Navigant Research Blog

New Analytics Solutions Give Consumers More Energy Choice

— July 13, 2017

Residential consumers are becoming increasingly aware of their energy consumption and are interested in how they can reduce their use, save money on energy bills, and become more environmentally conscious. More and more customers are receiving home energy reports, which detail energy consumed and compare usage to that of neighbors. Opower (Oracle) achieved more than 11 TWh of energy reduction across 100 utility partners with these types of reports. Consumers are also logging into mobile apps that disaggregate devices to help them make smarter choices about where to target energy saving efforts.

Despite increasing efforts and awareness about energy, many consumers still do not know where their energy actually comes from. Most people may have a vague sense of their country’s energy mix and imports, such as the US energy mix depicted in the figure below, or that the UK imports 60% of its electricity-generating fuel. However, when a consumer flips a light switch, turns on their TV, or adjusts their thermostat, the energy that powers those actions is coming from whatever power plant is turned on to meet that incremental demand. This means the energy your light bulb is using could be drawing power from a coal plant, a natural gas facility, or a solar panel.

US Energy Mix: 2016

(Source: US Energy Information Administration)

New Technology Helps Track Generation Sources

In the past, there hasn’t been a method for determining the generation source that is meeting demand in real time. However, a non-profit called WattTime has developed a data analytics software that solves this problem. The software, which was the brainchild of a hackathon event in 2013, detects where the electricity powering the grid is coming from and the actual emissions impacts of people and companies using electricity. Not only does it detect this information, but it can also automatically power devices when energy sources are the cleanest. It can be installed in any Internet-connected device, making it flexible and easy to implement. This tool empowers customers to have a choice in the type of energy they are using and how much they are emitting when they consume electricity. WattTime’s software is gaining traction, having partnered with companies like Microsoft, Energate, and most recently, the Rocky Mountain Institute (RMI). WattTime has joined RMI as a subsidiary organization to foster the transition to a cleaner, more decentralized grid.

Looking Forward to a Cleaner Energy Future

Data analytics solutions like these are empowering consumers to make smarter energy choices, facilitating the transition to a cleaner, more decentralized and optimized grid, and solving challenges associated with reducing carbon emissions. Currently, emissions are calculated based on average factors, not based on the actual emissions that are generated depending on the source providing the next kilowatt-hour of power. As countries and organizations around the world move forward with reducing greenhouse gases, real, data-based information on emissions can help consumers understand how their actions directly affect greenhouse gas emissions and contribute to the overall goal of a cleaner, greener world.

 

A Roadmap to the Coming Hydrogen Economy in One Chart

— July 5, 2017

Hydrogen has been discussed as a future energy carrier for decades, though infrastructure challenges and high cost seem to always keep broad adoption in the hypothetical realm. However, as the cost of electrolyzers and renewable energy continue to tumble and climate policies tighten, hydrogen is again experiencing renewed global interest.

Versatility and Disruptive Potential

Hydrogen’s versatility boosts its appeal as an energy carrier. It is the only energy carrier that has significant disruptive potential across the world’s energy-consuming segments: power, transport, industry, and heating. Electrolytic hydrogen—which comes from splitting water molecules by electrolysis, often with renewable electricity—is broadly seen as the key to clean hydrogen.

As seen in in the following chart, electrolysis remains expensive today. This is because electrolyzer capital costs have not fallen much below $1,000/kW. Renewable electricity costs, while falling dramatically, remain relatively high compared to a very high penetration future. But as those two costs fall, as is projected through 2025 and beyond, the cost of clean hydrogen falls substantially.

Hydrogen Cost Comparison with Other Energy Carriers, World Markets: 2017, 2025, and Beyond

Notes: Commodity costs include representative data from California, Germany, and Japan. Electrolytic hydrogen (2017) based on DOE data and actual filling station costs, while future prices presume large-scale (100 MW) systems with continued declines in both cost of renewable electricity and electrolyzer capital costs. SMR is steam methane reformation.

(Sources: Navigant Research, US Department of Energy, International Monetary Fund, International Energy Agency, California Energy Commission)

Hydrogen Use in Transportation

Transportation, which favors expensive energy-dense fuels, is among the more attractive uses for hydrogen. Indeed, electrolysis is providing a growing share of hydrogen to rollouts of both passenger vehicles and heavy duty vehicles like buses—in places such as China, California, Germany, and the United Kingdom. The success of battery EVs (BEVs) represents a major hurdle for hydrogen, though there is growing reason to believe that both energy carriers will be embraced. For example, the range-extending capabilities of hydrogen on battery vehicles are continuing to improve.

Other Hydrogen Uses

Hydrogen is also highly valued by industry as an important process input to production of ammonia, glass, and metals. Industrial uses represent an existing hydrogen economy that can be decarbonized and made more efficient by renewable hydrogen. Finally, hydrogen could revolutionize power generation and heating through fuel cells or other thermal generators, though it is expensive compared to natural gas, especially in the United States with its ongoing shale gas boom. Still, if the aggressive cost decline targets are met, even these two heavily polluting segments could be disrupted by hydrogen energy.

Hydrogen detractors correctly point to the infrastructure challenges of hydrogen storage, compression, and transport and the steep cost declines needed. If those hurdles can be cleared, this chart may hold two additional reasons for optimism: carbon pricing and hydrogen’s efficiency bonus. Carbon pricing, which is on the rise, makes hydrogen more attractive, as it displaces fossil fuels. Finally, comparing by units of energy hides a key efficiency bonus of hydrogen: it is often twice as efficient as the fossil fuels it replaces. This is because both stationary and vehicular fuel cells can be around 60% efficient, which is roughly twice the efficiency of combustion-based technologies after losses.

A Roadmap to Future Energy

This chart can be considered a roadmap to an eventual hydrogen economy. Electrolytic hydrogen is already competing with fossil fuels in the transport and industrial segments, and will continue to grow its market share. Provided the favorable carbon policies and cost declines continue, hydrogen has the potential to be the best and most versatile energy carrier of the future.

 

European Turn from Diesel Unlikely Due to Scandals

— April 10, 2017

The revelation of Volkswagen’s (VW’s) diesel emissions cheating is nearing its second anniversary and the automaker is well along in the settlement process. Yet, skepticism about diesel remains strong. Global governments have maintained a steady stream of inquiries into diesel automaker environmental compliance efforts. The latest investigatory announcements are emerging in France and Germany, where diesels accounted for over 50% and 45% of the 2016 market, respectively. Fiat Chrysler Automobiles NV (FCA), VW, Groupe Renault, and the PSA Group are being investigated in France, while Daimler is under investigation in Germany.

Surprisingly, the sustained scrutiny of diesel has not gutted sales in Europe at a high level. A rising vehicle market on the continent lifted all powertrains, including diesel, last year, though diesel’s rise was markedly low compared to other powertrains. The relatively low rise might be partially attributed to ongoing scrutiny, but this would ignore the fact that diesel share has been falling in Europe since its peak in 2011 at over 55%.

In 2011, diesel accounted for around three out of four vehicle sales in Belgium, France, Luxembourg, Ireland, Spain, and Norway. The next year saw the first deployment of plug-in EVs (PEVs); since then, diesel sales have dropped considerably. Diesel share lost over 20 percentage points in France and Belgium, over 15 in Spain, and over 10 in Luxembourg. Ireland remains unchanged, but Norway, which has the highest level of PEV adoption at 24%, is down by over 45 percentage points. Diesel share in the region is down 6 points overall and plug-ins have been the primary beneficiary, growing from effectively nothing in 2011 to around 1.3% in 2016. Hybrids have also made headway, especially in 2016, moving from 1.3% to over 1.5%.

Across the pond, impacts from the diesel cheat are more striking. VW previously led the diesel car market, and its retreat has had a substantial impact. That impact was partly offset by the introduction of diesel SUVs and trucks from FCA (now also under investigation by the US Department of Justice, the Securities and Exchange Commission, and several state attorneys general), General Motors (GM), and Jaguar Land Rover (JLR). Overall, diesel sales fell 30% in 2016. Unlike in Europe, plug-ins have had less of an impact in the United States on diesel. This is largely due to the fact that diesel in the United States is competing in larger vehicle classes where plug-ins do not perform well. Instead, PEV gains are mainly affecting the once robust US hybrid market that is primarily dominated by small vehicles, where PEVs have the strongest value propositions.

What this means is that, assuming ongoing US investigations do not uncover new revelations that would take the new class of larger diesel vehicles from FCA, GM, and JLR off the market, diesel is likely to return to its marginal pre-VW-scandal share in the United States with some upward potential. But in Europe, dominated as it is by smaller vehicles, diesel sales may continue to fall as other fuel efficient options compete in those segments.

 

Carbon Tax Plan Proposed by Climate Leadership Council

— February 15, 2017

Climate change is a big area of political strife. It was during the election and remains so during the opening weeks of the new administration. While the major political parties generally disagree on the issue and the measures necessary for addressing it, climate change is not a partisan topic. On February 8, a group of Republicans proposed a tax on CO2 emissions in exchange for the repeal of other regulations on the industry. The proposal is led by James Baker III, former Secretary of State under President George H.W. Bush, and other members of the Climate Leadership Council. Founded by Ted Halstead, the Climate Leadership Council is an international research and advocacy organization with aims to organize global leaders around new climate solutions based on carbon dividends modified for each of the largest greenhouse gas (GHG) emitting regions.

The Proposal

The Carbon Dividends Plan is based on four main areas:

  • Gradually Increasing Carbon Tax: A $40 tax on every metric ton of CO2 would be imposed and increased steadily over time.
  • Carbon Dividends for All Americans: The estimated revenue of $200 to $300 billion per year generated from this carbon tax would be paid out to Americans through dividend checks, administered by the Social Security Administration. On average, a family of four would receive $2,000 under the plan.
  • Border Carbon Adjustments: The plan proposes border adjustments that would increase the costs of exports and imports to/from countries that do not have a comparable carbon tax.
  • Significant Regulatory Rollback: The majority of the Environmental Protection Agency’s (EPA’s) regulatory authority over CO2 emissions would be phased out, including an outright appeal of the Clean Power Plan (CPP).

The Importance

Many Republicans, including President Trump, are publicly opposed to actions on climate change. The Climate Leadership Council is made up of a number of prominent Republicans who are not only publicly in favor of action supporting the climate, but also have created a proposal to do so. Besides Baker and Halstead, authors of the proposal include Henry Paulson, Secretary of the Treasury under President George W. Bush; Martin Feldstein, Chairman of the President’s Council of Economic Advisers under President Ronald Reagan; George Shultz, Secretary of State under President Reagan; and N. Gregory Mankiw, Chairman of the President’s Council of Economic Advisers under President George W. Bush.

The Impacts

The plan would repeal the CPP put in place by President Obama to reduce carbon pollution and reduce the EPA’s influence on GHG emissions, and will likely see opposition. However, President Trump already plans to repeal the CPP, and while it is unclear if he will be successful, the Carbon Dividends Plan is not needed to assist in that repeal. While the dividends paid back to consumers help with the increased cost of energy, many can argue this would be better if used for increasing renewable energy. If the proposal is rejected and the CPP repealed without an alternative plan in place, it is unlikely actions on climate change will be taken at a federal level.

In June 2016, the House approved a non-binding resolution condemning the idea of a carbon tax. The measure passed 237-163 and was intended to make it more difficult for those that voted against a carbon tax to do so again. President Trump also opposes a carbon tax, believing that President Obama’s CPP was a regulatory overreach of power. It seems unlikely that the current administration and Republication-controlled Congress would vote in favor of such a proposal, although there is hope that some type of alternative could be offered in its place. No matter what the outcome of the Carbon Dividends Plan, there will be many arguing both for and against it.

 

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