Navigant Research Blog

Businesses Say Bring On IoT Regulations

— November 28, 2017

Most businesses do not seek new regulations from governments or regulatory agencies. They already have enough rules to play by. But when it comes to the Internet of Things (IoT), many take a different tack and are quite open to strong regulations since they are acutely aware of the many reported hacks or known vulnerabilities in things like webcams, baby monitors, and cardiac devices.

A new survey underscores this sentiment. 96% of business respondents saying there should be IoT security regulation, according to the study of 1,050 global IT and business decision makers conducted by Gemalto, a global digital security vendor based in the Netherlands.

Not only do business people see the need for enhanced IoT security, consumers do as well. The same Gemalto survey finds that 90% of consumer respondents (out of 10,500) believe there should be IoT security regulation. 65% of the same consumers are concerned about a hacker controlling their IoT devices.

Challenges Businesses Face

The leading challenge for companies trying to secure IoT products or services is the high cost of implementation (44%), according to the survey. That means companies either bite the bullet and invest in greater security for products or services or cut corners. The latter is obviously not a wise approach. It leaves customers too vulnerable to shoddy security in the IoT products or services they purchase. If spending remains a barrier, it could spell trouble for the emerging IoT market as a whole. With no baseline of security, IoT technology buyers will remain leery and unlikely to make purchases.

Another concern the study revealed is that only 6 out of 10 businesses encrypt all the data they capture or store via IoT devices. That means 4 out of 10 (or 40%) businesses do not, a major red flag. Not all data flowing from IoT devices is that valuable; the number of times someone turns on or off a connected light bulb is minor. But health records or personal financial details is another matter altogether.

Energy Sector Relatively Secure, So Far

So far, the energy sector has a fairly good record of thwarting attacks against devices, with some exceptions. Things like smart meters, substations, and other grid assets have remained safe for the most part. But there are many attempts to penetrate the grid, like earlier this year when nuclear facilities came under attack. Those attempts are likely to increase as more things connect to the grid through distributed energy resources and behind-the-meter devices like smart thermostats or EV chargers. Without stronger rules and incentives, the risks will rise significantly.

One can understand the desire for more stringent regulations for the IoT. The number of things connecting to the grid and other systems is growing exponentially, and so too the number of potential threats. A strong set of standards throughout the IoT value chain is needed to keep data, systems, and people safe. Strong rules will force vendors to devote the needed resources and money to make it happen sooner rather than later.

 

Two Issues That May Derail Global Sustainability Efforts

— November 9, 2017

Most nations around the world are committed to reducing carbon emissions and energy consumption. This is evidenced by the near complete global membership of 197 parties in the United Nations Framework Convention on Climate Change (UNFCC), with 168 members currently having ratified their commitment to the Paris Agreement. However, two global issues may affect the long-term success of the Paris Agreement and other national or regional sustainability goals and targets.

A Vicious Cycle

The first is the increasing demand for residential air conditioners in areas that have previously had low usage rates overall. This is most noticeable and prevalent in the Asia Pacific region, where many countries are in tropical or subtropical climate zones. Developed countries around the world have higher historical demand and usage of air conditioners, but increasingly, developing countries in warmer climates are escalating their desire for these systems. Several factors contribute to this increase of use, including general warming of the climate, increased urbanization and the localized hotspots urbanization creates, and the availability of a wider variety of affordable air conditioners.

Today’s air conditioners are much more energy efficient than their predecessors, but they can still be the single largest energy consumer in a commercial or residential building. Additionally, the industry has largely eliminated, reduced, or restricted the use of ozone depleting chemicals such as chlorofluorocarbons and hydrochlorofluorocarbons, but many of the newer refrigerants can have thousands of times more global warming potential than CO2. It is easy to see how increased uptake of air conditioners in areas of lower historical use can derail the intent and goals of sustainability efforts such as the Paris Agreement.

Miss-Measured Returns

The second issue is the miscalculation by governing bodies and sustainability related organizations of the persistence of energy conservation measures (ECMs). For example, the European Union recently proposed a new Clean Energy for All Europeans package with a goal to extend its current sustainability targets to 2030 and beyond. One important feature not included in this legislation is the requirement of ECMs persisting from one period to the next. Essentially, this may give many participating countries an out. The Coalition for Energy Savings, a European organization that promotes energy efficiency, estimates that the energy savings from measures implemented before 2020 will be lost by about 18% by 2030, and about 70% by 2040. Additionally, measures taken to correct these losses can be counted as efficiencies gained during the new period—essentially double counting a single solution. No matter how stringent the goals, if persistence is not required and double counting of ECMs is not eliminated the ultimate goals will not be reached.

Countries around the world are doing an admirable job committing to global sustainability. But commitment alone is not going to provide results if the actuals aren’t measured accurately or don’t match the targets. A key takeaway is that efficiency and sustainability goals cannot be removed from real-world dynamics, such as existing or emerging market forces (e.g., demand for air conditioners in the Asia Pacific region) or the reality of energy efficiency project measurement lives. US utilities, for example, include degradation rates on energy efficiency projects included in their generation capacity credits. This is essential for the utility to meet its generation capacity requirements for large customer bases. Global sustainability goals and targets need to include this type of consistency and accountability in order to be effective in the long term.

 

It’s a Tie! The USITC Announces Its Section 201 Solar Trade Case Recommendations

— November 3, 2017

On October 31, 2017, the US International Trade Commission (USITC) announced the remedy recommendations that it will forward to President Trump. As we have discussed in previous blogs (here and here), this case has been shaping the future of the US solar industry. Impacts have been felt around the world since May 2017, when Suniva and SolarWorld asked the USITC to investigate.

What Did They Recommend?

The recommendations of each USITC commissioner can be found here. In summary, they recommended a system involving import quotas, import licenses, and a percentage-based ad valorem tariff of up to 35% in the first year of implementation. The commissioners rejected Suniva’s petition to set a minimum import price at $0.74/W; in percentage terms, this would be comparable to a 100% tariff. Like with Suniva’s petition, the tariff will be reduced each year and will drop to up to 32% in the fourth year of its implementation (the best case would set the tariff at 15%).

So, What Will Happen Next?

On one side, even when the highest tariffs are applied, module prices in the United States would regress to those seen about a year ago—when the industry installed 14.6 GW of capacity, doubling its previous installation record. Thus, the effects on the downstream of the solar industry should be minimal. It is unlikely that the protection given by the USITC will be enough to create a boom for solar manufacturing in the United States, but it should be enough to keep a profitable cottage industry focused on the local market with modest growth potential.

On the other side, the tariff and quota limits will stop future global price declines from being reflected in the US market. This will affect the competitiveness of solar and hence, its expansion into areas with lower irradiance.

With China hitting 50 GW of installed capacity this year (3 times the second largest market), India poised to take over the United States as the second largest market, and installations in the global sun belt (Latin America, Middle East, South East Asia, and Australia) soaring, global solar players are unlikely to be affected by the tariff. However, potential mirror tariffs might push out US companies with local manufacturing capacity, like First Solar, from the international markets.

Overall, the recommendations of the USITC commissioners favor the status quo, keeping the solar industry intact but slowing its growth.

 

Working Together toward a Circular Economy in Europe

— October 19, 2017

The European Commission is taking the lead on circular economy strategies through the circular economy package. Thus, an increasing number of industry associations and companies in Europe are working toward a circular economy. They are devising ways to implement related measures to reap the benefits while also preparing for upcoming regulations and directives.

Earlier this year, Ecofys, a Navigant company, and Fipra organised a roundtable discussion with industry coalitions, private sector, and the European Commission on the circular economy package, with a focus on the upcoming Strategy on Plastics. The aim was to gain more clarity regarding the current direction and expected content of the strategy that the European Commission will publish by the end of 2017. Ecofys and Fipra are working together with complementary specialisations and a common goal of furthering the narrative about the circular economy. Ecofys specialises in strategic insights, research, and analysis while Fipra specialises in public affairs strategies. This combination of skills is critical to proactively developing substantiated, viable alternatives to the challenges presented by the circular economy.

Cooperation between Stakeholders

The key message of the roundtable discussion based on feedback from participants was the importance of cooperation between all stakeholders in the value chain to find creative solutions to making the plastics materials stream circular. According to the roadmap on the plastics strategy released by the European Commission in January 2017, the three challenges the Commission plans to tackle are the following:

  1. High dependence on virgin fossil feedstock
  2. Low rate of recycling and reuse of plastics
  3. Significant leakage of plastics into the environment

The European Commission plans to conduct a variety of actions, including studies and analyses on alternative feedstocks, reuse, recycling, marine litter, and micro-plastics. It also plans to develop standards for secondary raw materials and the biodegradability of plastics, as well as consider policy tools such as extended producer responsibility (EPR) aimed at increasing the recyclability of products.

Not a One-Size-Fits-All Approach

For a business, this transformation to a circular economy is about efficiency gains, both in terms of input and output, and ensuring each part of its value chain is being targeted. Factors such as shifting focus from product design to usage of recycled content, investing in recycling processes and technology, and creating a market for secondary raw materials based on competitive prices, quality, and quantity are all essential drivers in this transition.

Companies should emphasize all levels of the value chain, including all economic operators and the final customer. A more holistic lifecycle approach should be taken to evaluate where along the chain the most efficiency gains can be made. This transition to the circular economy will be a long one, and it can only be sustained if it is profitable for businesses. It’s also important to note that recycling cannot be a goal in and of itself. Rather, it should be seen as a means to an end.

The application of the waste hierarchy in the member states will also be heavily considered in all actions within the strategy by the European Commission. The main concern for the private sector is that the competitiveness of European businesses is ensured to encourage a successful transition to the circular economy.

The key positive takeaway from the discussion on the circular economy with multiple stakeholders is that there is great interest and belief in this important issue, as well as the desire to implement related measures. However, the motivation to act needs to be accompanied by specific implementation steps to accomplish the transition in companies and sectors.

 

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