Tuesday, October 12, 2010

SDM teams address Hawaii’s clean energy challenges - SM Pulse Fall 2010

By Karl Critz, SDM ’10, and Donny Holaschutz, SDM ’10

Editor’s note: In this article, Karl Critz and Donny Holaschutz summarize the work of two teams of students in SDM’s class in systems engineering. The teams investigated the impact of renewable resources on Hawaii's transportation and electricity systems.

Karl Critz
SDM ’10
The state of Hawaii has great incentive to pursue renewable energy projects. The Hawaii Clean Energy Initiative (HCEI) has provided top-down pressure for change by setting targets of 40 percent renewable energy and a 30 percent increase in energy efficiency by 2030. Electricity costs triple the national average, and gas at the pump is 50 percent more expensive than on the mainland. This combination of political and economic drivers encourages Hawaii to test new systems for energy efficiency and sustainability significantly before such systems are explored on a national scale. For this summer’s course in systems engineering, SDM students undertook to find ways to help Hawaii reach its targets in these two areas: increased transportation efficiency and stable renewable electricity production.
Team Rental Car Efficiency: Electrifying the Rental Fleet

Donny Holaschutz
SDM ’10
Team members: Swope Fleming, SDM ’10, Khalid
Al-Ahmed, SDM ’10, Chang Bae Park, SDM ’10,
and Donny Holaschutz, SDM ’10.
Team Rental Car Efficiency looked at ways to help the Hawaii Clean Energy Initiative increase energy efficiency within the islands. Creating the infrastructure, incentives, and policies that would encourage alternative forms of transportation could substantially help HCEI meet its goals. According to Hawaii’s Department of Business, Economic Development, and Tourism, 18.8 percent of Hawaii’s oil usage comes from transportation.
Figure 1. This system dynamics model illustrates how the current ethanol policy promotes the
development of more gasoline-consuming infrastructure.
The SDM team discovered that current policy emphasizes reducing short-term petroleum consumption, rather than the long-term solution—making the island’s transportation systems less petroleum-intensive. Some current policies even have side effects that undermine the potential success of other transformational policies. For example, through the creation of a system dynamics model, the SDM team discovered that the current ethanol policy is promoting the development of more gasoline-consuming infrastructure by subsidizing and mandating the introduction of 10 percent ethanol to the gasoline mix (see Figure 1). The policy sends mixed signals to the private sector and could potentially compromise the investment in the electric infrastructure needed to support electric vehicles and plug-in hybrids.
Team Rental Car Efficiency was committed to finding ways for HCEI to incentivize small, effective changes that would help it meet its targets and would lead to positive, long-term changes in the energy consumption ecosystem. After exploring a large number of focus areas, the team zeroed in on the car rental fleet. The team found that if managed properly, the car rental industry could be used as a platform to introduce more efficient vehicles into the islands.
As the team discovered, the car rental company is quite different from the private car owner. Car rental companies will replace their car rental fleets with newer cars every 2-3 years. If car rental companies began purchasing plug-in hybrids or hybrid cars and were incentivized to sell their used cars to the islanders, an alternate car market of more efficient vehicles could be created, serving the more cost-sensitive islanders who prefer to purchase used vehicles.
The team deployed a complete set of systems engineering tools to test its policy recommendations. By using system dynamics, the team was able to develop a model that could test the effects of various policies related to different mile per gallon (MPG) mandates and subsidy levels for alternative vehicles such as hybrids and electric vehicles. The current MPG mandate is set at 27.5 MPG, and the federal government provides a $7,500 tax credit for the purchase of a plug-in hybrid. The team used trade space exploration to determine how the various stakeholders—including the rental car industry, government, and tourists—perceive important attributes of these policies, such as the subsidy level, the time taken to change the MPG mandate, and the increase in MPGs in every policy change.
The team found that a policy sensitive to the tourism economy would take into consideration the extra costs imposed on car rental companies by the MPG mandate. Currently electric hybrids have a premium of ~$5K over a comparable gasoline powered vehicle and a PHEV has a premium of ~$20K over a comparable gasoline powered vehicle. If an aggressive MPG mandate were passed without the appropriate subsidy level, then the price premiums paid on the alternative cars would have to either be absorbed by the car companies or passed on to renters. The team found that changing the MPG target at a rate sensible to the car companies is important to achieving a significant reduction of oil consumption in this sector.
Team Grid: Intermittent Resources, System Adequacy
Team members: Kacy Gerst, SDM ’09, Karl Critz, SDM ’10, Matt Harper, SDM ’10.
Much economic and policy research has already focused on how to structure incentives in order to meet a 40 percent renewable portfolio standard. Team Grid therefore chose to focus on the less-studied systems issues and incentives involved in integrating intermittent sources of energy, such as wind and solar power, into the electrical grid. While some renewable energy sources, such as biomass or biofuel, act like the status quo fossil fuels and can be ramped up or down as needed, others do not. Geothermal energy installations usually have a fixed maximum capacity and have limited ability to respond to demand variation. Worse, wind and solar sources are entirely at the mercy of nature. A grid supplied by these intermittent sources must work harder to meet demand when the wind stops blowing.

Figure 2. This system dynamics model is designed to capture
annual energy balance, capital stocks, and power not served.
The SDM team deployed a rich set of systems engineering tools to address the problem (an example is a complex system dynamics model shown in figure 2). Characterizing the proposed electricity grid for 2030 exposed the scope of the problem on the minute and hour timescale. A model of the grid from today until 2030 revealed the connections between generation, demand, investment, equipment retirement, transmission, and stabilization. The team also developed a model of stakeholders to put hard economic values on the cost of blackouts, not-in-my-backyard attitudes, habitat destruction, and behavior change. By using experimental design, the team evaluated a set of portfolios for its economic and social costs. This analysis revealed an optimal set of stabilizers for assuring an adequate energy supply with intermittent resources.
The best portfolios focused on simple solutions that use existing infrastructure. It is not, strictly speaking, economical to maintain oil-fired power plants when they will only be used infrequently. However, compared to other storage technologies it is much less expensive (economically and socially) to keep these plants maintained and ready to step in when the sun and wind cannot provide. The team therefore recommended that the Public Utilities Commission guarantee that low-utilization oil plants be compensated by ratepayers.
Unfortunately, such plants are unable to take extra energy when the wind is blowing strong and demand is low (“down-regulate”). To react quickly to unexpected changes and stabilize the grid, the team also recommended the use of chemical energy storage devices such as batteries or fuel cells. Since the storage would supply broad grid benefits, it makes sense that it be controlled by the electric company and not by individual wind/solar developers. The general benefits of storage should also qualify investments for public subsidies similar to the producer tax credit offered for wind and solar developers.
In addition to these two themes, the team also found benefit in (1) dynamic billing policies to shave demand during emergencies and (2) streamlined siting for transmission lines and geographically distributed intermittent sources. Each of these policies will create the strong grid Hawaii needs to reduce its fossil fuel imports and assure the continued services upon which its economy depends.
These projects were developed in close collaboration with Michael Duffy at the National Renewable Energy Lab, who provided continuous feedback and guidance to SDM students throughout the course. Both teams thank Duffy (who received a master’s from MIT and a PhD from Ohio State University) for his mentorship.

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