Navigant Research Blog

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.

 

Public Power + Solar PV + Batteries = Win-Win

— March 10, 2016

Solar heater for green energyThe stars are aligning for distributed energy resources (DER) to play an increasingly important role in providing energy services to consumers. Some see this growth in capacity (coming from devices such as solar PV panels, fuel cells, advanced batteries, and other forms of DER) as the supreme threat to incumbent distribution utilities, echoing the much ballyhooed “utility death spiral” storyline. Others see this evolution as an opportunity for utilities to reinvent themselves, aligning their business strategies and business models with the emerging digital economy.

While it is going to be a bumpy ride into the future, there are signs that it is possible to create win-win scenarios by leveraging the diverse services that energy storage can provide. Advances in software that can optimize DER to provide bidirectional value, along with the bridging capabilities that energy storage brings to the market, can create order out of what would otherwise be chaos.

Is there a way for everyone to come out as winners? The key is in intelligent distribution networks, an ecosystem of solutions that spans concepts such as nanogrids, microgrids, and virtual power plants (VPPs). These three platforms were described in a previous blog. Two companies are proving that the boundaries between these three unique market applications are blurring, thanks to innovative utility business models and the creative aggregation and optimization possibilities attached to energy storage.

Winners

PowerStream, the second-largest municipally owned utility in Ontario, Canada, is developing an innovative pilot project that involves 20 residential units, each to be equipped with a 5 kW solar PV array and a 6.8 kW/12 kWh lithium ion battery. The project is designed to enroll homes in select feeders (which may not be adjacent to each other) in order to provide system benefits.

Perhaps the most innovative aspect of the project is the business model dubbed DBOOME (design, build, own, operate, maintain, and energize). Customers have an opportunity to participate in a hassle-free, zero-maintenance solar storage program with an upfront cost to partially cover installation, followed by a nominal monthly service fee for a 5-year program (this DBOOME approach is also the model PowerStream plans to deploy for its microgrid program). In exchange for the customer’s upfront payment and ongoing service fee, PowerStream offers customers significantly reduced electricity bills and resilience.

The key vendor partnering with PowerStream is Sunverge, which provides residential and commercial building-sited energy storage solutions that integrate renewables such as solar PV. Sunverge offers a combination of onsite hardware and cloud-based services that enable remote monitoring and control of nanogrids, aggregating them into VPPs. Sunverge has also partnered with the Sacramento Municipal Utility District, a municipal utility that is using the company’s systems in 34 homes as part of its net zero energy demonstration project. A net zero energy home is one in which a home’s total annual energy use is approximately equal to the amount of renewable energy generated onsite. Each home is a nanogrid located on a single city block that can also island as a microgrid. Sunverge’s business model essentially links the concept of nanogrids to a VPP. All of its systems can be controlled remotely from a central control room and capacity can be offered to distribution grid system operators.

To learn more about how public power utilities and energy storage innovators are forging win-win DER solutions, listen to the Navigant Research Utility-Energy Storage Collaborations webinar on Tuesday, March 15 at 2:00 p.m. EDT.

 

Will COP21 Help Keep a Spotlight on Buildings?

— December 11, 2015

Buildings have been given a place in the spotlight, or at least they were for a day on December 3 at the world’s convention on climate change, COP21, in Paris. The emissions estimates make a statement: one-third of the global carbon footprint stems from energy use in buildings. If left unfettered, these emissions could triple by 2050. It is evident this reality has sunk in, for buildings are a necessary target for emissions reductions and the actions required for these reductions can make good business sense.

Registering Commitment

Inspired by the efforts of COP21, the U.K. Green Building Council (GBC) is leading the buildings industry in targeting emissions reductions. In a recent article highlighting the goals, CEO Julie Hirigoyen explained, “The eyes of the world are on Paris, but it is not just down to the politicians to make it a success. There is a clear business case for the construction and real estate sector to cut carbon emissions from buildings. The climate pledge commitments from our members demonstrate the widespread industry support for urgent action, and point to a market that is transforming itself.” The U.S. Green Building Council (USGBC) made similar commitments to support the aims of COP21, as well. In all, 25 GBCs worldwide joined the effort with goals for climate change mitigation.

In advance of the conference, USGBC and Ceres launched the Building and Real Estate Climate Declaration. These companies (125 and counting) have made a call for national climate policies and support of the Clean Power Plan. The voluntary registration of green buildings is an important step in bringing transparency and accountability to corporate climate commitments for commercial buildings.

The Business Impact

Tackling greenhouse gas (GHG) emissions is good for sustainability reporting, and it also delivers economic and business value. Navigant Research suggests intelligent building solutions are effective tools for supporting these corporate commitments to emissions reductions. Beyond reducing a building’s carbon impact, the benefits of investing in intelligent building solutions include reduced energy and operational costs.

Intelligent lighting and heating, ventilating, and air conditioning controls, for example, can coordinate system performance to reduce energy consumption while improving the occupant experience. A building energy management system can direct automated system improvements through automation and controls or manual improvements, and the benefits are wide reaching. The operational improvements can not only deliver energy savings for GHG emissions reductions, but can also generate the business intelligence that brings benefits to the bottom line.

In the end, even if national policy continues to wane in the political winds of the Capitol, there is hope for targeting buildings in the fight against climate change. The demands of business leaders—like those signing onto programs at the COP21 Buildings Day—are being heard at the local level. More momentum in city policy can lead the way. As explained in the newest C40 report, “Globally, the greatest opportunity for mayors to reduce GHG emissions is in urban building energy use.”

 

Business, Buildings, and Tackling Climate Change

— October 23, 2015

On October 19, the White House announced expansive commitments from corporate America to continue the battle against climate change. This announcement underscores the hope for effective global policy development at the United Nations Climate Convention in Paris, or COP21, at the end of November. The signatories represent 81 companies operating in all 50 states, employing over 9 million people, and generating more than $3 trillion in annual revenue. These companies also span industries, representing a spectrum from heavy industry to high tech, as well as service businesses. An independent consortium of long-term investors has also announced a commitment to invest $1.2 billion in clean energy development.

The growing corporate commitments reflect an understanding of customer demand. Alex Gorsky, chief executive of Johnson & Johnson, explained to the Financial Times, “Just as the opinion of customers, and in our case patients, around the world are more sensitized to this issue … they are demanding more from the companies from which they purchase their products.”

The Role of Buildings

There is an opportunity to focus major efforts for climate change adaptation and mitigation in buildings. From siting renewables and clean energy to major improvements in energy efficiency (EE), better operations and use of commercial and industrial facilities can have a major impact on countries’ greenhouse gas (GHG) emissions profiles. In fact, in preparation for COP21, the UN has prioritized EE as a major mechanism to reach GHG emissions reductions goals: “According to the International Energy Agency, increasing EE accounts globally for 49% of the measures needed to achieve the emission peak and meet the +2 degrees target. EE is also relevant for sustainable economic development and offers multiple benefits including local job creation, increased productivity and competitiveness for companies, reduction of pollution, improvements in health, energy access and energy security. A significant scaling up of global investment in EE is urgently needed.”

Intelligent building solutions could be the cornerstone of EE strategy for tackling climate change. In a recent report, Navigant Research detailed how building energy management systems can provide the analytics and software tools for measuring efficiency improvements, tracking return on investment (ROI), and ensuring ongoing performance. Intelligent lighting and advanced heating, ventilation, and air conditioning (HVAC) solutions can optimize system performance and at the same time improve the occupant experience in buildings while improving EE. The list goes on and on when the benefits of IT-enabled building solutions are considered. These innovations in building technologies hold the promise of EE, cost savings, tenant satisfaction, and even climate resiliency. Navigant Research will be watching the events that unfold at COP21 and tracking developments on even broader commitments to intelligent buildings and EE for tackling climate change.

 

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