Navigant Research Blog

Why the Pentagon Isn’t Buying Natural Gas Vehicles

— July 22, 2013

The Department of Defense (DOD) is the largest proponent of alternative drive vehicles (ADVs) in the United States.  Already around 55% of the DOD’s 195,000-plus non-tactical vehicle fleet can run on alternatives to gasoline, such as diesel and B-20 (Bio-Diesel), E-85 (Ethanol), electricity, natural gas, propane, and hydrogen. Of the DOD’s alternative drive fleet, only a small portion run on compressed natural gas (CNG) and that number has fallen over the past 5 years, according to annual GSA Federal Fleet Reports.

America has an abundant supply of cheap, domestic natural gas, so why isn’t the Pentagon using CNG to run its vehicles? The gradual retreat from CNG vehicles, despite natural gas’ low price, comparatively small greenhouse gas emissions, and energy-security advantages, is a function of a highly competitive North American market for ADV technologies, among which CNG is gradually becoming less competitive.

All alternative drive technologies face four major challenges: vehicle availability, infrastructure availability, infrastructure installation cost, and fuel cost per gasoline gallon equivalent (GGE). When compared to other ADVs, CNG overcomes only two of these factors: vehicle availability and low cost per GGE.

Heavy Duty

Few CNG vehicles are available directly from original equipment manufacturers (OEMs), which makes the technology more costly and challenges the business cases for developing CNG fueling stations (also costly).  Though Honda and the Detroit big three all offer CNG versions of some vehicles, CNG is largely being pushed out of the light duty passenger ADV markets in favor of hybrids and plug-in electric vehicles (PEVs), which benefit from widely-available infrastructure and extremely low refueling costs on behalf of technology efficiencies.

CNG has been the established player in the medium and heavy duty ADV markets.  However, the medium duty market is becoming increasingly narrow; both the DOD and commercial fleets are looking into opportunities to use PEV technologies for either vehicle to grid (V2G) or vehicle to building (V2B) services.  Additionally, other emerging alternative drive technologies utilizing hydraulic hybrid systems and liquefied propane gas (LPG) are targeting specific niche markets for refuse and postal service trucks and school buses, respectively.

The heavy duty vehicle segment is where natural gas vehicles lead the ADV market. The only competitor in this segment is liquefied natural gas (LNG), which is gradually becoming the choice for long haul trucking because LNG systems  can store more energy than CNG systems. According to the Navigant Research Market Data: Natural Gas Vehicles report, heavy duty LNG truck sales in North America will increase at a compound annual growth rate (CAGR) of almost 44% from 2013 to 2020, while the overall market for NGVs in all segments will increase at a CAGR of 17%.

While the market for ADVs is becoming crowded, it does not mean the overall CNG market is on the decline.  ADV markets in all vehicle class segments are growing.  Though natural gas is losing market share to a host of other ADV technologies, the net effect of the increased competition is simply slower growth.  The North American market for CNG vehicles will continue to grow but will only make up marginal portions of the North American vehicle fleet in the next decade.  The military market for NGVs  will, however, continue to weaken thanks to the Pentagon’s bet on other forms of power for transport.


Did the FCC Get it Wrong on Progeny?

— July 22, 2013

On June 6, the FCC issued an Order granting permission to Progeny LMS, LLC to begin commercial operation of its multi-lateral location and monitoring service (M-LMS) in the 900 MHz spectrum band.  Progeny’s system is expected to improve on existing location services like GPS by providing information on height – it can tell what floor a person is on in a high rise, for instance.  In addition to commercial applications, the service is intended for Enhanced 911 (E-911), which provides 911 operators with the physical location of the caller.  The company has received support from public safety agencies nationwide.

However, the utility industry is in an uproar.  Petitions for reconsideration were filed by seven entities last week, including Silver Spring Networks and the Part 15 Coalition (which includes companies like GE Digital Energy, Itron, Landis+Gyr, the UTC, and others).

The hubbub stems from the likelihood of interference with already deployed utility advanced metering infrastructure (AMI) and supervisory control and data acquisition (SCADA) systems, which operate in unlicensed 900 MHz spectrum.  Progeny uses licensed spectrum, and in granting the company permission to begin commercial operations, the commission made it clear that it placed Progeny’s business case (and potential E-911 benefits) ahead of the concerns raised by the utility industry.  In fact, the Part 15 system operators and devices are at the bottom of the heap when it comes to sharing spectrum in the lower 900 MHz band.


(Source:  FCC)

Unlicensed system operators are expected to make nice and engineer their systems so that signals can find alternate routes around interference – and for the most part, that’s what existing users have done.  The concern over Progeny’s system is that it is a high power system—30W—whereas most of the utility applications like AMI and SCADA are low power (from 1-3W).  Where interference develops, existing systems may have to be reconfigured, physically in some cases, and/or more hops may be required for a signal to reach its destination, increasing the latency of the data messages.

Safety Above All

Petitions for reconsideration point out that Progeny’s field tests – which were a requirement of the approval – didn’t test a wide-enough variety of devices.  In particular, they didn’t test against distribution SCADA systems that are dependent upon low latency.  Instead they tested only against AMI systems, which are less time-sensitive.  In its order, however, the FCC “concluded that the purpose of the field test is to promote the coexistence of M-LMS and unlicensed operations in the band by ‘minimizing’– not eliminating – the potential for M-LMS interference to Part 15 operations.”

The Order does require Progeny to work with other system operators to alleviate interference and also to report interference complaints to the Commission.  It also required Progeny to set up a  reporting website for interference issues and to report launched markets, which it did June 21.

A review of that list reveals that Progeny is already operational in 40 major markets covering two-thirds of the U.S. population.  “Operational” means that it has deployed equipment to cover at least one-third of the market.

Even before the order was adopted, PG&E filed ex parte comments with the commission describing SCADA interference that occurred at one of its sites in San Francisco last fall.  Based on how widely the Progeny system has already been deployed, such problems could soon arise in other cities.

The LMS spectrum license was originally established by the FCC in the mid-1990s, well before the widespread deployment of smart grid technology.  But in applying license conditions established nearly 20 years ago in its review of the Progeny situation, the commission appears to have been more motivated by the post-9/11 reverence for public safety than by smart energy goals.  In its petition for reconsideration, Silver Spring Networks asserts that “the Commission’s substantive rebalancing of the governing policies was peculiarly myopic, preferring a disappointingly modest improvement in E-911 services to a number of other important public policies, such as the reliability of critical infrastructure [and], amelioration of anthropogenic climate change.”


Reconnecting Buildings to the Grid

— July 22, 2013

That headline isn’t meant to be a joke.  Of course, buildings are connected to the grid, which supplies over three-quarters of the energy consumed to operate buildings (with natural gas consumed onsite representing the majority of non-grid energy consumption).

But I’m not talking about yesterday’s unidirectional grid architecture, in which utilities build the capacity needed to meet energy demand no matter how much it soars.  (And indeed it is soaring, with peak load in places like Texas growing by almost 20% over the next decade.) I’m talking about the next-generation grid, on which buildings will become increasingly flexible, dynamic assets that will help utilities reduce the billions of dollars they spend on building new power plants and transmission and distribution infrastructure every year (in the United States alone, the electric power industry spends $80 billion annually on infrastructure). 

How can buildings reduce these costly investments, which are passed on to ratepayers in the form of electricity price increases? The answers stem from the growing intelligence of the control systems that govern energy consumption by heating, cooling, and lighting systems, and plug loads.  Even today, many of the systems used to control buildings – particularly smaller buildings and older buildings – aren’t digital, so remote control is virtually impossible.  The good news, however, is that the global market for commercial building automation systems is on the rise, growing from $73 billion in 2012 to $146 billion by 2020 as noted in Navigant Research’s report, Commercial Building Automation Systems.

Lose the Fax Machine

With this increased digital infrastructure in place, the opportunities for controlling building systems in dynamic response to the broader grid conditions are nearly unlimited.  The earliest foray into building-to-grid connections to date has been through demand response technology, which enables utilities send a signal to facility managers to reduce energy consumption during incidents like peak load events and generation shortage emergencies.  The process of dispatching these demand response resources, however, is manual in many cases, with signals often sent via fax or pager (yes, even in 2013), limiting buildings’ ability to ease many real-time grid burdens.

Automated demand response, promoted by industry groups such as the OpenADR Alliance, aims to improve on the current demand response status quo by connecting utilities not just to buildings but specifically to the automation systems inside them, enabling faster and more reliable load reductions in many cases.  In the long term, this two-way connection will allow buildings to participate increasingly in ancillary services programs, which electricity suppliers pay billions to maintain in the case of major imbalances between supply and demand.  And, with more powerful connections between utilities and building systems, buildings will also be able to play a direct role in integrating the thousands of MW of intermittent renewable energy sources, like wind and solar, added to the grid each year.   

The utilities are not the only ones to benefit.  Building owners can generate thousands of dollars in revenue for shedding load, a reward for their contribution to avoiding billions of dollars in electric power investments.  This emerging business model is catching the eye of utilities and building owners alike, so we expect to see continued innovation in the building-to-grid connection as digital control systems grow.


Mobile Phones Fuel DC Networks in Developing World

— July 18, 2013

One of the first deployments of direct current (DC) – a form of electricity that was dominant worldwide more than a century ago – was on a U.S. Navy warship named the USS Trenton, commissioned in 1887.  The 2 kW ship used electricity for lighting instead of the common practice of oil lamps.  This may have been the first electric ship in the world, though that is a topic of considerable debate.

One could also consider this antique DC ship a microgrid, since it was not interconnected to any grid.  A similar argument is used today by Boeing, which refers to satellites powered by solar photovoltaic (PV) panels as remote DC microgrids (and whose expertise is now being applied for terrestrial microgrid applications).

Like the majority of machines that run on electricity today, most ships run on alternating current (AC), the format of choice throughout the industrialized world.  Nevertheless, the U.S. Navy is currently constructing a 78 MW DC ship under its DDG 1000 program.  In addition, large technology players like ABB have been selling high-voltage DC transmission systems for about 5 decades; the company now also offers a variety of DC-based products relevant to more distributed systems, such as data center microgrids.   (ABB has also put forward an innovative design for next-generation DC ships that can create efficiency savings of 20% and space and weight savings of 30%.)

ABCs of DC

Whether powering up a ship, data centers, or a cell phone tower, DC power is enjoying a comeback.

The business model that could help accelerate adoption of DC distribution networks such as microgrids is known as the A-B-C Model, which targets developing countries that make up approximately 80% of the world’s population, but consume only 30% of global commercially traded power.  This approach, which is being promoted by The World Bank, United Nations, Rockefeller Foundation, and others, takes advantage of the following starting facts: 550 million people out of the estimated 1.4 billion people without power own a cell phone.

The “A” stands for anchor, and in most cases today, that anchor load for remote microgrids running on DC power is green telecom towers.  “B” stands for businesses, which are the first customers served by the DC remote microgrid as the network expands.  The “C” stands for community, and refers to the DC distribution network microgrid extending out to residents as the final phase of this remote microgrid expansion model.

This A-B-C Model is being implemented today through a variety of pilot projects.  These systems would subsequently pave the way for state-of-the-art DC microgrids in the developing world that could be networked together to optimize regional energy provision, since most off-grid cell phone towers run on DC power.  These distribution networks are the largest market opportunity today, as evidenced by a recent report entitled Direct Current Distribution Networks by Navigant Research.

DC Telecom/Village Power System Revenue by Region, Conservative Scenario,
World Markets: 2013-2025


(Source: Navigant Research)

If we focus on the conservative scenario, total global capacity for DC distribution networks is expected to reach 2,308 MW by 2025, translating into worldwide vendor revenue approaching $25 million annually.   The vast majority of this capacity, surprisingly, will come from DC systems only 1 kW to 2 kW in size in the developing world.  In fact, almost 92% of total DC distribution network capacity will come from the green telecom/village power segment largely concentrated in regions such as India and Africa.

Ubiquitous mobile phones are helping to build this growing movement to shift from the current AC-dominated utility grid infrastructure back to the DC-based microgrids that were widespread at the birth of today’s electric utilities.


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