Navigant Research Blog

July Proved a Pivotal Month for Renewable Power

— August 3, 2015

The news stream started early on July 3, when the German government published a white paper presenting its proposal for power market reform known as Strommarkt 2.0, or Electricity Market 2.0. The proposed reform is focused around three ideas: the energy supply must be reliable, it must be environmentally friendly, and it must be cost-effective–even with a growing share of wind and solar power.

To achieve these focuses, the white paper proposed 20 pillars to support the new market. The most important are that the price is set by a free market, there is constant monitoring of the security of supply, that there will be the introduction of a capacity reserve (but not a capacity market), and that the power market will evolve to be balanced.

While the proposal does not impact renewables directly (Germany has been actively tweaking its incentives in the last 2 years to reduce impact on electricity bills), it does introduce the flexibility necessary to allow further growth of renewbales in the country, which is a must if the country wants to meet its 80% renewables target in 2015.

More News

A couple weeks later, on July 17, the European Union (EU) Commission proposed a new regulatory package that set the stepping stones of its EU strategy. While most of the proposal is geared toward empowering consumers so they can make better decisions affecting their energy consumption, it also advocates for a new single-market design at the European level that will add flexibility to the system to facilitate the expansion of renewables, promote cross-border competition, allow decentralized electricity generation (including for self-consumption), and support the emergence of innovative energy service companies.

And a few days later, on July 22, in the United Kingdom, the U.K. Department of Energy and Climate Change (DECC) announced a revamp of its solar and biomass policy support, ending solar feed-in tariffs for projects under 5 MW (projects above 5 MW were not eligible). DECC also said that it will remove subsidies that had been guaranteed to new biomass conversions and co-firing projects, including existing plants that were intended to burn higher shares of biomass. Finally, DECC announced it would delay new Contract for Difference tenders indefinitely.

Meanwhile, France announced a significant shift in its energy policy. On July 23, the French National Assembly approved its energy transition law. In it, the country announced that it will reduce its reliance on nuclear energy to 50% of its generated power by 2025, from 75% today, capping its nuclear power installed capacity at 63.2 GW. The country also set the share of renewable energy at 32% of its demand. In addition, France introduced a long-term target for carbon tax. Currently standing at €14.50 ($15.90) per tonne, this tax will increase to €22 ($24) in 2016, then to €56 ($62) in 2020, rising to €100 ($110) in 2030.

Overall, with their new intents, the EU, Germany, and France seem settled in their way forward, while the United Kingdom’s energy  policy is consistent at being inconsistent. After all, it’s the third time it’s changed policies in about 5 years.


Smart Cities: It’s All Relative

— July 29, 2015

Cities around the world are increasingly adopting technologies to improve the quality of life in the modern city, where traffic congestion, air pollution, and a lack of mobility are often the norm. Many smart city technologies are also being developed to deal with specific issues in energy distribution, energy and water management, transportation optimization, and public safety and security. Navigant Research defines a smart city as the integration of technology into a strategic approach to sustainability, citizen well-being, and economic development.

Currently, the level of smart city technology integration varies greatly by region. What is considered to be one of the leading smart cities in Brazil, for example, may be far behind some of the leading cities in Denmark. To illustrate this, let’s compare Curitiba, Brazil, with Copenhagen, Denmark.

Apples to Oranges

Curitiba has one of the most advanced recycling programs in Brazil, yet the city recycles just 20% of its waste.  In Copenhagen, 57% of total waste was recycled in 2009. Additionally, incineration centers are converting waste to energy by using steam from the water that is heated in the incinerator ovens. Roughly 80% of this steam energy is being used in the municipal heating system, and 20% is being fed back into the electricity grid. While Curitiba deserves significant praise for pioneering a very successful bus rapid transit (BRT) system, the city is still struggling with congestion and has just recently made initial plans for subway system infrastructure. Conversely, Copenhagen Metro began operation in 2002 (22 stations, nine of which are underground), and a driverless light metro supplements the larger S-train rapid transit system. Back in Brazil, Curitiba has the highest rate of public transport use in Brazil (45% of journeys), while in Copenhagen, it is estimated that 50% of all citizens commute by bicycle every day.

Beyond specific projects, broader climate action goals between these two cities are also quite different. Copenhagen aims to become the first carbon-neutral city in the world by 2025. The city has established targets in energy efficiency, renewable energy, and green building standards (all new buildings must be carbon neutral by 2020). Navigant Research has been unable to identify any city-level sustainability or climate action plans in Curitiba.

GDP Considerations

This comparative analysis by no means intends to detract from the tremendous achievements and progress in sustainability that Curitiba has attained. Instead, it seeks to illustrate the regional nature and context of what constitutes a leading smart city. With a gross domestic product (GDP) per capita of roughly $60,000 in Copenhagen, a much larger volume of resources is available for smart city development than in Curitiba, where GDP per capita is estimated to be $13,000.

The global smart city technology market is forecast to be worth more than $27.5 billion annually by 2023, according to Navigant Research’s Smart Cities report. Cumulative global investment in smart city technologies over the decade is expected to be $174.4 billion.

Annual Smart City Technology Revenue by Region, World Markets: 2014-2023

Smart Cities Revenue

(Source: Navigant Research)


Compliance Strategies for Satisfying Clean Power Plan Requirements

— July 23, 2015

Next month, the U.S. Environmental Protection Agency (EPA) is expected to release the final Clean Power Plan (CPP) rule, which regulates carbon dioxide emissions from existing power plants. While states may comply independently or work together to achieve CPP goals, Navigant Consulting has found that states can substantially reduce compliance costs by banding into trading blocs, and we have focused on regional trading in our modeling. The proposed rule is modeled in Navigant Consulting’s recent white paper,  Anticipating Compliance: Strategies and Forecasts for Satisfying Clean Power Plan Requirements, and highlights our finding that focusing on energy efficiency (EE), coal retirements, and targeted renewable expansion represents the least-cost compliance option.

Energy Efficiency

EE represents the lowest-cost compliance option in almost all areas, but it cannot single-handedly achieve compliance.  Expanding EE programs also helps ease interim compliance targets because EE can be rolled out more rapidly than new generators, reducing the near-term need to build large amounts of new low-carbon capacity. Navigant Consulting found that the expansion of EE programs in response to the CPP can save nearly $250 billion above business-as-usual EE through 2030.

Coal Retirements

The Northeastern, Southeastern, and Midwestern United States are expected to rely heavily on coal retirements for compliance. Since EE and renewables are less carbon-intensive than gas generation, higher penetration of these technologies helps keep more coal generators online.

Regional Least-Cost Compliance Options

(Source: Navigant Consulting)

Natural Gas

New gas generation plays an important role in compliance, and it is necessary to help maintain capacity and energy resource adequacy after coal retirements.  The Northeast and Southeast, in particular, will likely rely heavily on new natural gas combined-cycle plants to supplement EE in replacing retiring coal plants, and building these plants will be a large portion of their compliance costs.  The central and western United States will also rely heavily on gas to maintain capacity margins, but will likely see more simple-cycle peaking gas plants than the Northeast and Southeast due to a high rate of renewable expansion as well as EE growth.


Adding renewables is a cost-effective compliance option where renewable potential is high, especially in the central and western United States.  Navigant found wind expansion to be economic throughout the western and central United States, and it plays a particularly important role in compliance in Texas, the Southwest Power Pool (SPP), and Midcontinent Independent System Operator (MISO).  California, which has little coal left to retire, has to rely on EE and renewable resources almost exclusively for compliance. Solar and wind both play critical roles in ensuring low-emission generation in California.  Navigant Consulting found that areas that rely more heavily on renewables tend to need to spend less on replacing capacity than other areas, but also tend to see higher carbon allowance prices (which help make large-scale renewable buildout economic).

Glide Path

Many commenters to the EPA focused on the difficulty of meeting near-term interim targets.  Navigant Consulting’s analysis has shown that the implementation of a glide path with less stringent initial targets results in savings of over $200 billion when compared to a non-glide path scenario.


Do Energy Efficiency Investments Deliver? Yes!

— July 13, 2015

A new paper from the University of California, Berkeley and the University of Chicago garnered a little press this week and deserves a deeper dive. The paper makes a broad claim about demand-side management (DSM) program impacts based on a comprehensive study of program performance, with one hitch—the focus is exclusively low-income weatherization. One Forbes perspective came to the conclusion that “the study shatters a central orthodoxy in the rarified realm of energy and environmental policy. It suggests that energy efficiency is not necessarily a win-win solution for the environment and the economy. That suggestion is likely to influence future political debates over federal subsidies for energy efficiency.”

The authors have made a dramatic claim that falls short of the bigger picture on DSM program impacts. The paper states that “even when accounting for the broader societal benefits of energy efficiency investments, the costs still substantially outweigh the benefits; the average rate of return is approximately -9.5% annually.” Low-income programs have long had a special place in utility DSM projects as a public benefit and have been accepted as a part of the broader portfolio approach to energy efficiency by passing less stringent cost-effectiveness tests than other program types.

In fact, in an American Council for an Energy-Efficiency Economy (ACEEE) paper from 2014, this very issue was fleshed out. Low-income programs have faced distinct challenges from other energy efficiency programs but do not represent the overall cost and benefits of DSM as a whole. Let’s take a deeper look at recent utility program performance. 

Here are the results from the most recent Energy Efficiency Evaluation Report for the state of California:

California Energy Savings for Statewide 2010-2012 Portfolio

Casey Chart

 (Source: California Public Utility Commission)

The report also states that the portfolio of energy efficiency activities for 2010-2012 was cost-effective, with every dollar invested in non-codes and standards energy efficiency returning $1.04.

Extrapolating the performance of one category of a utility energy efficiency program, in one state, from one study can mislead the public in understanding the macro-level impacts of energy efficiency as a whole. Maybe even more problematic is the threat of using this kind of academic assessment as fodder for the heating politics of energy policy in the United States. Let’s keep an honest focus on the big picture.


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