Navigant Research Blog

FAA Regulations Continue to Limit Drone Deployments at U.S. Utilities

— August 10, 2015

Popular media is highlighting the controversy around unmanned aerial vehicles (UAVs)/drones in public airspace, as these devices are disrupting scheduled airline flight patterns near major airports, interfering with planes in wildfire zones, and even interfering with privacy concerns. Yet, the drive to establish commercial uses for drone technology is proceeding at a rapid pace. Companies like Amazon are seeking airspace regulations that establish corridors for commercial drone-based delivery applications. At the same time, transmission and distribution (T&D) operators and utilities across the globe are beginning to look toward UAVs to reduce costs, improve safety, and increase reliability and response times across their T&D systems. These new utility solutions include major operations such as overhead visual transmission line maintenance inspections, T&D storm damage assessment and outage management/response, substation inspection, asset monitoring and condition maintenance, and vegetation management.

Limited Takeoff

While all these applications and use cases sound like ideal methods for utilities to improve their operations and reduce their costs, there are some significant issues that are bringing the adoption of new T&D procedures to a virtual crawl. The typical utility today utilizes line crews and sometimes helicopters to complete T&D line inspections and maintenance, semi-rapidly do storm damage assessments, update asset management systems, and make decisions on vegetation management. As you can imagine, these approaches are cost-intensive, with line crews heading out on search and locate assignments and helicopters being deployed at costs of up to $1,500 per hour.

Many forward-looking utilities are looking at both multi-rotor and fixed-wing UAVs to not only reduce maintenance and operations (M&O) inspection and vegetation management costs, but also improve response times during outages caused by major storms and other events. Although these savings can be significant, the Federal Aviation Administration (FAA) regulatory hurdles and permit and flight approval processes create barriers to this market literally taking off. Under current regulations, the FAA is granting limited-scale pilot project permits for a small number of U.S. utilities, including but not limited to San Diego Gas & Electric (SDG&E), ComEd, Duke, Xcel, and Florida Power & Light Company (FPL). Pilot projects are typically limited to small regions or T&D training facilities. Like Amazon’s proposal that commercial UAV flight corridors be established for delivery services, T&D utilities will need the same, allowing companies to fly drones over T&D systems for both planned M&O and storm damage assessments necessary for outage restoration. In addition, the flight approval process for UAVs must be streamlined, as flight plans currently need to be filed with the FAA 72 hours earlier, clearly precluding timely storm assessment and outage restoration responses. These hurdles must be addressed for the UAV market with T&D utilities to take off over the next 10 years.

Emerging Promise

A number of UAV companies are already positioning themselves for the expansion of this market, including startups like Google-funded Skycatch and an interesting company in Colorado, FLōT Systems. The latter has established key partnerships with both inspection services companies and analytics software providers.

I’m currently writing a report on UAVs/drones and robotics for T&D applications. While I expect the companies manufacturing UAVs and related sensor technologies to do extremely well, I also anticipate that the complex analytics software companies analyzing streaming visual and thermal data, as well as the inspection services companies, will benefit. Look for my continued discussions about emerging technologies across the global T&D landscape in upcoming blogs and reports.

 

The Clean Power Plan Final Rule: A Boon for Energy Efficiency

— August 10, 2015

This week, the Obama administration and U.S. Environmental Protection Agency (EPA) released the Clean Power Plan Final Rule. The EPA moves this first nationwide greenhouse gas (GHG) reduction policy forward under the authority of the Clean Air Act section 111(d) and establishes CO2 emissions guidelines for existing fossil fuel-fired power plants. In order to achieve the estimated 32% reduction in GHG emissions by 2030 (from a 2005 baseline), each state will need to implement a formal compliance plan. So how will the Clean Power Plan (CPP) trickle down to the buildings segment?

Benefits of Energy Efficiency

The need for flexibility and inclusion of cost-effective solutions in order to meet the reduction target was a paramount message that emerged from the 4.3 million comments received during the rule-making process. As a result, the final rule enables states to leverage the most cost-effective option, energy efficiency, as a means of compliance. In fact, a 2014 Lawrence Berkeley National Laboratory study found that the average total cost of saved electricity through utility demand-side management (DSM) programs was less than $0.05 per kWh. In another 2014 study, the American Council for an Energy-Efficient Economy (ACEEE) estimated the levelized cost of electricity generation options and also concluded the benefits of energy efficiency from an economic standpoint, as illustrated in the figure below.

Levelized Costs of Electricity Resource Options

Casey Blog(Source: American Council for an Energy-Efficient Economy)

Utilities have recognized the benefits of energy efficiency in achieving GHG reduction targets. In California, for example, the state investor-owned utilities (IOUs) have long offered customer incentives to improve building efficiency. The benefits have made a mark, and even in light of a federal mandate from the CPP, Pacific Gas and Electric’s (PG&E’s) CEO expressed the company’s support of moving toward a lower carbon energy future with the statement: “I congratulate the Administration on finalizing the Clean Power Plan rule and greatly appreciate the significant outreach and engagement with our sector … It is expected that this first-ever national program to reduce greenhouse gas emissions from the power sector will advance investments in clean energy technologies throughout the country and provide tremendous environmental benefit.”

Regulatory Compliance and Opportunities

The Clean Energy Incentive Program is a critical element of flexibility under the CPP that enables states to award early action emissions rate credits (ERCs) and allowances to eligible demand-side energy efficiency projects that reduce end-use energy demand in 2020 and/or 2021 for those projects implemented after September 6, 2018. The goal is to accelerate activity in the early stages of the regulatory compliance period.

In the end, there are huge opportunities for energy efficiency in buildings. Demand-side energy efficiency projects implemented in low-income communities, for example, will receive 2 credits for 1 MWh of avoided electricity production, as the EPA will match each credit offered by the state. The door will open to much broader opportunities across the building sectors. It can even be stipulated that the momentum will accelerate the adoption of intelligent building solutions, including building energy management systems, as tools for measuring performance baselines and automated measurement and verification.

 

Clean Power Plan Ruling Presents Opportunities and Issues for States

— August 3, 2015

After a year in review, and following approximately 4 million comments and appeals by state public utilities commissions (PUCs), legislators, and special interest groups, the Obama Administration and the U.S. Environmental Protection Agency (EPA) have released a final ruling on the Clean Power Plan.

The Proposed Rule was released last June.  It included interim (2020) and long-term (2030) regulations that will be imposed state by state to decrease CO2 emissions from generation facilities.  It also requires gradual decommissioning of high-emissions facilities, increased support for low-emissions natural gas and renewable generation, and improvements in demand-side management and energy efficiency.  Speculations and protest across stakeholder groups has been colossal.

According to a paper sponsored by the Brookings Institute, the majority of comments to the plan centered upon several major issues: fairness, reliability impacts, attainability of goals, and its legal basis—many reaching past state boundaries and party lines.  Fairness concerns, held by 23 states, are largely based upon the 2012 baseline level of emissions. Many states had been proactive in the decade prior, already attacking the low-hanging fruit and therefore were being forced to implement improvements with higher marginal costs than those states that had not yet proactively addressed emissions. Reliability impacts, which differ from state to state, caution the over-dependence upon less reliable sources of power, in particular renewables.

Perhaps the most contentious pushback centered upon the attainability and legality of the program. According to the Brookings report, 36 states commented on attainability, predominantly criticizing the timeline as too short. Some states have even argued that the goals altogether are unattainable. Wyoming, for example, has an economy that is reliant upon coal production and coal-based generation. Wyoming Public Service Commission Commissioner Alan Minier, as well as other agencies in that state, has been outspoken in stating feasibility concerns surrounding the decommissioning of coal-fired plants as much as 30 years before scheduled retirement.  Similarly, although Wyoming has abundant wind resources, most of this power is exported and Wyoming would be unable to receive renewable energy credits under the plan.

The cherry on top is concerns on legality of the Clean Power Plan, particularly how it interprets the Clean Air Act (its legal basis), and that favoring gas-fired generation will encroach upon the Federal Energy Regulatory Commission’s least-cost principles in the dispatch of power. Experts have appropriately forecasted large sums in legal and lobbyist fees.

Issues and Opportunities

It’s clear that a number of issues exist within the Clean Power Plan’s approach to reducing CO2 emissions in the United States, and these do need to be addressed in order to realistically comply.  But there are also many opportunities.  In terms of creating pathways to alternative production and more efficient distribution of electricity, there has been more innovation in the energy in the past 5 years than in the previous 50. The introduction of the smart grid has invited the possibility of real-time, grid-wide networking and monitoring, enabling the use of renewable resources with very large to very small generating capacities, while ensuring reliability across the grid.

Many question the worth of derailing support for innovation in order to contest the rule. By supporting more engagement between utilities and building and industrial facility owners, city planners, and even individual homeowners to implement energy efficiency programs and integrate distributed generation, states can employ more creative and innovative approaches to compliance with the Clean Power Plan.  The possibilities are endless in terms of inviting an array of new stakeholders and developing new revenue-generating systems that can help states achieve their state goal. The question is whether the state will lend itself to innovation or litigation.

 

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 focus points, 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, a capacity reserve (but not a capacity market) will be introduced, and the power market will evolve to be balanced.

While the proposal does not affect 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 renewables 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. This design 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, 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, this is the third time it has changed policies in about 5 years.

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. This design 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.

 

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