Navigant Research Blog

Preparing for the Worst, Cities Seek Resilience

— August 7, 2014

The Rockefeller Foundation is asking cities to apply for the latest phase of its 100 Resilient Cities Centennial Challenge.  This challenge aims to enable 100 cities to better address the shocks and stresses of the 21st century.  The selected cities receive support from the Rockefeller Foundation to create and implement resilience plans and to hire chief resilience officers (CROs) to oversee strategies.  Thirty-two cities – including, for example, Bangkok, New Orleans, Durban, Mexico City, and Rotterdam – were selected in the first phase of the competition.  San Francisco appointed the first CRO in April 2014.

The Intergovernmental Panel on Climate Change’s 2014 report on the impacts of global climate change highlights the particular vulnerability of urban infrastructures.  The impact of climate change on cities can take many forms – including increased temperature, drought, and storms – but the most direct threat comes from rising sea levels.  Approximately 360 million urban residents live in coastal areas less than 10 meters above sea level.  China alone has more than 78 million people living in vulnerable, low elevation cities.  Miami, New York City, and Tokyo are also among the top 20 cities at the highest risk of coastal flooding, along with Asian megacities such as Mumbai, Shanghai, Bangkok, and Dhaka.   The 2011 Tohoku earthquake and tsunami in Japan and Hurricane Sandy off the East Coast of the United States in 2012 demonstrated how even the most advanced cities can be devastated by extreme events.

After the Flood

The threat to American cities is further emphasized in the Third National Climate Assessment from the U.S.  Global Change Research ProgramMiami, in particular, is developing into a test case for the impact of the climate changes on U.S. cities and the ability of civic and business leaders to collaborate in response.

Resilience can be characterized as the ability of cities and communities to bounce back from catastrophic events, as well as respond to more gradual changes that threaten well-being or economic stability.  Resilience is not just a question of identifying and acting on specific climate change impacts; it also requires an assessment of each city’s complex and interconnected infrastructure and institutional systems.   New York, for example, initiated a major study of the how the city’s infrastructure and services can be better designed to cope with events like Hurricane Sandy – including more resilient, distributed energy grids and new approaches to land use policy in flood-prone areas.

Urban Sensitivities

Resilience is also a driver for new technology adoption.  The Sensing City project in Christchurch, New Zealand is an interesting test case for how smart city technologies can support resilience planning.  Christchurch was devastated by an earthquake in 2011 that left 185 people dead; the rebuilding project is estimated to eventually cost around NZ$40 billion ($35 million) in total.  The aim of Sensing City is to use sensor technologies and data analytics, including smartphones and sensors embedded in new construction, to lay the foundation for a healthier, more sustainable, and more resilient city.

Coping with the threats and uncertainties of the 21st century will require a deeper understanding of the normal operations of a city and its vulnerabilities.  That’s why resilience is becoming one of the key attributes of any smart city and a significant driver for the smart city market.

 

In Asia, Wind Industry Picks Up Again

— August 6, 2014

The wind power market in Asia is normally quiet during summer, but this year is different.  Recent policies and new developments in China and India have delivered a very strong signal that Asia`s two largest wind power markets are ready to pick up the pace again.

China’s wind industry has been constrained the past few years by power transmission bottlenecks and high wind-power curtailment rates.  Figures released by China’s National Energy Administration (NEA) in July, however, show that the situation is improving, especially since the ultra-high-voltage Hami-Zhengzhou transmission line was connected.  In the first half of 2014, 6.32 gigawatts (GW) of wind power capacity has come online, up 31% from the same time in 2013, and the wind curtailment rate fell to 8.5%, 5.14% lower than the first 6 months of 2013.  It won`t be a surprise if this year China surpasses the record of 18.9 GW of new capacity that it achieved in 2010.

Survival of the FITtest

Another positive sign for the Chinese wind industry is that the NEA released its long-awaited feed-in tariff (FIT) for offshore wind in June.  Although the FIT is valid only for projects commissioned before 2017, and is not applicable for the four offshore projects included in the first offshore concession program, it provides certainty for near term investment.

According to Navigant Research’s annual wind power market report, World Market Update 2013, China will add 96 GW of new wind capacity over the next 5 years.

At the Offshore Wind China 2014 conference in Shanghai, many developers and turbine venders complained that the temporary FIT is too low and is not flexible to reflect differences in geographic location and wind resources.  While those are valid claims, I personally believe that NEA has learned from the “blind” investment that Chinese onshore wind experienced in the past and is working deliberately to introduce a low FIT so that only developers who have strong technical, engineering, and financial background and a sound project pipeline can take the necessary risks.  That’s the right way to minimize upfront risks and to secure a strong and stable offshore wind market in the long run.  Currently, there are six offshore wind projects totalling 784 megawatts (MW) under construction in China and another six projects totalling 1,350 MW that have been approved and are ready to be built.  It is likely that around 2,500 MW offshore wind capacity could be in operation by the end of 2016.

Restoration in India

In India, Asia`s second largest wind market, its Finance Minister has just announced the plan for the restoration of accelerated depreciation, an incentive was originally introduced back in 1990 but stopped in March 2012.  This tax savings supported private-owned projects that account for the majority of wind project installations in India.  At the historical rate of installation in India, AD is expected to create around 1,000 MW of wind power installations per year.  If the depreciation holds up, Navigant Research`s forecast for India in 2014, of 2,500 MW, is certainly achievable.

In short, it’s expected that India and China combined will account for at least 40% of global wind power installation in the next 5 years – a great contribution to reducing carbon emissions worldwide.  For a more detailed examination of the global wind power market, please join us for our webinar, “The State of the Global Wind Energy Industry,” on August 12 at 2 p.m. EDT.  Click here to register.

 

In California, High-Speed Rail Takes Its Time Arriving

— August 5, 2014

California’s proposed high-speed rail (HSR) line between Los Angeles and San Francisco is stirring controversy – not surprisingly – for a $68 billion infrastructure project that will take until 2029 to complete.  The concerns over the project’s cost-to-benefit ratio cross party lines.  While California Republicans have lined up against Democratic Governor Jerry Brown’s proposal, so has his own lieutenant governor, Gavin Newsom.  The state successfully beat back a legal challenge to the project’s funding plan, but more legal challenges loom.

The HSR debate also ties into the broader question of whether the United States can accomplish big things anymore. Congress’ inability to find a serious, long-term solution to the dwindling Highway Trust Fund is just one example of this problem – one that also results in less money to support any state’s big idea.

Writing in support of the HSR, James Fallows of The Atlantic makes a key point: “Big infrastructure investments are usually under-valued and over-criticized while in the planning stage.”  One obvious comparison is Boston’s Big Dig. That was also enormously ambitious project with a huge price tag that took more than a decade to complete.  It had massive cost overruns, becoming the subject of constant complaints in Massachusetts.  Today, visiting Boston since the Big Dig’s completion, it’s clear why the expense and hassle was worth it.  The city was knit back together after having been split apart by a major road running through its heart.  In place of the old elevated highway is a greenway that invites pedestrians and connects with bike-sharing stations.

Easier Than Flying

It’s worth noting that the Big Dig was a huge infrastructure project designed to undo the effects of another ambitious infrastructure project, one that had unforeseen, and disastrous, consequences.  Moreover, the Big Dig plan was based on known demand, since it essentially took traffic from above ground and moved it into tunnels.  This central purpose removed much of the uncertainty about new infrastructure projects that can keep politicians and planners up at night.

That uncertainty lies at the heart of the debate over high-speed rail. A major new passenger rail project, in a country that has largely abandoned rail travel for cars and planes, is a leap of faith.  The most apt comparison for the California HSR is Amtrak’s Boston-New York-Washington corridor.  In 2012, Amtrak reported that it had captured 75% of commercial passenger travel between New York and Washington, D.C.  The success of the train is not due to its being cheaper – tickets can be as much as $145 one way – but more to the convenience and ease of trains compared to air travel.

HSR Plus Autonomous Vehicles

A key factor in that convenience is that, unlike airlines, the trains deposit passengers into the downtown of each city and connect to local transit services. This multimodal connectivity will be key to the success of the California HSR, whether it means connecting to public transit or to nearby carsharing services like City CarShare and DriveNow in downtown San Francisco.

The rise of autonomous vehicles is frequently cited by key opponents as evidence that the HSR is a 20th century idea whose time has passed.  While Navigant Research’s 2014 Autonomous Vehicles report suggests that long-distance, inter-city travel is a possible model for self-driving cars, it projects they’re most likely to be used for passenger travel in carsharing services as well as in fleets as an alternative to taxis for local travel within the city.  In this scenario, autonomous vehicles will actually support the high-speed rail line by making carsharing easier and ubiquitous in urban centers while the HSR meets city-to-city travel needs.

 

Security Risks of Smart Meters Not New

— August 5, 2014

Recently, the Insurance Journal weighed in on the threats introduced by smart meters.  While I agree that smart metering presents risks both cyber and financial, I submit that many of those risks are merely new flavors of risks that have existed for decades.  And smart meters also introduce benefits that more than offset those threats.

The article seems to equate smart meters with the Internet, though we have yet to find any utility that is actually connecting its meters to the Internet.  (There are utility control systems connected to the Internet, most of which are known to hostile nation-states.)  And it also conflates a number of unrelated topics.  For example, the author cites the recent Havex Trojan, which attacks SCADA systems, not smart meters.  Likewise, the article mentions Stuxnet, which was directed at uranium enrichment centrifuges.  Stuxnet is a cautionary tale for anyone managing a control system, but smart metering networks are not control networks.  Still, the Insurance Journal explores situations worth considering.

Uneasy in the Islands

The successful meter attack described, citing Brian Krebs’ excellent analysis (written 2 years ago), occurred in Puerto Rico.  In that case, former employees of a local utility offered to reprogram residents’ smart meters via the meters’ optical diagnostics port.  For a fee ranging from $300 to $1,000, the technicians would reprogram the meters to under-report energy usage, resulting in a lower electricity bill every month.  This attack had nothing to do with the Internet.

The key to dealing with cyber risks is taking a big picture view of the situation.  In Puerto Rico, the fraud would have been easy to detect.  Utilities can put an additional smart meter at each transformer to measure total energy distributed to the customers on that transformer’s circuit.  When the total energy metered for all the individual customers is less than the total measured at the transformer, clearly something is wrong.  It may or may not be fraud, but it can be identified quickly by the technology described in Navigant Research’s report, Meter Data Management.  The $400 million lost in Puerto Rico indicates that the fraud may have persisted for months or years.  That sum is about 10% of Puerto Rico Electric Power Authority’s (PREPA’s) annual revenue – which seems awfully large to fly under the radar.

Finding Walter White

Smart meters provide other fraud detection capabilities that their electromechanical forebears do not.  One example is credit and collections.  Smart meters typically report energy consumption every 15 minutes.  So, for a customer who is already delinquent and is currently having a large spike in energy consumption (this is a common attribute of illegal activity, such as meth labs), smart meters enable utilities to detect these situations and initiate collection or disconnect activities immediately.  This approach is impossible with monthly-read electromechanical meters.  Plus, remotely disconnecting criminal activities is safer for the utility workforce.

For sure, smart meters introduce attack vectors that did not exist before.  This is a common byproduct of new technology.  Identity theft was much more challenging before we had the Internet – yet, there are few, if any, movements to shut down the Internet because of identity theft.

The Insurance Journal article does quote Navigant Research’s market forecast for global smart meter deployment.  The 1.1 billion smart meters expected to be deployed by 2022 should indicate that it’s time to stop worrying about smart meter security and just get on with it.

 

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