Navigant Research Blog

U.S. Bucks the Tide on Carbon Taxes

— October 31, 2012

Concerns about rising carbon emissions on a global basis have prompted many nations to implement taxes on their carbon-emitting industries.  According to a Climate Commission report, in 2013 33 nations and 18 sub-national jurisdictions will have adopted some form of national carbon tax that covers around 850 million people, about 30% of the global economy and 20% of global emissions.

Although the European Commission proposed a carbon tax in 2010 to charge companies between $5 and $39 per metric ton of CO2, that legislation has not yet been agreed upon by its 27 member states.  However, many European countries have enacted their own carbon tax, including Denmark, Finland, Ireland, the Netherlands, Norway, Slovenia, Sweden, Switzerland, and the United Kingdom.

Finland was one of the first countries to introduce a carbon tax, in 1990 (with a 2010 price on carbon of $26 per metric ton of CO2).  Sweden and Norway enacted carbon taxes a year later, followed by Denmark in 2002.  Today, Norway, the 8th-largest oil exporter in the world, has one of the most aggressive carbon taxes in the world.  The Norwegian government has recently proposed to double its carbon tax on offshore oil companies to more than $71 per ton of CO2 and to almost $9 per ton of CO2 on its fishing industry.  In the United Kingdom many large companies pay a price for the carbon they emit through the EU’s emissions trading scheme.  Examples of carbon tax adopting nations in Asia Pacific are Australia, India, South Korea, Japan and China, which has run pilot emissions trading schemes in a number of provinces and cities to eventually implement a carbon tax on high energy-consuming companies.

What about the United States?  The United States has resisted a nationwide carbon tax policy. Indeed, the current U.S. Congress has made every effort to prevent any action to curb carbon emissions by the Environmental Protection Agency (EPA).  Most recently, on September 21, the U.S. House of Representatives voted in favor of Stop the War on Coal Act (H.R. 3409) to prevent greenhouse gas (GHG) reduction measures, including a ban on any action by the EPA to address climate change.  Given this political climate, a nationwide carbon tax is not very likely in the foreseeable future.  However, California has taken matters in its own hands by enacting its own carbon trading scheme, including a carbon tax, as part of its Global Warming Solutions Act, enacted in 2006.  To meet the state’s carbon emissions reduction goal of matching 1990 levels by 2020, California developed a cap-and-trade program that included a carbon tax on 300 companies, including several utilities, deemed to be the most serious polluters.  Today, California’s cap-and-trade program is linked to Québec’s cap-and-trad scheme, with the first auction scheduled for November 14, 2012.

To be sure, carbon taxes are not without serious challenges and criticisms.  Critics object that such taxes will inevitably be passed onto consumers, could result in industry and electricity production moving to other countries, and won’t significantly reduce carbon emissions.  Yet, countries around the world, convinced that emission trading schemes coupled with carbon taxes are the most cost-effective and efficient ways of reducing emissions, are taking steps to tackle climate change by pricing carbon.  At the same time, policymakers in these countries realize that taxes alone are not enough: broader environmental policies on a national level need to be in place to reduce carbon emissions.


Sandy, Smart Grid, and the Human Factor

— October 30, 2012

As a Boston metro area resident, I have the impression that major grid disruptions from catastrophic storms are becoming annual events.  Last year, after outrunning Hurricane Irene, I considered the relative promise of smart grid technologies in the face of natural disasters.  Now, in the wake of Superstorm Sandy, this issue is coming up again.

The fact is that no system intelligence can overcome the massive destruction of a major storm like Sandy.  Transmitting electricity still requires wires (despite advances in wireless power – see our report, Wireless Power), and overhead wires succumb to high winds, while underground wires and equipment are susceptible to flooding.  New York City’s Consolidated Edison, operator of one of the most robust distribution grids in the world, is wrestling with these forces as I write.  Physical reconstruction, by people working long hours, is still needed.

However, distribution automation technology did appear to help me.  At the height of the storm, which was admittedly much less fierce here north of Boston than along the mid-Atlantic coast, the power flickered in such a way that I could almost sense the reclosers and sectionalizers actively executing their fault location, isolation, and service recovery (FLISR) algorithms, isolating the failed segment.  Unfortunately, I reside on that segment, but crews were somehow able to restore power in under 4 hours, even as the storm continued to rage.  Kudos!

As I noted last year, the biggest complaint in the wake of Hurricane Irene was the lack of good and accurate consumer restoration information.  Local regulators here in Massachusetts provided harsh post-Irene assessments in this regard, and the utilities appear to have taken note.  In the build-up to Sandy, I received proactive notifications from my utility detailing what to expect, where to go for information, with even an offer for a smart phone app that could monitor restoration progress.  (This was much more helpful than the inane recommendation of my broadband provider, who asked that I report broadband outages via their website.)  Now, less than 24 hours after the fiercest winds subsided, it’s still too early to see if the local utilities can live up to their promise, but initial responses are encouraging.  If advanced outage and workforce management applications enabled by field-based smart grid technology can help set accurate consumer restoration expectations, then we will have made a major advance.

On the downside, the on/off power fluctuations appear to have damaged my Internet router, and worse, my water well pump seems to have also given up the ghost.  So while I have power, I have no water.  I can’t be sure these were damaged by power spikes, but it seems likely.

As the storm raged I also found myself wondering about all the work that affected utilities have recently put into updating their GIS databases, reconciling cumulative 100-year records of the distribution network with the actual installations in the field, in anticipation of leveraging the models for voltage optimization or other upgrades.  Will work crews coming in from as far as Texas have the same record-keeping prowess and knowledge as the local crews? There’s nothing like a major storm to scramble utility “as-built” records!


BrightSource a Bright Spot for Cloudy Solar Power Industry

— October 29, 2012

Earlier this year I wrote that the concentrated solar power (CSP) industry – which uses a solar thermal technology that has important advantages over solar photovoltaic panels, particularly for utility-scale projects – was reaching a “make or break point.” Judging from the recent news from CSP provider BrightSource Energy, the breaking point hasn’t been reached, and CSP just might make it big.

BrightSource, which uses a “solar tower” structure to heat water into steam, which is then used to produce electricity, announced it has received a new round of funding totaling $80 million.  Headed by Alstom and VantagePoint Capital Partners, the investors include Draper Fisher Jurvetson, Goldman Sachs, Chevron Technology Ventures, and BP Ventures.

As my colleague Peter Asmus has pointed out, BrightSource has a unique technology, an impressive lineup of investors (that also includes Google Ventures and industrial heavyweight Bechtel), and a healthy backlog of power purchase agreements (PPAs) with utility customers including Pacific Gas and Electric and Southern California Edison.  BrightSource’s Ivanpah project in the Mojave Desert will be the largest concentrated solar power installation in the world, totaling 392 megawatts at completion.  As we explained in our 2011 report, Concentrated Solar Power, BrightSource has also added energy storage (in the form of molten salt) to its CSP technology. “Storage significantly improves the value” of solar- thermal systems, Michael Peevey, the president of the California Public Utilities Commission, said at meeting this week at which two new BrightSource PPAs with utilities were approved. “Ratepayers’ long-term interest will be best served in my view by beginning to invest now in advanced technologies,” Peevey added.

In April 2011, BrightSource received a $1.6 billion loan guarantee from the U.S. Department of Energy.  The Oakland, California company provides a stark contrast to solar providers A123 and Solyndra, both of which went bankrupt after receiving federal funding under the Obama Administration’s clean energy stimulus.  So why isn’t Obama the candidate touting the success of BrightSource?

Part of the answer seems to be that the Obama campaign simply believes that clean energy, including advanced solar power, is too hot an issue (excuse the pun) to bring up between now and the election on Nov. 6.  Bringing up one success story – and a provisional one, at that, since BrightSource’s future is by no means assured – will not do much to counter Republican charges that the U.S. government should not be in the position of subsidizing clean energy at all.

That’s too bad, because BrightSource and the CSP technology it’s helping pioneer could provide an important boost for the beleaguered solar power industry in the United States.  As opposed to making and selling solar panels, a low-price, low-margin business, BrightSource’s big CSP installations are not easy for overseas rivals to duplicate.  And the company’s business model, supplying competitive, renewable energy to large utilities that are under government mandates to obtain one-third of their power from renewable sources by the end of the decade, assures it of a large and stable customer base.  BrightSource also has varied revenue streams: it built a 29 megawatt facility for Chevron in Coalinga, California to make steam for enhanced oil recovery.

According to documents filed with the SEC in preparation for a planned IPO earlier this year, BrightSource’s PPAs total more than $4 billion in long-term revenue.  In April BrightSource, citing adverse market conditions, called off its public offering, in a move that was seen at the time as another blow to the struggling solar power industry, indeed to the U.S. cleantech industry as a whole.  Given more recent developments, that now looks like a smart move.


Itron-C3 Partnership Links Smart Buildings & the Smart Grid

— October 29, 2012

Itron, the global vendor of utility meters and associated software and services, recently announced a strategic alliance with C3, the enterprise energy management software company launched in 2008 by Tom Siebel and Pat House, the team behind Siebel Systems, which was acquired by Oracle for $5.8 billion in 2005.  The purpose of the alliance is to jointly develop and offer an energy management solution for North American utilities.

From Itron’s perspective, C3 represents the latest in a long list of partners that expand the reach of its metering and data management solutions.  It already works with firms such as Comverge, a demand response company, and Tendril Networks, a provider of home energy management technology, to provide additional software-enabled dimensions to its consumer metering offerings.  The partnership will strengthen three of Itron’s products: its Demand Response program management system, its Enterprise Edition Curtailment Manager, and its Smart Grid offering, on which it already partners with other smart grid networking and communications giants.

For its part, C3 views Itron as yet another channel to market its enterprise energy management software.  While C3’s current customer base focuses on large enterprises (including Dow and Pella) and even a number of utilities (such as PG&E and Constellation Energy), working in direct partnership with Itron allows C3 to go even deeper into facility- and meter-level visibility and control on behalf of utilities.

The company seems to make a bold move in the energy management software world every few months.  In May, C3 acquired Efficiency 2.0, a residential energy management software company à la OPOWER, as I wrote about in this blog.  This most recent deal builds on the previous ones by demonstrating C3’s commitment to addressing utilities’ growing needs around energy efficiency and customer engagement.  It also helps cement the company’s ability to play not only in energy efficiency but also demand response and smart grid.

Energy management companies have been trying to figure out how to expand their potential customer base beyond major enterprises and organizations.  Utilities have proven to be one of the best alternatives, due to the large building portfolios made up by their ratepayers as well as an increase in regulatory pressure demanding that they reduce their customers’ energy consumption.

By tying a meter data management offering with an enterprise energy management offering, though, Itron and C3 are aiming to create a platform that does far more than help customers visualize and reduce their energy consumption.  It allows utilities to make use of that data, too, enabling them to analyze meter data with a specialized analytics tools designed to help them dynamically manage loads and model the economic benefits for customers and utilities.  In doing so, it also allows utilities to squeeze more value out of their expensive smart meter installations.

I consider the success of this partnership a critical litmus test for the broader challenge of transforming buildings into dynamic nodes within the smart grid.


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