Navigant Research Blog

With Alstom Bid, GE Steps Up T&D Competition

— April 30, 2014

The news that General Electric’s (GE’s) $13 billion bid to acquire Alstom SA has been accepted by Alstom’s board – coupled with Siemens AG’s announcement that they are considering a counterbid  – represents a clash of titans in the global marketplace for electricity generation and transmission and distribution (T&D).  For the last decade, that market has been led by three companies: ABB, Alstom, and Siemens.  GE, a huge global corporation with multiple business lines across finance, healthcare, and electric T&D, has focused its T&D business primarily on generation, digital energy software solutions, and some high-voltage system components, such as series compensation (SC) devices used to correct voltage loss and other instabilities on the electric transmission grid.

In 2012, GE announced a joint venture partnership and equity position in XD Group, a Chinese heavy industrial manufacturer that sells a full range of T&D equipment, substations, transformers, and high-voltage direct current (HVDC) transmission lines.  The deal not only opened up the booming Chinese T&D market to GE, but also allowed the company to white-label XD’s T&D system equipment for resale in other regions.  In my discussions with the Big 3 (ABB, Alstom, and Siemens) vendors at the recent Institute of Electrical and Electronics Engineers (IEEE) T&D systems trade show in Chicago, they mentioned that GE has become a significant competitor, signaling that the market structure has now morphed into a Big 4.

Mind the Gaps

However, I also saw that there are significant gaps in GE’s technical product lines and global manufacturing and installation capabilities, which need to be filled.  For example, flexible alternating current transmission systems (FACTS) solutions for voltage drop and power quality on transmission lines represent a $4 billion dollar market that continues to grow annually.  GE has traditionally provided SC solutions, but not the faster-responding static VAR compensator (SVC) and static synchronous compensator (STATCOM) solutions that are now being adopted as the aging transmission grid is being upgraded.  The Alstom acquisition is the perfect solution for filling that gap, as Alstom SA has manufacturing, design, and installation capabilities for SVCs and STATCOMs in North America, Europe, and Asia Pacific.  A broader discussion of this market and the FACTS technologies can be found in Navigant Research’s recent report, Flexible AC Transmission Systems.

At the time of this writing, it appears that the GE offer will be approved by the French government, and that Siemens is preparing a counteroffer.  ABB’s CEO has stated that his company will not enter this fray, but I am certain that ABB’s internal analysts are running the numbers and assessing the opportunity.  In this ongoing clash, the Big 4 all have a long-standing history of growth through acquisition.   However this works out, we can expect the market to sooner or later be whittled down to the Big 3 again.  These developments will definitely add color to my upcoming report on high-voltage transmission systems, which will be released later in 2Q.  Stay tuned.

 

Has the Elio’s Time Come?

— April 29, 2014

This year’s Earth Day inspired Paul Elio, the founder of Elio Motors, to issue a press release outlining how his planned new vehicle would emit fewer pounds of greenhouse gases when driving 15,000 miles than a typical cow produces in a year of cud chewing.  Putting the word “fart” in a press release had the desired effect of gaining attention, at least in the initial target market of the United States.

It was also a good way to get pictures of the latest prototype into the media.  An earlier prototype got plenty of attention when it was shown to the press in the summer of 2013, and a trickle of stories has followed since the beginning of 2014.  Production is now slated to begin in the first quarter of 2015 after the original date of summer 2014 proved to be impractical.

The vehicle itself is an interesting design concept that features a two-seat tandem passenger cockpit with two wheels at the front and a single wheel at the rear.  This design has very stable handling, unlike the single front wheel trike design that the infamous (in the United Kingdom at least) Reliant Robin had.  Top Gear did a feature on it a couple of years ago that I think is one of the funniest 6-minute videos in motoring journalism.  It will put you off getting a Reliant, but not an Elio.

Customers Line Up

The Elio is a simple commuter vehicle that uses many off-the-shelf parts, and because it’s lightweight and has a small, efficient engine, it can offer decent performance and good fuel economy at a very low purchase price of $6,800. The company has even come up with an innovative purchase scheme that involves monthly payments that are twice what the owner spends on gasoline. The idea is that because the Elio offers about 3 times the gas mileage of a typical older car, owners will be spending about the same each month for a while, but eventually the running costs will drop by two-thirds.

Not only does this look like a good deal for consumers, but the vehicles will be built in Louisiana, thus providing hundreds of local jobs.  About 15,000 potential customers are reported to have paid deposits ranging from $100 to $1000 to secure one of the first off the production line.  Ambitious plans for six-figure production targets have been mentioned.  So is this the next big thing for individual transportation?  Will Elio Motors challenge the established automakers?

Helmet Required

Tesla has proven that a startup company can compete effectively in the automotive market.  Tesla’s approach was to attack the high end of the market by selling a small number of high-value vehicles packed with new technology.  The Elio business model, by contrast, relies on selling large numbers of basic vehicles at the bottom end of the value market.  One of the hurdles that both companies share is distribution.  Tesla is already facing costly battles in some states to sell vehicles without establishing a network of certified dealers.

But certification will be the biggest hurdle.  By choosing a three-wheel design, the Elio is classified as a motorcycle in the United States.  This brings some advantages in terms of not having to meet strict safety and other standards, but in many states, it means that the driver must wear a helmet, even though the vehicle is designed to meet crash safety standards for front and side impact and features airbags.  It also means that drivers must have a motorcycle license – even though the vehicle cannot be used to take the motorcycle test (which requires riders to show they can control a two-wheeler through a figure eight maneuver around cones).

The company is presently in negotiation with some state legislators to have its vehicle classified as an autocycle to get around this significant issue.  If this effort is successful, the unique Elio could really be another game changer for the automotive industry.

 

Zero Energy Buildings Become Reality

— April 29, 2014

Every Earth Day, there is a flurry of press releases and announcements in which corporations show how they are doing good for the Earth.  Once the dust settles, and the greenwash dries, it takes time to sort out the green (environmental) signal from the green (dollars) noise.  In the domain of zero net energy (ZNE) buildings, a clear signal can be heard.  ZNE refers to buildings that, over the course of a year, generate as much energy as they use.  Through a combination of efficient design, material choice, and performance, tied in to local renewable power generation, ZNE can be reached with small additional costs.

The signal of good ZNE news came from a recent report by the New Buildings Institute that showed that modifying a new LEED-certified commercial building to reach ZNE would cost an additional 5% to 10% beyond normal construction costs and would achieve a 30% return on investment in just 3 years.  This is a tabletop exercise, demonstrating that ZNE is possible in Washington, D.C., which has the highest per capita square footage of green buildings of any U.S. city.

In the Real World

But how does this concept play out in real buildings?  Two new ZNE buildings are on display this April.  The first is a large commercial building in La Jolla, California, the Tower II at La Jolla Commons.  This 13-story building will use fuel cells to convert biogas to generate electricity.  Through an extensive network of sensors and a grid-integrated building energy management system, Tower II will, at times, send surplus power to the grid.  At 415,000 SF, it is also the largest commercial ZNE building in the United States.

However, Tower II’s ZNE-ness is not without its critics.  A debate originates with where Tower II gets its power, namely from fuel cells powered by waste biogas. There is no formal authority on the many ways to define ZNE, but a good description of the hierarchies of ZNE can be found here.  No matter which way you view it, though, this ZNE looks like …  an ordinary office high-rise, with floor to ceiling windows.  On the inside, the building uses occupancy sensors and daylighting, but there is nothing shocking about the visual design of it.

This seems to be the trend.  A second example of a real ZNE building is the LEED Platinum Research Support Facility (RSF) at the National Renewable Energy Laboratory in Golden, Colorado.  This building is an impressive 360,000 SF in size, with a massive PV array on the roof.  Featuring open floor plans, and a data center, the RSF would look as at home in an office park as it does in a national laboratory.

Retro, Too

While most of the focus has been given to new commercial and residential buildings, there is a growing movement of incorporating ZNE in retrofits, according to Navigant Research’s recent report, Energy Efficiency Retrofits for Commercial and Public Buildings.  The $60 billion retrofit market is going to double in size in the next 20 years due to changes in building codes and the drive to reduce energy costs.  The ZNE concept will contribute to that effort, slowly at first.  As states like California pursue targets like making 50% of all existing commercial buildings retrofit to ZNE by 2030, the occurrence of ZNE-converted buildings will grow.  By 2030, perhaps we’ll be reporting announcements about ZNE cities.

 

Shares Shift in Global Wind Turbine Market

— April 29, 2014

Market shares among the world’s top 10 wind turbine vendors shifted in 2013, as negative conditions in several key markets, particularly the United States and Spain, were not conducive to growth and affected a number of wind turbine vendors exposed in these markets.  In 2013, 19,458 wind turbines were delivered with a combined capacity of 37,478 MW, which is 13.3% lower than the previous year in terms of megawatts supplied.  The turbines were supplied by 62 wind turbine manufacturers last year; of those, 42 companies are from Asia, 18 are from Europe, and two are from North America.  China remained the largest country in terms of the number of vendors supplying wind turbines to the market, followed by India, Germany, and South Korea.

This data, along with the following 2013 market share dynamics, is detailed in the recently released World Market Update 2013 – International Wind Energy Development Forecast 2014-2018.

Major market share shifts in 2013 include the following:

  • Vestas recaptured the No. 1 position, after losing the top spot to GE Wind in 2012.  Vestas was the top supplier to Poland, Romania, and Sweden and the second-largest supplier to Germany, Canada, and the United States.
  • Goldwind ascended from No. 7 to No. 2, thanks to its strong performance both at home and in overseas markets.  The Chinese turbine supplier exported 179 wind turbines to seven countries, with 46% of these going to Australia and 25% to Latin America.
  • Enercon moved up one place to No. 3 by relying on the growth of its home market, Germany, in which it supplied nearly half of the turbines installed in 2013.   It was the third-largest supplier to Poland, Sweden, and Romania.
  • Siemens dropped one position to No. 4 in 2013 due to the slump in demand in the United States, where it traditionally performs well.  However, the company retains its position as the world’s largest offshore wind turbine supplier.
  • GE Wind suffered from the late extension of wind tax credit support in its home market, the United States, and dropped to No. 5 from the position it occupied in 2012.  However, it was the largest supplier to Brazil and the fourth-largest supplier to India in 2013.
  • Gamesa maintained the same position it held in 2012, despite installing only 55 MW in its home market of Spain last year.  It performed well elsewhere, particularly in Latin America, where it was the largest supplier to Mexico and Uruguay and the second-largest supplier to Brazil.  In addition, the company was also the largest foreign turbine supplier to India in 2013.
  • Suzlon Group dropped two positions to No. 7.  It was not a bad year for subsidiary Senvion (formerly REpower), but the contraction of Suzlon’s traditionally strong markets, India and the United States, took a toll.  Suzlon Group was the second-largest turbine supplier to the United Kingdom and Poland in 2013.
  • United Power maintained its position as the world’s No. 8 supplier, but the Chinese turbine vendor lost more than 25% market share at home in 2013.
  • Mingyang replaced Sinovel as No. 9 in 2013.  Sinovel continued to suffer in China, its home market, during 2013 and dropped to No. 13.
  • Nordex crept into last place in the top 10 supplier list in 2013, thanks to its focus on the company’s core markets in Europe and emerging markets in Latin America and Africa.  The German supplier has been out of the top 10 since 2010.

(Source: Navigant Research)

 

 

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