Energy Finance Report

New Jersey's Proposed Renewable Portfolio Standard- Ambitious, but Uncertain

Posted by Jeffrey Karp on 4/20/16 11:28 AM

Co-authors Emma Spath and Morgan M. Gerard

New Jersey is poised to become a national leader in renewable energy by virtue of pending legislation that would substantially decrease the Garden State’s greenhouse-gas emissions through an ambitious Renewable Energy Portfolio Standard (RPS). An RPS is a regulatory mandate that requires utility companies to obtain a certain percentage of the energy they sell from renewable sources such as wind and solar, or purchase renewable energy credits (RECs) from qualifying energy sources. Recently passed by the State Senate, a new bill would require utilities to source 80 percent of their electricity from renewable energy by 2050.  If the General Assembly passes the bill and it survives the pen of Governor Christie, utilities must procure 11 percent of their electricity from renewables by 2017, with an increase every five years of approximately 10 percent until the 80 percent threshold is reached in 2050.

Although New Jersey passed its original RPS mandate in 1999, and has since updated its program to reach 20 percent by 2020-21 (including a solar energy “carve out” requirement of nearly 4 percent), the ambitious new bill faces an uncertain outcome. First, although the bill already has passed one legislative chamber, the Senate vote was strictly divided along party lines.  Second, the General Assembly, which is the next destination for S1707, delayed voting on a similar Senate bill in December 2015.  However, this General Assembly, like the Senate, has a Democratic majority; thus, it seems likely that the bill would pass.  Finally, the bill faces a veto-threat by Governor Christie, which could be overcome by a two-thirds majority in both houses.  In this scenario, a lack of bi-partisan support could doom the legislation due to a failure to obtain the requisite super-majority vote to overturn a veto. 

The bill also may be perceived as political by some or a “hot potato.” In addition to an increased RPS mandate, the legislation would allow the Board of Public Utilities (BPU) to establish an “emissions portfolio standard applicable to all electric power suppliers and basic generation service providers, upon a finding that [t]he standard is necessary as part of a plan to enable the State to meet federal Clean Air Act or State ambient air quality standards.”  The provision may reflect the State Senate’s desire to assure New Jersey’s compliance with President Obama’s Clean Power Plan, an Environmental Protection Agency (EPA) regulation presently under court review that seeks to limit greenhouse gas emissions under authority of the Clean Air Act.  In an omnibus litigation pending before the United States Court of Appeals for the D.C. Circuit, twenty-seven states, including Governor Christie’s administration, seek to block the Plan’s implementation.  Recently, the Supreme Court stayed the regulation and suspended any deadlines for state compliance until resolution of the litigation.

Another possible objection to the N.J. bill—based on the reaction to a similarly aggressive RPS in California—may be its potential significant implications for the power grid. A review of a study concerning the potential impact of California’s plan to increase renewables to 50 percent by 2030 provides insight into the challenges that such measures may pose. That study found that an aggressive RPS could result in over-generation of renewable energy. The study showed that once California reaches a 50 percent RPS, excess power would be generated for 23% of annual hours.  Such an occurrence could result in grid forecast uncertainty, which is very costly for utilities.  Thus, New Jersey lawmakers instructed the BPU to concomitantly evaluate how to ameliorate solar energy volatility. It may behoove the BPU to also look at longer-term grid strategies to mitigate the substantial increase in renewable energy.  Such viable mitigative methods may include requiring steps such as energy storage, smart inverters with future solar photo-voltaic installations, or encouraging a diverse renewable energy portfolio.  While each of these measures may come with its own political baggage, the consideration of such grid solutions may be the palliative that enables New Jersey to substantially increase its RPS.

Topics: Energy Storage, Solar Energy, Renewable Energy, clean power plan, Wind Energy, renewable portfolio standard, Clean Air Act, New Jersey, Grid Security

Tech Update: Another Use for EV Batteries?

Posted by Van Hilderbrand on 12/3/15 4:28 PM

Co-author Emma Spath

EV_Batter.jpgIn the midst of the Fukushima Daiichi nuclear disaster in March 2011, electric vehicle (EV) batteries were used in an unusual and innovative way—as energy storage.  The earthquake caused a plant shutdown, but the following Tsunami waters damaged the back-up diesel generators responsible for cooling the plant’s systems.  Many do not realize that as the situation in the nuclear reactors became increasingly dire and with no ability to generate power onsite, the Tokyo Electric Power Co. (TEPCO) brought in fully-charged EV batteries to supply electricity, restart the pumps, and reestablish steady water circulation for cooling.  Fukushima demonstrated to the world that EV batteries can not only be used for transportation, but also as mobile power sources able to resupply the power grid.

Use of EV Batteries for Storage is Growing

Elsewhere in the world, traditional EV batteries are gaining support not only to power vehicles, but also as battery storage.  For example, car manufacturer Nissan has partnered with Canadian electric company PowerStream to pilot tests to determine the potential of using its popular model, the Nissan Leaf, for battery storage.  The concept has been called Vehicle to Home, or V2H, and the vehicle would essentially communicate with the power grid, its charging station, and the house to determine when and how much electricity is needed in times of grid strain, such as brownouts in heat waves, or general power outages.  Additionally, V2H could be used to avoid peak energy demand charges.  Nissan states that the 24 kWh of energy could power the average home for 24 hours without power conservation attempts.  The special V2H charging station also has the load capacity to power common household appliances at the same time.

Elon Musk and Tesla have introduced the $3,500 Powerwall, to be delivered in late 2015. Based on the technology used in the Tesla Model S battery, the Powerwall is a home battery that charges using electricity generated from solar panels and has the additional benefit of automatically recharging in the middle of night when energy demand is at its lowest.  This new technology may be most feasible for someone who already has solar panels and a power inverter installed, so one can avoid buying an additional ac/dc inverter. 

In April 2015, Musk also unveiled the Powerpack, a $25,000 version of the Powerwall for businesses. Even before the public announcement, Walmart signed a deal with Tesla to test its stores with Powerpacks in conjunction with existing solar panels.  Musk informed shareholders at the April announcement that as much as 80% of the non-vehicle battery business will likely be to utilities and large industrial customers like Walmart. 

Recycled EV Batteries for Power

Companies are getting involved in EV batteries in a different way—recycled EV batteries.  Recycling EV batteries extends their life and prevents the immediate disposal in landfills.  The typical lifetime of an EV battery is 10 to 12 years, but after the batteries have exhausted their use within a vehicle such as the Chevrolet Volt or Nissan Leaf, the batteries still maintain up to 80% of their capacity.  For example, Chevrolet is currently using five recycled Chevy Volt batteries to power the new General Motors Enterprise Data Center at its Milford Proving Ground, helping the Center to annually deliver net-zero energy use.  The batteries also provide back-up power to the building for four hours in the event of an outage and can provide excess energy to the grid that supplies the Milford campus.  Because electric car sales are currently depressed in Japan and in the United States thus causing supply to be low, time will tell if recycled EV batteries will cause a significant and broad energy impact. 

Through Tragedy Comes Opportunity

The future for EV batteries as storage should gain additional momentum due to a 2013 order from the California Public Utilities Commission, which requires Edison, San Diego Gas & Electric and Pacific Gas & Electric to install or contract for more than 1,325 megawatts of electricity storage throughout the state by 2020, thus creating a significant market for batteries such as the Powerwall and recycled EV batteries.  Additionally, the Department of Energy is conducting extensive research on EV batteries, including ways to reduce size and production costs, both of which may make use of new EV batteries as storage more feasible.  Although in some ways the use of EV batteries as storage was brought to the public eye by a tragedy, the future for this type of battery storage has serious potential, especially as more technological improvements are made regarding size, weight, capacity and costs.

 

Topics: Energy Storage, Renewable Energy, Electric Vehicles

Mid-Atlantic: Distributed Energy Opportunities

Posted by Joshua L. Sturtevant on 11/3/15 11:58 AM

Solar panels at a roof with sun flowersThe Mid-Atlantic region (Maryland, Delaware, Virginia and the District of Columbia) is currently at the forefront of discussions regarding the next generation of distributed electricity markets. Notable developments pushing the region into the spotlight recently include M&A activity, creativity on the part of public service commissions, local innovations in PACE finance, and increasing flexibility on the part of local utilities.

Programs and developments of particular note include:

- Net metering and renewable portfolio standards in Maryland

- PACE financing in Montgomery County, Maryland

- Discussions around undertaking a REV-like proceeding in Maryland

- Interconnection standardization in D.C.

- Microgrid studies being undertaken in D.C.

- Potential third-party bidding for large-scale solar in Virginia

- Renewable portfolio standards and net metering in Delaware

- Community solar innovations and discussions throughout the region

Please join SEIA and Sullivan & Worcester’s Energy Finance team on November 5th live in SEIA’s new offices, or by dial-in, as we host a roundtable discussion on developments in the region and the unique business opportunities they could present. After Rhone Resch’s introductory remarks, Elias Hinckley will moderate a panel comprised of industry experts with unique opinions, including Maryland PSC Commissioner Anne Hoskins, Dana Sleeper of MDV-SEIA, Anmol Vanamali of the DC Sustainable Energy Utility, Bracken Hendricks of Urban Ingenuity and Rick Moore of Washington Gas. Interested parties can register here.

Topics: Water Energy Nexus, Utilities, Water, Carbon Emissions, Energy Security, Thermal Generation, Energy Policy, M&A, Structured Transactions & Tax, Energy Storage, Energy Efficiency, Power Generation, Microgrid, Energy Finance, Distributed Energy, Energy Management, Solar Energy, Renewable Energy, Wind, Oil & Gas

Six Questions to Consider about Microgrids

Posted by Jim Wrathall on 7/14/15 2:30 PM

microgrid ThinkstockPhotos-156606910

 

What is a microgrid?

The traditional electricity distribution model can be viewed as a “macrogrid,” using a large centrally located power station to provide electricity over an extensive service territory. This model was designed during the early days of electrification with the objective of providing affordable and reliable power to as many customers as possible. However, with technological advancements, a localized microgrid may provide the multiple benefits of grid resiliency and cleaner, more efficient energy production and distribution. Regarding resiliency, the microgrid may be able to disconnect or “island” from the macrogrid, minimizing and isolating blackout incidents and providing for power redundancy. Concerning energy efficiency, the microgrid uses local sources of energy to serve local loads, reducing energy loss in transmission and distribution. Additionally, this smaller grid can more easily deploy distributed energy resources (DER) such as solar energy and combined heat and power (CHP) to meet grid demand.

Why the push towards microgrids?

As stated above, microgrids provide the dual benefits of energy efficiency and resiliency. Picture Superstorm Sandy in Manhattan, if downtown had the capability to island and maintain power notwithstanding the downed Con Edison station? Or, perhaps, picture the upper east side of Manhattan being able to provide some power to the seven million people left without electricity? Even the nation’s capitol is vulnerable, as demonstrated when a PEPCO transmission line recently took out power in downtown D.C., with power disruption affecting federal buildings including the White House Complex. Not to mention, electricity can be saved by diminishing losses from long transmission.

Ok great! Why not build microgrids everywhere?

Currently, developers face uncertainties as there is not a clear policy or regulatory path in place, thus affecting the potential to obtain private financing. Previously, we lacked the technological capability to deploy a variety of distributed generation (picture roof-top solar, a traditional combined heat and power station, and a small wind turbine working together in different locations) through a set of advanced, real-time controls to manage energy demand across the entire microgrid. While the idea of a clean-tech microgrid is relatively new, the concept of a microgrid is not so new. University campuses, military bases and some industrial parks have been operating them for years, maybe even decades, but all such grids are on a solitary campus with one stand-alone energy customer. What is new is the desire to place microgrids throughout a utility grid system servicing commercial customers, perhaps in competition with the utility. The potentially competitive relationship with the utility may be why we haven’t seen microgrids popping up everywhere, unless they are utility-sponsored.

What is the utility’s stake in microgrid adoption?

Where a third-party, non-utility provides electric generation and distribution to retail customers, the utility may have a lot at stake. The traditional model always has been the use of a macrogrid, in which a solitary utility provides both the generation and distribution of electricity for a specified geographic area, their “service territory.” Simplifying the regulatory terrain, utilities are heavily regulated in exchange for their exclusivity and must set rates through a proceeding before the state’s public service commission (PSC). This is why electricity bills typically remain constant because change can only occur in a rate making proceeding. Depending upon how the state set up its relationship with the utility (during the late 1800s or through some subsequent restructuring), the utility may own its right to exclusivity, making it very difficult for a state to change its laws.

Some states and their utilities have opened the market to multiple electricity generating entities and, for example, enabled solar providers such as SolarCity through third party roof-top leasing. However, utilities have invested a great deal of capital in fixed wire distribution systems that physically connect your homes or businesses to electricity. Microgrids would directly compete with such fixed wire distribution; therefore, utility resistance may be expected. Depending upon the jurisdiction, fixed wire distribution may be the exclusive franchise of the utility. However, some states, like New York with its Reforming the Energy Vision (REV) docket, are seeking to modify the utility relationship, showcasing the vast differences in utility precedent by jurisdiction.

Are there other obstacles to microgrid adoption?

Lawmakers and public service commissions may need to realign their energy laws and regulations to enable the clean-tech microgrid. For example, to make a private microgrid financeable, the developers will need to know approximately how many customers (ratepayers) they can lock into their grid. Many states have competition laws that allow customers to choose their electric generation supplier. This approach may disadvantage a financed microgrid, as customers may be able to switch providers. Also, it is unclear what level of regulation microgrids will experience. Are they utilities? The common answer is most likely not, but the question remains: will there be any requirements in place to prevent rate spiking? Another unknown, will the microgrid as a whole be able to net-meter to the macrogrid? What will the interconnection procedures look like? The list of uncertainties needs to be addressed to provide developers and financers with better clarity.

With all of these challenges, what is the future for microgrids?

There is accelerating momentum behind the push to deploy microgrids. SolarCity already is offering a microgrid service to collaborate with municipalities and universities. With more severe and unpredictable storms and increased vulnerability to cyber-attack, microgrids are becoming the next horizon for our energy future. Utility and policy concerns are surmountable as demonstrated by REV and the market restructurings that enabled competitive generation. To gain a foothold, the microgrid revolution will take a tailored approach to local issues, and will be led by some pioneering developers, and, perhaps, a handful of forward-thinking utilities that are ready to capitalize on a new opportunity.

Topics: Utilities, Energy Policy, Structured Transactions & Tax, Energy Storage, Energy Efficiency, Microgrid, Energy Finance, Distributed Energy, Energy Management, Solar Energy, Renewable Energy, Public/Private Partnership, Wind

What do Tesla Batteries mean for Solar Power in Texas?

Posted by Graeme Walker on 5/26/15 6:39 AM

Tesla Alba

Source: Tesla Motors

Last week, Elon Musk announced Tesla’s new battery system, the first of its kind for solar power. Musk presented the sleek looking, wall-mounted Powerwall as an affordable alternative to the battery rooms currently on the market, which are often criticized as expensive, odorous, clunky and unreliable.

Since then, the Internet has gone into a frenzy, with some critics prophesizing the end of nuclear energy and others heralding Tesla’s solution as the Holy Grail that will negate our dependence on fossil fuels. There’s a lot of conflicting information about the Tesla battery, its usability and viability, but the orders to date (worth $800 million in potential revenue) would suggest that at least a few people are excited about the latest innovation from the renewables giant.

According to the EDF, there is enough solar energy potential in Texas to power the world twice over, and yet with approximately 57,000 home using solar power we rank 10th in the nation. What does Tesla’s latest venture mean for consumers here, and the solar industry at large? As a consumer interested in solar power as an alternative to fossil fuels, what are your options?

Priced at $3,500, Tesla’s battery holds 10kWhs of electric energy and will deliver approximately 2kWhs of continuous power. For homeowners, there are two offerings currently available: the smaller 7kWh system can be charged on a daily basis, and a 10 kWh system designed for weekly recharging.

Let’s look at each of these options individually. Firstly, the smaller system. In Texas, most solar systems allow for grid use to bridge the gap between the renewable energy supply and peak household demand (e.g. at night or when the sun is not shining). The cost of this grid electricity will be lower than the power produced from the Powerwall. Therefore, the economics of the smaller Tesla system are not yet that attractive, and we would only recommend this system if you are truly looking to go completely off-grid.

For people interested in the batteries in terms of energy security, the larger 10 kWh batteries is a better choice. Designed as a backup for when the grid goes down, they do offer a more cost effective alternative for households during outages. This is a more appealing option for homes with many connected devices or small businesses that need constant power. However, multiple batteries would need to be purchased to power an average household for a night so the price point would be considerably higher than $3,500 with a larger installation.

While Tesla’s solution still has a ways to go in terms of economic and power efficiency, the company’s bold move into home energy batteries will no doubt spark innovation from a number of competitors. Innovation fosters innovation and while Tesla’s solution isn’t quite ready for mass-market adoption just yet, it may just be the catalyst that spurs the market to act.

 

Thanks to our guest author, Graeme Walker, and Alba Energy for allowing the Energy Finance Report to republish their article. For more information on Alba Energy please visit their website or LinkedIn.

Topics: Energy Storage, Distributed Energy, Solar Energy, Renewable Energy

Utilities Seeking Solar and Storage

Posted by Van Hilderbrand on 3/17/15 8:11 AM

solar panels - 466601194

Co-author Jeff Karp

Utilities and other offtakers had an appetite for renewable energy in 2014 according to a recently released white paper by Bloomberg News Energy Finance. The white paper catalogs the 52 requests for proposals (RFPs) by sector, geography, and company, revealing utility trends that can serve as a litmus test for the overall market. The RFP activity demonstrates the procurement interests and needs of the utility sector, which can greatly sway market and investor activity.

The white paper summary notes that solar RFPs dominated clean energy in North America, both in capacity (1.8 GW) and quantity (27 RFPs). With at least 12 RFPs issued, the solicitation activity revealed that a strong interest in energy storage also exists. Mr. Will Nelson, head of analysis for Bloomberg New Energy Finance, stated that “the data reveals particularly strong interest in energy storage . . . interestingly, most storage RFPs are looking for a relatively small amount of capacity, evidence that these may be initial experimental forays into a rapidly changing sector.”

As energy storage technology moves out of the experimental phase and becomes a more integral part of the modern grid system, it is likely that utilities will continue soliciting projects. According to Greentechmedia “the country is forecasted to deploy 220 megawatts in 2015, more than three times its 2014 total, and growth should continue at a rapid clip thereafter.” The 12 storage RFPs issued in 2014 reflect that utilities may be eager to help the nascent industry find firm roots in servicing macrogrid load.

Special thanks to Morgan Gerard who assisted in the preparation of this post.

Topics: Utilities, Energy Storage, Solar Energy, Renewable Energy

Sullivan & Worcester logo

About the Blog


The Energy Finance Report analyzes developments in energy finance as well as provides updates and perspectives on market trends and policies.

Subscribe to Blog

Recent Posts

Posts by Topic

see all