Navigant Research Blog

The Hydrogen City Is a Thing Again—and Thanks to China, it Might Actually Work This Time

— February 8, 2018

The hydrogen city concept has been around almost as long as the hydrogen energy economy, but neither have really materialized as envisioned. Hydrogen cities (like the unrealized utopias of the 1980s and 2000s) face a familiar chicken-and-egg problem, with demand for hydrogen held back by a lack of hydrogen infrastructure, and vice versa. Now, with a number of recent market developments, the hydrogen city has returned. With global enthusiasm for hydrogen fuel building, this time it could be different.

China Propels the Market Forward

With its city air pollution issues, diverse energy appetite, and top-down interest in developing hydrogen and fuel cell technologies, China has a small but rapidly growing hydrogen scene. Notably, Wuhan in central China’s Hubei province is set to become a hydrogen city thanks to an announced $1.8 billion investment from a tech company. An auto manufacturing hub, the city could have 3,000 hydrogen powered vehicles in 2020 and 100 hydrogen fueling stations in 2025. Other recent developments from China include the world’s largest proton exchange membrane electrolysis order (to fuel buses in Guangdong province) and a number of partnerships with western companies that manufacture and share technology in the country.

Hydrogen Overcoming Hurdles at the Local Level

The hydrogen energy economy has been held back in part thanks to rapidly improving battery technologies, which have seen dramatically higher adoption in both transport and grid-tied storage applications. Underscoring this challenge, outgoing Governor Brown of California announced the raw numbers from last week’s clean vehicle plan—calling for 200 hydrogen fueling stations and 250,000 charging stations. That there were 1,250 times more charging stations points to the infrastructure and complexity challenges of hydrogen, and the strong incumbency of electric infrastructure.

But there is reason for optimism, with many decision makers seeing longer-term hydrogen potential along with a surge in actual deal activity. Though light duty vehicle sales have been slow, more fueling stations are quickly coming online, with one 2017 tally finding that 30% of global hydrogen refueling stations had been built in the past year alone. In the shorter term, captive fleets like buses are showing significant growth with at least 300 units expected in Europe in the coming years, and hundreds more in China and elsewhere. Indeed, a hydrogen city could deploy a fleet of fuel cell vehicles in a mobility as a service configuration, as covered in a recent Navigant Research report. And the potential of power-to-gas for renewables integration, as outlined in another recent Navigant Research report, is being realized with (for example) a massive 100 MW project recently announced in France.

Each of these use cases has a place in the hydrogen city. Aggressive local hydrogen plans in Japan and in the UK city of Leeds all point to the value hydrogen can provide especially when focused on a local level—overcoming infrastructure hurdles, enhancing economies of scale, and boosting local adoption. Whether the larger hydrogen energy economy will materialize remains an open question. But if it does, it just may happen one hydrogen city at a time.

 

Colorado Charges Forward with Plan to Support EVs

— February 8, 2018

While California garners deserved headlines for being the most ambitious state in promoting EVs, Colorado is pushing with its own aggressive agenda. On January 24, Colorado Governor John Hickenlooper announced the debut of the Colorado EV Plan to a crowd outside Colorado’s Alliance Center. The plan, developed in support of his 2017 executive order Supporting Colorado’s Clean Energy Transition, outlines specific programs, strategies, and goals to electrify travel corridors around the state to support the widespread adoption of EVs.

In his speech, Hickenlooper announced Colorado was eighth in EV market share last year, and that the Colorado EV Plan is “a big step toward pushing that forward.”

The plan’s five goals include:

  1. Increase adoption of light duty EVs to reach goal of 940,000 EVs in Colorado by 2030
  2. Increase the number of electric transit vehicles to 500 by 2030
  3. Increase the number of employers that provide workplace charging to employees
  4. Develop strategies and partnerships that prepare property owners for future investments in EV charging infrastructure and electrify challenging facility types
  5. Lead by example by accelerating the purchase of EVs for agency fleets and investment in EV charging infrastructure

Charging Infrastructure Expected to Benefit

The plan details that 15% of the $68.7 million Volkswagen (VW) settlement funds that the state will receive will go toward light-duty EV charging infrastructure, the maximum allowable under the settlement terms. Colorado also intends to capitalize on public-private partnerships and the grants provided through new and existing programs.

Hickenlooper spoke to how the plan fulfills Colorado’s commitment to the Regional EV West memorandum of understanding (discussed in a previous blog). This bipartisan effort brings together eight states (Arizona, New Mexico, Colorado, Utah, Nevada, Wyoming, Idaho, Montana) to connect and electrify over 7,000 miles to establish the Intermountain West EV corridor. The plan also mentions that Colorado will investigate opportunities to partner with cities, manufacturers, and transportation network companies (i.e., Lyft and Uber) to support the electrification of a variety of mobility options.

While the plan is good news for EV enthusiasts, it also marks declining support for other alternative fuel vehicles. The plan commits to changing the ALT Fuels Colorado program—which since 2014 has provided grants for the construction of publicly-accessible compressed natural gas, propane, and EVs—to begin directing funds toward the build out of the EV fast-charging corridors.

Colorado currently has only 53 DC fast-charging stations, and Hickenlooper stated that, “we probably need 4 times that, but the demand [for charging infrastructure] is not going to decrease, it’s only going to increase.” Increasing public charging infrastructure will relieve some of the anxiety that prospective and current EV owners may have about vehicle driving range.

Demand Is Great, but What’s the Cost?

The high estimate scenario for the goal of 940,000 EVs on the road by 2030 requires as many as 632 fast charger stations to support the EV population, or 580 additional chargers in the next 12 years. According to Navigant Research’s recent report, DC Fast Charging Equipment for EVs, this would require approximately $60,000 per charger, or $34.8 million. With the VW settlement funds of just over $10.3 million allowed to be used for EV charging infrastructure, this leaves the Colorado Energy Office looking for another $24.5 million from the private sector, the ALT Fuels Colorado budget, or other funding opportunities to build out the infrastructure needed to support almost 1 million EVs in the state.

 

Sharing Companies Shouldn’t Get Free Rides

— February 6, 2018

One of the big themes of recent years has been the emergence of the so-called “sharing” economy. Unless we were raised by hardcore Ayn Rand acolytes, chances are that as children we were taught that sharing is good, and I certainly subscribe to that philosophy. However, the kind of sharing I learned was about splitting cookies or letting other kids play with my toys. It wasn’t about business, it was for free in an altruistic manner. What we increasingly experience today is a freelance gig economy that has little to do with that kind of sharing, and has everything to do with commerce.

The Capitalism of Sharing

Why is this relevant? Many of the shared economy startups claim to be enablers of sharing when in fact they are independent business enablers. Not that there’s anything wrong with that, but we need to recognize these companies and their products for what they are and treat them accordingly from a policy standpoint.

Instagram is, or at least was before it was taken over by “paid influencers,” a place for users to share photos with friends. Uber and Lyft are platforms that enable freelance taxi drivers to give rides to strangers for pay. AirBnB is a platform to let people rent rooms, apartments, or houses to strangers for pay. Turo is a platform that lets individuals try to become Hertz by making their cars available to rent.

Dictionary definitions of sharing don’t rule out commerce since we buy fractions of companies and other products and call them shares. But the messaging from these companies always seems to focus on sharing in the altruistic context. This framing of the message is often used as part of the argument for circumventing regulations that govern the traditional form of the industries these new businesses are trying to compete with.

Safety in Sharing?

While there are undoubtedly plenty of rules in the taxi, hospitality, and rental businesses that are outdated and in many cases simply protectionist for incumbents, there are others that provide a public good. Background checks for taxi and livery drivers aren’t a terrible idea when it comes to public safety. Ensuring that homes being rented out to travelers meet building safety codes is ultimately a good thing. Managing where people pick up rental cars or hail rides at airports or in cities is crucial to safe and efficient operation for everyone. Yet some upstarts seem to think they get a free ride from regulations by playing the sharing card.

In late January 2018, Turo was in a dispute with the City of San Francisco about permitting at the San Francisco International Airport. The rules are meant to help pay for upkeep of the airport and manage traffic congestion. Turo claims it is not a rental company on the basis of it not owning or renting the physical assets, similar to the arguments made by Uber, Airbnb, and others. While the operational details differ from incumbent to incumbent, the end result to the customer is effectively the same as with those established players. They make reservations and payments using the startups portal, pick up their rental, and drive.

Compliance with reasonable business rules will be increasingly important as we transition to automated mobility services. Navigant Research’s report, Market Data: Automated Driving Vehicles, anticipates nearly 5 million such vehicles being deployed by 2025. If cities cannot manage where they go, congestion is likely to get worse rather than improve. We need to find a cooperative balance between overregulation and being completely laissez faire if we are to solve our transportation problems.

 

The Evolving Smart Home

— February 6, 2018

The growth of the Internet of Things is continually expanding the number of connected devices in our homes, offices, retail stores, and healthcare facilities, to name a few. According to Navigant Research’s recent report, The Smart Home, global smart home platform revenue is expected to increase from $4.2 billion in 2017 to $39.5 billion in 2026. This significant increase in revenue makes it clear the smart home is here to stay. With the smart home on the rise, what is the real added value these solutions offer to consumers?

Do Smart Solutions Provide Enough Value?

When you think of the smart home, it’s not uncommon to first picture Amazon’s Alexa-enabled voice activated devices, which allow users to play music, listen to the news, receive weather updates, and control compatible devices like a Philips Hue smart bulb all through voice. While devices like smart bulbs do provide additional benefits outside of voice control—such as dimming, color changing, and reducing energy use—how much additional value are these solutions really providing? Philips Lighting recently announced new software features that will sync Philips Hue lighting with gaming, movie, and music content. While this update does include additional features, how much value is this really adding? Is it helping to carry the smart home market forward? Is voice control, dimming, syncing with video games and movies, and energy savings enough? I would argue no. The added convenience of voice control and color-changing or dimming features through devices like smart bulbs do not provide enough of an advantage over more traditional products, like LEDs, for many consumers to justify paying the additional costs. The concept of voice control and changing the color of lighting through a mobile app are novel ideas that provide enough of a wow factor to intrigue consumers, but these features are not enough to carry the momentum of the smart home into the future.

Security as a Value Proposition for the Smart Home

Smart home vendors realize the need to provide additional value propositions for their products to appeal to the mass market and increase adoption of smart solutions. One of the top key trends expected in 2018 by Consumer Reports for the smart home industry is security. To be sure, this is not the only trend of the smart home this year; others range from additional connected devices to increased artificial intelligence to home healthcare, covered in a recent Navigant Research blog. Many of the trends anticipated for 2018 are about providing additional value to consumers for smart home solutions.

The desire for security is a universally shared need and one the smart home market can capitalize on. A recent example of this is Ring, a smart video doorbell company, acquiring Mr Beams, an LED lighting company offering indoor and outdoor LED fixtures. As a result of Ring’s first acquisition, the company launched a line of outdoor security lights. The new line includes pathway lights, step lights, and spotlights that will work jointly with Ring’s security cameras and doorbells. This acquisition not only highlights the growing significance of security as a use case driving progress in the smart home market, but also the importance of providing additional value to smart home products. Lighting integrated with security systems are a natural fit that can better highlight the value of smart home solutions for consumers than features like voice activation and remote control, and more logical partnerships will emerge. Security is just one example of a use case that can transform the smart home from providing additional convenience and a novelty features to a becoming a necessity for consumers.

 

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