Navigant Research Blog

U.S. Supreme Court Brings Closure to FERC Order 745 Saga

— January 26, 2016

Control panelThis is a bittersweet moment. The Federal Energy Regulatory Commission’s (FERC) Order 745 legal case has provided me with consistent blog fodder for the past year and a half, ever since the U.S. Court of Appeals overturned the order in May 2014. Every few months, I could count on a new development and twist in the plot to pontificate upon. Now, the end has come.

On January 25, the U.S. Supreme Court reversed the lower court’s decision on both parts of the case, meaning that demand response (DR) does fall under the FERC’s jurisdiction, and that the payment of the full locational marginal price (LMP) in the wholesale energy markets is just and reasonable. The DR community could not have asked for more, while the generators must acquiesce and learn to live with the competition.

After the Supreme Court hearing in October 2015, many pundits felt that the court was close to being split 4-4 (Justice Samuel Alito recused himself), which would have meant that the lower court’s ruling would stand. The final tally was 6-2 in favor of the FERC, with the swing vote of Justice Anthony Kennedy and the somewhat surprise vote of Chief Justice John Roberts going to the majority side. Chief Justice Roberts had some harsh questions for the FERC in the hearing, but perhaps he was just trying to make sure there weren’t any holes in his mind.

Status Quo

So what does all this mean? In reality, this decision just ensures the continuation of the status quo, since all the regional transmission organizations (RTO) under the FERC’s jurisdiction have been operating under the existing rules all along. There was much more downside risk to the alternative outcome than upside to this conclusion. DR has had little participation in the day-ahead and real-time energy markets lately, mostly due to historically low natural gas and electricity prices. In the capacity markets, resource performance requirements have become more stringent in many regions, so DR will likely struggle to see significant growth. This was really just a defensive battle for DR rather than an effort to gain more ground in the markets. However, the California Independent System Operator (CAISO) is in the midst of major enhancements to DR participation, so that is one area with growth potential.

Industry Reactions

How did the industry players react? PJM, which runs the largest DR market in the world, stated that “Although PJM will have to study the court’s decision, the ruling supports the continued participation of demand response in competitive wholesale markets. We’re pleased with that outcome. Certainty and continuity are important in markets. Demand response brings value to competitive wholesale markets and is a component of electric system reliability.”

In an interview, David Brewster, president of EnerNOC, said that there were no wild celebrations in the office after the decision was made, just a lot of high fives and sighs of relief that a major distraction of the past 2 years was over. The company had playbooks ready for whatever scenario prevailed, but this was definitely Plan A, rather than having to go state-by-state to develop new DR programs. Brewster wouldn’t say how much EnerNOC spent to fight this legal battle, but it hired one of the top lawyers in the field to represent it and had a monumental internal team effort to support the case every step of the way. The stock market liked the outcome as well, as EnerNOC’s stock jumped almost 70% on the day of the ruling (although it has come back down somewhat from that high).

In a statement to me, CPower’s Chief Sales and Marketing Officer Chris Cantone said “We are very happy to see the Supreme Court decision to uphold FERC 745. It is a clear reflection that demand response is a valuable and cost-effective resource keeping the energy market competitive and fair. We were privileged to participate in the arguments in this case and to help our customers continue their participation in DR and allow their communities to see the benefits of their efforts.”

“We are pleased the Supreme Court ruled in favor to allow FERC Order 745 to remain in place, thus securing the true value of demand response within wholesale energy markets,” said Terrill Laughton, Vice President and General Manager of Integrated Demand Resources for Johnson Controls. “This outcome ensures that demand-side assets can contribute to both the competitiveness of energy markets and enhance the reliability of the nation’s electrical grid.”

Now that the extraordinary saga that brought DR to the legal forefront is over, it can now return to obscurity, buried deep in the RTO’s market rules. I guess I’ll have to turn my attention to something more mundane this year—perhaps how the presidential election will affect the energy industry.


GM Wants to Be a Carsharing Maven

— January 26, 2016

male hand using navigation system on car dashboardOver the past several decades, Detroit-based automakers have rightly been accused of regularly burying their heads in the sand and ignoring changes in the marketplace that would upend their business. The latest announcement from General Motors (GM) shows that is no longer the case, as the biggest American automaker has launched a carsharing service in Ann Arbor, Michigan that also leverages its established OnStar telematics service.

Navigant Research’s Carsharing Programs report projects that such services will have 23.4 million members globally by 2024, potentially eating into individual vehicle sales. Ford has had a longstanding relationship with ZipCar, BMW is behind the DriveNow program, and Daimler provides vehicles to Car2Go.

Maven, the new service from GM is the latest in a string of moves by the automaker including a $500 million investment in Lyft and the purchase of assets, including intellectual property from the defunct SideCar ride-hailing service. While SideCar shuttered its service at the end of 2015 after failing to gain marketplace traction against larger rivals Uber and Lyft, many of its staff will join GM’s efforts, and the automaker will access to a 2002 patent on determining an efficient transportation route and requesting rides from a mobile device. SideCar founder Sunil Paul declined to use the patent against competitors, and it’s not clear if GM will be able to sue. More likely GM will use the patent defensively if Uber tries to corner the market.

Maven will have the advantage of GM’s longstanding OnStar system, which launched 20 years ago as the first commercial cellular-based telematics service. Many of the same features that OnStar subscribers get through the RemoteLink smartphone app will add to the convenience of using Maven. Using the Maven app, subscribers can reserve and locate available vehicles and remotely start them up to 8 minutes prior to a reservation.

The fleet consists of the four Chevrolet models including the Spark, Volt, Malibu, and Tahoe, allowing users to select the vehicle that best meets their needs on any given day. Rental rates start at $6 per hour for a Volt or Spark to $12 for the Tahoe.

Increasing Autonomy

For now, Maven users will have to go where the vehicles are parked, 11 locations around downtown Ann Arbor and the University of Michigan north campus. However, as GM continues to develop its autonomous vehicle technology and the autonomous hailing service it announced with Lyft at CES, Maven seems likely to morph into this type of service. It’s probably not a coincidence that GM chose to launch Maven at a location directly adjacent to the Mcity autonomous and connected vehicle test facility.

With GM and Ford both extensively dabbling in carsharing and ride-hailing services, Fiat Chrysler is the only Detroit automaker that hasn’t publicly announced any plans in this space, but it’s likely only a matter of time before they jump in as well. With a 30-mile electric driving range, the Chrysler Pacifica plug-in hybrid minivan that was revealed at the recent North American International Auto Show would make an excellent platform for mobility as a service.


Electric Mobility Devices Make a Splash at CES

— January 26, 2016

Car driving fastThe International CES, the global consumer electronics show held every January in Las Vegas, exhibits the latest technologies and trends in the electronics industry. This year, electric mobility devices formed one of the major trend lines of the conference, as cities are increasingly looking for new ways to reduce traffic congestion while consumers are simultaneously considering innovative options for cutting down on their commute times.

At CES, Oregon-based Arcimoto introduced its new all-electric 3-wheeled motorcycle, with a top speed of 80 mph and up to a 130-mile range. Currently, 3-wheeled vehicles are often used to reduce air pollution and congestion in cities while hauling cargo for deliveries. Rapidly evolving 3D printing technology is now being combined with electric motorcycle manufacturing, as Energica demonstrated with its debut of a 3D-printed e-motorcycle called the Ego. The streetbike has tremendous acceleration, able to go from 0 to 100 km/h (or 0 to 60 mph) in less than 3 seconds. The Ego’s top speed is 150 mph, and an 80% battery charge can be achieved in just 30 minutes. Electric bicycles (E-bikes) were trending at CES, and exciting new advances in hover boards, electric roller-skates, and electric skateboards were also on display.

Perhaps most notably, e-scooter company Gogoro unveiled its home-charging solution for customers who wish to forgo the company’s citywide battery swapping networks and charge their batteries at home. This product fills what perhaps was the last remaining hole for Gogoro, which now looks primed to expand its battery swapping network from Taipei to large European cities, beginning with Amsterdam in mid-2016. The company’s Go Charger holds two batteries and plugs into a 110V outlet. Two versions of the charger will be offered, with one version charging the batteries in 2.5 hours and the other taking 5 hours for a full recharge.

Cheapest, Quickest Way to Adopt Electric Transport

All signs are pointing toward the electric mobility device industry continuing to expand in 2016, as these vehicles are often significantly more affordable than full-sized electric vehicles. In fact, sales of e-bikes, e-scooters, and e-motorcycles are each expected to individually outpace the sales of electric cars this year, in some cases by a wide margin.

Electric Vehicle Global Sales Estimations: 2016

Ryan Blog Table

(Source: Navigant Research)


U.S. PEV Market Looks to Bounce Back in 2016

— January 26, 2016

EV RefuelingThe plug-in electric vehicle (PEV) market in the United States took a step backward in 2015, with sales falling off after 5 years of strong growth. A surprising decline in the price per barrel of crude oil along with customers waiting for refreshes of existing PEV models such as the Nissan LEAF and Chevrolet Volt contributed to the slump. However, a bevy of new model launches and improvements in vehicles and charging infrastructure provide hope that 2015 was only a speed bump along the journey toward vehicle electrification.

The slowdown enabled China to surpass the United States as the largest PEV market in 2015, and according to Navigant Research’s recently published Electric Vehicle Market Forecasts report, the Asia Pacific region is expected to pull away from North America in the coming years. According to Automotive News China, total production of EVs and plug-in hybrids grew by 300% during the first 11 months of 2015, climbing to 279,200 commercial and passenger vehicles.

However, by 2017, American consumers will have more variety and total choices in PEVs as Ford, Audi, Tesla, General Motors, BMW, and others are set to launch new models in multiple segments. This will likely prompt a rebound in PEV sales growth, especially if the cost of gasoline returns to pre-2014 levels.

Addressing Inconvenience

According to survey data from Navigant Research, consumers in the United States see the availability and inconvenience of charging PEVs as the main reasons not to switch from gasoline to electric powered cars. More than a third (36%) of consumers who responded to an open-ended question about the primary drawback to owning a PEV cited a lack of infrastructure or other vehicle charging-related hassles. Of the small sample size (14) of those surveyed who currently own a PEV, three mentioned the lack of infrastructure availability as a drawback to owning a PEV, while none mentioned the range of the vehicle itself.

Automakers are increasingly addressing the perceived lack of charging infrastructure, and several now include a free year of access to charging at dealerships and other locations when a PEV is purchased. While the number of public, workplace, and private Level 1 and Level 2 chargers continues to grow, increased fast charging is viewed as a necessity in growing the PEV market. BMW and Nissan recently teamed up to deploy 120 DC fast chargers across the United States. This partnership is particularly interesting since each of these two companies back a different fast charging standard, with Nissan supplying its vehicles with CHAdeMO ports and BMW offering SAE Combo ports on its cars. Each of the fast chargers deployed will included charging cables for both standards, so agreeing to disagree while contributing financially to equipment that supports all PEVs is an important development for automakers. Many EV charging companies now offer chargers that support both fast charging standards, and that trend is another reason to believe the PEV sales will rebound in 2016.


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