Navigant Research Blog

Dreamliner Fires Scorch the Advanced Battery Industry

— January 30, 2013

The investigation surrounding the Boeing Dreamliner battery fires indicates that Boeing, and its ballyhooed but beleaguered new jet, will recover from this incident.  The causes of the fires appear to be isolated to the battery system and not endemic to the overall design of the plane.  But the fires could have very different consequences for the advanced battery industry.  At the core of the Dreamliner fires is a debate that engulfs all technological change – How to balance risk and innovation?

So far in 2013 it seems as though high-profile battery accidents are appearing nearly as frequently as new battery shipments are being made. From Hawaii to Japan, batteries on the grid or in vehicles continue to highlight the technical challenges associated with battery storage. This is bad news for an industry that is already struggling to garner demand for its expensive products.  Lithium ion batteries, which have taken something of a competitive lead in consumer products and electric transportation, are pushing into new applications every day as multiple industries move toward cleaner operations based on electricity rather than liquid fuels.  Early adopters, such as Boeing (the Dreamliner is the first passenger aircraft to have Li-ion batteries approved for on-board operation), always bear more significant risk than those that follow.

While Boeing’s reputation and that of the Dreamliner may emerge intact, the battery industry is left with fundamental issues to address.  For years the great debate in the industry has been about cost, but safety issues could prove a greater drag on the industry’s growth in the near term.  Each incident casts a longer shadow over the future of advanced battery technologies.

Advanced battery makers must publicly address these issues and forthrightly move safety to the center of the discussion.  The Dreamliner fires place the burden of proof squarely on battery makers.  Early adopters must be reassured that safety issues are resolved if they’re going to be persuaded to pursue these innovative technologies.


The Arctic Commons and the Fate of Renewables

— January 29, 2013

The grounding of Shell’s Kulluk rig on New Year’s Day was an ill-timed event for a company that has invested 6 years and $5 billion to access vast undersea reserves of oil and natural gas in the Arctic Ocean.  Also, it may presage a reversal in the Obama Administration’s initial support of offshore drilling in the region.  Writing in Bloomberg View, Carol Browner, the former director  of the White House Office of Energy and Climate Change Policy, and John Podesta of the Center for American Progress recently cautioned that, “Following a series of mishaps and errors, as well as overwhelming weather conditions, it has become clear that there is no safe and responsible way to drill for oil and gas in the Arctic ocean.”

The Kulluk mishap came on the heels of a number of reports in 2012 of an oil and gas renaissance in the Western Hemisphere.  Earlier this month, BP released a forecast that the United States will surpass Russia and Saudi Arabia in 2013 as the world’s largest producer of crude oil and biofuels.  Russia, meanwhile, will likely pass Saudi Arabia for the second place in 2013 and hold this position until 2023, according to the U.K.-based oil major.

As widely noted, these developments challenge long-held assumptions that the energy geopolitical landscape is squarely centered on the Middle East.  One place where this shift is playing out is in the frozen Arctic, a political no-man’s land where a maelstrom of nationalism, environmental fragility, and logistical challenges is beginning to brew.

The Arctic Ocean is estimated to hold a quarter of the world’s undiscovered oil and gas reserves, beneath a body of water less than 4 times larger than the Mediterranean Sea.  The region is a global commons, meaning that jurisdiction over most of the Arctic Ocean remains up for grabs.

Hydrocarbons on Ice

Estimating exactly how much oil and gas is locked up in the region is an inexact science, but an analysis led by USGS in 2008 shows that there is a 95% likelihood that 44 billion barrels (BBO) of oil and 770 trillion cubic feet (TCF) of gas are buried under the Arctic Ocean.

If estimates hold, these resources would prove significant on the world stage.  The United States currently consumes around 7 BBO of oil and 25 TCF of gas per year.  The Arctic alone could provide enough oil to last the United States around 6 to 7 years and enough gas to last 30 years.

Onshore areas in the region are mostly explored, with some 40 billion barrels of oil (BBO), 1,136 trillion cubic feet (TCF) of natural gas, and 8 billion barrels of natural gas liquids already developed.  As recent events have shown, moving offshore presents logistical challenges and will prove to be far more expensive than oil and gas fields currently under development today, so it will likely be some time before significant resources are brought to market.

Staking Claims

While in theory, the Arctic is held for the benefit of the “common heritage of mankind,” the potential for an oil and gas bounty is luring “the Arctic Five” – Russia, the United States, Canada, Denmark (via Greenland), and Norway – northward to assess claims.

In 2007, Russia laid claim to the North Pole – and much of the oil and gas buried beneath it – by planting a flag on the sea bed 2.5 miles undersea using two mini-submarines.  Although merely symbolic in gesture, the claim raises difficult questions about sovereignty, climate change, and the future energy landscape.

Russia’s assertion that it owns much of the Arctic sea bed is based on its claims to two submerged ridges, which would secure exclusive access to extensive fossil fuel resources inside the Arctic commons and around the North Pole, under the UN Convention on the Law of the Sea (UNCLOS).

Under UNCLOS, a series of geographical zones delineate jurisdictional rights with respect to offshore resources, including oil and gas.  In the Arctic Ocean, these zones form a continuous ring around a commons area and are owned in varying proportion by the five Arctic powers mentioned earlier.  These areas are the target of development efforts thus far.  Recent gambits make it clear that momentum is squarely behind the commercial exploitation of oil and gas resources no matter the cost.

While UNCLOS represents an important development in international resource protection and cooperation, it may prove to be an enabler of a unilateral, take-all approach to deep offshore hydrocarbon resources.  The silver lining for renewables competing against oil and gas, however, is that deepwater drilling is only justified when the price of a barrel of oil is well above $100 and will face stiff opposition should environmental safety continue to be a concern.


In Cyber Security, It’s the Whole Picture That Matters

— January 29, 2013

The story goes that a group of business people were stranded on a desert island with a bountiful supply of canned and therefore imperishable food, but no way to open the cans.  As the group struggled to find a solution the lone economist in the group piped up, “Assume a can opener…”

Sometimes it seems that’s how we approach industrial control systems (ICS) security.   “Assume a secure perimeter…”  It’s not fair to expect any single product or any single vendor to provide complete security for ICS networks, and yet we seem stuck in a world of point-solution purchases and security without any overriding architecture.   It’s as if we’re saying, “If I can just get me some [insert technology of the week], then I’ll be secure.”

Barely 3 weeks into the new year, I have already had wonderful briefings from companies whose products lock down privileged IDs, ensure clean networks by detecting attacks at network chokepoints, heuristically identify attacks though behavior analysis rather than signatures, protect control networks from the lawless jungle that is enterprise IT, and so on.

All of these approaches are good, and all of them are necessary.   But in isolation, none protects an ICS network.   Cyber security still begins with risk assessment, not product purchase.  Every utility is a business, and every business is unique.   So before you go ask for this year’s cyber security budget, do a little planning.   Skip the shortcuts.

Call for Help

To the utilities that have a shopping list of security products but no overarching plan how to use them: You might be amazed how much you can save in deployment and ongoing maintenance with just a little thought.   Over the years I’ve seen countless companies purchase a less expensive product without planning how it would be supported.   A bargain is no bargain when it requires an excess staff of 10 full-time employees for 10 years to support it.

To vendors happy to show up at a utility and sell only their product: think about your customer as a business, not an account.   If you don’t see enterprise security planning going in, bring in some help.  Maybe that help is a systems integrator, maybe it’s just a single security assessor.  Maybe it’s collaboration with other cyber security vendors or even – gasp! – a competitor.  No matter what, understand the whole problem, not just the problem that your product will fix.

There is some cause for encouragement.   Compared to 2 years ago, vendors are much more likely now to tell me that they are part of a full cyber security solution.  Utilities have become much more methodical in their approach to cyber security – especially as OT teams have become savvy and made their reliability requirements part of cyber security projects.


Residential DR Gets Boost from Tendril-TEP Pilot Though Market Traction Remains Elusive

— January 28, 2013

Consumer engagement software provider Tendril and Tucson Electric Power (TEP) have concluded a residential demand response (DR) pilot program that yielded encouraging results amidst a U.S. home energy management (HEM) market that is still searching for some significant traction (see Pike Research’s Home Energy Management report for details).

Results from the pilot program among participating TEP customers produced a reduction of 2.3 kW per household for each DR event during the tests.  Additional findings from the pilot, according to Tendril, include:

  • 72% of participants said they were either very satisfied or satisfied with their overall experience
  • 31% logged in to the accompanying Web portal at least once a week, and an additional 31% logged in once per month
  • Nearly all participants said they were either very satisfied or somewhat satisfied (53%), or neutral (38%) with the overall power reduction events

The program also yielded an increase in energy awareness of 2.35%, though awareness itself was not a stated goal of the program.

TEP officials were satisfied with the pilot and the capabilities of Tendril’s platform, which enabled the utility to more easily initiate and run the program.  So satisfied was TEP that it decided to extend its partnership with Tendril for a new energy awareness program that will use the software provider’s flagship consumer application suite called Energize.

While results from this type of DR pilot program are encouraging for utilities and their customers, the fact that it was a pilot points out one glaring problem: the slow pace at which utilities are moving to implement the latest solutions for HEM.  The risk here is “piloting to death” new technology.  At some point the pilots have to blossom into full-fledged deployments among a larger portion of a utility’s residential customer base.  I’m still waiting.

Tendril-Hitachi Partnership

Perhaps the bigger story for the HEM market and for Tendril was the recent announcement that Tendril and Hitachi have joined forces.  The two companies plan to deliver new smart energy applications to consumers by way of set-top boxes, wireless gateways, and other already-in-the-home devices.  Seen in its larger context, the Hitachi-Tendril deal adds important players to those already in the mix: Panasonic and smart meter manufacturer Itron are working together in Japan on smart home energy solutions, and Toshiba, which owns Landis+Gyr, has made it known it wants a piece of the U.S. smart home energy market.  This activity sounds like good competition and could become the needed catalyst for a more robust HEM marketplace.


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