Navigant Research Blog

The Next Frontier for Large Consumers of Renewable Thermal Energy: Gaps and Opportunities

— June 18, 2018

Bryn Baker, WWF, coauthored this blog.

Renewable energy for heating and cooling applications has received relatively little attention compared to renewable electricity, despite large and growing demand for renewable thermal solutions. The Renewable Thermal Collaborative (RTC) is putting greater focus on this topic, led by companies like Mars, P&G, and General Motors and cities like the City of Philadelphia.

The Opportunity

Energy used for heating and cooling makes up approximately 50% of total global final energy demand and 39% of energy-related CO2 emissions. In the US, industrial manufacturing, which mostly consumes thermal energy, accounts for one-third of the nation’s total energy use. In the European Union, heating and cooling accounts for half of the total energy consumption, and within the industry accounts for over 70%.

The carbon reduction potential is significant. This, together with thermal users setting goals to cut emissions and shift to renewable energy, makes the call for clean thermal solutions imperative.

The First Barrier

The inconsistencies around the accounting methods used to assess the emissions impact of renewable thermal projects is slowing deployment and impeding decision-making. The lack of consensus around which methodologies to use is leading to confusion by users and incomplete assessments of the emissions and emissions inventories.

A new Navigant report, Renewable Heating and Cooling for Industrial Applications: Guidance for Carbon Accounting, developed with the RTC, reviews the methodologies for six project types (see table below) and recommends a single methodology for each type to simplify guidance for end-users. The report finds that some distilling of the range of methodologies is possible, but that significant gaps remain in accounting for bioenergy projects.


For four bioenergy project types—ranging from burning biomass waste and residues, virgin wood, or biogas—the report recommends one methodology (BioGrace-II) that is the most comprehensive compared to others but it excludes a calculation for three categories of emissions: 1) biogenic emissions, 2) conversion of natural forest to plantations, and 3) indirect land use change, which could result in a significant underestimate of emissions.

These three gaps indicate where work is needed to develop methodologies and build consensus around how users treat these emissions. This is important both to facilitate informed decision-making about the emissions impact of projects and to create a complete emissions inventory.

The report recommends using bioenergy from residual sources instead of virgin materials as the methodological caveats are most relevant for the latter. Navigant and RTC’s report is the first step in clarifying methodologies and identifying ways to provide clarity and guidance going forward.

The RTC is now working to assess approaches for accounting for biogenic emissions from a user perspective and making recommendations that can be adopted into accounting processes. Other stakeholder groups are addressing the gaps around land use change and the RTC will support these efforts.

Beyond bioenergy projects, two project types—ground source heat-pumps and waste heat recovery (from burning fossil fuels)—have either a consensus methodology or an uncontroversial calculation method that can be used. For recovered heat, a straightforward method was proposed, though no widely accepted methodology exists. Therefore, consensus was more clear-cut for these project types.

Recommended Methodologies by Project Type

(Source: Navigant and Renewable Thermal Collaborative)

The Next Frontier

In the not too distant future, candy, paper products, and cars may be made in factories that no longer rely on fossil fuels for process heat. The same shift is coming for cities, hospitals, and universities. Renewable thermal represents another frontier in the low carbon transition where stakeholders are joining forces to pioneer solutions. Getting the emissions accounting right is an important first step on that journey.

To learn more and download the report, visit Renewable Thermal Collaborative.


Wind PPAs Offer Exciting Prospects for Scandinavian Data Centers

— May 31, 2018

Social media conglomerate Facebook signed a 15-year power purchase agreement (PPA) with Norwegian wind farms to power its data centers in Denmark and Sweden. The $470 million Bjerkreim cluster of wind farms is located in southwest Norway (at Gravdal, Skinansfjellet, and Eikeland-Steinsland).

Details on the Wind-Powered Data Centers Deal

As per the agreement, 1,000 GWh per year of wind-powered electricity will be delivered to Facebook’s data centers from wind farms that will start commercial operations in 2019. Powering the project are 70 units of Siemens Gamesa turbines—each with 4.2 MW capacity—which will be developed by Norsk Vind Energi. The operational plants will be owned by German renewables investor and asset manager Luxcara GmbH. Facebook has partnered with Vattenfall to manage its grid integration and deliver its 100% renewable power requirement in the region.

Momentum Growing for Renewable PPAs

Sustainability strategies and clean energy targets have led to new utility business models, with corporations queueing up to sign long-term PPAs. Long-term agreements provide financial stability and resilience to clean energy projects. These are exciting developments for the Scandinavian wind power market, and they will encourage more project developers to flock to the region.

Key market dynamics driving corporate PPAs in the region include:

  • Low energy prices: Electricity prices are on an upward trend in Europe. According to Eurostat, average values of non-household energy varied significantly across the European Union in 2017. They ranged as high as €0.19 ($0.22) per kWh in Germany and €0.25 ($0.29) per kWh in Denmark. Non-household electricity prices across Norway and Sweden have remained low, at €0.08 ($0.09) per kWh, compared to the rest of continental Europe. Norway is also one of the largest generators of clean energy.
  • Data center market growth: Unprecedented growth in power requirements across data centers has given a boost to investments in Scandinavia. Since data centers are an energy-intensive application segment, the availability of large open spaces and a cool climate make the region attractive for investors. Norway is now receiving new interests from project developers in China as part of its One Belt One Road initiative. Cisco forecasts around 30 data centers across Europe by 2020.
  • Nuclear capacity closures: Sweden’s 2020 plans to divest its nuclear capacity have created an opening for new capacity investments. Two nuclear reactors, Ringhals-1 and Ringhals-2, will stop operations by 2020. A third, Forsmark-1, will reach the end of its designed lifetime by 2040, reducing Sweden’s power generation capacity by a combined 2.7 GW. This creates an acute need for new capacity investments in the country.
  • RE100 pledge encourages corporate PPAs: Facebook’s announcement has not come as a surprise, considering other investments in corporate PPAs. Google and Apple, for example, have invested in energy procurement models to keep their data centers running. This activity resulted from the recent sustainability initiative where over 130 companies signed the RE100 pledge to run their operations on 100% renewable energy.
  • Supportive legislation: Reductions in energy tax and the introduction of license awards for renewable energy development are key policy drivers across Sweden and Norway. Authorities have awarded a high number of licenses to developers in recent years, and the trend is likely to continue.

Wind Power Has a Future in Corporate PPAs

Wind power will continue to strengthen its position as a mainstream energy source across utility-scale and distributed energy generation. While mature markets will remain attractive for new wind capacity installations, investments across emerging markets are on the rise. Digital innovations, long-term operations and maintenance contractual agreements, and investments in predictive analytics will contribute to the operational efficiency of corporate PPAs for renewable power capacity.


California’s Energy Code Update Benefits Some More Than Others

— May 22, 2018

In a move to reduce energy use by more than 50%, the California Energy Commission (CEC) voted on May 9 to support on a series of reforms designed to require that new homes comply with standards of self-sufficiency. This includes requiring solar—a first globally.

Green Vision Is 2020

The new requirement will take effect on January 1, 2020 and will focus on four areas: residential and non-residential ventilation requirements, non-residential lighting requirements, updated thermal envelope standards, and—what interests me most—smart residential photovoltaic systems.

On the last topic, the CEC aims to “promote installing solar PV systems in newly constructed residential buildings. The systems include smart inverters with optional battery storage.”

The solar requirement is well-timed. The ITC step down will have its first decline in 2020, from 30% to 26%, and that will disappear for residential systems in 2022.

CEC Plans Include DER 

The requirements go beyond solar; the CEC also included other DER technologies in the mix. It also aims to “encourage battery storage and heat pump water heaters that shift the energy use of the house from peak periods to off-peak periods.” This aligns well with previous time-of-use electricity pricing regulations in California with mandates for solar installations.

While the solar industry will benefit from this requirement, some parts of the industry will benefit more than others:

  • OEMs: OEMs will be the clear winners from this initiative. California adds between 70,000 and 100,000 new housing units per year—or an extra demand for solar equipment of between 490 MW and 700 MW (assuming 7 kW systems). This effect will be similar for batteries and smart HVAC and heat pumps. Here we have two groups. Those OEMs that have products and brands that can add value to the property will benefit the most, as they will be able to work with real estate developers to create premium housing. Tesla leads this group, but others like SunPower, LG, and First Solar could benefit as well. The other group will have to compete to create low cost solutions to partner with real estate developers that target the poorer segments of the real estate market, or try to build a recognizable brand.
  • Installers: For installers, the new requirement is not a clear victory. While the extra demand is generally welcomed, in this specific market segment the real estate developers will have the upper hand. Therefore, installers will face deals that sacrifice margin for volume to become sub-contractors. In the medium-term, it’s more likely that real estate developers will build their own teams in charge of DER installations.
  • Financiers: Financiers face the same problem as installers. While the extra demand might bring new deals in which the person that buys the house decides to have a mortgage on the house and a separate loan or lease on the DER installations, the most likely outcome is that mortgages will cover the house and the DER equipment.

An Opportunity for a New Type of Residential DER Company

Initially, the outcome after the CEC energy code reforms does not seem to change for companies involved in installation and financing of solar systems in California, like SunRun or Vivint Solar. They do have a skill that real estate developers do not—the ongoing servicing they offer their customers. Companies with strong servicing arms could sacrifice part or all of their margin in the installation in exchange for long-term servicing contracts and potentially the rights to operate the equipment as an aggregator to offer services to the grid.


Google Has Reached 100% Renewable Energy, so I’m Issuing a New Challenge

— April 19, 2018

As consumers press companies to be more conscious of their environmental impact and sustainability, corporate procurement of renewable energy has gained momentum around the world. Some 130 companies have signed the RE100 pledge to make their operations run on 100% renewable energy. One of the companies that started this trend was Google.

Google’s First Renewable Steps

In 2010, Google started a journey to replace the electricity it uses with renewable sources by signing its first power purchase agreement (PPA) with a 114 MW wind farm in Iowa.

To ensure that its purchases have a meaningful impact on the environment, Google has followed the concept of additionality, which means that all the electricity it buys is funding new renewable energy projects.

In 2017—2.6 GW over 20 projects and 7 years later—Google announced that it reached its 100% renewables target. This is a massive achievement, especially considering that Google began these plans when grid parity was little more than a dream for wind, and solar energy was a technology that only rich Californians and Germans put on their roofs.

My Challenge to Google

While Google’s achievement should be applauded, I believe it is possible to move that target further afield. It is true that Google is buying all its electricity from renewable sources, but it is unlikely that all the electricity it is using comes from renewable sources. This is because solar and wind, Google’s choices for renewable sources, are both variable, while Google’s electricity demand is not. In other words, there are times and locations when Google must use electricity that comes from traditional sources, while simultaneously the electricity generated from the renewable projects funded via Google’s PPAs is curtailed and lost.

So, here is my challenge to Google (or any company willing to accept it—looking at Apple, Amazon, Microsoft) to move its energy program forward:

  • Work with the 20 projects it has funded to ensure they have onsite storage, which reduces the chance of curtailments and increases impact on the grid. This also means the balancing cost is not passed to other ratepayers.
  • Ensure all energy assets (distributed generation and loads) are part of demand response programs or virtual power plants, which makes the flexibility of these resources open to grid operators.
  • Make sure any new electricity procured is locally generated, and has no impact on the grid (or that the sites at least fulfill bullets 1 and 2 above).
  • Encourage employees to take their own energy consumption choices along the same journey!

Major Companies Should Continue to Set a High Bar

This is not an easy challenge, but it’s also not impossible. It’s probably as difficult as the goal to achieve 100% procurement of renewables seemed in 2010, when Google embarked on this mission. Google addressed these concepts in a white paper released in 2016, but mostly in a future tense. In my opinion, the technologies and regulations to make this possible are already here and are starting to reach scale. Now it is up to Google and other visionary organizations and individuals to make this happen.


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