Navigant Research Blog

Water, Water Everywhere—But Not a Drop To Drink

— July 31, 2015

Floating islands are the stuff of fantasy novels, Kevin Costner movies, and Final Fantasy VI. They can also occur in nature, as a conglomeration of aquatic plants, mud, and peat. With current predictions by climate scientist James Hansen that the sea level will rise at least 10 feet in the next 50 years, living on floating islands might become a necessity sooner than we think.

Fortunately, manmade floating cities are becoming as vogue as tiny houses.  In fact, outside of Kampala, Uganda, a group of 10 artists have taken up chic residence on a chunk of land that broke away from the mainland and is floating around Lake Victoria. The artists have everything they could want—constantly changing scenery, serenity, grass huts, a fresh supply of lake water, and even some fairly soggy garden beds.

Not a Drop to Drink

When floating islands are in a lake, it’s easy to rig up a filter or a simple chlorination system to make water potable. But water supply is an extraordinary issue when living at sea. The Seasteading Institute, in partnership with the Netherlands’ DeltaSync, recently ended a contest for architectural designs of modular floating islands. Participants were encouraged to consider sources of energy, but the contest did not require a water treatment center. Unless the island is connected to a mainland water source, though, on-island treatment systems are necessary. Some private companies have already developed solutions to this salty problem. On a $6.5 million private floating island (really more of a yacht) made by the Austrian company, Orsos, water supply is guaranteed through an onboard reverse osmosis desalination system. But with current high energy demands of traditional desalination plants, and the high price of this private island, this doesn’t seem likely to be a sustainable solution.

Enter the DESalting Island on Renewable multi-Energy Supply, or DESIRES. DESIRES utilizes several renewable energy sources (eolian, solar, tidal, wave, and hydrothermal gradient) and large storage reservoirs to produce salt-free, potable water at a cost of $0.88-$1.32 per cubic meter. Even the largest, most efficient desalination plants running on shore cost around $1.62 to produce a cubic meter of fresh water. Further, the DESIRES system has a small footprint—a module between 0.06 square km and 0.65 square kilometers can produce enough water to supply a city of about 105 inhabitants. Further still, the system utilizes enhanced energy during storms to pump water, reducing its impact even further. However, the system is only in research phases right now. Real-world implementation could lead to more expensive and less efficient operation. In addition, the sheer number of renewable energy systems aboard the system could make the commercial capital cost quite prohibitive. Only time will tell whether the DESIRES system will be far more sustainable than traditional desalination technology.

But in the meantime, future denizens of the floating island rejoice!


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)


Momentum Builds for Reinstatement of Wind Tax Credits

— July 24, 2015

The legislative effort to renew the expired wind energy tax credits took a big step this week in Congress as supporters of wind energy secured a 2-year extension of the wind credits. The Senate Finance Committee voted 23 to 3 to extend roughly $95 billion in 52 tax breaks for various industries and interests, including wind.

The Production Tax Credit (PTC) provides $0.023/kWh in tax credits for a 10-year duration to wind plant owners. A 30% Investment Tax Credit (ITC) is also included as an alternative. Both are comparable in value, offsetting around 30% of the installed cost of a wind plant.

The package also includes a 2-year extension of the 50% bonus depreciation, which allows an owner in a new wind plant to deduct 50% of the tax basis in wind turbine capital costs and depreciate the other 50% over the normal depreciation period. The PTC/ITC extension also includes geothermal, biomass, landfill gas, and ocean energy projects. Notably, solar energy was excluded from the package, but intense lobbying is underway from that industry to get it included.

The tax credits for wind, which expired in 2014, must be renewed to prevent the U.S. wind market from collapsing as it does from time to time when Congress fails to renew them. The wind industry is currently in a build cycle, with over 8,600 MW expected to be brought online this year of more than 13,600 MW under construction. This momentum, however, is riding on special start construction and other safe-harbor regulations provided by the Internal Revenue Service (IRS) that allows wind plants to qualify for the tax credits if construction is finished by the end of 2016.

The new 2-year extension would re-enact the PTC and ITC for a 2-year period through the end of 2016, and wind projects would have to begin construction during this 2-year window to be eligible. IRS guidance to the wind industry in recent years has allowed a 2-year window for wind plants to be built, and this is expected to be applied to this new extension. In practice, new wind plants that meet IRS guidelines for either starting construction or meeting other safe-harbor regulations will have 2 years to finalize construction. The ultimate result would be securing stable wind turbine installations in the United States from now through 2018.

Promising but Uncertain

The path forward for these tax extenders to be signed into law is promising but uncertain. It is promising because the wind industry tax credits on their own could be a hard sell in today’s polarized Congress, but when rolled into a larger package that appeases broad industry interests, Congress is more likely to approve the package. Also, the well-known but not well publicized reality in the wind industry is that most U.S. wind plants are majority owned by so-called tax equity financial firms, usually large banks, all of whom have the large tax bills necessary to fully monetize the tax credits. These companies have enormous lobbying power that can help get their interests over the finishing line.

Passage by the full Senate is required, plus a reconciliation with a House version of the bill that has yet to emerge. Importantly, lawmakers are moving ahead with this extenders package now instead of the end of the year when a last minute rush can doom even the most straight-forward and uncontentious legislation. Allowing the extender effort to fall into next year would be even worse, as the effort would become entangled and politicized by the 2016 presidential and congressional elections. All eyes in the wind industry will be on this effort going forward.


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.


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