Navigant Research Blog

Smart Water Making Gains beyond the United States

— November 20, 2013

While much attention has been paid to smart water technology deployments in the United States, there’s evidence that smart water technology is gaining traction in other parts of the world.  The need is certainly acute: Unaccounted for water amounts to more than $14 billion annually around the globe, according to The World Bank.  In response, innovative water projects in various stages have emerged in Europe, the Middle East, and Asia.

In Europe, the SmartWater4Europe project involves 21 different entities, including water utilities, technology vendors, research centers, and universities.  With a budget of more than €10 million ($13.5 million), the leading players are: Acciona Agua of Spain, Vitens of the Netherlands, and Thames Water from the United Kingdom.  The overall goal is to apply new technologies for better management of drinking water networks.

The first project will be deployed by Acciona Agua in the Spanish city of Cáceres.  Acciona will install advanced technologies in the town’s city center and historic district.  The company will utilize a single software platform that integrates remote meter reading, water quality sensors, a geographic information system (GIS), and mathematical modeling that can detect faults, jams, or leaks.  Vitens will lead a similar project in the Dutch province of Friesland and Thames Water will conduct its project in London.  Working with the University of Lille, the companies will also manage a project in the French town of Villeneuve d´Ascq.  Results from the four projects will be collected over the next 4 years.

In the Desert

In the Middle East, Saudi Arabia is making major investments in water supply technology.  The water-stressed country has allocated up to $53 billion for a variety of projects to be completed by 2022, with much of the money going to desalination and wastewater treatment projects.  Desalination is the country’s main source of water, and though it requires large amounts of energy to transform seawater into potable water, this process is seen as the most viable solution given Saudi Arabia’s ample supply of oil and gas.

Also in the Middle East, the United Arab Emirates’ SembCorp Water & Power Company is expanding its Fujairah 1 desalination plant using technology from Energy Recovery, a California-based company that specializes in harnessing reusable energy from industrial fluid flows and pressure cycles.  Energy Recovery’s devices will be used at Fujairah 1, with the expectation the new gear will cut 83,000 metric tons of CO₂ per year, amounting to 140 million kWh of energy savings and more than $14 million in annual cost savings.


In Asia, several water utilities in India are moving ahead on projects to upgrade their water systems.  The Bangalore Water & Sewerage Board (BWSSB) has awarded a contract to French company Suez Environnement to improve its distribution system and reduce unaccounted for water (UFW), which is due to leakage, theft, or under-registered meters; UFW is also known as non-revenue water.  The goal of the 8-year project is to reduce UFW from the current level of 42% to 16% in the state of Karnataka, which includes more than 400 000 consumers.  Similarly, Suez has a new contract with Pimpri-Chinchwad Municipal Corp. (PCMC) to upgrade its water system and reduce UFW.  The two contracts for Suez are valued at $27.5 million.  And in Delhi, the Delhi Jal Board (DJB), the main water supplier in the capital, is deploying new gear from Itron, which includes 120,000 advanced meters, 40,000 standard meters, mobile collection equipment, and software.  Upon completion in March 2014, this project will be India’s largest mobile advanced metering system.

These projects demonstrate a growing global awareness of the need for modernizing water production, distribution, and treatment systems.  The problem lies in making these projects budget priorities amidst competing capital projects.  Clearly, oil-rich countries like Saudi Arabia and the UAE have more flexibility to direct funds to water projects, while other countries like India struggle to make the case among competing infrastructure needs.  Eventually, investments in water systems will have to be made in order to avoid looming water supply catastrophes.


China’s Smog Crisis Brings New Crackdowns

— November 20, 2013

Harbin, a city of 11 million people in China, saw air pollution hit dubious records in October, reminiscent of pollution levels from Beijing last January.  While the bulk of the pollution is attributed to burning coal for heat and electricity, road pollution has also been cited as a major contributor.  This is not particularly surprising.  The automotive market in China surpassed U.S. sales in 2010 and is on track to sell 19.5 million cars and trucks this year.

The particulate matter cited for contributing to the smog in China is labeled PM2.5 (meaning that it’s 2.5 microns or smaller in diameter and can lodge deep within the lungs).  PM2.5 is mostly produced by burning fuels, such as coal, diesel, or even wood.  In China, diesel vehicles are responsible for 85% of the PM2.5 produced by motor vehicles.  The Chinese Academy of Sciences claims that in Beijing, 23% of PM2.5 is coming from vehicles (which is similar to the 20% the Environmental Protection Agency has concluded comes from motor vehicles in the United States).

A Bit Lax

Beijing, a city of 20.7 million people that is growing at a rate of 2.5% annually and has 5.4 million vehicles, has gone to the extreme to cap vehicle licenses at 6 million vehicles.  Additionally, the government has enacted a number of emissions rules in the last year that target both electricity generation and motor vehicles.  China follows the European Commission in its vehicle emissions rules.  In the most polluting vehicles, heavy duty diesel trucks, emissions restrictions are comparable to Euro IV in most major cities and Euro III nationwide.  However, the follow-through on the restrictions is where more aggressive action may be needed.

Part of the challenge in meeting the emissions restrictions lies within the diesel fuel itself.  While in the United States the sulfur content is required to be below 15 parts per million (ppm), in China the sulfur content varies from 250 ppm to 2,500 ppm across the country.  Engine manufacturers cannot meet Euro IV and V requirements without improved fuel – which means higher cost fuel.  The backlash against higher fuel costs in 2011 was so strong that the government delayed implementation until 2013, pushing back the Euro IV vehicle emissions restrictions nationwide until 2014.

Slower, Cleaner

Another part of the challenge lies with enforcement of the rules already in place.  While new vehicles manufactured generally meet the requirements, enforcement of emissions restrictions from older vehicles tends to be inconsistent nationally.

What does this mean for China’s air pollution?  When greater enforcement has meant higher costs and slower growth, the government has a poor track record of following through.  However, the appetite for slower economic growth may be more appealing as public health impacts rise and increasingly wealthy city residents look to improve their quality of life.  While the bad air days in China will continue, China’s tough new vehicle emissions rules may finally show some teeth.


Waiting for the Methane Hydrates Boom

— November 20, 2013

Even as the heralded natural gas energy revolution is still gearing up, the natural gas vehicle industry may be looking ahead to the next revolution.  While shale gas is having a significant impact on U.S. energy economics, some in the natural gas truck and bus industry are already eyeing the potential that methane hydrates could secure natural gas as the energy source for transportation in the 21st century.

During the research for my upcoming report, Natural Gas Trucks and Buses, methane hydrates came up twice in conversations, which made me curious as to how real this prospect is.  Methane hydrate (also known as methane calthrate) is methane trapped inside a water molecule, so that the molecule is flammable.  Estimates for the quantity of methane available in methane hydrates vary widely, from 100,000 trillion cubic feet (tcf) to 100 million tcf of methane.  Worldwide methane consumption was 113 tcf in 2010, according to the U.S. Energy Information Administration.  As my colleague Sam Jaffe wrote in a recent blog, though, the methane hydrates revolution is far from a certainty due to environmental and economic concerns, as well as a lack of mining infrastructure.

The Next Revolution?

The Canadians, rich in shale gas, ended their research into methane hydrates this year, which makes the Japanese the leader in R&D on mining technologies.  In March of this year, Japan produced 120,000 cubic meters of gas from methane hydrates in a 6-day offshore test.  On October 31, the Japanese officially requested that the U.S. collaborate on developing mining technologies, with a target of production beginning in 2018 or 2019.

In terms of politics and energy consumption, 2018 seems like a long way off.  But natural gas power plants can take up to 3 years from design, approval, and construction to operation, and most vehicle manufacturers are already planning or actively working on 2017 model year vehicles.  That’s why methane hydrates are coming up in conversations now.

What isn’t clear is whether the research into methane hydrates mining can get political support before the shale gas revolution has run its course or before biomethane and coal seam gas become economically competitive.  Clearly, in Canada, the answer is no.  Now that methane hydrates are known to exist and have been proven technically minable, countries with the means and needs for new energy sources (Japan, Germany, South Korea, and perhaps even China) are likely to push ahead to improve the economics of this potential new revolution.  If methane hydrates can be recovered in an environmentally sustainable and economically viable way, they are unlikely to remain underwater for long.


Has Demand Response Peaked in the Northeast United States?

— November 19, 2013

The theory of Peak Oil was proposed by M. King Hubbert back in the 1960s.  He tried to predict the point in time when the maximum rate of petroleum extraction would be reached, after which the rate of production would be expected to decline.  Hubbert’s forecasts have proven inaccurate, as world oil supplies are expanding with new discoveries and extraction methods, but the concept of defining a peak point for any resource is intriguing.

Demand response (DR) has enjoyed rapid growth in wholesale electricity markets around the United States in the last 10 years, since the first formal programs opened following the Enron crisis in California in 2001 and the Northeast Blackout in 2003.  In the past few years, as DR has matured in the market and been afforded the opportunity to bid directly against generation, it has also fallen under greater scrutiny from federal and state regulators, system operators, and other market participants.  PJM, NYISO, and ISO-NE have all seen signs of decreasing DR participation in their capacity markets over the last couple of years.  Here are some of the statistics and supporting facts:

  • In the last Reliability Pricing Model (RPM) Base Residual Auction (BRA) in PJM, which is used to procure capacity for 3 years in the future, DR that cleared dropped by over 2,000 MW, to 12,408 from 14,832 the prior year, a reduction of 16%.
  • In NYISO, DR in the Installed Capacity (ICAP) market dropped from a historical high in 2009 and 2010 of about 2,150 MW to 1,100 MW this past summer, a reduction of nearly 50%.
  • ISO-NE has shown both short-term and long-term decreases in DR participation in the Forward Capacity Market (FCM).  Active DR (which excludes energy efficiency and distributed generation) dropped from about 1,800 MW in 2011 to about 1,200 MW this past summer, a reduction of 33%.  In the latest Forward Capacity Auction (FCA) for the 2017-2018 delivery year, retirement requests for over 600 MW of DR were submitted to the ISO.

What are some of the more specific reasons for these trends?

  • There have been more DR events called recently, so customers are feeling more of an effect on their operations.
  • System operators want to make sure that DR resources are accurately portrayed to ensure reliable operations and efficient markets.
  • Generators are seeing DR eat into their profits, so they want more comparable treatment to ensure a level playing field.
  • Energy market regulators are keeping a keener eye on DR to catch any market manipulation, like they have been doing for generators and traders for years.
  • Environmental regulators are showing concern about the air quality effects of behind-the-meter generation used for DR.
  • DR may be hitting a natural saturation point as it approaches 10% of capacity resources in some areas and all the low-hanging fruit of large commercial and industrial (C&I) customers has been harvested.
  • Low natural gas prices and a historical glut of capacity have led to low capacity prices in some regions.

These factors have put more risk and pressures on DR providers and end-use customers, which is making the decision to participate in the markets harder than it used to be.  However, I do not see all doom and gloom.

With recent and upcoming coal and nuclear plant retirements, it is possible that capacity prices could rise to levels that would make participation worth the risk.  The concepts of resiliency and microgrids, meanwhile, have taken strong root along the Atlantic Coast following Hurricane Sandy, and DR will be an integral part of those developments.  And other types of demand resources, like energy efficiency and distributed generation such as combined heat and power (CHP) and solar PV, continue to grow since they have non-market drivers pushing them.

So the overall mix and impetus for DR may change, but there will still be drivers for demand-side resources in the future.


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