Press Release: Lazard's LCOS 3.0 and LCOE 11.0 Report

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The Lazard annual report on the Levelized Cost of Storage LCOS 3.0 was released today with the Lazard Levelized Cost of Energy report LCOE 11.0

Go to LCOE 3.0 Report and Executive Summary

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LAZARD RELEASES ANNUAL LEVELIZED COST OF ENERGY AND LEVELIZED COST OF STORAGE ANALYSES

– LCOE 11.0 shows continued cost declines for utility-scale wind and solar energy –
– LCOS 3.0 shows declining but widely variable battery storage costs –

NEW YORK, November 2, 2017 – Lazard Ltd (NYSE: LAZ) has released its annual in-depth analyses comparing the costs of energy from various generation technologies and of energy storage technologies for different applications.

Lazard’s latest annual Levelized Cost of Energy Analysis (LCOE 11.0) shows a continued decline in the cost of generating electricity from alternative energy technologies, especially utility-scale solar and wind. Lazard’s latest annual Levelized Cost of Storage Analysis (LCOS 3.0), conducted with support from Enovation Partners, shows declining cost trends among commercially deployed technologies such as lithium-ion, but with wide variations depending on the type of application and battery technology.

“The growing cost-competitiveness of certain alternative energy technologies globally reflects a number of factors, including lower financing costs, declining capital expenditures per project, improving competencies and increased Industry competition,” said George Bilicic, Vice Chairman and Global Head of Lazard’s Power, Energy & Infrastructure Group.

“That said, developed economies will require diverse generation fleets to meet baseload generation needs for the foreseeable future.” “Energy industry participants remain confident in the future of renewables, with new alternative energy projects generating electricity at costs that are now at or below the marginal costs of some conventional generation,” said Jonathan Mir, Head of Lazard’s North American Power Group. “The next frontier is energy storage, where continued innovation and declining costs are expected to drive increased deployment of renewables, which in turn will create more demand for storage.”

The two studies offer a variety of insights, including the following selected highlights:

LCOE 11.0

• As LCOE values for alternative energy technologies continue to decline, in some scenarios the full lifecycle costs of building and operating renewables-based projects have dropped below the operating costs alone of conventional generation technologies such as coal or nuclear. This is expected to lead to ongoing and significant deployment of alternative energy capacity.
   
• Global costs of generating electricity from alternative energy technologies continue to decline. For example, the levelized cost of energy for both utility-scale solar photovoltaic (PV) and onshore wind technologies are down approximately 6% from last year.
   
• Despite the modestly slowing rate of cost declines for utility-scale alternative energy generation, the gap between the costs of certain alternative energy technologies (e.g., utility-scale solar and onshore wind) and conventional generation technologies continues to widen as the cost profiles of such conventional generation remain flat (e.g., coal) and, in certain instances, increase (e.g., nuclear). Specifically, the estimated levelized cost of energy for nuclear generation increased ~35% versus prior estimates, reflecting increased capital costs at various nuclear facilities currently in development.
   
• Although alternative energy is increasingly cost-competitive and storage technology holds great promise, alternative energy systems alone will not be capable of meeting the baseload generation needs of a developed economy for the foreseeable future. Therefore, the optimal solution for many regions of the world is to use complementary conventional and alternative energy resources in a diversified generation fleet.

LCOS 3.0

• Among commercially deployed technologies, lithium-ion continues to provide the most economical solution across use cases analyzed in the LCOS, although competing flow battery technologies claim to offer lower costs for certain applications.
   
• Although energy storage technology has created a platform for discussions related to certain transformational scenarios, such as consumers and businesses “going off the grid”, it is not currently cost competitive in most applications. However, under some scenarios, certain applications of energy storage technologies are attractive; these uses relate primarily to strengthening the power grid and accessing cost savings and other sources of value for commercial and industrial energy users through reducing utility bills and/or participating in demand response programs.
   
• Industry participants expect costs to decrease significantly over the next five years, driven by scale and related cost savings, improved standardization and technological improvements, supported in turn by increased demand as a result of regulatory/pricing innovation, increased renewables penetration and the needs of an aging and changing power grid in the context of a modern society. The majority of future cost declines are expected to occur as a result of manufacturing and engineering improvements in batteries. Cost declines projected by Industry participants vary widely among energy storage technologies, but lithium-ion capital costs are expected to decline as much as 36% over the next five years.
   
• As the energy storage market continues to evolve, several potential sources of revenue streams available to energy storage systems have emerged. However, the ultimate mix of available revenue streams for a particular energy storage system varies significantly across geographies.
   
• LCOE 11.0 and LCOS 3.0 reflect Lazard’s commitment to the sectors in which it participates. The two studies are posted at www.lazard.com/perspective.

Lazard’s Global Power, Energy & Infrastructure Group serves private and public sector clients with advisory services regarding M&A, financing and other strategic matters. The group is active in all areas of 3 the traditional and alternative energy industries, including regulated utilities, independent power producers, alternative energy and infrastructure.

About Lazard
Lazard, one of the world's preeminent financial advisory and asset management firms, operates from 43 cities across 27 countries in North America, Europe, Asia, Australia, Central and South America. With origins dating to 1848, the firm provides advice on mergers and acquisitions, strategic matters, restructuring and capital structure, capital raising and corporate finance, as well as asset management services to corporations, partnerships, institutions, governments and individuals.

For more information on Lazard, please visit www.lazard.com. Follow us at @Lazard.

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Link to source: Lazard Press Release for LCOS 3.0

Video (0:48): LCOS

Levelized Cost of Storage energy analysis

Industry leading analytical comparison of energy storage costs

Learn the latest in the Levelized Cost of Storage methodology and analytics

LCOS Stacked Use Cases

One of the many ingenious features of the Lazard’s Levelized Cost of Storage (LCOS) analysis is the ability to stack use cases.

Stacked use cases capture multiple sources of value from a single installation. The total of all the potential value streams available for a given system defines the maximum, economically viable cost of the system; therefore, stacking value streams and use cases offer the greatest opportunity to maximize return.

Use cases focus on the user’s needs rather than the storage system, so by stacking all of the use cases into one stacked use case, a single system can be installed to perform all of the necessary actions. Having a single storage system that can cover all of the requirements in each unique circumstance is both easier to manage and install and also more cost efficient in the long run.

Example of a stacked use case: commercial and industrial 

Stacked use case: commercial and industrial → The graphic visually shows the example of the stacked use case along with economies of scale, compared to cumulative system cost.

You get the same value of each use case and of the system as a whole for a portion of the cost (seen in picture).

More about LCOS

Energy Glossary

by Grace Kelly

Enovation Perspective: The Emerging Energy Future

Is the opportunity for Distributed Energy Resources (DER) in the Commercial & Industrial customer segment real?

Enovation’s Perspective:

Next generation DER has the potential to reshape energy usage and create substantial value in the C&I segment. Progress on costs and appropriate business models is promising. Barring surprises, we expect to see the segment take-off over the coming two to four years.

Adoption of distributed PV by C&I customers will continue to accelerate

PV economics have improved rapidly, driving robust growth in PV penetration levels. Setting aside the potentially severe impacts of the imposition of steep tariffs on PV imports, we anticipate sustained growth.

More interestingly, we see the emergence of new business models. As subsidies fall and rate structures evolve, the emphasis is on using PV as part of an integrated energy source for C&I and municipal customers.

The focus is shifting from tax equity-based financing and origination (at any cost) to using PV to reduce the cost and risk of supply for C&I. Remote and virtual net metering, and more workable community solar business models are maturing rapidly.

Commercial Rooftop (2020 vs. 2025)

Behind-the-meter (BTM) energy storage market remains modest and localized to California, but that will change within a few years

About 100 MW of BTM storage has been installed in the U.S., and most of that is in California to help C&I customers reduce demand charges on their utility bills. At current costs, storage is generally attractive to C&I customers only in locations where demand charges in C&I tariffs are relatively high (>$15/kW-mo) – and even then, substantial incentives or policy mandates are usually also required to make a storage project viable. 

Stacking of value streams from multiple revenue sources is essential, and in the case of PV and storage in California, potentially quite lucrative.

Selected "Stacked" BTM Energy Storage Use Case Project Economics (2017 vs 2020)

However, storage costs are falling rapidly, around 10% per year for the next several years.  Moreover, other states (e.g., Massachusetts, Maryland, Nevada) are adopting policy mandates promoting storage.  Combined with business model innovation, BTM storage will become economically appealing to C&I customers in many parts of the U.S. in five years – or less.

Gas-fired distributed generation (DG) is often overlooked, yet economics are compelling in many situations

With low prices for natural gas and increasing efficiency of small-scale generation technologies, gas-fired DG is an attractive alternative to electricity in many U.S. markets, as evidenced by the emergence of specialized players such as Enchanted Rock and Tangent. As with storage, multiple value streams can be stacked to generate favorable returns for C&I customers – even in markets where PV and energy storage aren’t currently viable.

IRR for Demand Management Using Natural Gas Reciprocating Engines (2007 vs 2020)

However, storage costs are falling rapidly, around 10% per year for the next several years. Moreover, other states (e.g., Massachusetts, Maryland, Nevada) are adopting policy mandates promoting storage. Combined with business model innovation, BTM storage will become economically appealing to C&I customers in many parts of the U.S. in five years – or less.

Customer Insights

Customers don’t care much about the tools in the DER toolbox – they care about minimizing costs

Although many C&I customers indicate interest in storage due to reliability concerns or desire to reduce environmental footprint, our research (survey of >400 customers, augmented by interviews) suggest that economic considerations far outweigh any other factor in deciding whether or not to employ DER.

Energy Storage - Implement or not to implement

Value resides in owning the customer relationship, advanced software capabilities, bundling of products/services

Customer acquisition costs are high and sales cycles are lengthy, yet margins tend to be thin – especially today since many storage providers are pricing aggressively to enter the market. Owning and maintaining the customer relationship is essential for long-term success. Advanced analytics will be a critical source for unlocking value for customers, advanced software capabilities for monitoring optimization and control of DER; and load will become “table stakes.” Moreover, since C&I customers seek a materially lower total spend on energy, vendors that can offer an technologically agnostic array of solutions – including commodity – may be preferred.

Implications for Market Participants

Whether a C&I energy customer or a competitive or regulated supplier to the C&I market, a number of “no regrets” actions are worth beginning now in preparation for full take-off of C&I DER.

Competitive Energy Suppliers

• Rigorously analyze economics of alternative DER options for current and prospective C&I customers

• Prioritize customer outreach efforts based on customer economics and predictors of propensity for DER

• Establish competencies across DER technologies and associated product management functions

• Organize around account managers to ensure single point-of-contact with customers, enabling optimal bundling of DER alternatives to maximize value

Regulated Utilities

• Integrate DER into load forecasting*, system design/ operation, and customer management strategy

• Prepare regulatory strategy to benefit from increased DER adoption (e.g., decoupling, performance- based regulation)

• StrengthenOpenInnovation capability to improve visibility on future DER developments

C&I Energy Customers

• Understand real costs and performance of relevant DER options

• Enhance organizational coordination to pool knowledge and resources, and align incentives concerning DER

• Identify opportunities to profit from serving as a test-bed for DER technologies

Full Text PDF

Distributed Energy Resources (DER) is a primary focus area for Enovation Partners.

We have served a wide spectrum of clients – including many leading competitive energy providers and utilities, equipment OEMs, C&I energy buyers, and investors. We have also built proprietary analytical tools to support marketers, sales teams, product designers, and regulatory strategists. The following is a very brief summary of our observations on this rapidly evolving sector, and practical implications for potential market participants.

To learn more about our perspectives on C&I DER, please contact Dan Gabaldon.

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* “Enovation Perspective” on this topic under development

Three Top Energy Talents Join Industry Innovator Enovation Partners

Three Top Energy Talents Join Industry Innovator Enovation Partners

CHICAGO, Ill., May 24, 2017 – Enovation Partners announced that Matt McKenna, B. “Venki” Venkateshwara, and Tom Williams have joined Enovation Partners as it continues to rapidly build its strategy and organizational transformation capabilities. 

Matt McKenna, a senior Booz (and Strategy&) veteran has joined Enovation Partners as an Advisor. Mr. McKenna brings 30 years of experience in combining rigorous, fact-based analysis with real-world practicality to deliver world-class performance improvement to the world’s largest utilities, oil & gas, and chemical companies. Matt has worked around the world, with a recent focus on supply chain, asset optimization, major capital program effectiveness, and technology-driven productivity improvements for the electricity T&D and generation sectors as well as for midstream.

“Venki” Venkateshwara has joined Enovation as a Principal in the Washington D.C. office. Mr. Venkateshwara is a well-known strategist, economist, and regulatory expert who has served senior management teams in the electricity industry for the past three decades in roles at McKinsey, Charles River Associates, Areva, Con Edison, ICF, and Siemens.  Most recently, he has focused on assisting clients take advantage of the rapid growth of renewables and DER (Distributed Energy Resources).  

Tom Williams, organizational transformation expert and co-author of The Agility Factor: Building Adaptable Organizations for Superior Performance, has joined Enovation Partners as an Advisor. Over the past three decades, Mr. Williams has worked across numerous industry sectors around the world, guiding large organizational transformations for dozens of corporations as a senior leader.  Most recently, he has focused on partnering with senior leadership teams at leading midstream companies to redefine their culture and business systems as the sector experiences historic growth and change.

“We are delighted to be able to attract this caliber and diversity of talent to Enovation”, said Bob Zabors, CEO of Enovation Partners. “Our work at the forefront of innovation in the energy sector makes us a natural ‘home’ for top tier energy professionals who want to have a real impact on their clients and the industry. We are very pleased to welcome Venki, Matt, and Tom to the team.”

ABOUT ENOVATION PARTNERS

Enovation Partners is a strategy consulting and analytics firm dedicated to growth and innovation in the energy sector.  Enovation employs experienced teams and proprietary analytics to deliver real, rapid impact. Enovation Partners was named one of the “Seven Small Jewels” of the consulting industry in 2017 by Consulting magazine. Enovation has offices in Chicago, New York, San Francisco, Washington D.C, and London.  Energy + Innovation = Enovation™ (www.enovationpartners.com)
 

Contact:

Media Relations
312-953-3555
info@enovationpartners.com
www.enovationpartners.com

Presentation ESA: Observations on Storage Costs

The Lazard Levelized Cost of Storage (LCOS) Survey is the most comprehensive survey of project costs in the industry, with over 120 companies participating last year.

As expected, the LCOS shows that costs are coming down across most technologies and use cases, with expectations for sustained cost reductions in the next few years. This is showcased through the continued cost reductions of lithium ion batteries, the introduction of promising new technologies such as flow batteries into commercial production, or the revitalization of existing technologies like lead through the adoption of carbon nanoparticles to enhance capability.

Cost reduction trends vary across technologies, highlighting a partial lack of standardization in costing and configurations. As we are still in the early commercial stage of technical development, these trends are expected to continue through improved material sourcing and manufacturing improvements. “Soft Costs” – deployment and operating expenses are expected to be significant areas of cost improvement going forward.

These falling costs hold the promise of opening up extensive new markets in the coming years – especially for the combined use cases that can greatly enhance the value of deployed storage assets.

Based on Enovation Partner’s current research into the C&I market, these cost reductions of storage assets are a key determinate for adoption. Based on a survey of 500 energy management decision makers, 20% of or respondents seriously considered adopting energy storage systems on site, but did not implement a deployment—with 80% citing economics being the dominant motivation for decisions.

For more information contact: Daniel Gabaldon

Enovation Partners named to 2017's Seven Small Jewels

PRESS RELEASE

Consulting magazine's honor highlights consultancies "that are shaking up the profession"
 

February 15, 2017, Chicago—Consulting magazine has named Enovation Partners to its annual list of “Seven Small Jewels”—seven smaller consultancies that are breaking new ground in terms of firm management and financial performance.
 
“We’re honored to be one of 2017’s small jewels and to be listed with such an impressive group of firms,” said Enovation CEO and founding partner Bob Zabors.
 
Enovation Partners, which made Consulting’s “Seven to Watch” list in 2016, has seen impressive growth since it began. According to Zabors, Enovation identified three trends when its partners founded the firm in 2013: An emerging wave of technology innovation moving the energy market toward an increasingly distributed and renewable future; natural gas displacing other fossil fuels; and consumers and regulators developing new expectations for reliability, interaction, and sustainability.
 
“We wanted to facilitate this transition and work with companies to shape the new energy landscape,” said Zabors.
 
“We’ve been able to work with a broad set of clients--utilities, energy retailers, developers, suppliers, startups, private equity investors, and family offices,” said Zabors. “In turn, working across such a group has helped us expand our innovation capabilities, data sets, and analytics.” For Enovation, enhancing analytics and research are avenues of future growth, he said.
 
“We have a highly collaborative culture of sharing and challenging ideas and pushing ourselves to innovate, while we help clients do the same,” he added.
 
In January 2016, Enovation acquired the Cleantech Group, which serves to advance innovation and resource efficiency across sectors. Cleantech connects innovators and investors through events, research, and its i3 platform--an interactive database of more than 24,000 innovative companies.

Zabors also cited his group’s partnerships with WestRiver Management and Silicon Valley Bank, and with the Gas Technology Institute as an early catalyst.

We are in a generational shift, said Zabors. The expectation is that energy will be more renewable, that transportation will be electrified, that distributed technology will be pervasive, and that consumers and investors will look for more controllable and sustainable options.
 
"What attracts people to our consulting mission is also what poses the greatest challenges—staying ahead of the curve in an increasingly global market for innovation," said Zabors. "We help clients create new ideas and businesses and invest in where the markets will be in the future. It's exciting and, by definition, uncertain."
 

About Enovation Partners

Enovation Partners focuses on areas of rapid growth and innovation in the energy sector—including distributed energy resources, natural gas infrastructure, and venture investment—and provides strategic advice, advanced analytics and research, and networking opportunities (through its Cleantech Group affiliate). Enovation is headquartered in Chicago, with offices in London, New York, San Francisco, and Washington, DC.  www.enovationpartners.com

Cleantech Group Joins Enovation Partners

Press Release
January 19, 2016

Enovation Partners Welcomes Cleantech Group to Its Growing Network of Capabilities

Deal underscores how advanced technologies and innovative business models have become a strategic priority among energy companies, industrials, and investors.

Chicago, London, and San Francisco. January, 19, 2016 – Enovation Partners, LLC, one of the preeminent advisory services firms in the energy and infrastructure sectors, has acquired Cleantech Group, the leading global network for deploying sustainable innovations in energy and beyond.

Cleantech has moved rapidly from an aspirational set of technologies and business models to a foundation of strategy planning and innovation across industries.

“Since 2002, when it coined ‘cleantech,’ Cleantech Group has been at the forefront of new energy technology commercialization,” said Robert Zabors, CEO and founding director of Enovation Partners. “Its successful efforts to bring together entrepreneurs, investors, and corporate venture groups, through its well know events and its i3 Connect platform, have been instrumental in accelerating cleantech’s drive into the economy.”

“Combining those strengths with Enovation’s strategic advisory capabilities is a natural extension of both group’s missions,” Zabors said.

“Investment in sustainable technologies and the rate of customer adoption continue to progress,” said incoming Cleantech Group CEO Richard Youngman, former managing director of Cleantech Europe and Asia and partner with Enovation in the acquisition. “Together we will offer high-quality services for an international network of entrepreneurs, innovators, investors, energy companies and other industrials.”

The Cleantech Group assets are being acquired by an Enovation Partners, LLC, subsidiary, which will continue Cleantech Group’s brand and identity.  The expanded group will maintain offices in Chicago, Boston, London, New York, San Francisco, and Washington, DC.

About Cleantech Group

Cleantech Group connects sustainable innovation, finance, and corporate support in several ways

• Its events in North America and Europe are the premier intelligence and networking events for corporates, investors, start-ups, and government officials. Cleantech Forum San Francisco 2016 takes place January 25-27. Cleantech Forum Europe 2016 takes place in Lyon, France, April 11-13.  The San Francisco Forum will see the release of the group’s annual Global Cleantech 100 and Award Winners – the top private innovation companies in clean technology.
• The group’s online i3 Connect subscription platform allows corporates, venture capitalists, investors, economic development agencies, and universities to find and vet start-ups, list targets, and connect directly with start-up decision makers.  Subscribers gain access to proprietary intelligence on 24,000+ companies in (among other areas) energy efficiency, energy storage, smart grid, solar,water, and urban growth.

About Enovation Partners

Established in 2013, Enovation works with electric and gas companies, new ventures, suppliers, investors, and large consumers to drive innovation and growth across energy and related industries. Enovation’s team includes top-tier strategy consultants and former industry executives, energy investors, regulators, and developers.

• Enovation focuses on strategy in the context of the exponential growth of distributed energy and technologies, and the disruptive effects of innovation in renewables and natural gas.
• Its work includes business model innovation, helping to accelerate investment, commercialize new technologies and improve business practices
• In distributed energy resources, Enovation has developed ground-breaking cost-comparison benchmarking for storage technologies and applications, as well as tools to locate DER opportunities and threats for utilities, developers, and large energy users.
• The group also works with natural gas utilities using advanced analytics to reduce risk and environmental impact, and improve productivity in construction, operations, and leak detection.

For more information on the transaction, the role of cleantech in today’s energy economy, Cleantech Group and Enovation Partners, or to speak with Robert Zabors or Richard Youngman…

Contact:
Eric Blume
Director of Communications
Enovation Parters, LLC
+1.202.281.8462
eblume@enovationpartners.com

Stephen Marcus
Director of Business Development
Cleantech Group, Inc.
+44.203.743.8615
stephen.marcus@cleantech.com

Heather Matheson
Senior Program Manager
Cleantech Group, Inc.
+1.415.233.9714
heather.matheson@cleantech.com

Levelized Cost of Energy Storage - LCOS 1.0

The first substantial comparison of energy storage costs, technologies, and applications -  "Levelized Cost of Storage Analysis" was released on November 18th by investment bank Lazard.  The groundbreaking study was developed in consultation and partnership with Enovation Partners.