6.4_From Resiliency to Solvency_Horne_EPRI/SNL Microgrid Symposium
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Presentation from the EPRI-Sandia Symposium on Secure and Resilient Microgrids: From Resiliency to Solvency: Building a Business Case for Public Purpose Microgirds, presented by Kenneth Horne, Navigant, Baltimore, MD, August 29-31, 2016.
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6.4_From Resiliency to Solvency_Horne_EPRI/SNL Microgrid Symposium
- 1. / ©2016 NAVIGANT CONSULTING, INC. ALL RIGHTS RESERVED1 EPRI-SANDIA SYMPOSIUM ON SECURE AND RESILIENT MICROGRIDS FROM RESILIENCY TO SOLVENCY: BUILDING A BUSINESS CASE FOR PUBLIC PURPOSE MICROGRIDS AUGUST 30, 2016 KENNETH HORNE, P.E., PMP DIRECTOR NAVIGANT
- 2. / ©2016 NAVIGANT CONSULTING, INC. ALL RIGHTS RESERVED4
- 3. / ©2016 NAVIGANT CONSULTING, INC. ALL RIGHTS RESERVED5
- 4. / ©2016 NAVIGANT CONSULTING, INC. ALL RIGHTS RESERVED6
- 5. / ©2016 NAVIGANT CONSULTING, INC. ALL RIGHTS RESERVED7 / ©2016 NAVIGANT CONSULTING, INC. ALL RIGHTS RESERVED7 MEGA DRIVER: CLIMATE CHANGE AND DEMAND FOR RESILIENCY Power Outages Affecting 50,000 Customers by Extreme Weather Cause Total Annual Events US: 1984-2012 (Source: National Oceanic and Atmospheric Administration)
- 6. / ©2016 NAVIGANT CONSULTING, INC. ALL RIGHTS RESERVED8 / ©2016 NAVIGANT CONSULTING, INC. ALL RIGHTS RESERVED CONFIDENTIAL & PROPRIETARY – FOR EVALUATION PURPOSES 8 MARKET FORECASTS DER IN THE US: STRONG GROWTH FORECASTED Trend: In 2016: 30 GW DER vs <20 GW central station Through 2019: DER growing ~3x faster than central generation (168 GW vs. 57 GW). (Source: Navigant Research) DER Assets by Technology Annual Capacity Additions US: 2015-2024 - 10,000 20,000 30,000 40,000 50,000 60,000 70,000 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 (MW) Distributed Generation Distributed Energy Storage Microgrids Electric Vehicle Charging Load Demand Response Energy Efficiency
- 7. / ©2016 NAVIGANT CONSULTING, INC. ALL RIGHTS RESERVED9 / ©2016 NAVIGANT CONSULTING, INC. ALL RIGHTS RESERVED9 MARKET DRIVERS SUPPLY AND DEMAND DRIVERS FAVOR RAPID MARKET GROWTH Technology Weather Carbon Economics Attitudes Threats Fuel Policy Markets Capital Opportunities and Enablers Needs and Wants
- 8. / ©2016 NAVIGANT CONSULTING, INC. ALL RIGHTS RESERVED10 / ©2016 NAVIGANT CONSULTING, INC. ALL RIGHTS RESERVED10 MARKET DRIVERS SUPPLY AND DEMAND DRIVERS FAVOR RAPID MARKET GROWTH Technology Weather Carbon Economics Attitudes Threats Fuel Policy Markets Capital Opportunities and Enablers Needs and WantsInterest Choice Demand Willingness to Pay
- 9. / ©2016 NAVIGANT CONSULTING, INC. ALL RIGHTS RESERVED11 / ©2016 NAVIGANT CONSULTING, INC. ALL RIGHTS RESERVED CONFIDENTIAL & PROPRIETARY – FOR EVALUATION PURPOSES 11 MARKET FORECASTS COMMUNITY RESILIENT MICROGRIDS IN THE US: STRONG GROWTH FORECASTED Trend: 10 Year CAGR: 26% Scale: exceeds $0.5 Billion in 2023 (Source: Navigant Research) Community Resilient Microgrid Implementation Revenue North America: 2015-2024
- 10. / ©2016 NAVIGANT CONSULTING, INC. ALL RIGHTS RESERVED12 / ©2016 NAVIGANT CONSULTING, INC. ALL RIGHTS RESERVED CONFIDENTIAL & PROPRIETARY – FOR EVALUATION PURPOSES 12 - 100.00 200.00 300.00 400.00 500.00 600.00 700.00 800.00 900.00 1,000.00 - 50 100 150 200 250 300 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 ($Millions) (MW) Public Power IOU Revenue MARKET FORECASTS UTILITY DISTRIBUTION MICROGRIDS IN THE US: STRONG GROWTH FORECASTED Trend: 10 Year CAGR: 28% Ownership: Public Power surpasses IOU in 2022 (Source: Navigant Research) Utility Distribution Microgrid by Owner Annual Capacity Additions and Implementation Revenue US: 2015-2024
- 11. / ©2016 NAVIGANT CONSULTING, INC. ALL RIGHTS RESERVED13 / ©2016 NAVIGANT CONSULTING, INC. ALL RIGHTS RESERVED13 DEFINING “MICROGRID” U.S. Department of Energy: “An integrated energy system consisting of distributed energy resources (DER) and multiple energy loads operating as a single controllable entity in parallel to or islanded from the existing power grid” Always Islanded Both Islanded & Grid Connected Always Grid Connected Remote communities Small Island nations Rural electrification sites CHP Rooftop Solar DER systems Single building nanogrids Campus microgrids Smart city district energy
- 12. / ©2016 NAVIGANT CONSULTING, INC. ALL RIGHTS RESERVED14 / ©2016 NAVIGANT CONSULTING, INC. ALL RIGHTS RESERVED14 CAPABILITIES AND BENEFITS MICROGRIDS CAN PROVIDE A VARIETY OF HIGH VALUE BENEFITS Key Microgrid Capability Valued Benefit Optimized Economic Dispatch Asset Optimization Optimized Energy “Prosumption” Community Development Optimized Fuel Carbon Reduction Independent Self-Supply Resiliency Extension Local Control and Redundancy Security Enhancement Economic Load Defection Cost Reduction
- 13. / ©2016 NAVIGANT CONSULTING, INC. ALL RIGHTS RESERVED15 / ©2016 NAVIGANT CONSULTING, INC. ALL RIGHTS RESERVED15 busi·ness case /ˈbiznᵊs-k͞ as/ Noun : a justification for a proposed project or undertaking on the basis of its expected commercial benefit --Oxford Dictionary BUSINESS CASE DEFINITION
- 14. / ©2016 NAVIGANT CONSULTING, INC. ALL RIGHTS RESERVED16 / ©2016 NAVIGANT CONSULTING, INC. ALL RIGHTS RESERVED16 BUSINESS CASE DEFINITION commercial /kᵊ’mᵊrSHᵊl/ Adjective : having profit, rather than artistic or other value as a primary aim --Oxford Dictionary
- 15. / ©2016 NAVIGANT CONSULTING, INC. ALL RIGHTS RESERVED17 / ©2016 NAVIGANT CONSULTING, INC. ALL RIGHTS RESERVED17 busi·ness case /ˈbiznᵊs-k͞ as/ Noun : a justification for a proposed project or undertaking on the basis of its expected commercial benefit --Oxford Dictionary BUSINESS CASE DEFINITION A successful business case clearly and credibly defines how and when an investment will deliver a return to the financier with acceptable risk The objective of any business case is to persuade a financier to provide capital today in exchange for promised financial gain tomorrow
- 16. / ©2016 NAVIGANT CONSULTING, INC. ALL RIGHTS RESERVED18 / ©2016 NAVIGANT CONSULTING, INC. ALL RIGHTS RESERVED18 CAPABILITIES AND BENEFITS MICROGRIDS CAN PROVIDE A VARIETY OF HIGH VALUE BENEFITS Key Capability Valued Benefit Optimized Economic Dispatch Asset Optimization Optimized Energy “Prosumption” Community Development Optimized Fuel Carbon Reduction Independent Self-Supply Resiliency Extension Local Control and Redundancy Security Enhancement Economic Grid Defection Cost Reduction Requires Capital- Intensive Islanding Delivers Non- Economic Benefits
- 17. / ©2016 NAVIGANT CONSULTING, INC. ALL RIGHTS RESERVED19 / ©2016 NAVIGANT CONSULTING, INC. ALL RIGHTS RESERVED19 BUSINESS CASE CHALLENGES TO THE SOLVENCY OF RESILIENCE $0 $200,000 $400,000 $600,000 $800,000 Revenue Expense Annual Income Statement “Typical” 2.5 MW CRM Key Assumptions • 2.5 MW – PV + NG Turbine • PV Capacity Factor: 25% • Islanded Op Duration: 2 weeks • Value of Electricity: $0.15/kWh • Value of Natural Gas: $4/MMBtu • Capital Cost: $2MM/ MW • Debt Finance: 100% • Note Term: 20 years • Interest Rate: 5.2% (Source: Navigant)
- 18. / ©2016 NAVIGANT CONSULTING, INC. ALL RIGHTS RESERVED20 / ©2016 NAVIGANT CONSULTING, INC. ALL RIGHTS RESERVED20 BUSINESS CASE MICROGRIDS STILL FACE CHALLENGING BUSINESS CASE BARRIERS Five Microgrid Business Case Challenges Many valued benefits are not readily monetizable Monetizable benefits (revenues) are often difficult to securitize Significant Multi-Stakeholder benefit and cost distribution disparity Levered IRRs often fall below traditional Merchant Power targets Soft costs are high & cost estimates have high uncertainty
- 19. / ©2016 NAVIGANT CONSULTING, INC. ALL RIGHTS RESERVED21 / ©2016 NAVIGANT CONSULTING, INC. ALL RIGHTS RESERVED21 BUSINESS CASE BUSINESS CASE BARRIERS CAN BE OVERCOME WITH THE RIGHT APPROACH Four Microgrid Business Case Remedies Focus on blue sky operation and asset optimization Seek to create new products and services that can be monetized Partner with others to expand the pie Place a value on (and monetize) social good services
- 20. / ©2016 NAVIGANT CONSULTING, INC. ALL RIGHTS RESERVED22 / ©2016 NAVIGANT CONSULTING, INC. ALL RIGHTS RESERVED22 BUSINESS CASE MICROGRID BUSINESS MODEL To be both commercially and financially viable, a microgrid business model must make ecosystem participation choices by addressing eight business model components. Suppliers and sellers of goods and servicesTeam Processes and resources to create a value proposition for a customerCreating Value Products and services that create value for the customerValue Proposition Processes and resources to deliver the value proposition to a customerDelivering Value User and/or buyer of goods and servicesCustomer Monetary funds necessary for support product/service development and growthCapital Monetary expenses incurred in the creation and delivery of products and servicesCosts Monetary gain from sale of products and servicesRevenue
- 21. / ©2016 NAVIGANT CONSULTING, INC. ALL RIGHTS RESERVED23 / ©2016 NAVIGANT CONSULTING, INC. ALL RIGHTS RESERVED23 BUSINESS CASE MICROGRID COMMERCIAL VIABILITY QUESTIONS What are market incentives and constraints?Rules Which stakeholders would be affected?Stakeholders Who owns the assets?Ownership What services might those assets provide?Services What is the value proposition for stakeholders?Value What are revenues, costs, and financing sources?Dollars What relationships must be managed and how?Relationships
- 22. / ©2016 NAVIGANT CONSULTING, INC. ALL RIGHTS RESERVED24 / ©2016 NAVIGANT CONSULTING, INC. ALL RIGHTS RESERVED24 BUSINESS CASE MICROGRID ECOSYSTEM MODEL Our ecosystem model may be used to define the commercial design for any microgrid or distributed energy resource project, business or market Microgrid Project Community Incentive & Constraint Makers Suppliers Users Macrogrid
- 23. / ©2016 NAVIGANT CONSULTING, INC. ALL RIGHTS RESERVED25 / ©2016 NAVIGANT CONSULTING, INC. ALL RIGHTS RESERVED25 BUSINESS CASE COMPLEX COMMERCIAL DESIGN CHOICES • The realm of microgrid product / service offering possibilities is complex • There are 300+ ecosystem design element choices
- 24. / ©2016 NAVIGANT CONSULTING, INC. ALL RIGHTS RESERVED26
- 25. / ©2016 NAVIGANT CONSULTING, INC. ALL RIGHTS RESERVED27 CONTACTS KENNETH HORNE, P.E., PMP Director (781) 270-8368 Ken.Horne@navigant.com
Hinweis der Redaktion
- Source: https://hdwallpapers.cat/superstorm_sandy_satelitte_image_nature_of_hd-wallpaper-1363433/
- 8.5 million power outages – nearly 3% of US population 200,000 small businesses closed $65 billion in economic loss = 6.5 Donald Trumps 159 fatalities
- New York University’s medical center in Midtown Manhattan suffered severe flooding, which knocked out emergency power and forced the evacuation of hundreds of patients. But NYU’s main campus downtown still had electricity and heat, thanks to a 13.4-megawatt CHP (combined heat and power) plant and a self-sufficient microgrid system, which distributes electricity independently of the utility grid. Microgrids are considered one key way of making the power grid resilient during extreme weather events like Superstorm Sandy. Source: http://spectrum.ieee.org/energy/the-smarter-grid/one-year-later-superstorm-sandy-underscores-need-for-a-resilient-grid
- Given the wide range of technologies included in DER classification, deployments already outpace installations of centralized generation. This year, DER deployments will reach 30 GW in the US. According to EIA, central generation net capacity additions (new generation additions minus retirements) are estimated at 19.7 GW in 2016. This means that DER is already growing significantly faster than central generation. On a 5-year basis (2015-2019), DER in the US is growing almost 3 times faster than central generation (168 GW vs. 57 GW). The macro trends we cite certainly vary by jurisdiction as the policy approach, market dynamics and structure vary. So the rate of penetration of DER can be very different depending on the jurisdiction. However, we do believe the macro trends will persist, meaning that the movement towards customer centric solutions & DER will ultimately become common across the U.S.
- Source: https://hdwallpapers.cat/superstorm_sandy_satelitte_image_nature_of_hd-wallpaper-1363433/