Navigant Research Blog

Diving Deeper into IoT for Small and Medium Buildings

— October 31, 2016

HVAC RoofOn October 27, I joined Sunita Shenoy from Intel, Doug Harp from CANDI Controls, and Vladi Shunturov from Lucid for a roundtable discussion on the role of the Internet of Things (IoT) in developing intelligent small and medium buildings (SMBs). We wanted to tackle the big question of how technology—and specifically IoT—can transform smaller buildings for efficiency, cost savings, and broad business improvement.

For years, SMB owners disregarded opportunities to invest in intelligent building solutions because the ROI based on energy efficiency alone just did not pencil out. Today, the low-cost controllers, gateways, and sensors that make up an IoT platform solution deliver the kind of actionable insight that garners customer investment. Customers can utilize cloud-based software to translate a new array of data into impactful information regarding equipment operations, occupancy, and energy to help make strategic decisions around building operations costs. (You can hear our discussion around this important industry evolution by accessing the archived webinar on demand.) We received many great questions from the audience during the webinar—so many in fact that we could not address all of them in the allotted time. Below is one great question that we did not get to that highlights some additional important aspects of the market development for IoT in SMBs.

“To many SMBs, the whole concept of IoT and BEMS [building energy management systems] may be foreign. While the simplicity, affordability, security, easy install, etc. may have appeal, how do you make a concrete business case that makes the concept appear favorable to the non-tech-savvy SMB user who sees such tech as complex, an unwanted intrusion into their daily tasks, and are unsure of the ROI?”

Day-to-Day Results

As we saw with our research around another tech-focused trend, big data, customers don’t care about the jargon or buzz words. What resonates is the impact the technology will have on their day-to-day jobs and possible corporate objectives. The customer point of view is certainly not one-dimensional, and one of the challenges for market development is framing the business case in terms that speak to the variety of potential buyers. Our research suggests that the following aspects of IoT-enabled intelligent building solutions resonate with SMB customers:

  • Wireless solutions that can be installed in less than a day, without business disruption
  • Dashboards and reports that quantify the impact of operational inefficiencies in terms of energy, costs, and clear/prioritized action items
  • Business-specific insights such as space utilization for offices or occupancy data to inform product placement in retail

You can find additional detail about this trend in Navigant Research’s recent Building Energy Management Systems for the Midmarket report.


Sweden Looks to Stimulate Residential Storage with New Subsidy

— October 31, 2016

Lithium BatteriesGreater interest in the benefits of distributed energy storage systems (ESSs) is growing out of successful deployments around the world. The leading markets for residential ESSs have all seen some level of government support (typically in the form of subsidies to reduce the upfront investment required). Joining a growing number of countries, the Swedish government recently announced a new subsidy program to support its residential ESS development.

There has been little energy storage market activity in Sweden to date; however, the country has set an ambitious goal to eliminate all fossil fuels used for electricity generation by 2040. Swedish officials hope that much of the new generation capacity will come from solar PV, and distributed ESSs will allow for a smooth integration while improving the Swedish grid’s resiliency. The new subsidy will be among the most generous in the world, covering potentially 60% of the cost to install a system, up to $5,600 per customer. The program is scheduled to run until the end of 2019, with a maximum $19.6 million budget that could result in 3,500 new systems and over 25 MWh of new ESS capacity.

Support Is Key

Residential ESS deployments to date have been heavily concentrated in four countries, each with some level of financial support for the technology. Navigant Research’s recent Residential Energy Storage report explores conditions supporting the market’s growth worldwide.

One of the largest markets to date has been Australia, where the country’s Capital Territory is looking to support 36 MW of new residential ESS capacity. Customers in that state can apply for a subsidy of $527 per kW of a system’s capacity, likely to cover around 20% of upfront costs.

Although the United States is emerging as a leading market for residential ESSs, nearly all systems deployed in the country are located in California. The state’s market is supported by subsidies through the Self-Generation Incentive Program, which was recently reformed and extended through 2019. The program has a  budget of $270 million, 75% of which is set to fund energy storage projects, with 15% specifically reserved for residential systems (less than 10 kw), providing approximately $600 per kWh of storage capacity. So far, the program has supported roughly 1.8 MW of residential ESS capacity, with another 7.5 MW in the pipeline.

Highlighting the geographic diversity of the residential ESS market, the two largest markets to date have been Germany and Japan, both of which have run subsidy programs for several years. After some debate about whether to continue the program, German officials elected to continue subsidizing residential ESSs through the end of 2018. That program may cover approximately 30% of a system’s cost when tied to solar PV.

Japan is home to the most generous residential ESS subsidy worldwide. The country’s Ministry of Economy, Trade, and Industry offers over $9,000 in incentives toward the installation of a lithium ion ESS for homeowners. Notably, this is the only subsidy targeting a specific battery chemistry, as the country looks to become a world leader in lithium ion technology.

Ready to Grow

Subsidies have been key for the residential ESS market to date, as the technology requires further decreases in costs to see widespread adoption. However, most subsidy programs will end before 2020 and are unlikely to be continued if battery system costs continue to fall as expected. Navigant Research expects that the residential ESS market will begin to see much more dramatic growth in the next 2 to 5 years as falling system costs combine with reduced solar PV incentives to greatly increase the value of these systems.


Car? Truck? SUV? Who Knows? Who Cares?

— October 28, 2016

It used to be easy to distinguish a car and a truck. Until the 1970s, there were far fewer vehicle types than there are today. Truck buyers usually made their purchases because they needed the capability, and pretty much everyone else bought cars. Early SUVs were truck-based, niche products. Thus, when the US government first imposed corporate average fuel economy (CAFE) standards on the auto industry, it made some sense to have two different standards for cars and trucks. Not anymore.

Today, SUVs vary in form from subcompacts like the Nissan Juke to long-wheelbase Chevrolet Suburbans to the super-luxury Bentley Bentayga. SUVs are the fastest growing vehicle type in the market. But what exactly is that type?

For purposes of calculating CAFE and greenhouse gas (GHG) emissions, the feds have two target levels for cars and light trucks. But is an SUV a car or a truck? It can be both or either. It depends in part on the regulations and in part on what the manufacturer submits on the certification paperwork. Car segments are based on combined passenger and cargo volume while trucks are defined by gross vehicle weight rating (GVWR). However, SUVs vary so much that the US Environmental Protection Agency (EPA) doesn’t define them.

“You’ll notice no definition for crossover utility vehicles (CUV), which is what many vehicles seem to be called these days,” said Rob French, environmental protection specialist at the EPA. “When we last revised these regulations we considered inserting a definition for CUV, but found it impossible to describe robustly.”

While the EPA watches for automakers trying to game the system to get a best-in-class rating, it mostly goes with the classification that the manufacturer chooses based on size or weight. Since there is no crossover class, the manufacturer gets to choose a segment like small, midsize, or large car, or small or standard SUV. The small SUVs are generally the car-based crossovers, but EPA splits them based on two (2WD) or four-wheel-drive (4WD). A 2WD small SUV is grouped with cars while the 4WD version of the same is grouped with trucks.

Crossover Confusion

The Nissan Pathfinder, Chevrolet Traverse, and Ford Explorer are large three-row crossovers. The Chevrolet and Ford are classified as standard SUVs and thus trucks for all variants. The Pathfinder’s 5,985-pound GVWR is conveniently just below 6,000-pound threshold for a small SUV, so the 2WD model is a car while the 4WD model is a truck. Meanwhile, Nissan’s Murano—which to almost any set of eyes is as much an SUV as the Pathfinder—is a midsize station wagon and thus a car no matter how many driven wheels it has. Likewise, Nissan’s even smaller Rogue is also a small SUV but is also classified by how many driven wheels it has. Similar peculiarities can be found from most manufacturers.

For customers, none of these arbitrary labels matter, as they shop for price, performance, design, and capability. For manufacturers, it’s all part of balancing out the fleet averages for cars and trucks in a rapidly shifting marketplace. If the car average is in good shape, adding a big 2WD crossover enables them to still meet the car target while removing some vehicles from the truck count; likewise, a smaller 4WD can improve the truck average.

But there are limits to this segment juggling. Automakers are seeing the edge of the product mix envelope as they try to balance market demand, regulator demand, and affordability. That’s why (as the EPA and National Highway Traffic Safety Administration work on the mid-term review of the CAFE and GHG standards for 2020 to 2025) manufacturers are pushing back, hoping for some rollback of the current targets.

Capability Should Determine Categorization

Perhaps it is time to abolish the arbitrary car-truck split and devise a new formula that factors in the footprint size with payload/towing capacity. The world needs trucks, vans, and utility vehicles that can haul people and their stuff, but on an absolute basis these vehicles are never going to be as efficient as a small car. However, if we set a target based on the useful work the vehicle can do, we might be able to get away from some of this arbitrary categorization.


Recognizing the True Value of Storage and Facing Cybersecurity Threats

— October 28, 2016

AnalyticsEnergy storage has historically been too expensive to integrate with distributed energy resources (DER), but prices have fallen significantly across several portions of the value chain in the past few years. To continue to improve the economics of the technology, it’s important for new and existing energy storage systems (ESSs) to provide multiple services to customers. This will open up a larger market for aggregated systems that can help realize the true value of storage. Software platforms that can analyze, operate, and optimize battery energy storage-enabled virtual power plants (VPPs) will be critical to capitalize on value stacking.

Aggregated Energy Storage Systems


(Source: PowerShift Atlantic)

For instance, energy storage service provider Greensmith Energy was chosen to provide its software and integration services for several recent projects. In September, investor-owned utility American Electric Power (AEP) chose Greensmith’s GEMS platform to manage its 2 MW/14M MWh ESS in West Virginia. AEP plans to leverage the software’s functionality to expand the use of the system into a revenue-generating asset rather than solely a backup system for its distribution network. Several other companies like Sunverge, Demand Energy, and Green Charge Networks have also recently partnered with utilities where smart software will be used for flexible ESSs.

Energy storage software is increasingly becoming a vital part of determining the bankability of a project. Software modules optimized for different grid-level or customer-level applications create value for both utility-scale and behind-the-meter (BTM) users. Particularly for residential and/or commercial customers, the software module can create viable revenue streams by:

  • Optimizing self-consumption in real-time across multiple variables (e.g., demand charges, utility tariff data, etc.)
  • Participating in utility-sponsored demand response and resource adequacy programs
  • Providing long-duration backup power and islanding capabilities

A noteworthy development in the residential ESS software market is a recent partnership announced by energy Internet provider AutoGrid and distributed ESS manufacturer sonnen. The two companies partnered to fully integrate AutoGrid’s flexibility management suite with sonnen’s residential and commercial battery solutions. AutoGrid and sonnen will help energy project developers, utilities, and other energy service providers better manage, optimize, and aggregate sonnen ESS systems and other DER. Both companies believe that the partnership will help maximize project return on investment (ROI), reduce project delivery times, and unlock new revenue streams for several value chain players.

Need for Cybersecurity

With the increased automation of energy storage and DER in general, it will be important to consider the cybersecurity threats that could occur. These attacks can disrupt general system functionality or cause targeted damage to intellectual property, critical infrastructure, and physical assets. Incidents of cybercrime and associated costs can be substantial; companies must prepare for the worst-case scenario. This is not only important to protect against threats, but also to aid in how businesses continue to operate during an attack, as well as how they adapt and recover after. So what does this mean for DER businesses and stakeholders?

  • Utilities have the ability to drive the storage market forward, enabling ESSs to achieve profitability under several business cases like VPPs.
  • DER software companies should focus on developing controls that can optimize multiple use cases to maximize the value of projects.
  • ESS and other DER software developers must ensure they are adequately protected from cyber threats, including developing strong compliance programs, having advanced functionality to mitigate against vulnerabilities, and ensuring systems are in place to immediately alert stakeholders of breaches.

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