Navigant Research Blog

India’s Microgrid Moment

— August 24, 2012

As noted earlier by my Pike Research colleagues, the massive power outage in India that left over 370 million people in the dark in late July could open up opportunities for cleantech in booming South Asia.  It could also help make India one of the world’s top hotspots for remote microgrids.

Remote microgrids can serve as the anchors of new, appropriate scale infrastructure, a shift to smarter ways to deliver humanitarian services to the poor.  That’s why financial support for remote microgrids has come from the United Nations, the U.S. Agency for International Development (USAID), and non-government entities such as the Clinton Climate Initiative and the Bill Gates Foundation.  Even Greenpeace has endorsed the concept, with a report extolling a bottoms-up distributed renewables strategy to export surplus solar power out of the Indian state of Bihar via microgrid networks.

Clearly, relying upon centralized coal plants to fuel India’s expanding economy is not a viable solution.  As climate change expert Joe Romm points out in a blog on The Energy Collective, mobile phone towers powered by off-grid renewable energy sources may be pointing the way toward viable energy supply solutions for India.

Just as the developing world leapfrogged landlines – the equivalent of today’s centralized transmission grid – to move directly to mobile and wireless telecommunications, it may skip to distributed microgrid networks (the analogue of cell phones), rather than building out massive long-distance transmission networks.  More importantly, from an environmental point of view, these remote systems will not rely on diesel power generation, the default source of power throughout much of the developing world.

At present, entrepreneurs view India as an attractive market since all microgrids under 1 megawatt (MW) in size are deregulated, which means that these systems can be developed by the private sector with a minimum of government red tape.  Among the leading innovators is Simpa Networks, which has developed a “pay-as-you-go” business model that allows villages looking for simple systems to power lighting and mobile device-charging services.  Billing its service as a “progressive purchase,” the firm relies upon smart meters to measure consumption.  Customers purchase power in much the same way millions of cell phone users buy prepaid cards.  The difference is that customers are slowly investing in their own solar PV systems, which are typically paid off within 3 to 5 years.

One of the first microgrids to be deployed in India to service more affluent customers was installed by smart meter vendor Echelon for the Palm Meadows Community in Hyderabad, India.  This 86-acre gated community with 335 homes and residential services offers another peek into the future for India.  The community ties into the grid at a dedicated substation and sources energy in bulk from the utility.  While the community still runs primarily on diesel generators, a pricing plan can reduce consumption to help respond to peak demands.  The microgrid will also incorporate solar PV into rooftops that will feed energy back into the grid, creating a solar infrastructure with payback options.


Smart Water Grid Slowly Gains Momentum

— August 22, 2012

While smart grid initiatives on the power system get all of the attention (and most of the money), some water utility managers are embracing smart grid technologies as they strive to improve the efficiency of their systems.  That trend will expand in the next few years, albeit at a moderate pace compared to the more aggressive deployments by electric utilities.

Evidence of this trend continues to mount:

  • Australia’s Sydney Water began deployment in early July of high-efficiency Itron meters to replace its aging stock.  The three-year program will enable Sydney Water (which serves 4.6 million people) to eventually take advantage of automated and advanced metering technology.
  • In the United Kingdom, Thames Water is extending a smart grid trial in the town of Reading to the city of London.  The utility’s commercial director, Dr. Piers Clark, says, “Smart water metering will play a critical role in helping the water industry to better manage consumption and leakage.”
  • In Charlotte, N.C., a public-private effort called Smart Water Now has been created to measure consumption and improve efficiency.  The city has partnered with Itron, Siemens, CH2M Hill, and Verizon to collect and analyze data with the aim of lowering operational costs and improving sustainability.

At next month’s World Water Congress & Exhibition in Busan, South Korea, several workshops will tackle the issues around smart water systems including sessions on “Creating Operationally Smart Networks – Today and in the Future,” and “Water Quality Control and the Smart Grid Approach.”

Worldwide demand for water is expected to soar 40% over the next two decades, according to the 2030 Water Resources Group, and losses from un-metered water total $14 billion in missed revenue opportunities each year, according to the World Bank.  These drivers will help fuel a move to smart technology solutions that promise more efficient water systems.

At Pike Research we see smart meters playing a key role in this move to smarter water grids.  Our worldwide forecast calls for nearly 30 million smart meters to be installed by 2017, up from 10.3 million meters last year (see Pike Research’s Smart Water Meters report).  The annual market value of those new meters will be almost $500 million at that time.  Beyond improved metering, emerging solutions involve new sensor capabilities for better leak detection, enhanced monitoring of water quality, and the ability to better detect security threats to water systems.  Deployments of new technology will be steady, but growth in this market will be a stream, not a flood.  The inhibitors include the risk-averse mentality of some utility managers, the lack of capital for deployments amidst sluggish economic growth, consumer pushback (as we’ve seen with smart electric meters), and the data-deluge challenge that many utilities in both the power and water sectors just aren’t yet prepared to deal with.


Not Everyone’s Gloomy About Cleantech Investment

— August 21, 2012

Pike Research’s recent webinar on The Future of Cleantech Investment prompted an unusual number of comments and reactions, a fair percentage of which were skeptical.  Adjectives like “non-objective,” “puff piece,” and “amateurish” got tossed around.  The main objection of the skeptics seemed to be that the overall optimistic view of our presenter, Ira Ehrenpreis of Technology Partners, doesn’t reflect the gloomier realities of the current cleantech investment market.

An analysis by Adam Medoff, writing on Greentech Media this week, seems at first to echo those dismal conclusions: “Given the present state of cleantech venture capital (VC), many funds currently sit with blown-up portfolios, saddled with capital-intensive companies full of promise that have yet to commercialize their technologies,” writes Medoff.  “Difficult exit markets and notoriously capital-intensive plays continue to plague venture funds investing in cleantech.”

That scene-setting, however, gives way to a surprisingly upbeat outlook: the fact is, as Medoff notes, cleantech VC funds are doing no worse, and in some cases better, than the overall VC industry (a conclusion backed by a four-part analysis by Matthew Nordan, an investor at VC firm Venrock, on GigaOm); and, given long-term trends in the broader economy, canny, deep-pocketed investors will see significant upside by tacking against the current headwinds.  “A fund able to make initial capital commitments with adequate follow-on funding will surely find a more enticing exit market in the coming years as new carbon-pricing schemes (look to Australia) and friendlier public markets give rise to increased profitability of cleantech solutions across the globe.”

(Adam Medoff, by the way, is described as a “summer associate with Clean Pacific Ventures,” in San Francisco, so I would hardly describe his views as necessarily reflecting those of the principals at leading Silicon Valley VC firms.)

Research giant Frost & Sullivan, which has a sizable renewable energy program, sees a similar disconnect between the current downward spiral and brighter future prospects: “Despite a short-term slowdown in demand and challenging conditions in financing projects, Frost & Sullivan believes that the long-term outlook for cleantech is positive.”

The Romantic’s View

“We believe that the cleantech industry holds the answer to a few looming global problems in the energy, food and water industries,” states Alina Bakhareva, manager of the firm’s renewable energy program.  “A new wind of cleantech innovation will bring the answer and this will have a positive impact on the overall market.”

Frost & Sullivan highlights opportunities in three key emerging sectors: smart water, energy storage, and energy efficiency – particularly “extensive commercial building retrofits.”  It almost seems as if the F&S boffins have been following Pike Research’s coverage in these areas: in the last several months we have released reports predicting strong growth in all three sectors (Energy Storage Tracker, Smart Water Meters, and Energy Efficiency Retrofits for Commercial and Public Buildings).

Also this week, cleantech incubator Greenstart announced the winners of its startup competition.  It must be said that the chosen startups are not exactly revolutionary: they include “peer to peer bike sharing company Spinlister, energy software company People Power, energy optimization startup Root3, and PVPower, a web service for solar projects,” according to GigaOm.  Those startups are nibbling around the edges of cleantech rather than producing world-changing technologies.  Still, each will receive $115,000 in funding and three months of consulting on marketing, design, and business models – a significant prize in a tight market for seed funding.

At the other end of the scale, GE is funding the “Ecomagination Challenge,” a competition that will award a total of $200 million to promising cleantech startups.  Partnering with blue-chip Silicon Valley investment firms Emerald Technology Ventures, Foundation Capital, Kleiner Perkins, and Rockport Capital, GE joins a group of major firms that are plowing millions, and in some cases billions, into new cleantech investments (rounded up here by my colleague Anissa Dehamna).

Investment in cleantech at this point in history requires steel nerves plus the intellectual agility that the poet John Keats referred to as “negative capability” – which can be defined as acting on your core convictions and principles without definitive proof of the eventual outcome.  Right now the cleantech investment sector could use less gloom and doom and more negative capability.


Greening the Skyscraper

— August 21, 2012

As Nate Berg noted in his recent story in The Atlantic, “Is There a Limit to How Tall Buildings Can Get?”, skyscraper construction has long been a competition, a way for cities to flaunt their economic might and sophistication over others.  Berg explores the limits of this race, concluding that even today’s tallest buildings, such as the Burj Khalifa in Dubai, which soars to 828 meters (and which is now most famous for having Tom Cruise jump off of it), don’t come close to the technical limits of what is possible.  In fact, William Baker, the head structural engineer at architecture firm Skidmore Owings and Merrill, argues that “We could easily do a kilometer.  We could easily do a mile.  We could do at least a mile and probably quite a bit more.”

So why haven’t we even hit the 1-kilometer mark yet? There are a few challenges, such as the elevator system, funding, allowing for natural daylight, and a simple lack of demand for super skyscrapers in real estate markets.  Many of these factors are notably the same as the challenges in the green building market.  However, as total green building space swells to 53 billion square feet by 2020, as Pike Research forecasts in its report, “Green Building Certification Programs,” the challenge of reconciling the drive to go higher with the drive to go green will gain urgency.

Cumulative Certified Green Building Space, 2012-2020

(Source: Pike Research)

The certification of the Empire State Building as LEED Gold last year was hailed as a milestone not only because of that building’s fame but also because it became the world’s tallest LEED-certified building (it was the world’s tallest building, period, from 1934 until 1972 when the World Trade Center’s North Tower was completed).  That achievement dispelled any myths that tall buildings couldn’t be green as well.  As green building has virtually become a standard feature in Class A office building construction, developers of tall buildings will inevitably need to consider going green in order to ensure a building’s value in increasingly competitive real estate markets.

The stipulations of green building certification programs harmonize well with tall building construction, given the complexity of such megaprojects.  For example, many of the design processes typically conducted in green construction, such as building commissioning and building information modeling (BIM), are also required for tall building projects like the Burj Khalifa.  Although that building didn’t receive a LEED certification, these quasi-green measures helped it meet design specifications with minimal delay and reduced financial risk.

However, a number of major challenges lie ahead for green skyscrapers.  As construction markets shift toward zero energy building, for example, all new construction in Europe is expected to be by 2021, integrating on-site renewable energy may be difficult when a building is so high that only limited roof space is available for solar panels or other renewable sources.  Most zero energy buildings today, such as the National Renewable Energy Laboratory’s Research Support Facility in Colorado, have low-lying designs that allow for enough roof space to power the buildings underneath.  Technologies such as solar building skins will help address this challenge in the long term but are simply not commercially available today.

Tallness and greenness can and have coexisted nicely over the last few years, and it likely won’t be long until a building that breaks the height record also breaks the record for tallest green building.  Until then, we anticipate that most green building construction will be a bit more down to Earth.


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