Navigant Research Blog

Tackling the 2 in V2G

— January 16, 2018

EV adoption is speeding up around the world, and while electrification offers emissions reductions and other benefits, it creates new challenges and opportunities for grid operators. Navigant Research expects that EVs will make up 5% of the global market for personal vehicles by 2024, and that collective charging requirements will add 160 GW of demand to electricity systems as owners switch from filling up to plugging in.

Vehicle-to-grid (V2G) technologies seem an obvious and low cost alternative to ramping up generation in the face of new demand from EVs. Why not use EV batteries to shift and shave demand peaks during the 95% of the time they sit unused? But making V2G a reality requires significant infrastructure and software developments, and EV owners must also consent to allowing grid operators access to batteries for flexibility services.

Integrating EVs Requires New Technology

If EV batteries are to be called upon for V2G, they first need a physical connection to the grid that supports two-way charging infrastructure, which are not yet widely available. However, major automakers like Honda are already developing two-way charging stations with V2G in mind, and deployment is likely to increase as more EVs hit the road.

Once two-way charging infrastructure is in place, the vehicle-station pair needs a software solution for monitoring grid signals and managing power flows. IBM and TenneT are collaborating with sonnen and Vanderbron to pilot a blockchain-based V2G platform that can adapt to conditions on the grid, such as congestion or oversupply of wind power. The blockchain records the locations and identities of devices involved, exchange volume, and other details as a secure and verifiable basis for settlement with the EV owner.

Consumers Need to Be Compensated for V2G Risks and Services

Technology is only half of the equation—EV owners also need to participate. Owners that participate in V2G take on the risks of doing so, and should expect to be compensated for providing flexibility, services, and for potential wear and tear of the vehicle’s battery (though there are conflicting views on this). Owners will also require guarantees that integrating will not cost drivers the use of their vehicle in emergencies or other situations.

In the short term, compensation might provide enough incentive for owners to adopt V2G. One study estimated the value of flexibility services from £600 to £8,000 ($800 to $10,800) of income each year for vehicle owners. Whether the income is a sufficient counter to real or perceived risks will likely vary with a customer’s individual situation, which constrains the potential of V2G.

The Rise of Mobility as a Service (MaaS) Could Help Maximize V2G Potential

Evolving vehicle ownership models could have a huge effect on V2G. In a world where consumers access on-demand fleets of EVs owned and operated by an MaaS provider rather than owning vehicles, many barriers to V2G adoption disappear.

Since demand for MaaS vehicles is likely to be cyclical, with lower demand during midday when grid congestion demand is higher, a portion of the fleet can be parked and plugged in to act as a buffer for the grid. Utilities and grid operators could partner with fleet owners to ensure that some fraction of the electrified fleet is grid-connected at any given time, providing the grid with a reliable pool of flexible resources in exchange for a new source of revenue. The service provider pools customer demand, and any effects on vehicle battery performance become a straightforward business cost.

As is often the case, the challenge is getting from here to there. Navigant Research can help—check out our latest report on the future of MaaS.

 

Shell’s Acquisition of First Utility Augurs a New Wave of Competition

— January 16, 2018

At the start of 2018, a warning shot was fired across the utility industry’s bow: competition is showing no sign of abating. If anything, competition is actually heating up. The nature of utility industry competition has changed dramatically since the start of the decade.

If we rewind 5 years, utilities’ biggest competitors were other utilities. Telcos and high street retailers posed a moderate threat, as some showed an interest in the addition of energy supply to existing, mass-market services such as mobile and fixed-line communications, broadband, pay-TV, and financial services.

Telcos Contemplating Market Entry

Over the past decade, I have advised numerous telcos on opportunities in energy, some of which have moved into the space. Most of the market movement has taken place in collaboration with utilities, which essentially whitelabel energy supply. However, the impact of telcos on the energy industry (and vice versa) has been underwhelming. Why? Because there has never been an imperative for telcos to sell energy, or utilities to sell telco services. It’s a nice-to-have add-on that may help reduce customer churn, but little else.

EV Growth Present Clear and Present Danger to Oil Majors

The present day competitive environment has shifted significantly. Utilities face new threats from new entrants with a significantly greater reason to enter the world of energy services. Nothing underlines the shift in competitive pressure more than Shell’s acquisition of the UK’s First Utility, the first major energy supply business to be acquired by an oil major.

This acquisition should come as no surprise to anyone monitoring the energy landscape. My last blog of 2017 called on utilities to improve their peripheral vision and monitor competitive threats. It seems that many oil majors have a more mature peripheral vision, and are already acting to mitigate future potential risks to their core business.

The shift to EVs causes significant concern for oil majors. By Navigant Research’s reckoning, plug-in EV sales in 2017 exceeded 1 million for the first time; the significant investments in recharging infrastructure and increasing concerns regarding the pollution of internal-combustion engines will only accelerate the shift to EVs. Any oil major extrapolating EV adoption to an extreme scenario of ubiquitous EVs will recognize the potential disaster for service station businesses.

Oil Majors’ Competitive Response Covers the Entire Value Chain

However, EVs present an opportunity to oil majors. Most oil majors have renewable energy subsidiaries, and EVs present a new customer segment; existing service stations are perfectly placed to convert to EV charging points and 30-minute recharge times are an additional opportunity to attract customers into a retail store. But EVs are just one part of a wider energy service ecosystem which oil majors are targeting. Shell’s recent investments and acquisitions include a sizeable portfolio of grid-scale renewables generation; Sense, a smart home technology vendor; EV recharging points in the UK; and an energy supply business with 850,000 customers.

Oil majors, if certain scenarios play out, could suffer significant loss of value in the energy transition. This has helped create significant momentum behind oil majors’ activity in downstream energy, eclipsing any efforts from telcos over the past decade.

Shell and most other oil majors recognize there is significant value up for grabs in downstream energy. Their challenge is how to pull together their different acquisitions into a service that offers significant differentiation from utility industry incumbents. The challenge for these incumbents is a credible competitive response: utilities in competitive markets must first recognize value-at-risk from non-traditional competition, then develop products and services for the 21st century consumer.

 

Look to Islands to Teach Us More about IoT

— January 16, 2018

Islands play an important role in the energy sector, and in other sectors. The Hawaiian Islands, for instance, have been a test bed for new technologies at scale, such as rooftop solar and energy storage systems, led by the Hawaiian Electric Company. The concept of islanding, where a distributed energy resource continues to provide power to a location that goes off the grid, has gained stature through the deployment of microgrids. And in the Internet of Things (IoT) realm, both Spain’s Balearic Islands and New Zealand have recently entered the picture as laboratories for IoT technologies.

Case Study: Balearic Islands

Officials in the Balearic Islands are promoting a system involving half a million sensors that will blanket the islands as part of a broad IoT project. The plans call for 50 IoT antennas that can support at least 50,000 sensors. The underlying network infrastructure is based on the emerging LoRa technology, a low power wireless standard for wide area networks that is well-suited for IoT applications.

Several applications for this IoT network are under discussion, from helping tourists identify uncrowded beaches to helping the elderly avoid getting lost. One of the pilot projects uses the network to monitor the availability of some 1,200 parking spaces in a lot at the Balearic Technology Innovation Park.

The Balearic experiment has attracted the attention of Google, which has supplied the local government with its own IoT platform. The online search giant has also brought in its partner Beeva, a Spanish consultancy, to help steer another pilot project that aims to optimize the use of boat moorings in the city of Pollença’s harbor.

Case Study: New Zealand

In New Zealand, similar efforts are underway in that island nation. Telecom carrier Spark is building its own LoRa IoT network, with plans to cover 70% of the population by the middle of 2018. Officials there envision the new network will support connectivity for traffic lights, waterways, and machinery. And they expect to provide such services at lower costs compared to existing infrastructure.

Will these new, island-tested IoT networks prove to be trend-setters? Perhaps. But there are competing IoT network technologies, of course—such as 5G, which has many people in the energy and automotive sectors excited about what it offers (see Navigant Research’s 5G and the Internet of Energy report for some details). No matter how these IoT networks turn out, it pays to keep an eye on the latest advances so one does not get stuck on a technology island.

 

Five Bold Predictions on the Frontier of Energy for 2018

— January 11, 2018

It is that time of the year again, when pundits pontificate about what the future holds, and citizens and corporations alike set goals for the coming year. I’d like to make five predictions for 2018 that underscore why a forecast increase in distributed energy resources (DER) over centralized generation will transform the global economy in sometimes surprising ways.

1. DER Innovation Will Abound

The spotlight continues to shine brightly on solar and energy storage technologies. Yet other forms of DER, especially generators driven by fossil fuels, will push the envelope on new business models in surprising ways. For example, Fairbanks Morse recently announced a new offering it is calling power reliability as a service, allowing remote villages in Latin America to access reliable electricity in locations not accessible by road or even airplane. These generators are forging new partnerships/acquisitions while also integrating upgrades revolving around novel hardware designs: Innovus Power (featuring variable speed generators) and the 360 Power Group (extensively patented modular generators that dramatically reduce fuel consumption and improve reliability), are just two examples.

2. One Microgrid Vendor to Lead Them

A US company will emerge as the leading microgrids controls vendor based on validated performance, offering a controls solution priced below $2,000 for a kilowatt-scale microgrid. The company has wowed US government officials with the performance of its controls solution. The question is: can it effectively market its solution as the go-to platform in a market not quite mature enough for a true plug-and-play solution?

3. Policies to Net Positive Results for DER

Trump administration tax reform and new policy directives at the US Environmental Protection Agency will accelerate smart energy investments by a factor of three. While some of these regulatory tweaks will reduce public government support for renewables such as solar PV, the net results will be positive for DER. A combination of public policy reforms at the state level in the US and actions by the private sector will demonstrate that the transition to key elements included under the Energy Cloud future is unstoppable.

4. Asia Pacific Takes Over Innovation

The center of innovation on the DER front will shift away from North America and toward Asia Pacific, focusing on four countries: Australia, China, India, and Japan. Each of these countries offers a landscape fostering DER opportunities. One could argue that Australia is where the most diverse opportunity exists in terms of DER integration with microgrids and virtual power plants. Australia is also home to Power Ledger experiments with transactive energy.

5. Energy-Water Connection Creates Opportunities

New solution offerings focused on the energy-water nexus will come to the fore in 2018. In California, Advanced Microgrid Solutions is one company to recognize this linkage with innovative grid-connected battery systems supporting public water agencies: Inland Empire Utility Agency, Irvine Ranch Water District, and the Long Beach Water Department. Of course, water is a necessity for life. An even more urgent need for energy-water nexus solutions is in developing world locations such as India, where 1 billion people need access to safe and clean drinking water (and as many as 300 million lack access to electricity). Linking solutions for both water and power through DER-based solutions creates synergy and opportunities, both for do-gooders and for entrepreneurs seeking profit.

A Distributed and Resilient Future

These five trends are not the only things I see in my crystal ball. Yet I believe they will help define 2018 as the world makes the transition from costly centralized power infrastructure to a nimble, flexible, and more resilient paradigm. We are in a historic transformation toward a clean, distributed, intelligent, and mobile grid. Do you agree?

 

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