingly important, as the US needs to decarbonise twice as fast as it currently is to meet the Paris targets. 

Some utilities are adapting to and embracing distributed energy resources by modernising grids to keep up with the changing technological profile. This is also forcing shifts in rate design and net metering, raising questions around what future retail plans for customers might look like. Utilities are beginning to rethink their business models for the enernet era; “a dynamic, distributed, redundant and multi-participant energy network built around clean energy generation, storage and delivery and serving as the foundation for smart cities.” Eversource Energy in Massachusetts has filed a $400 million grid modernisation plan and lawmakers in the state have proposed a bill for 100% renewable energy by 2035, Georgia Power has 846MW of solar energy resource in operation and plans to add up to 1.6GW by 2021, and in California the three largest investor-owned utilities are proposing to spend $1 billion on electric vehicle infrastructure to support the innovation and infrastructure needed for the market to evolve and deliver revenue generating resource.

As a transition toward decentralised and decarbonised grids emerge, countries could learn a lot from Australia’s recent experience. Initial support for renewables in Australia through attractive feed in tariffs (FITs) helped develop a thriving market. Once the FITs were removed and solar buy back rates for customers dropped to $0.04/kWh to $0.06/kWh (compared to $0.30/kWh for purchasing retail electricity - a high price driven up by flat load and infrastructure costs), it became financially attractive for customers to generate and store their own energy rather than buy from the grid. But Australian utilities see opportunities in the DER market, and are now planning for more cost-effective dispatch of DER through tariff shifts to demand based rates. They're hoping to drive investment in new technology through rate and incentive based price signals rewarding customers for providing distributed resource, such as behind the meter storage or demand response, at the right time and in the right place.

And in Germany, where almost a third of energy comes from renewable resources, primarily wind and solar, there is a shift away from traditional thinking around the need for baseload power generation. With renewables sometimes meeting nearly 100% of the demand, baseload power could block the grid. Instead, Germany envisions "Electricity Market 2.0”, and rather than focusing on developing a capacity market where supply side resource meet peak power, they are looking to entities to make commitments to supply or use energy to balance the grid when needed, providing flexibility through responsive power plants that can ramp up and down quickly, smart technologies, and demand side management.

Storage

While storage prices may be dropping and tariff based incentives for purchase become more widespread, most storage projects - especially at the utility scale - still need more than one revenue stream to be financially viable. A new report from Navigant suggests that the role of an integrator is increasingly important for storage to earn maximum revenue and succeed in the market, and a growing number of large corporations are starting to enter this space. 

The nature of funding for such technologies is starting to shift too. In 2016, companies focussed on smart grid, energy storage and energy efficiency raised $1.3 billion in venture capital funding. While this was down compared to the previous year, corporate funding, including debt and public market financing, grew to $4.58 billion, up from $2.8 billion in 2015, suggesting that the sector is beginning to mature. 

In fact, over the next 8-9 years, storage capacity in developing countries is expected to increase 40-fold, from 2GW to over 80GW. The largest markets are expected to be in China and India to help these nations meet their growing electricity demands through renewable generation. Distributed systems and microgrids are expected to dominate, with rural and isolated communities driving the market for a different set of technologies to those needed for growing urban populations. 

In the UK prime minister’s industrial strategy includes the development of an energy storage research institution, putting the UK at the forefront of cutting edge battery technology. It will aim to build on existing strengths within universities and organisations on battery technology, energy storage and grid technology, and will form a key part of Theresa May’s efforts to spread economic growth within the UK. 

And in New York, the state's chief economic development agency, Empire State Development (ESD), together with the New York Battery and Energy Storage Technology Consortium (NY-BEST), are launching a battery cell assembly facility to provide facilities to companies, researchers, and entrepreneurs working to advance the battery industry.

Demand response and smart homes

Demand response offers similar grid benefits to storage, freeing up demand when supply is constrained, and can also provide net benefits to companies and customers involved. In Gateshead the district energy scheme, which will provide heat and power to homes, businesses and public buildings once operational later this year, is partnering with Flexitricity to participate in a demand response scheme, allowing the asset to increase revenues by £1 million and simultaneously support national energy security.

Smart homes and connected devices promise to enable residential consumers to participate more fully in new grid opportunities like demand response schemes, and communication between the grid and devices and between connected appliances in the home is key to enabling this to happen. However, unless purchased carefully, consumers are likely to end up with multiple products in their homes unable to communicate with one another. Tech titans have developed their own way of connecting to smart home products, but little standardisation exists. Different products may communicate across a variety of different networking protocols, such as Wi-Fi, Bluetooth, ZigBee or Thread. While hub or bridge devices can help overcome this by translating between languages, the bigger issue is due to incompatibility across the application layer, which is the language devices use to accomplish tasks. With different tech developers creating their own applications layers, the sheer number of languages means that many products just wont be able to talk to others, limiting the intelligence with which smart homes can interface with the grid.

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