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EDF Renewable Energy Joins the Fray With New Distributed Energy Business

March 17, 2017

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EDF Renewable Energy, a leading developer of large-scale wind and solar projects in the U.S., has entered the distributed energy arena with the launch of a new business unit named Distributed Electricity and Storage.

The new division is focused on deploying solar and energy storage projects up to 30 megawatts, and leveraging the experience of French-owned parent company EDF Group to provide a suite of products and services to commercial, industrial and utility customers.

Distributed Electricity and Storage (DES) was officially announced this week, but the unit has been in the works since last April, when EDF RE announced the acquisition of groSolar -- a developer and EPC provider with a successful track record of deploying C&I and municipal solar projects. Over the past 18 years, groSolar has built more than 2,000 projects with over 250 megawatts installed. The acquisition of groSolar served as a springboard for the new business, which is headed by industry veterans Tom Leyden, former CEO of Solar Grid Storage, and Felix Aguayo, former managing director at SunEdison.

“Felix and I bring to the group a long history of pioneering large commercial solar projects and see opportunity to benefit customers with the multiple use cases you have with storage,” said Leyden, in an interview. C&I and utility customers are currently missing out on the opportunity to improve their reliability and reduce costs by not taking a more holistic approach to their energy procurement and asset utilization, he said.

EDF RE is hardly the only company looking to develop a comprehensive DER strategy aimed at serving C&I customers in the U.S., though. Edison International recently rebranded its energy services arm Edison Energy. Duke has been active in the commercial space through REC Solar and a partnership with energy storage startup Green Charge Networks. Last spring, Green Charge was acquired by the European utility Engie, which has made several recent investments in distributed energy startups. GE has attempted to expand and streamline its DER business through Current. And then there's Tesla/SolarCity, which has been steadily moving into the commercial space.

EDF RE’s advantage in this competitive landscape is that the company has a broad spectrum of capabilities, “and if you integrate them well, there’s a lot more value to the end customer,” said Leyden.

“There are very few companies that can do it all -- solar in front of the meter and behind the meter, wind, energy storage, sophisticated controls, load management -- and…[still serve as] an electricity commodity supplier,” he said. “When you integrate these all together, the business model is much more powerful than any of these things separately.”

According to Leyden, the value play goes something like this: Solar reduces a customer’s overall energy demand, while storage is used to shape the customer’s load, reducing peak demand and costs associated with load volatility. EDF can then use its analytic capability to look at the customer’s newly shaped load profile and offer an attractive retail electricity price. Combine all of that with EDF’s sophisticated controls, and the customer’s load can also be used as an asset that’s bid into markets, like demand response.

These capabilities put EDF RE in a prime position to help companies looking to go 100 percent renewable -- of which there are a growing number -- achieve that goal in just a year or two, Leyden said.

DES has yet to complete a project that incorporates the full suite of services, but Leyden said that all components of the new business unit have been successfully executed by EDF and groSolar in some form. In partnership with EDF's North American affiliates, the company offers a complete array of services, including energy supply, hedging and risk management, as well as demand response, load management, and on- and offsite renewable generation. EDF RE has developed 9 gigawatts of wind, solar, bioenergy and storage projects in North America to date. And parent company EDF Group has deployed more than 300 megawatts (824 megawatt-hours) of storage projects worldwide.

Most of those energy storage projects are in Europe, but a few are in the U.S., such as the McHenry Storage Project in Illinois, which adds 40 megawatts of flexible capacity (20 megawatts nameplate) to the PJM Regional Transmission Organization and is currently participating in both the regulation and capacity markets.

EDF has very little distributed energy storage experience so far, however. There are also persistent financing challenges for C&I renewable energy projects, which have made it difficult for the sector to take off. As a result, there have been very few C&I solar-plus-storage deals to date, according to GTM Research’s Ravi Manghani. Given this market reality, it will be interesting to see how the DES group differentiates itself in the space.

One of EDF’s defining characteristics is that it’s patient, said Leyden. As a large international company with a strong balance sheet, EDF can afford to take some time to get the business model right -- at a time when the distributed energy sector is still very much in flux.

“I think there’s creative chaos going on in the energy storage and solar sectors,” Leyden said. “But I think in the next couple of years that will shake out, and it will be a really exciting time in the industry to position ourselves to play a much greater role in overall energy use.”

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GTM Statcast: The Week in Energy in Less Than 60 Seconds [GTM Squared]

March 17, 2017

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California Solar Industry and Utilities Unveil Dueling Solar-Storage Tariffs

March 17, 2017

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California is already breaking ground in attempting to properly value the distributed technologies hitting the grid. So far, that’s been done through large-scale capacity contracts, demand response auction mechanisms, and utility pilots. Now the state is opening another front in distributed energy integration: tariffs. 

Over the next year or so, the state’s investor-owned utilities are under regulatory pressure to create specially designed, optional tariffs available to homeowners or businesses that want to invest in solar PV, batteries, EVs or on-site energy controls. 

These rates would change from hour to hour, but with drastic price differentials between on-peak and off-peak times than the mass-market time-of-use (TOU) rates being rolled out across the state over the next four years. Such extreme price differentials could punish customers who can’t shift energy use. 

But they could also provide the financial incentives to cover the costs of adding a battery to a new or existing solar PV installation, to charge up when prices are low and discharge when they’re high. And unlike mass-market TOU rates, they could include different measures of real-time value -- price changes based on wholesale grid power costs, for example, or demand charges or distribution grid values aimed at getting customers to change energy-use patterns to mitigate local grid congestion needs. 

All of these options are now on the table in the general rate cases being put forward by Pacific Gas & Electric, Southern California Edison and San Diego Gas & Electric. PG&E’s rate case is coming first -- and we’ve already seen new tariff proposals come out from the utility and from the Solar Energy Industries Association (SEIA), two parties that have clashed before over solar-friendly rate design. 

Two different approaches to solar-storage tariff design 

This week, SEIA filed testimony (PDF) with the California Public Utilities Commission asking the regulator to reject PG&E’s proposed solar-storage rate schedules for residential and small commercial customers, and to go instead with an SEIA-designed set of rates. The solar group has also proposed a new “Option S” rate for large commercial and industrial customers to encourage solar-storage systems, something that PG&E hasn’t yet considered in its rate cases.

SEIA lays out two main reasons why it doesn’t like PG&E’s rate schedules for residential and small commercial customers, called E-DMD and A1-DMD, respectively, and why it wants to replace them with its own E-STORE and A1-STORE rates instead. 

PG&E’s rates would include a “significant non-coincident demand charge based on the customer’s maximum 15-minute demand each month, whenever it occurs.” And as we’ve seen from debates around the country, while some utilities have supported adding demand charges to solar net metering customers, solar industry groups have universally opposed them. 

“We’re categorically opposed to residential demand charges,” SEIA’s Brandon Smithwood said in a Wednesday interview, making PG&E’s idea of adding demand charges to its residential rate a non-starter. 

And while SEIA isn’t opposed to demand charges for small commercial customers, it would like to implement them in a different way. Instead of basing them on any single 15-minute spike over the course of a month, it’s proposing “daily demand charges,” imposed on customers only during the day’s peak demand hours. 

The difference, Smithwood explained, is that “with a monthly demand charge, it’s just that one 15-minute interval.” If a customer fails to prevent it, they've “blown [their] savings for the month.” With a daily demand charge, by contrast, “We could shape that demand charge so that it really sends a better price signal. We would be moving demand charges toward something that actually works better for customers, and makes more sense for a public policy standpoint.” 

California hasn’t used daily demand charges before, making SEIA’s proposal a novelty in the state's utility policy. Here’s how it describes the concept in its testimony: “The daily demand charge of $0.6390 per kW/day applies each and every day to the highest 60-minute demand during the 3 p.m. to 8 p.m. peak period. This rate element provides the storage user with a strong incentive to use storage both to reduce and to flatten their delivered load from the utility during the peak period, and to discharge storage when the stored power provides the greatest system benefits.”

The second big problem SEIA has with PG&E’s proposal is that it doesn’t believe the differences between on-peak and off-peak prices are significant enough. “It just won’t pencil out,” he said. “Even if you could manage your non-coincident residential demand charges, there’s not enough differential there.” 

SEIA’s rate differentials, by contrast, are quite high -- as much as 40 cents between the 52 cents per kilowatt-hour on-peak price and the 12 cents per kilowatt-hour off-peak price for residential customers under its E-STORE rate. 

But this is the kind of “spicy” differential needed to cover the extra costs of adding batteries to solar, which SEIA has estimated at 33 cents per kilowatt-hour. “You need the big -- 'spicy' is the word commission staff like to use -- more ambitious, more technology-focused, time-of-use rates, with that big differential between on-peak and off-peak,” Smithwood said. 

SEIA’s testimony backs this up with its own analysis of how a 10-kilowatt-hour battery, cycling daily between the off-peak and peak periods, would fare over a year's time under both proposed rates. Under the E-STORE rate, that system would realize $1,062 per year in benefits -- “economic if such storage units have reliable lives of 10 years and costs below $10,000. Such units appear to be commercially available soon, for example, the Tesla Powerwall 2.”  

In contrast, “We estimate that [PG&E’s] E-DMD rate will provide annual benefits of just $509, assuming optimistically that the storage can reduce the customer’s non-coincident demand charge by 50 percent of the unit’s output capacity.” 

At present, PG&E hasn’t provided an alternative analysis of its own rates. The utility recently testified to the CPUC that it “did not perform any analysis to determine the point at which the solar plus on-site battery storage would become economic under the proposed E-DMD and A1-DMD residential and small commercial rates.” 

The intricacies of creating, and comparing, never-before-seen DER tariffs

These are only two sets of multiple DER tariffs being proposed in California, and it can be hard to parse out the complex differences between all of them. At GTM's California’s Distributed Energy Future 2017 conference held last week in San Francisco, we heard a debate between SEIA’s Sean Gallagher and Environmental Defense Fund senior economist James Fine over another proposal coming from SDG&E, specifically for EV charging. 

EDF’s Fine pointed out that SDG&E’s experimental tariff for its Vehicle-to-Grid Integration pilot would be based on day-ahead forecasts of hour-by-hour prices the next day, with some adjustment for day-of changes. That will give EV drivers -- or the EVs themselves -- the data required to avoid high-price hours and take advantage of low-price hours. 

EDF is also asking PG&E and Southern California Edison to consider what it calls a “smart home rate,” which would expand the scope of customers beyond single-technology categories like solar-storage or EVs, to include demand response via smart thermostats, grid-responsive loads and other behind-the-meter controls. 

The basic concept includes some sort of monthly service fee (albeit one that's as low as possible); a grid charge that allows customers to benefit by managing their load profile; and day-ahead hourly price signals that accurately reflect a broad range of costs and values. 

Gallagher previewed SEIA’s E-STORE proposal in his CDEF talk, but also provided a critique of what SDG&E and EDF have proposed. In his view, hour-by-hour prices that change daily might push too much risk onto the customers and provide “too much certainty for the utility,” he said. 

Fine agreed that “the concern is that this is maybe too risky for many customers.” On the other hand, he acknowledged that “there’s also an attractive, profitable opportunity for customers who want to take on that risk” -- or perhaps are willing to hire a DER provider or aggregator to do it for them. 

Given all the uncertainty over how these kinds of rates will work in the real world, both Gallagher and Fine agreed that it’s important to have a number of options available to customers. 

Both also promoted tariffs that don’t just compel people to reduce energy at moments of high costs and high demand, but that also offer incentives to actually increase energy use during negative pricing events when demand is low and renewable energy supply is high -- such as during the midday belly in California’s "duck curve."

SEIA’s concept for this is called “discount days,” which would work along the lines of the critical peak pricing days widely used by California utilities (only in reverse), while EDF’s concept would embed these discounts in day-ahead pricing. 

The debate over DER-based tariffs is just beginning, but this will be the year that helps set the terms for rollouts across the state. PG&E’s general rate case will likely take until the end of 2017 to complete, SDG&E’s is set to close it in the third quarter, and Southern California Edison’s will conclude in 2018. 

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Enel Green Power CEO: Watch Out for Battery Oversupply in Early 2018

March 17, 2017

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Tesla and other battery companies have launched an arms race to expand their production facilities in an effort to bring costs down.

Questions remain about how soon the new factories will have an effect on pricing for end customers and how pronounced that effect will be. In the estimation of Francesco Venturini, who oversees 36 gigawatts of renewables as CEO of Enel Green Power, oversupply of batteries could hit as soon as early 2018.

“Cost is dropping faster than what everybody predicted, so it seems like it's following the same path that PV has shown in the past 10 years,” he told GTM during a visit to Berkeley to kick off an innovation hub. “I'm a believer. I see a lot of build-out of new factories around the world; I see right now the potential for having some overcapacity in the market, which is a good thing if I look at it as an IPP.”

It wouldn’t be news to hear rosy projections of storage cost declines from a battery maker. Venturini, though, has a unique vantage point on the industry.

Enel recently acquired the American energy storage developer Demand Energy to help expand the Italy-based utility’s global storage portfolio. The company is moving beyond pure renewables generation business to storage-assisted generation and potentially standalone storage.

The profitability of that new venture, and the efficacy of adding additional variable generation to the grid more broadly, rests very much on the prices the company can get to buy the batteries they install.

Tracking those prices requires breaking down the causal steps that flow from new factory construction. The supply curve here is about as smooth as a saguaro cactus: Each new factory coming on-line causes a surge in the batteries produced in a given month.

If demand for electric vehicles surges in parallel, there will be a ready market for all those new batteries. If EV demand doesn’t grow quite that much, those manufacturers will need to dump their surplus products somewhere. Stationary storage developers will be only too happy to oblige.

We’ve seen this dynamic at work in the past couple years, with underutilized battery production and slower-than-expected EV demand driving down stationary storage prices. In fact, we're already in a moment of battery oversupply, said Ravi Manghani, GTM Research's energy storage director. Existing plants don't have enough demand to operate at full capacity just yet.

What’s changing is the scale of production. As the giga-producers of the world -- names like LG Chem, Samsung, Panasonic -- race each other to increase manufacturing capacity, the rate of production is primed to increase further still.

“You need big volumes to be competitive -- to stay alive, you keep building capacity,” Venturini said. “Who benefits at the end? Usually it's the consumer, which is great.”

Granted, there are some differences between the silicon photovoltaics and battery production, Manghani notes. PV module-makers require silicon, an abundant resource, but they need a refined version of it; once the industry invested in more plants to produce high-purity silicon, "the price plummeted like a stone," he said.

The lithium-ion battery supply chain isn't as simple. "Raw materials are the biggest cost, but it’s not a single raw material that accounts for the majority of the cost," Manghani said.

Lithium is just one part of the puzzle. In the lithium nickel manganese cobalt oxide chemistry popular among electric car makers, those non-lithium components are rarer and more costly, and each has its own supply chain.

As such, Manghani expects battery costs to drop over the next few years, but not as fast as the PV modules did in their free-fall heyday. He estimated a rate of 30 to 40 percent cost declines over the next two years, similar to what we've seen in the past two years.

That'll cause manufacturers to scramble for any advantage over their peers, who will also be scrambling to undercut their competition on price. For customers, this turmoil will likely manifest itself as an increasingly favorable deal.

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Tesla Stock Up on News of $1.1 Billion Cash and Debt Raise

March 16, 2017

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Tesla, to the surprise of no one, just raised $1.15 billion in debt and equity to finance the build-out of its Model 3 production and battery factory.

In a release yesterday, the electric-vehicle and battery manufacturer announced "offerings of $250 million of common stock and $750 million aggregate principal amount of convertible senior notes due in 2022 in concurrent underwritten registered public offerings." Additionally, Elon Musk, Tesla's CEO, will buy $25 million of common stock.

If anything, this amount was less than expected, and will likely mean that an additional equity raise will be necessary later on. Barclays had said that a $2.5 billion stock offering wouldn’t be a surprise. Morningstar expected Tesla to raise $3 billion to fund Musk’s ambitions. Tesla expects to spend between $2 billion and $2.5 billion in capital expenditures ahead of the start of Model 3 production in 2017, up from $1.3 billion in 2016. The company has $3.4 billion in cash.

In last week's earnings call, Musk said Tesla has enough capital to reach the market with the Model 3, but its cash situation would be “close to the edge." To reduce the company’s risk, it “probably makes sense to raise more capital."

Tesla intends to build 500,000 vehicles in 2018 and will continue to invest heavily in the tooling, production equipment and construction of the Model 3 production lines and equipment to support cell production at Gigafactory 1, as well as new retail sites, service centers and Supercharger sites.

Tesla will have spent about $10 billion in R&D and capital expenditures since 2014, according to Morgan Stanley. Tesla went through $970 million in cash in the fourth quarter. UBS writes, "Cash burn was bad and is getting worse."

According to UBS, Tesla would need to spend up to an additional $8 billion on its network of charging stations in the U.S. alone "if it wants to make recharging a car as convenient as going to a gas station." Add that to the planned costs for gigafactories, Model 3 investments and costs associated with building a network of service centers, and Tesla might need $35 billion in capex through 2025.

According to CFRA, "The company plans hedging transactions to limit dilution of its common shares. The purpose of the transactions are to improve the balance sheet and support the investments to prepare for the mass-market Tesla Model 3. Lower than expected dilution is a positive, but in our view, risks persist."

Ben Kallo at Baird writes, "We view the offering positively as it should help de-risk the Model 3 launch, provide additional capital for Model 3 production equipment and/or investment in the Gigafactory, and remove an overhang on the stock. Bears will likely say the deal is too small, although we believe this displays TSLA’s confidence in the Model 3 timeline and anticipate shares will move higher."

Tesla stock is up more than 3 percent today.

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News Quiz: Energy Storage, Layoffs, Tesla and More

March 16, 2017

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Welcome to GTM's energy news quiz. I'm your host, Mike Munsell.

Test your knowledge of the week's news against our editorial team. Ready?


How'd you do? Be sure to sign up for our daily newsletter to improve your score next time around. Feel free to brag (or shame yourself) in the comments section. 


Mike Munsell is GTM's resident game show host. In addition to creating the GTM Energy News Quiz, he writes original riddles at Sign up to get them in your inbox every Monday and Friday.

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Clips, Quotes and Insights That Will Help You Understand California’s Complicated Energy Future [GTM Squared]

March 16, 2017

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Theft and Damage Are Putting a Damper on India’s Solar Electrification Efforts

March 16, 2017

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Bloomberg: The Dark Secret Behind India's Solar Plan

Maharashtra, home to the financial capital of Mumbai, declared itself fully electrified in 2012, relying on solar panels and small wind turbines to cover remote areas. India considers a village electrified if at least 10 percent of the households and public places such as schools have electricity.

But theft and damage have plunged 288 villages and 1,500 hamlets in Maharashtra back into darkness, according to according to Dinesh Saboo, projects director at Maharashtra State Electricity Distribution Co. “Most of the equipment is either stolen or not working,” he said. “Now we have decided that a majority of these villages will be electrified in the conventional way.”

Reuters: RWE Weighs Options as Utility M&A Talk Picks Up

German utility RWE is considering options including tie-ups with rivals and the sale of a stake in its Innogy business, its chief executive said, raising the prospect for large M&A deals in the crisis-hit sector.

"We are in regular contact with a large number of market participants. We are constantly examining all strategic options our company is faced with," RWE Chief Executive Rolf Martin Schmitz told journalists at a news conference on Tuesday to present the company's annual earnings.

Atlantic: The House Republicans Calling for Climate Action in the Trump Era

At a time when President Donald Trump is working to dismantle former President Barack Obama’s environmental legacy, more than a dozen House Republicans are calling for action to confront the threat of a changing climate.

Seventeen Republican lawmakers, including Elise Stefanik of New York, Carlos Curbelo of Florida, Mark Sanford of South Carolina, Mia Love of Utah, Don Bacon of Nebraska, and Ryan Costello of Pennsylvania, introduced a resolution on Wednesday that urges the House of Representatives to “address the causes and effects” of climate change,  according to a press release sent out by Costello’s office.

The resolution, which revives a call to action endorsed by nearly a dozen House Republicans in 2015, describes environmental protection as a “conservative principle.” And it warns that “if left unaddressed, the consequences of a changing climate have the potential to adversely impact all Americans.”

Washington Post: Here Are the Federal Agencies and Programs Trump Wants to Eliminate

President Trump's budget blueprint proposes to counterbalance a $54 billion increase in defense spending with a slew of steep cuts to discretionary spending programs, including by scrapping federal funding

Those cuts include the complete elimination of a number of agencies and programs across the federal government. They include some familiar names, like the Energy Star program and the Low-Income Home Energy Assistance Program (LIHEAP), as well as more obscure programs that do things like fund airports in rural areas, help low-income families, fight climate change and develop clean energy technologies.

In the budget blueprint the administration asserts that many programs, like LIHEAP, are targeted for elimination because of a failure to demonstrate efficacy. Others, like the Advanced Research Projects Agency-Energy (ARPA-E), are being eyed for elimination due to a belief that the private sector can handle those functions better. Still others, like the Emergency Refugee and Migration Assistance Account, are said to be duplicative with other federal functions.

Energy Collective: Energy and Blockchain Go Global: Utilities, Startups and Use Cases

Presently, there are approximately 40 startups operating globally in the energy blockchain space. These startups are working with the underlying technology of bitcoin and particularly on the Ethereum platform.

The technology still needs time to mature, and the core developer network estimates that this may be two to five years away. However, the emergence of  initiatives such as the Enterprise Ethereum Alliance and the Energy Web Foundation will speed up standards and help to create both interoperability and shared design between public and private chains.

Although blockchain may provide an opportunity to transform some existing utility processes, the major opportunities in the near term will focus on the changes in the energy industry, and in particular, the interplay between distributed energy resources and utility analytics.

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Survey: Customers Don’t See Net Metering as Key to Going Solar

March 15, 2017

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The transition to a distributed renewable energy future has often put the solar industry and utilities at odds -- most notably in the debate over net energy metering.

But the animosity between the established utility industry and distributed energy upstarts may not be warranted. A new study from the Smart Grid Consumer Collaborative (SGCC) called Consumer Driven Technologies shows that consumer attitudes toward rooftop solar may not align with company positions. And in some cases, the solar industry may be fighting in the wrong places.

There's more community focus for customers than you might think

The SGCC study was based on an online survey of 1,571 respondents from across the country. One surprise finding from the questionnaire is how generously customers tend to think about their role in energy and how they interact with solar energy in general. Solar customers don't necessarily see themselves as utility opponents or as revolting against the grid.

A striking data point in the report is that 80 percent of all respondents indicated a willingness to donate excess electricity from their residential solar PV system to their community, in the interest of expanding access to green energy. In other words, net metering doesn't matter to them as long as the energy they export advances clean energy for everyone. At least that appears to be true for the early adopter customers who answered the survey.

In another unexpected finding, more than 75 percent of customers who believe in the ability to go off-grid with solar indicated a willingness to pay the utility for a backup power option. And 36 percent said they would pay $25 or more per month for that backup service, a recognition that grid services aren't free. 

There's also high interest in alternative models for buying renewable energy. Forty-three percent of people said community solar (27 percent) or green power plans (16 percent) were their preferred solar option, not rooftop PV. This suggests there's room for the solar industry and utilities to find common ground in serving community needs.

Utilities and the solar industry need each other as well. Survey respondents said they are much more likely to prefer dealing directly with solar companies for purchasing and installing residential solar systems than with intermediaries such as utilities or government entities. However, a substantial proportion of respondents said they are interested in seeking the help of utilities to learn more about financing, putting the utility in the role of trusted energy advisor, which means there's value for both utilities and solar companies in working together.

Being in a solar state doesn't correlate to greater interest in solar energy

Another big takeaway from SGCC's report is that living in an advanced solar state doesn't necessarily mean you have greater interest in solar. In fact, customers in the western and northeast areas of the U.S., where solar is more prevalent, show slightly less interest in solar than less advanced regions. An analysis by the Smart Electric Power Alliance recapped this finding by stating, "interest in solar [is] slightly higher among study participants in states without strong net metering or other solar-related policies than in states that offer such incentives".

This could mean that distributed energy companies and utilities are missing a massive opportunity in states where there's not yet an advanced solar market. And both should be taking a close look at the customer base as a driver of interest in new products.

Demographics matter more than location and policy support

One of the least surprising findings from the report was that customer demographics drive their interest in residential solar energy. Statistically, customers who own a home, make over $50,000 per year, and are under the age of 45 are also more interested in solar than people who do not fit in this group. To the previous point, "the data do not support the hypothesis that consumers in advanced states would have a higher awareness of or increased interest in the technologies studied," the report states. 

Furthermore, it comes as little surprise that owning an EV increases a customer's interest in purchasing solar and vice versa. The report found that roughly half of respondents who already have PV or an EV have both. This finding has implications for utilities as they set rates and forecast load as technology adoption increases. It could also help guide solar companies and other technology providers as they make targeted marketing decisions in future.

Customers just want good energy information

The SGCC report shows that certain demographics have a strong interest in adopting solar and EVs, regardless of location. It also shows that many solar customers want energy solutions that help their community, even if it means reduced savings. Furthermore, they're willing to pay for certain grid services. While it's just one data set in the broader distributed energy conversation, the survey hints at how consumer attitudes can be leveraged to deploy distributed energy technologies in ways that could benefit all players.

But the survey also revealed that there are many other customers who know little about these technologies. Fewer than 22 percent of all consumers surveyed claim to have a fairly complete understanding of PV or EVs, which is an obvious barrier to increased adoption and customer engagement. It's also a potential opportunity for utility and solar stakeholders to collaborate. 

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This Week in Batteries: Sifting Through Two Big Bankruptcies

March 15, 2017

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Editor’s note: We’re trying out a new format for our Squared columns, to deliver more market insight in an approachable way. This is the first installment for Storage+.

The past week was a tough one for cleantech.

We had a double feature of bankruptcies -- saltwater battery maker Aquion and top-five residential solar installer Sungevity. With so much destruction around us, it needs to be said: This doesn’t mean the whole sector is doomed. It does, however, bring into focus the fact that it's still a tough market and there isn’t a lot of room for error.

Let’s start with Aquion, which carried a lot of promise for the advanced storage industry. We can even put a number on that potential: $190 million. That’s how much the company raised from a roster of big-name investors including Bill Gates and Kleiner Perkins Caufield & Byers.

The company aimed to challenge lithium-ion for the long-duration storage market, pitching a safer, nonflammable, nontoxic chemistry as a primary differentiator. It set up a factory in Pennsylvania capable of producing 200 megawatt-hours annually, and had manufactured more than 36 megawatt-hours by the end of 2016.

Aquion had numerous deals under its belt, most recently a solar-plus-storage system along with Schneider Electric for Kyushu Electric Power Company in Japan, announced February 27.

The rug seems to have been pulled out quickly, then. Now the search is on for a buyer for all the operating assets.

Two weeks ago, I attended the ARPA-E Energy Innovation Summit, where many of the keynote talks focused on how to properly fund, well, energy innovation. (One novel idea: Don’t slash federal funding for early-stage research.) Aquion shows how daunting this challenge can be.

This company made it well beyond the basic research stage that the DOE has historically funded. It left the labs at Carnegie Mellon University, raised private funds from high-profile investors and began to scale. 

But there were some warning signs. Aquion built a production facility with a capacity of 200 megawatt-hours. But it was only producing around 36 megawatt-hours of batteries -- showing that demand was far lower than expected. An idle factory is expensive.

It didn’t help that the long-duration storage market doesn’t really exist yet. We’ve seen utilities nudging up to 5-hour duration units in Hawaii, and buying lithium-ion for that. But for longer applications where the lithium is less cost-competitive, there are limited use cases.

Weak- or off-grid applications constitute one option. Zinc-air specialist Fluidic has built a business in Indonesia and the Pacific islands selling to island communities that rely on imported diesel or cell towers in need of backup power. It enjoys strategic backing from Caterpillar, which provides those diesel generators. Similar suppliers with connections to these markets might be interested in snagging a deal on Aquion’s IP.

The other boogeyman here is the falling cost of lithium batteries. If you’re a buyer, it makes sense to take a chance on some upstart chemistry if you can save a lot compared to the incumbent. Trouble is, lithium-ion costs keep beating expectations, which scrambles the carefully laid business plans of lithium-ion alternatives.

Eric Wesoff reports that Aquion’s cost target was $250 per kilowatt-hour; large-volume lithium-ion battery packs have hit that target in recent months. Granted, that's for a shorter duration than Aquion's technology, but costs are still falling.

Which brings us to Sungevity, which I’m including in Storage+ because it was dabbling in solar-plus-storage before this week's demise. The potential for a nationwide solar-plus-storage distribution channel built by Sungevity is now gone. The company, ranked fifth on GTM Research’s residential solar leaderboard, ran out of funding sources before it started generating profits. 

Evidently, a Series E was not possible, prompting corporate leadership to look elsewhere. The time was not right for going public either, so they pursued a reverse merger with a Wall Street shell company that promised $200 million in cash. That got pushed further and further back until the opportunity window elapsed at the end of 2016.

The company slashed a group of highly paid staff in January, then cut two-thirds of the remaining workforce last week before announcing bankruptcy Monday.

This does not spell doom for the cash-light solar installer model, nor residential solar more broadly. It’s not clear that Sungevity really fulfilled the promise of cash-light growth, although it did achieve the industry standard of unprofitability. In any case, a single data point does not disprove a theory.

If there’s a takeaway from these two bankruptcies, it’s that investors still have limited patience for cleantech startups trying to achieve profitability. And profitability is still elusive for pretty much any company in distributed energy with a national sales model.

And now, some assorted insights from a few weeks of conferences.

Standards, schmandards?

I heard a striking sentiment at an ARPA-E panel on second-life batteries and lithium-ion recycling. It went something like this: There’s a place for safety standards in a mature industry, but with battery technology growing and changing so fast, we don’t yet know what those standards should be. They should be delayed until the industry has matured to avoid stifling the innovation we need right now.

That flies in the face of conversations I’ve had with folks like UL, the global product safety standards authority with a few standards already developed for advanced energy storage. UL officials stress that batteries are going into people’s homes and businesses, and thus a minimum level of safety is of the utmost importance.

Another take I’ve heard from battery makers is that they do everything they can to make their products safe, but they worry about cheap imports from China catching fire and feeding the perception that the whole industry is dangerous.

Expect to hear more about this conversation as batteries make their way into more households and businesses. The safety protocols-versus-innovation debate calls to mind the Uber approach: provide a groundbreaking service that customers want, and let the regulation follow you.

Uber, though, wasn’t trying to put combustible chemicals into people’s houses.

Energy hotspot in chilly Chicagoland

From Washington, D.C. I hopped to Chicago for a stakeholder discussion on microgrids and critical infrastructure hosted by Advanced Energy. It was fascinating to hear from community leaders about how crucial uninterrupted power has become for many facets of modern life -- hospital care, water treatment and pumping, air traffic control.

Moreover, I was pleasantly surprised at the excitement and ideas swirling around the Chicago energy scene. We hear plenty about what’s afoot in California and New York, but the middle of the country appears infrequently in cleantech-minded news. The Chicago energy folks seem more focused on doing the hard work of improving the grid than on telling the world how great they are at improving the grid.

I got to check in with the Energy Foundry, a combination accelerator/shared workspace/networking hub for the city’s highly relationship-driven energy startup scene. Managing Director Sara Chamberlain told me they took a hard look at the barrage of VC cleantech failures from the mid-2000s and took a different tack.

The Foundry's evergreen fund deals in smaller dollar amounts, giving its beneficiaries time to grow slowly and healthily. They’ve had two exits so far -- Digital H2O, which handles fracking water efficiency, and energy-efficiency company Root3.

I also made an expedition to the Mesopotamia of lithium-ion civilization, Argonne National Lab. To understand how complex and impressive this battery stuff is, it’s worth seeing how it comes into being: first in rough-hewn, handmade prototypes, where a real human being crushes powders to form a slurry, paints it onto metal foil, and punches out little button-sized dots to make electrodes.

If you haven’t gotten to witness this act of creation, it’s time to leave your career and hop aboard the journalism train.

After testing a chemistry at that level, the scientists hand it off to other labs to mix the ingredients at scale and test whether they still work in large batches, as well as whether there are ways to simplify batch production and cut costs. The leftovers from that process are available for use by researchers if you ask for it.

Chemistries that graduate from there go to a humidity-controlled room where mechanized fabrication equipment stamps out the electrodes and coils them into industry standard canisters and pouches. Companies that see something they like can then make a deal for the IP.

It’s heartening to see the advanced lab research clearly geared toward rapid transfer of successful technology into the markets. Argonne has learned from the last couple of decades of high-profile commercialization and has a system figured out. If it works, it should reduce time-to-market for advances currently underway, like cheap flow battery storage that runs for months, or EV batteries that charge faster thanks to a blast of concentrated light.

EV batteries for the grid: The future is now

Last week, I found myself back in San Francisco presiding over a panel on electric vehicles as a grid asset, part of GTM's event on California's Distributed Energy Future. The full video of the event is available to Squared subscribers here, but I'll pull out my key takeaway: EVs are already grid assets; we don't have to wait for the future on this one.

We heard from BMW, which ran a real-world study using EV charging as a demand response tool for PG&E; the first round had 100 participants, and now the company wants to follow up with 300. Meanwhile, eMotorWerks is aggregating across its network of smart-car chargers to earn money on demand response and even in wholesale markets.

An important distinction here is that these companies are not discharging car batteries onto the grid to provide power. That would stress the batteries and, in many cases, violate an EV's warranty. Much can be accomplished with intelligent scheduling of charging based on the needs of the grid. That's exciting, because it means we don't need to wait for big technical leaps for all those roving batteries to help the electrical network overall.

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