Navigant Research Blog

Rough Road Ahead for EV Charging Network Providers

— November 30, 2012

Electric vehicle (EV) battery swap pioneer Better Place ousted its founder and CEO last month and lost three additional executives earlier this month.  Layoffs are reportedly planned.  The company also received $100 million in new funding earlier this month, the bulk of it from Israel Corp., the holding company of billionaire Idan Ofer, Better Place’s chairman.  That round brings the total invested in the startup to more than $850 million.  More recently, Israel Corp. threatened to cut off additional funding, and new CEO Evan Thornley is attempting to craft a new business plan.

There are many reasons for the company’s recent shakeup, but the most important is that Better Place, like many companies in the fledgling EV charging service industry, is simply too far ahead of the EV market.  The company offers the most elaborate services in an industry plagued by uncertainties over EV consumer acceptability, EV owner charging behavior, and a lack of standards for charging equipment.  The struggles at Better Place portend the next stage of EV charging service industry consolidation as some of these uncertainties find answers.

The long running belief in the automotive industry is that, in order to make the electric motor a viable competitor to the internal combustion engine, a charging infrastructure must exist to ease EV owners’ anxiety over driving ranges.  Exactly how that infrastructure should be developed is an unanswered question – as explained in Pike Research’s recent webinar on the topic, The Future of EV Charging Stations.  Besides the Better Place battery swap model, companies have developed AC (level 1 and level 2) and DC charging networks based on either pay-as-you-go plans or monthly subscriptions.  Such networks are provided by ECOtality, Coulomb Technologies, and RWE among many others.

AC charging provides power outputs of 1 to 7 kilowatts (kW) and can fill a depleted battery over a matter of hours.  DC chargers use outputs of 25 to 90 kW and reduce charge times to as much as a half hour depending on the vehicle’s battery capacity.  DC-only charging networks are offered by Aerovironment and Tesla stateside, ABB in Europe, and are the norm in Japan, where charging services are provided by the Japan Charge Network (JCN) and the Charging Network Development Organization LLC.

A Mishmash of Models

The problem with selling public AC charging services is that you’re competing against every EV owner’s garage (where almost 80%-90% of charging takes place), plus every retail location that is willing to give electricity away for free, to lure EV owners into the store.  Networks focused on DC chargers don’t have it much better.  If the number of EV sales is low, then the number of EVs compatible with DC fast charging is lower.  The Nissan Leaf, Mitsubishi iMiEV, and Tesla Model S are the only mass-produced DC compatible vehicles stateside.  Tesla’s proprietary Model S network is incompatible with the CHAdeMO standard used by the other two EV makers, and net sales in North America of the Leaf and iMiEV since both were introduced 2 years ago are slightly over 17,000.

Better Place’s model is unique, as its network of stations in Israel and Denmark take a depleted battery from an EV and replace it with a charged one in as few as 5 minutes.  The technology is advanced, but it’s also expensive compared to an AC or DC charging station.  Battery swapping also requires auto manufacturers to agree on a standard format and location within the vehicle so that replacement can be automated, and thus far OEMs, not surprisingly, are sticking with their independent battery designs.  Lastly, Better Place is a subscription service and relies on members, therefore, it needs lots of EVs on roads, something that’s not happening in great numbers anywhere.

Even though the market for EVs has more than doubled in the last year, it has drastically trailed expectations.  Those expectations fueled major investments in charging infrastructure service networks that now sit idle.  Companies operating on any of the above business models are by no means doomed, as Pike Research forecasts annual sales of EV charging systems will hit 1.75 million globally in 2020.  Early charging equipment entrants will survive by capturing greater market shares and cornering their respective areas – or by having deep-pocketed, patient investors like Ofer.  The market isn’t big enough for every idea.  Next year should be interesting in terms of who survives and who gets bought.


Dire Water Supply Forecasts Demand Innovation

— November 30, 2012

A recent warning about the increasing demand for water could be the needed catalyst to bring about significant change in how we manage this precious resource.  The alarm comes from a global survey of senior water utility executives, 39% of whom say the risk of national water demand outstripping supply by 2030 is “highly” likely, with more than half (54%) saying the risk is “moderately” likely.  In other words, they’re very concerned, but not panicked (yet).

The survey is the basis of a report from Oracle Utilities titled “Water for All?”  It was conducted among 244 executives in Australia, Brazil, Canada, China, France, India, Russia, Spain, the United Kingdom, and the United States.  The main barrier to meeting future water demand is wasteful consumer behavior (45%), according to the executives.  A third of the respondents (33%) say tariffs are too low to stimulate more investment, and another third (34%) cite worries about climate change as a significant hurdle.

Nevertheless, the challenge of increasing water demand is also a powerful motivator of innovation, the study notes.  Water utilities in both developed and developing countries are embracing new technologies to improve efficiency.  For instance, desalination technology, network sensors, and smart meters are being deployed by utilities in an effort to avoid potential water-related calamities.  (Pike Research’s Smart Water Meters report has details of some of these technology solutions.)

Oracle is not the only technology firm that recognizes the need for innovative solutions in the water sector.  Japan’s NEC and its Swiss partner Gutermann have moved into this space as well.  The two companies signed an agreement recently to jointly promote Gutermann’s acoustic water leak detection system along with NEC’s cloud platform in an effort to help water utilities improve efficiency.

Willing to Pay

NEC is moving aggressively on the academic research front as well.  It has joined with Imperial College London to establish a lab for developing new technologies for managing smart water systems.   Researchers there will look at how technology can overcome the challenges posed by aging water supply infrastructures, making them more energy efficient, and helping to reduce their impact on the environment.

Consumers, too, are aware of the challenges facing water utilities, at least consumers in the United States.  A large majority (77%) say they are concerned about the state of the country’s water infrastructure, and 61% are willing to pay more to fix it.  This is according to the latest Xylem Value of Water Index.   Moreover, a growing number (88%) think the U.S. water infrastructure needs reform, which is up 8 percentage points from a 2010 survey.  And in spite of water rate increases, 61% of respondents say they would be willing to pay a little more each month to upgrade the nation’s water infrastructure.

So in the face of dire predictions about demand for water outstripping supply, there are reasons to be hopeful.  High-tech companies have started to focus more attention on developing technology solutions for improving water management.  Consumers have gotten the message that water system infrastructure needs attention and funding, and there is evidence that governments see the need to cooperate on finding solutions.  For example, officials in the United States and Mexico are close to a deal that calls for adding areas south of the border to Colorado River water-sharing agreements involving seven Western U.S. states.  The oldest water treatment plant in New Delhi, India’s capital city, will be renovated using funds loaned by Japan’s International Cooperation Agency.  In the Middle East, members of the Gulf Cooperation Council (GCC) have plans to build a common water network by 2020.

Alarm bells like the “Water for All?” report can help motivate people to find new technologies and a willingness to work to solve big challenges.  None may be bigger than keeping the water flowing.


Batteries Get a Second Chance at Life

— November 30, 2012

Advanced battery manufacturers, both legacy vendors and start-ups alike, have placed nearly all of their attention on emerging cleantech applications, targeting new markets for electrified transportation and renewables integration as the future of their businesses.  However, in 2012 we’ve seen these markets developing slower than anticipated.  The cost of batteries is a primary factor, and advanced batteries are currently struggling under a classic chicken-and-egg dilemma: which comes first?  Sales or cost decreases?

It’s possible that General Motors (GM) and ABB have partially solved this dilemma with a new project being deployed in California using second-life lithium ion batteries from GM’s Volt to provide residential uninterruptible power supply (UPS).  Volt batteries are retired after roughly 30% of their capacity has been diminished, per the vehicle requirements set by auto manufacturers, but the remaining capacity in multiple Volt batteries can be combined to provide quality power supply to the distribution grid or other ancillary services.  GM and ABB are trying to capitalize on that remaining battery capacity to resell battery units and drive the capital cost down, to the benefit of both vehicles and the grid.

While GM and ABB are among the first players to deploy these second-life batteries into a real world, stationary application, the idea of using second-life batteries to lower the total cost of ownership (TCO) has been the subject of research and pilot projects for some time.  How much this approach will reduce the cost of batteries for electric vehicles remains to be seen.  While Volt sales remain low, battery replacements will be necessary in the first generation of vehicles for the next several years.  It’s safe to say, though, that any cost reduction is welcome in the struggling advanced battery industry.


Partnerships Aim to Boost Home Energy Management

— November 27, 2012

Three new partnerships in North America seek to advance the use of home energy management (HEM) products among consumers – a market that so far has a lackluster track record.  Home security leader ADT has joined with Southern California Edison (SCE) in this effort; Verizon has teamed with Lowe’s to enable remote home energy functionality; and in Canada, the province of Ontario is working with HEM solution provider Energate on a project to stimulate consumer engagement.

Briefly, here are details of each alliance:

  • In Southern California, SCE customers who also purchase ADT’s Pulse home management system will be able to connect it to their home’s smart meter to see energy consumption data, daily bill estimates, and energy savings alerts.  The aim is to enable users to adjust consumption and lower their electric bills.
  • U.S. customers of Lowe’s Iris solution can now remotely monitor and manage their thermostats or smart plug-connected appliances over Verizon’s wireless network; a USB modem connects to the Iris smart hub, allowing a user to control devices via a smartphone or a tablet without needing a wired broadband connection.
  • In Ontario, Energate and the provincial government are in the midst of an 18-month project called the Consumer Engagement for the Smart Grid (CESG).  Energate is deploying home energy dashboards, smart thermostats, web portals, and mobile applications to more than a thousand homes across Ontario, aiming to spur customer engagement with tools that extend the smart grid into the home.

All three efforts are evidence that the struggling HEM market is about to gain some new traction, and not all of the effort is coming from utilities.  The involvement of Lowe’s, Verizon, and ADT shows that adjacent players see opportunities to combine smart grid technologies with their own innovations.  Others, particularly broadband providers such as Comcast and Time Warner Cable, have jumped in recently as well with home energy management products and services.

This upward trend for HEM products was noted in two recent Pike Research reports, Home Energy Management and Home Area Networks, but our view is this market in North America will grow at a modest pace rather than a dynamic one.  Not enough consumers are motivated at this point to take action.  It was only a year and a half or so ago that Google and Microsoft abandoned their effort in the HEM space.  For this market to really heat up, it will take an energy price jolt, which is possible but not imminent, or a regulatory stick to move the masses to adopt.  Partnerships like these, though, provide a visible sign of the potential for HEM services.


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