Navigant Research Blog

Cities Seek a Bigger Say in the Energy Market

— February 26, 2016

Bangkok SkylineNavigant Research estimates that the market for smart energy technology for smart cities will be worth almost $21 billion by 2024. Early smart city and smart grid projects focused on the city as a site for technology and market pilots, with utilities taking the lead role. As documented in the Smart Energy for Smart Cities report, cities are now taking a more proactive role in the evolution of local energy provision. Cities are becoming active players in their energy markets, collaborating with their existing utilities where it makes sense but also becoming increasingly willing to challenge and even compete with those traditional providers. This is becoming particularly evident in the United Kingdom.

In February, Bristol became the latest U.K. city to launch its own community energy company. Bristol Energy is owned by the city council and run for the benefit of the whole community. As well as offering competitive energy deals, the company’s objective is to reinvest any profits to fight fuel poverty and support locally generated renewables. It also aims to increase low-carbon energy generation in the city and to eventually manage a new district energy network for the city.

Increasing Initiatives

Bristol is part of a wave of initiatives to form new city-owned energy companies in the country. In September 2015, the Nottingham City Council established Robin Hood Energy, the first non-profit city-owned energy company in the United Kingdom since the nationalization of the industry in 1948. The country nationalized and centralized its energy grid and market after World War II and since then has had no equivalent to the myriad of municipally owned utilities found, for example, in the United States or Germany. The process of deregulation and privatization in the 1980s created a clear split between the transmission, distribution, and retail markets, with the retail market led by the Big 6 energy suppliers. The new city energy companies have been established within this market structure and in response to some of its perceived weaknesses, not least of all a lack of local influence on the market.

Other major cities in the United Kingdom are considering setting up their own energy company alongside other initiatives such as the establishment of new energy service companies and increased investment in district energy networks. The Greater London Authority, for example, is in the process of establishing itself as a junior energy supplier, which will enable the city to support renewable energy generation and provide energy to local public bodies at an attractive rate. Some advocates are calling for London to go even further and follow the same path as Bristol and Nottingham.

A Worldwide Trend

Beyond the United Kingdom, this trend echoes broader moves by cities worldwide to be more active players in defining their energy future. In some cases, this is leading to a move toward remunicipalization (as in Hamburg, Germany), but this is not the only path for cities looking to accelerate their energy transition. Many are working in close partnership with their local utilities to drive the adoption of renewables and to introduce energy efficiency schemes.

Utilities cannot be complacent. The continued interest in smart city ideas reflects a new confidence and impatience among city leaders as to the pace of improvement on a range of issues including energy policy. If existing energy markets and utility models are not helping them achieve those goals, then we can expect to see more cities challenging the status quo.

 

Panasonic-Denver Partnership Highlights Cultural Considerations in Smart City Projects

— February 22, 2016

Bangkok SkylineIn January 2016, Japan-based Panasonic and the city of Denver, Colorado announced a partnership to transform the mountain municipality into a smart city, with a focus on improvements to transportation, energy efficiency, water conservation, and public safety, among other services. The focus project of the public-private partnership is the creation of a greenfield community southwest of the Denver International Airport called Peña Station NEXT.

Using Panasonic’s CityNOW approach, the new community in Denver is being modeled on the successful development of the Fujisawa Sustainable Smart Town in Japan. Fujisawa is 31 miles west of Tokyo and as has a comprehensive smart city implementation across multiple applications, including smart street lights and  rooftop solar panels that power homes during the day while fuel cells and batteries are utilized at night. The community is also in walking distance to public transportation, and electric cars and bicycles are widely available for rent.

This is a significant example of how companies like Panasonic are trying to take best practices from smart city projects in Japan to North America and other markets. Other Japanese giants have also been working with North American and European cities on a range of pilots and demonstrator programs, but the Panasonic-Denver collaboration is one of the most significant commercial projects to date.

Cultural Challenges

However, the translation of experiences in Japan to the United States raises some interesting challenges. According to the Denver Post, Denver’s smart city initiatives will have several different applications compared to what took place in Fujisawa, primarily in order to account for cultural and social differences between the two countries. Camera monitors with facial recognition spike much higher privacy concerns in the United States compared to Japan; as a result, the Denver project is expected to be much less intrusive. Instead of shared cars and bicycles, the Peña Station NEXT community is likely to use shuttles with parking garages and parking lots to accommodate some personal vehicle usage. In addition, far-reaching liability concerns in the United States mean that automated street lights are also unlikely, with dimming ability being a more realistic approach. While many of the same essential technologies that were tested in Fujisawa (i.e., cameras, smart street lights) are being applied in Denver, precisely how they are going to be used is being augmented for cultural considerations.

Through the partnership with Panasonic, Denver looks to improve its greenhouse gas emissions per capita, as the city’s sprawling infrastructure all too often encourages driving as the primary means of transportation. According to a 2011 World Bank report, Denver ranks far below other more densely populated cities with 23.7 tons of CO2 emissions per person. It’s a high figure, especially when compared to other locations like New York City (8.7), San Francisco (10.1), and Boston (13.3). The American Community Survey from the U.S. Census Bureau shows that Denver County has some of the highest rates in the country of commuters driving to work from surrounding counties.

While there are several common themes that go into making a city smart (such as digital technology, sustainability, mobility, and financing), how these factors are implemented changes drastically by jurisdiction. Initiatives that helped Japanese cities become smarter are likely to have relevance in other countries such as the United States, but some differences in implementation are needed for project success.

 

Is Recycling Garbage?

— December 28, 2015

Recycling has been a topic of recent media trash talk. Energy consumption associated with the practice, particularly through transport, is high, negating many of its environmental benefits. In addition, the price of many recyclable commodities has fallen dramatically (aluminum fell from $0.80 to $0.37 per pound in recent months), undermining the economics of recycling. However, depending on the material, recycling can still have a major environmental benefit. Recycling aluminum saves 10 tons of CO2 per ton of metal. Glass, on the other hand, only saves 0.34 tons of CO2 per ton of material, and these small savings are quickly offset by emissions from transportation, collection, and distribution. Cities are increasingly seeing that recycling is, in many cases, just not worth the investment.

In Portland, Oregon, for example, recycling recovery rates (the amount of recyclables recovered from municipal waste) fell between 2013 and 2014. Some of this decline is easily explained by reduced circulation of magazines, junk mail, and newspapers. However, the construction of new buildings rose in the city, increasing the amount of metal and wood waste that could have been recycled. The WestRock paper mill, Portland’s wood processing facility, closed in October of 2015 due to financial troubles. The cost of recycling remains high elsewhere as well, especially for curbside recycling. In Augusta, Maine, the cost of recycling is $879 and $113 per ton for curbside collection and collection at Augusta City Center, respectively. On December 17, the Augusta city council voted to end curbside recycling in May 2016.

Recycling is still very popular among consumers. In fact, since its introduction in the 1980s, there are now more than 9,800 curbside recycling programs in the United States. However, recycling is, and always has been, energy intensive and costly. Materials like aluminum are beneficial to recycle, but for plastic and glass, the current systems and technology makes the practice economically and environmentally unfavorable. For recycling to work, the system has to change.

Technology to the Rescue

Recent advances in recycling technology could solve many of these problems. For example, Epson’s new waterless PaperLab allows offices to recycle up to 6,720 sheets of paper a day onsite. This eliminates the need to transport heavy, used paper. In Denver, Colorado, Alpine Waste is setting up a state-of-the-art Styrofoam recycling system. This will allow the city to process a previously hard-to-recycle material and prevent a lengthy trip to far-away processing facilities.

Another improvement involves a new type of easily recycled plastics. Discovered by Eugene Chen and Miao Hong of Colorado State University, the material is known as poly(GBL), and can be reduced to its original monomer state (for remaking into plastics) at 220°C  and 300°C (428°F and 572°F) for linear and cyclic polymers, respectively. The process to recycle poly(GBL) completely breaks down polymers and does not require the same high level of energy or water as previous plastic recycling systems—since the raw material doesn’t reach as high of a temperature, less water is required to cool it. This material promises to be cheaper to produce and recycle than many petroleum- or bacteria-derived plastics currently in production.

The current system of recycling is not cost or energy efficient. However, many recent advances have been made to usher in more efficiency. Arlene Karidis of Waste Dive, a news source dedicated to covering of municipal waste, recently published an article stating that technological advancements in recycling are expected continue in 2016, with increased emphasis being placed on safety, automation, and separation of materials. As 2015 ends, the year ahead promises a renewal in the way we think about recycling.

 

Utilities Embrace Innovation at EUW, but Struggle with Culture

— November 25, 2015

There was a palpable buzz at European Utility Week in early November centered around change, innovation, and outsiders. For instance, one of the crowded presentations I witnessed was Neil Pennington’s talk about smart thermostats. Dr. Pennington, the director of innovation for RWE npower in the United Kingdom, noted that smart thermostats are a logical first step, but utilities should consider going beyond these devices and offer products and services that are highly personalized, connected, and automated. Move outside the heating, ventilation, and air conditioning (HVAC) system, he says, and think about home security and customer lifestyles if you want to succeed as an innovator.

Pennington’s message was effective. It generated some enthusiastic questions, and people in the audience were hungry for insights into how to engage customers in new and effective ways.

Other vendors and presenters at this trade show, which set records for attendance (some 9,000 visitors from 77 countries), offered similar stories about innovation and change. Joris Jonker, one of the founders of residential energy management company Quby, told me his company’s offering was gaining traction as a dashboard for the home, and that Netherlands-based utility Eneco would be installing 1 million units over 2 years. Indeed, Eneco has embraced Quby’s solution so much that it acquired the firm just ahead of the trade show. Eneco’s move demonstrates it is no longer business as usual for some utilities.

Other discussions included the outsiders, or non-utility companies like Google (or Alphabet, Google’s parent company), and how these firms might alter the utility game. Might Google, or perhaps Apple, or an unknown startup move aggressively with a customer-centric and data-driven business model to disrupt the utility status quo? Possibly, but others were not so sure, saying it would be hard to disrupt the incumbents, especially for smaller players. Still, the question about potential disruption sparked debate.

Beyond these change and innovation issues, several other themes played out at the show. The smart cities concept is gaining wider attention (as my colleague Eric Woods so aptly demonstrated in sessions he moderated), with companies like Itron and Sensus touting their capabilities in this area. And, of course, the Internet of Things (IoT) concept seemed to be on just about everyone’s lips. In that vein, one company that stood out was Sigfox, a French firm promoting its unique cellular communications technology that is designed for low-throughput connectivity among IoT devices. Very buzzy.

But for all the talk about innovation and change, there was an interesting poll conducted among attendees that revealed an Achilles heel for the utility business: an ongoing lack of innovation. The poll asked “What is the biggest threat to the utilities?” The results of the unscientific survey among about 400 people were:

  • Falling/flat demand: 6%
  • Revenue loss/distributed solar: 12%
  • Challenge Renewable/Integration: 12%
  • Regulatory/Policy uncertainty: 23%
  • Lack of “innovation culture”: 46%

So a key takeaway for me from the Vienna conference was that while there is a welcome mat set out for change and plenty of talk, true innovation is still some ways off. And the staid utility culture in Europe is ripe for a shake-up, internally, externally, or from both perspectives.

 

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