Navigant Research Blog

President Renews Commitment to Clean Energy, but Sustained Effort by Stakeholders Needed as Well

— September 17, 2015

U.S. President Barack Obama has renewed his commitment to promoting clean energy and energy efficiency with a set of executive orders designed to drive wider adoption of greener technologies. The president outlined his goals in a speech on August 24, in which he called for a greater penetration of renewable energy sources—wind and solar in particular.

The president’s executive orders encompass funding and a mix of private sector obligations, including:

  • Providing $1 billion in additional federal loan guarantees available for distributed energy projects using innovative technologies.
  • Releasing residential Property Assessed Clean Energy (PACE) financing for single-family homes to invest in clean energy technologies.
  • Creating a Department of Defense Privatized Housing Solar Challenge, as well as noting that companies are committing to providing solar power to housing on more than 40 military bases across the United States.
  • Announcing $24 million for 11 projects in seven states to develop advanced solar technologies that double the amount of energy each solar panel can produce.
  • Approving a transmission line that will support a 485 MW photovoltaic facility to be constructed in Riverside County, California and produce enough renewable energy to power more than 145,000 homes.
  • Creating a new interagency task force to promote clean energy, and announcing commitments from local governments, utilities, and businesses to drive energy efficiency in more than 300,000 low-income households, as well as investing more than $220 million in energy saving activities for veterans and low-income customers to help lower energy bills.

Energy Cloud and New Utility Thinking

These moves by the president and his administration are part of a larger trend already taking place, which Navigant Research has dubbed the energy cloud. In this emerging scenario, a broad range of technical, commercial, environmental, and regulatory changes are expected to combine to alter the traditional hub-and-spoke grid architecture. These changes are also resonating among some utilities. A recent survey of utility executives found that some 30% of respondents are planning investments in behind-the-meter technology (such as microgrids, energy storage, and distributed generation), and more than 40% of respondents are considering these types of investments.

The effort to promote clean energy has momentum and the government at the federal level can play a role, but utilities, their customers, and technology vendors are also needed to sort out what works and what doesn’t as part of a sustained effort. The approach taken by New York’s Reforming the Energy Vision (NY REV) seems to strike the right balance of government regulators setting some new guidelines and letting market participants come up with solutions and business models that can drive the cleaner energy market forward.


Speed Bumps on the Road to the Smarter Home

— August 20, 2015

While more smart home technology keeps rolling out from manufacturers, some of the targeted customers are finding the systems do not always satisfy their expectations or have shortcomings. This was pointed out recently in a Wall Street Journal piece that noted the downsides of the latest systems that control lighting, door locks, and thermostats, among other things.

Not Worth the Trouble?

One of those people is a professor of mechanical engineering who is also head of the Berkeley Energy and Climate Institute at UC Berkeley. He received a smart thermostat as a gift, but has yet to install it because it wasn’t worth the trouble, according to the story. Another is a tech-savvy contractor who finds his smart home control system is too complicated, particularly when things go wrong. He now tells his own clients to avoid automated systems.

These are anecdotal examples, to be sure, and may not reflect the experiences of satisfied smart home technology customers. But these stories do highlight some of the barriers to smart home technology adoption and the related Internet of Things (IoT) trend, which has gripped many in the high-tech, home automation, and energy sectors. These barriers (as noted in Navigant Research’s IoT for Residential Customers report) include complexity, pricing, and data security.

Moreover, a Bluetooth Special Interest Group survey released earlier this year underscored what consumers consider as key factors in deciding what to purchase. More than half of the survey respondents (54%) said smart home solutions need to be straightforward to use and 41% said they should be easy to set up; 4 in 10 of the respondents (42%) said offering products at competitive prices is important; and an equal number (42%) said keeping their data secure is essential.

Too Complex

While conducting research into IoT trends, many of the vendors and stakeholders I spoke with mentioned complexity as a barrier for smart home tech adoption. It is an age old problem: How to solve thorny problems, like increasing energy efficiency in a home, with improved products that don’t require the consumer to do too much? In other words, bring the benefits but hide the complexity.

Some manufacturers have done this. And despite the professor mentioned above who has yet to bother with his, smart thermostats from Nest, Honeywell, and ecobee (to name just a few) can boost efficiency without sacrificing comfort and without too difficult a setup. They aren’t perfect answers, of course, and tend to be more expensive than common offerings. But other hardware and solutions providers should take note: It is possible to conceal the complexity behind smart home devices. And it should be a top priority in designing solutions, especially when even geeks among us are reluctant to engage.


Honeywell Steps into Smart Grid Fray with Elster Acquisition

— July 29, 2015

Honeywell’s purchase of smart meter maker Elster is a sign that the smart metering business still has some attractive runway for companies willing to endure the somewhat lengthy procurement process of utilities. The $5.1 billion deal gives Honeywell a solid global competitor for the next wave of smart grid investments.

The Deal

Honeywell is purchasing Elster from its current owner, Melrose Industries, a British investment firm that specializes in buying manufacturing businesses, turning them around, and selling them for a profit. In this case, Melrose did that after paying approximately $2.3 billion for Elster in 2012, suggesting a profit of nearly $3 billion. Melrose said it generated a 33% internal rate of return in the 3 years since acquiring Elster.

Here is what Honeywell is getting by purchasing Elster: a global manufacturer of gas, electricity, and water meters; communications equipment; and software solutions, including data analytics. It is also taking on about 6,800 employees of Elster, which is based in Mainz-Kastel, Germany. The company has operations in 39 countries, including the United States, the United Kingdom, and Slovakia. Honeywell is also taking on about $1.4 billion in pension liabilities.

Fits with Plans

While this move raises some eyebrows for its premium price, the acquisition fits with Honeywell’s stated plans last year that it would target some $10 billion to buy companies over the next 5 years. And while the smart meter business has slowed, particularly in the United States since federal stimulus money dried up, Elster has been active, picking up business in France as part of ERDF’s deployment of 35 million meters, and scoring a deal with CFE in Mexico earlier this year for about 300,000 meters. In addition, earlier this year, Elster launched an enhanced gird software platform called Connexo that integrates utility workflows, business processes, and grid data from multiple devices and vendors into a unified solution. According to Honeywell, Elster is attractive for several reasons: its high- and low-temperature burner products and residential heating components complement Honeywell’s existing business within its Environmental Combustion and Controls group; Elster’s presence in high-growth regions aligns with Honeywell’s strategy; and the existing Elster customer base presents an opportunity to cross-sell legacy products.

For Elster and its employees, the deal makes sense. Honeywell already has some synergies in the gas sector, and is no stranger to the way the utility industry operates. Elster’s electricity and water businesses give Honeywell a broader set of technologies it can leverage as those sectors grow in ways different from gas. Nonetheless, Honeywell will be facing some experienced meter manufacturers. Companies like Landis+Gyr, Itron, and General Electric are formidable global players, not to mention lesser known Chinese manufacturers, such as Holley Metering, that want to move beyond their domestic markets.  By acquiring Elster, Honeywell has the vehicle to be competitive now, and with skill can stay among the leaders as the market evolves.


Smart Grid Demo Results Reveal Efficiencies, but More R&D Needed

— July 17, 2015

The Pacific Northwest Smart Grid Demonstration Project (PNW-SGDP), one of the largest in the United States, has been completed, and the project’s latest report shows a variety of new technologies can indeed reduce costs and improve energy efficiency. Additional research is required, however, to advance smart grid deployments elsewhere, according to project managers.

Transactive Control

One of the focal points of the 5-year PNW-SGDP was to evaluate a transactive control system in which decisions are distributed across the grid, even allowing consumers or individual devices to make informed choices about usage. This system is based on a two-way communication process that uses signals about the delivered cost of electricity and the amount of power needed by end devices, such as a smart appliance. The system shares information along the grid, from generation sources like dams or wind turbines to a residence. According to one of the models developed by IBM, peak demand in the Northwest could be reduced by 7.8% if 30% of the region’s grid used the necessary demand response (DR) equipment.

Saving Money, Energy

Some of the cost savings shown in the project were significant. For instance, smart meters with remote turn-on and turn-off functionality could eliminate more than 2,700 service calls a year and save an estimated $235,000 annually for Avista Utilities in its Pullman, Washington, service area. Avista also tested controls that lowered distribution system voltage by 2.1%, which would translate into about 7.8 GWh of annual energy savings, or about $500,000 in reduced annual costs for its Pullman distribution power lines.


The project also uncovered some challenges for utilities. For instance, some of the participants were not prepared for the large amounts of data generated by the equipment, and occasionally data was mislabeled with incorrect units or times. In addition, a lack of technology standards made it difficult for various equipment to interoperate, which required extra effort to get products from different vendors to work together. Also, the relatively nascent market for the equipment created issues, especially when some manufacturers went out of business or stopped servicing their gear, and some of the equipment just failed outright.

The $179 million project, which was led by Battelle, included 11 utilities across five states (Idaho, Montana, Oregon, Washington, and Wyoming), the Bonneville Power Administration (BPA), two universities, and multiple technology companies. Funding came from the federal American Reinvestment and Recovery Act (ARRA), through the Department of Energy’s (DOE’s) Office of Electricity Delivery and Energy Reliability, and from matching money from participants.

The PNW-SGDP lays a foundation for further grid modernization. Other utilities and stakeholders can leverage these findings and adapt them for their own future needs. And though the research is not fully conclusive, as the report authors point out, there are useful baseline results to work from which can enable the next wave of grid innovation.


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