Navigant Research Blog

John Krafcik Takes the Steering Wheel of Google Car Project

— September 29, 2015

Someday, Google’s vision of cars without steering wheels, accelerators, or brake pedals may come to fruition. For the foreseeable future, however, intelligent people will still be necessary to guide the process of actually developing and building those machines. Incidentally, Google has just hired one of the smartest in the business, John Krafcik. The former Ford, Hyundai, and TrueCar executive is now the CEO of Google’s self-driving vehicle program.

As the former head of product planning and later CEO of Hyundai Motor America, Krafcik demonstrated his ability to run an operation that develops, manufactures, and markets vehicles to a mainstream audience. Prior to his decade with Hyundai, Krafcik spent 14 years at Ford, where he is reputed to have coined the term “lean manufacturing” in an article he wrote while working on his MBA at MIT.

Navigant Research’s Autonomous Vehicles report projects that by 2025, approximately 45 million light duty vehicles with at least Level 2 semi-autonomous capability will be sold globally every year. Level 2 is defined as a system that can automatically control at least two primary functions—such as steering and speed. Widespread adoption of Level 4 systems that can handle all primary driving functions without human intervention are unlikely before the 2030s.

Google and the Automotive World

For Google, Krafcik brings a reality check to the company’s automotive ambitions. Unlike Google’s primary businesses, the automotive industry is one of the most heavily regulated in the world, and the product can put lives at risk. Representatives from several manufacturers have acknowledged that they have been approached by Google about partnering on autonomous vehicles. However, Google’s approach so far has been to have manufacturers supply a vehicle platform while Google provides a black box of software that the manufacturers have neither control nor influence over. Given the many unresolved legal and ethical questions around autonomous vehicles, this approach has been rejected so far.

Krafcik knows how the auto industry functions and why it so often appears to be extremely conservative in rolling out state-of-the-art technology. He has a keen understanding of how to mass manufacture vehicles in high volumes and what mainstream consumers want in a vehicle. At the same time, he is an acknowledged risk taker in taking his companies into new market segments. Under his leadership at Hyundai, the brand steadily expanded from a second-tier purveyor of value, building credibility with consumers and critics so that it can now sell luxury cars like the Genesis without being laughed at.

Krafcik’s Credentials

This writer has known Krafcik for 8 years and he is clearly an engineer and manager that appreciates a challenge. Prior to being promoted to CEO at Hyundai’s American branch, the office had a rotating door of occupants who struggled with the home office’s demands. Krafcik managed to occupy the post for an unusually long 5 years and is likely the best candidate that Google could have hired.

Chris Urmson will continue leading the technical development side while Krafcik opens possibilities as this project evolves into a real business. Krafcik is well-respected in the industry, and if Google decides to pursue OEM partnerships, he is far more likely to be successful in brokering deals than those that have a distinctly Silicon Valley mindset. On the other hand, if Google opts to get into the manufacturing of cars, Krafcik knows that side of the business equally well—whether Google wants either its own factories or a contract builder like Magna Steyr to handle the work. Whichever path Google takes, the future looks interesting. And that is said without even knowing if Apple will get involved.


Are LCOE Analyses Still Useful?

— September 29, 2015

Earlier in September, the International Energy Agency (IEA) published its 2015 edition of the Projected Costs of Generating Electricity report. Not surprisingly, the report shows a dramatic fall in the levelized cost of energy (LCOE) for solar electricity and a minor fall in the LCOE for wind in comparison to the IEA’s 2010 report.

Several media outlets have highlighted that the cost of a kilowatt-hour (kWh) coming from renewables is now similar to—or even lower than—costs coming from fossil fuel technologies, and therefore are citing renewables as the cheaper option. While this may be true in certain scenarios, what the reporters and the LCOE analysis fail to highlight is that, while all kWh are equal, some are more equal than others.

kWh and World Cup Coverage

Take, for example, the Germany versus Argentina game from the 2014 FIFA World Cup. The price of a kWh in Germany at the end of this game rose to the high of €46/MWh, than dropped €15/MWh 2 hours later. In the evening, electricity production from wind turbines reached almost full capacity from the day’s demand. Then the next day, lacking an event interesting enough to keep televisions on, that demand plunged.  Location, like time of production, can also make a significant difference in the quality of a kWh. There is no data to support the following hypothesis, but demand in Argentina had to have dropped after Germany scored, while demand in Germany likely stayed high for at least a few more hours.

Simplifying LCOE

A traditional LCOE analysis would assume a capacity factor for a turbine depending on the local wind resource data, then aggregate the hours that the turbine is expected to operate in its lifetime, and finally divide the overnight (capital expenditures) and operating costs by the expected hours to get the LCOE. This made sense in a world where wind generation was managed primarily to follow demand. It was enough when the costs were multiple that of other options—like Feed-in Tariffs and basic net metering. In those options, energy quality is not the incentive, and the most common policy support mechanism is allocated toward wind and solar.

But in the world we are headed toward—where supply and demand for solar energy may not match—a newer, simpler metric that media outlets could use to educate people would be useful. For example, something like a revenue generation cost analysis (the cost of producing $1 of revenue) that takes into account the cost of delivering a kWh and the time in which it is delivered, could be more interesting to the public—and could even help in moving renewables policy and innovation forward.


Smart Cities Initiative Provides Added Boost to Growing IoT Market

— September 29, 2015

Coinciding with Smart Cities Week in Washington, D.C., the Obama administration announced an investment of over $160 million for a new Smart Cities Initiative on September 14. The initiative focuses on federal research and will leverage over 25 new technology collaborations to help municipalities address key challenges such as reducing traffic congestion, fighting crime, fostering economic growth, managing the effects of climate change, and improving the delivery of city services.

The initiative shows the U.S. government following other national governments in supporting smart city initiatives, including the United Kingdom, India, and South Korea. This is further evidence of how the smart city concept is being fully embraced in North America.

The Obama administration has broken down the investment allocation as follows:

  • More than $35 million in new grants and over $10 million in proposed investments assigned to build a research infrastructure for smart cities, led by the National Science Foundation and National Institute of Standards and Technology.
  • Nearly $70 million in new spending and over $45 million in proposed investments allotted to unlock new solutions in safety, energy, climate preparedness, transportation, health and more, by the Department of Homeland Security, Department of Transportation, Department of Energy, Department of Commerce, and the Environmental Protection Agency.

IoT Segment Growing Quickly

This announcement comes at a time when interest and activity in smart cities technologies and solutions is higher than ever. There is a growing focus on the intersection of smart cities and the Internet of Things (IoT). In the context of smart cities, IoT refers to a network of physical objects within a smart city that are embedded with electronics, software, sensors, and connectivity to enable these objects to collect and exchange data.

Just over the past few weeks, several high-profile developments in the IoT market have taken place. General Electric announced the creation of a new business unit with the aim of becoming the leader in the IoT; IBM appointed Harriet Green—the former CEO of Thomas Cook Group in the United Kingdom—to lead its new IoT business unit (IBM is expected to invest $3 billion over the next 4 years in this unit); and Salesforce announced a new IoT Cloud platform. According to the Smart Cities Initiative, these developments in the IoT market reinforce the importance of its focus on “creating test beds for ‘Internet of Things’ applications and developing new multi-sector collaborative models.”

Array of Things

Several cities in the United States have been evolving to add more IoT concepts to smart city projects. For example, the University and the city of Chicago are engaged in a joint venture named the Array of Things (AOT) with the Argonne National Laboratory. This project will provide real-time, location-based data through sensor boxes that will be deployed in the Chicago area. The sensors will detect temperature, light, vibration, carbon monoxide, pedestrian and vehicle traffic, and surface temperatures to work with applications that use the sensor data to alert residents to areas with traffic congestion, pedestrian traffic, and icy patches on sidewalks. Data collected by the AoT project will be free and open to the public, a key feature of the program. The National Science Foundation is providing an additional $3.1 million to the AoT project, derived from the White House’s Smart Cities Initiative funding. The impact of IoT on smart cities will be explored in more depth in Navigant Research’s upcoming Smart City Street Management report.


Paving the Road for Progress on Climate Change?

— September 25, 2015

The Obama era has been blackened by Congressional dissent and contention on issues across the board—ranging from raising the minimum wage to climate change. As a result of the stalemates in progress for energy policy development through legislation, the president has released a steady stream of Presidential Actions that outline—and in some cases mandate—federal leadership on climate change while circumventing the protest lines of the legislators. What lies ahead for U.S. energy policy is up for debate, what with the upcoming 2016 election, and the Obama administration has been busy in its attempts to set that stage:

  • International collaboration—United States-China Climate Leaders’ Declaration (9/14/15): 18 United States and 11 Chinese cities, states, and provinces have agreed to demonstrate leadership in the climate change battle with specific targets, commitments to report greenhouse gas (GHG) emissions, climate action plans, and coordination in efforts to make progress on combating climate change.
  • Federal mandate—Executive Order on a Decade of Federal Sustainability (3/19/15): Includes targets of 40% GHG emissions reductions by 2025 relative to a 2008 baseline.
  • Rulemaking: Most notable of all was the August 3 announcement of the Clean Power Plan by the president and the Environmental Protection Agency. This landmark ruling leveraged the authority of the Clean Air Act to establish GHG emissions reductions mandates for power plants across the country.

So, Where Do the Candidates for 2016 Stand?

While it may be hard to believe the presidential election is still over a year away with all of the media hype and constant advertising, an early review of the contenders illustrates a very uncertain future for U.S. climate change policy. A quick scan from the official campaign pages of a few of the candidates shows a rough road ahead:

  • Hilary Clinton’s campaign slogan on climate change is “Making America the clean energy superpower of the 21st century.” All focus is on renewables, and there is no stated stance on regulation.
  • Bernie Sanders aims for international leadership and proposes to tax carbon and methane. His campaign further opposes the Keystone XL pipeline.
  • Donald Trump has not directly addressed climate change policy in his campaign events or via his website. According to The Washington Post, he did speak on the topic on the Palin radio show in late July, stating: “You look back and they were calling it global cooling and global warming and global everything, but if you look back and the biggest tornadoes were in the 1890s, the biggest hurricanes were in the 1860s and 1870s.”
  • Jeb Bush’s campaign page also omits climate change as an issue. His perspective on the issue is foggy at best. A series of stories in the spring highlighted his uncertainty on any official stance. According to The Nation, he was quoted early on in his governorship as stating, “At this point, global warming is not the top priority.” Recently he has been even more vague: “I don’t think it’s the highest priority,” he said in May, adding, “I don’t think we should ignore it, either.”

The year ahead holds many questions on climate and energy policy, but federal leadership will likely continue through the non-legislative channels of the president as the candidates set their eyes on the office.


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