Navigant Research Blog

Cities Like Madison Lead the Way to Local Clean Energy

— December 5, 2017

As the Inaugural North American Climate Summit convenes in Chicago, Illinois, cities from across North America are leading the way toward ambitious climate action. The shift to local clean energy, known as the Energy Cloud transition, is creating new space for cities to influence the energy ecosystem. This transition will accelerate even more quickly as the adoption of Energy Cloud platforms supporting smart cities, building-to-grid, electrification of transportation, and more increases.

Imagining the Energy Cloud at Madison

Cities such as Madison, Wisconsin are influencing the Energy Cloud transition through their push for renewable energy and the reduction of carbon emissions. In March 2017, the City of Madison became the 25th city in North America to set the ambitious goal of powering city operations with 100% renewable energy and zero net carbon emissions. Navigant Consulting, Inc. (Navigant) is working with the City of Madison to envision what the future Energy Cloud looks like in this community. At a public forum earlier this year, we created a depiction of an Energy Cloud based on public input about how the City of Madison could achieve zero net carbon emissions by working together with the community to implement energy efficiency, renewable energy, and efficient transportation.

Imagining the Energy Cloud at the City of Madison, Wisconsin

Source:  Navigant (artist credit to Truscribe)

Madison’s “Energy Cloud” strategy includes making its facilities and operations more efficient, adding renewable energy generation, and identifying opportunities to incorporate renewable fuels and electrify its transportation fleet. People play an important role too. Influencing behavior by encouraging active transport, such as biking and walking, can help people reduce reliance on fossil transportation fuels and achieve health benefits through reduced air particulate matter and more active lifestyles. Additional ideas include training vehicle operators and building operators to operate vehicles and buildings as efficiently as possible.

Cities can’t accomplish their goals for renewable energy without working with utilities. The Energy Cloud includes opportunities for cities and utilities to work together. In Madison, the city is talking to two local utilities, Madison Gas and Electric (MGE) and Alliant Energy’s Wisconsin Power and Light (WPL), to identify areas of mutual interest. Topic areas include promoting energy efficiency, expanding solar and wind energy generation, expanding the use of EVs and developing charging infrastructure, and identifying opportunities to build social equity and economic development into these initiatives. The City of Madison and MGE have already made progress toward mutually identified goals: a recent grant will yield the first three all-electric Proterra Catalyst buses in Madison. Discussions with WPL are gaining momentum. The parties are looking at creative strategies such as building solar arrays on sloped industrial sites not well suited for buildings, possibly modeled after WPL’s successful West Dubuque Solar Garden project—the largest single solar array in the state of Iowa.

Leading the Way via People Power and Collaboration

Each city must envision its own Energy Cloud to account for the needs of its own stakeholders, including individual taxpayers, utilities, the business sector, environmental groups, and others. For Madison, people power and collaboration is key to moving closer to realizing 100% renewable energy. Cities like Madison are leading the way to implement an Energy Cloud transformation.

What does the Energy Cloud look like for your city? Navigant has identified five factors for success for cities that are looking to create their own Energy Cloud.

 

Could New Trade Deals Create a Cloudy Forecast for the US Solar Market?

— November 1, 2017

After a lengthy investigation, the US International Trade Commission (ITC) unanimously voted in favor of pursuing protectionist policies on imported solar equipment. The panel found that imports of crystalline silicon PV cells and modules have caused serious injury to the US solar industry, rendering some firms incapable of competing in the global market. To insulate US solar companies from the practices of foreign producers, the ITC agreed to grant President Trump the authority to implement trade protection policies.

Renewable Energy Often Needs Government Support

As cost structures do not always reflect the environmental benefits of green technology, the integration of renewable energy (RE) often requires some form of government aid such as tax incentives, customs duties, or import tariffs to support nascent industries. For instance, Germany’s feed-in tariff scheme under the German Renewable Energy Act created financial security for investors, allowing for healthy market competition within the region to thrive.

Subsidies and tax breaks can also assist solar producers and manufacturers in their efforts to vertically integrate themselves along the value chain, especially when market prices become volatile. For example, a company producing solar cells may want to vertically integrate upstream by manufacturing polysilicon, or integrate downstream by installing PV equipment.

Government support can help alleviate cost impediments associated with integration along the value chain. The spillover effects from German policies, along with other market forces, have created an economic environment suitable for solar technology innovation and deployment. This has allowed Europe to represent 80% of global demand for solar panels for much of the 2000s.

A Global Trade

However, the efficacy of protectionism for the US solar market is up for debate, as the preferential treatment of domestic manufacturers may end up doing more harm than good. Comparative advantages and market imbalances within the RE industry have led to an increasingly globalized supply chain and a growing reliance on international trade. In fact, 87% of all US solar installations use foreign-assembled panels, which means that restrictions on solar imports would increase costs for US consumers. This could severely limit the integration of solar energy and US adoption of clean energy practices as a whole.

US Solar Market

The size of the US solar market at stake within the broader RE industry is grounds for concern. A substantial tariff could lead to the loss of 88,000 US solar energy jobs out of an estimated 250,000. US-based manufacturers have even spoken out against the use of trade sanctions due to the detrimental impact it would have on the entire solar industry.

In fact, researchers at the University of Chicago found that the primary driver of solar industry growth in the United States has not been manufacturing, but rather the increase of installations caused by decreasing costs of solar products. This study highlights the fact that solar employment in the United States is not dependent on manufacturing but on several other subsectors within the market such as installation, sales and distribution, and project development. The US decision to invoke protectionist policies may end up protecting cell and module manufacturing at a great expense to these subsectors.

Policy Ripple Effects

The ripple effects from these new tariffs would be far reaching. Many US businesses depend on competitive pricing along the entire value chain, not just in manufacturing. The solar industry represents one of the fastest growing industries in the country. Consequently, the decision to implement such policies could darken what was once a bright future for a critical industry.

 

Floating Offshore Wind Showing Potential

— November 1, 2017

Offshore wind is notching up impressive cost reduction success, evidenced by record low power purchase agreement prices in recent UK and other European competitive bidding auctions. This is great news, but the game changer is if floating offshore wind foundations could achieve commercial success.

This could reduce offshore wind foundation costs and open cost-effective wind power in locations coincident with large coastal population centers, energy demand, and deep ocean sea beds that currently aren’t cost-effective with today’s variety of fixed bottom foundations. Potential markets are the entire west coast of the Americas, Hawaii, Japan, South Korea, parts of China, South Africa, New Zealand, and many European markets, including much of the Mediterranean.

Floating Offshore Wind Becoming a Reality

With that context in mind, it’s great news to see that floating offshore wind is moving from the conceptual and design phase to actual projects. In 4Q 2017, Norway’s Statoil installed a 30 MW wind farm on the northeast coast of Scotland. It is made up of five 6 MW Siemens turbines installed on floating structures at Buchan Deep, 25 km off Peterhead, Scotland.

The Hywind Scotland wind farm is expected to power around 20,000 households. Statoil believes the project will demonstrate the feasibility of future commercial floating wind farms “that could be more than four times the size.” From the first pilot floating turbine outside Karmøy, Norway in 2009 to the launch of this new wind farm, capital costs have fallen by around 60%-70%. Statoil says cost reductions of a further 40%-50% are realistic for future projects.

Hywind Scotland Wind Farm

(Source: Statoil)

Hywind Scotland

The Hywind project will cover around 4 square kilometers at a sea depth of 95-120 meters. The floating turbines have a total height of 253 meters, with 175 meters of the structures floating above the surface of the sea (to the wingtip) and 78 meters submerged underwater. The rotor diameter is 154 meters. This is only the first step of the project, with the end goal being to develop a large-scale floating offshore wind project of 500 MW-1,000 MW. Statoil is a serious company with serious money backing its efforts, including the company agreeing in a competitive auction round in December 2016 to pay $42.4 million for lease rights to develop an offshore wind project off the New York coast.

Following France’s Example

The Hywind launch comes on the back of the inauguration of France’s first floating offshore wind turbine—Floatgen—in October and represents an important breakthrough for floating offshore wind. It shows it is ready to be integrated into the energy market. Floatgen’s 2 MW turbine features a number of innovative solutions, from the concrete composition and its construction to the nylon mooring lines.

The consortium developer Ideol has optimized some areas of the design and the construction method. It is building its supply chain in preparation for mass production, all with an eye to driving costs down. Ideol says its solution is ideal because it is compact and does not need to increase in size and mass at the same ratio as the turbine nameplate rating. Ideol says it can potentially be adapted to turbines up to 15 MW, the size range the leading turbine OEMs are planning for next-generation 2025-2030 offshore installations.

Offshore Wind Soon to Be a Legitimate Power Option

Floating offshore wind is not yet commercially viable against fixed bottom foundations. Plenty of fixed bottom locations are available, but these two projects show that commercial viability just around the corner. If the past decade has been any guide, with the costs of onshore wind falling 77% in the past 7 years, the wind market has been attacking challenges, costs, and other impediments and disproving doubters. Floating offshore wind is increasingly likely to prove its legitimacy as a cost-effective offshore wind option.

 

Navigant’s 2017 Mid-Year Energy Market Outlook: Ongoing Drivers and Cutting-Edge Trends in North American Energy Market

— August 31, 2017

Industry trends and uncertainties continue to transform the North American energy market. Examples include increased renewables in the power sector, technological innovation in energy storage, shifting supply and demand patterns in the natural gas market, and environmental policy uncertainty due to the administration change. Navigant’s 2017 Mid-Year Energy Outlook (NEMO) analyzes how these trends and others are expected to affect the energy and capacity mix as well as market prices over the next 24 years.

Energy Demand

The rate of growth in energy consumption and peak demand has decreased in recent years despite an increase in economic growth. The United States and Canada appear to be transitioning from the long-term trend where growth in energy consumption closely tracked economic growth. While NEMO forecasts overall growth in both consumption and peak demand, the levels of growth (as well as energy efficiency and other demand-side resources) vary between regions. For example, Electric Reliability Council of Texas (ERCOT) and parts of Western Electricity Coordinating Council (WECC) are among the faster growing regions in the forecast. However, New York, New England, and PJM are expected to see lower levels of growth, leading to a slowdown in generation additions. This marks a shift in PJM, where coal retirements, the capacity market, and low natural gas prices have driven the construction of many new merchant natural gas combined cycle power plants in recent years.

Renewable Energy Growth

Despite the absence of a carbon policy, Navigant expects that solar installations will continue to grow in North America as costs decline—though not as steeply as in recent history—and as the technology continues to be pushed by state policies and consumers. In 2016, the United States installed 14.8 GW of solar PV projects, second only to China for annual installations that year. The wind forecast is more dependent on the federal Production Tax Credit that is already declining and set to expire by 2020. This has led to a boom in construction that is expected to peak in 2020 (the last year projects can go online and still get 100% of the tax credit) before declining steeply.

The convergence of increasing renewables penetration and declining battery costs indicates that battery storage is likely on the precipice of increased deployment across the electric grid for renewables integration and the provision of ancillary services. For the first time, Navigant’s NEMO includes an energy storage addition outlook. Energy storage is being implemented in areas such as California to meet policy targets without adding significant new natural gas generation. The revenue that storage projects would expect to receive from avoiding curtailment of renewables is not yet enough to cover the overnight cost of storage, though this could change in the future as the costs of storage decline and renewables penetration increases.

Natural Gas Market Transformation

While the power market grapples with the evolving energy generation mix and the associated effects on the grid, the natural gas market in North America continues its own evolution characterized by threshold events. Exports of natural gas have overtaken imports into the country for the first time in 60 years. US natural gas pipeline exports to Mexico have more than quadrupled since 2010. Exports by ship occurred for the first time from the lower 48 states, with the Cheniere Sabine Pass liquefied natural gas (LNG) export facility delivering LNG to the world market in February 2016. From this point forward, at least to the end of the NEMO term in 2040, Navigant expects exports by pipeline and by ship to continue increasing. Exports are anticipated to grow to represent over 18% of the US natural gas market by 2040.

Navigant’s NEMO covers the changing supply and demand dynamics in the natural gas market, continued renewables generation buildout, slowing load growth, the introduction of emerging technologies like storage, and the continued absence of a federal carbon policy. David Walls and Rob Patrylak will present further details on Navigant’s forecast via a webinar on September 13.

 

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