Navigant Research Blog

Smart Building Apps Seek Relevance

— March 20, 2014

In a world where software applications are replacing bank tellersconcierges, and even opticians, what’s the impact on the role of building engineers?  As described in Navigant Research’s Commercial Building Automation Systems report, the convergence of information technology and building control networks is yielding vast amounts of data.  Moreover, the wider adoption of open standards and the decentralization of building networks make this data widely available.  Against this backdrop, the appification of building management seems inevitable.

Still, the universe of building management applications appears to be in its infancy.  A quick search of the iTunes App Store revealed several available choices.  Apps are available from developers as large as Siemens and as small as Lorenzo Manera (I don’t know who he is, either).  The low barrier to entry in app development means that new entrants are just as capable of bringing an app to market as veteran industry players.

Most of these apps appear to turn a mobile device into another building-level control panel, providing functionalities such as monitoring and controlling heating, ventilation, and air conditioning (HVAC) and lighting or providing some level of energy management.  With the proliferation of open protocols, these types of apps have become easy to develop.  However, they all seem to be equally unsuccessful; none of the apps identified have received enough overall ratings for an average rating to be displayed.

Worthy or Worthless?

Smartphones and tablets provide a slew of sensors and far greater mobility than laptops.  Successful apps take advantage of these features, whether it’s the ability to play games anywhere or to use the embedded camera to snap a quick Instagram selfie.  Residential building automation provides several compelling ways to leverage the properties of mobile devices: occupancy can be set using geolocation, outside air temperatures can be provided through the Internet, and devices can remotely monitor and control lighting, HVAC, and security.  Moreover, an app can obviate the need for a system console.

Apps for commercial buildings, however, are a different story.  Since they’re built on top of an existing building management system (BMS), they don’t replace any equipment.  They don’t provide any more functionality than the underlying system.  The sensors on the device do not provide any useful input.  Some building management apps may aid in commissioning, but the biggest feature appears to be providing another way to monitor the BMS.  The Facility Prime app from Siemens, for example, is described on iTunes as “an ideal interface for non-facilities employees that may need access to live system data.”  Until building management apps can provide more functionality for commercial buildings, they will remain a cool toy for home automation.

 

Autonomous Vehicles Drive Themselves toward Reality

— March 19, 2014

Australian startup Zoox made a splash at the LA Auto Show in December by hosting a stand at the Connected Car Expo to promote its ideas about autonomous vehicles.  Zoox’s view is that the best way to introduce fully autonomous driving is to start with a clean sheet of paper and develop a new type of transport from scratch, rather than incrementally changing existing vehicles.  The initial concept currently under development is a taxicab that uses a chassis made of four identical quadrants.  Each quadrant will have a wheel with its own electric motor, and all four wheels can steer.

The passenger compartment will have no steering wheel or pedal controls and will utilize a carriage layout, with passengers facing each other.  The design is being optimized for rapid prototype manufacturing techniques rather than mass production.  Zoox is targeting taxi fleets as its first customers, because the business model shows that the biggest savings come from eliminating the drivers’ wages.  The vehicles will be designed for low-speed travel on city streets.

Experience Not Required

At the Autonomous Driving conference in Berlin hosted by we.CONECT, the Zoox team actively sought feedback from the other participants.  They are in the first year of a 7-year product development plan, so there is no vehicle to sit in at present, but the overall concept is well thought out and some detail work has begun.  I am sure that the Zoox developers will be tracking progress of the Navia, a robotic driverless shuttle, and Tesla has shown what can be accomplished in the automotive industry without decades of experience.

One recurring theme in Berlin was how to develop an automated driving system that can return control to the driver safely when necessary, particularly when road conditions change beyond what the developers anticipated.  While driver assistance functions are steadily getting more sophisticated, there are huge advances to be made before people can safely be removed completely from the driving process.  Today’s incremental improvement process involves automating the control systems that have been developed over the last century for humans to use.  This seems to be the fundamental challenge that Zoox has identified, and it wants to approach the solution from the other direction.

Maps from the Cloud

In addition to the intriguing Zoox concept, the presentations at the Berlin conference were of high quality and networking opportunities were abundant.  Here are some of the highlights that I noted that gave me some fresh perspectives on the current state of autonomous driving technology:

  • Professor Emilio Frazzoli of the Massachusetts Institute of Technology pointed out that the biggest potential benefit from autonomous driving will be carsharing, far exceeding improved road safety.  His detailed analysis of traffic in Singapore indicated that 800,000 personal cars could be replaced by only 300,000 shared autonomous vehicles.
  • Dietmar Rabel, from digital map company HERE (formerly known as NAVTEQ and Nokia Location & Commerce), promoted the Internet cloud for continuous map updates and introduced the concept of crowdsourcing for accurate map data.  Rather than relying on map suppliers to continuously update the information, sensor data from connected vehicles could be shared through the cloud, thus providing near real-time updated map and road condition information locally.
  • Geoff Ballew of NVIDIA explained how his company has grown from a supplier of graphics boards for PCs into a high-performance computing specialist.  Rapid data processing will be a key requirement for self-driving vehicles to become a reality.

While the automotive industry makes slow but steady progress toward the goal of a self-driving vehicle, it’s also good to hear about new companies approaching the topic from a different perspective.  I shall continue to watch with interest as I work on an update to Navigant Research’s 2013  Autonomous Vehicles report.

 

Utilities Boost Efficiency with Smart CVR

— March 18, 2014

Dynamically optimizing voltage levels via sophisticated smart grid technologies, smart grid conservation voltage reduction (CVR) continuously reduces energy consumption and demand during peak periods, when electricity prices are inflated and demand may exceed the available energy.  At American Electric Power (AEP) in Ohio, 17 circuits have already been equipped and tested with smart CVR capability, and the initial results were so promising that AEP Ohio is now doubling down on this technology.  Utilidata will deploy its advanced CVR solution on 40 more circuits at AEP Ohio.  Ram Sastry, director of distribution services support at AEP, is confident that smart CVR will give the company’s energy efficiency program a turbo boost.  Also in Ohio, Duke Energy aims to have a systemwide smart CVR deployment (a project called Integrated Volt/VAR Control, or IVVC) in full production by 2015 to reach the state’s energy efficiency and peak reduction targets over the next 10 years.  Duke Energy used a small portion of the $200 million the company received in Department of Energy (DOE) smart grid investment grants to help finance the CVR investments in Ohio, one of many states that now incorporate CVR as an energy efficiency resource.

Untapped Potential

The DOE investment grants, combined with companies’ matching investments, are expected to result in the installation and/or automation of about 18,500 capacitors nationwide between 2009 and 2014, according to a recent presentation from the DOE.  (Automated capacitors play an integral role in most smart CVR projects.)  This is a large sample set of automated capacitors, serving as a nationwide demonstration of smart CVR, spurring osmosis between utilities and capturing interest from the National Association of Regulatory Utility Commissioners.  Not all 18,500 automated capacitors are to be used for smart CVR, but even if they all were, that would represent only enough capacitors to populate a small fraction of all substations and feeder circuits in the United States.  In other words, there’s a large, untapped market for smart CVR.

Government smart grid funding is nearing its end, but manufacturers and vendors of smart grid equipment and CVR software solutions will soon see a nice boost from increased adoption of smart CVR outside of DOE-funded projects.  Navigant Research’s Conservation Voltage Reduction report analyzes the market for smart CVR in North America.  While the market is still forming, revenue from smart grid equipment and software products dedicated to CVR solutions is expected to reach $30 million to $40 million this year.  With an intention to meet efficiency targets, most major utilities are already piloting various CVR control schemes.  As more large-scale deployments are expected to ramp up over the next few years, smart CVR component sales are expected grow into a $100 million market annually by 2017.  Total utility spending associated with smart CVR, including planning, installation and systems integration costs, could easily be 2 to 3 times higher.

 

Is Warren Buffet Betting Wrong on Utilities?

— March 18, 2014

In Warren Buffet’s famed letter to shareholders of March 1, 2014, the Oracle of Omaha made it clear that following Berkshire Hathaway’s $10 billion buy of NV Energy last year, he is still shopping for utilities.  Analysts are throwing around names like Wisconsin Energy, Westar Energy, and Alliant Energy because they each provide the returns on equity (historically) that Buffet demands and operate in states with favorable regulatory climes.

Now, Warren Buffet has more investing savvy in his little finger than I’ll ever have.  But is he right on this one?

The Berkshire Hathaway website offers a succinct list of Buffet’s investment requirements.  He’s looking for big (but simple) businesses with consistent earnings, low debt, and good management.  In the latest letter to shareholders, he notes that utilities have “recession-resistant earnings, which result from these companies exclusively offering an essential service.”

The Figures Don’t Lie

There may be a few cracks in the foundation of Buffet’s premise, especially because his broader investment theme has always been an unshakeable belief in America’s ability to innovate and grow over the longer term.  We’re talking 20 to 100 years, not 5.

I examined recent financial reports for MidAmerican Energy Holdings, the subsidiary that includes Berkshire Hathaway’s utilities, and also those of NV Energy.  The buy of NV closed in mid-December.  Here are the MidAmerican figures as shown in Buffet’s letter:

 

Overall, healthy growth for Warren’s shareholders, but look what happened with the utilities (HomeServices is a real estate company).  U.K. utilities (i.e., Northern Powergrid) have experienced a 12% average annual decline in earnings since 2011.  Earnings at the Iowa utility (MidAmerican Energy) have fallen 9%, on average.  Western utilities (PacifiCorp) enjoyed a nice bump in earnings last year, but at NV Energy, revenue was down 2%, cost of fuel rose 38%, and operating income fell 7.5%through September 30, 2013.

In the discussion of results for the various utilities, there are other worrisome comments.  From the discussion of PacifiCorp:  “Certain large industrial customers with generation capabilities began to self-generate in 2012 resulting in lower industrial customer usage across PacifiCorp’s service territories,” and “Net income increased $55 million primarily due to higher retail prices approved by regulators and higher retail customer load, partially offset by higher energy costs, lower renewable energy credit (REC) revenue and higher depreciation and amortization.”

Still Coal-Dependent

Growth is largely predicated on regulators raising rates.  Large commercial and industrial (C&I) customers are beginning to self-generate, and fuel costs are rising.  Buffet also likes to tout his companies’ diversification and investment in renewables.  But at PacifiCorp, it was coal (as a percentage of overall energy sources) that rose from 59% in 2011 to 62% in 2013.

In his letter, Buffet also said, “Our confidence is justified both by our past experience and by the knowledge that society will forever need massive investments in both transportation and energy.  It is in the self-interest of governments to treat capital providers in a manner that will ensure the continued flow of funds to essential projects.”

That may be true, but that American entrepreneurial spirit that Buffet so believes in is exactly why he should be worried.  Cheaper and better solar and wind options for residential – and C&I – customers will affect utilities’ bottom lines whether regulators like it or not.  And they won’t just keep raising everyone else’s rates in response.

 

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