Navigant Research Blog

Alarming Energy Headlines Mask Good News

— January 30, 2014

In Davos, Switzerland, the confabbing tycoons at the World Economic Forum spent their last day fretting over climate change.  The irony of the super wealthy flying in their private jets to hang out in a luxurious resort and talk about reducing carbon emissions was, apparently, lost on the attendees.  There’s no question, though, that we are at an apparent turning point in the struggle to limit global climate change over the next 40 years.

Recent headlines out of Brussels shouted that the European Union is essentially abandoning its ambitious clean energy targets.

“The EU’s reputation as a model of environmental responsibility may soon be history,” lamented the German newsweekly Der Spiegel.  “The European Commission wants to forgo ambitious climate protection goals and pave the way for fracking, jeopardizing Germany’s touted energy revolution in the process.”

“A deep and lasting economic slowdown, persistently high prices for renewable energy sources and years of inconclusive international negotiations are giving European officials second thoughts about how aggressively to remake the Continent’s energy-production industries,” reported The New York Times.

The European Commission, the EU’s executive branch, “has lost its moral courage,” Brook Riley, a campaigner at Friends of the Earth, told Reuters.

Not Quite So

Meanwhile, cleantech investment fell in 2013 for the second straight year.  Reports from Bloomberg New Energy Finance, Cleantech Group, and Clean Energy Pipeline all trace the decline, with Bloomberg saying that total investment in smart and renewable energy companies was $254 billion worldwide, down 12% from 2012.  If you were thinking of manning the lifeboats on the clean energy ship, now would seem like a good time.

Luckily, that’s not really the case.  In fact, the alarmist headlines are at odds with the underlying trends and may, in fact, wind up being good news.  The EU, for instance, has almost achieved its carbon emissions reduction goal, set in 2007 as part of the 20-20-20 mandates, of a 20% reduction from 1990 levels by 2020.  Emissions on the Continent today are 18% lower than in 1990 – remarkable achievement by any measure (though reached, in part, because of the continentwide economic slowdown).

What’s more, the current talks are not about scrapping the 20-20-20 targets (which call, in addition to the emissions reductions, for renewables’ share of EU energy consumption to rise to 20% and a 20% improvement in continentwide energy efficiency, both by 2020).  The argument is over what happens after 2020 – and the question is not whether to institute new targets through 2030, but how ambitious and how binding they should be.

In January, the European Parliament passed, with a strong majority, a measure to reduce carbon emissions EU-wide by 40% (per 1990) by 2030.  That figure might be reduced to, say, 35%.  And countries may be given more leeway as to how to get there, with France (which gets most of its power from nuclear plants) and Germany (which is still determined to achieve its ambitious Energiewende, or energy revolution) making deep cuts while, say, Poland and Bulgaria, which are still heavily dependent on coal, progress more slowly.

Hold My Jet

It’s important to remember that the tripod of 20-20-20 includes two legs – energy efficiency and renewables – that are really just avenues to the primary goal: reducing carbon emissions.  If that can be accomplished by moving more of Europe’s coal plants to natural gas, then absolute targets for renewables’ share of the energy mix, for instance, can be more fluid.

Even the cleantech investment slowdown has an upside.  The industry is maturing and major technology players such as Google, which just paid $3.2 billion for Nest, are placing large bets on established companies with existing markets for their products.  Corporate America is rapidly waking up to not only the economic and financial risks of climate change, but also the potential upsides of energy efficiency and cleantech businesses.

Fortune 500 CEOs increasingly “see global warming as a force that contributes to lower gross domestic products, higher food and commodity costs, broken supply chains and increased financial risk,” reports The New York Times – a position “at striking odds with the longstanding argument, advanced by the coal industry and others, that policies to curb carbon emissions are more economically harmful than the impact of climate change.”

At the widest view, the shift to a less carbon-based economy is happening more and more in boardrooms, in city council meetings, and on Main Street – and less in the gilded chambers of diplomats or the posh watering holes of the rich.  That’s a good thing.  And if the plutocrats in Davos can reach some consensus about how to simultaneously promote broad prosperity, advance technology, reduce global inequality, and limit climate change, good for them.  Maybe they could save all that jet fuel and hold next year’s WEF by teleconference.

 

Building an Energy Efficient Detroit

— January 30, 2014

The headlines coming out of Detroit recently have largely been focused on bad news.  However, as anyone who lives here knows, Detroit and the surrounding area has a lot more of interest going on than what the headlines and images of “ruin porn” portray.

Most recently, Wayne County (the county that contains Detroit) voted to allow Property Assessed Clean Energy (PACE) financing by working with Lean & Green Michigan to administer the financing.  While PACE financing often conjures images of solar panels glistening in the California sun, in Detroit, it seems likely to be more closely associated with building remodeling and renovations.  In terms of PACE financing, Michigan’s is certainly small in comparison to the rest of the country, which was anticipated to reach $250 million in 2013.

However, the opportunity for using PACE financing to improve Detroit’s building stock is a significant one.  The city, state, and federal governments are going to great expense to clear abandoned structures in a city where the precise number of building to be razed or refurbished isn’t even known (the figure most often cited is 78,000).  A public-private partnership is doing a survey of every structure in Detroit to determine the extent of the blight.  But really, this is all just a prelude to the real work of figuring out what to do with the abandoned neighborhoods and city blocks.

Closing Down Coal

At the same time as PACE financing gains momentum in Michigan, the state is starting to push toward a future with less coal being burned.  Michigan Governor Rick Snyder has laid out goals for the state’s energy policy, including increasing renewable energy (particularly from onshore wind), reducing coal usage, and improving reliability.  While he campaigned against a failed 2012 ballot proposal that would have required 25% of electricity production in Michigan come from renewable resources in 2025, Snyder now says that the current requirement of 10% by 2015 is too easily achievable.  Of course, the first pass at the new energy policy is heavy on broad goals with little specifics to offer much guidance.  The cynical environmental watchers will also point out that a good part of the push away from coal has more to do with economics than the environment: Michigan has lots of natural gas but imports all its coal from other states.

At this point, the alignment of the goals for PACE financing and the state’s push for more environmental energy production seems likely to happen by happenstance, rather than by intent.  The timing of the PACE financing announcement, however, is fortuitous.  The city’s tools for helping with energy efficiency costs have come to an end, leaving only modest state tax rebates and utility programs.  Michigan is already gaining notice as one of the leaders for growth in renewable energy.  PACE financing can play a key role in keeping the new commercial building stock as energy efficient as possible – and perhaps even improving the distributed generation picture in Detroit.

 

Silver Spring Launches First Utility App Store

— January 30, 2014

As utilities strive to inexpensively increase the benefits and functionality of smart grid deployments, IT developers are being pressed to develop innovatve solutions.  Silver Spring Networks has just introduced its SilverLink Sensor Network, a cloud-based analytics and networking platform that represents the first ever utility app store.  Based on an open API, the platform can be overlain on existing communications networks.  Silver Spring is positioning it as a low-cost but highly customizable option for utilities that want to unlock the value of data gathered by smart meters, or advanced metering infrastructure (AMI).

The modular selection and development of SilverLink’s smart grid apps will allow utilities to customize smart grid functionality that’s enabled by meter data.  For example, customers can view and adjust current home energy use, utilities can monitor and manage assets, and managers can oversee operations and workforce planning.  Silver Spring is putting significant effort into developing strategic partnerships with analytics developers, such as Plotwatt, ONZO, Sentient, and AutoGrid.  The results of these partnerships will vastly expand the choices available for specific applications— the utility version of having numerous options when seeking out an app for editing photos on your smartphone.

Crawling through the Data

An interesting development in data collection and analysis is the platform’s “crawling” method of sorting through data to recognize (and potentially automatically respond to) unique grid events.  While Silver Spring does not disclose proprietary details on its data search, it has likened it to Google Search and Twitter Trending, both of which index sites and posts based on frequency and credibility gained from associated links and mentions.

For utilities, this means the establishment of a meter data search that can prioritize information based upon the applications selected by the individual organization.  For example, if a utility wants to use the platform for real-time condition monitoring, smart meter data can be accessed and automatically filtered to gain insight into substation health through the analysis of voltage and load from individual endpoints.

The SilverLink technology illustrates the convergence of IT and operational technology (OT) by using the smart meter as a networked sensor that transmits data directly into the IT platform.  It also meets growing demand from utilities that invested heavily in smart grid upgrades after receiving federal funding through the American Recovery and Reinvestment Act (ARRA), but have yet to effectively leverage these new AMI systems to meet diverse system and organizational needs.  (Navigant Research discusses these trends in depth in three recent reports, Smart Grid IT Systems, AMI and Distribution Automation Integration, and Smart Meters.)  One key question raised by the release of this platform is whether such technology developments will reduce utilities’ hesitation to deploy new AMI systems, a smart grid market segment that has seen a significant slowdown over the previous year as many systems have struggled to produce significant cost benefits.

 

Clean Energy Incentives Plan Faces Opposition

— January 30, 2014

The chairman of the Senate Finance Committee has a noble goal: to level the playing field for clean energy incentives while also making their benefits more predictable.

Montana Democrat Max Baucus’ staff published a discussion paper in December that details a plan to reduce the number of tax credits and standardize the amount of incentives based on the environmental benefit.  Companies – both fossil fuel producers and renewable energy companies – would have the flexibility to choose either a production tax credit or an investment tax credit.

“Today, there are 42 different energy tax incentives,” according to the paper, “including more than a dozen preferences for fossil fuels, ten different incentives for renewable fuels and alternative vehicles, and six different credits for clean electricity.  Of the 42 different energy incentives, 25 are temporary and expire every year or two.”

That the credits expire every 12 to 24 months has been a source of consternation for the clean energy industry and its customers, as they are reluctant to make capital investments if the credit goes away before it can be fully realized.  Creating stable incentives would likely expand investment in renewable energy production.

Logical But Unloved

The plan states that all incentives would be based on reductions in greenhouse gas emissions for each alternative; only technologies that reduce emissions by more than 25% than the current average for energy generation would be eligible.  This would create new opportunities for using technologies such as energy storage (for capturing excess renewable energy) and combined heat and power plants, which until now haven’t been treated equally.

Standardizing the incentives is a logical idea, but the plan’s intent to use the U.S. Environmental Protection Agency’s (EPA’s) standard calculations for emissions will be contentious.  There are many studies that contradict the agency’s findings, which would likely result in loads of complaints from dissenting advocates of specific technologies.  Conversely, the oil & gas industry will strongly oppose legislation to eliminate fossil fuel incentives – but if they’re still included, then the promise of equality would not be realized.

The plan also looks to consolidate seven incentives while eliminating eleven others, including the incentive for purchasing a plug-in electric vehicle (PEV).  While the incentive plan may reduce the cost of renewable electricity, it would not lower the cost of all electricity for use in a vehicle.  Eliminating this tax credit would not sit well with the electric vehicle (EV) industry and would likely reduce EV sales in the short term.  Vehicle buyers generally do not spend considerable time calculating the recurring fuel costs when purchasing a vehicle (other than possibly looking for higher MPG ratings); rather, they focus on the upfront cost of the vehicle.  Without a credit at the time of purchase, EVs, which carry higher prices than conventional cars, would become considerably less attractive to many.

Note, too, that the plan would end the incentives as fuels and power generation get cleaner.  For transportation, the credits would phase out once the greenhouse gas intensity of all fuels is 25% cleaner than gasoline.  Having an end date is likely more palatable for legislators who are focused on debt reduction.

Despite its merits, should elements of this plan become a bill, it would likely face opposition from many interest groups, especially considering that Baucus is tying the incentive plan to reducing corporate taxes.

 

Blog Articles

Most Recent

By Date

Tags

Clean Transportation, Digital Utility Strategies, Electric Vehicles, Energy Technologies, Finance & Investing, Policy & Regulation, Renewable Energy, Smart Energy Program, Transportation Efficiencies, Utility Transformations

By Author


{"userID":"","pageName":"2014 January","path":"\/2014\/01?page=2","date":"5\/27\/2018"}