Navigant Research Blog

How Will the Developing World Help the Paris Climate Summit Reach Carbon Reduction Goals?

— November 30, 2015

With negotiators gathering in Paris Climate Summit this week, talks will likely be ruled by the need for mega projects of scale to help stem the rise in global temperatures linked to our deep addiction to fossil fuels. Though there is no doubt that developed economies such as Europe will need large offshore wind farms in the North Sea and equally massive solar farms in North Africa to reach existing targets, a much more interesting question is this: How can the developing world contribute, given the fiscal challenges facing the bottom of the pyramid populations?

Scaling Up

A quick answer: Through a major scaling up of both remote microgrids and nanogrids.

In a forthcoming report, Navigant Research forecasts the size for both of these off-grid networking platforms designed to increase renewable energy content for off-grid power. Ironically enough, it is here, in the deep jungles near the Equator or the frozen tundra of Siberia, where renewable energy resources such as solar and wind actually reduce energy costs.

It is estimated that over one-fifth of humankind lacks modern energy services. According to the United Nations, more than 95% of these potential customers live in Sub-Saharan Africa and Southeast Asia, with 78% residing in rural areas. While the cost of providing universal access to the electricity grid and decentralized electrification systems would be in the tens of billions of dollars annually, these costs also represent potential revenue to vendors of microgrid/nanogrid components such as distributed generation, energy storage, smart inverters, and smart meters.

The International Energy Agency (IEA) estimates that by 2020, developing countries will need to double their electrical power output. Demand for energy, especially electricity, is growing much more rapidly in these nascent economies than the rate of expansion of conventional electricity grids in the major industrialized world. All told, the developing nations are expected to represent 80% of total growth in energy production/consumption by the year 2035, according to IEA’s World Energy Outlook. Given the current economic conditions, one could safely assume that the majority of these new power supplies will be produced and distributed via remote microgrids, nanogrids, and other related forms of distributed energy resources rather than traditional hub-and-spoke centralized transmission grid infrastructure. This distributed approach is less risky and incremental, and syncs up with available trends in finance and business models related to power distribution in emerging economies.

Investment Needed

Just how much investment is needed to bring clean energy to the world’s poorest of the poor?

The African Development Bank, for example, aims to mobilize $55 billion in private funding under a New Deal on Energy for Africa program also designed to eliminate Africa’s energy deficit by 2025. Yet this number could underestimate the opportunity just for one continent, since it is based on providing minimal power for things like cell phones, LED lights, and laptops. Experience shows that once electricity is brought to a village, desire rapidly increases for more power.

In Africa alone, Navigant Research forecasts spending will reach more than $8 billion on remote nanogrids for village electrification by 2024. Ironically, it is these smaller systems that are expected to lead the market in Africa, rather than microgrids, due to their simplicity. They translate into not only big business, but a key tool to slow climate change in parts of the world that historically have not been considered major hotbeds for innovation. If we are to succeed in harnessing the power of new technology to slow climate change, I would argue it is in the developing world where that battle will be won—or lost.


New Business Models & OEM Products Grow the Electric Power Two-Wheeler Market

— November 30, 2015

The electric power two-wheel vehicle (e-PTW) industry is expected to achieve stable and continuous growth during the coming years as new business models and several large OEMs permeate the market. According to Navigant Research, global annual sales of electric motorcycles (e-motorcycles) are expected to grow from 1.2 million vehicles in 2015 to 1.5 million in 2024, while sales of electric scooters (e-scooters) are expected to grow from 4.1 million to over 4.4 million.

Gogoro Brings Battery Swapping to Europe

In the e-scooter market, battery swapping startup Gogoro is transforming urban mobility by offering its e-scooter customers a battery swapping network, removing the range anxiety common to most types of electric vehicles (EVs). Gogoro has sold over 2,000 of its e-scooters over the past few months in Taiwan (using an infrastructure base of 90 GoStation battery swap stations), and the company has raised an additional $130 million in Series B funding from Panasonic (its battery supplier) and the National Development Fund of Taiwan.

Forbes reported that Gogoro will be expanding its program (which is currently only in Taipei, Taiwan) to Amsterdam in early 2016. As a city with narrow streets, a general lack of available parking, and a government looking for ways to reduce the number of four-wheel vehicles on the road, Amsterdam is a great fit for the electrification of two-wheelers. Aligning with Amsterdam’s smart city initiatives, Gogoro is aiming to become more of an energy company rather than solely an e-scooter manufacturer. The company’s GoStations are cloud-connected and are expected to coordinate with electricity grid demand in Amsterdam, charging batteries only at times when energy demand is low.

Gogoro is becoming a disruptive force in the industry, and the company has now raised over $180 million since being founded back in 2011. If the company’s business model can prove successful in Amsterdam, there’s no limit on the number of large European cities that could benefit from congestion-reducing e-PTWs.

OEMs Show New e-PTW models

Large OEMs are unveiling new e-PTW products that will serve an important role by increasing product availability in key markets. The sleeping giant in the industry, Honda Motors, plans to launch an electric scooter in 2017. This will be the first time Honda will sell an e-scooter to consumers, as its previous EV-neo e-scooter was a short-term project (2010-2013) that focused on leasing e-PTWs to fleets. Sales are expected to be concentrated in Japan, China, and other Asian countries where population density is creating congestion and air pollution problems. Meanwhile, BMW Motorrad unveiled a new e-motorcycle concept called the eRR. This high-performance motorbike is a further expansion into e-PTWs since BMW first released the C Evolution Maxi-Scooter back in 2014.


Oregon State Energy Policy Leadership Back on Display

— November 30, 2015

Oregon has a long history of innovative firsts across the social, political, and business spectrum with regard to energy. Below are some notable examples of Oregon energy state policy leadership:

  • In 1919, Oregon became the first state to initiate a gas tax, and the rest of the country followed its example in repairing roads. Now rolling out a trial pay-as-you-drive tax called OReGO, the state is incentivizing its citizens to drive less. In 2011, per capita use of gasoline in Oregon fell to its lowest level since 1962.
  • Oregon was the first West Coast state to pilot a floating offshore wind farm in Coos Bay.
  • The state is home to Shepherds Flat, one of the largest wind farms in the world at 845 MW. Shepherds Flat has more than 300 2.5 MW General Electric (GE) wind turbines.
  • Portland was the first U.S. city to adopt a climate change plan, called the Global Warming Reduction Strategy. In 2010, Oregon hit its 2010 emissions target.
  • In 2007, the state legislature passed numerous pieces of clean-energy legislation in electricity, biofuels, and other sectors that led to the arrival of Vestas, Iberdrola, SolarWorld, and other industry leaders.
  • Oregon’s only coal plant, Boardman, is expected to be converted to biomass by 2020.

However, since the financial crisis and amid challenging market conditions both locally and globally, there have been lulls in legislation and activity that previously gave Oregon its credibility in the energy sector.

There are two new initiatives facing voters in the coming ballot cycle. Initiative Petition 63 aims to increase the state’s renewable portfolio standard from 25% by 2025 to 50% by 2040, which would make it one of the top five most aggressive among U.S. states and territories. The initiative would also ban coal electricity imports, which, when combined with the planned phaseout of coal generation in the state, would make the state coal-free by 2030. Initiative Petition 64 is similar, but it also ties these results to executive compensation, which is the first approach that I have seen tied to energy policy, anywhere.

Initiative Petition 64

Dexter Blog Quote

 (Source: Oregon Initiative Petition 64)

To be sure, many other aggressive state-level efforts have seen strong innovation on the policy front and have enjoyed various levels of success. One differentiating factor that makes Oregon particularly unique on the local implementation front, however, is the massive hydroelectric system in the Columbia River Gorge. This system provides about half of the state’s power (and does so cheaply), and has been somewhat of a barrier to the larger uptake of non-hydro renewables at the residential, commercial, and industrial levels.

Voters have consistently voted with their dollars, and Oregon is home to one of the highest percentages of green power program subscribers—where customers pay approximately 10% more on their electric bills in order to support renewable energy projects in the state. Similarly, polls associated with these new ballot initiatives found that 71% of Oregonians supported the bills, and that 58% said they supported the proposal even if it would increase their energy bill. This flies in the face of conventional wisdom that voters are unwilling to put their money where their mouth is, and is instead representative of most of the state’s population. The positive economic impacts of wind and biomass power in rural areas has led to progressive energy legislation being passed.

Many groups outside of Oregon will be watching closely to see if these initiatives pass, and this underscores not only the importance of policy to keep the state on the front lines of statewide energy policy, but also its potential for the rest of the United States.


Will One Company Conquer the Distributed Energy Space?

— November 25, 2015

I have often suggested that I don’t see any single company ever dominating the distributed energy space with networking platforms such as microgrids. My recent Leaderboard report, which ranks microgrid developers/integrators that offer their own distributed energy resource (DER) controls platform, underscores this point. All 15 companies that were ranked were, at the very least, contenders, with only three emerging as leaders according to the report’s criteria.

Some disagree. After this report was released, General Electric (GE) made a major announcement that raised some eyebrows, launching a new company called Current, an aggregation of existing business units currently valued at $1 billion. Jan Vrins, global energy practice leader here at Navigant, suggested in a recent blog that this move positions GE in a role of the network orchestrator, a business model that may prove to be the most profitable over the long term.

Current is designed to bundle previously disparate business lines offering LED lights, solar PV, energy storage, and electric vehicles into a single startup located within the walls of GE. Many in the industry are curious as to how this will play out, among them yours truly.

Whether talking about microgrids or virtual power plants (VPPs), the other significant development in the DER space is the approval of the merger between GE and Alstom Grid. Why? While GE’s broad suite of products relevant to the microgrid space is impressive, its control platform was not its strongest suit. By incorporating Alstom Grid’s controls, which are repurposed from its platforms used by numerous wholesale grid operators throughout the world, it now has a platform aimed at the VPP portion of the distributed energy value stream, migrating value from distribution level resources up to wholesale operations.

I see GE recent moves aligning more with VPPs—a network orchestrator business model—than microgrids. This is in spite of its major presence in New York, the hotbed for retooling utility business models to allow utilities a greater role with DER aggregation and optimization via community resilience microgrids. Since France, Germany, and Denmark in Europe are the current hotspots for VPPs, the GE-Alstom Grid merger is looking like a potential winner.

Yet there is plenty of competition. Navigant Research’s recently published report, our ninth edition of the Microgrid Deployment Tracker, for the first time tallies up identified microgrid capacity by vendor. Using that metric, ABB comes out on top. The bulk of these projects are remote microgrids in places such as Australia, islands off the coast of Spain, and in Alaska. The same update shows, nonetheless, if one tallies up total projects, it is Schneider Electric that rises to the top. Coincidentally, Schneider Electric ranked first in terms of the Leaderboard report, largely due to its partnership strategy on the controls questions, with firms as diverse as ETAP, Green Energy Corporation, and DONG Energy among its co-innovators.

One also has to admire the breadth of solutions being offered by Siemens. By offering a complete end-to-end solution for microgrids, including financing, and integrating this approach with the vision of smart city infrastructure, Siemens is echoing the idea that microgrids become a complete infrastructure package. The worlds of microgrids and VPPs come closer and closer together over time.

So, the bottom line? I don’t see any one company dominating the microgrid/VPP space anytime soon. GE’s recent moves will go a long way in strengthening its role in the DER space, but it has plenty of competition. Left unanswered at this point in time is whether the network orchestrator role will indeed unlock the revenue streams to allow large technology players to innovate in the increasingly crowded distributed energy market. It looks like GE wants to find out.


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