Navigant Research Blog

A Small Change with a Big Impact for U.S. Wind Incentives

— May 19, 2016

Der Rotor wird angesetztAn easily overlooked change in guidance from the Internal Revenue Service (IRS) last week may seem like arcane minutia, but it will have a profound impact on the U.S. wind market, measured in billions of dollars and gigawatts installed through 2023.

First some background. In late 2015, the U.S. wind industry and its stakeholders succeeded in securing from congress an elusive policy goal: long-term market certainty. Federal tax credits, predominantly in the form of the Production Tax Credit (PTC), have typically been provided to the wind industry in 1- and 2-year increments. The PTC pays $0.023 per kWh of energy produced for 10 years of operation of a wind plant, which amounts to roughly 30% of the total installed cost of a wind plant. Or it can be taken as a one-time Investment Tax Credit (ITC) worth approximately the same amount.

The 2015 legislation was a significant twist on wind policy. It was a deal between industry and government for the wind industry to eventually give up its tax credits in exchange for a 4-year gradual phaseout of the credits. It was structured so that wind plants that began construction by the end of 2016 would receive 100% PTC value, projects starting construction in 2017 would receive 80% of the PTC value, 60% in 2018, 40% in 2019, and zero in 2020. Start construction is defined as significant site work or 5% of project cost incurred.

The minutia that matters is the start construction guidelines and how long a wind plant is given to come online. In recent years, the IRS guidance of the PTC was to allow wind plants 2 years to complete construction in order to avoid a requirement to show continuous construction progress. That would result in 2018 being the peak capacity installation year, as wind plants starting construction in 2016 would come online by 2018 in order to secure 100% PTC value.

A Pathway to Offshore Wind

The guidance provided by the IRS last week changed the construction window from 2 years to 4 years. It also removes a previous guideline that stipulated construction must be continuous in nature. Combined, this will take a lot of pressure off the wind industry so it doesn’t have to rapidly build as fast as possible to meet a 2-year window. Wind plants seeking 100% PTC value and starting construction in 2016 will have until 2020 to be built. Applying the 4-year guidance, projects starting in 2017 will receive 80% value if completed by 2021, 60% value by starting in 2018 and completed by 2022, and 40% if starting in 2019 and completed by 2023.

The new 4-year window means that capacity additions will see less of a short-term spike and more of a smoothed out deployment cycle. Most wind plants don’t need 4 years for construction, so many will stick to shorter planned schedules. However, large offshore wind projects require longer construction timelines, and this new 4-year window could mean the difference between one or more large offshore projects proceeding that may not have before. For onshore wind, many developers will optimize their development cycles, turbine supply agreements, component transportation, and construction logistics to enable the most cost-effective and largest build cycle possible under these more flexible guidelines. For example, some developers may have a few foundations poured during the first year of construction at a site and turbines not installed until the fourthyear while development is prioritized elsewhere.


Bionic Eyeballs and Digital Ceilings: What the Future Holds for Intelligent Buildings

— May 19, 2016

Intelligent BuildingI am a dedicated fan of sci-fi thriller Orphan Black, but the idea of bio-tech jaw implants shook me to the core in a recent episode—talk about taking wearables to the next level. The thing is, a less diabolical (and more voluntary) implant is not so far-fetched. Enter Google. Earlier this month, the tech giant took one more leap forward in its vision for integrated intelligence—its 2014 patent has been published, setting the stage for the intra-ocular device. Step one.

The good stuff buried in the patent: “The inter-ocular device could include one or more antennas configured to enable communication with an external system and/or reception of wireless power by the intra-ocular device.” For now, it seems this is an ideation of connected health, but the possibilities are really endless. The early experiments with Google Glass could point toward a new reality of contact computing work to be had. In reality, step two—the era of reading operating stats via apps that send operational data tied to nameplates through your eyeballs—is probably a ways off. That said, there are disruptive shifts in facilities management underway today.

Inter-ocular Device

Casey Eyeball Blog

(Source: Google)

Reimagining Infrastructure

Wearables will likely remain outside the body (at least for the next year), but nonetheless, technology is transforming the facilities management industry. The Internet of Things (IoT) is sure making a buzz, but its impact in buildings is real. Navigant Research defines IoT as a scalable, secure, and open platform for aggregating and communicating data for performance improvement. What this means is there is a proliferation of devices that are transforming facilities into data-rich environments, and when these devices are networked as a part of an IoT infrastructure, better information becomes available. This is key; there is a lot of noise surrounding technology advancements and more data, but these solutions only have value if they deliver better information. The effective IoT-enabled intelligent building delivers efficiency in operations and energy, but also a host of other business benefits, including occupant engagement, satisfaction, and productivity.

Networked Building Optimization and Lifecycle Benefits

A unified approach to optimizing performance of multiple systems in a facility is fundamental to the process of developing intelligent buildings. Let’s step back to the technology available today. Cisco, for example, has introduced the Digital Ceiling Framework, a single IP network for directing improvements in both HVAC and lighting. The company recently explained the end-to-end benefits of a unified platform: “The convergence of these disparate systems is providing opportunities that reduce construction and operating cost; enhance physical and cybersecurity of people, assets, and performance in buildings; reduce environmental footprints through the use of advanced analytics; and allow for personalised and customised experiences that appeal to workers from all generations.”

Other major industry players are making big moves to showcase their capabilities in this IoT-enabled approach. As another example, Current announced its acquisition of Daintree Networks in late April. The story is analogous; IoT solutions enable optimization across the facilities value chain through coordinated operations of HVAC and lighting.

The industry is taking note of the benefits of IoT and software. According to a recent survey by Schneider Electric, 65% of facility managers predict IoT will affect building and maintenance within the next year.  There is a huge market to penetrate, when you consider that this same survey found that only 18% of facility managers are using continuous or real-time data. Our research indicates the tides are turning and the pace of investment is accelerating as IoT devices and intelligent building software open the door to broad business benefits for companies operating in facilities large and small.


Fuel Cell Vehicles Join the Carsharing World

— May 19, 2016

CarsharingGerman hydrogen company Linde is experimenting with a solution to the infrastructure problem for fuel cell cars. This summer, the company will launch an all-fuel cell vehicle (FCV) carsharing service in Munich. For this trial program, Linde is partnering with Hyundai to provide the fleet of FCVs. The service, called BeeZero, will have 50 fuel cell-powered ix35 crossover SUVs (known as the Tucson in North America), Hyundai’s current entry into the fuel cell market and one of only two FCVs commercially available today.

Linde is in good company in offering a carsharing service with zero tailpipe emissions, as a number of carshare programs around the world specialize in battery electric vehicle (BEV) fleets. In its 2015 Carsharing Programs report, Navigant Research estimated that around 20% of all carsharing vehicles in use globally were plug-in electric vehicles (PEVs)—mostly pure BEVs. Most of these EVs are in a handful of programs where the EV is a part of the service’s brand identity. The most famous is probably Autolib’ in Paris, run by Bollore. The Kandi carshare service in China also uses a fleet of micro EVs. Both Daimler and BMW’s carsharing services have deployed the automakers’ EVs, but not exclusively. Daimler recently switched out all EVs for gas cars in its San Diego carsharing service; the reason given was a lack of charging stations. (It will be interesting to see if the cars are reinstated once utility San Diego Gas & Electric launches its EV charging pilot program.)

The Challenge of Charging

Charging is one of the challenges for battery-powered carsharing vehicles, and likely explains at least in part why few carsharing companies integrate BEVs into their larger fleet of gas cars. Even if chargers are available, there can be problems with ensuring they are properly plugged in and that the charge stays full.

FCVs operating in fixed areas have the advantage of requiring a relatively small number of strategically located refueling stations in a city while offering longer ranges than EVs. Navigant Research predicted the introduction of fuel cell carsharing services for this reason in our recent white paper on the future of transportation. This makes an easier pathway to market for FCVs than having to build a network of refueling stations to service private car ownership.

Longer Ranges

Linde is also promoting the advantages of the longer driving ranges offered by FCVs. The Hyundai ix35 has a range of over 350 miles on a tank of hydrogen. While this is indeed a key benefit of fuel cell cars, it will be useful to see how much of a benefit this is for a carshare user. Carsharing services have a few typical use cases: short inner-city trips (the kind being served by one-way carsharing operations); planned trips with slightly longer range needs; and long-distance trips, typically on weekends. The BeeZero service would presumably be used for the latter two cases, but long-distance travel might require use of a hydrogen fueling station at the destination.

Linde has said it will use BeeZero to gather information on “day-to-day fleet operations” of fuel cells and hydrogen that can be fed back into its hydrogen development efforts. BeeZero presumably also offers Hyundai not only with an avenue to deploy more of its fleet of fuel cell ix35s, which have seen limited uptake to date, but also a chance to take lessons learned into its FCV development efforts. In the long-term, it is possible to envision FCVs being deployed in carshare services sponsored by automakers and infrastructure providers in cities where only low carbon or even zero emission vehicles are permitted.


Deploying Energy Efficiency to Lower CO2 Emissions and Comply with the Clean Power Plan

— May 17, 2016

Cloud ComputingThis post originally appeared on the Association of Energy Services Professionals (AESP) website.

This article was co-authored by Frank Stern and Rob Neumann. Amanvir Chahal and David Purcell also contributed.

There has been a great deal of discussion on compliance with the Clean Power Plan (CPP). Surprisingly, there is little discussion of specific costs and benefits in leveraging energy efficiency (EE) to reduce CO2 and move toward complying with the CPP. Navigant investigated the effects of deploying additional EE resources to decrease CO2 emissions in two regions—California and PJM [1]. Our analysis shows that deploying additional EE for CPP compliance results in reduced CO2, as would be expected, but it also reduces costs and system congestion. Additional EE can reduce cost to serve load by 3% to 5% in California and PJM, which reduces costs annually up to $825 million in California and $1.5 billion in PJM. Another benefit of deployed EE is system congestion relief, which reduces the cost to serve load—this is important since large, urban utilities are focused on reducing congestion points, and EE can be used as a solution.

CPP and CO2 Reduction Timeline

The CPP has been stayed by the U.S. Supreme Court until final resolution of the case through the federal courts. The U.S. Supreme Court may not have final resolution of the case until 2018, although it could be sooner. Regardless, many states and regions continue to move toward the CPP goals to reduce carbon emissions, plan for an advanced energy economy, and meet cleaner generation goals. It is not known at this time if the deadlines in the CPP will be modified.

Modeling EE for CO2 Reduction

Navigant has been modeling supply resources for many years and has been including EE as a modeled resource. For this analysis, we focused on modeling PJM Transmission Interconnection and the state of California. To establish our EE base case across California and PJM, we included levels of EE modeled in each of Navigant’s most recent PROMOD and POM [2] transmission model runs. The data and assumptions in these runs are updated and verified with industry experts each quarter. Variables in the model include (i) rate of EE adoption over time, (ii) amount of EE compared to new generation, and (iii) varying amounts of EE deployed. EE was modeled across CA and PJM for the three cases (high/medium/low)—each case was run for 2025 and 2030. These years are important since 2025 is the middle of the CPP implementation period and 2030 is the first year of full compliance with the rule (final goal). The low case included a 50% reduction in EE from the base case, while the high case included a 50% increase in EE from the base case—the base case in 2030 is 33 million MWh for PJM and 24 million MWh for California.

Modeled Results

Deployed EE can provide up to 8.8% of California’s and 3.6% of PJM’s overall CPP Compliance goal in 2030. There is also a reduction in the cost to serve generation load based upon deployed EE. In PJM, the cost savings from the low EE case to the high EE case results in over $1.5 billion in savings annually in 2030 (3.6% of total cost to serve load), while in California, the same metric results in up to $825 million in savings annually in 2030 (4.7% of the cost to serve load). To state it in different terms, the cost to increase EE in 2030 to assist meeting CPP requirements is approximately $900 million in PJM and $550 million in California, which results in an EE return on investment of $600 million in PJM and $300 million in California. This lowers 2030 system capacity requirements by 5.6% in PJM and 10.7% in California. The lower savings and returns in California are due to aggressive renewable and EE policies already underway today in advance of CPP compliance.

Another benefit of deployed EE is reduced system congestion, which reduces the cost to serve load. EE will lower the need for new thermal generation on the system and put downward pressure on capacity and resource prices. Our model shows that system congestion is reduced by approximately 1.5% and is seen systemwide. This amounts to cost reductions of more than $765 million a year in PJM and $270 million a year in California. This system congestion finding is important, since there are various efforts underway across the nation to improve congestion (e.g., Con Edison Brooklyn/Queens Demand Management Initiative).


CPP initiatives would benefit greatly by incorporating additional EE into the planning process. EE reduces emissions and systems costs and pushes out the need for large, costly new generation projects. Specifically, we showed that CO2 emissions would be significantly lowered in PJM and California in both 2025 and 2030, while system costs are lowered in PJM and CA by at least 3% and 5%, respectively. This all adds up to longer glide paths for meeting regulatory requirements or when state goals have to be implemented. By including EE as a resource into the resource mix, system planners and environmental offices gain significant benefits in the form of decreasing costs, flattening demand and a zero-emitting resource.

[1] PROMOD IV is a detailed hourly chronological market model that simulates the dispatch and operation of the wholesale electricity market. It replicates the least cost optimization decision criteria used by system operators and utilities in the market while observing generating operational limitations and transmission constraints. The Proprietary Portfolio Optimization Model (POM) is leveraged for regional analysis of regulatory impacts.

[2] PJM coordinates movement of electricity through all or parts of Delaware, Illinois, Indiana, Kentucky, Maryland, Michigan, New Jersey, North Carolina, Ohio, Pennsylvania, Tennessee, Virginia, West Virginia and the District of Columbia – numerous states and diverse regions.


Blog Articles

Most Recent

By Date


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":"2016 May","path":"\/2016\/05?page=3","date":"5\/26\/2018"}