Navigant Research Blog

California Incentive Updates Recognize Value of Storage

— June 29, 2016

??????????????????California’s Self-Generation Incentive Program (SGIP) has been one of the most successful and contentious programs supporting the deployment of distributed energy resources (DER). The program has generated significant attention in recent years from stakeholders pushing changes to how financial incentives are awarded. As a result of recent controversies and the looming grid stability issues facing the state, the California Public Utilities Commission (CPUC) officially announced modifications to the program late last week.

These reforms include a number of significant changes that regulators believe will better align the program’s goals of reducing greenhouse gas emissions and peak demand, improving grid stability, and supporting technologies that have the potential to enable market transformation without long-term subsidies.

Storage Wins Big

The newly agreed upon rules highlight energy storage systems (ESSs) as a key priority for the program moving forward. Most notably, 75% of the program’s $77 million annual budget will be allocated specifically for ESSs, with priority given to systems tied directly to renewable generation. Within this, a 15% carveout has been mandated for residential ESSs specifically, which to date have struggled to secure incentives. The remaining 25% of the budget will go to generation systems, including wind turbines, gas-powered microturbines, and fuel cells. In response to concerns over single companies monopolizing the submission process and taking up a large percentage of the program’s budget, all awards will now be determined based on a lottery system, with no developer able to claim more than 20% of the total annual incentives.

In addition to ESSs being guaranteed the majority of the program’s funding, the actual incentive rates and how they are determined have also changed and will step down gradually each year. Incentives will now be determined based on the total energy capacity (or watt-hours [Wh]) for each system. This change helps align incentives with a system’s discharge duration, and in turn, its ability to reduce peak demand or shift usage to off-peak times. Furthermore, the CPUC has established separate incentive rates for systems that are also receiving financial support through the Investment Tax Credit (ITC). The initial rate for ESSs not receiving ITC support is now set at $0.50/Wh and at $0.36/Wh for systems that do receive the ITC. All residential systems (<10 kW) will receive the full $0.50/Wh incentive.

The new incentive rates also take into account the duration of each system by assigning decreasing rates based on the number of hours of discharge duration. For example, at a $0.50/Wh incentive level, a 4-hour 10 kW ESS would receive a total incentive of $15,000. $10,000 is awarded for the first 20 kWh of capacity, the first 2 hours of duration at 10 kW. An additional $5,000 would be awarded for the remaining 20 kWh, the second 2 hours of duration at 10 kW at a 50% reduced rate.

Looking Ahead

With an estimated $270 million in funding remaining through 2019 for the SGIP, these newly announced changes could have a major impact on California’s DER markets. Hopefully, the reformed program will support a more diverse and competitive market for ESSs that will result in a greater number of new systems and more rapidly falling costs. The state’s regulators recognize the unique and significant value that ESSs can provide the grid and are working to ensure the technology plays a key role in the evolution of the electricity grid.

 

3D Printing Providing a Boost to Building Energy Efficiency

— June 29, 2016

ManufacturingAdditive manufacturing has shown significant potential toward reducing manufacturing energy consumption and material waste. While these techniques are still evolving, the creation of objects with 3D printing, using computer models and depositing materials layer by layer into a predefined pattern, has the potential to revolutionize manufacturing. An article from Energy Policy estimates that 3D printing can provide cost savings of nearly $593 billion from energy and material savings. The applications for 3D printing span from the creation of medical devices to objects as large as wind turbine blades. In addition to saving energy and materials used in traditional manufacturing processes, 3D printing also has the ability to improve the performance of mechanical systems.

The Heat Exchanger

As its name implies, a heat exchanger is literally used to transfer heat from one source to another. For many decades, it has been a critical component in power generating stations, chemical plants, engines, refrigeration systems, and  facility heating or cooling systems. Heat exchangers have an impact in every industry, but despite its wide range of uses, the technology has seen minimal improvement or change for many years.

3D Printed Heat Exchangers

Recently, the University of Maryland used 3D printing technology to manufacture an innovative air to refrigerant heat exchanger in a single piece. The heat exchanger weighs 20% less and performs 20% more efficiently compared to traditional heat exchangers, while also being manufactured in much less time. The single-piece heat exchanger is constructed to be more resistant to pressure or leakage. From the perspective of building energy consumption, heating and cooling accounts for nearly 50% of energy costs. A 20% increase in effectiveness for heat exchangers, which act as both the evaporator and condenser in heating and cooling cycles, is a substantial improvement toward reducing building energy consumption. The University of Maryland estimates that the product has the potential to save nearly 7 quads of energy, or roughly the equivalent to 252 million tons of coal.

As 3D printing technology continues to evolve, game-changing techniques will lead to products that not only require less material, energy, and time to produce, but that also operate with effectiveness that was previously unattainable with traditional manufacturing processes.

 

Initial Quality Study Highlights the Commercial Risks of Vehicle Automation

— June 29, 2016

Connected VehiclesFor many years after J.D. Power and Associates began conducting its Initial Quality Study (IQS) 3 decades ago, most problems reported by customers in the first 90 days of vehicle ownership were either defects or non-functional features. However, in the past decade, the nature of reported problems has shifted toward what J.D. Power calls design-related issues. This could pose a serious problem for manufacturers as they rush to introduce autonomous driving technology.

At a recent meeting of the Automotive Press Association in Detroit, J.D. Power vice president Renee Stephens presented the 2016 IQS results. The industry as a whole improved by 6% in 2016 to just 105 problems per 100 vehicles, the best improvement in 7 years. Among the reported problems, those that fall into the audio, connectivity, electronics, and navigation areas continue to represent the largest category of complaints.

Voice recognition and connected devices still befuddle consumers. Numerous manufacturers including Ford have seen ratings decline in past years as a result of difficulties using infotainment systems. “Expected reliability remains the most important consideration when purchasing a new vehicle, cited by 49% of owners,” said Stephens. “It’s critical that technology be implemented correctly or consumers lose trust.”

Potential Problems

An increasing number of new vehicles now include advanced driver assist systems (ADAS) such as adaptive cruise control and lane keeping aids. However, if features don’t work as expected by the consumer, they often get turned off after a few false positives or surprises. This highlights a potentially serious problem for the auto industry in the coming decade as semi and fully autonomous systems are increasingly rolled out in the marketplace. Navigant Research’s Autonomous Vehicles report forecasts that nearly 5 million autonomous vehicles are expected to be sold in 2025, a volume that is expected to grow to more than 40 million in 2030.

Regardless of current ADAS and whether future autonomous systems work as the engineers intend them to, it is absolutely imperative that they work as consumers expect. Autonomous capability will add significant cost to vehicles, and until there is a shift toward on-demand mobility services, consumers will have to absorb that cost. If their experience with the stepping stone technologies is excessively negative, the market will reject these technologies.

Contradictory Views

This will be particularly true if consumers realize that autonomous systems don’t work at all in the scenarios where they are most likely to want to hand over control, such as in poor weather. A major market force for automated driving is improving safety. Related to the general functionality of these systems is the problem of ethics where, as is often the case, the public has contradictory views. A new study by MIT professor Iyad Rahwan shows consumers want autonomous vehicles to minimize casualties in the event of unavoidable crashes. However, that only applies if that person is not the potential casualty. It comes down to protect everyone—but protect me first.

If society as a whole is ever going to benefit from the potential of autonomous vehicles in reducing collisions, congestion, and energy use, much will have to change in society. Consumers will have to be educated in how these systems work so that expectations can be set appropriately. If the bar is not adjusted, consumer complaints in IQS and other studies will skyrocket, and this technology could die on the vine.

 

What Does Brexit Mean for the United Kingdom’s Energy Policy?

— June 27, 2016

Energy CloudOn Thursday of last week, Britain voted to leave the European Union (EU) in a referendum known as Brexit. The vote to leave won 52% to 48%, with 17.4 million voters in favor of leaving the EU and 16.1 million voting to remain. In the wake of the vote, the world has expressed mixed feelings on the outcome, including rage, frustration, excitement, anger, pride, and sadness. While the vote may not mean a huge shift for in the energy field, it is a historically significant event, not only in Britain, but for the rest of the world as well. One of the largest initial changes to occur as an outcome of the vote is that Prime Minister David Cameron, a leader of stay campaign, will resign. The pound plummeted to its lowest level since 1985, and further economic impacts are yet to be determined. Britain is the first nation to leave the EU, and one thing is clear: the vote means significant global change and uncertainty.

The EU’s Energy Directives

The EU has been a leader in energy efficiency regulations and requires its member states to create and update their own National Energy Efficiency Action Plans every 3 years. The requirements set forth by the EU have pushed member states to proactively create and enforce their own policies surrounding increased energy efficiency, greenhouse gas (GHG) emissions reduction targets, and increasing renewable energy.

Navigant Research’s Global Energy Efficiency Policy Analysis report discusses the role of the EU in driving global energy efficiency policy. The United Kingdom’s GHG emissions target is to reach 80% reductions below 1990 levels by 2050, in compliance with the EU’s minimum regulations of 20% below 1990 levels by 2020. The EU’s Renewable Energy Directive aims to minimally fulfill 20% of its total energy needs from renewables by 2020, which is set to be achieved through the accomplishment of individual member targets. Even within the EU’s already notable energy efficiency requirements, the United Kingdom is a leader in many policies, having surpassed many base requirements.

Brexit and the EU’s Energy Policies

The EU’s targets for GHG emissions and renewables are based on all member states achieving their individual goals. The exit of Britain from the EU does not mean the EU will no longer be able to achieve its targets, but increased targets will need to be met in the remaining member states to make up for Britain’s portion. In 2010, only 7% of the United Kingdom’s electricity came from renewables, but this increased to 18%-19% by 2014 and is on target to reach 30% by 2020.

While Brexit would mean the United Kingdom can relax on some efficiency policies, overall, it would not drastically affect the country. The Climate Change Act requires tougher GHG emissions targets than the base EU requirements. In order to hit the 30% renewable goal, many projects, such as new wind farms, have been given subsidy contracts and granted planning authorization. The vote won’t affect the project to build the Hinkley Point nuclear power station, as EDF CEO Jean-Bernard Lévy stated that, “We think that this vote has no impact on our strategy.

Leaving the EU will make it easier in the future for Britain to relax its energy policies and emissions targets, as these changes would only require domestic legislative approval. Even if Britain does not change its policies after its exit from the EU, it will lose other valuable assets, such as negotiating support with Russia, which supplies the country with 16% of its energy imports.

With the all the uncertainty surrounding Brexit, there is no way to predict the impact this vote will have on energy policies in the United Kingdom and the EU, but they could become a dominant subject in the years to come.

 

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