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by Jeff St. John
April 25, 2019

Let’s consider the diesel generator, the workhorse of the edgiest of the power grid’s edge environments.

From truly off-grid applications like islands or remote mining and drilling operations, to backup on-site power for data centers, factories or cold storage facilities, diesel generators — as well as their cleaner, yet still carbon-emitting, natural-gas-fired cousins — represent terawatts of generation capacity across the globe. 

But over the past decade, solar PV prices have fallen below the cost of shipping and burning diesel to generate electricity at remote sites, and this gap is only growing.

Likewise, megawatt-scale batteries are falling in price — not enough to justify replacing generators entirely, but certainly to help store solar energy for later use, buffer the ups and downs in electricity demand that force generators to run inefficiently or risk power quality problems, and otherwise shave the biggest cost of any generator over its lifespan: how much fuel it consumes. 

This explains the big push into "hybrid" generator systems, or generators prepackaged with the power electronics, connections and control platform to integrate solar, batteries and other inverter-based distributed energy resources (DERs). Using a combination of technologies developed in-house, provided by partners, or gained through acquisitions, global generator giants like Caterpillar, Aggreko, Wärtsilä and Cummins are increasingly integrating these systems in different ways and for different key markets.

While the main markets for these systems remains islands and off-grid mining and industrial sites, they’re also finding their way into on-grid applications. Generators can be used to mitigate demand charges or arbitrage against grid power, or by municipal and cooperative utilities to shave their peak power consumption and reduce capacity charges.

Adding batteries to the mix could allow a system to react instantaneously to on-site power disturbances, or to bid their power into fast-response grid frequency regulation or spinning reserves markets. 

Both off-grid and on-grid markets are the target for Finnish engine maker Wärtsilä, which earlier this month unveiled its Engine+ Hybrid Energy solution.

While the systems are primarily meant to lower the operating cost and improve flexibility of the engine itself, Wärtsilä is also targeting countries with rapid renewable energy growth as key markets for its batteries, generators and integrated systems, as Andy Tang, vice president of the company’s Energy Storage, Solar and Integration division, pointed out in an interview with Greentech Media last month. 

Growing demand for future-minded generators

“The announcement of Wärtsilä’s new line of hybrid energy storage and fossil generators is an important addition to an ongoing trend of generator manufacturers seeking to integrate storage and advanced controls as they start to have to interact with other DERs,” Isaac Maze-Rothstein, research associate with Wood Mackenzie Power & Renewables, said in an interview this week. 

Some of these have been in the works for years, such as Caterpillar’s solar-battery-microgrid solution, which has been on the market since 2016, or the Tangent and Cummins joint venture launched in 2016 to tap the flexibility of backup generators for grid services and energy market arbitrage.

But other more recent examples, such as Wärtsilä’s hybrid system announcement, or the Rolls Royce-ABB microgrid partnership announced last month, also represent years of integration work behind the scenes, largely to meet the same imperatives to include ever-cheaper renewable energy and energy storage. 

While these examples differ in important details, each is “an indication of how folks who provide both prime power and backup power are increasingly thinking about how they can work with other DERs within a customer site,” Maze-Rothstein said. It’s also a way for generator giants to compete with each other for customers, he noted. 

“Wärtsilä has a ton of generators that are sitting there, and they have service contracts. Caterpillar is the same way. I see it as expanding their relationship with existing customers, so if someone says, ‘We can get this cheaper, and with solar or energy storage,’ they can come back and say, ‘You can get solar or storage from us,’” he said.  

These microgrids can certainly still be engineered from the ground up, as most of the world’s microgrids of note have been. “The early adopters, many of them have been off-grid,” Maze-Rothstein said. “Many of the microgrid controllers were developed for these off-grid applications — a refinery needs really stable power quality, and so someone built a microgrid controller for them.” 

But in the last three years or so, there’s been a significant shift in the approach to integrating solar, energy storage, and other DERs at a scale and scope that demands some level of standardization and replicability, he said.

The results are showing up in the multi-technology, modular offerings on order from companies like Wärtsilä and Caterpillar, in particular — though each companies’ offering differs in important ways.  

Caterpillar’s solar, battery and generator microgrid 

Caterpillar is one of the world’s biggest generator set makers, with diesel and natural-gas-fired units ranging from 6.8-kilowatt household models to 22-megawatt industrial monsters. It officially launched its own branded solar PV business in 2015, and its own integrated PV-battery-generator microgrid system in 2016

This commercial offering represents the culmination of work on hybrid energy projects for various industrial and military customers that stretches back to 2008, Darrin Johnston, customer solutions manager with Caterpillar’s hybrid energy solutions business, said in an interview this week. It also contains a number of technologies developed in-house. 

Caterpillar’s Cat-branded solar panels come from vendors such as First Solar, SunPower and others, and the company uses lithium-ion or lead-acid batteries from an undisclosed list of leading manufacturers. But it packages these batteries in its own factory-built container with fire suppression and environmental controls, as well as a bidirectional inverter using technology adapted from Caterpillar’s electric tractor drivetrain technology, he said. 

Caterpillar’s microgrid controller, also designed exclusively for its Cat dealers, is capable of managing dispatch of generators, energy storage and solar inverters, managing microgrid voltage and frequency regulation, islanding and reconnecting from the grid, black-start capability, and integrating its data with Caterpillar’s remote monitoring platform, he said. 

The company and its dealer network have supplied these technologies to projects in more than 30 countries, including a large-scale gold mine in Namibia, telecommunications towers in Morocco and Jordan, a wildlife lodge in Gabon, and at rural sites and commercial facilities. It’s also deployed grid-connected solar PV at up to the megawatt scale in projects in the United States, Australia, China and other countries. 

As for why Caterpillar has added solar and batteries to its longstanding generator business, “the prime benefits are to reduce fuel consumption for people who run prime diesel,” or that is, diesel as a primary generation resource, Johnston said. He estimated that diesel-generated power costs between 20 cents to 50 cents per kilowatt-hour for island or remote microgrids, with the wide variation based on the differences in fuel price and transport cost.

“Solar broke through the 20-cent range around 2012,” by comparison, “and solar-plus-storage is probably going to be there in the next two to five years.” 

While solar and batteries can’t replace a generator, “at a very high level, the free solar energy replaces the diesel fuel.”

This was the motivation for Caterpillar to bring 500 kilowatts of solar and 500 kilowatts of batteries to its off-grid proving ground outside Tucson, Arizona. The site has since become a test-bed for its microgrid capabilities, including the ability to run completely off solar and battery power for up to 8 hours on sunny summer days, as well as shave diesel fuel consumption by 40 percent. 

Even without solar energy to store, batteries can work as shock absorbers of sorts for remote generators, by absorbing or injecting power much faster than a generator can ramp up or down. “Energy storage really helps the power quality of the gensets, because it can react within a few milliseconds, rather than a few seconds, to come through a transient,” he said — an important feature for customers like oil and gas drilling rigs that depend on clean power. 

Caterpillar has deployed its hybrid systems in grid-connected environments as well, although it hasn't revealed any such projects publicly. But its generators are widely used for backup grid power and demand response, and Caterpillar has supported this grid-tied use with peak shaving applications since the 1980s, he said. 

“We’ve been working for years on generator sets with municipal and co-op utilities,” he added, lending the company’s expertise to their own grid and energy market management needs.

“A lot of these value propositions are going to get unlocked over the next five to 10 years.”  

Wärtsilä’s engine-plus-storage hybrid system

Wärtsilä, one of the world’s largest makers of engines for the generation and marine propulsion markets, has integrated renewables into many custom-designed microgrids in the past. But with its 2017 purchase of Greensmith, it gained a multi-megawatt portfolio of projects under management, as well as the California startup’s software platform to run not just batteries, but a whole range of distributed energy resources.  

This software is now at the heart of Wärtsilä’s new Engine+ Hybrid Storage systems. Built for modular deployment, the systems can come in units as small as one engine — albeit a massive one capable of generating between 5 to 10 megawatts — combined with batteries in a typical formation of about 10 megawatts, or 5 megawatt-hours, of storage capacity.

But they can also scale up to as much as 400 megawatts of Wärtsilä’s gas, liquid fuel or multi-fuel generators, combined with 2 to 20 megawatts of batteries, typically with 30 minutes to 2 hours of capacity. 

Both companies have integrated engines and batteries with wind and solar power in previous projects, David Miller, vice president of business development for Greensmith, a Wärtsilä company, said in an interview this week. Last year, it announced its first generator-storage hybrid project in Hungary, and in January announced a 6-megawatt hybrid system for the Caribbean island of Bonaire

But the pre-integrated Engine+ Hybrid Storage systems are “specifically more around a packaging of the engines and batteries, that may or may not include solar and wind,” he said. That’s because combining batteries with engines can reduce the operating cost of those engines significantly, even without the solar power to provide a free alternative to costly fossil fuel. 

As we’ve previously noted, batteries can help reduce the wear and tear and inefficient ramping required of generators that have to respond to sags and surges in electricity demand, by absorbing and injecting their power in ways that allow the generator to run as efficiently as possible. 

Adding batteries can also allow a fleet of generators to run more efficiently by providing “spinning reserves,” Miller said.

Microgrids that need reliable power have to keep extra generators running at low and inefficient power ratings, or run their entire fleet at less-than-optimal capacity, to retain reserve generation capacity in case their primary generators break down or otherwise have to be taken offline. Batteries can cover that need for a short time, at least until those backup generators can be spun up to full speed, thus eliminating all the fuel wasted to keep them running in reserve.

All of these benefits can allow a typical off-grid hybrid system to pay off the additional costs of including storage within three years or less, Miller said — and “that is not assuming any solar, just the payback on the battery-storage investment” from fuel and operations and maintenance savings.

“The numbers look even better when you talk about integrating solar with these systems running on diesel.” 

But this same set of capabilities and cost savings could also suit Wärtsilä’s hybrid systems for on-grid applications, he said.

Depending on the regulations at hand, hybrid engines could bid into spinning reserves, frequency regulation or other ancillary services markets with their battery capacity, while running their generators at their most efficient rates. They could also optimize their energy balance to reduce fuel consumption, and thus reduce emissions — a critical factor for on-site generators that face air quality restrictions on how often and how long they can run.