Navigant Research Blog

Ford Goes All-In on Trucks, Utilities, and Hybrids

— March 16, 2018

At January’s North American International Auto Show, almost all of the significant product announcements were about new pickup trucks and SUVs from Ford, General Motors, and Fiat Chrysler Automobiles (FCA). Maintaining sales of those high margin vehicles will be crucial to funding the development and introduction of new and often pricey electrified propulsion and automation technologies. This week, Ford executives led a briefing at the company’s product development center where they provided more details on how they plan to handle that transition.

Core to Ford’s revamped product lineup is a range of new SUV nameplates as the company shifts away from passenger cars. The subcompact Fiesta will likely be discontinued from the North American lineup and Focus sales have dropped to a level where the next model for North America will imported from China. By 2020, Ford expects 86% of its sales in North America to come from trucks and utilities.

That doesn’t mean Ford is giving up on fuel efficiency. Quite the contrary. Ford intends to become the hybrid market leader in North America by 2021, overtaking Toyota. While Toyota is most associated with hybrid technology, Ford introduced the first hybrid SUV in 2004 and plans to leverage this position to offer hybrid or plug-in hybrid powertrain options on every utility model from the Ford and Lincoln brands. That’s in addition to the 300-mile range battery electric crossover it will launch in 2020.

Selling Performance and Power

FCA is branding its mild-hybrid system as eTorque on Jeeps and Ram pickups and marketing based on performance enhancement. Since most North American customers show little interest in green vehicles, Ford wants to appeal to them by using electrification to boost capability and speed. While most details aren’t yet available to the public, previous announcements give a clue as to where Ford is going. The automaker has talked repeatedly about its new F-150 hybrid having a power take-off capability that will enable contractors to get power for their tools without needing to carry a generator. Similarly, the upcoming Mustang hybrid will use electrification to enhance performance and efficiency.

Ford is not sharing many technical details of its next-generation hybrids yet, but most are expected to be high voltage systems that can also support plug-in capability. The automaker is already one of the top purveyors of plug-in hybrid systems; it has sold nearly 100,000 Fusions and C-Maxes with a plug since they were introduced in 2012.

Even the electric crossover will be targeting a more premium customer than something like today’s Escape or Edge. With hints of its 300-mile range and performance at the auto show, Ford President of Global Markets Jim Farley positioned this vehicle as a melding of the desire for crossovers with the passion the Mustang inspires in some customers.

So Why the Massive Shift from Cars to Trucks?

It’s all about the money. Farley explained that since the current-generation F-150 debuted in 2014, average transaction prices have jumped $6,700 while the new Expedition SUV that debuted last year is getting $11,000 more per sale. The F-150 alone generates $41 billion a year in revenue and a significant chunk of Ford’s profits.

In 2015, when Farley was still president of Ford of Europe, he discussed the burgeoning market there for crossover utilities, with many of the offerings being less truck-like. While details of the seven new Ford and Lincoln utilities are still under wraps, a similar segmentation is expected in North America, replacing many of the soon-to-be outgoing car models. It’s too early to tell if the automaker can overtake Toyota in total hybrid sales, but Ford is making a strong push.


DER Opportunities in Spain

— March 15, 2018

Despite the uncertainty created by the Sun Tax in Spain, the industry is growing again. According to the Spanish PV Union (UNEF), in 2017, the annual installed capacity increased by 145% thanks to new self-consumption facilities, growing from 55 MW in 2016 to 135 MW in 2017. This development has been driven by the high degree of competitiveness achieved by PV, the costs of which have reduced significantly in recent years.

Off-Grid DER Is Booming

Most of the growth in 2017 came from agricultural use and rural electrification. In most of these installations, distributed energy resources (DER) has an advantage as it competes with either high fuel costs in applications like water pumping that used diesel generators or, in the case of new rural facilities, with expensive grid expansion costs.

In this sector, the challenge now is to not to reduce the price, but to convince potential customers of the value DER installations can bring. For example, farming operations can reduce diesel consumption to power irrigation pumps by around 70% with the addition of a solar plus storage system, this type of installations have a payback of just a couple of years.

Commercial and Industrial Is Becoming Competitive

The introduction of variable demand charge on auto-consumption (the so-called Sun Tax) in Spain created the impression that distributed solar was doomed to fail as with this charge, installation would be too costly to operate. This impression has lingered although, with the lower cost of solar installations, a significant number of installations could be paid back in 5-7 years despite the variable demand charge payment. The local systems integrator Opengy, reported that 2017 was its best year since 2010, with around 18 MW in its project pipeline (compared to less than 10 MW in 2016 and 2015).

Residential Gaining Momentum

The residential market is also gaining momentum, although it is yet get significant numbers of installation in place. In the latest news from this segment, the challenger local energy supplier, Viesgo, announced in February 2018 a partnership with (the also challenger) Bigbank, to finance Viesgo’s customers that want to buy a DER system (that can include solar, storage, and even EVs). In this agreement, Bigbank offers a 6.95% credit to Viesgo customers, while Viesgo is in charge of installing and servicing the system and collect customer payments. This follows the news of sonnen and SOLARWATT, the German battery and shared energy platform providers, which both entered the market in the last 6 months.

In the Global DER Deployment Forecast Database report, Navigant Research analyses the global market for DER technologies and assesses key market and technology trends. Driven by these trends, Navigant Research estimates that Europe installed 29.1 GW of new DER capacity in 2017, generating $25.5 billion in revenue. Spain missed the mark of what DER can bring to a country, but the future looks sunnier.

While Spain is far from the leading DER market and local legislation is not especially welcoming to DER, the demand charge could be improved and the lack of a flexibility market limits the revenue streams DER could tap into. The country is finally waking up from its distributed generation nap and a combination of a better economy and better system economics are behind it. The utility-scale record low bids in last years’ tenders put renewables back in the front pages, this time with a positive note and word-of-mouth marketing about savings at the distributed level are creating a buzz. Once these trends consolidate, Spain could become the first European country to have a successful DER industry that does not rely on any type of incentive (direct or indirect) to thrive.


Regulated Utilities Deliver Innovative Home Construction Solutions

— March 15, 2018

In a recent blog, I discussed how a new virtual net metering product is saving residential customers money by going solar with no money down while also retaining customers and reducing sales overhead for the energy service provider. This kind of creative, customer-focused solution is the focus of my new Utility Customer Solutions Research Service.

Utilities Are Rolling out Creative Solutions

The announcement of the Southern Company Smart Neighborhoods initiatives with Alabama Power and Georgia Power is showing that creative customer solutions can have utility benefits within a regulated utility jurisdiction as well. These Smart Neighborhood initiatives will be featured among others in an upcoming Navigant Research Strategy Insight report.

In Birmingham, Alabama Power is now providing distributed energy resources (DER) including solar PV and battery energy storage, as well as smart home appliances and technologies as part of a new home construction development. This initiative will also aggregate renewable generation and distributed energy storage at the neighborhood level through community scale storage, solar PV, and emergency distributed generation to optimize the local grid and improve resiliency.

In Atlanta, Georgia Power is also providing DER (rooftop solar PV and battery energy storage), enhanced home insulation, advanced HVAC units, and LED lighting, as well as home automation systems with smart thermostats, smart locks, and voice control technology as part of a new home construction development. The Georgia Power program will collect data from the DER, HVAC systems, heat pump water heaters, and other technologies to inform grid optimization and new services for customers.

What Should We Expect in the Evolving Market?

Navigant Research anticipates that both regulated utilities and deregulated energy service companies will be increasingly more focused on these new solutions and business models to meet new utility customer expectations. For deregulated energy services companies, the reason is quite simple—the sale of electricity in retail choice is being commoditized, which reduces margins. Therefore, the drive to deliver new services without customer expenditures under longer contracts and recurring revenue is obvious. And there are few regulatory barriers to doing so.

But regulated utilities face regulatory constraints on what the utility can do beside operate the grid and sell electricity to customers, making the path to new business models more difficult. However, these two Southern Company Smart Neighborhood initiatives are extending the role a home can play in transitioning the grid from traditional centralized generation to part of an Energy Cloud platform while also creating new residential customer solutions.


2018: A Year for Action and Implementation for Circular Economy

— March 15, 2018

In the last few years, circular economy has gained momentum in various parts of the world: corporates, governments, non-profit organizations, industry associations—everybody has been trying to unpack, decode, and understand what circular economy is. What does it mean for them? What is the effect of circular economy economically, environmentally, socially?

Groundwork Is in Place

Multiple reports have been building the evidence and the business case for circular economy. Ecofys, a Navigant company, contributed to the movement with its thought leadership on groundbreaking calculations and research with its white paper, Implementing Circular Economy Globally Makes Paris Targets Achievable, which was used by the Government of Netherlands in its vision and strategy for making Netherlands a circular country by 2050. As a part of Navigant, Ecofys’ report, Circular Economy and Environmental Priorities for Business, was used extensively by the private sector to understand their concrete potential for circularity based on sector.

The groundwork of the past few years has landed the world in the moment of action and implementation for circular economy. In 2018 there will finally be momentum to implement circular economy globally. The year started with World Economic Forum placing circular economy front and center in its agenda. As proud members of the World Business Council for Sustainable Development (WBCSD) and of its new circular economy program, Factor10 platform, Navigant Consulting, Inc.’s CEO Julie Howard and Navigant’s global Energy practice leader Jan Vrins met other senior leaders from the industry at World Economic Forum in Davos to show commitment and kickstart action for circular economy.

Navigant joined forces with 30 other leading companies across 16 sectors to implement the circular economy through WBCSD’s Factor10 initiative. Collectively responsible for USD $1.3 trillion in annual revenue, the companies in Factor10 represent a powerful business effort to scale-up momentum for circular economy solutions.

“We need to focus on implementation now,” said Jan Vrins, “It’s important for both the public and private sector to move out of the ‘concept-phase’ of circular economy and into the ‘implementation-phase.’”

Three-Pronged Approach to the Circular Economy

As part of Navigant’s focus on circular economy for 2018, the team has a three-pronged approach for this year. First, the team will continue to focus on thought leadership and contribute toward case studies, business case, scientific evidence, and research to support circular economy implementation. Second, with WBCSD as its partner, Navigant plans to focus on mapping out the global policy landscape of circular economy so that companies can understand existing policies and prepare for upcoming ones in the field of circular economy based on their sector and regions/countries of operation. Third, the team will continue to support governments and companies in their transition toward circular economy through the following key offerings:

  • Navigant recognizes that each company, agency, or organization is unique and a one-size-fits all approach will not work. To support the transition, the team translated the concept of circular economy to develop tangible and implementable steps that organizations can take.
  • Navigant looked at the key levers of energy, material, waste, and more to develop building blocks and steps to move toward a circular economy. In doing so the team focuses on reducing costs, improving efficiencies, and transforming business models for competitive advantage.
  • Navigant is currently working across companies, sectoral organizations, and governments to develop and implement circular economy policies, strategies, and projects. Navigant brings together more than 30 years of experience and expertise in the field of climate change and sustainability in close cooperation with corporate companies, policymakers, and nongovernmental organizations.
  • Navigant plans on contributing to the upward momentum of circular economy in 2018 to drive positive environmental, economic, and social impact and look forward to working with governments, companies, and organizations move to a circular and sustainable future.

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