Navigant Research Blog

Natural Gas Vehicle Faceoff: Honda vs Detroit

— April 26, 2012

Ever since the introduction of the Tesla Roadster in 2008, compressed natural gas (CNG) has taken a back seat as an alternative fuel in the U.S. retail automotive market.  Despite heavily financed advocacy campaigns, the technology has suffered from a lack of model availability, infrastructure, and public interest. Recent announcements from both domestic and foreign automakers , though, may be placing the alternative fuel back in the spotlight alongside electricity.

General Motors, Chrylser, and Ford all announced in early March that by the end of 2012, CNG versions of the OEMs’ pickup trucks will be available for the U.S. retail market directly from their dealers.  The “Big Three” used to sell CNG vehicles retail in the 90’s and early 2000’s, but cheap gas and a lack of infrastructure made the more expensive CNG models less desirable.  Thus the CNG models have been relegated to the conversion aftermarket with other eco-friendly alternative fueled vehicles such as biodiesel and EVs.   Ford was the first of the Big Three back into the CNG market, offering packages preparing engines for CNG conversions in 2009.

One auto-manufacturer, Honda, has consistently maintained a CNG light duty vehicle on the U.S.  market: the Civic GX.  The GX has been a perpetual winner of the “Green Car of the Year” award, but is only available in four states.  Though sales of the Civic GX in the U.S.  have not been spectacular (2009 sales numbered less than 2,000), Honda announced in late 2011 it was expanding its sales territory to 38 states while simultaneously installing CNG refueling stations at its dealerships – essentially creating its market.

The trend certainly has much to do with the rising price of gasoline and the more consistent price of CNG (see below), as well as the slowly growing infrastructure (there are now 449 publicly accessible stations).  Though the increased interest from OEMs is encouraging, the trend has not yet translated to  actual sales.  This is in large part because conventional internal combustion engines are becoming more efficient, hybrid mpg ratings are topping 50 miles, and plug-in electric vehicles (PEVs) are finally starting to hit the market.  All these competing technologies also rely on an infrastructure that is quickly becoming, or already, easily accessible.  This fact is troubling for Honda, because it means that a) the GX faces stiff competition, and b) it doesn’t have the public infrastructure to make “range anxiety” irrelevant. For GM, Chrysler, and Ford, however, the issues of competition and range anxiety are less concerning.


The big three have taken a markedly different approach.  The first difference being that, instead of competing in a market saturated with small Japanese hybrids, plug-ins, and European clean diesels; Detroit is sticking to markets it knows well, offering a fuel efficient “enabler” to a vehicle segment desired by fleet purchasers and prominently regarded as gas guzzling.  Second, and most important: many of the CNG pickup trucks are dual Fuel, which means they will have tanks for both gasoline and CNG, and can switch between the fuels with ease.  Ford and GM models will boast a range of more than 600 miles on combined tanks.  Dodge’s model has a much smaller gasoline tank, and therefore combined range is placed around 360 miles.  The dual fuel system will therefore give drivers the opportunity to both reduce mileage costs and be “greener” without the concerns of range anxiety.

Dual fuel CNG technology is not necessarily “new” to the world, as Fiat first introduced the systems in 2008 to South American markets.  The system, however, has never been directly available from U.S.  dealerships.  In the battle for the CNG vehicle market share, Detroit’s prospects look good.


China’s Smart Grid Spearhead

— April 26, 2012

According to a Chinese government source, China intends to install over 300 million smart meters in 2015, a massive increase of 730% from the 36 million smart meters installed in 2011.  China’s utility giant, the State Grid Corporation of China (SGCC), will invest $47 billion in power grid construction over the next five years.  About $100 million of this amount will be used to advance the smart grid technology.

The news media only supplies numbers, so it’s hard to know what the Chinese players are actually doing now.  I feel that the real story behind China’s smart grid program would be even more impressive than the published figures.

Chinese players are engaging across all aspects of the smart grid space: power generation, transmission, substation, distribution and consumption, by adopting advanced information-gathering and intelligent information-processing technologies.  While there are many different views in China’s development in smart grid, my focus is on the utilization of information technology, automation, and intelligent interactivity in components of the power grid infrastructure from utilities to consumers.

The overall goal of the Chinese smart grid effort is to enhance the capabilities and levels of existing elements, including:

  • Power transmission equipment utilization
  • Network security and reliability
  • The quality of electricity service
  • Power grid efficiency

More specifically, on the transmission side, the major goal is to implement sensors to achieve real-time monitoring of transmission lines.  At the substation level, Chinese parties believe that smart grid technology can automatically adjust power levels and achieve rapid fault resolution in intelligent substations, through intelligent switches and transformers.

On the distribution side, Chinese players expect that real-time monitoring, intelligent power distribution, and other networking applications can achieve more rapid failure restoration, a more reliable electricity supply, and visualized operations management tools.  Eventually, these elements could offer advanced functionality in information collection and analysis, intelligent electricity load shifting, and remote meter reading applications to link two-way smart meters.

Recently, a bunch of Chinese players, including RXPE Sieyuan NARI, XJ Electric, Clou Electronics, Holley, and Ningbo Sanxing, have shifted their business focus to pursue huge market potential in the domestic smart grid markets.  At the same time, it’s clear that China could be more aggressive on the global stage.  Huawei announced that it will launch in the U.K. smart meter market after signing a joint venture deal with technology provider Landis + Gyr.  SGCC, meanwhile, has signed smart grid deals in the Philippines, Brazil, and Portugal.    China has also stepped up efforts to become part of the global community in seeking smart grid standards.  For example, China recently insisted on establishing a new committee under the International Electrotechnical Commission (IEC), with the U.S. and European representatives approving this request.  China is signaling its intent to get off the sidelines and instead become directly engaged on the standards front.  That’s an appropriate move, as China becomes a center of global smart grid innovation.


NRG Settlement Far From Settled

— April 25, 2012

A proposed settlement to make amends for energy price-fixing during the Enron era is causing shockwaves around California’s electric vehicle charging industry.  The settlement between the California Public Utility Commission (CPUC) and NRG Energy, which was announced on March 23, would require the energy company to spend $100 million on building out EV infrastructure and pay $20 million in cash to the CPUC.

The settlement is based on energy market manipulations committed more than a decade ago by Dynegy Inc., which at the time was a co-owner, along with NRG, of a portfolio of power generating plants that NRG later acquired in full.

More than half of the infrastructure investment would go towards installing 200 commercial EV charging stations.  NRG would install the stations in the San Francisco Bay area, the San Joaquin Valley, the Los Angeles Basin and San Diego County, all areas expected to see significant penetration of EVs during the coming years.

The DC charging stations, which enable battery electric vehicles to fully charge their batteries in 15 minutes or less, would be owned and operated by NRG, which would receive all of the revenue derived from their usage.  An obvious question is, How does opening up retail locations to distribute one’s services and generate revenue constitute reparations?  This is akin to a petroleum company being ordered to open up more gas stations because they were overcharging customers.

The dissatisfaction with the settlement was a frequent topic of conversation in the hallways at the EV Infrastructure USA conference in San Diego last week.  Competing EV charging services companies are unhappy that the “penalty” would give the company first-mover advantage in fast DC charging in many key locales throughout California.  California currently has only one installed DC charging station.

Earlier in the week EV charging services company ECOtality filed a motion for public review of the CPUC settlement.  The filing points out the potential hindrance to competition through the “monopoly-like benefits” and asks, “Does [the settlement] carry the potential to impair competition among different developing business models?”

Of the remaining funds, $40 million would go towards wiring homes, multi-unit dwellings, and public locations, such as schools and hospitals, to make them ready for the installation of EV charging stations.  While this aspect of the contract at first glance might appear to serve the public interest (for those who happen to plan on buying a plug-in vehicle in the next few years), the ECOtality filing points out that “the settlement would confer exclusivity on NRG at the ’make ready’ sites for 18 months before competitors would have access to the use of these sites.”

The nascent EV charging infrastructure industry is as much about the land grab for prime locations as it is about technology and business models.  EV charging vendors see great value in forging relationships with real estate companies and retailers before EVs become commonplace.  An amendment to the agreement that would not inhibit competition would open up access to the pre-wired sites to competitive bidding amongst EV charging services companies.

EV owners could benefit initially if the infrastructure is put in place earlier than if the market were left to its natural evolution, but the benefits may be short-lived if competition is reduced.  Many industry folks believe that the NRG settlement is unlikely to be approved if additional scrutiny and public review are permitted – which in this case seems only appropriate.


Greenpeace Criticizes Apple, Amazon, Microsoft Data Centers

— April 20, 2012

Greenpeace has re-ignited the debate over the environmental impact of cloud computing with its latest report on energy consumption and energy sourcing in the data centers of some of the largest tech companies.  Its new report, How Clean is Your Cloud?, looks at the data center deployments of 14 of the leading players in the market.

The report is particularly critical of Apple, Amazon and Microsoft, identifying them as major suppliers who are expanding their data center capacity “without adequate regard to source of electricity,” relying “heavily on dirty energy to power their clouds”.  On the other hand, it praises Google and Yahoo for the investments in renewable energy.  Its rapprochement with Facebook also continues, as it commends the social media giant’s decision to develop its next data center in Sweden, where it will be able draw on renewable energy sources for its power.

Both Apple and Amazon have reasserted the green credentials of their data centers and of cloud computing in general.  However, according to a report in The Guardian, Amazon appears to be simply retreading arguments for the general benefits of cloud computing, while sidestepping the issue of energy sourcing altogether.  This rather misses the point of Greenpeace’s criticism.

More interestingly, Apple has responded by providing more details on what it is actually doing in its flagship data center in Maiden, North Carolina.   Apple argues that its new data center will be highly energy efficient, will use a significant amount of renewable energy, and overall will use only 20% of the 100 megawatts (MW) attributed to it by Greenpeace.   In turn this is putting the spotlight on Greenpeace’s method for ranking data centers.

However, Apple would seem to be suffering in part from inflating its own claims to being green.  It’s hard to see how it can claim to building the greenest data center ever if it is still relying even partially on coal-generated electricity – Verne Global, for example, likely feels it has a much better claim on that score.  Interestingly, Apple now says that its next data center in Oregon will be powered by 100% renewable energy, something Greenpeace hadn’t allowed for in its rankings.

Greenpeace can claim that getting Apple to talk more openly about energy use in its data center is already a step forward.  But until there’s an agreement on data transparency and metrics, such partial disclosures tend to confuse rather than clarify the debate.  The focus should therefore be on getting cloud computing providers to be more open about the actual energy efficiency and environmental impact of their data centers.

As Greenpeace says, data centers are the factories of the digital world. So it’s interesting to see Akamai, the cloud and Internet platform provider, gaining credit from Greenpeace for being the first major players to report on its Carbon Usage Effectiveness (CUE).  CUE, developed by the Green Grid, provides a means of assessing a data centers overall emissions performance, including its primary energy sources.  Only when all cloud providers enable such transparency will customers be able to make informed decision on whether they are procuring cloud services that are truly green.


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