Navigant Research Blog

Cape Wind Project Faces New Hurdles

— January 26, 2015

The prospects for near-term offshore wind take-off in the United States dimmed at the end of 2014, as the two utilities that had agreed to buy the electricity output of the 468 MW Cape Wind offshore project terminated their contracts.  The deals collapsed because the developers of Cape Wind had failed to reach key contractual milestones for project financing and construction launch by December 31, 2014.  National Grid signed a conditional power purchase agreement (PPA) in 2010 for 50% of the project output, and utility NSTAR agreed to purchase an additional 27.5% of the project’s output in 2012.

Saying they do not regard the terminations as valid, Cape Wind officials claim that force majeure provisions in the contracts stipulate that the milestones should have been extended.  Once again, the embattled project is in a legal dispute – and this one with potentially show-stopping consequences.  No offshore wind project in the United States can proceed without the price certainty of a PPA.  The outcome of these contract disputes could deal a fatal blow to a project that has been under development for 14 years.

Not in My Ocean

Planning for Cape Wind has taken so long partly because it was the first to navigate the unchartered waters of offshore wind development in a country that has little offshore wind policy and, as yet, no steel in the water.  Vociferous and well-funded opposition to the project’s location off Nantucket Island – a popular vacation destination for the affluent and influential – plagued it from the beginning.  The developers have been fighting a two-front battle against the challenges of offshore wind and the legal hurdles put up by anti-wind activists, coastal homeowners, and conservative billionaires.

The unfortunate reality is that, while the United States has excellent offshore wind potential along the Eastern seaboard and growing need for diversified and clean electricity generation, U.S.  policies are ill-suited to support offshore wind.  The production tax credit (PTC) and investment tax credit (ITC) for renewable energy projects subsidize around 30% of the cost of building an offshore wind farm.  European countries like Germany, Denmark, and the United Kingdom provide similar levels of subsidy.  The major difference is that those incentives have been consistent and long-lived enough to support projects that are years in development.

Back and Forth

Unlike most developed countries, where tax law is permanent until changed through legislation or other decrees, many U.S. tax laws and incentives are increasingly enacted on a temporary basis.  This is partly because U.S. lawmakers count on industries like wind power to help finance their election campaigns.  As a result, tax favors are largely granted on a 1- or 2-year basis, resulting in boom and bust cycles (13 GW of wind installed in 2012 in the United States, for example, followed by 1 GW installed in 2013).  This also results in severe inefficiencies in manufacturing and human resources as factories lay off workers only to rehire again when incentives resume.

The onshore wind industry grudgingly copes with this back-and-forth because onshore wind can be built in 1- and 2-year cycles.  But offshore projects require much longer to develop and build.  Eventually, U.S. lawmakers may realize the benefits of offshore wind and provide suitable long-term incentives.  Unfortunately, that will likely come decades after more progressive countries in Europe – and now China – are far ahead in offshore wind.

 

Vanadium Batteries Await Breakthrough

— January 26, 2015

A remote hillside in the Nevada desert may hold the keys to developing the next generation of affordable energy storage systems.  One of the world’s largest deposits of vanadium, a hard, silvery gray mineral often mixed to create high-quality steel, is located underground on this site.  First discovered in the 1950s, the site is now being developed into a large-scale mining operation, known as the Gibellini Mine, by Vancouver, Canada-based American Vanadium.  The company, which partners with German flow battery manufacturer GILDEMEISTER, requires an affordable and secure supply of vanadium to develop its redox flow batteries.

With the majority of global vanadium supplies coming from China, a domestic source of the metal could be instrumental in reducing battery costs.  Despite the recent success of lithium ion (Li-ion) batteries, alternative technologies such as flow batteries address several shortcomings of Li-ion chemistries.

Stepping Up

There are several types of flow batteries with different characteristics currently competing for market share, including iron-chromium, zinc-bromine, and vanadium redox.  Well-suited to stationary applications, vanadium-based batteries offer several advantages over Li-ion systems.  Vanadium-based batteries can fully discharge with minimal degradation of key components, leading to a longer duration discharge and greater life expectancy.  Additionally, vanadium flow batteries are much safer than certain Li-ion chemistries, as they have no thermal runaway issues, which is a key consideration for systems located on densely populated distribution networks.

Significant improvements to flow batteries have been made in recent years as more companies enter the space and competition heats up.  One area in which flow batteries must improve is energy density; Li-ion and other batteries are much more energy-dense, giving them an edge in any project with limited space.  A recent milestone was achieved by UniEnergy Technologies with its vanadium-based flow battery, allowing a standard 500 kW, 4-hour system to be containerized and installed in a 1,000-square-foot pad.  The system has an expected operating life of 20 years and can be installed for around $750 per kWh.

As with most advanced batteries, makers of vanadium-based systems must reduce costs to fully capitalize on the diverse market opportunities available.  Fortunately, advances are being made in that area as well.  California-based Imergy, for example, claims that it will soon reduce costs enough to offer a vanadium-based flow battery for around $300 per kWh.  One reason for the low price is Imergy’s ability to use lower-grade vanadium, recycled from mining waste and other sources.  While vanadium flow batteries are currently somewhat more expensive than most Li-ion chemistries, they have the advantage of a longer life expectancy, allowing the upfront cost to be spread over several decades.

An Uncertain Future

Navigant Research’s report, Energy Storage for the Grid and Ancillary Services, found that flow batteries are likely to account for 2,357 MWh of capacity in 2020, about 7% of the total market for grid-scale systems.  However, these figures could increase dramatically with breakthroughs in system efficiency and cost.  A consistent, low-priced supply of key components, such as vanadium, could help rapidly reduce costs.  Additionally, greater diversity and competition among suppliers of key flow battery components can drive down manufacturing costs.  Given the very ambitious price reductions being forecast by manufacturers, many may be relying on market developments such as the Gibellini Mine to allow flow batteries to compete effectively with Li-ion.

 

Cloud Connections Bolster In-Vehicle Systems

— January 26, 2015

With the average transaction prices of new vehicles in the United States hitting nearly $35,000 at the end of 2014, drivers can be grateful that the cars they purchase are also more durable and reliable than ever before. The average age of the more than 200 million vehicles on the road in the United States today is now nearly 11.5 years.  However, that longevity has a big potential downside: as computing and communications technology marches on to improve safety, efficiency, and reliability, many of those existing cars will be incapable of participating in these advances.  Luckily, cloud computing could come to the rescue.

According to Navigant Research’s report, Autonomous Vehicles, full-function self-driving vehicles aren’t expected to be available in significant volumes until late in the 2020s.  Until the fully self-driving car arrives, we’ll have a steady stream of incremental improvements in advanced driver assistance systems.  Thanks to increasing connectivity in vehicles, we’re also less likely to be stuck with the capability that was built-in when the vehicle rolled off the assembly line.

No Car Left Behind

General Motors (GM) and Audi are among the manufacturers that are already building 4G LTE radios into many of their new vehicles.  When this capability is combined with advanced new microprocessors from companies like NVIDIA and Qualcomm, vehicles will be able to leverage cloud computing infrastructure to get smarter as they age, rather than being left behind.

At the 2015 Consumer Electronics Show in Las Vegas, NVIDIA unveiled a new generation 256-core processor, called the Tegra X1, along with electronic control units powered by this advanced chip.  One of the problems that driver assistance and autonomous systems have to solve is being able to recognize and distinguish the objects detected by all of the sensors on new vehicles.  The human brain is remarkably adept at distinguishing the nuances between an animal and pedestrian or an ambulance and a delivery van.

Detection before Failure

This sort of image recognition is far more difficult for a computer, so the Tegra X1 is designed to collect image data from its 12 camera inputs and transmit it back to data centers where it can be aggregated with information from other vehicles.  By combining data from many vehicles, the object recognition can be dramatically improved, and updated image libraries can be fed back to vehicles for improved onboard sensing ‑ even without changing hardware.

GM is also harnessing the power of the cloud to provide drivers with predictive diagnostic information for their vehicles using OnStar.  Available for more than a decade, OnStar provides subscribers with vehicle health reports when faults are detected.  Now, by monitoring critical systems such as the battery, starter, and fuel pump and sending this information back to the cloud, OnStar is able to detect subtle changes in performance that have previously been shown to be precursors to component failures.  The OnStar Driver Assurance system can then notify the driver so that an impending problem can be corrected before the driver is left stranded on the side of the road.  This predictive diagnostic system will be available on several of GM’s 2016 model year vehicles.

As automakers roll out new infotainment interfaces, such as Apple CarPlay and Google’s Android Auto, drivers will also benefit from improved voice recognition that leverages massive data centers run by these technology companies.  More robust and reliable voice control will help reduce driver frustration and keep their attention on the road ‑ at least until the car can take over completely.

 

With Cheap Oil Flowing, U.S. Looks to Next Energy Revolution

— January 26, 2015

With oil prices continuing to languish and Saudi Arabia moving through a royal succession upon the death of King Abdullah, the idea that the “OPEC era is over” has gained credence among government officials and industry analysts. “Did the United States kill OPEC?” asks New York Times economics reporter Eduardo Porter. The answer, he argues, is essentially yes: “The Nixon administration and Congress laid the foundation of an industrial policy that over the span of four decades developed the technologies needed to unleash American shale oil and natural gas onto world markets,” thus loosening OPEC’s grip.

The reality is a bit more complicated than that: OPEC still produces nearly 40% of the world’s oil; the United States produces less than 18%. And oil at $50 a barrel could actually increase OPEC’s power as producers of unconventional reserves, which are more costly to produce, are driven from the market. Like the coal industry, OPEC is not going anywhere anytime soon.

The Big Opportunity

The shale revolution does, however, offer some other welcome knock-on effects, if policymakers are alert and astute enough to take advantage of them.  “Cheaper oil and gas will contribute an estimated $2,000 per American household this year, and $74 billion to state and federal governments coffers,” note Ted Nordhaus and Michael Shellenberger of the Breakthrough Institute, a San Francisco-based energy and climate think tank. The Breakthrough Institute has done extensive research on the role of public-private partnerships in the development of the seismic and drilling technology advances that underlie the shale revolution. Should the government choose to take advantage of it, this windfall could fund a multi-decade R&D program for renewable energy similar to the one that led to the shale boom.

“We can afford to spend a tiny fraction of the benefits of the bounty that cheap oil and gas have brought so that our children and grandchildren can similarly benefit from cheap and clean energy in the future,” declare Nordhaus and Shellenberger.

The Gas Tax Solution

That’s an inspiring concept. The execution is likely to be messy, though. Any such spending would probably need congressional support, or at least consent – and the U.S. Senate only last week finally reached agreement that “climate change is real and not a hoax.” That’s a long way from dedicating billions to develop alternative energy sources.

One suggestion put forth by clean energy activists is an increase in the U.S. gas tax. A few cents extra per gallon (on gas that’s about half the price it was a year ago) could help fund a massive crash program to develop inexpensive, clean energy technology (not to mention shore up the failing U.S. Highway Trust Fund).

But raising the gas tax is like the National Popular Vote – a terrific idea that’s unlikely to happen in our lifetimes. Even though polls consistently indicate that consumers are willing to spend slightly more for the energy they consume in order to limit climate change, actually slapping extra taxes on motorists at the pump is unlikely to be a winning move in Washington – which explains why President Obama left it out of his call for a “bipartisan infrastructure plan” in his State of the Union address.

 

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