Navigant Research Blog

European Utilities Are Moving toward New Energy Platforms at Different Paces: Part 3

— March 29, 2017

The energy industry is experiencing a profound transformation as the sector moves toward more intelligent, more distributed, and cleaner use of energy. Utilities’ traditional business models are being challenged by disruptive firms offering new services that leverage more advanced technology, as described in Navigant’s Energy Cloud analysis in its Navigating the Energy Transformation white paper. In the first post of this blog series, I described six new energy platforms underpinning the energy transformation. In the second post, I showed that some European utilities have been more active than others in partnering with, and investing in, companies offering new energy platforms. In this post, I focus on the geographical distribution of activity to show that the majority of partnerships are with companies located in Europe, while most of the investments are made in organizations based in North America. In the next and final post, I will argue that in order to be successful in the transition toward a smarter, more digital energy future, utilities will need to strategically adopt the most relevant new energy platforms.

(Source: Navigant Consulting)

In terms of geographical distribution, while the majority of partnerships are with companies located in Europe, it is worth noting that most of the investments that eight major European utilities have made over the last 2 years are concentrated in North America—and California more particularly (see above figure). This is not surprising, when one considers that most startups offering services in Distributed Energy Resources (DER) Integration were created in California. These include AutoGrid (which raised funds from both E.ON and Total), Stem (in which RWE and Total invested), and Green Charge Networks (acquired by ENGIE). French utilities ENGIE and Total and German utilities E.ON and RWE have been the most active investors in California-based companies. While both French utilities have been focusing on companies offering DER Integration services, the German utilities’ activities have been more diversified across multiple platforms, such as Internet of Things (IoT), Electric Mobility, and DER Integration.

The majority of partnerships have been signed with companies located in Europe. An obvious reason is the ease of having operational teams able to work closely together across European countries and time zones—rather than across continents. In the Electric Mobility sphere, Enel has been partnering with automaker Nissan to offer a bundled product consisting of Nissan’s EV and Enel’s home charging point and smartphone app locating charging points across Italy. In the DER Integration field, E.ON and solar PV system provider SOLARWATT have signed an agreement to jointly offer a solar PV and battery storage system, an energy monitoring app, and a green electricity tariff to their German customers.

Lastly, utilities that are competitors in their home European markets sometimes invest in the same startup, while other times betting on competitor companies. Both E.ON and RWE have invested in Bidgely, which provides real-time appliance-level energy consumption applications for residential customers. The California-based startup will use both German utilities’ funding and customer bases to expand from North America to Europe. On the other hand, ENGIE acquired battery storage system and platform provider Green Charge Networks, which is a direct competitor of Demand Energy—the company acquired by Enel in early 2017.

In the next and final post of this blog series, I will argue that in order to be successful in the transition toward a smarter, more digital energy future, utilities will need to strategically adopt the most relevant new energy platforms.

 

Lighting Solutions Leave Something to Be Desired, but Hope Is on the Horizon

— March 29, 2017

The residential connected lighting market is becoming increasingly popular as consumers adopt more voice-activated smart home devices, such as the Amazon Echo, Google Home, and Apple HomeKit, that enable them to interact with their lighting in a whole new way. Connected lighting shows significant potential as new use cases emerge for assisted living and elderly care, security, notifications, and health and wellness, to name a few. However, the industry has a long way to go before connected lighting is adopted by a greater number of mainstream consumers.

Something to Be Desired

Research for Navigant Research’s Residential Connected Lighting report revealed that there is no single complete, comprehensive lighting solution available on the market. It seems as though every product leaves something to be desired.

Many of the connected bulbs available are either connected and color-changing but do not have very intelligent features; are fairly intelligent but overwhelmingly expensive; do not require a hub but cannot be controlled outside of the home; can be controlled outside of the home but also require a hub; or are so new that it could be a risky purchase relative to more mature products (meaning the company or product itself may not be around in coming years).

And many of the connected bulbs available have tradeoffs when it comes to function and marketability:

  • Connected and color-changing but without very intelligent features
  • Fairly intelligent but overwhelmingly expensive
  • Do not require a hub but cannot be controlled outside the home
  • Can be controlled outside the home but require a hub
  • So new as to be a risky purchase relative to more mature products

Connected luminaires or fixtures such as table lamps are few and far between, and those available on the market tend to take on a more futuristic style than what average consumers might be used to and interested in having in their homes.

Most control products are offering connectivity through protocols like ZigBee and Wi-Fi, and capabilities range from dimming to occupancy sensing. However, many are simply not as smart or automated as consumers are led to believe. Compared to other types of lighting solutions, switches can be an affordable alternative to retrofitting an entire home with connected bulbs, though they require an electrician or experienced do-it-yourselfer to install.

Positive Progress

However, because the residential connected market is still emerging, there are many players entering the market with innovative solutions for solving these issues. For instance, companies such as Nuro Technologies, which will be offering a Wi-Fi-enabled light switch, are arguably positioned to offer the smartest lighting controls products. (In Nuro’s case, though, these switches are not yet available.) Qube Smart Lighting is offering an affordable Wi-Fi and Bluetooth-enabled bulb with smart capabilities like machine learning. Companies like these are expected to push incumbents and other players to continue innovating and developing their products, which will make for positive progress in the connected lighting market.

To learn more about residential connected lighting, look for Navigant Research’s Residential Connected Lighting Market Overview and Leaderboard reports.

 

Australia Moves Forward with Transactive Energy

— March 29, 2017

Last month saw an announcement of another Australian transactive energy trial, led by the Australian Renewable Energy Association (ARENA) and distributed energy resources (DER) management software specialist GreenSync. The transactive energy trials, which will be run alongside network operators United Energy and ActewAGL, will use GreenSync’s DER management software as a market platform. The trial marks another step in the evolution of DER management: from managing the physics of DER to also managing financial transactions. By trading grid services from their DER with local network companies, residential and commercial customers will benefit from direct financial incentives that GreenSync believes will help justify the investment in DER.

A Hotbed

Australia is a hotbed for transactive energy. There are numerous transactive energy trials underway in the country—certainly more per capita than anywhere else in the world. And there is good reason:

  • At 15%, residential solar PV penetration is high.
  • There is abundant sunshine in most cities.
  • Critically, residential PV makes up a significant proportion of all PV, so is relatively important and gets plenty of regulatory attention.
  • Network charges are high, due to the extraordinarily long distances power has to travel for relatively small numbers of customers.
  • Blackouts are not uncommon—a recent heat wave in South Australia caused a surge in demand that could not be met by existing thermal generation led to the market operator to demand 100 MW of load be shed.

Future Resources

Energy Networks Australia (ENA) and Australia’s national science agency CSIRO co-wrote the recent Electricity Network Transformation Roadmap, which details a series of integrated measures that will expand customer choice, decrease emissions, lower costs, and improve security and reliability. ENA expects residential DER participation rates of 40% by 2027, with 29 GW of solar PV and 34 GWh of batteries. By 2050, Australian generation is expected to be virtually entirely renewable.

DER are regarded as important future resources that—when aggregated—will balance the networks, reward their owners, remove the need for green subsidies, and reduce the need for network infrastructure investments.

While the Australian market has some unique characteristics that have encouraged the early adoption of transactive energy, the continued falling costs and improving efficiency of solar PV and storage will make a viable economic case in more and more geographies. It is vital that vendors develop trustworthy, robust, and scalable platforms if transactive energy is to mature from its current embryonic state to a widely accepted market mechanism. Over the next few years, regulators, network operators, energy suppliers, and DER vendors will all be watching the Australian market with close interest.

 

Move Over Alexa! Text Messaging Wants a Seat, Too

— March 28, 2017

Using your voice to control your smart home might not become as popular as previously thought. Text messaging is looking for a seat at this table, too—especially for controlling smart appliances.

Ever since Amazon’s Echo device, better known as Alexa, stormed the market, voice activation has dominated smart home technology. This device was the star at the 2017 Consumer Electronics Show (CES) in January, where vendors of smart home and Internet of Things devices and services clamored to stay in Alexa’s orbit. For example, Google’s voice-activated Home device now competes with Alexa for market and mind share. Home, launched in late 2016, gets prominent retail display inside Verizon Wireless stores and seems to be riding in Alexa’s wake.

A New Use for an Older Technology

But an older technology lurks: text messaging. Unified Inbox, a small Singapore company, offers a text messaging service that has attracted the attention of several major appliance manufacturers, including Bosch. The service works by adding a user’s home to a contacts list in an app like WhatsApp; a message such as “preheat the oven to 300 degrees at 5:00 p.m.” can then get passed to an oven.

While this type of text messaging has yet to catch on with consumers, some technology leaders, including Facebook founder Mark Zuckerberg, are fans. Zuckerberg has been tinkering with Jarvis, his own voice-activated artificial intelligence program. He has discovered that he prefers text, mostly because the use of it feels less disturbing to people around him compared to voice-activated devices.

Texting has its place, and it should take hold among consumers in the coming months and years. However, the pace of adoption could be muted in the United States, where smart appliances are not that attractive to consumers. A report by Mintel last year found that 56% of respondents are willing to pay more for an energy efficient washing machine (good for consumers and utility demand-side management programs). Yet, just 11%-12% would pay more for a washing machine with smart features—including the ability to diagnose problems or monitor and control the machine from a mobile device.

An Open Question

Smart or connected appliances have already entered the market, and Navigant Research expects steady growth for this category going forward (see our Market Data: IoT for Residential Energy Customers report). But how people will interact with these smart appliances is still an open question. Voice activation has its place, but there is room for other user interfaces such as text messaging. The view here is that multiple interfaces will be available, and users will have to decide how best to control their own smart devices. There is no clear winner here—at least for the near term.

 

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