Navigant Research Blog

Aclara to Buy GE Meters Unit Amid Shifting Strategies for Smart Grid Vendors

— December 7, 2015

Aclara Technologies pending acquisition of General Electric’s (GE’s) electric metering business underscores the shifting strategies among smart grid vendors. For Aclara, the move strengthens its goal to beef up its smart grid infrastructure. For GE, shedding its metering business fits in with its aim of becoming a more digital company. If the deal goes through by the end of 2015 as planned, Aclara would take over GE Meters’ global headquarters in Somersworth, New Hampshire. This includes 300 employees, as well as a satellite manufacturing plant in Chicago and a center of excellence in Bilbao, Spain. Terms of the deal were not disclosed.

St. Louis, Missouri-based Aclara intends to leverage GE Meters’ expertise in support of its concentration on important technology trends such as advanced metering infrastructure integration, cyber security, and cost-effective field upgradability, according to a management statement. Most of Aclara’s current smart metering business is among small and midsize municipal and rural electric utilities in the United States.

The Aclara-GE Meters deal follows a similar pending transaction by Honeywell, which announced in July its agreement to buy smart meter manufacturer Elster from Melrose Industries, a United Kingdom-based investment firm that specializes in buying and spinning off manufacturing firms. The Honeywell-Elster transaction is valued at $5.1 billion and is expected to close in the first quarter of 2016. In terms of scale, the Honeywell purchase of Elster is much larger than the Aclara-GE Meters transaction, given that Honeywell is expected to take over management of about 6,800 employees and the business includes gas and water meters, and not just electric versions.

For major smart meter competitors like Landis+Gyr, Itron, and Sensus, these pending deals have to give them some pause as they ponder what type of landscape they will compete in when 2016 rolls around. Do they double down on their own strengths, or do they seek new pathways, deals, or partners to stay relevant in the market? Along with other stakeholders, they need to also consider the fact that the smart metering business is undergoing some important changes, and that the pathway ahead is unclear in a somewhat down market. Major deployments of smart meters in Europe are stuck in slow gear, Chinese manufacturers are sniping from below on price and capabilities, and the U.S. market remains sluggish, though bigger deals are expected in the next year or two.

On a personal note, it is also somewhat sad to see a venerable brand like GE leave the meter market after some 130 years, but then again, business will be business.


State-Regulated Energy Efficiency and Renewable Energy Use in California

— December 2, 2015

California’s newest energy bill, senate bill (SB) 350, passed 26 to 14 and was signed into law on October 7. The Clean Energy and Pollution Reduction Act of 2015 aims to increase the Renewable Portfolio Standard (RPS) to 50% by 2030 (up from the previous target of 33%), establishing that a percentage of electricity be generated by renewables and requiring an increase in energy efficiency in existing buildings by 50% by 2030. The bill originally proposed to cut petroleum use by 50% by 2030, but this was removed from the bill shortly before it was passed. The bill supports a previous order by Governor Edmund Brown reducing greenhouse gases by 40% below the 1990 levels by 2030.

According to the American Lung Association, the top five ozone and particle polluted cities in the United States, both year-round and short-term, are in California. Senator Kevin de León, the author of the bill, stated at the signing ceremony in Los Angeles that, “with SB 350, we are making clean power sources like wind and solar the mainstream, democratizing the benefits to our economy and environment. … Soon, those communities living in the shadows of smokestacks and freeway overpasses will breathe a little easier.” Funded by the Los Angeles Department of Water and Power, Pacific Gas and Electric Company, the Sacramento Municipal Utility District, San Diego Gas & Electric Company, and Southern California Edison Company, a study by Energy and Environmental Economics, Inc. concluded that achieving the 50% RPS set forth by SB 350, while aggressive, is feasible. The study found a number of short-term solutions, including increased regional coordination, increasing the diversity of renewable resources, and energy storage.

Impact on Utilities

Austin Whitman, Director of Regulatory Affairs for FirstFuel Software, stated that the benefits of SB 350 to utilities include an increase in data-driven improvements. Utilities will need to reduce demand hour-by-hour, not just on a yearly basis.

SB 350 requires the State Energy Resources Conservation and Development Commission to establish annual targets for energy efficiency savings, the California Public Utilities Commission to establish efficiency goals for private utilities, and the California Energy Commission to do so for municipal utilities. ReedSmith explained that while these commissions are required to set annual targets, the local, publicly owned electric utilities are required to set annual targets for energy savings and demand reduction. Utilities are encouraged to participate in cost-effective activities, such as peak load reduction. The bill is expected to transform the independent system operator (ISO), which is required to propose modifications to the states legislature for approval, in to a regional organization. The bill stresses the importance of the use transportation electrification (TE) and increase’s the state’s authority to direct investor-owned utilities to implement TE, which will likely create a plethora of new programs.

California as a Test Pilot

The regionalization of the ISO is intended to encourage the growth of regional electricity transmission markets in western states, which will increase access to customers within these areas. The ISO must conduct additional studies on the impacts of a regional market enabled by the proposed governance modifications. If the studies are found successful, it is likely this could be adapted with other states and even neighboring countries, as well.

California has continually been leading the country—and the world—in its efforts to fight climate change. A 50% RPS is the highest anywhere worldwide, and all eyes will be focused on California to see how these goals can be achieved by 2030.


Colorado Moves to Increase EV Adoption

— December 2, 2015

When it comes to supporting and selling plug-in electric vehicles (PEVs), California exceeds expectations. The state is expected to represent 48% of all PEV sales in the United States in 2015, and has far outspent any other state in supporting electric vehicles (EVs) while also creating a highly favorable regulatory environment. The recently enacted Senate Bill 350 is a legislative U-turn for the state, which went from preventing utilities from owning EV charging stations to requiring them to participate in and support EV charging.

Many states that want to clean their skies and reduce fuel imports envy California and are looking for ways to copy its success with EVs. Public and private sector organizations in northern Colorado are accelerating efforts to move the state from the middle of the pack toward becoming an EV leader.

In a recent study, the International Council on Clean Transportation (ICCT) evaluated 30 activities that states, cities, and utilities can do to support EVs. Denver is in the middle of the pack, ranking 13th out of the 25 cities evaluated by ICCT, while San Francisco ranked first. According to ICCT, Denver’s primary utility, Xcel Energy, is participating in two of the six recommended utility activities.

EV Promotion Actions

John Blog Chart - Nov 11(Source: International Council on Clean Transportation)

Denver ranks 11th among metropolitan statistical areas in Navigant Research’s PEV Index, which evaluates populations for the likelihood of purchasing PEVs according to a variety of demographic characteristics including age, education level, and economic factors. According to Navigant Research’s Electric Vehicle Geographic Forecasts report, nearly 45,000 PEVs will be in use in the Denver metro area by 2024, a tenfold increase from 2014. In addition, Colorado is expected to rank 13th among states in PEV sales as a percentage of new light duty vehicle sales in 2015, and PEVs are projected to reach 4% of new vehicle sales in 2024.

To make EV charging more readily available, non-profit Drive Electric Northern Colorado (DENC) has been encouraging organizations to join the U.S. Department of Energy’s Workplace Charging Challenge. According to Annie Freyschlag, deployment community associate at DENC, 17 employers have joined the Challenge initiative, adding that residents of northern Colorado are within 6 miles of an EV charging station at any given time.

Colorado has strong financial incentives to purchase PEVs and charging equipment that should help the state pass others in PEV adoption. The state offers up to $6,000 for a PEV purchase, which uniquely includes used PEVs brought in from other states, and the Charge Ahead Colorado program can reimburse up to 80% of the incremental cost of purchasing a PEV or EV charging equipment.

Groups within the state are currently lobbying the legislature to provide high-occupancy vehicle lane access to PEVs as a stress and time-reducing incentive. The Denver Metro Clean Cities Coalition, in partnership with the American Lung Association, also has several initiatives to encourage PEV adoption, including Project Fever.

To enable PEV owners to fill their batteries with clean power, Boulder, Adams, and Denver counties joined together in the fall of 2015 to facilitate discounts for rooftop solar and EV purchases. As reported by the Daily Camera, the Solar Benefits Colorado program offered homeowners an estimated 15% discount on solar rooftop systems and roughly $8,300 off the cost of a Nissan LEAF.

Freyschlag says the biggest barrier to EV adoption in Colorado continues to be lack of direct consumer experiences, as the majority of the public still have never driven a PEV. Also, most people do not think about the financial cost of owning and operating a vehicle over longer than a 3-5 year span.


A User Guide to the Climate Change Conference

— December 1, 2015

The 2015 United Nations Climate Change Conference (COP) held in Paris in the first week of December will be the 21st early session of the Conference of the Parties to the 1992 United Nations Framework Convention on Climate Change (UNFCCC) and the 11th session of the Meeting of the Parties to the 1997 Kyoto Protocol.

Six years have passed since the public debacle suffered by the group in 2009, when all the eyes of the world were turned toward Copenhagen expecting (perhaps naively) to see a global accord binding the countries to reduce greenhouse gas (GHG) emissions enough to prevent a rise in atmospheric temperature of more than 2 °C  by the end of the century.

Climate policy today is increasingly negotiated behind closed doors, depending more often on unilateral commitments and bilateral negotiations that have proven to be as valuable as the all-or-nothing approach used before Copenhagen. Also, technical advances have significantly reduced the cost countries face in achieving their reduction targets. For example, according to the Lawrence Berkeley National Laboratory’s Tracking the Sun VIII report, the cost of solar power has fallen by about 80% since the conference in Copenhagen in 2009. 

In the past, the involvement of the two largest GHG emitters, the United States and China, caused disruption and delays. Now, these two countries are working together ahead of the meeting in Paris. With the United States and China now moving in the same direction, there is cautious optimism that a deal could be reached. That said, there are several different scenarios that might play out in this year’s COP.

Outcome Already Known

The negotiations to sign an all-inclusive agreement will keep people involved in early December. However, some of the outcome is already known. During the process behind this year’s COP, the majority of countries have put forward Intended Nationally Determined Contributions (INDCs), which are essentially climate plans. These countries have pledged reductions that in total will bring 95% of global GHG emissions under some form of policy or regulatory scrutiny.

The next step (even if an all-inclusive agreement is not reached), is to translate country strategies into an executable playbook. It is here that the continuous improvements in low-carbon energy generation and energy efficiency technologies, business and financial models, and the implementation of the Energy Cloud will play a major role in achieving global emission reductions. These continuous improvements represent a necessary step in slowing down global warming and improving resilience during catastrophic events by optimizing power consumption across the grid while increasing comfort levels and providing a decentralized control and management that allows for redirecting energy flows and many-to-many networks.


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