LCOE has reached its limits  We regularly read about new record lows for the Levelized Cost of Energy (LCOE); such as US$ 1.79 ct/kWh for solar photovoltaic (PV) projects in the Kingdom of Saudi Arabia or US$ 1.97 ct/kWh in India. Those who are more familiar with the subject know that these numbers sometimes represent the levelized cost of energy, and at other times they indicate the anticipated levelized revenues for the energy sold under the terms of an auction. If you dig deeper, you start to understand that this number is based on multiple assumptions: not only about Capex and Opex but also debt and equity levels, the cost and term of financing, the life time of the asset, availability, wind speed and solar irradiation, the period and method of depreciation, residual value, and the exchange rate. Where the number represents levelized revenues, you also need to factor in assumptions about how the offtake agreement is adjusted over time and what the market price for energy will be after this agreement expires. With all these considerations in mind, you may wonder what the value is of an LCOE? Can you rely on the figure; or should you only trust LCOEs when they come from one source, because then at least you can compare one LCOE with another? Or is the LCOE about as insightful as the typical statement in a press release where the new owners proudly announce that their project will supply so and so many households with electricity? Let’s take a step back and ask ourselves if cost per kWh is the right number to look at? Is the underlying assumption that every kWh has the same value correct? Can I use the LCOE index in a world where storage is becoming more and more prevalent? Batteries typically increase the LCOE, but perhaps these higher costs increase the value of the system at the same time? And if so, by how much? We all like a method that allows us to compare different solutions and technologies in a simple way. As long as LCOEs are calculated using the right assumptions, then they provide a straightforward comparison. But we should be cautious. There is an old saying, “what gets measured gets done”. But is a low LCOE what we want to get done, or would we rather demand and supply are matched at the lowest possible cost? Do we want to have security of supply that is sustainable environmentally? If the answers to these three questions are ‘yes’, or even if it is ‘yes’ to just the first question, then we need to go beyond a simple LCOE number. In future, we need to work with a “function” rather than with a single “index”. Our new Cost of Energy Function (COEF) needs to start by capturing the system cost of power generation, and then progressively show how this cost changes, typically increasing, if the generation (supply) profile is adjusted to a demand profile. The resulting curve may well end before full adaptation has been reached as this amount of flexibility may not be possible technically. The demand profile will be a new assumption that is factored into our equations. We may also need to accept that two demand profiles are necessary: one for summer daily demand, another for winter. We will also need to include whether we are considering a base load or a peak load generation source. In addition to generation curves, we can construct demand curves that start with demand today. By creating two curves, we can show the cost of energy efficiency (how much investment would be needed to reduce energy consumption) and the cost of flexibility (how much it would cost to move the point in time when energy is consumed by 30 minutes or one hour, for example). Moving from a LCOE index to a function is not an easy undertaking, and it may well progress in stages. The car industry currently measures gas consumption using different driving profiles, depending on whether it’s in the city, on country roads, or on the highway. Regardless of the question, if we use a function or a group of values that are profile-based, we need to ensure that we all mean the same thing. Here, an independent body or workgroup could play an important role in developing and codifying a workable framework: a framework that captures the complexity of demand and supply, that captures the value of storage, and that helps regulators to set policies because it measures what needs to be done.

Bloomberg’s new European headquarters in London was described as the world’s most sustainable building when it was unveiled last month.

The 3.2 acre site in London’s financial district, designed by architects Foster + Partners, cost an estimated £1bn according to some media reports. The building will use about 70% less water and one third less energy and associated carbon emissions, than an average office building, said Bloomberg, a news and information provider.

The building generates its own power from gas and re-uses “waste heat” to heat the building in the winter and cool it by circulating chilled water in the summer. It captures rainwater on the roof and re-uses it in the building, while its airplane-style “vacuum flush” toilets minimise water use.

“Flaps” on the outside of the building open and close, letting it breathe while reducing noise from outside.

According to Bloomberg, the building scored 98.5% when judged by BREEAM (Building Research Establishment Environmental Assessment Method), a widely-used assessment method for sustainability in buildings.

The new Bloomberg building isn’t an isolated development, of course. It’s the natural progression of an iterative process of learning and incorporating new techniques and materials.

Foster & Partners was also the architect of the first phase of Masdar City – home to one of the world’s largest clusters of high performance buildings. Masdar City has become a “greenprint” for sustainable design, drawing on both passive and active design techniques to minimise water and energy use. While technology has advanced since the project was designed, its capacity to demonstrate the potential of sustainable design remains constant.

10 years later, sustainable urban design is now mainstream and part of business as usual among developed nations. In arid climates such as the Middle East, the impact of sustainability measures can be dramatic. Up to 80% of energy in Middle East countries is consumed by buildings alone – this can be cut by 30% with “quick win”, low cost measures.

It is little wonder that sustainable design is at the heart of ambitious development plans across the region, including Saudi Arabia, which last month announced plans to build a $500 billion city, known as NEOM (short for “new future”), which will get all its power from renewable energy.

Sustainable design can also provide solutions to challenges and natural disasters associated with climate change. In China, for instance, a pilot “sponge cities” project is seeking to minimise the threat of floods through measures such as covering rooftops with plants and permeable pavements that store excess water, as well as the creation of wetland reservoirs. Such ideas could be adopted by flood-prone cities across the world.

Collaboration, partnership and knowledge sharing is vital to ensure that sustainable design (including new technology, approaches to design and engineering) continues to spread. Brick by brick.

About half of the world’s population now lives in cities. The United Nations has forecast that this figure will rise to 66% by 2050.

By 2030, the world is projected to have about 40 mega-cities with more than 10 million inhabitants.

In many cities now, there is already a shortage of housing. Public transport is straining to cope with growing passenger numbers and water and energy supplies are erratic.

Climate change is likely to worsen these problems, and issues such as water shortages are likely to drive even more people to live in towns and cities. As a result, dealing with urbanisation is one of the biggest environmental, economic and social challenges humans face.

Just to keep up with expected economic growth, the world will need to spend an average of $3.3 trillion each year on critical infrastructure such as rail, water, telecommunications and roads, until 2030, compared to $2.5 trillion now, according to a 2016 report by McKinsey.

Technology can help ease the strain of urbanisation – and reduce its carbon footprint.

For instance, the “Internet of Things” (web-connected sensors in everyday devices that can talk to each other) can be used in buildings to regulate temperature and forecast/control power demand in cities.

Experts believe that 3D printing could revolutionise the building industry by enabling wider use of efficient materials (better suited to extreme climates such as desert regions) and faster development times. (These and other developments will be discussed at the Energy Efficiency in Buildings Forum 2018 on 18 January, part of the Energy Efficiency Expo, ADSW 2018.)

Technology giant Siemens, which is an exhibitor at ADSW 2018, says that “neural networks” in its software can accurately predict air-pollution levels in major cities several days in advance. Such solutions could give municipal authorities and city residents the information needed to minimise pollution peaks before they happen, improving quality of life and reducing healthcare demand.

“Retrofitting” buildings to incorporate new or updated technologies can lead to significant savings on electricity and water bills, while reducing environmental impact. Advances in engineering, renewable energy and architectural design (e.g. “Building Information Modelling”) will also help make cities more sustainable.

These are just a few examples of how smart technologies are being incorporated into our cities to make them more efficient, cleaner and more user-friendly – ultimately enabling a better quality of life for residents.

The potential for smart technologies and systems is particularly high in dynamic, fast-growing and heavily urbanised regions such as the Middle East.

Masdar City in Abu Dhabi was a forerunner for smart city developments when it was launched more than 10 years ago, and its sustainable design principles and use of renewable energy have since been emulated around the world.

Dubai’s smart city initiative aims to make it the “smartest and happiest city on Earth”, and it is part of a campaign by the United Nations to use digital technology to promote smart cities.

Saudi Arabia also has strong smart city ambitions, and last month announced plans to build a $500 billion city and business zone that links Saudi to Jordan and Egypt. The 26,500-square kilometre zone, known as NEOM (short for “new future”) will get all its power from renewable energy. It will focus on industries such as energy and water, technology, bio-technology and entertainment.

While the potential benefits of smart cities are clear, a number of challenges need to be overcome to bring them to reality, from privacy to data fragmentation to the impact on energy systems. In order to address these, collaboration between governments, businesses and citizens will be essential.

Join the debate at Abu Dhabi Sustainability Week 2018.