Navigant Research Blog

Government Continues to Drive EV Market

— August 28, 2009

The future prospects of companies involved in electric vehicles continue to be greatly influenced by the support (or lack thereof) from the federal government. This week the government handed out another $300 million in funding for alternative fuel programs to Clean Cities initiatives around the country.

Of the 25 Clean Cities initiatives that received funding, 10 involved electric vehicles or vehicle charging stations. These projects will provide much-needed income to companies that produce batteries, vehicles, and charging stations. During this tight economy, even small orders such as these can provide a life line to startup companies looking for capital, as well as boost investor confidence.

Earlier this month the DOE handed out $2.4 billion in grants for electric vehicle-related manufacturing that went to the big 3 auto companies as well as smaller companies including A123 Systems, Ecotality, UQM Technologies, and Smith Electric Vehicles. More than 100 other companies applied for funding but lost out, and at least a few of them are unlikely to survive.

One company that continues to receive strong government support from outside the U.S. is Palo Alto, California’s Better Place. The company’s unique business model is to provide electric vehicles as a service rather than to produce any equipment. Better Place will build a project pilot in Tokyo that will include an automated battery swapping station that can install fresh batteries in the city’s fleet of electric taxis in a matter of minutes.

Better Place has made more progress internationally than in the U.S., with partnerships to provide EV infrastructure services in Israel, Denmark, and Australia. The company’s “batteries as a service” and swapping station operations are either highly visionary or very risky, depending on whom you ask.

Lining up at government troughs that have less price sensitivity is great to help companies get off the ground, and will continue to be a considerable source of income for many of these companies for the next 2-3 years. But they must then prove themselves with products that can compete in an open market. For some, that will be a rude awakening.

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Even Buildings Have Twitter Accounts

— August 27, 2009

umissgym: Is it just me, or is it hot in here?

The social media craze has hit building automation, as the campus at the University of Mississippi will soon be broadcasting its energy consumption via Twitter and Facebook updates.

In partnership with smart grid company SmartSynch, UMiss has created online feeds (also via RSS) detailing several of its main buildings’ energy use, ostensibly to “alter behavior to reduce electricity consumption and carbon emissions.” The UMiss project will study consumption from lighting, temperature controls, and appliances. The organizations have created an online application to monitor and report the energy draw so that building operators can learn where energy is being wasted and implement new conservation strategies.

UMiss’ extending the data from grid to the public web showcases (albeit in questionably productive manner) the merger of energy and IT worlds. Let’s just hope that some computer science student with hacking skills doesn’t think it’s cool to set the gym temp to 95 degrees.

Companies such as SmartSynch are adding IP technology to energy management equipment as part of the massive smart grid upgrade that is now beginning. These companies are unleashing data management tools crafted during the digital music era on an industry that by comparison functions with the sophistication of electricity innovator Thomas Edison’s cylinder phonographs.

Smart grid companies such as SmartSynch, GridPoint, and Echelon are on the cutting edge of figuring out the many possibilities in which internet, communications and networking technologies can make the grid more efficient. By harvesting the billions of bytes of information about the energy that flows across the grid, these companies, as well as big dog players such as IBM, Cisco, Google, Microsoft and GE, will invent a whole new world of applications that will drag the energy industry into the 21st century.

How we use energy in 2015 will look nothing like what we do today — thankfully. We already have several iPhone apps for managing energy consumption, and appliances that will reduce or cut power to avoid blackouts or when energy gets pricey. Having the dryer turn off and the flat-screen reduce its brightness momentarily to prevent the neighborhood from going dark is not only cool, it’s practical.

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IBM and Trilliant Team to Simplify Smart Grid

— August 25, 2009

Turning the country’s vast islands of proprietary utility networks and isolated equipment into an intelligent grid that manages the power going into homes, offices and factories will take decades and hundreds of billions of dollars. IBM is partnering with veteran energy efficiency and grid communications company Trilliant to ensure that the companies’ hardware and software will speak the same language.

The agreement to integrate IBM’s Websphere and Tivoli products for managing enterprise data into Trilliant’s smart grid communications system provides utilities with and end-to-end system for collecting information and administering grid operations.

Trilliant, which currently has more than 200 utility customers, provides technology that can relay information about power consumption and network performance from smart meters in homes, to utility equipment out in the field such as transformers and substations, and then on to centralized (head end) utility servers. The company will build its management system using Websphere’s application server and the Tivoli network management suite.

IBM and Trilliant will be able to resell each others products, enabling utilities to work with one company for all of its smart grid management needs. The two will also work together to develop grid standards, and will coordinate efforts with national standards bodies.

Trilliant is forming strategic relationships with many of the top smart grid firms, including system integrators Capgemini and Accenture, and equipment companies GE and Itron. “It’s a very small world where you are [both] partners and competitors. You have to be very flexible,” said Trilliant CEO Andrew White.

The federal government has provided $4.5 billion in stimulus funding for smart grid initiatives, and venture capital investment in energy efficiency startups grew by 168 percent during the second quarter of 2009.

IBM says the utilities and energy sector is one of the highest growth industries for the company. In addition to enhancing its products to make energy equipment more efficient, IBM is also looking to sell services to
mitigate the impact of climate change
(which the energy industry has had a hand in creating) on utilities.

According to a recent IBM-sponsored report, 90 percent of utilities expect that climate change will put their business at risk due to more severe weather that will damage equipment and reduce the availability of fresh water.

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Limited Government Proponent Calls for Smart Grid Intervention

— August 23, 2009

Some projects are just too big to let the private sector handle them alone. Updating our aging one-way system of centralized power production to a smart grid is one of those projects. Left mostly to its own initiative, the energy industry has done very little in technology innovation during the past fifty years to make the grid more efficient and to accommodate distributed power production.

The need is so clear that even a group that supports limited government agrees that building a smart grid that conserves energy, integrates renewables, and diminishes peak power requires the guiding hand of the federal government.

The Lexington Institute has published a paper that neatly summarizes the smart grid challenges, and concludes that “Just as the grid of today required presidential initiative, the smart grid will take a high-level policy push, too.” The public policy research group, which says it “actively opposes the unnecessary intrusion of the federal government into the commerce and culture of the nation,” adds that “Smart grid will most likely require federal, state and local government incentives” and that “Policy action is worthwhile to move promising technologies closer to full adoption.”

The “Moving Forward on Smart Grid” report cites the Rural Electrification Project of the 1930′s as a success story where the federal government helped to bring electricity to farms.

The Lexington Institute’s seemingly contradictory position on government intervention is understandable given its energy independence/security and climate concerns. And the logic is sound. The demand for energy is likely to increase by 40 percent by 2030, and the choice is to either greatly increase efficiency while adding renewable power, or to plan on building hundreds more coal and nuclear power plants.

Utilities, whose business model has traditionally been to increase revenue by selling more power, will not change behaviors without federal incentives. Many utilities are in the midst of rollouts of thousands of smart meters to enable commercial and residential customers to manage their energy consumption. Federal grants, such as the Recovery Act funds, are enabling energy efficiency projects. For example, the Mississippi Development Authority, in partnership with smart grid company, SmartSynch, is installing smart meters at 1,500 state-run public facilities.

Also instrumental in prompting utility action are the investment tax credits and loan guarantees. Loan guarantees for energy efficiency make fiscal sense because the loans can be repaid through savings. One option would be to allow utilities to provide smart meters to customers, and instead of permanent rate hikes, have temporary rate increases that wouldn’t raise customer’s monthly bills above present levels as long as the expected reduction in consumption is met. Then, after the equipment is paid off, rates can be lowered.

Also, to get hundreds of power producers and sellers to design equipment that will work together requires federally mandated standards, and that process is already underway.

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