Navigant Research Blog

Compliance Strategies for Satisfying Clean Power Plan Requirements

— July 23, 2015

Next month, the U.S. Environmental Protection Agency (EPA) is expected to release the final Clean Power Plan (CPP) rule, which regulates carbon dioxide emissions from existing power plants. While states may comply independently or work together to achieve CPP goals, Navigant Consulting has found that states can substantially reduce compliance costs by banding into trading blocs, and we have focused on regional trading in our modeling. The proposed rule is modeled in Navigant Consulting’s recent white paper,  Anticipating Compliance: Strategies and Forecasts for Satisfying Clean Power Plan Requirements, and highlights our finding that focusing on energy efficiency (EE), coal retirements, and targeted renewable expansion represents the least-cost compliance option.

Energy Efficiency

EE represents the lowest-cost compliance option in almost all areas, but it cannot single-handedly achieve compliance.  Expanding EE programs also helps ease interim compliance targets because EE can be rolled out more rapidly than new generators, reducing the near-term need to build large amounts of new low-carbon capacity. Navigant Consulting found that the expansion of EE programs in response to the CPP can save nearly $250 billion above business-as-usual EE through 2030.

Coal Retirements

The Northeastern, Southeastern, and Midwestern United States are expected to rely heavily on coal retirements for compliance. Since EE and renewables are less carbon-intensive than gas generation, higher penetration of these technologies helps keep more coal generators online.

Regional Least-Cost Compliance Options

(Source: Navigant Consulting)

Natural Gas

New gas generation plays an important role in compliance, and it is necessary to help maintain capacity and energy resource adequacy after coal retirements.  The Northeast and Southeast, in particular, will likely rely heavily on new natural gas combined-cycle plants to supplement EE in replacing retiring coal plants, and building these plants will be a large portion of their compliance costs.  The central and western United States will also rely heavily on gas to maintain capacity margins, but will likely see more simple-cycle peaking gas plants than the Northeast and Southeast due to a high rate of renewable expansion as well as EE growth.

Renewables

Adding renewables is a cost-effective compliance option where renewable potential is high, especially in the central and western United States.  Navigant found wind expansion to be economic throughout the western and central United States, and it plays a particularly important role in compliance in Texas, the Southwest Power Pool (SPP), and Midcontinent Independent System Operator (MISO).  California, which has little coal left to retire, has to rely on EE and renewable resources almost exclusively for compliance. Solar and wind both play critical roles in ensuring low-emission generation in California.  Navigant Consulting found that areas that rely more heavily on renewables tend to need to spend less on replacing capacity than other areas, but also tend to see higher carbon allowance prices (which help make large-scale renewable buildout economic).

Glide Path

Many commenters to the EPA focused on the difficulty of meeting near-term interim targets.  Navigant Consulting’s analysis has shown that the implementation of a glide path with less stringent initial targets results in savings of over $200 billion when compared to a non-glide path scenario.

 

For EV Range, 200 Miles Changes Things

— July 23, 2015

The rapid growth of plug-in electric vehicle (PEV) sales in the last 4 years has slowed in the United States as of late. Low gasoline and diesel prices have likely had an effect, but more likely, the slowdown is coming from a lag between the introduction of next-generation models and the clearing of first-generation inventories. Notably, second-generation PEV development is focused on significant range increases at lower costs, which will greatly impact the PEV market as well as create interesting implications for infrastructure developers and electricity providers.

The most near-term second-generation introduction is the Chevrolet Volt, which is slated to enter production in August. Besides the significant redesign of the vehicle body, the Volt’s all-electric range has been extended by 12 miles and the price starts around $34,000. This is $7,000 less than the original 2011 Volt. Further afield, Nissan has announced its intention to increase range of the next-generation LEAF beyond 200 miles. The second-generation LEAF is not likely to be introduced for quite some time, however, it is rumored that some of the battery technology designed to achieve this 200-plus mile range will feed into the 2016 LEAF, assisting that vehicle in breaking the 100-plus mile all-electric range mark.

When the second-generation LEAF is finally introduced, it won’t be alone. 200-plus mile all-electric range introductions are expected from Tesla and Chevrolet at price points from $30,000-$40,000. Similarly, some premium brands, specifically Audi, are likely to introduce 200-plus all-electric range vehicles to compete against Tesla’s large sedan and SUV platforms. The introduction of these vehicles makes all-electric drive a more viable option for a larger population. However, it also drastically changes things for electric vehicle service providers by increasing demand on a per-vehicle basis and expanding that demand to intra-city locations.

Longer Range = More Use

Most battery electric vehicles (BEVs), aside from the Model S (which already has a 200-plus mile range), are acquired as the second vehicle in households with two or more vehicles, and use is limited by vehicle range. Initial studies on average annual vehicle miles traveled (VMT) for BEVs have indicated that these limited-range BEVs travel around 9,650 miles a year. Meanwhile, light duty vehicles average around 11,250 miles.

However, for the Model S, average annual VMT is higher than for the average BEV. Last month, Tesla was the first automaker to announce that drivers of the Model S have surpassed 1 billion all-electric miles, with 68% of those miles being driven in North America. This equates to roughly 13,200 miles per Model S sold in the United States and Canada through May 2015. Given estimates on Tesla’s U.S. monthly sales, the average Model S has been in service for over 1.3 years. This means average annual mileage is around 10,400 (or 7% more than other BEVs).

Granted, Model S owners have great incentives to drive often, as the Supercharger network makes long-distance travel fuel costs free. Yet, these drivers also have the benefit of a vehicle that can get them to the network stations. Soon enough, owners of non-Tesla’s will, too, and these vehicles will need their own networks.

 

The Future of U.S. Solar Energy Companies – Part 4

— July 22, 2015

Note:  This blog is the fourth in a four-part series examining the evolution of U.S. solar companies.

In the final part of my series focused on the future of U.S. solar companies, I will cover yieldcos and community solar.

Yieldcos

The solar market has seen a dramatic increase in the number of yieldcos during the past 2 years. My colleague, Roberto Rodriguez Labastida, recently blogged on the topic, explaining that the idea behind yieldcos involves the creation of a company to buy and retain operational infrastructure projects and pass the majority of cash flows from those assets to investors in the form of dividends. Structurally, yieldcos are similar to real estate investment trusts. They are also almost ideal for renewable energy projects, including wind farms.

In July 2014, SunEdison established a yieldco, called TerraForm Power Inc., which raised approximately $500 million through a successful initial public offering. In March 2014, First Solar and SunPower combined forces to offer a joint yieldco called 8point3, the amount of time, in minutes, it takes for light to travel from the sun to earth. The joint yieldco will include 87% utility-scale power plants and 13% rooftop, with installations in the United States, Chile, and Japan. There are also more than 15 other yieldcos from other large renewable energy providers, including NRG Yield, NextEra Energy Partners, Abengoa Yield, Pattern Energy Group, and Transalta Renewables.

Community Solar

To facilitate the roll-out of community solar, U.S. states are expanding policies for virtual net metering, allowing multiple customers to participate in the same metering system and share the output from a single solar facility. Whether or not they are required to be physically connected to the system varies by policy. Here is a selection of historical and current shared solar programs:

  • California: Virtual net metering for multi-tenant buildings is required for investor-owned utilities (IOUs), and Senate Bill 43: Green Tariff Shared Renewables Program established a future clean electricity rate for all customers.
  • Colorado: Through the Community Solar Gardens Act, IOUs were required to accept 6 MW per year from community solar gardens for 2011 through 2013 (2 MW project limit, minimum of 10 participants, restricted to same municipality or county as the garden).
  • Delaware: Through community net metering, full retail credit is given for participants on the same distribution feeder as the community energy facility (subject to a net energy metering cap, minimum of two participants).
  • Minnesota: Through the solar Energy Jobs Act, Xcel Energy is required to credit community solar gardens at the retail rate (1 MW size limit, at least five participants, subscriptions for 25 years). The Minnesota Public Utility Commission recently provided further clarification that expanded the system size limit to 5 MW alternating current (AC).

Pure-play community solar companies, such as Clean Energy Collective and SunShare, are now being joined by major players, including SunRun and SolarCity. SolarCity stated that it will partner with Minnesota-based developer Sunrise Energy Ventures to develop up to 100 1 MW (AC) community solar installations. While this market is expected to require time to develop, as each public utility commission sets the rules in each state, the opportunities and pipelines of projects are growing.

Looking back, and ahead, at the trends covered in this four-part blog series, U.S. solar PV companies have done a remarkable job adapting to the changing landscape. Moving beyond the expiration of the 30% Investment Tax Credit at the end of 2016, is just another one of those evolutions.

 

University of Michigan Opens Autonomous and Connected Vehicle Proving Ground

— July 20, 2015

For decades, the University of Michigan in Ann Arbor has been one of the top training grounds for the engineers that power the American automotive industry. However, with the focus on Google and its self-driving driving cars in recent years, the center of gravity seems to have shifted westward to Palo Alto, California, and Stanford University. With the grand opening of the Mobility Transformation Center (MTC) in Ann Arbor, however, Michigan hopes to regain its place in the pecking order while driving automated and connected vehicle technology forward.

Navigant Research’s Autonomous Vehicles report projects that nearly 50 million vehicles with some form of autonomous capability will be sold globally by 2030. Those vehicles will need to function reliably in a broad range of environments and coexist with the existing human-driven fleet as well as technologies from many different companies.

The Solution

The MTC, also known as Mcity, is a 32-acre dedicated proving ground built on the university’s North Campus, which was formerly the site of pharmaceutical giant Pfizer’s Ann Arbor R&D center. Mcity will be operated by the University of Michigan’s Transportation Research Institute (UMTRI) in partnership with more than a dozen automakers, suppliers, insurers, and the U.S. and Michigan departments of transportation. The facility includes road surfaces paved with a variety of materials along with unpaved roads and features such as signs, fire hydrants, crosswalks, roundabouts, overpasses, and tunnels. Movable building facades will enable the testing of a variety of real-world scenarios.

Partner companies and students of the university will all have access to the facilities to develop and validate new transportation technologies. Among the participating companies are Toyota, Honda, General Motors, Ford, Robert Bosch LLC, Delphi, Qualcomm, and State Farm Insurance. Each of the manufacturers have R&D centers and test facilities of their own in or near southeast Michigan, but those facilities are closed to outsiders. At Mcity, the companies will have a common ground where they can test individually and collaboratively to ensure that their respective systems can coexist.

And, unlike in California, where weather is rarely an issue that test drivers have to contend with, Mcity will also provide a platform for testing under all of the environmental conditions faced by drivers, including winter snowfall and road salt. Most current automated driving systems do not function as well or, in many cases, at all if the weather is less than ideal. This is a problem that will need to be addressed before systems are deployed to customers.

Preparing for V2X

Navigant Research’s Connected Vehicles report estimates that more than 80% of new vehicles sold in North America and Europe will be equipped with vehicle-to-external (V2X) communications capability by 2025. While initial deployments are expected to focus mainly on vehicle-to-vehicle transmission of basic safety messages, the potential to expand the data transfer to pedestrians, cyclists, and infrastructure could have a significant impact on reducing congestion and accidents. Among the features of Mcity are stationary and motorized pedestrians and cyclists that can be equipped with V2X transponders and that can also be used for testing the sensing capabilities of automated vehicles.

The collaborative efforts at Mcity will also include the development of performance and reliability standards for communications and automation systems. While much of this work will likely become the basis of new SAE industry standards, it could also feed into future federal motor vehicle safety standards, which do not currently address autonomous driving. Work at this new collaborative testing facility is scheduled to begin this summer.

 

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