Navigant Research Blog

Bioenergy Transition: The Challenge Ahead

— October 13, 2014

Despite the relative abundance of biomass as a fuel source in many places, the bioenergy industry has failed to gain the traction as a cornerstone renewable resource that many envisioned just 5 to 10 years ago.  Facing stagnant industry growth, the industry is in desperate need of a shot in the arm from policymakers.

Baseload biomass plants, for example, were especially hard hit by the restricted lending and general economic malaise of recent years.  Commercial installed capacity was historically much higher than wind and solar power combined, but it has been eclipsed by wind generation sources in recent years.  Global installed capacity currently stands at an estimated 3% of global generating capacity.

The European Union (EU), which envisioned a broad surge in bioenergy power and heat production to deliver its 20-20-20 goals, expects to achieve just 83% of its target by 2020.  A combination of market forces, weakened policy support, contentious debate over the sustainability of bioenergy, and the relative success of wind and solar has stifled investment across the industry.  Contending with similar but more severe headwinds, growth for the bioenergy industry in the United States has been mostly nonexistent.

New Openings

With the regulatory vice tightening on carbon-emitting power producers in the past year, however, the opportunities to co-fire diverse biomass feedstocks in coal-burning plants or switch these plants over to dedicated biopower production looks to be shaping up as an attractive proposition again.  As a feedstock, biomass remains a compelling option for reducing carbon emissions from centralized power plants because it eliminates the need for a significant overhaul of existing hardware.

Unfortunately, while recent policy and regulatory developments in the EU and United States look promising on paper, they are unlikely to give the industry the boost it needs in the near term.

Under its framework for climate and energy policies presented in January 2014, the European Commission called for 27% renewables by 2030.  Meanwhile, the Environmental Protection Agency’s (EPA’s) proposed Clean Power Rule in the United States is a potentially positive development for the bioenergy industry.  Yet, biomass will need to be recognized under the Clean Air Act as a renewable source of energy, with a favorable carbon profile when compared to fossil fuels, for the industry to gain significant traction.

Cost Gains

Longer-term developments look more positive.  According to a recent McKinsey Insights article, bioenergy in Europe has the potential to lower the levelized cost of energy (LCOE) by up to 48% by 2025 through gains like boiler efficiencies and greater plant standardization.  Although the relative abundance of cheap coal and softer emissions regulations in the United States (relative to Europe) require greater LCOE gains to reach price parity with coal-based generation, these developments would be positive for bioenergy development in both regions.

For bioenergy to capitalize on these positive trends, logistical challenges related to the collection, aggregation, transportation, and handling of biomass will need to be overcome.  Higher growth will depend on breakthroughs in carbon densification processes for biomass resources, for example, and the increasing commoditization of biomass feedstocks (including the expansion of the international trade in pellets) for power production.

 

Cities Are Making the Energy Cloud a Reality

— October 12, 2014

The possibilities for procuring and distributing clean, low-cost electricity offer challenges to cities and utilities – but also opportunities to forge new relationships and lay the foundations for cities that are clean and efficient in their energy use.

I’ve written previously about the close relationship between smart cities and smart grids.  Early projects have largely been driven by utility programs for the piloting and demonstration of smart grid technologies and to gather intelligence on consumer and business responses to energy management programs.

The challenge is to integrate the lessons learned from these projects into broader smart city programs.  Cities have played a role in these pilots but have largely been supporters of utility-driven technology programs.  This is changing as cities develop more extensive energy management strategies of their own.  Boston, for example, is working closely with its local utilities (National Grid and NSTAR) to reduce its $50 million-plus energy costs and meet the goal set in 2007 to reduce greenhouse gas (GHG) emissions 25% by 2020 and 80% by 2050.   The city is targeting energy consumption across residential and commercial properties.  Other initiatives include the introduction of an energy management system for Boston’s public buildings and the deployment of LED street lighting.

New Collaborations

Minneapolis is going further.  The city is using the renegotiation of its franchise relationship with its utilities (which governs their access and use of city resources such as roadways and buildings) to establish a new form of collaboration that it believes can be a model for the rest of the United States.  The proposed Clean Energy Partnership between Minneapolis and its electricity and gas suppliers, Xcel Energy and CenterPoint Energy, will create a new body focused on helping the city meets its climate action goals of reducing GHG emissions 15% by 2015 and 30% by 2025 based on a 2006 baseline.

The increasing focus of city leaders on energy efficiency, reduced GHG emissions, and the development of a more resilient infrastructure requires close partnership with utilities.   Cities like Boston and Minneapolis are pushing their utilities to help them meet their commitments, but the cities themselves are also taking a more active role.  The Greater London Authority (GLA), for example, has become the first local government authority in the United Kingdom to be licensed as a “junior” energy supplier.  This enables London to buy power from small generators and sell it to other public bodies at an attractive rate.   The city expects to be buying and selling power by early 2015, and it hopes to reduce energy costs for London while also boosting the local renewable energy industry.

A Vision Emerges

The emerging energy vision for smart cities integrates large- and small-scale energy initiatives: from improvements in national infrastructure through citywide increases in efficiency to expanded local energy generation.  Cities will thus become clusters of smart energy communities that can exploit the benefits of the new energy systems, such as distributed generation, dynamic load management, and active market participation.

This synergy presents an excellent example of the opportunities and challenges presented to utilities by the emergence of the energy cloud.  Utilities need to see cities as more than demonstration sites for technology.  Cities are ideal partners for developing the new relationships and the new services core to that energy cloud vision.

These issues are explored further in a new Navigant Research white paper, Smart Cities and the Energy Cloud.  I will also be discussing these developments in my presentation on Smart Cities at Korea Smart Grid Week in October and at European Utility Week in November.

 

French Smart Meter Rollout Gains Momentum

— October 7, 2014

There is finally clarity on which companies will supply the devices for France’s rollout of smart meters.  France’s electricity distribution company, Electricité Réseau Distribution France (ERDF), has chosen six firms to supply the state-controlled utility with the first 3 million of the meters known as Linky: Landis+Gyr, Itron, Elster, SAGEMCOM, Ziv, and Maec.

By the year 2020, ERDF intends to install 35 million new smart meters at an estimated total cost of $6.5 billion.  ERDF has been piloting smart meters since 2010, when approximately 300,000 meters were installed in the Tours and Lyon regions.  The Linky meters use a power line communications (PLC) technology called G3-PLC.  Among the meter vendors that took part in the pilot project was Slovenia-based Iskraemeco, though it was not selected to provide meters for the initial 3 million meter deployment.

Europe Ascendant

The program is expected to begin in the third quarter of 2015 and conclude at the end of 2016.  ERDF has not said when the next phase of meters will begin, but presumably vendor selection will take place within the next year.   The move by ERDF to choose multiple meter suppliers was not unexpected and is similar to what Spanish utility Iberdrola did 2 years ago when it selected seven different suppliers for the initial rollout following its 2010 pilot project.

The timing of the next big phase of France’s smart meter rollout coincides with the expected start of a wide-scale deployment of smart meters in Great Britain in the fall of 2015.  Utilities in Great Britain are to begin installing the meters in earnest in the fall of 2015, with a total of 53 million smart electric and natural gas meters to be in place by the end of 2020.

As noted in Navigant Research’s latest Smart Meters report, the expected large rollouts in France and Great Britain will make Europe the new focal point for the smart metering industry, as shipments have tapered off in North America since nearly all of the federal stimulus money that fueled deployments has been spent.

 

Sharing Center Shines Light on Security Threats

— October 6, 2014

Like most forms of evil, cyber security threats do best under a cloak of silence.  The fewer people who know about a threat, the more it can spread unhindered.  By contrast, widespread information sharing about threats can help defenders prepare for a threat and minimize impact.  But how to gather all that information in one place and get it to the people who need it?

That’s where the Industrial Control Systems Information Sharing and Analysis Center (ICS-ISAC) comes in.  ISACs already exist for a number of specific industries such as information technology, financial services, and yes, even the electricity sector.  But ICSs cut across many industries, such as energy, transportation, manufacturing, and utilities.  These industries are served by a common set of vendors with a common set of products.  So a vulnerability in one vendor’s product line could spell danger for many industries.  The mission of ICS-ISAC is to spread those messages across industries.

Experts Needed

ICS-ISAC held its first conference in September in Atlanta.  As cyber security conferences go, it was a breath of fresh air.  Although many of the usual suspects (like me) attended, the topics were anything but the usual fare.  Rather than a parade of vendor presentations, this conference was nonstop panel discussion on cyber security topics that utilities actually think about: situational awareness, workforce development, cyber insurance, establishing facility inventory, and organizational identity.

The session on building a cyber security workforce was fascinating.  Schools and industry want to make cyber security a cool career choice to attract more students to the profession.  Could we even entice professionals to make a mid-career change to cyber security?  There is a desperate shortage of qualified cyber security experts – those who can tell a utility in practical terms what security it needs.  One penetration testing firm has expanded its services from remote software testing to putting on hard hats and walking around substation yards to understand the threats facing its clients.  That requires substantially more staff than running penetration tests from a remote office.

Into the Light

There were speakers from Qatar and the Czech Republic at the September conference, describing their national computer emergency response teams (CERTs).  Both countries had been subjected to full-scale attacks upon their national infrastructure: Qatar in 2012 and the Czech Republic in 2013.  Both have passed laws to identify their critical national infrastructure, and each now has a single response center in place to defend their infrastructures.  While a large nation like the United States might require more than a single response center, the concept of having the entire national infrastructure covered by incident response is a desirable state.

The key role of ISCs centers around communication.  For any organization to share the attacks it has endured, especially successful attacks, is an act of immense will.  But without that sharing, the infrastructure as a whole remains in the dark.  Members of ICS-ISAC are committed to break out of this protectionist mindset and share the information that will help the entire infrastructure defend itself.

The right security solutions exist and must be deployed.  On top of that, let us all communicate openly so that the serious threats are exposed to the light of day before they can wreak havoc.

 

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