Navigant Research Blog

Key Takeaways from the CPP Oral Arguments

— September 30, 2016

AnalyticsOn Tuesday, September 27, the hottest ticket in Washington, DC was for a seat in the courtroom to hear oral arguments in the US Environmental Protection Agency’s (EPA’s) Clean Power Plan (CPP) appeals. Below are some key takeaways from the proceedings.

Oral arguments were thorough and the judges were well-prepared. The discussion took almost twice as long as scheduled; the court allotted 218 minutes for arguments, and the hearing lasted nearly 7 hours.

Transforming the Sector?

A key issue was whether or not the CPP rule is transformative to the electric sector. The EPA is walking a fine line here because it wants to tout the positive impacts the rule will have on climate change and air pollution without indicating that the CPP is transformative enough to warrant a clear directive statement from Congress. Questions included whether the Clean Air Act was intended for this purpose, and what to do when Congress fails to act. The fact that a number of utilities intervened in support of the EPA and spoke to the issue of the ongoing shift to low-carbon generation sources (e.g., natural gas and renewables) may weaken petitioners’ case that the EPA overstepped its authority, meaning congressional action is required for such a change.

At Navigant, we have been modeling regulations on CO2 from power plants since President Obama first announced that this kind of regulation would be a part of his Climate Action Plan in 2013. A number of factors, including continuing low gas prices and ever lower renewable costs, make emissions reduction actions more cost-effective. This is to say that the CPP is not as costly to achieve in our current future outlook than it appeared a few years ago. The court’s focus on this point indicates that the judges recognize the nature of the ongoing energy transformation may be in line with current trends.

Other challenges brought in front of the judges on Tuesday included whether a Best System of Emission Reduction (BSER) that extends beyond the fence line (i.e., outside of the regulated generation plant) is allowed under section 111(d) of the Clean Air Act. Based on feedback from attendees, this issue did not seem as contentious as originally expected. Discussions on differences between the House and Senate versions of the 1990 Clean Air Act amendments also seemed less contentious than originally thought.

Procedural Notice

The other challenge that I found interesting was the issue of procedural notice. Petitioners’ challenge that there are major differences between the proposed and final rules and contend that the EPA should have reissued the rule allowing for additional comments prior to finalizing it. If the judges agree, the court may not have to rule on the merits of the case and the CPP could be sent back to the EPA for additional comments. At that point, it would be up to the next president and administration to move the CPP forward. Under those circumstances, the reissued CPP would also likely see appeals through the DC Circuit and US Supreme Court, likely pushing back compliance.

The case was heard in front of 10 judges, 6 Democratic appointees, and 4 Republican appointees. Regardless of the DC Circuit’s decision (expected in early 2017), most agree that this case is likely to be appealed to the US Supreme Court. In its current makeup, the Supreme Court is largely assumed to be split 4‑4 on the issue.


New Technologies and Systems Widening the Solar Market

— September 30, 2016

Rooftop SolarUntil recently, most solar installations have been set up to generate the maximum kilowatt-hours per day/year possible. This was because the incentive programs in place only took into account the overall production of a plant. This is not an issue in regions with low solar PV penetration in their energy mix, but it’s becoming a problem in areas with high solar penetration relative to the peak demand, such as in California, south Germany, northern Chile, and southwestern United Kingdom. As I have argued before, all kilowatt-hours are not equal, but since the two most common policy incentives (feed-in tariffs and net metering) treat them as equal, installers choose to maximize generation.

There are some signs that this is changing. Chile has introduced a tender system that divides the market by delivery time, and there are efforts to introduce solar-based time-of-use (TOU) tariffs in some markets. But perhaps the strongest force pushing the industry away from equal kilowatt-hour values is corporate power purchase agreements (PPAs).

Unlike in traditional PPAs, in which a utility (or the government in the case of feed-in tariffs) buys electricity and then sells it to their customer base (which has different load requirements), corporate PPAs are signed with single entities that have a specific daily load demand curve. In this scenario, the offtaker corporation might prefer to match the PPA agreement (and hence generation profile of the project) as closely as possible to its demand curve, even if that means the project will produce less than its full potential.

New Technologies Widen the Opportunity

In a world that only looks at maximizing output at the lowest cost possible, the premium that innovative solar technologies that tackled the TOU mismatch was almost nothing; the modules that were sold at the lowest price per watt were king. Once TOU enters the equation, installations will favor technologies that maximize revenue (or avoid cost from the corporate view). It is possible to use technologies like energy storage systems or implement demand response systems to match generation and demand, but it can also be tackled from the solar system design, including new technologies like bifacial solar modules based on n-type PERT (passivated emitter, rear totally-diffused) module designs, which allow vertical installations that flatten the daily generation profile of an installation, producing more electricity in the morning and in the late afternoon and less at midday.


Enhancing Grid Resiliency through Collaboration

— September 30, 2016

GeneratorAfter nearly 11 years without a major hurricane in Florida, Hermine hit the gulf coast in early September 2016. While it was a relatively small hurricane compared to others that have hit the region, the storm caused widespread power outages that lasted for over 4 days in some parts of the state. Many areas that saw outages experienced no significant wind damage or flooding, yet were left in the dark due to damaged power lines many miles away. As with most major storms, Hermine served to highlight the fragility of a centralized electricity grid dependent entirely on large-scale generation and long-distance transmission networks. Despite being very susceptible to this type of extreme weather, Florida lags behind other states in efforts to modernize its grid and improve resilience against major storms.

Addressing Outages

The impacts of Hurricane Sandy in 2012 drove many northeastern states to push significant grid modernization initiatives aimed at limiting the potential for outages from future storms. Much of this activity focuses on deploying microgrids—including energy storage and solar PV—to provide backup power to critical facilities including police and fire stations, communications infrastructure, and gas stations in the event of a major grid outage. Given the greater risk of extreme weather in Florida, energy storage and microgrids could provide much more value than in other parts of the country. However, deployments of these technologies in the state have been limited to date.

The rapidly falling costs of distributed energy resources (DER) including solar PV and battery energy storage systems have resulted in utilities around the world looking to both improve grid resilience and customer relationships by offering these new technologies. One emerging opportunity, explored in  Navigant Research’s recent Residential Energy Storage Systems report, includes utilities deploying networks of solar + storage systems for residential customers. These projects have numerous benefits for both utilities and customers, including:

  • Reduced need to upgrade infrastructure to meet peak demand
  • Provide greater visibility into conditions on distribution circuits
  • Easier integration of distributed solar PV systems
  • Enhanced customer engagement
  • Backup power for customers
  • Maximum use of solar PV onsite for customers

Innovative business models are being explored both in the United States and internationally in order to maximize the value of residential DER as utilities recognize both the potential and risks presented by these technologies. Despite the contention surrounding ownership and deployments of DER in many areas, partnerships between utilities, solar PV, and storage providers are emerging as a popular model. Utilities including Consolidated Edison in the United States, PowerStream in Canada, and Ergon Energy in Australia have partnered with leading DER providers to offer combined solar + storage solutions for their customers. Though these offerings are mainly limited to pilot projects, early results have been positive for both utilities and their customers. This type of model could provide a solution to the contention surrounding solar PV development in Florida while also limiting the effects of future storms.


Could On-Demand Mobility Finally Pave the Way for Vehicle-to-Grid Integration?

— September 27, 2016

EV RefuelingA decade ago, when discussion of modern plug-in electric vehicles (PEVs) was just getting ramped up again, one of the big potential selling points was the concept of vehicle-to-grid (V2G) integration. For a variety of reasons, it never quite caught on. However, as automakers, suppliers, and a variety of service providers have made a flurry of announcements about deploying autonomous vehicles into ride-hailing services in recent weeks, the time may also have arrived for V2G.

The idea behind V2G was to enable two-way communications and power delivery between PEVs and charging outlets. In addition to electricity flowing into the vehicles’ batteries to enable mobility, PEVs could also provide power back to the grid when needed to cover peak demand loads. A number of automakers have worked with utilities over the years to test out the concept, including Ford. When the automaker built a fleet of 20 prototype Escape plug-in hybrids for field testing in 2008, the cars were loaned out mostly to utilities to evaluate V2G.

Benefits of V2G

For customers, potential benefits of participating in a V2G system include possible rebates for contributing power back to the grid or discounts on charging during off-peak times. Utilities using V2G would have access to a buffer of power during load spikes that would reduce the need to build out extra generating capacity.

Unfortunately, sales of PEVs have turned out to be far lower than many projected a decade ago, with fewer than 120,000 sold in 2015. At the same time, there are more than 3,300 electric utilities in the United States, all with different (and incompatible) systems. With relatively few PEV owners, many with low-range battery EVs, there wasn’t a huge demand for V2G from consumers concerned about being left with insufficient range when they needed their vehicles.

Enter the era of autonomous on-demand mobility (AMOD). Navigant Research’s Transportation Outlook: 2025-2050 report projects that as the world becomes increasingly urbanized and crowded in the next 3 decades, there will be a push toward AMOD to solve the combined problems of air quality, safety, and urban congestion. Most if not all of the autonomous vehicles used to provide these services are also expected to be electric.

New Business Models

Large fleets of more standardized EVs should ease some of the technical issues involved with V2G and could provide the critical mass of fleet size needed to make the investment worthwhile for both utilities and fleet operators. By taking individual owners out of the equation, the fleet management system could cycle some percentage of these autonomous vehicles through V2G-enabled charging stations during the peak hours of electricity demand to provide the needed buffer.

In a world of dramatically reduced retail vehicle sales and the possibility of automakers running these mobility services, such a scheme could also be beneficial to today’s auto dealers. Those dealers could turn their focus to providing maintenance services for fleets, and while vehicles are onsite, they could participate in the V2G system. If utilities were to share part of the savings from not having to expand generation capacity with these mobility and service providers, it would contribute to a new revenue model. As the transportation ecosystem transforms in the coming decades, everyone in the supply chain will need to look at innovative approaches to building a sustainable business.


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