Global Insight 10: 27-06-17

Australia

Gigafactory to be opened in Darwin

Energy Renaissance, backed by UGL, is planning to build a $100 million gigafactory to manufacture large-scale lithium ion batteries in Australia. This will be the first of four planned by the group. They will be concentrating on increasing the efficiency of batteries in hot weather, a particular problem in Australia and plan on creating a market within the Asia-Pacific region. If correctly positioned these factories could answer the employment crises within areas which previously relied on coal based enterprises.

Europe

Sweden aims to become carbon neutral by 2045

Already a leader in renewable energy, Sweden has just passed a new law aiming to cut carbon emissions to zero by 2045. As is the case in many other Northern European countries, such as Denmark, the political system encourages cross-party consensus building and the law was developed through just such a process. The plan also involves getting 50% of energy from renewables by 2037, with a particular focus on reducing transport emissions.

European utilities continue to buy into a DER future – solar looms for Engie while Enel scoops up EnerNOC

The trend of European utilities getting out of traditional large scale fossil fuel generation and into distributed energy continues. In a recent appearance at SolarPower Dialogues, Isabelle Kocher, CEO of French power company Engie (which took over independent power producer International Power in 2011) talked about ‘fundamental changes’, and argued that ‘Solar will play a prominent role in this new energy system’. Engine has been buying into solar projects in Asia, the US and UK. Meanwhile, leading Italian utility Enel is acquiring the American demand response and energy management firm EnerNOC, a move that will make Enel a global leader in demand response.

German Renewable Auctions

Insights into Germany’s first renewables auctions show they have played an important role in bringing down prices, whilst also achieving high a realisation projects – 100% of the projects in the first round were built within the set deadline. There were however mixed results in terms of how to best support community projects and local energy cooperatives. A key issue appears to be around how to provide preferential conditions in an auction to enable these sorts of projects to come forward, without those conditions leading to market distortions and distortions in who brings projects forward. Ultimately they suggest auction design is vital and understanding what policy goals should be delivered via an auction, and which should be delivered via addition measures outside the auction are key. Wider research by the AURES project suggests that auction outcomes are very sensitive to auction design and small changes to key elements can be the difference between success and failure. In terms of system change, it seems auctions can play an important role in supporting large scale renewables, but may always struggle for smaller scale projects – given the need for a transition to happen from the top down as well as the bottom up, auctions are only one tool in bringing about change.

US

Nevada’s New Solar Law

Nevada passed it’s new solar law (AB 405) in mid June 2017. This reinstates net metering for rooftop solar customers in Nevada, after utility regulators eliminated the policy in December 2015. Uniquely to the US, it also provides a guaranteed right to self-generate electricity. Under Section 24 of the bill, consumers are granted the right to generate their own electricity and offset their own internal usage one-for-one at the full retail rate – altering issues around net-metering. If this spreads, then one can argue that a distributed, decentralised energy system really is occurring. It will have implications for combined distribution utility wire and supply companies, moving them more to wires companies (as is normal in Europe), and it have may have implications for net metering.

US Department of Energy Grid Study

The expected US Department of Energy Grid Study report ordered by Secretary Perry to find out whether wind and solar is undermining power markets and grid reliability, and whether baseload is necessary is leading to a flurry of reports. The NRDC has commissioned Brattle to investigate. The Brattle Report (Advancing Past “Baseload” to a Flexible Grid: How Grid Planners and Power Markets Are Better Defining System Needs to Achieve a Cost-Effective and Reliable Supply Mix) has the major take-away that flexibility is the key to delivering cost-effective and reliable service. It shows that wind and solar is not undermining power markets or grid reliability and that baseload power is not necessary for a well-functioning electric grid, and is also increasingly counter-productive to meeting public policy objectives at low cost. An NRDC blog about the Brattle Report is available here. Another report also produced in advance of the expected DOE report is one funded by the AWEA and AEE.

Market design and price formation

PJM Interconnection has published four documents focused on market design and possible changes to price formation. Two of the papers introduce proposals to address state subsidy issues, including a proposal to integrate carbon prices into power markets and a proposal for two-part capacity market auctions similar to an earlier plan floated by ISO-New England. A third paper addresses price formation in PJM’s energy market and considers whether changes are necessary to market rules governing when and under what circumstances a generator is eligible to set marginal prices. This is a step to try to work out what would be an appropriate market design for a electricity system with a large proportion of variable power. It is a hugely contentious issue because it could be that a new market is designed which keeps the fossil fuel industry happy whilst also maintaining fossil fuels longer than public policy might wish in terms of GHG emissions, and at higher cost.

Insights from a Regulator

For those interested in the differences between the US and GB regulatory system, there has been a 3 part blog series called Lessons of a US Regulator by Phil Jones ex President of NARUC and ex Washington State Regulator. Together, they sum up the spread and difficulties of being a US Regulator.  Lesson 1 Toughest job in Government – mini-memoirs of a Regulator. Lesson 2 Insights into wrestling with Regulator issues. Lesson 3 Get proactive and stay paranoid

US mini-round up

The New Hampshire PUC has approved net metering tariffs for small solar customers. This is a temporary measure, and will be updated following on from a study of distribution energy resource valuation. Academics in the US have been having a well publicized argument about the possibility of a 100% renewable energy system in the US. A letter of 21 eminent academics has criticized a study by Marc Jacobsen of Stanford. Others argue: please stop bickering about this and get on and do it. Reuters sets out how Big US companies are driving renewable deployment. Elsewhere, there is discussions of how difficult it actually is to develop a successful start-up in the flexibility area in the US, and why this is. And increasingly, concerns (see also here and here) are raised over the long term viability of the CA market given high proportions of RE which is bringing down the wholesale price, whilst raising the retail price.

Posted by: rhoggett

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