Navigant Research Blog

Energy Efficiency Is Not Lost in the Supermarket

— July 18, 2016

ControlsLast month, national grocery store chain Trader Joe’s made headlines when it agreed to reduce greenhouse gas emissions from refrigeration equipment at 453 of its stores. The federal government alleged that Trader Joe’s had violated the Clean Air Act by failing to repair leaks of R-22, which is used as a coolant in refrigerators but which also depletes the ozone and has 1,800 times more global warming potential than CO2. In addition, the government alleged that the company failed to keep appropriate service records.

Under the proposed settlement with the U.S. Department of Justice and the U.S. Environmental Protection Agency, Trader Joe’s will spend an estimated $2 million over the next 3 years to reduce its leak rate to less than half the average in the grocery store sector, and to use non-ozone depleting refrigerants at all new stores. It also agreed to improve its leak monitoring and recordkeeping. This is the third settlement federal authorities have reached with a national supermarket chain over refrigeration practices. Previously, Safeway agreed to pay $600,000 in penalties and reduce its emissions in 2013. The following year, Costco also agreed to pay $335,000 in penalties and take similar emissions-reducing actions.

Reducing Operating Costs

An average-sized grocery store releases 1,900 tons of carbon emissions annually. By reducing the amount of ozone-depleting refrigerants and potent greenhouse gases, the Trader Joe’s settlement will help address major global environmental problems. An added benefit of repairing refrigerant leaks is improved energy efficiency of the system, which can save electricity. In fact, supermarkets are one of the most electricity-intense types of commercial buildings due to the large amount of power needed for food refrigeration. Refrigeration accounts for around 50% of electricity consumption in supermarkets. Every year, an average-sized grocery store spends more than $200,000 on energy costs. Consequently, energy efficiency technologies that help reduce energy consumption can significantly reduce operating costs and improve profit margins. According to ENERGY STAR, a 10% reduction in energy costs can boost net profit margins by as much as 16%.

Fortunately, there are ample energy efficiency and emissions-reducing investment opportunities for the retail sector. Some efficiency upgrades specifically target the supermarket segment and refrigeration practice. For example, Axiom Exergy’s Refrigeration Battery stores cooling, not electricity. The battery stores refrigeration when electricity costs are the lowest and deploys it when electricity costs are the highest, reducing on-peak demand by up to 40%. Thermal storage tanks and software optimizing the charge cycle can be easily added on to an existing system.

The Retrofit Market

The average supermarket size in the Unites States is 47,000 square feet, placing these stores in the small and midsize building class. Navigant Research defines small and medium commercial buildings (SMCBs) as those ranging from less than 10,000 square feet up to 100,000 square feet, and most supermarkets fall under this class. While approximately two-thirds of the global building floor space is occupied by SMCBs and more than 90% of commercial buildings are small or midsize, SMCBs have not yet seen the same penetration of energy efficiency technologies as larger facilities. However, with the largest commercial buildings already engaged in energy efficiency retrofits, the focus is expected to shift to SMCBs. According to Navigant Research’s Energy Efficiency Retrofits for Small and Medium Commercial Buildings report, the SMCB retrofit market is expected to grow from $24.1 billion in 2016 to $38.6 billion in 2025.

 

City and Regional Governments Ramp Up Fight Against Climate Change

— June 20, 2016

BiofuelGlobally, climate action and greenhouse gas (GHG) reduction programs are becoming increasingly prevalent as electricity costs and climate change become larger areas of concern for residents. In North America alone, cities such as Boston, Los Angeles, Portland, San Francisco, Minneapolis, Vancouver, and Toronto have defined ambitious targets for improving sustainability and reducing GHG emissions and energy consumption.

While national aspirations were largely aligned during the United Nations Framework Convention on Climate Change COP21 Paris conference, the global partnership lacks meaningful implementation and enforcement mechanisms. In the United States in particular, climate change is heavily politicized, and little action is being taken on a national legislative basis to combat the problem.

Climate Action Plans of Selected Cities

Climate Action PLans of Selected Smart Cities_RC blog

(Source: Navigant Research)

To fill the gap from strong city action and low levels of national alignment, several state and provincial governments have recently taken bold action to combat climate change. The province of Ontario unveiled its new sweeping Climate Change Action Plan in June 2016. The initiative is expected to spend up to $8.3 billion on a range of clean technology programs, largely funded from the provinces’ cap-and-trade program. The Climate Change Action plan aims to quickly transition the province toward more energy efficient heating systems, electric and hybrid cars (via a rebate of up to $14,000), promote the conversion of diesel-powered trucks to natural gas, and help the industrial and agricultural sectors adopt low-carbon technologies.

State and Provincial Collaboration

The state of California, well-known for its clean energy leadership, has a cap-and-trade program that is linked to three Canadian provinces: Quebec, Manitoba, and Ontario. Cap-and-trade programs now cover 61.8 million people across North America—38.8 million in California, 13.6 million in Ontario, 8.2 million in Quebec, and 1.2 million in Manitoba. Each of these programs are designed to drive down emissions and set aggressive GHG reduction targets. Over 17% of the combined North American population (354.1 million people, with 318.9 million from the United States and 35.2 million from Canada) is now participating—knowingly or unknowingly—in a cap-and-trade program without any national or regional framework in place. This figure is anticipated to grow significantly as more states and provinces look to fill the void left by national governments by creating enforceable programs that reduce overall GHG emissions levels.

 

Deploying Energy Efficiency to Lower CO2 Emissions and Comply with the Clean Power Plan

— May 17, 2016

Cloud ComputingThis post originally appeared on the Association of Energy Services Professionals (AESP) website.

This article was co-authored by Frank Stern and Rob Neumann. Amanvir Chahal and David Purcell also contributed.

There has been a great deal of discussion on compliance with the Clean Power Plan (CPP). Surprisingly, there is little discussion of specific costs and benefits in leveraging energy efficiency (EE) to reduce CO2 and move toward complying with the CPP. Navigant investigated the effects of deploying additional EE resources to decrease CO2 emissions in two regions—California and PJM [1]. Our analysis shows that deploying additional EE for CPP compliance results in reduced CO2, as would be expected, but it also reduces costs and system congestion. Additional EE can reduce cost to serve load by 3% to 5% in California and PJM, which reduces costs annually up to $825 million in California and $1.5 billion in PJM. Another benefit of deployed EE is system congestion relief, which reduces the cost to serve load—this is important since large, urban utilities are focused on reducing congestion points, and EE can be used as a solution.

CPP and CO2 Reduction Timeline

The CPP has been stayed by the U.S. Supreme Court until final resolution of the case through the federal courts. The U.S. Supreme Court may not have final resolution of the case until 2018, although it could be sooner. Regardless, many states and regions continue to move toward the CPP goals to reduce carbon emissions, plan for an advanced energy economy, and meet cleaner generation goals. It is not known at this time if the deadlines in the CPP will be modified.

Modeling EE for CO2 Reduction

Navigant has been modeling supply resources for many years and has been including EE as a modeled resource. For this analysis, we focused on modeling PJM Transmission Interconnection and the state of California. To establish our EE base case across California and PJM, we included levels of EE modeled in each of Navigant’s most recent PROMOD and POM [2] transmission model runs. The data and assumptions in these runs are updated and verified with industry experts each quarter. Variables in the model include (i) rate of EE adoption over time, (ii) amount of EE compared to new generation, and (iii) varying amounts of EE deployed. EE was modeled across CA and PJM for the three cases (high/medium/low)—each case was run for 2025 and 2030. These years are important since 2025 is the middle of the CPP implementation period and 2030 is the first year of full compliance with the rule (final goal). The low case included a 50% reduction in EE from the base case, while the high case included a 50% increase in EE from the base case—the base case in 2030 is 33 million MWh for PJM and 24 million MWh for California.

Modeled Results

Deployed EE can provide up to 8.8% of California’s and 3.6% of PJM’s overall CPP Compliance goal in 2030. There is also a reduction in the cost to serve generation load based upon deployed EE. In PJM, the cost savings from the low EE case to the high EE case results in over $1.5 billion in savings annually in 2030 (3.6% of total cost to serve load), while in California, the same metric results in up to $825 million in savings annually in 2030 (4.7% of the cost to serve load). To state it in different terms, the cost to increase EE in 2030 to assist meeting CPP requirements is approximately $900 million in PJM and $550 million in California, which results in an EE return on investment of $600 million in PJM and $300 million in California. This lowers 2030 system capacity requirements by 5.6% in PJM and 10.7% in California. The lower savings and returns in California are due to aggressive renewable and EE policies already underway today in advance of CPP compliance.

Another benefit of deployed EE is reduced system congestion, which reduces the cost to serve load. EE will lower the need for new thermal generation on the system and put downward pressure on capacity and resource prices. Our model shows that system congestion is reduced by approximately 1.5% and is seen systemwide. This amounts to cost reductions of more than $765 million a year in PJM and $270 million a year in California. This system congestion finding is important, since there are various efforts underway across the nation to improve congestion (e.g., Con Edison Brooklyn/Queens Demand Management Initiative).

Conclusion

CPP initiatives would benefit greatly by incorporating additional EE into the planning process. EE reduces emissions and systems costs and pushes out the need for large, costly new generation projects. Specifically, we showed that CO2 emissions would be significantly lowered in PJM and California in both 2025 and 2030, while system costs are lowered in PJM and CA by at least 3% and 5%, respectively. This all adds up to longer glide paths for meeting regulatory requirements or when state goals have to be implemented. By including EE as a resource into the resource mix, system planners and environmental offices gain significant benefits in the form of decreasing costs, flattening demand and a zero-emitting resource.


[1] PROMOD IV is a detailed hourly chronological market model that simulates the dispatch and operation of the wholesale electricity market. It replicates the least cost optimization decision criteria used by system operators and utilities in the market while observing generating operational limitations and transmission constraints. The Proprietary Portfolio Optimization Model (POM) is leveraged for regional analysis of regulatory impacts.

[2] PJM coordinates movement of electricity through all or parts of Delaware, Illinois, Indiana, Kentucky, Maryland, Michigan, New Jersey, North Carolina, Ohio, Pennsylvania, Tennessee, Virginia, West Virginia and the District of Columbia – numerous states and diverse regions.

 

Take Control of Your Future, Part III: Rising Number of Carbon Emissions Reduction Policies and Regulations

— May 16, 2016

Energy CloudMaggie Shober and Rob Neumann also contributed to this post.

My recent blog discussed seven megatrends that are fundamentally changing how we produce and use power. In the second part of the series, I focused on the power of customer choice and changing demands. Here, we will discuss the rising number of carbon emissions reduction policies and how this trend is fundamentally changing the power industry.

What’s Happening with Carbon Emissions Policies Globally?

The long-term impact of the Paris Climate Agreement will be significant. This agreement will focus on limiting global warming to well below 2°C (3.6°F) by the year 2100. Each nation sets its own target for reducing emissions and updates that mark each year. A record number of countries (175) signed the agreement on the first available day. Governments must now ratify and approve the agreement, which could take months or years. The agreement goes into effect once 55 countries representing at least 55% of global emissions formally join. It’s clear that the tone and tenor of the Paris Climate Agreement is providing a guiding light for nations to reduce emissions.

The biggest news was the full commitment of China. The country, together with United States, was one of the first to sign the final Paris Climate Agreement. The United States and China account for nearly 40% of global carbon emissions. It does appear that China is serious about reducing emissions, since the country has made significant investments in renewables, electric vehicles, green cities, and more. Already the world leader in wind power, China is set to overtake Germany this year in solar power (see chart below).

Renewable Energy Growth in Major Economies

Jan Blog 3

(Source: World Resources Institute)

We see that other countries are not waiting. This week, Germany announced a €17 billion ($19.2 billion) campaign—that’s right, billions—to boost energy efficiency. The ultimate goal is to cut the country’s energy consumption in half by 2050. This is part of meeting domestic and Paris Climate Agreement emissions reduction targets. The campaign could prove bearish for European Union (EU) carbon prices if it reduces demand for power and heating in Germany, the top economy (and emitter) of all the EU’s 28 member states.

Many other initiatives at the regional, country, state, and local levels are currently being designed and implemented in support of carbon emissions reductions, accelerated by the agreement. Importantly, the EU is seeking swift approval and implementation of the Paris Climate Agreement at the United Nation’s Bonn Climate Change Conference in Bonn, Germany this week.

U.S. Carbon Regulation

And then we have the Clean Power Plan (CPP). The CPP has been stayed by the U.S. Supreme Court until a final resolution of the case passes through the federal courts. Litigation may not be resolved until 2018, although it’s possible a resolution could be reached sooner. There has been a great deal of discussion on compliance with the CPP. Our analysis continues to show that cost-effective compliance includes a variety of options that are tailored to regional characteristics. A recent deep dive by Navigant into a southeastern state with modest renewable resources showed that trading with other states and developing energy efficiency programs and portfolios are key strategies for reducing overall compliance costs. Compliance strategies depend on existing resources; older coal resources on the margin for retirement are able to get a large bang for their buck on the emissions balancing sheet through replacement with gas, renewables, and energy efficiency.

Navigant also investigated the effects of deploying additional energy efficiency resources in order to decrease CO2 emissions in two regions: California and PJM. We found that additional energy efficiency reduces CO2 emissions, overall cost of compliance, and system congestion. The cost to serve load is reduced by 3%-5% in California and PJM. System congestion relief is also likely to occur, which further reduces the cost to serve load. This last point is important, since large, urban utilities are focused on reducing congestion points—and energy efficiency can be used as a solution.

Other Ongoing Developments

Even though the CPP is on hold, many individual states, cities, and utilities continue to move toward the CPP goals to reduce carbon emissions, plan for an advanced energy economy, and meet cleaner generation goals. The CPP parameters are being used as a guide for emissions reductions:

  • Last month, Maryland lawmakers approved the Clean Energy Jobs Act of 2016 (SB 921) by large majorities in both houses, increasing the state’s Renewable Portfolio Standard (RPS) to 25% by 2020.
  • As part of the New York Reforming the Energy Vision (REV) proceedings, the New York Public Service Commission introduced an order that requires placing a value on carbon emissions, focusing on distributed generation portfolios, and compensating customers for their distributed electricity generation.
  • Over the past year, six states led by Tennessee (plus Georgia, Michigan, Minnesota, Oregon, and Pennsylvania), the U.S. Department of Energy (DOE), and a few other national organizations have been developing a National Energy Efficiency Registry (NEER) to allow states to track and trade energy efficiency emissions credits for CPP and emissions compliance purposes.
  • Last week, San Diego announced its pledge to get 100% of its energy from clean and renewable power with a Climate Action Plan that sets the boldest citywide clean energy law in the United States. With this announcement, San Diego is the largest U.S. city to join the growing trend of cities choosing clean energy. Already, at least 12 other U.S. cities, including San Francisco, San Jose, Burlington (Vermont), and Aspen, have committed to 100% clean energy. Globally, numerous cities have committed to 100% clean energy, including Copenhagen, Denmark; Munich, Germany; and the Isle of Wight, England.
  • Meanwhile, many utilities are decommissioning or converting their existing coal plants and investing in utility-scale renewables, as well as distributed energy resources. As example, AEP is in the process of decommissioning 11 coal plants, representing approximately 6,500 MW of coal-fired generating capacity as part of its plan to comply with the Environmental Protection Agency’s (EPA’s) Mercury and Air Toxics Standards. The company is simultaneously making significant investments in renewables, with a total capacity of close to 4,000 MW by mid-2016.

What Does This All Mean?

The sustainability objectives of government, policymakers, utilities, and their customers are more closely aligned than ever before. In my last blog, I discussed how customer choice and changing customer demands are shifting toward supporting sustainability. States and regulators will continue to discuss how sustainable targets can be met without affecting jobs and the access to safe, reliable, and affordable power. And utilities will continue to evolve to support cleaner, more distributed, and more intelligent energy generation, distribution, and consumption.

Recommended action items for states and utilities include:

  • Understand the possibilities, costs, and full impacts of low-carbon generation and distributed energy resources (energy efficiency, demand response, and others).
  • Implement a workable framework and develop an integrated plan to move toward lower emissions goals, since it’s likely that decreased emission requirements will be in place in the near future.
  • Leverage existing state and neighboring utility designs and efforts to develop joint plans, policies, and goals.
  • Implement (pilot) initiatives that include renewable energy and other low-carbon generation into a reduced emissions framework while also incorporating energy efficiency and distributed generation as resources into the decreased emissions planning process.

This post is the third in a series in which I will discuss each of the megatrends and the impacts (“so what?”) in more detail. My next blog will cover shifting power-generating sources. Stay tuned.

Learn more about our clients, projects, solution offerings, and team at Navigant Energy Practice Overview.

 

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