Navigant Research Blog

Clean Power Plan Ruling Presents Opportunities and Issues for States

— August 3, 2015

After a year in review, and following approximately 4 million comments and appeals by state public utilities commissions (PUCs), legislators, and special interest groups, the Obama Administration and the U.S. Environmental Protection Agency (EPA) have released a final ruling on the Clean Power Plan.

The Proposed Rule was released last June.  It included interim (2020) and long-term (2030) regulations that will be imposed state by state to decrease CO2 emissions from generation facilities.  It also requires gradual decommissioning of high-emissions facilities, increased support for low-emissions natural gas and renewable generation, and improvements in demand-side management and energy efficiency.  Speculations and protest across stakeholder groups has been colossal.

According to a paper sponsored by the Brookings Institute, the majority of comments to the plan centered upon several major issues: fairness, reliability impacts, attainability of goals, and its legal basis—many reaching past state boundaries and party lines.  Fairness concerns, held by 23 states, are largely based upon the 2012 baseline level of emissions. Many states had been proactive in the decade prior, already attacking the low-hanging fruit and therefore were being forced to implement improvements with higher marginal costs than those states that had not yet proactively addressed emissions. Reliability impacts, which differ from state to state, caution the over-dependence upon less reliable sources of power, in particular renewables.

Perhaps the most contentious pushback centered upon the attainability and legality of the program. According to the Brookings report, 36 states commented on attainability, predominantly criticizing the timeline as too short. Some states have even argued that the goals altogether are unattainable. Wyoming, for example, has an economy that is reliant upon coal production and coal-based generation. Wyoming Public Service Commission Commissioner Alan Minier, as well as other agencies in that state, has been outspoken in stating feasibility concerns surrounding the decommissioning of coal-fired plants as much as 30 years before scheduled retirement.  Similarly, although Wyoming has abundant wind resources, most of this power is exported and Wyoming would be unable to receive renewable energy credits under the plan.

The cherry on top is concerns on legality of the Clean Power Plan, particularly how it interprets the Clean Air Act (its legal basis), and that favoring gas-fired generation will encroach upon the Federal Energy Regulatory Commission’s least-cost principles in the dispatch of power. Experts have appropriately forecasted large sums in legal and lobbyist fees.

Issues and Opportunities

It’s clear that a number of issues exist within the Clean Power Plan’s approach to reducing CO2 emissions in the United States, and these do need to be addressed in order to realistically comply.  But there are also many opportunities.  In terms of creating pathways to alternative production and more efficient distribution of electricity, there has been more innovation in the energy in the past 5 years than in the previous 50. The introduction of the smart grid has invited the possibility of real-time, grid-wide networking and monitoring, enabling the use of renewable resources with very large to very small generating capacities, while ensuring reliability across the grid.

Many question the worth of derailing support for innovation in order to contest the rule. By supporting more engagement between utilities and building and industrial facility owners, city planners, and even individual homeowners to implement energy efficiency programs and integrate distributed generation, states can employ more creative and innovative approaches to compliance with the Clean Power Plan.  The possibilities are endless in terms of inviting an array of new stakeholders and developing new revenue-generating systems that can help states achieve their state goal. The question is whether the state will lend itself to innovation or litigation.


Smart Thermostats Helping To Grow Home Energy Management Market

— July 31, 2015

Home energy management has come a long way in recent years, and smart thermostats have been a significant portion of its increasing technology adoption.  Nest, ecobee, and Honeywell (to name a few) have created iconic and effective tools that have proven results for regulating the amount of energy used to heat and cool homes and small commercial spaces.  Some would suggest that these devices are well on their way to being adopted as mainstream (and not niche) tools for home energy management.

According to a market research report released this month by Parks Associates, the market for smart thermostats is expected to have composed 40% of total thermostat sales in the United States in 2015, which is estimated at around 10 million devices annually.  In 2017, greater than 50% of all thermostats will be smart thermostats.

According to the report, the majority of these devices sold will be via the retail channel, although significant numbers will also occur through HVAC contractor, Home Security/Automation, and Utility channels.

Assuming a mix of devices priced between $150-$250, with cost declining slightly year over year, and relatively linear growth in the overall market, this could mean a $1 billion to $1.3 billion opportunity in the United States alone.  No small figure.

Smart Thermostat Unit Sales, United States: 2013-2017

Smart Thermostats

(Source: Parks Associates)

Making a Case

Parks’ breakdown of the multiple sales channels show that retail is by far the fastest-growing channel, followed by HVAC. The chart also shows that utilities and home security/automation channels are expected to experience less upfront growth in the near-term.

This distinction between channels is helpful, but quite possibly one of the most interesting aspects of the smart thermostat market has been the overlapping of sales channels that has occurred recently.  Through Bring Your Own Thermostat (or BYOT) programs, utilities are looking at how they can decrease overall program costs, mitigate risk, and increase consumer choice by networking consumers’ pre-purchased devices into their demand response and energy efficiency programs.

Similarly, in Spring 2015, Commonwealth Edison (ComEd) incentivized Comcast Xfinity Home customers to sign up for Comcast’s Summer Energy Management Program, managed by EcoFactor (ComEd also incentivized Nest owners to sign up for that company’s Rush Hour Rewards demand response program).

As vendors in this market show no signs of decreasing their level of creativity in marketing these devices to consumers across different geographies and demographics, the market will continue to evolve.  In terms of overall home energy management, smart thermostats are just the beginning.  The recently published Navigant Research Leaderboard Report: Smart Thermostats provides a comprehensive overview of leading vendors, recent market activity, and both current and forward-looking market trends.


North Carolina’s RPS Debate Continues

— June 22, 2015

In April, the Public Utilities Committee of the North Carolina General Assembly voted against the passing of House Bill 681, which would effectively cut the state’s 2021 renewable portfolio standard (RPS) in more than half, from 12.5% of the total load to 6% (its 2015 requirement).  Just a month later, another attack on the RPS came in the form of House Bill 332, which proposed amendments to North Carolina’s energy policy, including the same lowering of the state’s RPS to a fixed 6% after 2015.  Additionally, the bill seeks to lower the cap on qualifying generation facilities to receive a standard contract for power supplied from 100 kW to 5 MW, something that would kill the financing for many planned and existing projects.

In a state that is characterized by polarized politics and shifting party support, North Carolina’s RPS has been fiercely opposed and defended (previously in 2013 and likely again in the future).  The majority of opposition has focused on the cost implications of incorporating more renewable resources into the supply mix and how these high costs would be passed directly on to consumers in the residential, commercial, and industrial sectors. Note that to date, North Carolina maintains some of the lowest electric rates in the country for all of these sectors.

Considering the Implications

In the most recent round of this debate, several industry stakeholders have emerged to publicly oppose changes that would lower the state’s planned RPS.  These companies, including Google, Apple, and Facebook, have developed facilities in North Carolina specifically because that state’s support of renewables has aligned with corporate sustainability goals and initiatives. The protest also raised concerns that limiting the state RPS would actively stall technology innovation that could reduce the cost of renewables and eventually even lower the total cost of energy.

Located near Charlotte, North Carolina, the Coalition of the Willing project is currently underway at Duke Energy.  The project is actively seeking means of optimizing the electric delivery system, including its ability to manage and deliver renewable resources.  It has brought together more than 30 of the most powerful and innovative companies in the electric supply and delivery industry to develop common standards for interoperability across the organization and physical grid, something that has traditionally prohibited the optimized use of both centralized and distributed renewable resources.

Duke’s work has been immensely influential to utilities across the country on how to modernize grids to allow for increased renewable generation of both small and medium capacities and at both centralized and distributed levels.  Any policy changes that limits innovation in this area could be much further reaching than the state lines.

For more information on new technologies that support renewables and distributed energy resources integration, please see Navigant’s recent reports, Grid Edge Intelligence for DER Integration and The Energy Cloud.


With Renewables Revolution Comes Industry Debate

— June 15, 2015

Alongside the renewables revolution, the energy industry has found itself in the midst of a substantial debate.  And this is not just in a technical sense; it’s in an economic and existential sense, as well.  The technical considerations of integrating renewables can be highly variable from one geography and transmission and distribution (T&D) network to the next. Similar to economics, which are also bound tightly to policy, the existential debates have been grounded upon anything from environmentalism and perceptions to differing levels and sources of information, etc.  Because of this complexity, I do not envy those bodies currently tasked with pulling together an effective plan of attack to promote and support integration of renewables and distributed energy resources (DER).

The first need to address is gaining a stronger understanding of what is occurring at the edge of the distribution grid from an electrotechnical perspective in real time or near real time, or establishing highly comprehensive network monitoring and accurate situational awareness.  This is then followed by implementing appropriate and cost-effective control and support solutions. It sounds easy, but it is far from it. Traditionally, the sector of the distribution grid past the distribution substation has not been monitored and controlled according to actual conditions—at best, assets have been programmed to react according to sensed or forecasted conditions. The concept of developing a real-time model of more centralized parts of the network is only something that has been achieved in the past decade.

But grids that have high penetration of DER and renewables require comprehensive monitoring and situational awareness right down to the resource itself—that eerie last mile of the grid.  This is because the intermittent nature of renewables and the presence of bidirectional power can easily disturb voltage profiles, creating issues with stability and capacity in the distribution network.  The utility needs to be able to sense these disturbances before it can figure out how to cope with them.

As an analyst for the energy and utilities industry, I have watched renewables and DER-enabling technologies over recent years as they’ve transgressed from theoretical to real, tested, and in a growing number of cases, proven as effective.  Recently, the information, operational, and communications (IOC) technology sectors have produced a number of unique offerings for real-time network monitoring and situational awareness.

Diverging Perspectives

In the running for success, there seem to be two general schools of thought—the centralized enterprise approach, filled by distribution management system vendors, and a school of more alternative solutions that can act as distributed standalone systems or can sit on top of an enterprise system.  A commonality between both categories is that they largely revolve around the integration of a greater number of devices (both DER and new networked equipment such as sensors and power electronics), and they rely on big data analytics to develop situational awareness in an unpredictable DER environment.

The key difference is that one simultaneously manages the utility network as a whole—a highly complex process—but one that has the potential to optimize goals across the organization.  The other one acts as a standalone solution that is isolated to a smaller number of use cases depending on technological and organizational needs and can be a much smaller overall investment that achieves required results—but there is so much gray area surrounding the efficacy of each approach.

Navigant Research’s recent report, Grid Edge Intelligence for DER Integration, provides an overview of these different technology segments and competitive analysis for different companies involved in the fast-growing market for technologies that integrate DER.


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