Navigant Research Blog

Nissan Enters the Energy Storage Market

— June 19, 2015

Since Tesla debuted the PowerWall in late April, two other automakers, Daimler and Nissan, have announced plans to bring similar products to both the commercial and residential energy sectors. Daimler announced in early June that it’s offering a storage plant of up to 20 kWh that will begin shipping in September. The next week, Nissan announced it will deploy second-life vehicle batteries for commercial energy storage markets through partner Green Charge Networks; the first system is set to be placed this summer at a Nissan facility to offset demand charges. These three announcements are important indicators of trending automaker revenue stream diversification; however, Nissan’s announcement is far more important as an indicator to a strengthening business case for plug-in electric vehicle (PEV) ownership.

Outside of automotive and mobile device applications, stationary batteries can provide energy cost savings to homeowners through energy arbitrage and increased rooftop solar utilization. The same applications are true for commercial entities; however, an additional use is to draw power from the batteries during peak energy consuming times, which minimizes the monthly demand charge, significantly cutting electricity bills. Further, batteries can be used by aggregators to participate in grid service markets as BMW is doing in the bay area. Though these opportunities have existed for some time, the high costs of batteries have made these investments risky.

Minimizing Risk

To minimize risk, some companies are developing ways to utilize PEV batteries when the PEV is parked, in a number of the above use cases. This reduces the total investment, as battery costs are borne by the PEV owner, but it also reduces returns, as a PEV’s primary function is mobility and the PEV owner requires compensation. Utilizing a PEV battery in such a fashion strengthens the business case for PEV ownership, however, the technological and logistical requirements of these business models are complex.

Nissan and Green Charge Network’s development of a business model for a second battery life is another approach to harnessing the full potential of vehicle batteries, though without the logistical complexities inherent in utilizing a battery while it’s still in the vehicle. Theoretically, success of this type of business model would likely increase the value of PEVs already in use and/or play into innovative automaker financing schemes that bake second-life battery value into PEV purchase costs. Both of these strategies would be a significant step forward in strengthening the business case for PEV ownership in high volume economy class vehicle segments.

 

China PEV Market Coming of Age, Bypassing Hybrids

— June 17, 2015

With the largest market for new vehicle sales at over 23.5 million in 2014, significant smog issues, and lofty goals for hybrid and plug-in electric vehicle (PEV) sales growth, China has long been seen as the biggest global opportunity for plug-in and hybrid vehicles. That hope has failed to materialize, with PEV sales through 2013 never surpassing 20,000 and hybrid sales far weaker. However, signs of a robust PEV market in the country are finally emerging, with 2015 sales figures indicating around 28,000 PEVs sold through April, just a few thousand less than the nearly 32,500 sold in the United States during the same period.

These figures are encouraging, but it should be noted that many of the PEVs sold in China would not qualify as highway-capable vehicles in the United States; therefore, these comparisons aren’t exactly apples to apples. Regardless, for hybrids like the Toyota Prius, there isn’t much to say except that compared to the number of plug-in options now being sold in China, there are few hybrids.

Toyota and Honda have long tried to jumpstart hybrid sales in the country, but dismal sales figures have been consistent. Since 2005, Toyota has only sold 90,000 hybrids in China. In late April, Toyota once again announced it was doubling its efforts through two new hybrid platforms scheduled to be introduced sometime this year as part of a grand strategy to make hybrids account for 30% of the company’s sales in the country. Given Toyota’s goal of doubling current annual sales in China, this 30% could mean up to 600,000 hybrids annually.

Good Luck

Though sales of hybrids still outpace PEVs in most major markets globally, market share is beginning to lag in established markets while PEV sales continue to grow, specifically in the United States. In fact, since the beginning of 2014, monthly year-over-year sales of hybrids in the United States have fallen in every month, with the exception of May 2014. It is likely that more expensive PEVs with significant energy cost savings and lucrative government incentives are cutting into the established PEV market share. However, it’s also likely that less expensive fuel efficiency gains through stop-start technologies, engine downsizing, and vehicle light-weighting alongside low oil prices are also having an impact.

Monthly Hybrid Sales, North America: 2013-2015

Scott Blog Chart

(Source: Navigant Research)

Caught in between low-level, inexpensive fuel efficiency improvements and expensive alternative fuel options with significant incentives and energy costs savings, the plugless hybrid business case is eroding. Prospects for the platform are not likely to improve, as stop start technology is likely to permeate rapidly through the global automotive industry and PEV costs continue to decline. In China, the steady flow of new PEV introductions alongside growing interest in stop-start batteries could negate hybrid interest altogether, making Toyota’s 30% hybrid by 2020 goal difficult—if not impossible—to achieve.

 

Tesla Introduces a Missing Piece for PEVs

— May 15, 2015

In late April, Tesla announced the expansion of its product line beyond cars to include battery systems for homes and utilities. Called the Powerwall, the system can store 7–10 kWh of energy and respective costs are $3,000 and $3,500. Adding a battery to a home enables greater utilization of solar generation and of off-peak pricing in time-of-use (TOU) rate plans. For utilities, the home system may be considered a threat because it enables consumers to bypass services entirely; however, it also presents opportunities to mitigate potential energy management problems stemming from the rapid increases in residential solar installations and plug-in electric vehicle (PEV) adoption happening now.

Challenges

The grid is constantly being monitored to match electricity supply with demand. As demand fluctuates throughout the day, resources are ramped up or down in response to keep grid frequency within a narrow range of around 60 Hz. The more reliable generation resources are in responding to shifts in demand, the more cost-effective the grid is. Traditional generation resources like nuclear, coal, and natural gas are dependable generators; however, renewable resources like solar are not, because generation depends on the weather. This means that solar requires additional grid resources like batteries to backfill lapses and absorb spikes in generation.

PEVs can create additional problems because most can consume up to 6.6 kW from home electrical infrastructure. The most power-intensive appliances in a home (clothes dryer, dishwasher, or oven) can use from 2 kW to 5 kW. While there is enough energy produced by the grid to supply massive amounts of PEVs, there may not always be enough power (instantaneous energy). So the challenge created by PEVs is the collective charging behavior of a 9-to-5 workforce that plugs in at the end of the work day.
In the near term, this behavior is a threat to distribution-level transformers in neighborhoods with high PEV concentrations. In the long term, this may exacerbate problems stemming from widespread solar generation, as the sun will be setting when people are plugging in. The theoretical lapse in generation and leap in consumption will require grid operators to ramp generation assets quickly and significantly; not a cheap or easy exercise.

Solutions

The root cause of the above challenges is that most electricity is consumed almost immediately upon generation because there are few storage resources on the grid. The PEV itself can be a solution, as grid operators can manage battery charging; or, in more advanced PEVs, the car itself may be able to supply power back to the grid. In both cases, the PEV owner is compensated financially and most of the costs of adding grid-level storage are avoided by the electric power sector. Pilot programs utilizing PEVs for such services are already underway. However, there will always be limits to these services, as PEVs are not always plugged in, don’t always need a charge, and sometimes do need to charge regardless of compensation.

Enter the home battery. Though the upfront costs are high for the homeowner, there are multiple economic benefits that may be had by both the owner and the utility. As mentioned above, it enables lower energy costs for the homeowner, and for the utility, a home battery can directly mitigate the challenges posed by intermittent residential solar generation and PEV charging at the distribution and generation level. Even more than that, it provides an opportunity for energy aggregators and utilities to incorporate homeowners into lucrative grid-service markets in a manner that is more reliable and consistent than PEV integration into these same services. Though reservations have been significant early on, the $3,000–$3,500 price point will be a hard sell to individuals in the mass market; it’s unlikely home batteries will exhibit similar gains to PEV and residential solar market growth without some financial incentives from utilities and/or governments, both of which stand to benefit from this technology.

 

Solving the EV Charging Puzzle

— May 11, 2015

When Tesla, Nissan, and General Motors (GM) introduced plug-in electric vehicles (PEVs) to the mass market, arguments against PEVs mainly cited weaknesses with vehicle cost, range, and limited publicly available electric vehicle supply equipment (EVSE). The first two weaknesses are difficult to solve, but their solutions are fairly straightforward: battery cost cuts through economies of scale and range increases through the development of better batteries. However, solving the third weakness is more nuanced. For instance, it’s been assumed that simply increasing public charging infrastructure will increase the adoption of PEVs, which has led to multiple government- and utility-funded initiatives on public infrastructure build-outs.

A Contradiction

Though it’s arguable that the public charge point build-out on behalf of the EV Project has been integral to PEV sales growth (most likely as passive marketing), data from these and other early infrastructure projects has suggested that PEV owners overwhelmingly charge at home rather than at the public points. This fact questions the practicality of these initial public infrastructure investments. Yet, data analyzed from a survey discussed in Navigant Research’s Electric Vehicle Geographic Forecasts report suggests that a lack of charging infrastructure still seems to be the biggest drawback to PEV ownership, as illustrated in the chart below.

Primary Drawback to PEV Ownership, United States: 2015              

(Source: Navigant Research)

What this contradiction appears to indicate is that yes, there is a need and likely a business case for public EVSE, but it needs to be in the right place. The trouble is that building owners are unlikely to invest in EVSE unless they see a need from residents, employees, or customers. And these groups are unlikely to ask for these services unless they have a PEV, which is unlikely if they don’t have places to plug in the PEV. What this all means is that the EVSE industry has to continue to find the right places for both the PEV owner and the building owner—or run the risk of placing infrastructure where it’s unnecessary.

Innovation

An innovative approach to solving this problem is underway thanks to the efforts of a San Francisco-based non-profit organization, Charge Across Town. In mid-April, the organization launched the Driving on Sunshine campaign, which showcases EVSE company Envision Solar’s integration of solar power and energy storage into a mobile EVSE unit named the EV ARC. The campaign places three EV ARCs at predetermined locations throughout San Francisco for 3-month periods and collects data on site usage. Findings on the data will be used to inform on public EVSE use and determine where units may be most effectively placed for consistent use; units will be donated to sites with the most use.

The charging stations are likely not inexpensive; however, it’s feasible to consider that a utility with big plans for infrastructure development (Pacific Gas & Electric, perhaps) would benefit greatly from a similar approach to siting public EVSE installations. Further, it would provide incredible value to potential host sites in actually determining the efficacy of EVSE placement without the added costs and embarrassment of a never-used public EVSE station.

 

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