Navigant Research Blog

With Gas Prices Low, EV Drivers Adjust to Timely Price Info

— January 22, 2015

While the falling price of gasoline is welcome news for many drivers, it undercuts the financial argument for driving a plug-in electric vehicle (PEV).  On a per-mile basis, electricity in the United States is between 20% to 35% of the cost of driving a gasoline-powered car, depending on the utility rates and gas taxes.  Avoiding paying $50 or more for a weekly fill-up on gas compared to around $40 per month for charging an EV gives EV drivers financial satisfaction.

Gas has dipped below $2 in some states, and U.S. sales of plug-in hybrids have simultaneously slumped, falling 26% in November 2014 versus a year ago, according to HybridCars.com.  However, EV economics can be further improved by charging off-peak, and recent studies show that not only are significant savings possible, but also that consumers will adjust their charging to take advantage of the lower rates.

Time to Charge

A recent demonstration that provided EV owners with timely information about the cost of electricity and grid health indicates that the cost of charging can be reduced by up to 60% through smart charging.  Customers in the study had access to hourly utility rates through a connection to the Siemens energy cloud, and charging power levels were alternated based on the needs of the grid.  The study was performed by Duke Energy and Siemens and delivered charging information to mobile phones, tablets, and computers, enabling EV drivers to schedule charging based on the anticipated costs given the varying rates at different times of the day.

Siemens delivered electricity rate information via its computing cloud using the OpenADR demand response protocol, which enables energy-consuming devices (including charging stations) to respond to grid conditions.  The Society of Automotive Engineers (SAE) has established many standards for communications between charging stations and EVs; others, including the CEA-2045 modular communications interface standard, enable communications between charging stations with smart meters and home networking devices.

A Bad Connection

Meanwhile, in December, the U.S. Department of Energy published a report summarizing six projects related to EV charging that were funded in 2009 as part of the American Recovery and Reinvestment Act.  Entitled Evaluating Electric Vehicle Charging Impacts and Customer Charging Behaviors, the report states that when provided with discounted overnight rates for EV charging, consumers will adapt their charging habits.  “Customers took advantage of time-based rates to save on overnight residential charging” when they were able to pre-program charging, according to the report.  Convenience in managing charging is viewed as essential to minimize the cost of EV charging.

The report also points out that work needs to continue on connecting EV chargers with smart grid devices.  The Sacramento Municipal Utility District (SMUD), which was one of the six utilities managing the projects, found that charging equipment “successfully connected to SMUD meters about 50% of the time for several reasons, including poor ZigBee radio signal quality (often range related), problems with power supply circuits in the EVSE [electric vehicle supply equipment] communications module packet loss recovery, and environmental interference.”

Simplifying and reducing the cost of EV charging is critical to convincing more consumers to opt for EVs over conventional vehicles –  especially when prices at the pump are low.

 

In Growing EV Market, Volkswagen Is On the Rise

— January 20, 2015

Navigant Research estimates that plug-in electric vehicle (PEV) sales in 2014 surpassed 320,000, 60% above 2013 sales.  The U.S. market accounts for over one-third of all sales; however, the largest growth has come from China, with 2014 sales estimated to have nearly quintupled those in 2013.  The biggest developments of 2014 were BYD’s introduction of the Qin and BMW’s global introductions of the i3 and i8.  The two automakers, which combined only accounted for about 2% of the global market in 2013, now account for more than 10%.  Although 2014 wound up being a good year for the PEV market, with double to triple-digit growth in every major region, 2015 will be far better.

In Navigant Research’s report, Electric Vehicle Market Forecasts, we forecast that PEV sales in 2015 will surpass 570,000, growing nearly 80% from 2014.  The U.S. market, which grew around 30% in 2014, is expected to grow by more than 70% in 2015.  Similar gains will likely be made in China and Europe.  The bump in 2015 comes from the introduction of Tesla’s next vehicle, the Model X, alongside a number of new PEV models, primarily from Volkswagen (VW).

Late Bloomer

Likely the most significant development in 2015 will be the dramatic expansion of VW’s PEV market share.  VW has been slow to enter the PEV market, but it is now one of the largest players.  Eight PEV models (six plug-in hybrid electric vehicles [PHEVs] and two battery electric vehicles [BEVs]) are available in various regions through different brands: VW (two PHEVs, two BEVs), Audi (one PHEV), and Porsche (three PHEVs).  In 2013, VW accounted for less than 1% of the global PEV market; in 2015, Navigant Research expects the automaker to account for 10%.  This will likely make VW, along with Mitsubishi, the third-largest PEV maker, behind Nissan and Tesla.

 

PEV Market Share, World Markets: 2015

(Source: Navigant Research)

The German Wave

Further strengthening VW’s position in the PEV space are its plans to roll out even more PEV adaptations to existing luxury vehicle model lines from Audi, Porsche, and Bentley to compete against Tesla.  Navigant Research believes that VW is likely to overtake Nissan in 2017, but still trail Tesla.

VW’s broad adoption of PEVs is similar to the strategies of other German automakers, including BMW and Daimler.  These types of commitments are uncommon in Japan and the United States, where major automakers, besides Nissan, have been hesitant to enter the PEV market in force.  The net effect of this trend could produce a PEV industry synonymous with German engineering, not unlike Japan’s preeminence with hybrids.

 

How Technology Partnerships Will Shape the Future of Building Innovation

— January 20, 2015

The last 5 years have been monumental for the smart buildings industry.  Major building automation vendors have repositioned themselves as tech companies, a flurry of startups have entered the market, and building owners have become increasingly aware of the business value of integrating energy and operations management technologies.  Navigant Research expects to see a shift from the rash of acquisitions that dominated the smart buildings news a few years ago to partnerships shaping the market’s near future.  Companies are coming together to help customers overcome the challenges of enterprise awareness and integration and to make energy service offerings even smarter.

Enterprise Awareness

Even as the economy improves, many customers resist investing in energy efficiency.  The upfront capital costs of systems integration and equipment upgrades can be a daunting proposition for building owners and managers still learning the business value of intelligent energy and operational management.  Yet, a growing number of startups are finding new ways to bring cost-effective solutions to market that will help deepen the market penetration of smart building technologies.

In August, for example, Panoramic Power and Lucid announced a partnership to help customers capitalize on enterprise efficiencies through wireless energy monitoring and analytics.  Panoramic Power’s self-powered micro-sensors and Lucid’s BuildingOS software help customers aggregate building data and generate useful data across diverse systems and facilities.  In October, GridPoint and MicroStrategy announced a new partnership to enhance the software platform and visualization capabilities of GridPoint Energy Manager for cost-effective insight across light commercial building portfolios.  These two examples epitomize the partnering activity in the market that’s helping customers realize the benefits of smart building technologies at lower costs.

Enhanced Energy Services

Energy and engineering service companies are also seeing the benefits of partnering to bring smart building technologies to their customers.  AtSite is now enhancing its smart building professional services with the BuildingIQ Predictive Energy Optimization software.  The collaboration converges cloud-based software analytics with engineering expertise to elevate the service offerings to their customers.  ForceField Energy has partnered with Noveda to enhance its energy service company (ESCO) offerings with the IntelliNET Luminaire Management System (LMS) offering.  These partnerships illustrate how smart building technologies can generate new efficiencies and insights for professional service providers and differentiate offerings to customers who increasingly demand data-driven decision support.

Navigant Research will continue to track how new partnership models unfold in 2015 and whether these companies can successfully utilize their individual core competencies to deepen market penetration and expand the market for smart building technologies.

 

The Future of Energy: Open or Closed?

— January 20, 2015

Among technology giants, two predominant business models dictate the way in which consumers connect (and interact) with the broader Internet and the way in which innovation unfolds: open and closed.  This tug-of-war between open versus closed has been going on ever since the Internet first started to hit the mainstream.  As described by GigaOM, “It’s a battle that has been at the heart of the technology industry for most of its modern history.”

Open models seek to facilitate universal access and maximize creativity, but potentially breed chaos, error, and design catered to the lowest common denominator.  Closed systems limit the number of participants and exert more control over the flow of information, but can make it easier to roll out dynamic products while minimizing the potential for error.  In more specific terms, it’s a battle between the Google, Android, and Adobe business models and those of Facebook, Apple, and Microsoft.  Each carries with it specific advantages and disadvantages.

Advent of the Cloud

Although still in its infancy, in the emerging Energy Cloud, the battleground is divided similarly, with advocates of open and closed models both beginning to stake claims.

The Energy Cloud – the end result of an evolutionary shift away from a financial and engineering model that relies on large centralized power plants owned by utilities to one that is more diverse, in terms of sources of generation and ownership of assets, and enables the integration of new, distributed energy resources in addition to traditional generation – provides a rich ecosystem for breeding innovation as energy becomes increasingly democratized.  As depicted in the graphic below, the hallmark of the Energy Cloud is a shift away from one-way power flows to bidirectional flows in which consumers become both consumers and producers of power:

The Energy Cloud

(Source: Navigant Research)

Lessons from the Revolution

There are many lessons from the Internet revolution that can be applied to the Energy Cloud.  Open and closed Energy Cloud models alike must balance the need for access, reliability, safety, and ultimately, innovation.

The question comes down to this: will the Energy Cloud take the form of a walled garden, as CompuServe and America Online attempted in the early days of the Internet and Facebook is doing today, or will it remain an open landscape?  Or, perhaps of more relevance to stakeholders, which model best serves the goal of fostering a thriving, ubiquitous Energy Cloud?

Likely, both open and closed models will play key roles, as the Energy Cloud will serve multiple objectives simultaneously.  According to an essay on the topic from PricewaterhouseCoopers, innovation is almost never an either/or choice.  As most companies have discovered, their innovation goals involve a complex mix of closed and open models that is uniquely tailored to their specific innovation objectives.

Customers and Providers

For the incumbent utility, for example, objectives remain focused on preserving market share and maintaining safety and reliability while also growing profitability.  For the consumer, access to inexpensive and reliable power around the clock and choice in how and by whom their energy is produced remain key objectives.  Some stakeholders will seek to maximize either one of these positions, while others will seek to bridge the two.

In either case, the emergence of the Energy Cloud will require a rethinking of standards, protocols, and relationships among stakeholders.  With a slew of innovative technologies gaining market share – solar PV, distributed storage, home energy management systems – the integration of these assets into an efficient and resilient system remains among the greatest challenges ahead for all Energy Cloud stakeholders, and will likely be where the greatest emphasis on innovation will occur.

 

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