Wish lists come in many forms. This time of year, the most prevalent ones are delivered to Santa Claus from children all over the world. But as we close in on the end of the year, now is the time to think big about what promise 2013 could hold.
We’re not talking about a renewed commitment to the treadmill, but rather what could come in the utility and smart grid industry. With a market shifting from just smart meters to increasing deep analytics and distributed intelligence on the grid, now is the time to sit back and dream big.
A wish list is just that, wishful thinking. Some of these wants might be delivered; others could never see the light of day. But that doesn’t stop us from dreaming.
10. Robust Privacy Rules for Consumers
There is a lot of data coming off of smart meters when they are fully turned on. There are a lot of companies that would like to get their hands on that data to design products and offerings to Americans -- as well as others who would look to do harm with that data.
For the millions of Americans that have smart meters bolted to the side of their house, it should come with robust privacy rules that ensure that the information is not given to anyone without their permission.
Some utilities and states, with California leading the way, focused on privacy, with rules to give confidence to consumers in 2012. San Diego Gas & Electric joined Ontario province earlier this year in making “Privacy by Design” the basis for its smart grid deployment.
The issue is not just critical in the U.S., but also in Europe, where privacy concerns are impacting smart meter rollouts. Some would argue that consumers happily log into their bank accounts via a smart phone, and that similar privacy measures are in place on smart meters.
But in many states, privacy rules are not spelled out the way they are in Ontario or California. In 2013, we hope many states will look to early adopters and other industries for robust rules. In some cases, third parties are leading the way with their own privacy rules.
It’s not enough to say that privacy is top of mind; it must be demonstrable. It’s not enough to attempt to be a leader within the utility industry in this area; utilities should strive to lead when compared against other industries. While it will likely continue to be a state-by-state issue, the real wish is that the feds -- and the White House -- put some effort in to ensure that utilities are investing in consumer privacy.
9. Demand Response Moves to Demand Optimization
The demand response market got a lot of good news in 2011, when the Federal Energy Regulatory Commission allowed demand response to receive the same payment as generation resources in wholesale markets.
That critical decision has already led to far more demand response being installed in PJM’s capacity markets, but most of the markets are still figuring out the details of implementing the order.
Some argue the ruling was not the right way to incent the market, because it does not optimize demand response in a digital, dynamic way. During a webinar this fall, Paul Centolella, VP of Analysis Group and former commissioner of the Public Utilities Commission of Ohio, argued that Order 745 is a somewhat distracting market mechanism when the real effort should be in enabling demand response in every facet of our lives, rather than a system that only reduces demand during peak.
Earlier this month, there were some glimmers that some of that is moving forward. California’s three big utilities are getting behind OpenADR 2.0, the latest version of an open standard for turning buildings, motors, microgrids and other distributed forms of “demand” into grid assets.
Of course, demand response can do more than play in capacity markets, although rules need to be in place for load shedding to take a bigger role in ancillary markets. OpenADR is working on its 2.0b standard, which will allow for fast-response times that would work for spin and non-spin markets. None of this will be totally implemented in 2013, but we are wishful for more action -- and not just in California -- and meaningful pilots.
8. Regulatory Innovation
While on a panel at the National Town Meeting on Demand Response and Smart Grid, this journalist noted that it’d be great to see a little regulatory innovation to match -- or spur -- utility innovation and move the entire industry into the 21st century.
One of the other panelists noted it was sorely needed, but urged me to not hold my breath.
At conference after conference, there’s a serious conversation about moving utilities into the 21st century. Year after year, there is a nebulous agreement that regulation -- which varies across the 50 states -- needs to change too.
And there the conversation stops. At a conference at the end of 2011 that hosted a panel of regulatory commissioners, there were few tangible suggestions on how or when we would see a complete overhaul of the regulatory structure, although there was a palpable feeling in the room that everyone is craving it -- even the regulators themselves.
To encourage efficiency within utilities, decoupling kilowatts from earnings is still necessary in some states. One group that is working on this issue, Utilities 2020, notes that there doesn’t have to be deregulation, like the Texas market, to move the industry forward. Others argue that legislation needs to drive regulation, as it is doing in California’s smart grid market. Of course, in Illinois, it’s been messier.
GTM Research smart grid analysts were particularly keen on regulatory innovation. “We need clearer risk management policies from public utility commissions regarding proactive replacement of assets versus either continued run to failure or online monitoring solutions,” said smart grid analyst Ben Kellison.
In fact, the entire issue of how investment is recovered, and how benefits are calculated, is sorely in need of innovation. Whether it’s more favorable treatment for ongoing services such as cloud-based solutions that can reduce operating costs or integrating societal benefits into smart grid investments, there are a lot of areas to improve.
We’re wishing for some out-of-the-box thinking from at least a few state regulators in 2013, but we’re not holding our breath.
7. Dynamic Pricing Training Wheels
Just like a childhood Christmas list, it’s important to have a few things on your wish list that you’re pretty sure you’re going to get. It can’t be all unicorns and trips to Hawaii. There has to be a new book or pair of slippers on there to hedge your bets.
Many utilities talk in hushed tones about the desire to move customers to different pricing plans. If this wish is spoken too loudly, backlash ensues from regulators, community organizations and lobbying groups.
Backing away from the fight, utilities are instead offering retooled peak time rebate programs as smart meters are installed. The programs are all carrot and no stick, and allow customers to get a feel for just how much energy they can shift.
Pepco, San Diego Gas & Electric and Baltimore Gas & Electric are just some of the big-name utilities using two-way thermostats and/or smart meters to enable new peak time rebate programs going into next summer.
The utilities also offer customers access to their energy information via a web portal or paper reports. Companies like Opower, Silver Spring Networks and EnergyHub are also beefing up analytics to manage pricing programs.
Eventually, the programs could help inform other types of pricing schemes that could be beneficial to customers. It doesn’t have to go from all carrot to all stick, either. Time-of-use pricing, for example, could come with multi-year price guarantees, argues Ahmad Faruqui, principal of The Brattle Group. The idea of bill protections would certainly soften the blow as customers become more comfortable with the idea of new ways of paying for electricity.
Oh, but then there’s a little issue of regulatory innovation to allow for major changes to pricing options for the residential sector. (See No. 8.)
6. Big Data Analytics
While we’re on the issue of industry advancements already in motion, let’s put big data analytics on our wish list.
We’re not alone; software companies large and small are chomping at the bit for utilities to embrace big data opportunities. Oracle laid out the promise, and shortcomings, in a report over the summer. The survey of 151 North American utility executives found all kinds of interesting disconnects between the intelligence being embedded into the grid and how that is being translated and analyzed in back offices.
Many utilities are collecting data from smart meters and grid devices, but not all of those collecting it are using it. When Greentech Media reported on the survey, Linda Jackman, group vice president for Oracle’s utilities global business unit, noted that as some deployments are further along, utilities will turn on more capabilities.
That means that, by default, 2013 will see more utilities doing interesting things with the data they’re getting. But it’s just the beginning. Many utilities with smart meters don’t have meter data management platforms. Some can’t afford them.
The move to more cloud-based services could help drop the cost in 2013. Vendors are also increasingly focused on offering enterprise-level data services, which touch various parts of the utility, rather than just billing or operations, for instance.
This is one area where M&A will also likely continue in 2013. At the end of last year, Siemens picked up eMeter. Just after that move, Landis+Gyr picked up Ecologic Analytics. Oracle recently snagged DataRaker. With distribution automation projects along with meters from stimulus funds still being installed, the acceleration of the big data analytics market is not just a wish for 2013, but a pretty sure bet. Silver Spring Networks, which offers a complete smart grid network -- from communications to software to meters -- is the biggest target in 2013.
How sure of a bet? A new report by GTM Research estimates that the global spend on power utility data analytics will grow steadily in the next decade, increasing from $700 million in 2012 to $1.1 billion in 2013. By 2020, that figure will be closing in on $4 billion.
5. Opt-Out Policies
For every smart meter deployment, there are critics. Some criticisms are valid, while other are based on more dubious assertions. Utility workers in some areas have stories of being physically attacked when doing their job of installing the new meters. One woman pulled a gun on an electric company worker.
Utilities, which already suffer from a lack of trust with customers, have been responding in different ways. Most recently, DTE Energy sued a customer for $25,000 for removing his smart meter and replacing it with an unauthorized analog meter.
One way to diffuse this situation is to have an opt-out policy. Many states already require them. Often, the opt-out involves an extra cost for people who, for whatever reason, demand to hold on to their analog technology.
Utilities that have opt-out policies on the book often find that the opt-out rates are lower than expected. Sometimes people just want a choice. The utility industry isn’t known for delivering consumer choice, so in this case, it makes sense to just offer an alternative.
In some states, it’s a small group of outsiders from other states who are raising concerns about smart meters. So allow the opt-out, and let customers that are genuinely concerned choose not have a smart meter. Ideally, utilities will get savvier about anticipating customer concerns (read: anger) and we hope in 2013, the opt-out issue is so pervasive we don’t even have to think about it.
4. Advanced Outage Management
October snowstorms, derechos, hurricanes, superstorms, hot summers -- the list of weather-related grid strains seems to only increase in scope with each passing season.
One solution is just some old-fashioned grid management, like trimming trees around wires.
But with two-way digital communications and increasingly sophisticated smart grids, there are glimpses into the future, and it brings more sophistication to outage management than has ever been available in the past.
So far, those glimpses haven’t resulted in wholesale changes in storm responses. One reason is that some storms -- like Superstorm Sandy -- were just so large that even the most innovative utilities would have suffered huge damages. The other reason is most utilities just don’t have the whole package of bells and whistles.
The package consists of four key systems, according to John McDonald, director of technical strategy and policy development at GE Digital Energy. Utilities need a distribution management system, an outage management system, a geographic information system and smart metering. Any one of the systems offers some benefits, but taken together, they offer enhanced modeling and response capability.
General Electric even helped one utility incorporate Twitter feeds into its OMS, although we’re not expecting to see that sort of functionality widely deployed in 2013. Instead, we’re wishing that the large storms are followed up by big action from lawmakers -- ideally, demands for the systems above and not just fines. More stringent power quality and outage standards are a few easy steps that would create incentives for utilities to invest in this area.
At the very least, we hope to hear more stories in the new year of how smart grid investments reduced outage times, or prevented them all together.
We are wishing that 2013 isn’t the year where it takes a major attack for this to happen.
2. Home Area Networks, 2.0
We still think that the concept of home area networks, or HAN, is a little off. With the introduction of everyone and his brother into the market (big-box stores, telecoms, alarm companies), the connected home is not just some wonky utility concept.
The connected home, replete with smart appliances and intelligent devices, is still mostly a Jetsons fantasy. But the utility industry has installed a lot of smart meters, about 30 million in the U.S. Everyone loves talking about the Green Button. With the groundwork laid down, we hope 2013 is the year we see some real movement on the home front.
As noted with dynamic pricing, there’s some headway there too. With so many other players getting into the game, 2013 could be the year where we see a new wave of HAN products -- and maybe even new companies -- with innovative offerings.
Some of those new companies will certainly be apps developers. For the Green Button to become something that average people actually use, it’s going to take a clearinghouse (lets call it an apps store) in which developers can showcase their wares.
We’re wishing for some updated standards too.
1. Smart Water Grid
Why does electricity get all of the attention? We saw glimmers of talk about the smart grid for water in 2012, with some water meter contracts and startups with innovative offerings to bring intelligence to water infrastructure, mostly to reduce loss.
It’s a tricky industry, with mostly cash-strapped municipalities in charge of water. But the market is huge and it’s very likely that it won’t be the U.S. that catalyzes this market.
The GTM Scott AMI Market Tracker predicts 2012 will see 5.5 million smart water meters networked, up slightly from 5.3 million in 2011, about a third of the amount of smart electric meters that were shipped in the U.S. in 2011.
But metering is just one technology. The total cost of infrastructure upgrades for drinking water in just the U.S. between now and 2035 is estimated at $1 trillion, according to the American Water Works Association, meaning water companies will have to work smarter. China and India combined will soon spend more than $450 billion in water infrastructure, which includes irrigation, as laid out in both countries’ current five-year plans.
The investment needed is huge; the focus on water is just gaining momentum. We wish that 2013 will be the year that everyone jumps in.
The following is an article based on GTM Rearch's latest smart grid market report, The Soft Grid 2013-2020: Big Data & Utility Analytics for Smart Grid.
While power utilities like to claim that they employ data analytics, they really don’t. Utilities tend to have last-gen business intelligence (BI) reporting solutions that they call “analytics,” but that typically amount to not much more than reporting tools or descriptive analytics (primarily based on older database architectures running SQL), as opposed to the real-time and predictive software using complex event processing, to which the term “analytics” is now commonly understood to refer.
Utilities are today seeking to become more proactive in decision-making, adjusting their strategies based on reasonable predictive views into the future, thus allowing them to side-step problems and capitalize on the smart grid technologies that are now being deployed at scale. Predictive analytics, capable of managing intermittent loads, renewables, rapidly changing weather patterns and other grid conditions, represent the ultimate goal for smart grid capabilities.
Based on GTM Research’s latest report, The Soft Grid 2013-2020: Big Data & Utility Analytics for Smart Grid, the leading areas of concern for utilities within data analytics are:
- Achieving an enterprise-wide IT architecture where all relevant data can be shared with all other necessary departments, systems and applications.
- Ensuring that the enterprise is big-data-ready vis-a-vis the data storage and data management layers of its architecture.
Once utilities begin to overcome these foundational architecture issues, they can then begin to move into the deployment of analytics. The bulk of momentum behind utility analytics deployment is coming from:
- Consumer-based analytics
- Situational awareness gained through synchrophasor/phasor measurement unit (PMU) reporting the health of the transmission grid on an ongoing basis
- Grid optimization analytics of the distribution networks (e.g., voltage management)
A recent GTM Research survey of more than 70 global utilities, which was conducted in partnership with the SAS Institute, displays how well different stakeholders understand the value that analytics provide. Not surprisingly, the survey confirms that utilities themselves report having the most momentum for analytics in the domains of customer management and grid operations.
FIGURE: In What Areas of the Business Do Analytics Seem to Have the Most Momentum?
Source: The Soft Grid 2013-2020: Big Data & Utility Analytics for Smart Grid, SAS Institute
Historically, very little, if any, analytics have been performed on the consumer side. This is due largely to the fact that this industry primarily operates in a monopolistic fashion, with only a smattering of states allowing retail competition. However, the era of smart grid has sparked a renewed interest in demand response and energy efficiency. It appears that utilities are beginning to improve both the data and the level of analysis they are willing to offer customers.
In considering utilities’ progress to date, it should be pointed out that most of the early success stories are rather narrow in scope and often are limited to a single domain. It is GTM Research’s conclusion that the true implementation of broader analytics (both customer-enabling and enterprise-wide) is not yet underway.
However, another trend that is occurring is that employees and customers are beginning to ask for access to particular datasets. At the current juncture, many utilities are not equipped to fulfill these requests, as they do not have enterprise-wide data architectures in place.
In many instances, this has resulted in a growing level of frustration, particularly as employees from other non-operational departments clamor for access to smart meter data. It is our belief that this situation will put some pressure on utility CIOs to properly design the right architectures to allow universal access.
FIGURE: How Would You Rate Your Utility’s Analytics Competencies? (5 Is the Highest, 1 Is the Lowest)
Source: The Soft Grid 2013-2020: Big Data & Utility Analytics for Smart Grid, SAS Institute
Some progressive utilities, such as OGE, SCE and SDG&E, realize that there has been a paradigm shift and are beginning to make strides. However, the results of the survey indicate that the majority of utilities give themselves low marks in areas such as the utilization of analytics for reliability, the utilization of analytics for customer satisfaction, availability of enterprise-wide analytics, data integration of smart meter and grid operations data, and the propensity for data-driven decision-making in general.
The majority of utilities will therefore be challenged over the next ten years to invest properly in big data infrastructure, software, and services in order to avoid the risk of moving too slowly and having their enterprises be overwhelmed by the rising tide of smart grid data.
President Obama signed the American Energy Manufacturing Technical Corrections Act (H.R. 6582) on Wednesday after the bill received bipartisan support in Congress.
The law is a modification of the Enabling Energy Savings Innovations Act (H.R. 4850) and includes elements of the Shaheen-Portman Senate bill.
Energy efficiency enthusiasts hailed the move, but also cautioned that there is far more work to be done.
“At a time that Washington is gridlocked, it is notable that the only energy bill with enough bipartisan support to pass is one that targets energy efficiency,” noted Steven Nadel, Executive Director of the American Council for an Energy-Efficient Economy. “This bill is a modest but bipartisan step forward, one we hope the next Congress can build upon.”
The bill had mostly minor changes to the current way of doing business. The highlights of the bill, which were listed by the Alliance to Save Energy, include:
- Coordination of research and development of efficiency technologies for industry;
- A study of barriers to industrial electrical efficiency;
- Best practices for advanced metering in the federal government;
- Disclosure of energy and water usage by federal facilities;
- Technical corrections and specific fixes to recently-enacted standards;
- Uniform treatment of conventional and tankless water heaters;
- Clarification of periodic review of commercial equipment standards and of DOE’s response to petitions regarding standards.
The bill also relaxes some standards, including rules for walk-in coolers, over-the-counter refrigerators and water heaters.
Energy efficiency advocates hope that this bill has laid the groundwork for more significant bills, such as the Shaheen-Portman bill, which call for stronger national model building codes, more loan guarantees for efficiency upgrades and increased research and development on energy efficiency. The American Council for an Energy-Efficient Economy supports the bills, but would also like to see changes to the tax code to spur investment in manufacturing efficiency.
"We commend the President on approving today important improvements to the nation’s energy efficiency laws,” said Graham Richard, CEO of Advanced Energy Economy. “The bipartisan support this legislation enjoys underscores that energy need not be politicized. Americans overwhelmingly believe that advanced energy is important to our economic future. The bill signed into law today points us in the right direction."
It’s not a stretch of the imagination that more energy efficiency legislation could pass in the new Congress. The Obama legislation is also working on its own front; the president is trying to pass HOMESTAR legislation that would help homeowners finance retrofits and a $4 billion “Better Building Initiative” that would make commercial facilities 20 percent more efficient by 2020. The president’s first term was also noted for its significant improvements in fuel standards in cars and trucks.
Even with a hopelessly gridlocked Congress, there are interesting actions happening at the city and state level. Energy benchmarking rules continue to find new markets. Low-cost software solutions are everywhere in the market to help building owners tackle wasted energy.
On the local and federal level, it’s hard to argue with the fact that energy efficiency is not just a money-saver, but also a job creator. It is that message that will be key in pushing through legislation amongst politicians, who love to toss around jobs numbers. After all, you can’t outsource retrofitting a window.
The red tape of solar permitting can constitute a bigger part of the price of installing a rooftop solar system than the hardware itself. But it gets worse. Bureaucratic complexities can prevent people who want and can afford solar from getting a solar system.
That’s one of the big findings in a report entitled Nationwide Analysis of Solar Permitting and the Implications for Soft Costs by Clean Power Finance (CPF) Senior Policy Director James Tong, produced as part of CPF’s Department of Energy-funded effort to drive down the non-hardware (soft) costs of residential solar.
The national survey of 273 residential installers and 546 solar installations covered “90 percent of the residential solar market.” Its first and possibly most serious conclusion: One-third of installers will avoid selling solar where the Authorities Having Jurisdiction (AHJs) over permitting make the process too costly and time-consuming.
“Permitting processes are limiting the adoption of solar,” the analysis concluded. This can drive up costs. “Installer unwillingness to expand to new territories,” the survey suggested, reduces competition and leads to “market inefficiencies and potentially higher costs.”
Permitting, the survey found, typically involves two to five agencies. The more agencies are involved, “the more likely there are to be mixed messages and/or different rules that result in delays and increased costs.”
More than one in ten installations (11 percent) are still in places where there are no established permitting requirements for solar.
Installers can get through the average amount of red tape in approximately 14.25 hours, that is, just under two working days. But AHJs require an average of nearly eight weeks to process an application, potentially delaying thousands of dollars of vital returns on installers’ investments in finding and closing customers and securing hardware, “both of which can impede installer profitability or force them to pass on additional costs to consumers.”
The report does not simply accuse AHJs of intentional obstruction. Flawed paperwork submitted by installers is also part of the problem, as are under-budgeted, overworked, and less-than-knowledgeable AHJs that are new to rooftop solar but serious about building safety. What is needed, the study suggested, is a channel of communication between AHJs and installers.
“Perhaps a fifth of submittal packages are poorly organized and may require hours of red-lining,” one AHJ told CPF. “This is matter of safety, not red tape,” said another.
But AHJs can do better, the survey found. “I find myself having to educate the city staff on their own requirements,” an installer complained. Authorities must be more consistent, installers reported. “AHJs can change their interpretation of existing codes and you only find out after you are about to submit your paperwork.”
The new survey is an early step toward CPF’s larger goal of creating a National Solar Permitting Database (NSPD), which it and the DOE hope will allow installers and AHJs to work together to streamline the process. Policies that will do that, Tong said, fall into three categories: (1) raising awareness, (2) identifying areas that can be improved, and (3) offering solutions AHJs can readily adopt.
Such policies include having all permitting requirements spelled out on the record in the NSPD, which should eliminate inconsistencies in the permitting process.
As AHJs become more aware of solar, they are likely to improve their own procedures. A wider scope of permitting regimes may provide a basis for more flexible permitting fee systems that reward AHJs for better performance and allow installers to obtain the services they need.
If installers understand localized standards as necessary to local conditions and not arbitrary, they might also be more flexible. And seeing AHJs from the NSPD’s larger perspective could reduce recriminations and minimize friction.
The actual cost of permitting procedures, the report acknowledged, is not entirely clear. The “average personnel cost” of “permitting per installation” was calculated at $664 (or $0.11 per watt). But this number was reported in the “Areas for Further Research” section of the study and it was called “highly suspect.” Installers, the analysis said, are too inconsistent about staff remuneration make reliable calculations.
“NREL determined personnel cost associated with permitting and inspection to be $0.13 per watt and the average fees to be $0.09 per watt for a total of $0.22 per watt,” Tong said. A recent LBNL study put it at $0.27 per watt, he added.
But there are second-order costs such as losing customers in the permitting process, having to compensate customers for a bad experience, and the potentially large cost of holding inventory longer than necessary, Tong explained. “These factors can add an additional $0.10 per watt or even more.”
“Navigating the regulatory red tape constitutes 25 percent to 30 percent of the total cost of solar installation in the United States, according to data from the National Renewable Energy Laboratory,” wrote NRG Energy (NYSE:NRG) President David Crane and Robert F. Kennedy, Jr., in a recent New York Times editorial. “It can take as little as eight days to license and install a solar system on a house in Germany.” As a result, they wrote, “more than one million Germans have installed solar panels on their roofs.”
Rooftop solar and “rational, market-based rules,” Crane and Kennedy wrote, “could turn every American into an energy entrepreneur.”
Advancing another potential renewable energy trade war, the tariffs imposed on Chinese and Vietnamese wind turbine tower manufacturers in June have been affirmed by the U.S. Department of Commerce (DOC).
The U.S.-based Wind Tower Trade Coalition (WTTC) petitioned DOC and the International Trade Commission (ITC) at the end of 2011 to investigate countervailing duties allegations against Chinese tower makers and to investigate anti-dumping allegations against Chinese and Vietnamese tower makers.
In 2011, imports of utility scale wind towers -- towers for turbines of over 100 kilowatts in nameplate capacity -- from China were valued at an estimated $222 million and those from Vietnam were valued at an estimated $79 million.
“Today’s Commerce Department decision was expected,” said Dan Pickard, one of the two Wiley Rein lead attorneys for the WTTC. “The big one will be early next year, when the ITC rules on whether the Chinese and Vietnamese import practices have materially injured the U.S. companies. If the ITC rules affirmatively, tariffs will be imposed for five years, can be re-imposed every five years and will be subject to yearly re-evaluation.”
The DOC’s final determination is that producers/exporters from China have sold utility-scale wind towers in the United States “at dumping margins of 44.99 percent to 70.63 percent” and those from Vietnam have sold at dumping margins “of 51.50 percent to 58.49 percent,” DOC reported. “Commerce also determined that producers/exporters from China have received countervailable subsidies of 21.86 percent to 34.81 percent.”
For the Chinese companies, the DOC will require cash deposits equal to the dumping margin less an adjustment (the cash deposit rate) plus the subsidy rate.
A cash deposit will be required of the Vietnamese companies equal to the dumping margin.
If the ITC affirms the DOC ruling, these cash deposits will become tariffs.
“These are substantial margins,” Pickard said. “They will have a real effect on the marketplace.”
“The Chinese government has targeted the clean energy industries -- a variety of clean energy industries -- with massive subsidies that have distorted the marketplace,” Alan Price, another Wiley Rein attorney, told GTM when the petitions against imported wind turbine towers were filed. “The subsidies are well documented,” Price added. They can be found, he said, in official government documents, including China’s most recent five-year plans.
Wiley Rein represented the coalition of solar panel manufacturers in the successful petition of the DOC that resulted in an almost 32 percent tariff being levied on imported Chinese solar panels.
The WTTC comprised four companies when the petition was filed. Stressed by economic pressures, DMI Industries and Katana Summit have left the business, sold their assets and are not expected to come back. Trinity Structural Towers and Broadwind Energy continue to struggle.
While the new tariffs are intended to protect U.S. companies, many believe they will be counterproductive to wind’s newly announced target to bring its costs down enough to be incentive-free by 2019. The rule of thumb is that the tower accounts for 10 percent to 20 percent of the $1.5 million to $2.5 million turbine price.
The impact of Chinese and Vietnamese imports on Trinity, Broadwind and the rest of the U.S. market is somewhat clouded by the huge strains on the wind industry from the failure of Congress to extend wind’s production tax credit (PTC).
“People aren’t going to build towers in the U.S., because without the PTC, nobody is going to put the farm up,” an independent tower maker not involved in the WTTC action told GTM in the spring. Orders, he said, had stopped coming into his shop. “It’s really great that they’ve put the tariff on to keep the Chinese and Vietnamese out of here, but unfortunately there probably isn’t going to be much of a wind business in the United States until the PTC passes.”
“The impact of dumping in a down market is even greater,” Pickard said, “because competition is greater for fewer buyers.”
An official with a national railroad that handles wind tower transport told GTM that soon after the tariffs were imposed in June, their business shifted from the transport of imported towers from West Coast ports to the transport of domestic towers loaded regionally.
It has remained busy, the railroad official added, because the second half of 2012 has been a record year for wind as developers rush to finish projects by December 31, 2012, when the PTC expires. But the railroad is forecasting a 50 percent drop off in wind industry transport activity for 2013, he said.
An argument against such cases is that they unnecessarily inflame international players, and only result in circumvention of the imposed tariffs.
Circumvention, Pickard explained, is “the criminal attempt to work around anti-dumping orders or countervailing duty orders. It is not unusual in Chinese import matters. There are efforts by CBP to prevent it and action on Capitol Hill to create stiffer penalties.”
But, he added, it is different “if it is a small commodity that someone is attempting to trans-ship through a third country and fraudulently change the country of origin. It’s probably going to be more difficult with a 150-ton steel tower.”
In this week’s smart grid news, we’ve got Elster emerging as a contender in the cellular smart grid space, and new projects from Itron and Echelon in two of the world’s up-and-coming smart grid markets.
Let’s take Itron’s new project in South Africa first. On Monday, the Liberty Lake, Wash.-based smart meter maker announced a $150 million project to deploy smart meters in Johannesburg for utility Edison Power Group. It’s the biggest smart meter project in South Africa to date, according to Itron, though the company didn’t disclose details.
South Africa is one of a number of developing economies, including India, Brazil, and of course China, that’s rife with potential for grid infrastructure improvements and information-communications technology (ICT) upgrades. In South Africa’s case, the country has been dealing with peak power demands so severe that it has forced big industrial and mining users to curtail operations.
Comverge, the U.S.-based demand response company that was taken private in a $49 million deal early this year, has a $27 million contract with South Africa utility Eskom to build a region-wide platform to help add more industrial, commercial and residential endpoints to the country’s demand response capacity.
At the same time, we’re seeing interesting moves to add microgrid capacity to South Africa’s grid from companies like Echelon and others -- a model that applies itself well to unreliable power grids, where lots of customers already have backup generators to ride through sometimes daily outages.
Speaking of Echelon, the San Jose, Calif.-based smart grid networking technology vendor just expanded its work in Brazil, where it competes with virtually every major meter maker for that country’s 65 million or so power customers. Echelon’s Monday announcement wasn’t so big, involving 1,500 units via partner ELO. But it’s a pretty high-profile deployment, in support of Brazilian utility Cemig’s new “City of the Future” project, a broad smart grid test ground in the country’s Sete Lagoas region that includes 95,000 residential, commercial, and industrial customers overall.
Echelon is far from alone in testing its technology in Brazilian showcase projects, however. Silver Spring Networks, Trilliant, Itron, Elster, Sensus, General Electric and Toshiba’s Landis+Gyr have been partnering with Brazilian companies for years now in anticipation of a government decree that had been expected to mandate smart meters for all. The government drastically reduced that goal in August, however, saying it would only require smart meters for new buildings and those large customers that asked for them -- a much smaller market overall.
That shift to an “opt-in” style smart metering mandate may be a boon to cellular communications for the smart grid in Brazil, by the way. Companies like Silver Spring, Itron, Elster and L+G have used mesh networks for their North American smart meter deployments -- but mesh doesn’t work so well when only a few customers in a neighborhood elect to have meters.
Of course, the aforementioned mesh networking players have all been getting into cellular in a big way, whether it’s been Itron’s acquisition of cellular smart metering startup SmartSynch and work with German telco giant Deutsche Telekom, or Silver Spring’s newest version of cellular-compatible technology, among others.
Elster, the German smart metering giant that was bought by private equity firm Melrose for $2.2 billion this May, joined the cellular club last week, announcing it had added cellular two-way communications to its EnergyAxis mesh networking platform. Utility partner Dominion Virginia Power has started using Elster’s cellular for its plug-in electric vehicle customers, the company announced.
Elster has also teamed up with Cisco and Landis+Gyr to share communications technology, a move that’s being matched by lots of other cross-platform integration efforts in the smart metering space. After all, an AMI network’s value increases as it shares its data and functionality across multiple utility operations, like outage detection, grid diagnostics, asset management and customer relations, to mention a few.
GE last month celebrated its 20,000th wind turbine installation, a gargantuan achievement given that the U.S. power generation giant only stepped into the sector in 2002 when it purchased the wind power assets from the then recently bankrupted Enron.
In many ways, GE's meteoric rise tracks the growth of the global industry. From a cumulative global capacity of 31.1 GW globally, the U.S. and China each hit the 50 GW milestone this year, and Europe's installed capacity reached 100 GW.
"Ten years ago, we had 2,000 units across the globe; today we have over 20,000 units. It's [changed] from being a very small part of power generation installs over the last four years," said Matt Guyette, Chief Strategy and Marketing Officer for GE Wind.
The U.S. wind industry has added more than 35% of all new generating capacity over the past five years, second only to natural gas, and more than nuclear and coal combined, according to the American Wind Energy Association.
U.S. wind generation increased 27% last year and the figure is likely to be high for 2012, as the first three quarters saw a recordbreaking 4,728 MW installed.
"Wind performance over the last decade has been greater than we expected," said Guyette. "We certainly had high expectations, but we didn't expect that in the U.S., wind would be the number-one power generation technology installed in this country this year. Ten years ago, we didn't expect it to be that big."
PTC Expiration Dramatically Changes the Outlook
But the U.S. wind industry is heading toward a cliff in 2013 when the critical Production Tax Credit expires. First introduced in 1992, the PTC gives a credit of 2.2¢ per kWh for a wind facility's first ten years of operation. But each of the three times the PTC has been allowed to expire, the U.S. wind industry has collapsed.
AWEA estimates that 37,000 jobs are at risk, and the trickle is already beginning to turn into a flood of job losses.
"This uncertainty period has made it hard on our customers and hard on us," said Guyette. "But we do expect to get through and we do expect this to be a vibrant market in the future, not only in the U.S., but also globally."
Wind advocates anticipate that the PTC will be renewed for 2013 before the end of this year, with hopes pinned most firmly on an amendment authored by Senator Chuck Grassley of Iowa in August, and passed with bipartisan support by the Senate Finance Committee.
"We believe we'll get past this PTC impasse, but it is challenging, and we're going to see a drop-off because of how late it is in the game for the extension," he said, adding, "Everyone in the industry would have preferred to see it sooner rather than later. But we did not expect it until after the election. We're at that point now, so we do have high hopes and expectations of the passage."
A one-year extension is estimated to cost the U.S. taxpayer $12B over ten years. But the industry agrees that the PTC should not last forever, and that the technology can soon stand on its own two feet. Over the last twenty years, the cost of generating electricity from wind has dropped by 80%, and recent research suggests new installations in good locations can generate electricity at rates as low as 5¢ per kWh.
"Today, wind can compete and be cost-effective against everything except for natural gas, only because it is so inexpensive in the U.S. Like all fossil fuels we will see the costs go up and down over time. Ten years ago or five years ago, nobody expected natural gas to go under $3. The expectation is that over the next 5-10 years you're going to continue to see cycling of natural gas pricing which helps a technology like wind that gives you a fixed cost of energy for the next 20-25 years once you put it in the ground," Guyette said
GE will install more than 3,000 wind turbines around the world this year. GE turbines dominate at home with a market share of 40%, but globally its position has slipped to that of the seventh-ranked manufacturer, in part because of Chinese companies. Meanwhile, GE hopes for a toehold in China's market via its joint venture with Hanergy.
"We have to make sure we're very locally tied to make sure we understand the uniqueness of the market and that we have the ability to compete in regions where a Western company may not be able to compete. But China is a top market."
GE also won approximately 20 percent of all the auctions in the last three years in Latin America. Offshore holds great potential in some regions, but only one of GE's 20,000 wind turbines is located offshore, a 4MW turbine that is currently being tested as a pilot demonstration.
The U.K.'s energy bill represents an opportunity for GE in offshore wind, but only if the price is right, said Guyette.
"The challenge for us has been in the offshore market -- does it make economic sense for our customers to install it?" he said. "That's the same challenge in the U.K. and globally. Every quarter, you see write-offs because of offshore delays."
Agility and nimbleness will be vital to survival in this industry where even the global leader, Vestas, a single-technology player, is struggling to maintain momentum. GE will be able to draw strength from its sheer scale and diversity -- boosted by a booming business in gas-fired turbines.
"The environment is challenging," said Guyette. "Only the strong can survive. We'll see that from a manufacturers' perspective and supplier perspective. It happens in all industries. When you grow and shrink over and over again, you really have to be a world-leading company to be able to live through those cycles. That's one of the reasons why GE got into the wind space in the first place."
In hindsight, 2012 may be seen as the year that the smart grid industry emerged from its adolescent stage of development, graduated from school, and went out to find work in the real world.
Sure, it’s a trite analogy, given that many of the companies behind the technologies that make up the “smart grid” today have been working in the field for decades. But for the newest smart grid technologies that have captured the fancy of VC investors, corporate acquirers and utilities of late, it certainly seems to apply.
After all, we’ve seen a definite boom-bust pattern emerge in smart grid investment and government support. Billions of dollars of government stimulus funds that have given the industry a big boost over the past few years are pretty much all been spent by now. At the same time, venture capital investment in smart grid has tumbled over the course of the past few years, as the venture community has come up against the challenge of realizing returns on investment in the timeframes they’re used to in the slow-moving, regulation-burdened utility sector.
That doesn’t mean we haven’t seen lots of progress over the past year, though. We’ve seen an array of technologies to connect utilities to their customers via energy efficiency and demand response programs, as well as distribution automation and restoration projects that are starting to prove their value in efficiency and reliability for utilities behind the meter -- or amidst storms that have tested the grid.
They’ve also been struggling to integrate and manage all this new gear being put onto their grids, as well as the data that’s flowing from it in volumes unprecedented for the relatively slow, staid industry. That’s made for a big wave in technology interoperability and integration, both via partnerships and via acquisitions by corporate giants in the field. Certainly the long-running task of integrating disparate smart grid systems will be critical if the industry is to realize the value of the wave of investments over the past few years.
Here’s a quick breakdown of these key trends, in no particular order:
1) Money is much harder to come by for smart grid startups, and that means acquisitions. In late 2009, the Department of Energy announced nearly $4 billion in stimulus grants and awards to help push the smart grid industry into the mainstream. That money has since helped pay for tens of millions of smart meters, millions of in-home displays and energy controls, hundreds of thousands of distribution grid transformer sensors and other automation gear, and the like.
But the end of that spending spree has definitely left a hangover for the smart grid industry, particularly smart meters. Evidence is emerging that 2012 may well end up being slower than 2011 for advanced metering infrastructure (AMI) and automated meter reading (AMR), according to the latest North American AMI Deployments & Market Share report -- and 2013 is expected to be a flat year for AMI as well.
That’s an issue for the venture capital community, which has invested the lion’s share of its smart grid bets in network and communications infrastructure such as AMI, as well as home energy management and utility-to-customer connectivity. We’ve seen overall VC investment in smart grid slide to new lows in the first three quarters of 2012, with a few large investments failing to make up for the general turn away from the sector by investors.
Highlighting the challenge for new money trying to break into the industry is a simple fact -- so far, we’ve not seen a single smart grid startup take the step of an initial public offering. The one big name that’s publicly declared its IPO intentions, Silver Spring Networks, has been lingering for more than a year and a half without pulling the trigger. In the meantime, speculation abounds that it may be a target of acquisition by one of the giants in the field as well.
Acquisitions in the smart grid space are certainly booming -- though not necessarily delivering VCs the returns they may have hoped for. The biggest acquisitions of the year were big corporate and private equity deals, such as the $11.8 billion purchase of Cooper Industries by Eaton, German smart meter giant Elster’s $2.3 billion purchase by private equity group Melrose, and Blackstone Group’s $2 billion purchase of Vivint, a home security and energy services company, to name a few multibillion-dollar deals.
Startups acquired this year, on the other hand, include disclosed deals like ABB’s $35 million purchase of Tropos Networks, which had raised more than $30 million from investors; Itron’s $100 million purchase of SmartSynch, which had raised about $65 million over the previous decade, and Silicon Labs’ $72 million purchase of Ember, which had raised $62 million from investors since its 2001 founding. All in all, not a stellar track record for investors.
2) The last wave of smart grid investments are now facing their proving time. Tens of millions of smart meters deployed across the country are promising to deliver efficiencies and new features that will make them worth their extra costs in utility bills -- someday. But more and more of these deployments are being asked to make their values clear to consumers and regulators sooner rather than later -- or, in some cases, being postponed or delayed on those concerns (see the case of Commonwealth Edison and the Illinois Commerce Commission for a recent example).
In the meantime, spending on distribution automation -- a general term for the hardware, communications technology and back-end IT support that brings sensors, monitors and controls to the distribution grid -- is expected to outpace spending on smart meters over the coming years. It’s also poised to deliver quite a bit more value to utilities, given that it’s completely under their control, unlike the customers at the other end of those smart meters. We’ve seen a number of projects reveal statistics that help prove out this value, whether it’s in the face of some of this year’s storms, or via other metrics.
3) Despite being a hype center, home area network (HAN) technologies finally hit the mainstream in 2012 as well. For years now, we’ve seen home energy management startups with a variety of in-home displays, web interfaces, ZigBee, Z-Wave and Wi-Fi networks, etc., all tackling a market that doesn’t yet exist. Sure, utilities like Oklahoma Gas & Electric, Arizona Public Service, and the dozens of utilities serving Canada’s Ontario province, are turning on their smart-meter-to-home networks to connect with smart thermostats and energy monitors. Deregulated energy markets, like those in Texas or the U.K., are also seeing growth in HAN technology offers from retail utilities seeking to attract and retain customers, as well as to drive efficiency and peak load reduction.
But these projects are strictly utility affairs -- signing up customers, sending them equipment, and setting it all up for them. The idea of customers going out to their local Home Depot or Lowe's (or going online to Amazon or the Apple store, for that matter) and buying their own gear to interoperate with the new smart meters on their walls is trickier, involving questions of technical interoperability and data privacy, security and ownership -- not to mention the big question of who’s going to incentivize a purchase that most homeowners don’t want to spend much money on.
But that’s starting to change. Southern California Edison, which has 4.2 million Itron smart meters deployed, opened the door to smart-meter-to-HAN connectivity last month with partnerships with companies including energy display startup Rainforest Automation and big home security company ADT. Nest, the smart thermostat company founded by Apple alums, is proving there’s a market for $250 thermostats that can talk to your iPhone. Honeywell, a big player in smart thermostats (and the plaintiff in a lawsuit accusing Nest of infringing on its patents), is working on linking its mobile connectivity and automation to home energy efficiency startup Opower’s suite of energy-saving tools and big-data back-end applications.
4) Big data is not hype, it’s trench warfare. Utilities used to collect meter data once a month. Now, with a smart meter that sends back data to the utility once every hour, it’s collecting data 720 times a month, and 15-minute reads add up to 2,880 collections a month, or an increase of more than three orders of magnitude. Add in the fact that each meter is sending back multiple data points in each read -- as well as talking to devices in the home, or on the grid, for other purposes -- and you’ve got a networking problem that utilities are sorely unprepared to face.
That’s going to help drive the U.S. market for smart grid data analytics from $322.5 million this year to $1.4 billion by 2020, according to GTM Research’s report, The Soft Grid 2013-2020: Big Data & Utility Analytics for Smart Grid. And while we’ve got the usual suspects involved, like Oracle, IBM, EMC and Microsoft, we’ve also got a host of startups from the big data sphere involved as well. In the smart grid, companies like Versant and AutoGrid are building applications on top of core unstructured data analytics platforms, and smart grid companies leveraging Hadoop include Opower, Tendril and EcoFactor, to name a few.
5) Integration is the core challenge for the smart grid from now on. All those millions of smart meters we’ve been talking about don’t just run themselves. How much value a utility realizes out of its AMI deployments depends to a great extent on how well it has integrated that flood of data into its existing and new business operations, from core billing (not itself an easy task) to everything from customer service, outage management and grid asset monitoring.
But a mid-2012 survey of utility executives revealed that nearly half of those that had deployed smart meters hadn’t gotten around to implementing a meter data management (MDM) system to handle the resulting data, let alone start collecting meter data for grid diagnostics, enterprise business planning or other such second-order functions. (Of course, the survey was conducted by Oracle, a big MDM player, so it was a bit self-serving.)
Still, it underscored the fact that all this new smart grid technology takes time and money to integrate into the way each utility does business. We’ve seen smart grid contenders from Infosys and SAP to Silver Spring Networks and Echelon launch quick-to-market smart grid solutions sets, complete with “apps” like transformer health diagnosis, “last-gasp” outage notification, and the like, aimed at shortening the time it takes for utilities to start realizing the value of the technology.
The same goes for distribution grid automation, of course. Utilities have long been captive to proprietary technology from big players like Schneider Electric, ABB, Siemens, General Electric, Toshiba, Hitachi, Alstom and Eaton/Cooper, and many see interoperability and integration requirements as a key way to lower prices. But beyond that, the idea of modular smart grid deployments, or integrating with big customers’ existing building automation or demand response technologies, makes interoperability a very attractive goal for utilities and vendors alike.
On the grand scale of the enterprise, we’ve got a host of established giants like IBM, Infosys, Wipro, Capgemini and Accenture managing cross-platform smart grid integration for utility clients around the world. Perhaps the most important company to watch on the integration front is Cisco, however. The networking giant has staked a claim to become the networker of the smart grid as well, and has a long list of partners, including smart meter giants Itron and Elster and DA providers Alstom and Cooper Power (now part of Eaton), to name a few. Its list of startup partners also includes a who’s-who of specialists in certain aspects of integrated smart grid deployments, such as Proximetry’s pan-wireless network management software, or Space-Time Insight’s real-time geographic information system (GIS) software.
Water and energy production have always been inextricably linked, but the amount of water needed to power our lives is increasing, according to the latest forecast from the International Energy Agency.
The role of water in energy, often referred to as the water-energy nexus, is getting more attention than ever before, and last month’s report from the IEA was the first time that the report has given water issues related to energy production its own section.
Energy production sucks up about 15 percent of the world’s total water withdrawal, which could increase by about 20 percent between 2010 and 2035. Much of the increase will be driven by higher-efficiency power plants and expanding biofuels production, according to the report.
“In an increasingly water-constrained world, the vulnerability of the energy sector to constraints in water availability can be expected to increase, as can issues around how the quality of water is affected by energy operations,” the IEA’s report stated.
The water-energy nexus will be a central focus at the inaugural International Water Summit, which is to be held during the Abu Dhabi Sustainability Week in January and hosted by Masdar. For the companies that provide energy infrastructure and the governments that regulate that infrastructure, now is the time to take an increasingly holistic approach wherein water and energy are seen not just as intersecting, but rather are recognized as two equal parts of the same whole.
A holistic approach means looking at every aspect of water use in energy. Sometimes, energy efficiency requires higher energy use, such as with some high efficiency power plant technologies, according to the International Energy Agency. In the U.S., water continues to be the second biggest concern of utilities.
But there are technologies that can vastly reduce carbon emissions and water at the same time. A new coal plant in South Africa, the Kusile project, will use 5 percent of the volume of water compared to a conventional new coal-fired power plant (thanks to dry cooling), according to Dean Oskvig, CEO of the energy division at Black & Veatch, a consultant and project manager for the Kusile power station.
Renewable energy sources, not including large-scale hydro, use far less water than fossil fuels and nuclear power. But solar and wind still make up a very small percentage of the overall energy picture, and coal continues to dominate in many regions, including the U.S., China and India. Retiring older coal power plants and limiting water-intensive biofuels are two of the most important changes that could stop the growth of water use in energy production. In areas of the U.S., some farmers are already competing with gas companies for water rights because of the significant requirements for hydraulic fracturing of shale gas wells.
It will not only be power producers that will need to think more critically about water -- water producers will need to think more seriously about energy, as well. In the U.S., for instance, drinking and wastewater systems account for up to 4 percent of the total energy use. That figure is expected to grow in the U.S. and worldwide as populations grow. More water-efficient irrigation also often involves more energy for pumps.
But systems-level thinking, which has been suggested as a method for improving electricity efficiency, can also apply to the water-energy nexus. There are a variety of technologies, both software and hardware, that can increase efficiencies in everything from energy production to agriculture.
Before water can be thought of as part of energy production, water itself needs to be thought of as a single sector, according to a contention in Black & Veatch’s first U.S. water utility industry survey. From 2005 to 2015, there will be a 25 percent increase in the use of treated wastewater or salt water in agriculture and aquaculture, according to the U.N.
“One water qualification that must be eliminated from the water industry vernacular is ‘waste’ water,” the report authors state. “It is time to shift our focus away from the elimination of something undesirable to the opportunity to recover valuable resources such as water, energy, nutrients and beneficial products.”
As the impending “fiscal cliff” looms, government agencies and many industries are preparing for federal tax increases and spending cuts. Although the solar industry is not as directly vulnerable as some, it is still helpful and pertinent to understand what a post-fiscal-cliff landscape might entail for the U.S. solar industry.
What Is the Fiscal Cliff?
The term “fiscal cliff” was originally coined by Federal Reserve Chair Ben Bernanke and refers to the estimated $500 billion in tax increases and $200 billion in spending cuts that are scheduled to take effect on January 1, 2013. Congressional decisions over the past few years, combined with the expiration of certain measures at the end of 2012, have created a need to reach a deal by the end of the calendar year. Without a deal, austerity measures could throw the U.S. back into a recession, as the Congressional Budget Office (CBO) estimates that tax increases and spending tax cuts would equal 4 percent of GDP -- greater than the approximately 2 percent of the U.S. economy growth rate -- thus creating a contraction in the economy.
Some of the most significant triggers of the fiscal cliff include the expiration of the Bush tax cuts and payroll tax holiday which would raise taxes significantly for many Americans (over $300 billion). The other major basis of the fiscal cliff is sequestration -- spending cuts of around $110 billion in Medicare payments and discretionary spending -- which would go into effect as mandated by the Budget Control Act of 2011, which was enacted during the debt ceiling debate. Neither Republicans nor Democrats want these austerity measures to go into effect, and many analysts are in agreement that failure to reach a deal could hurt the majority of Americans.
However, according to President Obama and House Speaker Boehner, the opposing leaders in this negotiation, little progress has been made in reaching a deal. The main sticking point has been taxes for those individuals earning $250,000 or more annually. Democrats would like to increase this marginal tax rate (for those making more than $250,000) to Clinton-era levels of 39.6 percent, thus creating around $1 trillion of revenue. Republicans are opposed to any tax rate increases and want the Bush tax cuts to be extended for those making over $250,000. Republicans, meanwhile, have indicated they are open to raising revenue by eliminating deductions, but neither party appears any closer in finding compromise on tax revenue versus spending cuts, especially as it relates to increasing the marginal rate for wealthy individuals.
Assuming that no deal is reached, then the tax increases and spending cuts mentioned above would go into effect over the next two years, and the U.S. would be at risk of falling into a recession. The stock market would also likely react poorly, driving stock prices and company valuations downwards, potentially comparable to the response of global markets to the financial crisis experienced in 2008.
How Would the Fiscal Cliff Affect the Solar Industry?
One direct effect the fiscal cliff would have on the solar industry would be the reduction in the 1603 cash grant payable for qualified projects.
The Sequestration Transparency Act of 2012 states that the 1603 cash grant would be reduced by 7.6 percent, resulting in a total spending reduction of $279 million. As an example, if a developer had a 2-megawatt solar project that was expected to receive the 1603 cash grant at $3 per watt, the expected grant payment would go from $1.8 million to $1.66 million (a 7.6 percent reduction in the grant means that it would now be payable for 27.72 percent of the project cost). This ~$137,000 difference would decrease the project’s IRR from 10 percent to 9.4 percent. In certain cases, this IRR reduction could be below the investor’s required return hurdle, thus jeopardizing the financing for the project and the developer’s ability to complete the system.
However, the OBM’s report does not specify exactly how the grant will be reduced or if the application process will change at all. Moreover, there is no effective date provided in the sequestration. This environment causes uncertainty for investors closing deals and building “safe harbored” projects and may cause many investors to price in an extra margin for the increased risk.
Solar Investment Tax Credit (ITC)
On the bright side, the main federal incentive for solar, the Investment Tax Credit (ITC), will still be in effect through 2016 and should not be affected by the sequestration spending cuts. In fact, the lack of progress by Congress and the White House, in terms of larger tax reform, could actually be seen as a positive thing for the ITC. Congress has discussed targeting tax loopholes and government subsidies as a long-term strategy for reducing the federal deficit, and it is likely that the ITC would at least be considered for the chopping block. However, the current gridlock and timeline has limited Congress’ ability to examine all tax loopholes and deductions.
The Tax Equity Market in a Post-Fiscal Cliff World
Prior to 2008, the tax equity market for solar and wind projects in the U.S. was fairly robust, although still very specialized, with fifteen to twenty potential investors comprised primarily of financial institutions and insurance companies. With the 2008 recession, the number of tax equity investors greatly contracted. In order to support the economy and encourage investment, the federal government elected to provide a “grant in-lieu-of tax credit” which is also known as the Section 1603 cash grant.
This grant, which stemmed from the American Recovery and Reinvestment Act of 2009 (ARRA), became a lifeline for the solar industry as the tax equity market dried up following the 2008 financial crisis. Although new players are entering the market now, tax equity has still not returned to pre-financial crisis supply.
If the fiscal cliff is not avoided, it is possible that financial markets would react similarly to 2008, leading the U.S. economy into recession. If the U.S. also defaults in February or March 2013, when the current debt ceiling is likely be reached, some analysts believe there could be a financial crisis of even greater scale than 2008. However, assuming that worst-case scenario does not happen, and we are only dealing with the austerity measures caused by the fiscal cliff, then it is still likely the solar industry would experience a contraction in the tax equity market.
According to the U.S. Partnership for Renewable Energy Finance (US PREF), there was $6.1 billion of tax equity supplied to wind and solar projects in the U.S. in 2007. That number decreased 44 percent to $3.4 billion in 2008, the year before the grant was implemented. If a comparable decrease in tax appetite occurred between 2012 and 2013, it would substantially slow the growth of the solar industry.
Sol Systems estimates that there will be approximately $3.8 billion of tax equity investment necessary in 2013 and $4.67 billion necessary in 2014 to keep pace with the expected growth of the solar industry. According to US PREF, the current 2012 tax equity appetite, for both wind and solar together, is estimated at approximately $3.6 billion (on an optimistic basis) implying that solar projects are already facing a shortage of tax equity in the market and that this shortage will continue in 2013.
If the $3.6 billion of tax equity available in 2012 decreased as much as it did in 2008, it would imply that only $2 billion of tax equity would be available for both solar and wind in 2013, thus creating a significant shortage in the market, and an environment where developers with good, bankable projects (at least by today’s criteria) would not be able to find requisite financing.
Fortunately, there is reason to believe the tax equity market would not contract as much in 2013 as it did in 2008. Of the approximately twenty tax equity investors active in renewable projects in 2007 according to US PREF, ten of them dropped out of the market in 2008 due to insufficient taxable income or bankruptcy. In 2008, these bankruptcies and losses were largely due to too much leverage in the financial system and risky bets on the housing industry by both banks and insurance companies.
Therefore, the worst hit companies in the 2008 financial crisis, players like Lehman Brothers and AIG, were also the same specialized investors who were previously active in the renewable energy tax equity market. If there is a fiscal-cliff-induced recession in 2013, the companies at greatest risk would likely be defense-related companies, not the financial institutions that tend to invest in solar.
Furthermore, despite the imagery invoked by the term "fiscal cliff,” the austerity cuts would likely take effect more gradually than one would believe. Therefore, current tax equity providers and new players would not see such a swift and unexpected drop in expected taxable income as in 2008.
The more pertinent question will be if tax equity investors are still able to generate sufficient taxable income during a recession in 2013 to support planned tax equity solar investments.
Unfortunately for the solar industry, obtaining tax equity will continue to be one of the main limiting nutrients for development in the U.S. over the next several years, with or without a fiscal-cliff-driven recession.
In the end, no one knows what will happen if a deal is not reached in Washington, but it can be said that fiscal uncertainty is a hindrance, not a help, to the solar industry.
A higher degree of certainty would allow tax equity investors and their clients to make business investments that generate taxable income, which could be used to invest in solar projects for the ITC and depreciation benefits. Given this perspective, the industry should oppose the idea of letting Congress “kick the can” and push the fiscal cliff off until a distant future date.
Instead, the industry needs some type of long-term deficit resolution plan to allow tax equity investors to have the confidence in their future income and encourage active players to remain in the market.
Andrew Gilligan is an Associate on the SolMarket project finance team. Sol Systems is a solar finance firm addressing residential, commercial, and utility-scale projects.
Below is analysis from GTM Research report author Andrew Gabor. For more information on the technologies discussed, see Innovations in Crystalline Silicon PV 2013: Markets, Strategies and Leaders in Nine Technology Areas.
Has the trend toward thinner solar cells ended? It seems like the industry has paused at the 180- to 200-micron-thick wafer level.
With the dramatic plunge in polysilicon feedstock prices, the motivation to go thinner may not be worth the hassle for manufacturers; this is due to the problems of increased yield loss from breakage, difficulties with handling and processing bowed cells after metallization firing, and an increased percentage of cracked cells within modules, which may translate to lower nameplate power ratings and worse degradation rates in the field.
Still, savings on the order of $0.10 per wafer or more are possible from thinning down the wafers, particularly if module performance can be maintained or actually improved. Briefly described below are ten technologies that can help enable thinner solar cells, listed roughly in order of the ease of implementation.
- Low-bow aluminum pastes: As usual, metallization pastes lead the list in enabling technological progress within the PV industry. All of the major paste vendors are working on aluminum paste variations that cause less bowing of thin cells.
- Diamond wire sawing: This wafering method is used primarily for monocrystalline ingots, but several companies are also exploring its use for multicrystalline ingots where wire breakage costs tend to be higher. In contrast to the standard SiC-slurry wire sawing approach, the fixed abrasive in the more expensive diamond wire allows for not only much higher cutting speeds, but also for lower total thickness variation across the wafer area. This reduction in thickness variation can ease the transition to thinner wafers.
- Conductive adhesives: Why do cells crack after soldering? The culprit is largely the flat copper wires that interconnect the cells. When cooling from the soldering operation, the stress from the differential contraction between the copper (high expansion coefficient) and the silicon (low expansion) creates microcracks under the wires in the silicon. These microcracks can propagate into full cracks more easily when the wafers are thin. By bonding the wires with conductive adhesives instead, the stress and microcrack formation are largely eliminated. Common concerns with conductive adhesives are cost and reliability. The graph below shows how by eliminating the front silver-paste busbars and bonding wires directly to the fingers with standard silver-filled conductive adhesives, the costs can actually go down. Other benefits from this approach add to the potential cost savings and module design freedom. Concerns about galvanic corrosion at silver/tin interfaces can be addressed through use of Dexerials' and Hitachi Chemicals' conductive tape materials that are used already at high volume in Panasonic’s HIT modules. Hitachi Chemicals’ hybrid CP-300 material with epoxy and solder characteristics is also promising. Thus, conductive adhesives can lower costs, enable thinner wafers, improve efficiency, and improve module reliability.
FIGURE: Calculation of Cost Component Increases and Decreases for Conductive Adhesive Stringing vs. Standard Stringing
Source: Innovations in Crystalline Silicon PV 2013: Markets, Strategies and Leaders in Nine Technology Areas
- Rectangular cells: By using half-size cells, the bowing problem is reduced. In addition, the resistive power losses in the interconnect wires are greatly reduced since these scale as the square of the current. This frees up the design space to allow the use of thinner wires, which cause fewer microcracks. Mitsubishi Electric and other companies are pursuing this approach. The downside is of course increased capital expenditure for some handling and processing steps, depending at which point in the process the cells are cut.
- Interconnect wire arrays: In this approach, the two or three flat interconnect wires are replaced by an array of twelve or more round wires. Invented by Day4 Energy, variations on this approach are being commercialized by equipment vendors Meyer Burger and Schmid. The Schmid variation still uses solder, but the stresses and microcrack distributions are likely different so that crack propagation may be less common. In either case, due to the larger number of redundant current paths, the modules are much more tolerant to cracks.
- Rear Dielectric Passivation: By placing a patterned dielectric layer between the rear aluminum paste and the wafer, the paste will cause less bowing of the thin cells. Cell efficiency can also be improved, but the potential improvement is higher for monocrystalline wafers than for multicrystalline. Rear-side wet-etching/polishing (e.g., RENA, Schmid) that generally accompanies this approach also helps to strengthen the thin wafers. A variation on this approach uses physical vapor deposition of the aluminum layer for reduced materials costs, but higher capital expenditure.
- Metallization Wrap Through Cells: In this approach both the positive and negative contacts are placed on the back side of the cells. Rather than using interconnect wires, a patterned conductive backplane material may be used, although the costs associated with this can be high. The stresses associated with soldering at discrete points rather than continuous lines may be advantageous (or worse). Eliminating the front busbars improves cell efficiency, although processing costs are increased. Canadian Solar is one of the leading companies implementing this technology with its ELPS series of modules. In addition, this approach may also be combined with conductive adhesives.
- Interdigitated back contact cells: These SunPower-style cells have positive and negative contacts on the rear side along opposite edges so that only a short piece of interconnect ribbon is needed. Thus, soldering-induced damage is greatly reduced in SunPower cells, and this has enabled their industry-leading 135 micron wafer thickness. They also have no fired aluminum paste to cause bowing. Of course, the cost of manufacturing these cells is much higher.
- Kerfless wafers with a carrier: Solexel and Crystal Solar are examples of companies that exfoliate very thin, epitaxially-grown wafers from thick monocrystalline substrates. During the early stages of cell processing, these substrates act as a sturdy handle for the wafers to enable high mechanical yields. Later, after exfoliation, the cells are again securely bonded to another carrier (printed-circuit-board material or glass) for robust processing of the remaining steps. The carrier represents an additional material cost, but it also can add functionality and displace other costs. Solexel claims to have figured out a low-cost, interdigitated-back-contact cell design with this approach.
Standard wafers with a carrier: If the carrier approach works for the kerfless guys, why not try it for conventional wafers? Is anyone pursuing such an approach?
For more information on these technologies, see GTM Research's latest solar report, Innovations in Crystalline Silicon PV 2013: Markets, Strategies and Leaders in Nine Technology Areas.
Can coal and natural gas play nicely with solar power? Can hybrid CSP-fossil fuel accelerate the commercialization of concentrating solar power?
The DOE, as part of its SunShot program, is devoting $20 million to potentially integrate concentrating solar power (CSP) systems with fossil fuel power plants -- aiming for a CSP-natural gas or CSP-coal hybrid which generates power at approximately $0.10 per kilowatt-hour levelized-cost-of-energy without any subsidy for solar. The DOE solicitation looks to fund two to four projects, each with greater than one megawatt of solar generating capacity.
A typical Integrated Solar Combined Cycle (ISCC) system would use steam generated by a solar field coupled to a conventional coal or natural gas-powered steam plant. The steam generated by the CSP plant can be injected into the turbine of a natural gas or coal plant, be used to preheat the incoming gas stream for a combined cycle plant, or perform a thermochemical process on natural gas or coal to boost the efficiency of the fuel.
So why build a hybrid plant instead of a standalone fossil-fueled plant?
- Reduction in fossil fuels and emissions
- Potentially "greens" existing assets
- Hybrids can address regulatory pressures and potentially help meet Renewable Portfolio Standards
- The transmission and balance of plant (like the power block) are already in place, as are existing plant staff, along with permits and a water supply
The DOE is looking for an increase in nameplate capacity, improvements in heat rate, reduction of fuel consumption or O&M cost, or reduction of emissions. Projects must have a commitment from a power off-taker to purchase the electricity generated.
There are hundreds of megawatts of hybrid-CSP in more than a dozen hybrid projects in various stages of development (or de-commissioning), including:
- Tucson Electric Power (TEP) is working with Areva Solar on a CSP "booster" to the 156-megawatt Unit 4 at TEP’s H. Wilson Sundt Generating Station in Tucson. The Sundt plant is a dual-fueled unit capable of using coal or natural gas. The Solar Boost Project will use Areva Solar’s Compact Linear Fresnel Reflector (CLFR) solar steam generators to produce up to 5 megawatts of power during peak power demand. Areva acquired the CLFR technology from KPCB-funded Ausra back in February 2010. The Sundt Solar Boost Project is part of TEP’s plan to expand its solar generating capacity to more than 200 megawatts by the end of 2014 in an effort to meet the Arizona RPS of 15 percent by 2025.
- NV Energy at the Chuck Lenzie Station in Nevada, a 1,100-megawatt natural gas plant with 95 megawatts of proposed solar
- Tri State G&T in Escalante, New Mexico, a 245-megawatt coal plant with 36 megawatts of proposed solar
- The FPL project with 75 megawatts of solar in Florida
- Areva has a 44-megawatt solar booster project for an Australian coal-fired power plant in progress and has more than 540 megawatts of CSP projects in operation, under construction, or in development
According to a 2011 report from NREL entitled Solar-Augment Potential of U.S. Fossil-Fired Power Plants, solar power towers are, unsurprisingly, more efficient than trough designs and better candidates for hybrids.
With the price of natural gas at or near record lows, an ISCC plant is just not competitive -- although it's still more competitive than stand-alone PV or CPV according to the NREL report.
It is still early days for hybrid-CSP. Right now, there is little pure financial reason to invest in this type of project.
Areva's Compact Linear Fresnel Reflector (CLFR) solar steam generators
Arun Majumdar, most recently director of the Advanced Research Projects Agency-Energy (ARPA-E) is joining Google.org. Majumdar will steer Google.org’s energy program and advise the firm on its energy strategy.
Canadian Solar (NASDAQ: CSIQ) named Guangchun Zhang as COO. Prior to joining Canadian Solar, Mr. Zhang was VP for R&D at Suntech.
Fluor’s Group Executive, John L. Hopkins, will leave that post to become NuScale’s CEO. NuScale is developing small modular nuclear reactor (SMR) technology. Paul Lorenzini, NuScale Power’s current CEO, will remain as a consultant to the firm.
REC Solar's parent company, Mainstream Energy, appointed Paul Winnowski as CEO. Winnowski was most recently President of United Technologies Fire & Security.
Cool Planet Energy named Barry Rowan as EVP and CFO. Rowan previously served as EVP and CFO at Vonage. Cool Planet aims to turn biomass into vehicle fuel. The firm has won funding from GE, Google Ventures, BP, ConocoPhillips, NRG and Constellation Energy.
CoaLogix hired Brett Ellis as CFO. CoaLogix addresses the environmental footprint of coal-fired plants.
Keahole Solar Power, a clean energy firm in Hawaii that has developed 12 megawatts of solar to date, has named Harry Jackson as President. The company focuses on "micro-utility" solar in the 1- to 25-megawatt range.
More than 128 megawatts of geothermal capacity came on-line in the U.S. in 2012, the second largest annual capacity addition since 2005.
By comparison, the U.S. will install more than three gigawatts of solar this year, and the U.S. wind industry may hit 12 gigawatts. That’s why a developer recently called U.S. geothermal “sort of nichey.”
Competition from historically low natural gas prices was, as one developer put it, “the threat” in 2012. But geothermal leaders expect gas price volatility to end its own threat. Geothermal’s bigger challenge might come from utility-scale solar and wind. Those resources win the majority of utility contracts, though geothermal offers the same long-term price certainty.
In any case, here are the high points of the U.S. geothermal year.
Top Twelve Geothermal Projects
One: Hydroshearing at AltaRockEnergy’s Newberry Crater project in Oregon appeared to be successful. Microseismic events were recorded, indicating hot rock at 500 meters had been fracked with high pressure cold water. Hydroshearing, AltaRockEnergy hopes, will allow control of the seismic activity caused by Enhanced Geothermal System (EGS) fracking. If it proves safety, geothermal would no longer be restricted to conventional hydrothermal wells but could produce anywhere there are hot rocks and water.
Two: U.S. Geothermal Project of the Year award winner Hudson Ranch I was the first plant to go on-line in California’s Salton Sea area in twenty years. Th 49.9-megawatt EnergySource project brought the area’s installed capacity to almost 330 megawatts and renewed interest in its economically recoverable 1,400 megawatt to 2,000 megawatt potential, especially because of the nearby, newly built Sunrise Powerlink transmission line.
Three: Chevron (NYSE:CVX), a silent partner in Hudson Ranch I, announced it would return to active development in the U.S. market and is looking for projects of ten megawatts or more.
Four: Phase one of Ball State University’s $45 million ground-source heat pump (GHP) system went active in 2012. When complete, the system will heat and cool the 5.5 million square feet of Ball State’s 47 buildings, eliminating coal-fired boilers and saving the university $2 million per year.
Five: Connected to Hudson Ranch I is startup SIMBOL’s demonstration facility for pre-reinjection extraction of precious metals from geothermal brine. SIMBOL’s harvest of a grade of lithium currently available in few other places offers a valuable revenue stream because of lithium’s value in the rapidly expanding electric car battery market.
Six: Geothermal systems are natural sources of greenhouse gas emissions, a 2012 study from the Geothermal Energy Association (GEA) reported as California’s emissions trading market opened, but they contain little carbon dioxide, minute amounts of methane, and little or no nitrogen oxide.
Seven: USGS testing discovered a new type of high-temperature energy reservoir in the Utah-Arizona-Nevada Black Rock desert basin that showed a potential equivalent to California’s Geysers, the Calpine Corp. (NYSE:CPN) fields that produce a third of the world’s geothermal energy.
Eight: The DOE-funded Geothermal Technologies Program offered $1 million awards to each proposal promising to “reduce the levelized cost of electricity from new hydrothermal development to $0.06 per kilowatt-hour by 2020 and Enhanced Geothermal Systems (EGS) to $0.06 per kilowatt-hour by 2030.”
Analysts predict the 2012 geothermal marketplace will approach $13 billion. As of May 2012, approximately 11,224 megawatts of installed geothermal power capacity was on-line globally.
According to Ormat Technologies (NYSE:ORA) CEO Dita Bronicki, the major international geothermal markets are still Ethiopia, Kenya and Tanzania in Africa, Indonesia, Japan, and the Philippines in the Asia-Pacific, the Caribbean Islands, El Salvador, and Nicaragua in Central America, Argentina, Chile, and Peru in South America, and Germany, Canada and Turkey.
Nine: In Nicaragua, RAM Power went on-line in phase one of its San Jacinto-Tizate flash steam plant. Phase two may also be in operation by the end of 2012. The site could ultimately produce 270 megawatts for twenty years.
Ten: The U.S. Agency for International Development and the U.S. Geothermal Energy Association launched the two-year, $1.5 million East Africa Geothermal Partnership (EAGP) to help put U.S. geothermal to work developing East Africa’s estimated 10,000 to 15,000 megawatts of potential, and German development agency KfW launched the $67 million East African Geothermal Risk Mitigation Facility, an exploration partnership with the African Union Commission.
Eleven: Japan’s drive to replace its nuclear industry with renewables got boosts, according to the Geothermal Resources Council’s Ian Crawford, when the government approved geothermal exploration in national parks, expected to open 1,000 megawatts of the nation’s 23,000 megawatt potential, and when recreational hot springs owners acknowledged that geothermal, using binary technology that transfers the source water heat to a pressurized working fluid and reinjects the cooled water, does not threaten vital water resources.
Twelve: To reduce dependence on imported natural gas, Western Europe moved toward geothermal energy for heating. A U.K.-Iceland MOU would initiate the building of a sub-North Sea cable, the longest in the world, to deliver Icelandic geothermal resources. Germany, the Netherlands and France also initiated efforts in 2012 to increase use of geothermal heating.
The acquisition will help WegoWise shift from the multifamily housing market into commercial buildings, where some of its clients already have buildings and are looking for solutions. Melon Power, a relatively new company, focuses on low-cost benchmarking services by leveraging Green Button data.
There are a variety of ways to tackle the commercial energy management market, but both WegoWise and Melon Power shared the same basic philosophy of building as broad a base as possible, rather than doing deep analytics on every inch of a particular building.
“Our idea on data is, let’s grab as much information about as many buildings as possible,” said Andrew Chen, CEO of WegoWise.
Currently, WegoWise collects data on more than 160 million square feet of multifamily housing in more than 11,000 buildings. The Boston-based company is also partnered with the U.S.Green Building Council to offer its platform to LEED-certified homes.
If that move seemed to push WegoWise closer to the residential space, Chen said that there are actually a lot of synergies between multifamily and commercial. The issue of split incentives with tenants and owners is similar in the two types of building stock. Also, he noted that energy companies and building owners often manage or own buildings in both sectors.
WegoWise did not go searching for Melon Power, but rather ran into the company at a tradeshow earlier this year. “We’re thinking about data in the same way,” said Chen. “It’s less about technology or marketplace -- it’s an underlying philosophy that big data needs to be thought of in a different way.”
Craig Isakow, Director of Commercial Solutions at WegoWise and former Melon Power CEO, agreed that getting the big picture, especially for comparisons within portfolios, was important. “Let’s just get the data out of buildings,” he added. “We saw that benchmarking was a great way to start the conversation.”
Many of the country’s largest cities, and some states, have requirements for commercial buildings (usually 50,000 sq. ft. and larger) to disclose an energy benchmarking score annually, usually using EnergyStar.
Melon Power’s easy, low-cost benchmarking analytics will be wrapped into WegoWise’s platform, which will also be tweaked to meet the needs of the commercial market.
The commercial offering will target three main customers: auditors, building portfolio owners and programs that track efficiency, such as utility programs, LEED or Massachusetts’ Low-Income Energy Affordability Network.
WegoWise will acquire all of Melon Power’s assets as part of the deal. The purchase will allow WegoWise to move into the commercial space faster than if it had developed relationships and not had Melon Power’s benchmarking capabilities. “We’re really excited about this opportunity,” added Isakow.
The expanded company will be opening a Washington, D.C. office. The financial details of the acquisition were not disclosed.
It’s official: Johnson Controls has filed an appeal to the bankruptcy court sale that saw it lose its bid for A123’s assets to Chinese auto equipment giant Wanxiang. But it’s not demanding to stop the sale -- though it stands ready to take over the bankrupt lithium-ion battery maker if politics gets in the way of Wanxiang’s takeover of the company.
That’s the gist of a Monday announcement from Johnson Controls, which said it has filed an appeal in U.S. Bankruptcy Court in Delaware to get back a $5.5 million breakup fee it had given the court to participate in the bid for A123’s business. Johnson Controls, which had sought to acquire A123’s automotive assets out of bankruptcy for $125 million, but bowed out of the auction after a final bid of $251 million jointly with Japan’s NEC, about $5 million short of what Wanxiang has pledged to pay.
U.S. Bankruptcy Judge Kevin Carey put that $5.5 million in escrow last week, after being told by attorneys representing unsecured creditors that JCI had been lobbying in Congress to have Wanxiang’s bid blocked. But Monday’s statement from Alex Molinaroli, president of Johnson Controls Power Solutions, said that it’s appealing the sale in order to get back that money.
"We appreciated the opportunity to serve as stalking horse, which resulted in significant value to the estate, creditors and employees," Molinaroli said. At the same time, Johnson Controls defended its right to lobby the government, and stated that anything it’s done along those lines in relation to A123 has been “consistent with First Amendment rights to free speech and are strictly governed by the company's ethics policy and comply with government regulations.”
The company also made it clear that it considers the sale of A123 to a foreign company a national security issue -- and that it stands ready to buy A123 if the sale to Wanxiang is blocked: “Johnson Controls has consistently maintained that national security questions tied to the core technology used in all of A123's businesses represent a risk to the sale which cannot be dismissed until resolved by the government review process.” If Wanxiang’s bid ends up being blocked, “Johnson Controls remains open to considering future opportunities to acquire relevant portions of A123's assets,” Molinaroli said.
Here’s our previous coverage of the latest in A123 bankruptcy news:
Wanxiang has already given up a lot in its $256.6 million winning bid to take over bankrupt U.S. battery maker A123. Not only has it said goodbye to A123’s U.S. government work, it has lost the remaining $120 million or so of a $249 million Department of Energy grant that’s helped build A123’s lithium-ion factories in Michigan -- plants that Wanxiang says it will keep open.
But political opponents of A123’s sale to a Chinese company are saying that may not be enough. Even A123’s commercial technology is inextricably linked back to its federally funded work with partners like DOE and the Department of Defense, they say. That could allow Wanxiang to develop military applications based on A123’s U.S.-funded technology, it is claimed -- and that’s enough reason to block the sale.
These are some of the issues facing the Committee on Foreign Investment in the U.S. The committee chaired by Treasury Secretary Tim Geithner is in charge of deciding just what parts of a proposed sale of A123’s assets and intellectual property might constitute a national security risk. This week, the group began a 45-day review of the sale, with a deadline of January 15, 2013 to make a decision.
The Strategic Materials Advisory Council, an industry group, said this week that dozens of members of Congress have weighed in against Wanxiang’s takeover. U.S. Rep. Bill Huizenga (R.-Mich.), representing the state with the most to gain or lose from the future of A123’s U.S.-based manufacturing, took to Facebook to call it a threat to national security and economic competitiveness.
Members of Congress have already been demanding investigations into A123 and key business partner Fisker Automotive, along with other DOE-backed companies that have gone under (Abound Solar, Beacon Power) in the wake of Solyndra’s bankruptcy. Of course, DOE has also given money to foreign companies to create U.S. jobs, with mixed success -- LG Chem, which took a $151 million DOE award for its Michigan factory that builds batteries for the Chevy Volt, furloughed 200 workers in September.
As for A123’s military work, it was sold to Illinois-based Navitas Systems for $2.25 million, ensuring that Wanxiang would not take over federal contracts for projects like portable power systems and unmanned vehicles. Wanxiang gets the remainder of the Waltham, Mass-based company’s assets, including its automotive business with customers like Fisker, General Motors, BMW, Tata Motors and Smith Electric Vehicles, and its grid storage business, with partners including AES Energy Storage, Sempra Energy and NSTAR.
Just how many of those customers will remain with A123 through its transition remains to be seen. GM, which has tapped A123 to build batteries for its Spark EV, has remained mum on whether it will continue to work with the company as it goes through bankruptcy. Fisker, which accounted for 26 percent of A123’s revenues at the time of its bankruptcy, is facing its own challenges.
On the grid-scale energy storage front, AES, which accounted for 24 percent of A123’s revenues at the time of its bankruptcy, last week announced a new battery partner, Mitsubishi-GS Yuasa, for a 20-megawatt lithium-ion energy storage project in Chile. AES Energy Storage President Chris Shelton said in an interview this week that the choice of a new partner wasn’t related to A123’s bankruptcy, and that AES envisions working with a post-reorganization A123, as well as many other battery partners in the future. He wouldn’t say whether or not A123 had competed for the latest bid.
Cree claims “unprecedented” output for a single-die emitter -- 1198 lumens and 116 lumens per watt at full drive. Luminus Devices can beat the output but not at comparable efficiency. Like its predecessor, the XM-L, this new LED can be driven at up to 3 amps yielding about 10 watts of input power.
The part is based on Cree's third-generation silicon carbide (SiC) platform. A range of warm, medium, and cool whites is available, with color temperatures from 2600K to 6200K.
But when it comes to LED specifications, it pays to always read the fine print.
As is typical with LED product announcements, the 186 lumens per watt is for a premium bin part, in a cool white, at 25 degrees Celsius, and at a reduced current drive, 350 milliamps in this case. Efficiency goes down with economy binning, warmer white, real-world temperatures, and higher drive level -- the last due to the phenomenon known as "droop" (drive the parts lightly and you get extra efficiency).
A low-bin warm white driven at 700 milliamps may yield as little as 79 lumens per watt. There is also a little bit of specsmanship in using the common 350 milliamp drive level for nameplate efficiency with a part this big. That is hardly more than 10 percent of full power, whereas it would be 45 percent of full power for a 700-milliamp part. Catalog binning is done at a more realistic 700 milliamps.
Overall, the new light source does appear to meet Cree’s efficiency claims of 17 percent improvement over the previous generation.
It is significant to see this sort of a step at a late-game stage, where lighting industry observers had expected to see the curve flattened out. Haitz’s law may have at least some legs left.
American Wind Energy Association (AWEA) CEO Denise Bode is resigning.
This news comes a day after announcing that the wind industry urgently needs Congress to extend its production tax credit (PTC) for 2013. And that wind could become the first renewable energy industry to go incentive-free by 2019,
“There is now a strong, bipartisan team of congressional champions for the wind industry and the all-important extension of the PTC,” Bode said in her resignation statement.
Political gridlock continues to prevent extension of the PTC for next year. Thousands of workers have been laid off, plants across the country have been shuttered and the worst may be yet to come. Bode’s job is yet another job lost to Congressional inaction in the most successful renewable energy industry.
Congress watchers say wind’s PTC will get a one-year extension, along with other special tax provisions, in a tax extenders package attached to whatever fiscal cliff deal is made, whenever it is made.
But dissatisfied with the PTC’s progress and seeing the wind industry crumbling, AWEA decided to release its economic analysis. The analysis concluded that, with the PTC in place for 2013, the wind industry will be ready for a phase-out of the incentive beginning in 2014.
The phase-out offers a compromise to congressional conservatives who oppose any subsidy. It had been proposed as a bargaining tool by industry leaders like NextEra Energy (NYSE:NEE) and BP Wind (NYSE: BP) months ago, an industry player told GTM.
A letter sent Thursday by AWEA to congressional leaders said “detailed economic analyses and high-level discussions with industry leaders” concluded an extension of the PTC at 100 percent of its $0.022 per kilowatt-hour present value for projects started next year, followed by extensions at 90 percent of the present value for projects placed in service in 2014, at 80 percent in 2015, 70 percent for 2016, and at 60 percent for 2017 and 2018, should take the industry through the two further technology innovation cycles wind needs to go incentive-free in 2019.
A wind industry attorney reportedly complained that AWEA’s offer was premature. But, Bode said with the release of the analysis, “Our number-one priority right now is not putting the wind industry over its own fiscal cliff.”
Bode took over as AWEA CEO on January 1, 2009. The selection of a Republican and former oil and gas industry advocate and regulator was seen as a bold move to build political bipartisanship.
Said to have been in on the notorious early 2001 secretive White House energy policy meetings held by Dick Cheney, Bode could, wind’s leaders hoped, bridge the divide between wind and its fossil-fuel-industry opponents and perhaps help forge the kind of alliance between natural gas and wind that environmentalist Robert F. Kennedy, Jr. was working on at the time. Such an alliance during George W. Bush’s Texas governorship led to that state leading the country in wind capacity.
But Bode came in during a recession and at a time when bipartisanship was out of favor.
Still, Bode has been able to oversee one of wind’s biggest growth spurts. During her tenure the industry has doubled its capacity and increased its domestically manufactured content to almost 70 percent, according to Bode.
Under Bode’s leadership, several Southern utilities recognized the economic advantages of wind. But a federal RES grew even less achievable after the 2010 Tea Party electoral wave. The Tea Party-influenced Congress never seemed to recognize that 80 percent of wind is in Republican districts and seemed to oppose renewables only because President Obama was for them.
As a former high-ranking AWEA officer noted, Bode’s tenure after 2010 was characterized by growing partisan rancor and increasing attacks on wind, even though wind’s market penetration grew and its price fell below other generation sources.
There was grumbling from the start about Bode’s leadership style, a renewables veteran and congressional lobbyist told GTM. But, he acknowledged, smoother going for the PTC might have led to a different outcome.
“With tax policy the dominant interest of my career and prospects for a real tax reform bill in the air,” Bode, a tax attorney, said on resigning, “I can’t imagine a better time to make this move.”
Rob Gramlich, AWEA's Public Policy Senior VP and electric industry expert, will serve as interim CEO.
Below is analysis from GTM Research report author Andrew Gabor. For more information on the kerfless wafer market, see Innovations in Crystalline Silicon PV 2013: Markets, Strategies and Leaders in Nine Technology Areas.
Two kerfless wafer companies have bowed out of the industry in the last few weeks. Twin Creeks shut down operations and sold its intellectual property and other parts to GT Advanced Technologies -- for non-PV applications. Silicon-film-on-metal-foil company Ampulse shut down, finding no apparent interest in its National Labs-developed technology.
Kerfless solar silicon firms look to eliminate a costly part of the solar silicon wafering process. But, the wasted silicon saw dust (kerf) in the conventional ingot wafering step is much less expensive than it was just a few years ago. Is there still promise in “kerfless silicon,” now that the price of polysilicon feedstock has plummeted? Not if you sacrifice efficiency or increase processing costs. None of the mentioned companies ever came within one percent absolute of the efficiencies of standard multi-crystalline cells.
What of the surviving firms? Here's a quick look at the remaining domestic kerfless players.
Solexel is exfoliating an epitaxially grown layer (gas-to-silicon) from a donor wafer. There are cost savings to be had here, but what sets Solexel apart from the competition is the success it has had with innovations at the cell and module level as well. The company is unique in the kerfless field by virtue of having demonstrated 20 percent cell average efficiencies with champion results as high as 20.6 percent. The firm's 156mm back-contacted, silver-free cells are larger than Sunpower’s (a Solexel investor) and have lower processing costs as well. Solexel's cells are attached to a flexible carrier. While the firm's success at low volume is impressive, it will need to demonstrate robust reuse of the monocrystalline substrates in mass production (greater than 30 reuses) and this is likely tricky business.
Also promising is 1366 Technologies with its Direct Wafer approach. These wafers, grown directly from molten silicon, look remarkably like standard square multicrystalline wafers, albeit with smaller grains. Small-grained wafers with lower dislocation density likely represent the direction for the multicrystalline industry in 2013 anyway -- while quasi-mono technology appears to have been ungraciously dumped.
Direct Wafers also have much more consistent quality than multi wafers, and the resulting cells have an extremely narrow efficiency distribution. The efficiency tail (yield loss, these days) of a standard multi cell line is largely due to low-quality wafers, so there is considerable value in this tighter distribution. Cell efficiencies in customer trials using standard processing are now above 16.5 percent.
In only a few years of development, Direct Wafer technology has surpassed String Ribbon performance. The potential savings in polysilicon feedstock has dropped to less than $0.20 per wafer as feedstock prices have plummeted to $20 per kilogram. However, Direct Wafers still enjoy considerable cost savings for avoiding the ingot and wafering steps, with projected total savings of more than $0.45 per wafer even at $20 per kilogram feedstock prices. Scaling begins in 2013.
FIGURE: Polysilicon Costs per Wafer for Various Kerfless Wafer Approaches as a Function of Polysilicon Price
Source: Innovations in Crystalline Silicon PV 2013: Markets, Strategies and Leaders in Nine Technology Areas
Crystal Solar has a similar epitaxy approach to that of Solexel, but uses a less advanced cell structure using p-type wafers supported by a coverglass carrier. With champion efficiencies at 16 percent, Crystal Solar still has a ways to go, but should not be counted out. The potential exists for challenges in the clean release of wafers from the substrate and reuse of the substrate.
AstroWatt has only reported 14.9 percent cell efficiencies with advanced and expensive heterojunction cell processing. Kind of like Twin Creeks. Its metal-layer induced exfoliation approach creates thin, curled, freestanding wafers. Kind of like Ampulse.
AmberWave, visible to many for the first time courtesy of a DOE SunShot award, is pursuing technology with similarities to the Solexel approach. The DOE award description mentions flexible steel carriers and UNSW-inspired advanced cell architectures. Recent patent applications are consistent with this description where silicon films are epitaxially grown on monocrystalline substrate wafers, and then a flexible carrier of steel or other materials is bonded to one or more wafers and the films are exfoliated from the substrate wafers. With SunPower and Hanwha having invested in epitaxial companies Solexel and Crystal Solar, it will be interesting to see if any strategic investments come to AmberWave.
We have seen the low-cost, low-efficiency story before, and no longer believe it, particularly when expensive, advanced cell architectures are required to enable the approach.
Kerfless wafering approaches still hold promise, but greater than 16 percent efficiencies are required with low-cost processing, and significantly higher values are required should expensive processing be employed. Solexel and 1366 are the only two firms that show distinct promise thus far. While the DOE’s significant investments in kerfless wafer technology have not yet panned out, even the failures have built up a deep experience and technology base in the U.S. Perhaps success is just around the corner for these two companies.
Click here for more from GTM's report Innovations in Crystalline Silicon PV 2013: Markets, Strategies and Leaders in Nine Technology Areas.
Please note that the author of this article is a former employee of 1366 Technologies.
Home energy management in 2012, like every other year, finds us somewhere between the Flintstones and the Jetsons. There are nationwide television commercials that show a mom remotely turning on kitchen lights for her child using her smart phone. Two-way smart thermostats that can be controlled via the internet fly off store shelves. But dishwashers and refrigerators are hardly communicating with a utility to turn themselves on when energy is cheapest.
Progress is slow and steady in the home energy management and connected home industry. But mostly slow. Companies with solid analytics that can offer immediate savings to utilities without having to spend too much saw progress in 2012. But the notion of a home area network still seems like the Jetsons. The internet of things just hasn’t quite made it to the average home.
Americans Still Clueless
Before we get to some of the feel-good trends of this year, let’s start with the harsh reality. People still have pretty much no idea what drives energy use in their homes.
The most important question is, whose fault is that?
There’s plenty of blame to go around: apathetic Americans who pay relatively low prices for electricity; utilities that are unable to become the trusted advisor Americans need on energy use; and then there’s the ever-increasing onslaught of gadgets that offset the strides made in efficiency standards.
At least every six months, Greentech Media and other news outlets report on these sad statistics that barely budge. And while people like to complain about heating and cooling bills, one recent study found that bills would have to go up at least $10 per month before a homeowner is willing to shell out for energy-efficiency retrofits.
As utilities choose, or are mandated, to offer more energy portals and reports that educate the average consumer, this could start to shift in coming years. But we’re not there yet. Not even close.
Everyone Gets In the Game
Last year, we closed out 2011 by mentioning the entrance of big-box stores after big software firms exited the home energy management space.
The news about big-box stores making plays in the energy space increased, but so did press releases claiming that everyone else is getting into the game, including security firms, cable providers and equipment makers, like Ingersoll Rand.
A few years ago, insiders questioned whether the utilities might just be left holding the wires while other companies owned the relationship with a customer inside of the home. That could happen, but many utilities have expressed interest in handing off that relationship.
It’s already being tested in some places, like San Diego Gas & Electric, which is leveraging thermostats in their territory on Alarm.com or EnergyHub’s platform for a peak time rebate program. Earth Networks (owner of WeatherBug) is also working with CenterPoint in Texas in a similar program.
The appeal for big-box stores is the synergy of buying a GE refrigerator and a Nucleus home energy manager all at the same time, as Sears wants to do. There are also different approaches. Lowe’s has its own platform for a connected home, Iris, while Best Buy has concept stores in three large cities to test the waters on connected home offerings. Home Depot is working with Opower to offer tailored coupons.
Comcast announced it was picking up EcoFactor to roll into its Xfinity home offering, although it won’t be available to customers until 2013. Verizon also announced connected home services late last year.
The competition to make the connected home a reality should continue in 2013, with more software startups snagging deals with the big guys. But the Consumer Electronics Show has been promising the home of the future for decades.
Utilities will start pilots to integrate their energy efficiency and demand response programs with third parties, especially as smart meters are deployed and turned on. Big-box stores and telco providers have the huge ad budgets that could help to sell connected home services -- of which energy will play one part -- in a way that was never possible when just the utilities were in the game.
Becoming Hardware Agnostic
As the in-home display goes the way of the dodo in the U.S., companies are downplaying or completely shutting down hardware divisions and leaving the rest to established players.
Tendril is the starkest example. The company, which once noted that the big savings really come with controlling the thermostat, is now an open platform for everyone from BMW to Whirlpool to build apps with. EnergyHub is also downplaying its hardware offering as it works with big name thermostat maker Radio Thermostat of America. Onzo also sold off its hardware division to focus on analytics.
Not everyone is tossing the hardware out the window. Nest, the sexiest thermostat in the world (competition wasn’t stiff in that category), is all about its sleek design coupled with advanced analytics. Energate is another home energy startup that still has hardware at the core of its offering, which has been expanded to include broadband connections.
Of course, the biggest savings come from controlling the stuff that uses the energy -- whether that’s a hot water heater, an HVAC system or a refrigerator. But for now, the appetite in the market is low-cost analytics that utilities can deploy, and hardware is largely being left to legacy players… and Nest (if it can scale at the speed it wants to next year).
Tapping Big Data
Some would argue that taking various electricity readings from a home is hardly big data. And by itself, it isn’t.
Opower, however, is taking in 90 billion meter reads annually from the more than 75 utilities it works with. In 2012, Opower released Opower 4, which is based on Cloudera’s Hadoop infrastructure, and supports Opower’s core competency of delivering behavioral feedback to energy customers to help them be more efficient. Oracle also purchased DataRaker, a cloud-based data analytics company that works primarily with smart meter data.
At The Soft Grid conference in San Francisco, Jim Walker from Hortonworks talked about how his company’s focus on accelerating Hadoop for enterprise solutions could help with consumer-focused energy, such as charging networks for electric vehicles.
As utilities turn on the full functionality of their meters, which can often collect data every 15 minutes, there is also the need for analytics that can take that information and turn it into something useful for the consumer, whether it’s finding a better rate plan for the customer (if there’s ever different rate plans to pick from) or presenting real-time outage information during a large storm.
As Jeff St. John noted in an article about IBM’s big data work with Oncor, “Big data -- the smart grid delivers it, utilities are awash in it, and somebody’s got to step in to collect it, analyze it and start delivering real-world value from it.”
Expect some household names, like IBM and Cisco, to have end-to-end solutions that touch the consumer. But startups are also making the investment to handle unstructured data to move from niche players to enterprise solutions for the utilities -- and everyone else looking for a piece of the consumer energy pie.
Green Button Grows
In utility circles, the Green Button was the belle of the ball in 2012. Large utilities flocked to endorse it; companies eagerly nodded in support as well.
But go ahead and ask your average neighbor if they’re using the Green Button, and you will likely get blank stares. The reality is that it’s been a good start, with lots of industry support, but most of that support has not yet turned into action. More people are probably using the Easy Button from Staples.
By May 2012, the Green Button, which offers utility data in a standardized format, had been adopted by utilities that serve more than 30 million customers. Soon it will be available so that consumers can automatically share data with third parties, if they choose to.
The initial uptake is laudable, but there’s still so much more work that needs to be done, according to a study from IEE, an institute of the Edison Foundation focused on innovation, electricity and efficiency.
Of the 33 utilities that have committed to providing energy data in that format, only seven have implemented it so far. In 2013, it will likely be the small and medium commercial customers that gain the most insight from working with third parties that can take the data in this format and turn it into something useful.
More utilities will also likely come on board in 2013. But it won’t be commitments that matter as much as activation and clearinghouses where consumers can easily try out third-party applications.
Residential DR Gets Real
Two years ago, we questioned whether residential demand response was mirage or reality. Of course, old school demand response, where utilities turn off air conditioners, had been around decades.
But newfangled demand response programs that involve different price tiers -- whether carrot or stick -- are being offered to consumers in increasing numbers. Baltimore Gas & Electric has had an opt-in demand response program for years, but it will now offer a rebate program to all customers beginning next summer. San Diego Gas & Electric also offers a rebate program for customers turning down their thermostats during the hottest days.
At Oklahoma Gas & Electric, there is a plan to involve at least 100,000 homes in its demand response program, which will help delay new generation until at least 2020. ConEdison is working to curb watts from window air conditioners, which are prevalent in New York City.
The secret to success in residential demand response is scale and segmentation. Homes don’t have the energy usage of large buildings, but taken together, they still represent a significant portion of peak demand for most utilities.
The other issue is segmentation. Some houses are just better candidates for demand response: either they are more flexible with their energy usage or use more overall and therefore there are more ways to cut energy use.
Of course, utilities also need enough information about their customers’ usage to be able to suggest if they might benefit from a demand response program by saving money. Even if the entire customer base is being targeted, some utilities have found that it’s important to understand customer segments for better uptake of new demand response services.
For analytics companies in the industry, that level of customer insight is becoming a more important selling point -- especially for utilities like OG&E, which aren’t just playing around with different pricing models for fun, but have genuine targets for peak reduction.
Peak time rebates are still in their infancy, but they will only grow in coming years. Think of it as time-based pricing with training wheels.