Just over a year ago, the World Health Organization (WHO) officially declared a global pandemic. At the time, there was a great deal of uncertainty about how COVID-19 would impact the energy industry. More than 12 months later, we witnessed a 20% drop in oil demand, a 5% reduction in electricity consumption, and the largest year-over-year reduction in global CO2 emissions. However, through it all, the energy transition continued to move forward at an accelerated rate.
Using our news commentary feature, we have been tracking key developments in the energy industry over the first year of the global pandemic, covering nearly 650 individual developments across more than 10 of our major topic areas. These innovation-related events range from partnerships and investments to recent R&D and policies. Each news commentary includes information about the companies involved and our take on the development.
The news trends analysis is one of the main factors shaping the Lux Energy Team's outlook for 2021 and beyond. Many of the transformational developments that occurred directly influenced the Energy Program's four key themes – Evolution of Electricity Networks, Decarbonization of Industry, The Business of the Energy Transition, and Future Energy for Mobility – and shaped our 2021 predictions. In the below figure we analyze the activity over the past 12 months within one of our main topics, power grid.
As we enter the second year of the global pandemic, we take a look back at the "Truly Disruptive" and "Very Important" developments over the past 12 months. In addition, we have selected the most read and discussed innovation-related events.
Distributed Energy Resources (DERs)
- Battery storage and virtual power plant (VPP) developer Stem seeks buyer. After raising a total of more than $200 million, Stem sought a buyer in early 2020 and announced its merger with Star Peak Energy Transition, a publicly traded special purpose acquisition company (SPAC), by the end of the year.
- Shell signs off-take deal with 100 MW storage facility in U.K. This project consists of two 50 MW lithium battery units to be used for grid balancing and frequency response, and Shell's subsidiary Limejump – acquired in March 2019 – will optimize battery usage through its virtual power plant platform.
- UC Berkeley reports that solar, wind, and Li-ion batteries can cost-effectively help decarbonize the U.S. grid by 2035. The study found that 90% of the U.S.'s electricity demand in 2035 can be met cost-effectively by scaling wind, solar, and Li-ion battery storage deployments. This is another data point showing that decarbonizing the electricity supply is straightforward in the U.S.
- FERC allows wholesale market participation for distributed energy resources. Order 2222 allows aggregators of DERs to participate in wholesale capacity, energy, and ancillary services markets. This builds on FERC's Order 841, which removed barriers for DERs to participate in regional markets and added value for asset owners and grid operators.
- U.S. legislators propose investment tax credit (ITC) incentives for stand-alone energy storage systems. The new bill aims to support all kinds of storage technologies, whether they are installed together with renewable generation or as stand-systems. The ITC had an important impact on the solar industry in the U.S.; if this legislation is approved, we can expect a considerable rise in storage deployments of all sizes.
Energy Trading and Retail
- Kaluza provides grid flexibility services using residential batteries and electric vehicles. Kaluza claims it will become the first provider of grid flexibility services to Western Power Distribution (WPD) as part of the IntraFlex project, which intends to "develop learnings on the operability of short-term flexibility markets."
- Tesla Energy Plan launches in U.K. to build residential VPP in partnership with Octopus Energy. The plan offers 100% renewable electricity and the most attractive electricity rates in the U.K. and removes the daily standing charge; this combination will translate into considerable electricity bill savings. In the U.K., Tesla is moving fast to offer compelling bundles of products and services.
- Centrica concludes its local energy market (LEM) trial successfully. The project aggregated 100 homes with solar-plus-storage into a VPP along with 113 businesses. While the trial proved the benefits of trading energy flexibility, a commercial implementation of this type of market would require a coordinated push from governments and industry.
- Tokyo Gas acquires stake in U.K.'s Octopus Energy and creates joint (JV) venture in Japan. TG Octopus Energy will provide 100% renewable electricity and smart energy solutions using Octopus' software platform Kraken. Through partnerships and acquisitions, Octopus Energy is rapidly expanding worldwide.
- Shell acquires Next Kraftwerke. The energy trader and VPP service provider will become part of Shell's Renewables & Energy Solutions division. Through Next Kraftwerke, Shell is gaining more expertise in additional European markets and expanding aggregating and optimization capabilities for a wider diversity of distributed energy resources.
Electric Vehicle (EV) Charging & Vehicle-to-Grid (V2G)
- MOBI launches blockchain-based standard for V2G integration. The group released its first technical design specification for V2G, carbon credits, and peer-to-peer (P2P) use cases. Applications enabled by this common standard have the potential to benefit various stakeholders, including electric utilities, charging infrastructure operators, and EV drivers.
- Kaluza and Bosch trial direct-to-car smart charging. The companies combined the capabilities of their digital platforms and embedded vehicle technologies, connecting directly to EVs to manage their charging process without smart charging hardware. This may open up opportunities for energy retailers to offer smart charging services as part of their electricity tariffs.
- First bus-to-grid project ready to launch in London. The project intends to transform a North London bus garage into the largest V2G site, providing more than 1 MW to the grid. The project kicked off in 2018, and the consortium expects to start operations in the summer of 2021.
- Shell complements EV charging business with acquisition of Ubitricity. Through acquisitions, Shell has been opening doors to different electric mobility markets, including residential and commercial charging points, public charging networks, and fast-charging stations.
- Shell pilots battery-powered ultrafast charging and VPP integration. Shell will use stationary storage to avoid grid connection upgrades, support ultrafast charging events, increase the use of renewable electricity, and provide grid services. Shell put together a winning strategy to support the significant expansion of its electric mobility business in the next few years.
POWER GRID MANAGEMENT
- CAISOreport finds wind farms can provide the same grid services as gas plants. Wind farms' inverter-based smart controllers could provide grid balancing, voltage and active power control, and frequency response. Existing assets with minimal upgrades could find new revenue streams, but current incentives would need to reward ancillary services and not just energy production.
- GE developing wind and PV inverters that provide frequency and voltage response. The growth of asynchronous wind and solar generation has been one of the major drivers of energy storage, but that will change if GE succeeds in developing inverters and controls that enable wind and solar facilities to provide frequency and voltage response like a typical synchronous asset.
- State Grid Corporation of China completes $3.2 billion renewable electricity transmission project. The ultra-high-voltage (UHV) DC transmission project will be the world's first transmission project built to carry only zero-carbon electricity from wind, solar, and hydropower.
- Emerson acquires OSI for $1.6 billion to tackle the digital transformation of power. OSI adds transmission and distribution management solutions to Emerson's existing generation expertise, making it a more attractive contender in the digital transformation of power; in return, Emerson will likely help OSI expand its business outside of North America.
- Fraunhofer study shows that wind turbines can compensate for decreasing electricity grid inertia. The GridLoads project shows that wind turbines are mechanically capable of providing grid inertia for the grid if the control system has been designed with this in mind. It means that adding wind turbines to the grid does not automatically lead to a need for additional fast reserve capacity.
- National Grid and TenneT to connect Dutch and British offshore wind farms. The two players plan to connect up to 4 GW of offshore wind through a multiterminal HVDC link. Cross-border wind farms are gaining traction in Northern Europe as a means to reduce the cost of new grid infrastructure while enabling electricity trading.
- Australia to host 10 GW PV farm connected to Singapore through underwater HVDC line. The project is set to become the world's largest solar farm, but it is also an unprecedented effort in terms of storage requirements and distance. For this particular case, an important risk to bear in mind lies in the geopolitical and tectonic boundaries that the cable will need to traverse.
- Europe produced more power from renewables than from fossil sources in 2020. For the first time in history, the EU produced more electricity from renewable primary energy (wind, sun, hydro, and biomass) than from fossil primary energy. COVID-19 resulted in 4% less power consumption in 2020 and thus contributed somewhat to the record.
- South Korea is now open for renewable power purchase agreements (PPAs). The Ministry of Trade, Industry and Energy will allow energy consumers to purchase renewable electricity through third-party PPAs in an effort to establish a Korean RE100 system. This is a crucial step that will allow companies and the country to reach carbon neutrality goals.
- South Australia hits renewable energy milestone, sourcing 100% of its electricity from solar energy during one hour. On October 11, South Australia sourced 77% of its electricity demand from rooftop solar and the remaining 23% from utility-scale plants. This outcome is remarkable but in line with the growing penetration of renewables and distributed energy resources.
Over the past year, there have been a significant number of projects across all of the above categories, focusing on tapping into energy flexibility, increasing grid resiliency, and supporting more renewables integration. In the next year, project development will not slow down, especially now that there's more proof that renewables can take over a larger portion of the energy demand and with countries and companies committing to decarbonization.
In addition, one key player that has been accelerating its power business in recent year is Shell, which appears in most categories above. Like other oil and gas giants, Shell intends to become a whole energy company, and its power business is a big part of this expansion. Shell is making strides with strategic investments and acquisitions in electric mobility and power grid technology developers. The electrification trend and the need for resiliency will continue pushing for technology innovations to support the power grid of today and the future.