(Part 4) Distributed Energy: Q4 Northwest Electric Power Landscape Exploration (2017 – 2030)
Greetings. My, name is Joshua - and I'm the industry foresight lead within, the corporate strategy organization. At the Bonneville Power Administration. The. Following, presentation, is part four of a, seven part video series focused. On exploring the long term electric power industry landscape, if you, haven't already please take a few minutes to view the introduction, to the series for some valuable, context, hopefully. You'll find the time spent viewing this video to be valuable please. Feel free to send me an email with any feedback enjoy. Electricity. Services, will become, more distributed, and less, centralized, and, you. Know this is an area of the, industry landscape that's, kind, of old hat for a lot of folks already but I've got to go through this because for some folks in different parts of the business, it's, not necessarily. One. Of the things that we've already been, noticing. For several years now is, this trend of you, know the grid is moving, from a point of being a very centralized, power system, one that's very distributed and when we look at you know the way that things have been done for the last century power. Is, generated, in large central, facilities, like a big dam or nuke plant coal plant gas, plant sent one way through, the transmission system, into. The distribution system, into. Different. Neighborhood, feeders, and then all the way to the home and those, home owners have been basically. Captive. Or passive, end-use, consumers, of that electricity, now, what's been happening, over time is that, we're. Watching that, system. Evolve. Through, the addition, of, distributed. Generation, distributed. Storage and some. Energy management. Capability. Here. In this image referred to a smart load added. At all levels, of the system, whether it's at the transmission, level the, distribution, level or down at the local level and that's. Having this impact of, number, one creating, two-way power flows throughout, the system not. Just power but also data and it's also as, the, distributed. Energy resources, are getting added behind. The meter at the end-use facility, it's, enabling. Them to actually, produce power, to, feed into the grid from the opposite, end and so we've, got these what, once were very passive. Or captive, and use consumers. Becoming. Prosumers. Of power. As well. In. As this ecosystem. Continues. To evolve we see portions, of it also, getting. The capability, to island themselves, during periods, of grid disturbance, or blackout, where. They can Island themselves, and maintain, their, function, through. Micro-grid development, now, within, the, micro grid there's, a defining, characteristic that. They have the ability to share power within. The micro grid because. Of the presence, of some. Combination, of distributed, generation energy management, and often distributed storage that, enables, different parts, of the micro grid to exchange power, back and forth the, micro, grids themselves, have been evolving, over time so original. Micro, grids you know the first out of the gate or, typically, micro, grids of like a large facility maybe a hospital and there, were different portions, of the hospital, that would communicate with each other to maintain. The. Reliability, of, that specific. End use facility, over time the. Micro, grid got to be larger so it would cover an entire hospital. Campus or an educational. Campus, and then. It continued, to expand, to include multiple. Parties, spread, across a wider, geography. That could participate in the micro grid as well and, when, we look at the micro grids that have been deployed across the United States we're.
Seeing More and more of them out there of course a lot of the first micro grids were developed, in the Northeast, on the heels of superstorm, sandy because. You, know after that, storm hit a lot, of the diesel generators, started running out of fuel within a week and they, were very difficult to keep. Refueled, but there were some micro grids that were in place that that did very well, politicians. Took note of that policymakers, took note of that across the board and. It ended up unleashing, millions of dollars, for, additional, micro grid development as, different. Politicians and communities, realized, there, are a lot of benefits to making, their communities, more resilient in. The face of these, destabilizing. Effects like with large storms, or great outages, and among. The parties, that have been spending, heavily on micro grid development is the US military you know one of the key factors for our. Military. Investing. In a micro grid development is just frankly, just to save soldiers lives and, protect our infrastructure, when, you look at how, many soldiers lives have been lost in order to transport liquid fuels out to remote locations during, wartime, it's, a little, of the lives lost of the US military, they want to make those remote. Locations, much more resilient and by, relying, on renewable, energy in reducing, the, the supply, chain infrastructure. Associated. With keeping, liquid, fuel generators, moving. And operable, and they also have a lot of coastal installations that, they're concerned about maintaining, the reliability, on and and so we, see a lot of investment by the military, and across the board so we're seeing municipal. Investments, we're seeing investments. On Islands, you know and you've got companies like Tesla. Who were doing, very well selling. Systems, to islands, and commercial. And community, universities. All over the place and really. What we see is this kind, of repeating, cycle. Of major, storm event press hits about you know how good these micro grids are doing it tends to release more, attention, and more funding, to continue, developing. Micro grids to garden, communities, and make them more resilient and so. We're seeing more and more constantly. Even, as they continue to evolve and you. Know one of the things that is driving, the evolution of. This. Decentralization. Of the grid is the advancement, of distributed. Energy resources across. The board now, some, labs like Pacific Northwest National Lab, Lawrence, Berkeley National Lab, for example, and parties, like Bonneville, who have been working, on making, a transactive. Energy, economy. Kind of our future or some that's what you know technologists, would refer to it as I think lay people just kind of call it the shared energy economy, and we've been working on this for over a decade in, different, different, ways and so. This. Is a visual, that was put together by some. Of those folks, who participate. In those studies and you, know you can't fault, them for kind, of looking, at the future, integration. Of de ours and the development, toward transactive energy futures as this kind of incremental, flow. Because that's how things have gone there. Are folks that look at this though and get, concerned, that these, three stages of, de, are adoption, and the, impacts, that they have in, enabling, a transactive energy future could, all actually be collapsed. Down into a single stage because. Of the way that technology, keeps pushing forward, and and in, particular, here, you know an example of a technology that, could have a destabilizing. Impact on, this assumption, of a longer gradual. Path toward, transactive. Systems. Is the development, of blockchain, technology, and blockchain, technology. Came, out of the finance, industry as a way to start. Removing middlemen. From transactions. So you didn't have to have a third party verify. A transaction. That it could happen in more real time and help reduce the cost of financial, transactions, and essentially.
This Is the technology, that sits behind, cyber. Currencies, like Bitcoin and, what it is is is basically just distributed. Ledger ring and all, the parties, to a blockchain, system. All have copies, of the same exact, ledger in that, system and if two parties, within that system conduct. A transaction, in their block on their blockchain, it records, who was transacting, with whom what. Were they transacting. What was the cost of the transaction, and when did it happen, and once. That transaction. Is made. It shows up in everybody's. Blocks. On the blockchain, simultaneously. In that way it's it's harder to cheat if someone starts messing with it it has to be acknowledged. By the rest of the blockchain as, well this. May sound a little bit complicated and it is but. You know the key thing here is this is one, of those advances. In the digitization. Of all, industries, not just the energy industry but it is hitting the energy industry at the same time that all these other advances. In digitization, are as well and, so, folks are looking for different ways that, they can take advantage of. Blockchains, to make their operations. More efficient, cheaper, so, they can keep their rates as low as possible and, so. There's around, the world right now there's at least two, dozen pilots. These are identified, by indigo, and, their website it has an interactive, site you can click on these and learn about each one I've seen some estimations, of as high as 50, different pilots, around the world looking at using blockchains, for the energy, industry. And these range from blockchains. Used within a single facility where appliances, are talking to themselves and, and transacting. Among themselves for, more efficient operations of the facility, to neighborhoods scale, where, end-use, consumers, are trading, power back and forth like the micro grid that's been developed in Brooklyn New York under. This or, you know even at a larger, scale where, you know like in Europe they're testing, out a pilot for wholesale energy trading that's based on block chains this. Is an area that you know we've got to keep an eye on there, may be efficiencies. That utilities, can use in their. Supply, chain to cut out middleman so it's not just about you know the transaction, of electrons, and dollars it could infuse, into other parts of businesses, as well just. A thing. Here just for context, to think about is like I said this is part of the, wave, of digitization, that's, hitting our industry, and. I, think, the impact, of blockchains really shouldn't be understated, too much but it's important to be, put in context, to there, is a hype cycle associated. With it but, the promise, of it is potentially, quite large, some. Of the folks, that are closest. To this kind of refer to block chains being kind of where the internet, was at around 1995. And 96 with all the promises. That people are espousing about what the internet could do and then you know now we've actually, seen that for a couple decades block. Chains could be very similar but block chains aren't the only thing that's a new way of doing business in this distributed. Energy economy. You've. Got other companies, that are doing some. Significant. Product, innovation, and here I'll just hold up an example from Sun and formally Sun and battery out of Germany and they've, they're very active especially, in Germany and Austria and Australia. And. You know in Australia recently, they've, opened, up a product, offering, they call Sun and flat you've, got three different packages for, it and basically the idea is you pay a monthly fee of 30 40, $50, a month for a, solar, plus storage system, I'm various, sizes you, pay a flat fee per month, and they take care of all your energy, needs their quid pro quo is that, they want to have access to your battery so they can aggregate, all of those batteries and sell ancillary. Services, into the wholesale, market, so they've, been doing this already in Germany for a while and. Slightly different way to, basically maintain a virtual. Power plant in Germany they're. Looking to get that going in Australia, and they've also gotten very active in the United States now we're, seeing more activity where, they just secured a deal with a new housing construction developer. In Arizona, where they're looking, to add solar. Plus storage systems, into, about. 2900, new homes offering. About 23 megawatt, hours of energy storage capacity. Connected. To rooftop solar PV their goal is to have, that community self, supply about 80%, of its own power and then source.
The Remaining, 20% from. Off-peak, priced, power from, 2:00 to 5:00 a.m. in the morning they're they're getting really tired of piloting, everything, they just want to start getting megawatts, out there so now. That they've opened up the headquarters in Atlanta, we're expecting to see more activity from sauna in the US market, they're not the only innovator, out there in the space I just, raised them up as an example of some different business models that we're seeing start, to evolve of. Course you know as the, distributed. Energy is kind of moving more, and more into the mainstream we're. Seeing you know homes becoming. Much more controllable, this, is just an example of all the different parts of a home and a smart home where you can their demand, response ready there evie charging, ready they've got some solar on and potentially some storage this. Is a snapshot, of a Honda home app where anytime, on your phone you could look to see how well your your house is producing, what it's feeding into the grid how much solar it's generating, you know what your consumption levels or charging, levels are looking like and. Granted most, people are not gonna want to be, microcontrollers. Of their, nano grid of their home or facility, most people don't want to be energy experts, so I think a small amount of people are gonna want to get really excited about all the control, that they can have it most people are gonna want some kind of automated. Agent, within their home that's gonna do it autonomously, so. They don't even have to think about it beyond just setting a couple preference settings at the beginning now you, can't, talk about distributed, energy unless you spend a little bit of time talking about solar so, let's, talk about solar PV a little bit a lot of this I'm gonna show you is coming from green tech media who spends, a lot of time looking at this stuff here this is one, of their views, of rooftop solar markets, in 2016. Where we saw actually, here I'll just stop a second keep in mind this is not a utility, perspective of, looking at this this. Is more. Of like how the solar. Industry looks, at at markets, they, want to enter into states where they can offer and use customers, 10%. Greater savings in year, one and those, investments, so the darkest, states that you see here like California, Arizona New Mexico New, Jersey these are states in 2016.
Where They're really viable solar markets, I crossed, out Nevada because of activity, that happened, in Nevada at the end of 2015, where they got rid of some of their a metering policy, that supported, solar, PV I was back on the books now but that's for 2016. The solar is she pretty much fled in nevada i'll talk a little bit more about that later there, were new markets, opening in 2016, as of. You know last year rooftop. Solar markets, were expected, to continue expand, into 2019. There's some countervailing forces, that are afoot right now but I think the general gist, of it is that this is actually fairly close to what we've been seeing now the cost of solar systems, keeps dropping these, and again this is for rooftops, not utility, scale and it's opening up more markets we're seeing a lot more activity, it's starting to branch into the American southeast, in the Midwest, when we look at utility, scale view you, can see that that's even much more expansive, typically. Utility. Scale installations are about 40%, cheaper than rooftop, systems, so no surprise that you could see a more viable market, at the utility, scale in the, northwest, the, utility, scale markets, largely driven from purpo, contracts, that's the public, utility, regulatory, policies, Act of 1978. And you know basically that's, an act that was passed specifically. To reduce them an opsin e power of electric. Utility so at the time were the, only you know if they chose not to buy the output. Of a, generator, and then that generator, did not have access to the market so purple. Was basically. Required those electric, utilities, to, purchase their output, if a local renewable resource was sited within their territory, and could, offer electricity, at a competitive, price in, the northwest, what we've seen is a lot of activity, against, those purple antrax you know mostly. Companies like Pacific, Corp and PGE ad Idaho Power where, they wanted to basically reduce, the offerings, of those contracts from long, term contracts, down to short. Term contracts, and in an Idaho in 2015, they, were successful. In getting those contracts, down to two years and, I don't think we've seen a single purpose contract, out of Idaho since it happened it's hard, to imagine anybody, getting, financing, for, a renewable, project, if they've only got a two-year off take agreement, and so you know we'll see how that continues to advance but purpo didn't really get people to fire it up until renewables, got much, more cost competitive now. It's becoming a real key issue in some states now, going back to the rooftop stuff for a minute one of the things that is driving, the residential, market so much and, commercial, to just rooftops in general are net metering policies and, these are just policies, that require when. End-use consumers, are spilling energy into the grid it requires the retail electric utility, over them to compensate, them, typically. Starting, at retail, rates but more recently, there there's been efforts to push those down to, a wholesale, rate of compensation these, are done at state level there's typically, a cap associated. With it so wants, a certain amount of customers, join, a net metering program up, to like one two three four five percent it triggers a review, of the, policy I just see if changes, have to be made retail, utilities, have gone very actively, into those spaces to try to take those renewal, opportunities. To push, compensation. Rates from retail down to wholesale and it's, seeming a little better in the last year but for a few years there it was pretty obvious that the utilities, were going very heavy against, solar intrusion. Into, their territories, and so you know one of the things that we saw happen, as utilities, threatened the solar industries, business. Proposition, to India's customers, where they were selling systems, to folks under. These net metering policies and. Folks, were expecting, to see their system paid off in five to seven years or whatever it was under that policy as the, utilities, came out to fight net metering I think it's scared of the solar installers, to the point where they had to drank in their business proposition. By partnering, with battery, companies, to provide a fall, back proposition. For self supply if the net metering rules changed, drastically and. Took away that the. Original proposition and so it's when, I look at this I see a lot of Reed not all but a lot of retail utilities, are not really playing a long game in this space it's, a bit of knee-jerk reaction.
Against, This intrusion, into their territories, and it's created, a fair amount of conflict, between, retail. Utilities, and solar installers, and in this space the retail utilities, have not been winning a lot and even, sometimes when they do win they're still losing and Nevada is a good example here you know in Nevada they got rid of their, net, metering policy, at the end of 2015. Drove the solar industry out of the state in 2016. But that policy changed, they did not grandfather, in any of the end-users, who had been, part of that need the net metering policy, prior to that change and they also put, in a fixed fee that would start off I think somewhere around like 7 or 750, a, month in, the, first year and over, the a series of years, grow. To be, you know around thirty five to thirty seven dollars a month within a matter of five to seven years I want to say that really cheesed off a lot of folks in Nevada so it triggered a class action lawsuit against. NV energy by those people who did. Not get grandfathered, to the old policy, it. Triggered the creation of a new advocacy, organization. That launched, a ballot measure to defray. The monopoly, status of, the retail utilities, in Nevada it also in tributed, to and the Energy's largest, commercial customers, also, wanting to exit the grid completely and. Go out and procure their own renewable. Energy and diminish. The total load of NV energy quite considerably, and then ultimately what, happened in the last year, is that man redoing is now back on the books in nevada and v energy took an incredible blow, from a PR side between, them and their customers, and, the. Utilities. Passed overwhelmingly, I, think around 75, to 25 percent. If it passes again, in the next general election it becomes law and the state so, like I said even when, utilities, are winning in some, of these net metering policy, fights it's ultimately, a. And, so there's this need for, retail, utilities, play a much longer, game so. You know I think, the argument can be made that, it's probably better for a utility to have customers. Still, participating. With them in a net metering program than. To be pushing, them to. Exit, their grid with their own self-sustaining systems so this is again like what I'm saying where I think a lot of retail utilities, are kind of moving into the space and a bit need jerkish attitude, and creating. An environment, of antagonism. Frankly, looking, at this from a wholesalers, perspective, I'm seeing a lot of acrimony right now and we'll. See if that continues, we. Keep looking at some of the solar stuff we're seeing markets continuing, to expand, whether, that's community, choice aggregation. Especially, in California, advancement. Of community, solar shared, solar arrays where people can basically buy a stake, in that solar array we're seeing quite strong advancement, of solar plus storage especially as storage is getting cheaper and more efficient, and solar is getting cheaper and more efficient, and we're seeing corporate. Off-site, agreements, also take off and I'll come back to that in a little in a little bit but this is just kind of gets to the strengthening, of the marketplace. In general in the Northwest, Oregon, solar. Energy industry Association. Is hoping to see about 4,000. Megawatts of solar get, added in Oregon, over the next 10 years much. Less so in in Washington. But still a fair amount and, all this is happening even you, know before we even get into seeing solar, really infuse, its way into the built environment, where you start seeing solar slather, onto buildings of all types. Now. When we look at the cost. Of solar the cost has been dropping, this is no secret people been talking about this quite. A bit now for the last few years I put, a star here on this chart to show kind of where we ended up in 2016. That's. The residential, market commercial. Market is very similar costs, are falling this is where we ended up in 2016. And you. Know as we look at the Power Purchase Agreements. That have been taking place they're, trending low and continuing, to go lower this. Is a snapshot. Of you know kind of break out of some of the costs associated with with, the price fall over. Time and. Residential. Commercial and, utility-scale and although. This is fixed tilt. Prior.
To Some of the latest issues, associated with some international trade, and some other policy things that are happening what. Happened is we saw this big bump in 2016. In installations. As a lot, of folks were thinking that the, federal tax credit was going to go away at the end of 2016 it got extended. And so greentech, media's you know was arguing that it basically pulled a lot of the market, forward from. 2017. And we could expect a dip over the next couple years two or three years as everybody. Kind of dealt with what was in their pipelines, as they were kind of full, up at the moment it'll be interesting to see how this plays out because. Of the extreme, price Falls that happen in 2016. Especially, with solar, modules, in particular, from, crystalline silicon, modules, most of those are coming out of China and, so. There, was a Chinese. Majority, owned, manufacturer. In Georgia that filed for, some trade action against, the Chinese, and they're asking for some some help and basically, the. Went through about a month or so ago the, trade commission decided that there has been evidence of harm on American, manufacturers, of solar, PV panels, again, these are crystalline silicon panels and I'm not talking about thin film and now that, has to go to President Trump to make a decision about what the remedy is going to be and some. Projections. Of the impact, again from Green Tech on what, the impact is gonna be here is they're seeing the potential for a significant, drop in activity as. Prices. Are probably. Pushed up again, to the point where solar modules, were probably, sometime between like 2012, and 2013 somewhere. In there. This. Is their price forecast, for single. Axis systems, those are the, utility. Scale systems, where they can follow the Sun from morning to evening on, a pivot in the northwest, just about all the utility. Scale solar systems. We're seeing put in or coming in on a single axis. System so that's why I grabbed this and threw it in so you could see that but it's really it's it's anyone's guess what's gonna happen at this point but some trade action is coming, when. We look at storage. This, is getting a little old for. To data so. Keep that in mind I think this might be from. 2014. But you know basically it's still helpful to see that a lot of the original, applications. For storage were in the PJM, area when they put out you know some approval, for, using, battery storage to supply ancillary, services, in that market it filled a need fairly, quickly and then we had to start waving people off but now you, know the biggest pipeline, is in California, obviously, and everybody's. Watching to see what's gonna happen as we, see more and more storage hit the grid, in California. The. Prices, on the lithium-ion battery, packs have been following, you know just this rapid, pace where, you know the prices that people projected. For 2020, already got hit in 2015, and I think since the time that this snapshot, was taken in, April. Of 2015. I think the prices have fallen about another 70%. Since then so, they keep trending, lower but, you can look at different technologies, and how, they're faring in comparison, to each other here and this, is actually organized, by, what's, electric. Vehicle space being used for transport, what's, being used for stationary and then we've got some other portable, batteries in. Here as well now we're watching the price fall in all these and, what. Folks like Green Tech are telling us is that as we. See, more batteries. Getting sold into the marketplace over. Time we can expect to see more demand, side, solutions. Being, employed. So that it's not just a utility, scale driven, market the. Market for these you know they're expecting, to continue, to increase over, time and it's a pretty strong market, development, and you know one of the things that's behind, that is the price fall of course but behind the price flow is that you know there's this battery, production boom, that we're just watching the early stages of right now with, Tesla's, advancement, of their Giga factory in Nevada but, BYD is building out in China and there's.
A Lot of manufacturers. That are really scaling, up their manufacturing. Capacity, in a big way to meet the electric vehicle, adoption, curve that they're projecting, all of these batteries are not going to go in the cars a lot of them are going to be sold stationary, but basically, as the manufacturing. Scale-up hits in this technology, it's going to drive the price lower. We're also expecting to see, a lot of renewable, storage. Hybrid, systems whether its wind plus storage solar, plus storage etc. You know going in and we already are seeing that we're gonna see more of it as far as what happens to the used batteries coming out of the electric vehicles there's, a divergence, of opinion on, what this is gonna look like you got companies, like Tesla, in one side of the spectrum who, have been telling everybody that, you know they've looked at reselling. Used batteries, it doesn't make sense to them they'd, rather recycle. Those batteries, a hundred percent and they've set up their Giga factory Nevada to do that so, they can take all that lithium back. Out and some of the other materials. In them like cobalt, and reuse them and other batteries, other, companies, like Nissan, are wanting, and Mercedes, are wanting to sell their. Batteries, secondhand into a market place where they become, stationary systems. Probably behind the meter now associated, with all this battery you know news I think one of the the creeper advancements. That happen over this last year in particular was. The announcement. Of a, polymer, that can enable solid-state. Batteries, there's. A lot of folks that are working on creating solid-state batteries not the only one but, ionic, has really put out a pretty, good solution that can enable solid, state lithium ion batteries but also solid-state. Alkaline. Batteries, which we've never had alkaline, batteries, that could be recharged.
That The electrolytes, cost too much damage inside, those batteries, but. If they could have a solid-state, electrolyte, then, they'd become much more stable and alkaline. Batteries are cheaper, to produce and, they don't use as much rare earth materials as, lithium. Ion for example and so we could start to see much more competition, in the space as these, batteries, move away from liquid electrolytes, and, also we can end up with much lighter batteries, as well which, then has a carryover to the, electric vehicle space and better fuel efficiency equivalency. And. Now, we're also seeing in some places like in Hawaii where they have a lot of solar on the grid already and, they, don't necessarily want to add more daytime. Solar production we're, seeing this you, know solar plus battery, storage system, like what Tesla has put in, Hawaiian, Electric Company, on the Island of Hawaii and what they did is they put in a 13, mega watt system, that was paired with a 52, mega watt our storage, system the idea being that they could store all of the output, that that, solar system, had, available during the middle of the day and then, use that to treat the evening peak and, that's, worked out pretty nicely for them and you, can see in 2016, the, contribution. From solar to, meeting the loads, and then once, they added, in the, solar storage system, you, could see that solar storage, combo, taken. Off some of the evening peak as well without. Contributing substantially. To. The, middle, of the day solar oversupply, and whatnot and so you know I think he, Co just invested. Into their second system like this I've started investing, into it so, I typically, take that as a sign that that things are looking good we, can expect to see more of these.