Four Trends to Watch in the Energy Transformation of 2019

2018 is over, and a new year of energy evolution is upon us.

The past year laid a robust foundation for growth in 2019. It
ended with six states and territories, including two of the three
largest state economies,
committing to 100 percent clean electricity
. The solar industry
weathered the much-feared tariffs without excessive bleeding. The
list of cleantech failures was much shorter than in previous
years.

There’s still plenty of room to grow. Solar only accounts for
1.3
percent of U.S. electricity generation
, and wind produces 6.3
percent. Grid edge technologies are helping the grid adapt, but
they’re still in limited real world use.

Keeping in mind that contrast between heady potential and modest
achievement so far, we shall venture into the prediction game to
identify key clean energy developments to come over the new
year.

More states commit to clean

GTM’s Emma Foehringer Merchant dubbed 2018
the year of 100 percent clean energy
. Watch for another waves
of jurisdictions to follow the past year’s trailblazers.

In 2018, California joined Hawaii in legislatively committing to
a carbon-free electricity system. Governors in New Jersey, New York
and Puerto Rico made their own executive commitments to that end.
Washington, D.C.’s city council passed a target of 100 percent
renewables by 2032.

For a while, debates over 100 percent clean energy policy broke
down into intellectual tribalism, as different factions jostled
over who had the better vision for a clean energy future.
Meanwhile, skeptics could dismiss the whole exercise as a
folly.

Once economic and demographic powerhouses like California and
New York got on board, it became exceedingly difficult to dismiss
the policy as a fairy tale. Suddenly, passing the target switched
from seeming intractably difficult to eminently achievable;
following through is now the hard part.

Other states need not worry about breaking new ground; they have
a buffet of policy options to pick at, with a variety of stances on
timeline, tools and enforcement mechanisms. Instead of battling
over whether only renewables should be allowed, states can follow
California in legislating carbon out of the system, and leaving it
to industry and utilities to figure out the best mix of resources
to fulfill that directive.

Soon, leaders will face a different set of questions: if they
care about climate change, air pollution, or a more localized,
secure and affordable energy system, why wouldn’t they entertain
some sort of systematic overhaul?

In the near-term, look for action in Colorado, Connecticut and
Oregon, where governors won in November calling for 100 percent
clean energy. Governors-elect in Illinois, Maine, Nevada and New
Mexico called for
very high levels of clean energy
in the coming years.

Utilities get smarter about planning their investments

Utilities had resource planning down to a science: figure out
load growth and build enough gas plants to meet your future peak.
Then things got a lot harder.

Load growth stopped showing up when it was supposed to. Wind and
solar started filling in energy production, but not necessarily
during those peak times. Battery storage appeared on the scene,
frustrating the clean categories of generation and wires that had
worked for so long. And controllable, customer-sited equipment
created the possibility of lowering peak demand instead of raising
production to meet it.

It took a while, but at least some regulators have caught up to
these changes in how utilities can plan for the future. Now the
utilities have to follow suit.

The harbinger came in March when Arizona’s all-Republican
regulatory commission
froze new gas plant construction
for the year and rebuked the
investor-owned utilities for relying too much on gas plants in
their 15-year plans. The regulators had been mulling a clean energy
overhaul to use storage to deliver more solar power during the
evening peaks, rather than building lots of new gas peakers.

The unexpected news demonstrated how quickly new energy
technology can move: storage offered uninspiring economics when the
integrated resource planning began in 2016, but that changed by the
time the plans were submitted for approval.

The other conundrum was that Arizona Public Service, for
instance, had already built more energy storage and solar than its
own plan called for. The technologies spoke for themselves in
competitive solicitations, and the gas-heavy planning document
didn’t get in the way.

That might offer some comfort for all the other jurisdictions
where utilities haven’t factored new assets like storage into
their planning. Just this year, Duke energy called for a base case
of
300 megawatts
of storage in its Carolina territories, while
neighboring Dominion Energy
didn’t plan for any
.

But Virginia regulators
rejected Dominion’s plan
in December for overestimating load
growth and failing to account for a recently passed grid
transformation law that will hasten renewables deployments.

The message for other utilities: expect greater scrutiny on your
planning calculations than ever before. Conveniently bountiful load
growth expectations, or exclusion of viable alternatives, are not
going to slide any more, at least for some regulators.

Flexible load comes into its own

There are a lot of tools to modulate energy consumption in homes
and businesses, but getting them to work in sync within a building
and within the broader grid network has taken a while.

“2019 is going to be the year of orchestrating flexible
resources, both on the residential and C&I side,” said Elta
Kolo, research manager for the Grid Edge team at Wood Mackenzie
Power & Renewables. “You’re going to see increasing
diversity in the resource mix that’s being orchestrated.”

This development is part of a long-awaited shift from
old-school, unidirectional demand response signals to a
bidirectional system where utilities communicate with a range of
devices out in the field and get them to respond to peaks or other
stresses on the system.

The necessary ingredient of connected energy devices is finally
coming into place. Smart thermostats are reaching market
penetrations unheard of for heavier home energy investments. And
advanced battery systems are finally incorporating other home
devices, like smart appliances, solar panels and electric vehicle
chargers.

Sonnen unveiled a
luxury home automation battery
in September, clocking in at
$26,000. The ecoLinx can predict extreme weather and automatically
shed loads to prepare for an outage, then switch seamlessly to
backup mode. A new model priced for a broader market will
come to market in 2019
, outfitting a sustainable home
development planned for construction in Florida that year.

Upstart company ElectrIQ also said it will release a smart
home-enabled battery in 2019 for $9,000; it raised a
$6 million seed round
to finance that effort.

Residential storage heavyweights Tesla and Sunrun aren’t
talking much about connected-home capability just yet, focusing
more on backup power as a selling point. If early autonomous home
battery products win customer appeal, other companies are likely to
follow.

For big action on flexible resource orchestration follow the
money — to the Empire State, where the New York Power Authority
recently got approval to spend $75
million by the end of 2020
on grid flexibility, part of a
longer-term $250 million initiative. The first phase will focus on
alternatives to wires infrastructure upgrades, distributed energy
resources, and storage-paired renewables.

Storage hits the big time

It was a lackluster year for large-scale storage in the U.S.,
punctuated by South Korea coming out of nowhere and nabbing the
title of most megawatts deployed in a country.

2019 will be different.

The value of the U.S. storage market will more than double, to
$973 million from $474 million in 2018, according to Wood
Mackenzie’s latest
Energy Storage Monitor
report. The market value is expected to
double again in 2020.

Getting within spitting distance of a billion-dollar annual
industry is a huge landmark for what has been the new kid on the
energy block for the last decade. Sufficient scale attracts people
with more capital. Already, private equity firms are coming out of
the woodwork with ample balance sheets to develop storage and earn
longer-term returns than most of today’s financiers would
accept.

The industry will nearly double its megawatts deployed (338 to
659) and more than double its megawatt-hours deployed in 2019 (686
to 1,682), according to the Energy Storage Monitor. That makes 2019
the first year in which the industry delivers more than one
gigawatt-hour of storage capacity. The subsequent years will likely
dwarf this high water mark.

Storage developers still face a fearsome series of obstacles:
outdated market design, supply constraints, slow sales timelines
with cautious customers, to name a few. After years of an infant
market with dramatic swings in quarterly activity, 2019 will kick
off the era of steady deal flow at gigawatt-hour scale, with
billions of dollars on the table.

Source: FS – GreenTech Media
Four Trends to Watch in the Energy Transformation of 2019