Energy consumer demand for distributed-energy resources (DER) is growing for a number of reasons—unexpected utility power outages, planned rolling blackouts, power quality problems, increases in power costs, etc.
Customers have always wanted reliable, high-quality, reasonably priced power. Until recently, though, they had to cross their fingers that their local utilities would provide all of these. Now, with the increasing availability and cost-effectiveness of DER, more customers—industrial, commercial, governmental and residential alike—are taking power generation and even storage into their own hands.
DER can include natural gas (used in generators, turbines and microturbines); hydrogen (used in fuel cells); and combined heat and power (known as CHP, which uses waste heat from the generation to provide on-site heat).
However, other DER technologies are of particular interest to electrical contractors (ECs): renewable-generation sources, such as solar and wind; large-scale battery storage; and microgrids, which are often some combination of natural gas, hydrogen, CHP, solar, wind and battery storage.
In the past, the only people who could design, install and maintain power generation for customers were the engineers and electricians who worked for utilities. Now, with the growing popularity of DER generation and storage, ECs have the opportunity to help customers of all sizes and types design, install and maintain DER generation and storage resources.
At the Grid Edge Live 2015 conference, Steve McBee, president and CEO of NRG Home, a division of Philadelphia-based utility NRG, said, “The fundamental takeaway is the extent to which technology has destroyed long-standing, centralized, provider-driven service models and replaced them with decentralized, demand-driven service models that have empowered customers in ways that are totally unprecedented.”
How large is the opportunity? A December 2014 report, “Global Distributed Generation Deployment Forecast,” published by Navigant Research, stated that the global market for distributed generation is expanding rapidly. While distributed generation was providing 87,300 megawatts (MW) of power per year in 2014, Navigant projects that to grow to 165,500 MW by 2023.
Advances in distributed generation
Besides advances in DER technology and more attractive costs, growth is also fueled by policy changes made by state utility regulators. For example, California’s three investor-owned utilities were required to file detailed DER plans by July 1, 2015. Part of the state’s mandate would allow aggregators of distributed generation the opportunity to sell into the independent system operator (ISO) electricity marketplace, which was the first time this was allowed in the United States.
In addition, the results of a new survey of 500 energy industry representatives (utility executives, regulators, distributed energy providers, etc.), conducted by GTM Squared, a research arm of Greentech Media, suggest that ongoing regulatory proceedings designed to properly value DER will be critical in helping it gain traction. As industry stakeholders focus efforts on regulation and valuation of DER, growth is expected to continue, paving the way for ECs to expand their work in this area.
A recent Navigant Research report, “Direct Current Distribution Networks,” examined the opportunity for direct current (DC) distribution networks, such as microgrids, in four key market segments—off-grid/bad grid telecommunications, data centers, commercial building grids and off-grid military applications. Each revolves around different market assumptions, dynamics and drivers. While large, centralized power plants are expected to continue playing a role in providing alternating current (AC) power to the wholesale macrogrid (the nation’s interconnected electric transmission grid), there is, according to Navigant, increasing momentum at the electric service distribution level to diversify power offerings and pursue solutions incorporating a growing proportion of DC power. Navigant expects that global DC distribution network implementation revenue will grow from $2.8 billion in 2015 to $5.1 billion in 2024.
Recent decreases in the installed costs of residential and nonresidential solar photovoltaics (PV) bode well for ECs, since the decreases make the technology more attractive to more customers. Each year, Lawrence Berkeley National Laboratory publishes the report “Tracking the Sun,” which identifies trends in solar PV. In past years, the report has included residential, nonresidential and utility-scale PV trends. This year, however, utility-scale PV trends were spun off into a separate report, “Tracking the Sun VIII: The Installed Price of Residential and Non-Residential Photovoltaic Systems in the United States.”
According to the report, the overarching trend is that “installed prices” continue to decline rapidly. The national median installed price in 2014 for residential systems declined year-over-year by $0.40 per watt (a 9 percent decline). The national median installed price for nonresidential systems under 500 kilowatts (kW) declined year-over-year by $0.40 per watt (a 10 percent decline). The national median installed price for nonresidential systems over 500 kW declined year-over-year by $0.70 per watt (a 21 percent decline).
“Preliminary data for the first half of 2015 indicate that installed price declines have persisted into 2015 and are on pace to match those witnessed in recent years,” the report said.
The growth in large-scale batteries is expanding rapidly and the most popular type is lithium-ion. The batteries store energy for use when the generation capacity temporarily comes to a halt (such as when the equipment breaks down or requires maintenance) or weakens (as can be the case with the instability of solar and generation).
According to “State of the Electric Utility 2015,” published by Utility Dive, U.S. energy storage capacity grew 40 percent from 2013 to 2014 and is expected to grow almost another 300 percent from 2014 to 2015 to 220 MW. Lithium-ion batteries represent about 70 percent of the storage market, with the remaining 30 percent being composed of flywheels, flow batteries, and sodium chemistries.
Ravi Manghani, an energy storage analyst with GTM Research, was quoted in the Utility Dive report: “Broadly speaking, we expect lithium ion to be the biggest battery technology deployed through 2019,” he said.
According to “Batteries Charge Up For the Electric Grid,” a September 2015 report by Moody’s Investors Services, many lithium-ion battery-storage applications could become economically viable by the end of the decade, as long as prices continue to fall. These applications include peak-shaving for commercial and industrial customers, grid storage to integrate renewables, and fast-response ancillary services. And, according to a recent GTM Research report, the solar-plus-storage market is expected to reach $1 billion by 2018, and the U.S. energy-storage market in total will reach $1.5 billion.
On the residential side, Tesla’s Powerwall battery, introduced in early 2015, will likely change how homeowners view electric power. The new line of stationary, rechargeable lithium-ion batteries for homes and small commercial buildings is designed to store energy so that it can be used when energy is unavailable (during a grid power outage) or less expensive (with solar-panel-storage applications).
The moderately priced Powerwall units do not include installation or the required DC-AC inverter. Tesla plans to create a network of certified installers.
DER on the commercial side
Commercial, governmental and retail customers are quickly embracing DER. In 2015, for example, Walmart broke ground on its 300th solar-power project, expanding its PV output to 100 MW across 14 states.
“What we have found over time is that, once we’re successful with on-site solar at one location or state, opportunities begin to open up in other states,” said David Ozment, senior director of energy, Walmart. “We literally work across the United States to try to make solar work in that particular capacity.”
DER on the residential side
According to the California Public Utilities Commission (CPUC), zero-net-energy (ZNE) homes, which would focus heavily on solar-plus-storage, could become the new norm for homes in that state in the coming years. The CPUC and the California Energy Commission (CEC) have launched a “New Residential Zero Net Energy Action Plan,” with the goal of building a self-sustaining energy market, such that all new homes in the state would be ZNE by 2020. ZNE facilities are defined as those that produce as much energy as they consume, usually through a mix of high-efficiency design; clean, on-site generation (such as solar); and energy storage (such as batteries). The state expects to see more than 10,000 new ZNE homes by 2017 and substantially more by 2019 and 2020.
The electrical contracting industry is becoming more aware of DER’s potential as a source of work. In early 2015, for example, construction began on the Renewable Energy Training Field (RETF) a 250-acre, on-site facility. It is designed to provide training to electricians and provide support to ECs for renewable smart-grid applications, including industrial, commercial, municipal and residential applications of solar and wind.
The facility opened in September 2015. It features a 100-kW bidirectional inverter that charges a 45 kilowatt-hour (kWh) lithium-ion battery system and a 45 kWh lead-acid battery, a 45-kW fixed-tilt ground-mount PV system that simulates a utility installation, an 18-kW solar carport with four electric vehicle (EV) charging stations, a 10-kW roof-mounted solar-power system with monitoring, a 5-kW Bergey wind turbine, a 4-kW solar-power system on a standing-seam metal roof, a 4-kW solar-power system on a composite shingle roof, and a 3-kW solar-power system with a dual-axis tracker and Enphase microinverters. It also features a 100-foot cell tower for climbing and mounting antennae, a 75-foot miniature turbine and a 60-foot tower to practice working with wind turbines.
Individual contractors are getting involved, too. One example is PDE Total Energy Solutions, Santa Fe Springs, Calif., formerly Pacific Data Electric, which first got involved in battery storage in 1992 and then added expertise in renewable energy and microgrids in 2010.
Currently, microgrids represent the largest share of the company’s business relating to these three specialty areas. (PDE has installed 10 microgrids and is in the pricing/planning stages of even more for three additional clients/prospects.)
“Grid-connected microgrids are the future of energy design,” said Dan Henrich, PDE president. “Advancements in technology and connectivity are enabling energy users and producers to take an active role in the energy marketplace.”
Whether producing or consuming electricity, according to Henrich, the availability of real-time data, combined with third-party intelligence, helps to optimize energy production. There are challenges, however.
“The equipment is new, and Technology Readiness Level is not always ready for mass deployment,” Henrich said.
For example, some PDE system designs, such as those for a Caribbean desalination plant microgrid, are the first of their kind in the world.
“Lessons are learned, and engineering challenges are realized after deployment,” he said.
Second, advanced control systems with complex algorithms must be predictive and be analyzed for performance.
“Once an analysis is done, engineers and programmers must make parameter changes to constantly optimize the microgrid,” Henrich said.
A third challenge is a shortage of controls engineers and technicians with deep expertise in power electronics, batteries and integration.
“There is a need for government policies to better support the free-market conditions allowing distributed energy to flourish,” he said. “Net-metering policies and compensation need to improve.”
The future of DER
“DER is on the rise,” Henrich said. “As more consumers, businesses and utilities increase DER, consumers and utilities can both benefit by reduced peak energy needs. All of this points to additional opportunities for the electrical construction industry.”
Sprig Electric, San Jose, Calif., is also getting involved in DER.
“Since renewable-energy produces power, it will always be a strong part of the mix,” said Michael Clifton, engineering/operations manager for Sprig Electric’s Energy Efficiency Division. Clifton anticipates that solar/wind, battery storage, and microgrids will be a part of the mix, as each can be of benefit in different areas.
Clifton, like Henrich, also sees some complications.
“One of the challenges is working in a stable environment of costs and incentives,” Clifton said. “Unpredictable incentives make long-term planning difficult and risky. Workers can be trained as a technology ramps up.”
However, he said it is important to be able to have a steady flow of work in order to use this trained workforce.
Marketing is another challenge.
“Getting the word out that we now have a new expertise under our belt takes some time,” Clifton said. “We are engaged in reaching out to our long-term clients and customers, and educating them that we can now offer solar/storage technologies, in addition to our usual palette of electrical, data, and service work.
“[ECs] are being asked to install these new technologies at an ever-increasing rate. Having a good understanding of these technologies is essential to being successful,” he said.