Navigant Research Blog

Carbon-Saving Innovation in the Airline Industry

— July 7, 2015

Relative to the rapidly changing automotive industry, which pumps out new models every year, the airplane industry has evolved at a considerably slower pace. This is not surprising, given that around 1,000 aircraft are made by Airbus and Boeing, the leading manufacturers. Unlike cars, changes in design and function take longer to incorporate into planes. For some time, the airline industry has been under pressure to increase its fuel efficiency and lower its greenhouse gas (GHG) impact. While airplanes contribute to 2%–3% of global GHG emissions annually, some posit that the high altitude of those emissions has a greater impact on climate change.  This past month, the U.S. airline industry has been put on notice to reduce the amount of GHG from air travel.

Citing the right to regulate emissions as part of the Clean Air Act, the U.S. Environmental Protection Agency (EPA) reported that almost one-third of global aircraft emissions originated from U.S. aircraft. To address this, President Obama has charged the EPA to begin crafting rules similar to the draft Clean Power Plan (111(d)) that addresses power plants and utility energy use.  European carriers have been under similar pressure from the European Commission.

The Path toward Change

There are two fundamental ways that airplanes can reduce fuel use: they can use a lower GHG fuel source and they can make more efficient planes.

For airplanes, the lower GHG fuel source has been biofuel, either from biological sources or waste products. As discussed in Navigant Research’s Aviation and Marine Biofuels report, choosing biofuels also helps hedge against increases and variability in fuel costs. The volatility of aviation fuel cost over the last 5 years can be seen in the figure below.

Monthly Cost and Consumption: 2000-2015

carbon airlines

(Source: U.S. Department of Transportation)

It is interesting to note, however, how relatively flat U.S. and international fuel consumption has been over the past 15 years. The United Nations’ International Civil Aviation Organization (ICAO) projections have cited the rapid growth of European plane travel in forecasting that fuel demand for air travel could result in a 300% to 700% growth in emissions by 2050.

U.S.-based United Airlines just announced an unusual step in securing biofuels for its planes. In late June, it was announced that the company is investing $30 million in Fulcrum BioEnergy. Once production of the waste-to-jet fuel has matured, United will be able to purchase up to 90 million gallons of jet biofuel.  Fulcrum already has a deal with Cathay Pacific and has received funding from the U.S. Department of Defense with the aim of becoming another military jet fuel provider.  Yet, United is not putting all of its eggs in one basket; it already had a deal with AltAir Fuel, which began in 2009.

 

States’ Roles in the Clean Power Plan

— June 25, 2015

Cross_Gatel_webThe U.S. Environmental Protection Agency (EPA) plans to finalize the Clean Power Plan (CPP) this summer. As part of the plan, states will have 1 to 3 years to submit State Implementation Plans (SIPs) to the EPA for review. Some states are already starting the planning process to develop an SIP, and most are beginning with stakeholder meetings that include utilities and other major players in their state. Other states are waiting to see the final regulation before they begin.

States face a complicated web of decisions when crafting SIPs. The figure below shows a simplified hierarchy of the paths that they may take. States are unlikely to go through the decision process in a linear fashion; instead, they will need to consider all options and narrow them down based on their existing policies, resources, and stakeholder goals, among other factors.

SIP Example Decision Process

 

CPP Decision Tree - Recreated

(Source: Navigant Consulting)

SIP or FIP?

The first decision a state needs to make is whether to submit an SIP. If a state does not submit an SIP, the EPA will impose a Federal Implementation Plan (FIP). The EPA has indicated that it may include insights on what an FIP will look like when it releases the final rule this summer. Some states have passed legislation limiting their state agencies from submitting an SIP without legislative approval, which could impede those states from submitting an SIP at all.

A decision that will need to be made early in the process is whether or not a state wants to work with other states to submit a regional plan. There have been proposals, for instance, from Duke Nicholas Institute, that individual plans could be crafted to be standalone and still allow trading of credits with other states, similar to the way that renewable energy credits (RECs) can be traded among states even though Renewable Portfolio Standard (RPS) policies were not coordinated prior to implementation. However, many states are already in discussions about coordination efforts—for example, 14 Midcontinent states submitted comments to the EPA on its proposal and held a stakeholder event on June 5.

If states do work together on regional implementation plans, under the proposed rule they would have an additional year before their plan is due to the EPA. This allows additional time to coordinate among the many players involved across all coordinating states, but narrows the amount of time between when the implementation plan is approved by the EPA and compliance begins—potentially as little as 1 year.

Targets and Policies

Another decision that states must weigh in on is whether or not to use the rate-based target laid out by the EPA or to convert it to a mass-based target. This decision is interrelated with the kind of policy regime a state chooses to include in its SIP. A rate-based target may be more appealing to states that impose individual unit obligations on fossil units in their state, as it eliminates the uncertainty surrounding future load growth. Conversely, a mass-based target may be easier to implement in the northeast, where a mass-based cap-and-trade system already exists.

States will also need to determine how to integrate existing renewable and energy efficiency policies into their SIPs and decide if new policies are needed. These include RPSs, energy efficiency standards, and updates to building codes and can be combined with cap-and-trade, as in California, or standalone.

There are many additional considerations for states to take into account as they craft implementation plans. For the best overall outcome, it is recommended that states start early, have meaningful stakeholder involvement throughout the process, and leverage modeling and analytical tools where possible.

 

Green House Gas Emissions and HVAC

— June 9, 2015

The scientific consensus around climate change is that greenhouse gases (GHGs) emitted by human activities are creating a very serious problem. As a result, most major global regions have adopted targets for reduction of GHG emissions, notably carbon dioxide (CO2). The largest source of CO2 emissions comes from the burning of fossil fuels for generating electricity, powering vehicles, and providing heat. Heating, ventilation, and air conditioning (HVAC) equipment plays a large role in CO2 emissions, as it accounts for roughly 40% of total building energy consumption.

Thus, increasing the efficiency of HVAC equipment is a clear way to address GHG emissions. But, it’s not the only way HVAC equipment can help. Indeed, in a recent report, the World Resources Institute points out that non-energy and non-CO2 emissions account for 22% of all U.S. GHG emissions and are expected to rise. The report goes on to recommend the reduction of hydroflourocarbons (HFCs), which are used as refrigerants in HVAC equipment. However, when it comes to HVAC, what HFCs should be replaced by is not entirely clear.

Engineering Requirements

Within an HVAC system, refrigerant needs to be evaporated, condensed, and be compressed in such a way that the system can provide cool air. As a result, the band of temperature and pressure in which refrigerant changes phase between liquid and gas is narrow. Within a building, even the best HVAC systems may leak at some point in their lifetime. So, refrigerant needs to be non-toxic and non-flammable to keep building occupants safe. These requirements were met by chlorofluorocarbons (CFCs) and hydrochlorofluorocarbons (HCFCs). However, the proliferation of these refrigerants introduced a new problem: ozone depletion. While HFCs have solved the problem of ozone depletion, they are a GHG that traps heat in the atmosphere, contributing to climate change. The next generation of refrigerant needs to solve all of these problems.

So far, finding one refrigerant that is functional, safe, and doesn’t have severe impacts on the environment has been difficult. Potential candidates that have a lower the global warming potential than HFCs include R-32, which is mildly flammable, and CO2, which doesn’t fully change phase. Both have been commercialized. R-32 has been available in Japan since 2012. CO2 is being used as a standalone refrigerant in Europe and has recently been deployed in the United States. While challenges still remain, the development of these refrigerants presents the promise of reduced GHG emissions.

 

The Energy Efficiency Way to Emissions Reductions

— January 15, 2015

The Obama administration has few levers to pull to shift the United States’ position on climate change, besides enforcing the Clean Air Act of 1970.  That legislation authorizes the U.S. Environmental Protection Agency (EPA) to enforce regulations on power plants and associated pollutants.  The Clean Air Act put the onus on individual states to design programs to follow the EPA’s federal guidelines.  Last June, the EPA released its Clean Power Plan (CPP), with a new ambitious target: carbon emissions reductions totaling 30% relative to 2005 emissions by 2030.  The proposed rule includes the following primary components:

  • Four building blocks that define the EPA’s Best Strategy for Emissions Reductions
  • State-by-state 2030 carbon emissions reduction targets and interim targets based on a 2012 base year
  • Numerous alternative emissions reduction strategies, including renewables, under construction nuclear generation, and energy efficiency

Cost-Effective Efficiency

Not surprisingly, some legislators are arguing that the CPP is unconstitutional, functioning as a federalization of states’ activities via the EPA.  Some utilities are also not happy with the CPP, as they are going to have to be held to real climate goals.  Utilities that burn coal or other fossil fuels inefficiently will have to pay to upgrade their facilities or face stiff penalties.

In a recent white paper, Navigant reported that energy efficiency is a cost-effective way for states, utilities, and businesses to achieve the CPP targets, with considerably less investment than upgrading or building new power plants.  Of all the building blocks, energy efficiency is the only one that is not a form of generation.  From a cost perspective, energy efficiency is a highly competitive approach to offsetting supply requirements and reducing carbon emissions.   This approach can be used for both overall total load reductions, but also for peak shaving (i.e., reducing the carbon intensity of electricity demand at the times when the grid is dirtiest – usually in the afternoons).

The Challenges

The major challenge for using energy efficiency as a way to achieve policy goals lies in how and where it is implemented.  Utility energy efficiency programs are one approach, and are forecast to grow, according to the Lawrence Berkeley National Laboratory (LBNL).

Energy Efficiency Spending by Utilities

(Source: Lawrence Berkeley National Laboratory)

Many utility programs require 5 or 6 years to mature and develop savings streams that persist.   Developing efficiency programs today will allow the savings potential to grow prior to the start of the CPP requirements.

It’s not just up to the utilities.   By focusing on the bottom line – the financial savings – the business community can help states achieve their CPP goals, whether they realize it or not.  Navigant Research’s report, Energy Efficient Buildings: Global Outlook, found that the current energy efficient building market is generating over $300 billion annually and is expected to grow, in major part, because the software and hardware works, and saves end users money.  If the EPA uses the green of a dollar to promote the CPP, it could help states reach their targets.

 

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