Navigant Research Blog

What’s to Be Learned from ECOtality

— September 26, 2013

In a move that had been expected since the U.S. Department of Energy (DOE) suspended funding of the ECOtality-administered EV Project in mid-August, ECOtality filed for bankruptcy early last week.  The company’s collapse will serve as yet another talking point that media outlets will use to question the wisdom of federal government support for clean and renewable energy technologies.  While that debate is important, there is much to be learned from the wealth of information that ECOtality provided through its role in the EV Project to the national and global electric vehicle supply equipment (EVSE) industry.  Primary among these lessons is the currently weak business case for Level 2 alternating current (AC) public charging, an area in which ECOtality was a major player.

ECOtality made and installed charging units for residential and commercial (publicly available, workplace, fleet) applications.  Other companies in the same business have had success by partnering with plug-in electric vehicle (PEV) manufacturers to bundle EVSE costs with PEV purchases.  The first failing of ECOtality was its inability to gain a partnership with a PEV maker in the above manner, thus becoming dependent on the EV Project.

Additionally, ECOtality developed and managed the Blink Network, made up of more than 4,000 charging stations, including 87 direct current (DC) fast charging stations, most of which were in place because of the EV Project.  While other companies are also invested in this space – AeroVironment, NRG, Tesla, ChargePoint, etc. – it is currently not considered a significant revenue-generating enterprise (Tesla gives it away for free!).

As the 2Q 2013 report from the EV Project indicates, publicly accessible AC charge points were connected to a vehicle on an average of 4% of the time they were available.  During the course of the 91-day quarter, this amounted to 20 charging events per Level 2 EVSE, with the average connection being 4.5 hours.  At the Blink membership rate of $1 per hour, this equates to roughly $361 of annual revenue per installed unit.  Assuming an even split of charge events occurring at Blink member rates and guest rates ($2 per hour) and subtracting the cost of electricity taken at the average commercial electricity rate per the United States in July ($0.108 per kWh), any Blink Network site host could expect $430 per unit annually.  That is, of course, without network management fees, maintenance costs, and any profit-sharing agreement with the EVSE manufacturer.

Total installation costs of public Level 2 installations vary widely, as they depend on a number of variables.  Estimates fall between $3,000 and $11,000.  With those costs, it takes 7 to 25 years to pay back the investment.  At the lowest estimated installation cost, chargers need to be used more than twice as often to net a return on investment in 3 years.  Therefore, outside of government programs that pay for the station’s installation, there is not a strong case for property owners to install publicly accessible Level 2 AC EVSE based on direct revenue – especially not with the low number of PEVs on the road in 2013.  Instead, property owners must justify EVSE installations through the benefits of attracting more business to their locations and differentiating from competitors to attract EV drivers.  Additional value-adds are emerging in the form of utilizing the installed EVSE space for advertising.

EVSE manufacturers survive by selling their EVSE to service providers, property owners, and/or PEV drivers.  The commercial market is growing, but in most cases, publicly accessible Level 2 stations are used too rarely to make them financially viable for most property owners.  Installations at workplaces and for fleets make more sense, as the EV Project data shows these stations are used more than twice as often as publicly accessible stations.  While this market is growing, it is still a small market, and ECOtality was just one of many players.  ECOtality’s troubles may be a harbinger of things to come in the larger EVSE industry as it continues to mature.  However, PEV sales are just starting to take off and increasing densities of EVs per public charge point may significantly improve the business case for publicly accessible AC charging infrastructure.

Plug in Electric Vehicle Sales, World Markets: 2013-2020

Untitled (Source: Navigant Research)


Alternative Drivetrains Poised for More Growth with Fleets

— September 26, 2013

The trucking and fleet vehicle industry is facing some enormous challenges but is seeing strong growth this year.  The long-haul trucking industry is facing a well-publicized driver shortage, and all trucks are seeing increasingly strict regulations for emissions, fuel economy, and driver safety.  With the continued slow rebound of manufacturing, automobile sales, and construction, the fleet industry is also starting to feel a bit more comfortable.  Since gasoline and diesel prices are relatively stagnant and economic prospects are improving, is it possible that the momentum felt in the alternative fuel vehicle market for fleets is likely too slow?

The answer to that question is likely to be different for the different types of drivetrains.  There is a tremendous amount of excitement and growth in the natural gas vehicle market, and that momentum continues to be built on a strong economic foundation.  Both the compressed natural gas (CNG) and propane truck markets are generating payback periods that can be as short as about 1.5 years in high fuel use applications.  These short paybacks encourage adoption and can help quickly cover infrastructure as well.  The smaller vehicles that have higher fuel economy see longer paybacks and rely more heavily on government or company efforts to reduce environmental impact – a more tenuous position as the economy rebounds – but fleet budgets remain tight.

Liquefied natural gas (LNG) trucks are more economically challenging.  This is not only a refueling infrastructure challenge.  The trucks also have longer payback periods than CNG trucks with more variance in LNG prices in different parts of the country.  LNG trucks are increasingly likely to feel competitive pressure for fleet dollars coming from CNG rather than diesel (though that is not to understate the competition from diesel).  From a logistic perspective, because of new truck driver “hours of servicerules, it may be that long-haul LNG trucks that have a driving range of 980 miles are not likely to be used significantly different than a CNG truck that gets 870 miles of range.  Trucks are likely to only be used for about 500 to 550 miles before switching drivers, so even with two drivers LNG and CNG long-distance trucks are likely to see similar distances before refueling is required (or at least accessible).

Electric vehicles in fleet markets remain heavily contingent on gasoline and diesel prices.  The cost of operation for a plug-in electric vehicle (PEV) is significantly lower than that of liquid or gaseous fuels, but the acquisition costs remain significant and, therefore, payback periods can be long depending on the drive cycle and the cost of fuel.  The passenger car PEV market is seeing falling prices, but the medium and heavy duty truck market continues to see high costs and low production numbers.  The result is that fleets are likely to have a tough time making a strong case for moving to truck PEVs with long payback periods.  However, PEV passenger cars can be economically beneficial for fleets without easy (or inexpensive) access to CNG or propane, as the cost to install recharging infrastructure remains below refueling infrastructure costs of either fuel.

Overall, the alternative drivetrain market is finding fuels that fit specific niches without significant overlap except in a few specific cases.  It is with this perspective that fleets and manufacturers will gather in Phoenix, Arizona for the Green Fleet Conference.  It will be interesting to see whether current and anticipated gasoline and diesel prices, driver regulations, and potential labor shortages cast a pall over the euphoria.


Europe Is Next Frontier for Demand Response

— September 26, 2013

Europe is showing signs that it has the potential to become a major demand response (DR) market.  The regulatory environment, which has so far represented a serious obstacle to the implementation of DR programs that have remained illegal in the majority of European Union (EU) member states and in most of the wholesale and retail markets, is becoming supportive of the participation of demand-side resources.  A handful of the 28 member states have already created new regulations, along with payment and contractual structures, that support DR.  Other countries, such as Austria, Belgium, Finland, and Switzerland, have begun to review their national regulations.

Although it will take time before all regulatory barriers are removed, there are a number of driving factors that will facilitate DR deployment across Europe. The key drivers are:

  • The Energy Efficiency Directive, established by the EU Commission in 2012, which stipulates that national regulatory authorities should encourage demand-side resources
  • The EU’s Climate and Energy Package, which targets three key objectives:
    • To reduce carbon emissions by 20% from 1990 levels
    • To raise the share of energy consumption produced from renewable resources to 20%
    • To improve the EU’s energy efficiency by 20%
  • The adoption of intermittent renewables, such as wind and solar power, which are putting pressure on utilities to rely on DR capacity to balance the fluctuating supply and demand of electricity on a continuous basis
  • Smart meters, which are a critical element of the EU’s energy goals, as well as a cornerstone to DR deployment (Navigant Research projects that smart meters will have penetrated almost 90% of the electricity metering market in Western Europe by the end of the decade)
  • The growing use of electric vehicles (EVs), which, like intermittent renewables, will put a strain on the grid, requiring DR to address the unpredictable demand for power from EV charging

Navigant Research estimates that the total load curtailment from DR programs in Europe will reach 8,655 MW in 2013.  More than 56% of this will be generated by the industrial sector, and more than 28% will be generated by the commercial sector.  About 15% of total load reduction will come from households, primarily from those participating in time-of-use (TOU) programs.  Today, the largest load curtailment is contributed by Italy, mainly because of a large interruptible load program for the commercial and industrial (C&I) sector.  But as the load opportunity improves in both France and the United Kingdom, especially in the C&I sector, France will take the lead in 2017 with Europe’s largest DR load reduction, followed later by the United Kingdom.  Because of its slow start, Germany will trail the other nations, but will gradually catch up in 2020.

DR Load Curtailment by Major Country or Region, Europe: 2013-2020

DR blog chart(Source: Navigant Research)


EV Racing Comes of Age

— September 25, 2013

Motor racing has always been at the forefront of automotive technology.  In 1901, Henry Ford won a race that enabled the beginning of the Ford Motor Company.  Disc brakes were first invented in the late 1890s, but practical problems and lack of suitable pad materials kept them off volume cars until Dunlop introduced them on the Jaguar C-Type racing car in 1953.  Winning at Le Mans convinced manufacturers that this technology was ready for production, and the first disc brakes were subsequently installed on cars from Citroën and Triumph.

In recent years, as described in an earlier Navigant Research blog, motor racing has been a test bed for advanced engine technology as well as energy recovery systems.  While Formula One racing gets a lot of headlines in Europe and Asia, and NASCAR is very restrictive on which technologies can be used, the endurance racing series is more valuable to most original equipment manufacturers (OEMs) to test out new systems.  The 24 Hours of Le Mans is the best-known single race.  Both Toyota and Audi have had success in recent years with high-powered hybrid racing cars.

Not So Noxious

2014 will see the launch of a 10-race Formula E series featuring electric racing cars.  From September 2014 to June 2015 races will take place in cities around the world including London, Rome, Los Angeles, Beijing, Rio de Janeiro, and Bangkok.  One of the advantages of pure electric racing is that cities are more willing to host races because there is less noise and fumes than a traditional Formula One race.  New teams already signed up include Drayson Racing in the United Kingdom and United States-based Andretti Autosport.

As a demanding test of electric vehicle technology, e-racing provides an incentive for battery and motor manufacturers to showcase their latest products.  Qualcomm has signed on as a partner and will supply both telematics and wireless charging to the race teams.   The advantages of a more efficient motor or a more energy-dense battery that can stand up to a racing environment will surely be in demand in production vehicles.  And more publicity focused on EV performance won’t hurt the marketing efforts, either.


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