Navigant Research Blog

With Consert Acquisition, Toshiba Targets U.S. Utilities

— February 20, 2013

Japanese electronics giant Toshiba has assembled a portfolio of solutions that positions it well for two of the hottest smart grid opportunities available right now: demand response (DR) and microgrids.  Now, if it can figure out a way to leverage the technology of recent acquisitions into a coherent integrated package, the company could make major inroads into new geographic markets, especially the United States.

The announced purchase last week of Consert is a case in point.  Consert’s current portfolio is minuscule when compared to other DR aggregators, such as EnerNOC (8,500 MW) and Comverge (5,500 MW), but the company focuses on providing the highest value DR from the most difficult places: the residential market.  The firm’s flagship project is a 250 MW “virtual peaking plant” for CSP, the municipal utility that serves San Antonio, which could achieve full build-out within the next 3 to 4 years.

General Electric, Constellation, and Qualcomm have all invested in Consert.  Its “software as a service” business model is gaining traction within smart grid software providers, too.  The company has been focusing on public power utilities – its low-cost solution is not the ideal fit for investor-owned utilities.

Toshiba apparently plans to marry Consert’s real-time DR capability with the data analytics enabled by its May 2011 acquisition of Swiss technology supplier Landis+Gyr (L+G).  L+G  is  the leading supplier of electrical meters in the world (as well as North America).  Think of the possibilities if one could link up L+G smart meters with Consert’s real-time, two-way communication down to each device-level offering? Toshiba might actually provide some of the elusive value for both utility and consumer that has escaped so many smart meter deployments in the United States.

Along with this DR capability from Consert, one must also consider the technology expertise of Toshiba itself.  Toshiba’s unique advantage over other grid infrastructure companies may be its ability to link home energy management (HEM) systems, as well as commercial smart building technology, with optimized microgrid functionality.  Toshiba already has deployed a 4 MW solar and wind microgrid on Japan’s Miyako Island.  The Japanese company is also providing DC/AC power conditioners and smart inverters with widespread applications in remote microgrids, as well as its rechargeable battery known as SCiB.

Toshiba was once so bullish on the overall smart grid market that it reported that it hoped to reach over $11 billion in revenue from this market by 2015, with over $1 billion in the United States alone.  The only way that’s going to happen is to integrate the company’s smart meter, microgrid controls, and DR capability in the United States, and make the business case for boosting reliability and revenues through its unique portfolio of products in the world’s leading markets for both DR and microgrids.


New Hype for the Internet of Things

— February 20, 2013

I am not sure who first coined the term “Internet of Things” (or, since everything technical must be an acronym, IoT), but I first heard it in the early 2000s.  I thought at the time it had already outlived its usefulness.  I thought the more mundane term “machine-to-machine communications” (or M2M, an even cuter acronym) was far better, and it appeared the market agreed with me, at least for a while.

However, the IoT is back with a vengeance, and this time the term is loaded with additional meaning that may be elusive.  Early uses of the term conveyed the power of allowing “things” – ranging from vending machines to home appliances to building controls and sensors – to communicate with each other.  The current use of the term implies much more: it’s not just that things should communicate, but it’s about how they communicate.  Things should communicate like the Internet, with the capability of ubiquitous any-to-any communications.  More specifically, they should accomplish this ultimate connectivity via the Internet Protocol (IP) or some relevant flavor of IP.

This more specific IoT understanding is attractive.  The idea of open, layered protocols that mix and match physical media on the bottom of the protocol stack and virtually unlimited applications above them has been fundamental to Internet innovation.  So all things being equal, all M2M communications should be based on IP.   But all “things” are not equal and going all-IP is not necessarily free.  Hence strict adherence to a narrow definition of IoT as being IP-based may hinder innovation more than it helps or at least imply over-hyped benefits that are rarely evident in the world of things.

Everything’s a Peer

One universe of things where this risk appears evident is in building automation and control systems.  A true IoT implies that every sensor, actuator, thermostat, lighting ballast, and switch should be a peer IP-based communication node.  However, these are rarely independent, intelligent nodes on a network, and rather elements of a specific subsystem (lighting control, HVAC control, humidity control, etc.).  It’s highly unlikely that an occupancy sensor will ever need a software download to become something other than an occupancy sensor.  So, top-of-stack application flexibility is not really a relevant benefit for these devices.  The added cost in microcontroller memory and processing of supporting even a stripped-down IP stack in such a device may be higher than any benefit.

On the other hand, the situation of isolated, proprietary, non-connected subsystems that has been the norm in the building controls industry for about 100 years is unacceptable in the long run.  There has been real, if gradual, progress in developing and applying reasonably open and interoperable building control networks using non-IP based specifications such as BACnet, though there are probably still too many such “standards” to choose from.  Using IP networking and the application architectures implied by IP as the basis for subsystem integration and common network transport is not only a good idea but necessary for the continuing building systems evolution.  Applying the IoT model to building controls, though, does not mean everything must have an IP address.  This is similar to the difference between your laptop having IP networking and having the devices within your laptop – disk drives, video controller, keyboard, and so on  – be IP-based.

So as we consider the IoT applied to our own universe of things, let’s be clear on how much Internet-ness we really need to pay for.


High Capacity Chargers Target Europe’s Luxury Market

— February 20, 2013

This spring Daimler will introduce the third generation of its smart fortwo electric drive (ED) vehicle to the North American consumer market.  Technically, the electric version of the vehicle has already made landfall through Daimler’s carshare program car2go in San Diego and Portland; however, this year’s introduction is especially important, as the vehicle will be the lowest priced battery electric vehicle (BEV) on the market at $25,000 MSRP.

The vehicle entered mass production in June of last year, and sales to various European markets have begun over the last few months.  In Europe the automaker offers an optional on-board 22 kW charger for its 17.6 kWh battery, which can charge the battery from a high capacity AC power supply in around an hour.  This gives the ED the potential to charge from AC power at a rate 3 times faster than all other BEVs.  Daimler has yet to announce whether the 22 kW onboard charger will be an option in North America, but it probably won’t since the standard outlet in North America can supply far less power than outlets in Europe.

The onboard charger capacity determines the amount of time it takes to recharge a vehicle’s battery.  The first generation Nissan LEAF used a 3.3 kW onboard charger, but 2013 versions are being outfitted with 6.6 kW chargers.  This upgrade allows the LEAF to be charged twice as fast when using Level 2 charging equipment.  High capacity chargers generally require a lot of space and therefore most BEVs have a max capacity charger of 6.6 kW.  Daimler’s integration of a 22 kW onboard charger is a leap forward.

Low Power Solution

However, in order for individual and fleet EV owners to use the higher capacity onboard chargers they must first install the infrastructure capable of delivering such a charge.  This is much easier in Europe, where the standard electrical outlet is 230V, whereas outlets in the United States and Canada are 120V.  The difference means that (depending on amperage) standard outlets in Europe can theoretically deliver around 19 kW whereas standard North American outlets max at 1.8 kW.  In North America, 230V outlets are usually for high power appliances like washers and dryers, but they can also be installed with the addition of a circuit from the electrical panel to the outlet.

Installing the necessary infrastructure to deliver such a high power charge is not necessarily expensive in comparison to the purchase price of the BEV; however, the cost may be unnecessary as charging at lower power capacities is proving sufficient for many early BEV adopters.  A survey of 3,703 fleet EVs administered by Fleetcarma measured vehicle rest times and states of charge (SOC) at the end of the day.  The survey found that charging at 1.3 kW could meet the needs of 88% of the average fleet BEV.   The 22 kW onboard charger would be an intriguing option for the North American market, but its incremental costs will make it of interest to only a few early adopters.  Like the 35-hour work week and real Champagne, it will likely remain a European luxury.


Sleeping Geothermal Giant Stirs

— February 19, 2013

Rumblings in the geothermal power sector have been highlighted in early 2013 by several important developments.  Geothermal startup AltaRock Energy, which is backed by Google, Khosla Ventures, Kleiner Perkins, and Vulcan Capital, has reported cost reductions through the successful creation of multiple engineered geothermal areas from a single drilled well at its Newberry project outside of Bend, Oregon.  JP Morgan, meanwhile, has purchased an interest in eight existing geothermal plants owned and operated by a U.S.-based subsidiary of Ormat Technologies.

These announcements signal a likely expansion in geothermal activity over the next decade.  Although the levelized cost of geothermal power is competitive with fossil fuel-based plants, the drilling required to exploit resources involves significant risk and requires large capital outlays, with often speculative ROI potential.

These obstacles have confined geothermal prospecting to low-risk, high-return resources in proven rift zones or volcanically active parts of the world where naturally occurring pockets of steam or hot water are close to the Earth’s surface.  Due to these limitations, geothermal power capacity currently stands at 11 GW worldwide, representing less than 0.2% of installed generation capacity globally.

However, the recent JP Morgan/Ormat deal underscores the stable revenue potential of conventional geothermal power once a plant is up and running.  After a resource has been identified and proven viable, geothermal power plants can provide reliable and emissions-free baseload power with capacity factors greater than 90%.  Although resources must be managed carefully, plants do not require fuel delivery infrastructure like coal or natural gas plants since they sit directly atop active steam fields.  These attributes make geothermal power particularly attractive to investors and among the most enticing of emerging renewable technologies.

Geothermal Frontier

AltaRock’s announcement, meanwhile, signals potential reductions in the cost of enhanced geothermal systems (EGS), an innovative approach to engineering geothermal resources that involves drilling 4 miles into the Earth’s crust and artificially fracturing granite and other impermeable rocks.  These fractures are then connected to create an artificial reservoir in which water can be injected to create steam.  Significantly more expensive than traditional hydrothermal resources, EGS remains a highly speculative technology: just two small facilities are in operation today.

Although EGS is truly the wild west of energy speculation, its outsized long-term potential is what has investors like Google most excited about companies like AltaRock.  Outlined in a 2006 MIT report, entitled The Future of Geothermal Energy – Impact of Enhanced Geothermal Systems (EGS) on the United States in the 21st Century, EGS resources would allow for a decoupling of geothermal development from naturally occurring anomalies, greatly expanding the geographic range in which projects could be developed.

The MIT study projects that EGS and hydrothermal resources could supply roughly 140,000 times the total U.S. annual primary energy use in 2005 or all of the world’s current energy demand and then some.  And it’s probably cheap: the report concludes that EGS could be capable of producing electricity for as low as $0.039 per kWh less than the cost of coal-fired generation.

In the meantime, innovations around conventional geothermal resources are also pushing geothermal power into the 21st century.  Simbol Materials, a California-based startup, is piggy-backing on geothermal development in the geothermal-rich Salton Sea field, with plans to extract lithium from geothermal brine for use in innovative battery applications like electric cars.  Plans to lay undersea cables from Iceland, a geothermal power leader which sits atop more potential than it can consume, would provide a renewable power source to Scotland.  Similar proposals have been floated among island nations throughout the Caribbean and South Pacific.

Pike Research’s Geothermal Power Projects report shows that conventional (hydrothermal) development has expanded from just 26 countries in 2010 to 64 at the start of 2013.  With 567 named projects identified worldwide, the geothermal industry is looking more and more like a dormant volcano beginning to stir.


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