Navigant Research Blog

As Forests Burn, Biopower Feedstocks Go Up in Flames

— December 30, 2011

According to a recent study released by the Texas Forest Service, as many as 500 million trees in the state – roughly 10 percent of the state’s forests – succumbed to heat and water stress over the past year as a result of 2011’s unrelenting drought. The study does not include the 4 million acres already lost to wildfires across the state over the past year.

The finding is an alarming reminder of the deteriorating health of forest landscapes worldwide. From pine beetle infestation in evergreens to declining aspen forests throughout the Rockies, a number of tree species are showing signs of acute stress. In areas already clobbered by persistent drought, wildfires root out what’s left. Across Russia, 10 million to 30 million acres of forest have gone up in flames, or are still burning. Estimates suggest that 2009 wildfires in Australia released the energy equivalent of 1,500 Hiroshima-sized atomic bombs.

In light of dying forests, large scale biopower, which mostly relies on wood biomass to generate electricity and heat, faces difficult challenges ahead. Derivatives of woody biomass – black liquor, tree trimmings, urban waste wood, sawdust, etc. – currently account for nearly three-quarters of the fuel used in the biopower industry. In the forthcoming Pike Research report, Biopower Markets & Technologies, we estimate that consumption of biomass resources will reach 1 billion tons by 2021. Industry expansion depends heavily on a burgeoning trade in densified biomass pellets, largely derived from wood resources, expected to reach at least 17 million tons by the end of the next decade. The two trends – the succumbing of forests to drought and wildfire on one hand, and growing demand for wood biomass from the biopower industry on the other – appear to be on a collision course, with difficult consequences for the industry.

As a recent New York Times article explains, in all cases, the magnitude of recent devastation raises concerns over the loss of carbon sinks and is a grim reminder of the potential threat posed by climate change. Forests play a pivotal role in mitigating the climate impact of greenhouse gas emissions. Studies show that tropical forests absorb about 18 percent of all carbon dioxide added by fossil fuels. The loss of forest cover can also increase the reflectivity of surface areas, contributing to a positive feedback loop that could accelerate global warming.

With “natural” phenomena already wreaking havoc on the world’s forests, if left unchecked, accelerated demand for wood biomass could compound the problem by hastening the loss of vital forest cover. Although the use of forest thinnings and sustainable forest management – or “milking” the forest – can alleviate fire danger in threatened areas, this process is often too expensive and the resources too distributed to justify large scale operations.

With an increasing number of 100MW+ biopower facilities under construction, the volume of demand for biomass feedstocks from the power generation sector will require the development of an efficient and stable supply chain.

The burgeoning biomass pellet trade is showing early signs of meeting this challenge. According to our analysis, the bulk of production is currently centered in North America with the EU-27 countries consuming an estimated 5.5 million tons or 70% of the global supply.


Although Pike Research’s analysis shows that the trade in biomass pellets will grow rapidly over the next decade, markets that are highly dependent on these resources will have to contend with increased opposition from environmental groups. Our forecasts assume this to be the case in the EU, where despite strong policies promoting the use of biomass for power and heat generation, growth is expected to fall short of 2020 targets due to challenges associated with sourcing wood biomass.

The Swedish state-owned multinational Vattenfall, a company featured in our forthcoming Biopower report, demonstrates the challenges associated with navigating these issues. Currently Europe’s fifth largest energy producer, its affiliate Vattenfall Europe, based in Berlin, is planning to build one of the largest biomass power plants in Europe, with a total capacity of 190 megawatts (MW). The company has also drawn up plans for a smaller plant (32 MW) and will co-fired facilities (260 MW) in four existing coal-fuelled plants. With limited forest resources available locally, Vattenfall Europe is planning to import pellets from rubber trees in Liberia. The move has faced significant opposition.

As the Vattenfall case study illustrates, the large-scale use of biomass can hardly be met by local sources, leading to an increasing global trade in woody biomass. Although purpose-grown trees offer a sustainable solution, these short rotation species are hardly a replacement for the carbon abatement potential of old growth forests. The scale-up potential of the biopower industry rests squarely on the industry’s ability to navigate these complex issues amidst persistent drought and wildfires.

 

Procurement Arrives In the 21st Century

— December 29, 2011

In the United States, retail electricity sales are more than $300 billion a year. Only a portion of this is in competitive states – that is, states whose historical vertically integrated utilities, which held monopolies over generation, transmission, distribution, and retail functions, have been broken up, allowing end-users to choose their supplier from a host of options. Today, 17 states as well as the District of Columbia, offer competitive retail electricity markets.

Given that, you might think that every utility customer in a competitive market is taking full advantage of the choices that have been made available to them since FERC Order 888 promoted the creation of independent system operators (ISOs) and opened the door to competitive markets. In reality, though, many commercial and industrial customers have been slow to take full advantage of competitive choice. There are a number of reasons, ranging from technical barriers to accessing a full buffet of choices to aversion to change among facility managers and energy managers.

But the number of options is only going to multiply over the next decade, as competitive electricity purchasing grows from 350,000 GWh today to over 450,000 GWh by 2020. Texas and Illinois are the two largest competitive electricity markets today and, as markets open up and more C&I customers take advantage of choice in New York, California (yes, even California, despite the state’s history of unsavory competitive market practices) and other states, the volume will continue to swell.


Still, the procurement industry as a whole is stuck in the 20th century. Less than 10% of energy procured by commercial and industrial customers today is traded online. Instead, energy procurement is most often handled on paper and by phone. To illustrate just how far procurement still has to go, think of it this way: Twenty years ago, if you wanted to book a plane ticket, you had to either call airlines yourself and compare offers or hire a travel agent. Today, you go on Orbitz or another similar service and instantly compare hundreds of offers. With business customers spending hundreds of billions of dollars on energy every year, you would think the market would have gone in a similar direction. There have been attempts at creating competitive online energy markets in the past. But the power industry lags behind in many ways.

Companies like World Energy Solutions are leading the way on bringing “auction-based price discovery” to the energy procurement world. World Energy’s play is based on compiling dozens of offers from retail suppliers and helping customers select the plan that optimizes not only on power costs but also other services like demand response, green power, and energy efficiency. World Energy recently announced the acquisition of Dallas-based energy management and procurement firm GSE Consulting for $8.6 million. This followed acquisitions of Co-eXprise, a procurement firm, and Northeast Energy Solutions, an energy efficiency firm, rounding out its services to include deeper energy efficiency expertise as well as deepening its coverage of the government sector.

These advances in procurement are paralleling the convergence of IT and building systems into energy management systems and changing the way large companies think about energy. As we detailed in Pike Research’s report, Energy Management Systems for Industrial Markets, developments in building energy management technology are putting CEOs and CFOs in the driver’s seat for business-related energy concerns, with the main goal being to reduce expense by reducing energy consumption. With advanced procurement techniques, decision makers can also reduce energy costs through wiser procurement strategies. If you can reduce energy costs by 10% either by implementing a complex retrofit or by simply switching suppliers, obviously you’ll start by switching before you start thinking about making changes to the building itself.

 

The Specter of Fuel Cells at Apple Rises Again

— December 28, 2011

Just about anything to do with the tech company Apple gets a lot of press attention. But for some reason Apple and fuel cell patents in the same sentence tend to have a multiplier.

In January 2011, the company was granted a patent for the use of liquid metal in bipolar plates. (Please don’t ask me why this is important, as I really don’t know.) OK great, one patent. Then in October 2011 Apple was “rumored” to be patenting fuel cell stack designs for the MacBook. After all, as we all know, sizes counts, for fuel cells as with everything else. Published by the United States Patent and Trademark Office, the applications were “Parallel Fuel Stack Architecture” (US 2011/0256463) and “Reduced-Weight Fuel Cell Plate” (US 2011/0256465). Now in December, it has come to light that Apple has applied for two more patents: “Fuel Cell System to Power a Portable Computing Device” (US 2011/0311895) and “Fuel Cell System Coupled to a Portable Computing Device” (US 2011/0313589).

So, one patent granted and four more we know of that Apple has applied for. If Apple gets them that makes five – five patents in the United States for the use of fuel cells for portable Apple devices.
According to the recent FuelCellToday Patent Survey, 2010 saw a global total of 1,801 patents granted on fuel cell technology. Looking at the top 10 assignees in 2010, companies with an active portable fuel cell program include Canon with 20 granted patents, Toshiba with 21, and Samsung with 140. Each of these companies has been working on integrating fuel cells into portable electronics for a number of years and each has amassed a patent portfolio in many areas. None of these companies has yet to release a commercial product.

So what does this mean for Apple? Apple is one company in a number working hard on developing a fuel cell system that can be integrated into a portable electronics system. If Apple’s patents are granted next year then expect to see another slew of headlines purporting to show that Apple will make fuel cells sexy. They won’t. They haven’t made batteries sexy so why should they make fuel cells sexy. Will Apple release a MacBook with an integrated fuel cell? Probably. When? Heaven only knows. The commercial launch dates for integrated fuel cells into laptops have been missed time and time again by other large electronic developers, so there is something holding up this market. Once that something is removed, or cleared, then we can expect to see a rush to market for many companies, and yes, probably including Apple.

 

In Texas, Even the Weather is Big

— December 28, 2011

In homes and boardrooms across the country, individuals and organizations are reviewing the year’s dealings in the hope of gleaning some lessons and preparing for the year to come.  In Texas, the Electric Reliability Council of Texas (ERCOT) is reviewing a year of extreme weather and unforeseen loads, and looking at a future constrained by EPA regulations, but one that offers an expanding menu of innovative technologies. 

Whether or not you attribute it to climate change, in 2011 extreme weather proved to be a formidable variable for the Texas market.  Perhaps it would have been manageable if the state’s electricity providers only experienced one major event.  Unfortunately, the extreme weather was responsible for significant swings in power consumption.  New peak demand records were set in the summer months, and the largest unforeseen load increases were caused by weather, not by economic circumstances.  The good news is, on its one year anniversary, the ERCOT nodal market (which uses a grid of local power nodes, rather than a zone- or region-based system) is operationally efficient and effective.  The bad news: the transition to a nodal market is much easier to account for than the weather.  In 2012, ERCOT will be challenged to manage potential supply and demand issues that are tied to increasingly unpredictable variables, namely record weather events. 

ERCOT can claim some pretty impressive milestones from the year 2011 as well.  The independent system operator (ISO) set a record for the largest wind power contribution in October 2011; 7,400 MW of wind resources supplied 15.2% of ERCOT’s total load.  This is an important milestone for the nodal market design, which is proving well-equipped to handle some of the difficulties associated with renewables integration, and it is also a milestone for the broader wind industry.  Wind power comes with inherent obstacles, namely the potential for instantaneous swings in generation, in either direction, that can make forecasting generation and balancing the grid fiendishly complex.  ERCOT’s 2011 load forecast was 240.2 terawatt-hours (TWh), but the actual load turned out to be 9% higher, at 262.8 TWh.  Given the high penetration of wind energy in Texas, ERCOT is likely going to need better forecasting tools and additional resources that will help balance supply, demand, and grid reliability. 

Looking forward, ERCOT pointed out that power reserves have declined by about 5% for 2012 and 2013. One-fifth of that is due to increased load, and the rest comes from decreased generation.  That drop will drive ERCOT to consider innovative approaches to balancing supply, demand, and grid reliability.  Demand response is already a significant resource in ERCOT’s portfolio, and there is about 160-250 MW of DR that could be activated in 2012.  At the more progressive end of the technology spectrum, vehicle-to-grid technologies may become the newest addition to the ERCOT portfolio.  In September 2011, NRG Energy, Inc. and the University of Delaware launched a joint venture called eV2g, developed to use distributed battery storage in fleet EVs to provide ancillary services to the grid. 

ERCOT’s electricity load is forecast to grow by 2.5% over the next 10 years, and peak demand is expected to grow at a more rapid pace.  With the nodal market in place, and the continued commitment to a diversified portfolio, ERCOT is in a good place to meet growing demand in innovative ways.  Predicting the weather in Texas is another matter.

 

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