Navigant Research Blog

California Drought Implications for Electric T&D Becoming Clearer

— June 2, 2015

The implications of climate change and the 4-year California drought are just beginning to become clear. The snowpack in the Sierras, where reservoirs and dams ultimately feed the canal system that delivers water to the Bay Area, the Central Valley, and Southern California, is at an all-time low. While strict water rationing is mandatory for some residential and commercial consumers in many parts of the state, there are other forces at play. Some are laudable, and some are not.

On one hand, many city and municipal water districts are offering new rebate programs and incentives to remove lawns that require watering and replace them with xeriscape landscapes that require little if any water. On the other hand, the agricultural economy in California’s Central Valley needs water for almonds, pistachios, and a host of other products, and the large farms are reportedly pumping down the aquifers to support their business.

Thinking Long Term

Prolonged drought could also have major effects on the electric transmission and distribution (T&D) system, as well as on the water delivery system across California.

  • The major water agencies, including the Association of California Water Agencies (ACWA) managing the canal system between Northern and Southern California, have for many years been not only a major end-use consumer, but also a demand response resource for the California Independent System Operator (CAISO).  If the volume of water moving south through the Central Valley and over the mountains into the Los Angeles basin decreases substantially, the loss of demand response resources during peak demand conditions could be substantial.
  • With limited snowpack, major California reservoirs are now at record low levels and have limited, if any, hydropower capacity. Innovative pumped water storage projects like Pacific Gas and Electric’s (PG&E’s) Helms System, which uses off-peak Diablo Canyon nuclear power to pump water up for day-time generation use, will be at risk.
  • Recent reports in media have suggested that many locations in California’s Central Valley are sinking as a result of ongoing water pumping from the underground aquifers by all types of commercial and agricultural businesses. Not only are residential, commercial, and agricultural wells going dry, but the land itself is subsiding. This has tremendous implications for California’s Peripheral Canal system and other longstanding canals that transport water north to south through the central valley. As subsidence occurs, it is entirely possible that cement canals will fracture, and major leaks will occur, further exacerbating the water loss problem.

As in many states, the electric transmission infrastructure in California is aging. It’s clear that California’s drought will have a significant effect on the electric power market as well, degrading demand response resources, electric demand for water pumping, and hydropower resources.

 

Following Election, U.K. Renewables Policy Plans Come to Light

— June 2, 2015

A couple of weeks after a surprising result in the United Kingdom’s parliamentary election, in which the Conservative Party won a majority, plans for the government’s renewable energy policies are becoming clearer. Although the Conservative Party has governed for the last 5 years, it was part of a coalition, so there is a possibility that significant policy changes will occur.

Amber Rudd Takes the Lead

On May 11, Prime Minister David Cameron appointed Amber Rudd as the United Kingdom’s new Secretary of State for Energy and Climate Change, which was well-received by the renewable energy industry. The renewable energy trade bodies in the United Kingdom (Renewable Energy Association, RenewableUK, and the Solar Trade Association) appeared to have good comments about Rudd, and Nina Skorupska, the chief executive of the Renewable Energy Association, had the following comments on Rudd’s appointment.

“Amber Rudd has been a champion of renewables and the low-carbon economy in the past year, and her appointment will do much to allay the fears some may have after the general election … ensuring we meet our targets in the most efficient way … and making sure the UK is leading the way in green jobs and cost effective renewables.”

While RenewableUK, which mainly represents the wind industry, criticized the Conservatives’ manifesto when it was launched, its chief executive, Maria McCaffery, was also pleased by the appointment of Rudd. In a note released to the press, McCaffery said:

“We welcome the positive commitments which she has made on reducing emissions, tackling climate change and protecting the environment. We are looking forward to working with her and showing how all the technologies we represent: onshore wind, offshore wind and wave & tidal energy, can help achieve these aims.”

Onshore Wind on the Chopping Block

The Conservatives’ manifesto included a promise to stop incentives for onshore wind farms and to give local residents more influence in planning approval of the projects. In an interview with the Sunday Times this week, Rudd reiterated the Tories’ manifesto pledge to effectively end the development of new wind farms on U.K. land, outlining her hopes for the new measures to come into force by May 2016. While onshore wind in the United Kingdom can be competitive with fossil generation, the additional requirements to develop a project, like signing a power-purchase agreement, and survive what would be a gruesome planning application process, carry extra risks that few investors would like to face. This is expected to affect Navigant Research’s U.K. wind energy forecast, which is part of the World Wind Energy Market Update 2015 report.

Currently, there are about 7 GW of onshore wind capacity under development. While the onshore wind utility-scale installations are expected to decline, there will be room for companies willing to participate in community-scale projects. Community projects have the double advantage of a guaranteed buyer for the electricity produced while getting local support for the project by sharing the benefits of the wind farm.

A Solar Revolution Underway

While at first look this looks like a step back for the renewable industry, in reality, the winners if this policy is implemented would be all other sectors within the industry. In another interview, Rudd said she hopes to “unleash a new solar revolution” as a government cabinet minister. This seems feasible given that solar PV would become the cheapest source of renewable energy that can be deployed at scale. Other sectors will benefit as well. Some biomass projects would become competitive, and even offshore wind would benefit if the bids in the Contract for Difference (CfD) increase.

 

Innovation in New Mobility Offerings

— June 2, 2015

Rideshare app company Uber is continuing on its phenomenal growth trajectory. In the 6 years since the company launched in San Francisco, it has expanded into 300 cities in 58 countries. What’s more, Uber has raised $5.9 billion in 10 funding rounds. During the most recent funding round, in early 2015, the company was valued at an astonishing $40 billion, and it anticipates a $50 billion valuation in its next funding round. The much smaller rideshare app company Lyft, which operates in over 60 cities, has raised around $1 billion and was valued at $2.5 billion in its most recent funding round.

It is interesting to compare these companies to another company in the new mobility sector, carshare company Zipcar. Since it was founded in 2000, Zipcar has spread to around 250 locations and boasts more than 700,000 members. Although this is not an apples-to-apples comparison, it is interesting to note that Zipcar’s valuation from its 2011 initial public offering (IPO) was $1.2 billion; yet, in 2013, Avis Budget Group purchased Zipcar for $500 million.

Comparing Rideshare and Carshare

Uber is essentially being valued as a tech company, whereas carshare companies are more like a traditional business. This difference may seem somewhat counterintuitive since rideshare apps and carsharing are both part of the growing mobility sector. Both are services that thrive in the digital age. Rideshare services like Uber and Lyft would not exist without the smartphone. These services take advantage of the perpetual connectedness that a smartphone offers, for both drivers and users. Carsharing, on the other hand, is not dependent on smartphones, but it has embraced the ease of use that smartphones offer. While carshare companies can still operate from website and smart card access, the use of a smartphone app to locate and book cars opens up new business model opportunities like one-way service, where the vehicle can be returned to any location. One-way service encourages more impulse usage, with someone realizing that a car might be an easier way to get where they are going based on traffic or weather conditions.

The possibility of more usage is key to the success of carsharing because, in spite of the enormous success of the carshare sector over the past 15 years, companies can still struggle to consistently report a profit. Carshare companies have significant expenses due to vehicle leasing, maintenance, and fueling, as well as parking, which can be very costly. By contrast, rideshare companies don’t bear the costs of physical infrastructure. Fundamentally, what these companies are is a matchmaker service, and this requires significantly less upfront investment. This is part of what has allowed Uber to expand so swiftly. And these services are used much more frequently, with over 1 million rides occurring daily. Carshare companies are more like a traditional business with ongoing physical infrastructure costs that make it harder to scale as rapidly.

What will be interesting is to see how Uber and Lyft can leverage their strengths to create new revenue streams. It will also be interesting to watch carshare companies evolve in this new environment. Zipcar has been rolling out one-way service, while Swiss carshare company Mobility Cooperative invested in sharoo, a company that offers a private carsharing platform. The new mobility space will increasingly encourage these kinds of innovations and partnerships.

 

The EV Could Mean the End of the Brake Pedal

— June 1, 2015

The battery electric vehicle (BEV) will likely remain a small fraction of the overall automotive market for many years to come, according to Navigant Research’s report, Electric Vehicle Geographic Forecasts. However, spending time with the BMW i3 left me pondering the possibilities for changing the automotive human-machine interface by eliminating the brake pedal.

A recent New Yorker article by Malcolm Gladwell about automotive safety brought to mind the 2010 Toyota recall crisis prompted by consumer complaints about sudden unintended acceleration. While the automaker replaced the floor mats and accelerator pedal assemblies that could stick, the root cause of most of the reported incidents was determined to be pedal misapplication by drivers. This is a recurring problem for many brands, most prominently Audi in the mid-1980s.

What Does Pedal Misapplication Have to Do with BEVs?

BMW’s 2007 megacity project to investigate sustainable transportation in a world with increasing number of densely populated urban centers settled on electrification as a key component of any solution. BMW partnered with California-based AC Propulsion to retrofit a fleet of MINI hatchbacks, to gather real-world data on how people used EVs.

The MINI E featured unusually aggressive regenerative braking. Previous EVs I had driven had been programmed to replicate the behavior of traditional vehicles with a little bit of creep ahead when the brake was released and mild deceleration similar to engine braking when the accelerator pedal was released. Releasing the right pedal of the MINI E brought on about 0.5g of deceleration, which would be considered hard braking under most circumstances. Real-world driving data has shown that 80% to 90% of stops involve deceleration of less than 0.3g, with most being less than 0.2g.

In addition to electric propulsion, BMW decided to rethink everything about urban driving, including braking. Since the MINI E, many manufacturers have introduced plug-in vehicles, and virtually every one of them has defaulted to the traditional approach for brake control. Most of these vehicles include some form of simulated down-shift that triggers stronger regenerative braking, but most drivers are probably unaware this even exists.

The ActiveE, a second-generation EV prototype, came out in 2011, followed by BMW’s definitive BEV, the i3, in 2014. Like its predecessors, the i3 retains the one-pedal strategy, and it makes perfect sense in a vehicle targeted for urban driving.

“I would say that it’s absolutely the most calming car I’ve driven in stop-and-go urban traffic jams. I think the single-pedal drive has benefits I didn’t appreciate,” said John Voelker, editor-in-chief of GreenCarReports.com. “Sebastian Blanco of Autoblog and I drove it together at the Amsterdam launch, and we both struggled to figure out why being caught in horrible, chaotic, European rush hour was just fine. Seriously, the only car I’ve ever been able to call soothing.”

During a 90-mile round trip drive to a meeting with the i3, I could count the number of times I touched the brake pedal on my fingers, and once I became accustomed to it, I found it worked extremely well. When considered from a safety perspective, dropping the brake pedal would immediately eliminate instances of pedal misapplication since a driver only has to release the pedal to stop. Fewer accidents mean less congestion, wasted fuel, and time. Since all new vehicles include electronic stability control, the ability to tie brake application to movement of the accelerator pedal already exists even for non-EVs. It seems like only a matter of time before the brake pedal follows other anachronisms like the manual transmission and the foot-operated high-beam switch into the annals of automotive history.

 

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