Navigant Research Blog

Wind PPAs Offer Exciting Prospects for Scandinavian Data Centers

— May 31, 2018

Social media conglomerate Facebook signed a 15-year power purchase agreement (PPA) with Norwegian wind farms to power its data centers in Denmark and Sweden. The $470 million Bjerkreim cluster of wind farms is located in southwest Norway (at Gravdal, Skinansfjellet, and Eikeland-Steinsland).

Details on the Wind-Powered Data Centers Deal

As per the agreement, 1,000 GWh per year of wind-powered electricity will be delivered to Facebook’s data centers from wind farms that will start commercial operations in 2019. Powering the project are 70 units of Siemens Gamesa turbines—each with 4.2 MW capacity—which will be developed by Norsk Vind Energi. The operational plants will be owned by German renewables investor and asset manager Luxcara GmbH. Facebook has partnered with Vattenfall to manage its grid integration and deliver its 100% renewable power requirement in the region.

Momentum Growing for Renewable PPAs

Sustainability strategies and clean energy targets have led to new utility business models, with corporations queueing up to sign long-term PPAs. Long-term agreements provide financial stability and resilience to clean energy projects. These are exciting developments for the Scandinavian wind power market, and they will encourage more project developers to flock to the region.

Key market dynamics driving corporate PPAs in the region include:

  • Low energy prices: Electricity prices are on an upward trend in Europe. According to Eurostat, average values of non-household energy varied significantly across the European Union in 2017. They ranged as high as €0.19 ($0.22) per kWh in Germany and €0.25 ($0.29) per kWh in Denmark. Non-household electricity prices across Norway and Sweden have remained low, at €0.08 ($0.09) per kWh, compared to the rest of continental Europe. Norway is also one of the largest generators of clean energy.
  • Data center market growth: Unprecedented growth in power requirements across data centers has given a boost to investments in Scandinavia. Since data centers are an energy-intensive application segment, the availability of large open spaces and a cool climate make the region attractive for investors. Norway is now receiving new interests from project developers in China as part of its One Belt One Road initiative. Cisco forecasts around 30 data centers across Europe by 2020.
  • Nuclear capacity closures: Sweden’s 2020 plans to divest its nuclear capacity have created an opening for new capacity investments. Two nuclear reactors, Ringhals-1 and Ringhals-2, will stop operations by 2020. A third, Forsmark-1, will reach the end of its designed lifetime by 2040, reducing Sweden’s power generation capacity by a combined 2.7 GW. This creates an acute need for new capacity investments in the country.
  • RE100 pledge encourages corporate PPAs: Facebook’s announcement has not come as a surprise, considering other investments in corporate PPAs. Google and Apple, for example, have invested in energy procurement models to keep their data centers running. This activity resulted from the recent sustainability initiative where over 130 companies signed the RE100 pledge to run their operations on 100% renewable energy.
  • Supportive legislation: Reductions in energy tax and the introduction of license awards for renewable energy development are key policy drivers across Sweden and Norway. Authorities have awarded a high number of licenses to developers in recent years, and the trend is likely to continue.

Wind Power Has a Future in Corporate PPAs

Wind power will continue to strengthen its position as a mainstream energy source across utility-scale and distributed energy generation. While mature markets will remain attractive for new wind capacity installations, investments across emerging markets are on the rise. Digital innovations, long-term operations and maintenance contractual agreements, and investments in predictive analytics will contribute to the operational efficiency of corporate PPAs for renewable power capacity.


Global Industrial Titans Join Efforts to Thwart Cybersecurity Threat, but Will They Work?

— May 31, 2018

The threat of cyber attacks to critical industrial Internet of Things (IoT) technologies has risen to a near crisis level and is driving more global industrial titans to band together. Recently, Cisco, Dell, oil & gas multinational Total, and testing and certification firm TÜV SÜD joined the Charter of Trust, an initiative spearheaded by Siemens.

The charter now boasts 16 members and is likely to add more. Its lofty goals are threefold:

  • Protect the data of individuals and companies
  • Prevent damage to people, companies, and infrastructure
  • Create a foundation for trust in the digital world

To reach these goals, members have also agreed to 10 principles that range from taking responsibility for securing the supply chain to focusing on user centricity to working with governments. Perhaps the most important and practical principle is the establishment of mandatory independent third-party certifications for critical infrastructure and IoT solutions. While that sounds good, the details are skimpy.

Reasons to Worry

There are clear reasons for corporate leaders to be worried and motivated to act. A study among cyber risk managers in the US oil & gas industry found 68% had experienced at least one security breach in the last year, resulting in the loss of confidential information or operational technology (OT) disruption. A different survey of IT security professionals found that 85% foresee a cyber attack on critical infrastructure taking place in the next 5 years. Then there is the sobering message from the US Department of Energy last year that said the electricity system faces “imminent danger” from cyber attacks, which are growing more frequent and sophisticated.

But one wonders how Siemens’ initiative is any better or all that much different than Microsoft’s call for a digital Geneva Convention, or the more recent Cybersecurity Tech Accord. Yes, the Microsoft push leans more toward discouraging government or state-sponsored hacking. But both companies are focused broadly on cybersecurity and the myriad threats to individuals and corporations.

Trust Issues

So which company should we trust and will these efforts actually work? As Sasha Romanosky, a former cyber policy adviser at the Pentagon’s office of Under Secretary of Defense for Policy says, the firms joining Siemens’ charter might have noble goals, but not all companies have the same incentives. For example, some firms might have a greater focus on environmental concerns or health issues or child labor. The threat from cyber attacks might not be as important to some companies, and without widespread participation and a closer alignment of goals, the dangerous level of cyber threats will persist.

These doubts are not raised to discourage efforts to prevent cyber attacks. In fact, a recent Navigant Research report, Managing IoT Cybersecurity Threats in the Energy Cloud Ecosystem, recommends grid operators and other enterprises set up a comprehensive cybersecurity plan and use it. But how many broad initiatives are really going to make a difference? The Industrial Internet Consortium (IIC) has its Industrial Internet Security Framework. Germany’s Industrie 4.0 has a working group focused on security. In the US, NIST has its own program for IoT cybersecurity.

I’m all for serious steps to thwart the bad guys. But count me skeptical until we see demonstrable evidence that these initiatives, alliances, and frameworks are making a difference in keeping data and processes safe. It is hard to be otherwise when some companies and governments are known to skirt the rules to their advantage.


US Alpine Resorts Leveraging Their Power for Climate Solutions

— May 31, 2018

A quiet revolution is happening at US alpine ski resorts. As resorts grapple with climate change, they are moving to decarbonize the power grid. Resort companies are engaging with utilities and state commissions and piloting technologies. Ski mountain operators are learning that the benefits of taking progressive steps go beyond the lifts, trails, and lodges to help support efforts to shift to clean energy.

Working with Utilities

Squaw Valley and Alpine Meadows in California aim to be 100% renewable by December 2018. They are working with Liberty Utilities on renewable energy and with Tesla on a microgrid project with battery storage that will store the energy for backup power for the resort and community.

In Michigan, the owners of Crystal Mountain are leading a similar dialogue. Starting with clean energy for the Clipper chairlift, they want to move from 56% carbon-free energy to 100% by working closely with the Cherryland Electric and Wolverine Power Cooperatives. The operators of Crystal have also invested in geothermal solutions to heat and cool buildings.

Influencing Public Commissions

As an example of the influence of ski resorts, the owners of Crystal Mountain chair Governor Rick Snyder’s Utility Consumer Participation Board (UCPB) in Michigan. They are intervening in a utility rate case on behalf of residential ratepayers in support of the closure of five coal plants.

In Colorado, Aspen Skiing Company and Alterra (its new sister organization) are supporting a proposal by Xcel Energy to close two coal burning power plants. The plan calls for Colorado to shift from 29% renewable energy to 55% by 2026. It would retire 660 MW of coal generation by 2026 and reduce Colorado’s emissions 60% below 2005 levels. In March, the Colorado Public Utilities Commission permitted Xcel to present the Clean Energy Plan for consideration as part of the state electric resource plan.

Onsite Renewables

Berkshire East in Massachusetts is one of the only ski areas in the world to generate 100% of electricity onsite. In 2011, it began running a 900 kWh wind turbine. A year later, it leased a site to build an 1,800-panel, 500 kWh solar farm. Berkshire’s wind turbine was made possible by grants from the Massachusetts Clean Energy Center, administered through the Renewable Energy Trust Fund. The resort is also piloting a biofuel electric generator and a microgrid storage system, initiatives that were honored with an Environmental Protection Agency award. Berkshire runs a Renewable Energy Classroom to teach about its portfolio of technologies.

Also in Massachusetts, Jiminy Peak installed a 1.5 MW wind turbine named Zephyr that provides 33% of electrical demand. During the winter when winds are strong, Zephyr provides as much as half the electricity needed. Jiminy received a grant from the Massachusetts Technology Collaborative. The resort also hosts a 2.3 MW community solar facility located on 12 acres—the largest community solar project in the Northeast.

Net Zero Frontiers

Before the UN COP 21 in 2015, Park City in Utah committed to net zero emissions communitywide by 2032. Similarly, Vail Resorts is pursuing a commitment called Epic Promise for a Zero Footprint. This ambitious plan commits to net zero emissions by 2030, zero waste to landfill by 2030, and net zero impact to forests and habitat.

These goals are dazzling, but all ski resorts could benefit from a 2030 roadmap to inspire them to follow guides for decarbonizing the industry. Heat and transport are additional frontiers for the ski resort industry’s low carbon transition. Globally, the share of heat that is considered renewable is 10% for heating and 4% for transport. At alpine resorts, the north star should be 100% for both.


Advanced Driver Assist System Vehicles May Require Pricier Repairs

— May 31, 2018

Bosch, the world’s largest automotive supplier, held a media event this May at its Flat Rock, Michigan proving grounds to demonstrate its latest technologies including new advanced driver assist systems (ADAS). In addition to all the components and systems that Bosch sells to most of the world’s automakers, Bosch also provides a wide range of service and repair tools for factories, dealers, and independent repair shops.

One of the static displays at the recent event was showing off equipment used to calibrate the cameras used for ADAS and automated driving. The calibration equipment includes a stand with checkerboard panels for aiming and focusing cameras, gauges for checking ride height, and electronic diagnostic tools to actually make adjustments to the sensors. While Bosch declined to discuss the price of all this equipment, given the cost of professional tools, a complete set capable of handling all the different sensors would likely run into the tens of thousands of dollars.

Let’s Talk about Repairs

For a repair facility, buying tools has always been the cost of doing business. But for consumers and insurance companies, life happens and this equipment designed to save lives can also lead to substantial repair costs for damage that has nothing to do with crashes. The chances of actually being in a crash for any vehicle, including those without ADAS technology, are surprisingly small. The 6.3 million crashes in 3.1 trillion vehicle miles driven in the US in 2015 equals about one crash every half a million miles. The frequency of crashes for vehicles with ADAS should be even lower, resulting in fewer trips to the body shop. A far more likely occurrence is a pebble thrown up by one vehicle striking the windshield of another. At 70 mph, even a small projectile has a surprising amount of energy, and can lead to the formation of a crack.

Smarter Cars Can Mean More Expensive Car Work

Such a crack happened 2 years ago to one of the cars then in my household, a 2010 Volkswagen Jetta with no ADAS. A national vendor that does auto glass repair came to my home and replaced the cracked windshield in my garage in less than 30 minutes for under $250.

The Jetta was replaced by a 2017 Honda Civic last year. The latter has lane keeping assist, adaptive cruise control, and other ADAS features including a camera mounted on the windshield.

A windshield repair estimate from the same vendor for the newer car came to $559, more than double the earlier cost. That new price does include calibrating the camera. However, not all local facilities have the equipment required to do calibrations in the field, so depending on location and the type of vehicle a customer may need to take the time to go to a repair facility.

If Smart Features Are Integrated in Common Ones, Expenses Increase

When Ford launched the current generation F-150, it featured a blindspot monitor with rear corner radar sensors integrated into tail light clusters. A broken tail light with the radar sensor cost more than $887 to replace. Ford has since redesigned the system to separate the radar sensor, reducing repair costs. However, that’s not always possible with all sensors.

Non-Crash Vehicle Repairs May Negate Savings

As manufacturers move to make ADAS features like forward collision alerts and automatic emergency braking the standard, damage caused by the vagaries of driving in the real world will offset some but probably not all of the savings that should result from reduced crash frequency. Nonetheless, consumers should be aware that when those non-crash related repairs are needed, they will likely be a lot pricier than they have been in the past.


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