Navigant Research Blog

New Demand Response/Energy Storage Partnership Poised to Reduce Customer Deployment Hurdles

— September 12, 2017

In my most recent Navigant Research blog, I highlighted how load management and optimization solutions, which include demand response (DR) and energy storage, fit within the energy as a service (EaaS) framework. The EaaS solutions framework is now positioned to support how corporate commercial and industrial (C&I) energy and sustainability managers apply these new technologies and business model innovations to meet their energy management and sustainability needs.

EaaS Deployment Options

In Navigant Research’s Energy as a Service report on the evolution of EaaS, I highlight how EaaS solutions like load management and optimization will be deployed, which can be summarized as follows:

  • Pure-play EaaS solutions provider: Customers engage with a pure-play EaaS provider such as a solar PV developer or an energy efficiency performance contracting provider that provides just a single financed solution.
  • Bundled EaaS solutions provider: Vendors offer multiple EaaS solutions across a project development/financing platform that meet customer needs while also decreasing their customer acquisition costs.
  • Integrated facilities management plus EaaS solutions: A single vendor manages the customer’s day-to-day building operations and EaaS solutions over longer-term agreements that can enable financing innovation.
  • Managed energy services agreement (MESA): Customers with predictable energy use and spend outsource their entire energy management operations to a comprehensive EaaS provider under long-term agreements to unleash long-term financing innovation.
  • Asset monetization or public-private partnerships: Private and publicly traded C&I companies, universities, or municipalities monetize their energy assets in a sale leaseback arrangement that results in the outsourcing of energy operations.

One significant challenge for the deployment of new load management and optimization EaaS solutions to date from the customer perspective is that the market is populated by pure-play solutions providers. This scenario presents a challenge to C&I customers given the potential interdependence of solutions like DR and energy storage on the overall business case for deploying these technologies.

Potential of DR/Energy Storage Partnership

However, a recent partnership announcement by CPower and Stem will combine Stem’s energy storage capabilities services with CPower’s DR and curtailment services to better manage customer energy load and spend. Given the current contracting and revenue models that each vendor provides, an integrated Stem/CPower offering has the potential for an improved customer savings business case that can exceed the business case of each technology individually, as highlighted below:

  • For existing Stem customers, this partnership can result in an increased bonus payment over their equipment lease payment/demand charge savings scenario given the added DR market participation that CPower can enable. Stem’s existing customers can also benefit from an improved battery use case scenario over time given that additional building controls under CPower DR technology control can be leveraged instead of just the battery energy storage system (BESS).
  • For Stem sales contacts looking to deploy new BESSs, this partnership can result in a better bonus payment scenario given that a potentially smaller BESS could be installed (or one with a lower cost use case scenario over time), thereby potentially lowering the equipment lease subscription price.
  • And for existing CPower customers and sales contacts looking to participate in DR programs, this partnership can result in and improved DR market participation revenue scenario given the added response capabilities that the deployment of a Stem BESS can enable. This can help reduce the over subscription/under commitment challenges that DR aggregators face given the need to keep building occupants comfortable during demand response events.

It will be important to keep an eye on how the CPower/Stem partnership handles the integration of dispatch algorithms and customer dashboards as the partnership matures. But this partnership appears poised to reduce customer barriers for the deployment of integrated DR/energy storage EaaS solutions.

 

Climate-Related Financial Disclosure: From the Sustainability Department to the Desk of the CFO

— September 12, 2017

In June 2017, the Task Force on Climate-Related Financial Disclosures (TCFD) released its final report with recommendations that will have an increasing impact on all organizations (both financial and non-financial). Most importantly, two necessary organizational changes were brought to light: bringing together both experts on climate-related issues and financial executives to report risks consistently and introducing scenario analysis as a tool for creating robust and agile strategies. CFOs should develop a holistic understanding of how climate change affects their business to satisfy investors.

Climate-Related Financial Disclosure Going Mainstream

The TCFD expects that the practice of climate-related financial disclosure (e.g., disclosing greenhouse gas emissions, abatement strategies, and opportunities) will scale up significantly over the next 5 years, driven by demands of various stakeholders. This has already been happening in the market. Several large asset managers (including Blackrock, Aviva, Axa, and Legal & General) have issued statements promising action if companies do not disclose in line with TCFD recommendations. Some companies have already experienced pressure from these asset managers (e.g., Exxon). Additionally, CDP announced that TCFD recommendations will be implemented in its disclosure platform.

How to Disclose Climate-Related Information

The TCFD developed several recommendations relevant for all organizations about where and what to disclose. As the TCFD believes climate-related issues are material for many organizations, it recommends organizations disclose within annual financial reporting. That ensures appropriate controls govern the disclosure process. The following figure summarizes the recommendations.

(Source: Ecofys, a Navigant Company)

Practical Guidance for Disclosing Organizations

Besides the generic recommendations above, the TCFD also offers specific and concrete guidance for companies. For example, organizations should consider including in their disclosure of governance a description of processes by which management is informed about climate-related issues. Another example is that when disclosing emissions targets, organizations should consider including whether their target is absolute or intensity based and which key performance indicators are used to assess progress. All organizations are encouraged to employ scenario analysis to test strategies under different policy, technology, and macroeconomic developments. Additionally, supplemental guidance is presented for financial and non-financial sectors.

Key Changes Compared to the December 2016 Report

The TCFD published its preliminary findings in December 2016, after which it entered an extensive consultation process. A key change for financial sectors is that the weighted average of carbon intensity is now the recommended metric for asset owners and managers. A key change for non-financial sectors is the $1 billion threshold for robust scenario analysis.

Recommendations

Companies that want to successfully disclose climate-related financial information should focus on two things: 

  1. Integrate climate-related information into broader risk management processes: To successfully disclose climate-related financial information, it is essential to connect climate experts with financial executives since climate-related risks and opportunities need to be integrated in mainstream risk management. Climate-related financial information should be audited and signed by the CFO when it is included in mainstream financial filings.
  2. Employ scenario analysis to get insights into climate-related developments: Companies should realize that continuous testing of strategies against developments (e.g., policy, technology, and macroeconomy) is required. Scenario analysis is a valuable strategic tool for navigating an uncertain future, and it should be used to test the robustness of strategies. Such analysis requires unique capabilities that may need to be developed. After conducting scenario analysis, insights should feed into the company’s strategic framework.

The TCFD’s recommendations emphasize the arrival of climate strategies in the boardroom. Implemented effectively, these offer a great opportunity to truly integrate climate concerns into an organization’s operations and future-proof strategy.

 

How the IoT and Big Data Make Cities More Efficient

— September 8, 2017

The delivery of city services is being transformed by smart technologies that are providing city managers with new insights into operational performance and providing platforms for new forms of personalized and responsive services. Central to this transformation is the availability of real-time data from a growing range of intelligent devices that can monitor city operations. Sensors, communications networks, and the real-time data cities collect can enable more intelligent, efficient, sustainable, and interactive public services. The new technologies are helping cities make the most of limited budgets while adding additional value to the services provided to their communities. These innovations have the potential to drive a revolutionary change in the way city services are delivered in term of the quality, efficiency, and responsiveness of services.

Digital Technologies and City Services

Examples of how digital technologies are changing the way city services are provided can be found across a variety of key sectors:

  • Transportation: Real-time data collected from sensors and other devices can optimize connections between modes of transport for faster travel times, reduce the costs of operation, and increase convenience through improved information services for users on parking and transit availability in cities. Real-time data on traffic and transit services is providing new tools to city managers for both operation optimization and the delivery of new services to users. In Helsinki, for example, the bus service operator Helsingin Bussiliikenne Oy (HelB) worked with CGI to use improve its competitiveness through the use of sensors and data analytics on service performance.
  • Waste: Waste collection in cities is being transformed through the use of sensor technologies to improve collection. Companies like Enevo are providing real-time data and predictive analytics on the fullness of waste bins, enabling optimization of the collection process. These technological advances address the inefficiency of traditional waste collection, which is carried out by emptying containers according to predefined schedules and routes that are repeated at a set frequency.
  • Water: Droughts and population growth around the world have made water an increasingly important issue for cities. Intelligent devices, communications networks, and advanced IT systems are helping the water industry transform the way they deliver water services for cities. Veolia, for example, is working with the City of Lille, France to transform its water infrastructure. Working in partnership with the city, it deployed 1,000 sensors across the water network to identify leaks, as well as water meters and probes to test water quality.

Innovative Smart City Projects

The smart city market continues to expand, as city leaders across the globe are heralding innovative projects and laying out a vision for how cities can use technology to meet sustainability goals, boost local economies, and improve services. The importance of smart cities is being recognized at national level, as well. Canada is the most recent country to launch a national program, joining a list that includes Australia, the United States, China, India, Japan, Singapore, South Korea, and the United Kingdom. The Canadian federal government announced in early 2017 the launch of a Smart Cities Challenge Fund, proposing $300 million over 11 years for Infrastructure Canada to implement the program.

Intelligent Cities Summit

The myriad of ways in which this funding can utilize the power of big data and the Internet of Things (IoT) to deliver improved services in Canadian cities will be discussed at the upcoming Intelligent Cities Summit in Toronto (October 24-25). The conference speaker lineup features C-level municipal executives from cities such as Toronto, Vancouver, and Calgary, among others. See the conference website to download the brochure and register for the summit.

 

Smart Dust Has Yet to Settle, but the Hype Flourishes

— September 7, 2017

Smart dust … it sounds like a magical substance sprinkled on dumber things. Which is kind of true. The concept has been making the hype-cycle rounds late this summer and setting off some industry buzz among megatrend watchers during an otherwise lackluster news and information cycle.

But smart dust is not all that new a concept. Not long ago, it might have been known by the more mundane and geeky term micro-electromechanical systems, or MEMS, which is common in the computer chip world. Lump it together with the much hyped artificial intelligence (AI) notion and presto, smart dust gets new life.

Motes Not Dust Mites

So, what is smart dust? It is a swarm of tiny electronic sensors, some evidently smaller than a red blood cell, designed to float in the air and do various things. These tiny devices, known as motes, are self-powered. The idea is to unleash hundreds or thousands of them, have them interconnect wirelessly, and then perform a task or set of tasks. Think of releasing a batch over a farm for testing soil chemistry or pesticide levels.

Smart Dust for Energy Management

This smart dust could also be used in homes or commercial settings to reduce energy use. That was one of the use cases imagined by Kris Pister, a professor at the University of California Berkeley and smart dust pioneer. He has been tinkering with smart dust since at least 2001, when California was in the midst of an energy crisis. Back then, he worked on the technology with colleagues at Berkeley’s Center for Information Technology Research in the Interest of Society (CITRIS) in an effort to find new ways to conserve energy. The idea never quite took off as imagined.

The idea for dust networks goes back further to when the US Defense Advanced Research Projects Agency (DARPA) and RAND Corporation worked on the idea in the early 1990s. One can imagine the use of smart dust over a battlefield, feeding field commanders with relevant data in real-time to get the upper hand on an enemy. The idea can even be traced to novelist Philip Pullman’s His Dark Materials trilogy; dust in the books is a mysterious cosmic particle that is a central plot device.

A Cloud of Potential

Needless to say, smart dust motes have not made much of an impact outside the labs. Nonetheless, given the potential and the many swirling technologies of AI (e.g., deep learning, machine learning, smart robots, and the rest), smart dust’s future could be quite amazing, though that remains on the horizon. For now, one can keep the idea of smart dust on the radar while focusing on the more practical emerging technology trend affecting the grid and other industries, namely the Internet of Things, a topic extensively covered by Navigant Research.

 

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