Navigant Research Blog

Reimagining Energy Efficiency as a Pillar in the Climate Action Strategy

— December 5, 2017

A recent Wall Street Journal blog post by Sam Ori from the University of Chicago, “Why Government Energy-Efficiency Programs Sound Great–But Often Don’t Work” starkly criticizes energy efficiency programs and ideas on how to revisit residential program design. The author’s conclusion is sound, but there is more to be said on how energy efficiency can become a sturdier pillar in the strategy to combat climate change. Ori points out, “there is an opportunity for policymakers to rethink the ways they choose, design, implement, and evaluate energy-efficiency programs.” Based on ongoing Navigant Research analysis, policymakers play a role, but the challenge requires a balanced two-pronged approach.

Utilities Are Only Part of the Equation

The reality is that a transformation of the energy industry is underway. A more dynamic, digital infrastructure of renewable, distributed, and non-traditional resources is being applied in the commercial buildings context. Navigant Research characterizes this new energy ecosystem as the Energy Cloud. In the buildings sector, rapid adoption of behind-the-meter energy management technologies, alongside onsite power generation and storage and ongoing investments in information technologies on the utility side of the meter, are redefining the relationship between electricity supply and demand.

This means federal and state policy and electric utilities will no longer be the gatekeepers of energy supply or the rule makers for how to orchestrate shifts in energy demand. Energy efficiency improvements are crucial for building optimization, which is made possible by intelligent technologies—notably the uptake of Internet of Things infrastructure and analytics. Navigant Research’s recent Building-to-Grid Integration report outlines how the intelligent building represents a conceptual paradigm shift for businesses through the integration of facilities management and IT. The intelligent building unifies strategy, investment, and decision-making. The door is open to market influencers, utilities, and many others that can introduce creative ways to utilize existing technology infrastructure, deploy new solutions, and analyze increasing data streams to optimize facility operations that meet broad business demands with energy efficiency savings as a byproduct.

Do Not Undervalue Energy Efficiency for Commercial and Industrial Customers

The Wall Street Journal blog outlined some significant challenges to realizing greater carbon emissions savings from energy efficiency in the residential sector, but missed one important part of the climate change big picture: tackling commercial and industrial (C&I) building energy use. C&I facilities are important because they not only consume more energy, but are also more energy-intensive per SF of floor space compared to residential customers.

Furthermore, C&I customers can be effective partners in tackling energy efficiency improvements because the scale of their effectiveness (and business perspectives) can help accelerate change. First, the energy savings potential of a single large building, single customer with multiple buildings, or a campus simply delivers a greater volume reduction in energy use and therefore carbon savings. In order to meet the magnitude of savings to combat climate change in a significant way (as outlined in the Wall Street Journal blog), business customers need to participate. Second, business customers understand the risks that climate change presents to their bottom lines and the mounting environmental, social, and economic challenges tied to unfettered energy consumption. This sector deserves credit for showing leadership through sustainability initiatives. Read more about how C&I customers invest in sustainability and combat climate change in Navigant Research’s report Intelligent Building Technologies for Sustainability.

As Ori summed up, “Energy efficiency offers significant potential as part of a portfolio of climate policies. But that potential will only be realized if we crack the code to get programs structured to deliver results. If we don’t, dealing with climate change will be much more expensive than we realize.” Want to hear more about Navigant Research’s perspective on the importance of energy efficiency? Register for our upcoming webinar, Monetizing Energy Efficiency, with Tom Machinchick.

 

Utilities Must Take a Pragmatic Approach to the Energy Transformation

— July 27, 2017

Few will dispute the fact that the industry is undergoing significant change. The shift to clean and distributed energy sources and the adoption of EVs will force significant changes to the way distribution companies run their businesses. However, much of what is written on business transformation can be high level. If everything that is written on the subject is to be believed, then there are huge utility transformation projects occurring across the world. While there is certainly a lot of activity, projects are typically targeted at specific areas rather than businesswide.

Transform Business Models via Planning

As discussed in Navigant Research’s Distribution Utility Transformation Strategies report, which highlights some of the leading examples of business model transformation within distribution networks, transformation does not happen overnight. Rather, it is a decade-long process that requires careful planning and a staged approach. There are many different drivers for transformation, including increasing competition, business process efficiency improvements, a renewed focus on customer experience, new product and service development, and the incorporation of distributed energy resources (DER). These drivers will affect utilities in different ways; the most striking difference is between competitive and monopoly markets.

Create a Vision for the Future

One key takeaway is that as with any large-scale project, utilities must set out a vision for their future businesses and a roadmap detailing how to achieve this goal. Companies cannot do everything all at once, so they must place their bets wisely and invest in projects that deliver the biggest returns. In addition, organizations cannot underestimate the contribution a strong stakeholder engagement program can make to a project’s success.

Develop an Actionable Roadmap

As a result, each utility’s transformation will be different and will happen at different times—and at different rates. Digital Utility Transformation Best Practices builds on some of the recommendations provided in Navigant Consulting’s “Energy Cloud Playbook” to offer best practices for creating an actionable roadmap for transformation. Most utilities will not be able to avoid the inevitable forever. Therefore, they must plan now for their future businesses. The right strategy will help utilities navigate political uncertainty; manage market-specific regulatory policies; access project finance from skeptical and conservative shareholders; and confront legacy issues such as corporate culture, a lack of skills, and outdated technologies.

The latest reports published in Navigant Research’s Digital Utility Strategies Research Service provide specific details on different utilities’ transformation projects. They discuss and compare initiatives in California, New York, the United Kingdom, Italy, and Australia while also providing some practical advice to organizations embarking on their own transformation projects.

 

How Solar PV Plus Storage Fits into Corporate Energy Management Strategies

— May 12, 2017

The electric power industry is now facing a fundamental shift toward a more decentralized grid, known as the Energy Cloud. As highlighted in a previous two-part blog series, technology and financing innovations sit at the heart of this shift as key enabling factors that are driving business model innovation and customer choice. For years, corporate commercial and industrial (C&I) energy and sustainability managers had no say about the price and type of electricity they used. Now, these same managers are choosing to apply new technology and business model innovations to meet their sustainability needs. These new customer needs can be categorized into the following important trends:

Fortune 500 C&I utility customers are seeking cost-effective, customized, and comprehensive energy solutions that can meet these evolving needs without capital expenditures or impact to their day-to-day operations. And the market is just now beginning to respond in a turnkey, comprehensive way.

Navigant Research will highlight how these solutions are being brought to the marketplace to meet Fortune 500 customer needs in an upcoming report titled Energy as a Service, which is scheduled for release in 2017.

Distributed Solar PV Joins the Solutions Table

Given these evolutions, it is now clear that distributed solar PV plus energy storage is starting to take a seat at the table as an integrated component of the solution set that Fortune 500 C&I customers are seeking. The drivers for the development of distributed solar PV plus energy storage markets are highlighted in Navigant Research’s recently released report titled Distributed Solar PV Plus Energy Storage Systems.

For example, Sharp now offers solar PV plus energy storage financing. And Macy’s recently announced another series of solar PV installations, several of which included integrated solar PV plus energy storage. The advantage that a solar PV plus energy storage installation can provide is twofold: a solar PV system can produce energy for use onsite at a per-kWh rate that is lower than the local utility rate, while an energy storage system can guarantee the type of tariff-specific demand charge savings that solar PV alone cannot deliver. Both the Sharp and Macy’s announcements are key examples of technology and financing innovation being deployed to meet the needs of C&I corporate energy and sustainability managers.

 

Innovators Wanted for DER Solutions: Part 1

— April 18, 2017

Coauthored by Ken Horne and Laura Vogel 

Distributed energy resources (DER) are a hot topic in the energy industry these days. Some industry players take it as gospel that there will be an inevitable transition from centralized electricity generation to dispersed sources of both producing and reducing power to manage the bulk of grid supply—including Navigant Research.

The Energy Cloud and Changing Relationships

The Energy Cloud will most likely be the result of a fundamental shift in the way electricity is generated and distributed. It will signify an evolution in the traditional relationship between stakeholders across the electrical grid, particularly between utilities and their customers.

The Energy Cloud

(Navigant Consulting, Inc.)

Such a change may occur in the long term, but there are plenty of challenges that need to be overcome that invite numerous opportunities for innovation from current and new players in the energy industry. The issues range from technical to economic, regulatory, and consumer-based.

Energy Cloud Issues: Opportunities for Innovation

(Navigant Consulting, Inc.)

Technical Issues Facing the Energy Cloud

On the technical side, many hardware and software questions need to be answered. It is not so simple as to throw DER onto the existing grid—which was designed for one-way power flow. If clusters of DER on one feeder or substation occur, which is more likely than perfectly dispersed resources, voltage and reverse power flow issues must be dealt with. Visibility to DER on the grid will be key, along with real-time state estimation for behavior of the grid under near-term changes—for example, a switching operation. Communication standards (such as OpenADR) for different vendors, devices, and resource types will be necessary so that the grid operators do not need to rely on each DER vendor’s proprietary system. Big data management will be paramount for optimizing transactions, telemetry, prices, and controls on the grid.

Capturing Value Streams in the Energy Cloud

Assuming all the technical hurdles can be met, policy and economics will determine the types of business models that will succeed in a DER environment. No two countries in the world or even states in the US have identical regulatory structures. Thus, in order to scale up efficiently, flexible business models that can capture multiple value streams will be required. In some markets, the regulated utility may be allowed to own and finance projects, while in others the utility may be prohibited from such activity. Measuring the value of DER will vary by market as well, so creative financing mechanisms will be necessary. Finally, a new type of transactional platform will be imperative to accurately enact deals between suppliers and consumers—or even from consumer to consumer—in a timely manner.

 

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