Navigant Research Blog

Sensus Lands Great Britain Smart Grid Communications Deal

— August 14, 2013

Raleigh, North Carolina-based Sensus was the only American company to win a piece of the long-awaited Great Britain smart meter deployment contracts, which were announced on August 14.  The U.K. Department of Energy and Climate Change (DECC) selected  Arqiva Limited as the preferred bidder to provide the smart metering communications service for Northern England and Scotland.  In conjunction with Arqiva, Sensus will provide the long-range radio technology for the communications network.  DECC estimates the value of the communications service contract to be £625 million ($828.5 million) over 15 years.

Sensus’ FlexNet technology will deliver data from both gas and electric meters at 10.2 million locations across the region, or between 16 million and 17 million meters.  Sensus will be providing base stations and long-range radios that will communicate with a hub at each meter location.  Base stations will be mounted on Arqiva-owned communications towers; Arqiva owns 8,000 cellular towers and several thousand radio and television broadcast towers across the U.K.

Sensus says the complexity of the region to be served was a big reason for its selection.  Covering both rural and urban areas, the district reaches from the Highlands of Scotland to the City of Manchester.  Sensus reports a range of up to 40 miles in rural locations for its Flexnet wireless network, and 2 to 3 miles in urban and suburban locations.  Cellular provider Telefónica UK was chosen for the more urban central and southern region communications contracts.

FlexNet is a point-to-multipoint private radio frequency (RF) solution.  In the United States, FlexNet operates on licensed 900 MHz spectrum; in the U.K. the solution will operate over licensed 400 MHz spectrum owned by Arqiva.  The use of licensed spectrum allows for higher power transmission than unlicensed communications networks, and is generally not subject to the interference that may occur in unlicensed systems.  The system uses a star topology, with nodes communicating with a centrally located tower.  Each node typically sees more than one tower, allowing for network redundancy.

Big Win

The solution was designed to meet DECC’s service level requirements and has the ability to prioritize data through channelization.  The FlexNet system can support data throughput of 1 megabit per second.

The solution will support pre-pay and load-shedding applications, and will also facilitate British consumers’ ability to change retail energy providers in the deregulated market.

The deal is a very big win for Sensus and positions the company well for future business in Europe.  Sensus says that it already serves 475 electric, gas, and water utilities worldwide.  Previously, however, the bulk of Sensus’ business was in North America.  PECO in Philadelphia, for example, is deploying the FlexNet communications network in its 1.8 million meter smart grid program and plans a wide range of distribution automation applications over the network, in addition to traditional AMI applications.

Navigant Research estimates that point-to-multipoint communications nodes accounted for just 2% of total smart grid communications nodes worldwide at the end of 2012.  With Sensus’ significant entrée into Europe, however, it’s possible that share may grow in coming years.


The Road to Clean Energy is Greased With Fossil Fuels

— August 14, 2013

In recent months, both the United Kingdom and Germany have initiated fossil fuel expansion plans in the face of coal and nuclear retirements during the next decade.  Although the development plans coincide with ambitious clean energy agendas, the respective governments’ decisive shifts in favor of fossil-based generation stand in direct contrast to their official decarbonization policies in accordance with EU’s Renewable Energy Directive.

Currently in the midst of a comprehensive Energy Market Reform (EMR) effort to spark investment in renewables, the U.K. government has doubled its shale reserve estimates and cut shale production’s tax rate by half.  In Germany, momentum has been building this year behind efforts to expand the nation’s coal fleet, with a number of new projects slated for development across the country.

In both cases, recent developments in oil and natural gas markets have played a decisive role with unpredictable consequences for renewable deployments.

Coffee and Tea

The interplay of oil and natural gas commodities is a funny business.  Although oil’s primary role is to power a massive, worldwide transportation network, traded globally, its fluctuating value serves as a proxy in electricity markets for everything from natural gas prices to power purchases agreements (PPAs).  Natural gas, for its part, is at once a climate change nuisance in its natural state – it is roughly 70 to 90 percent methane by volume, a greenhouse gas 21 times more potent than carbon dioxide – and a climate change boon for countries like the United States, seeking to decarbonize power production with ample supplies of relatively clean-burning natural gas, instead of coal.  It is also a commodity produced and consumed in relatively close proximity.

The indexing of natural gas prices to crude oil – or fixing the traded price of the former to the latter – has helped insulate high-priced renewables seeking a foothold in economies throughout Europe and Asia.  A function of European importers who needed a price reference for newly produced natural gas in the 1960s, the practice remains common through many European and Asian markets.

Although steeped in historical precedent, oil-gas indexing is not without its critics.  It “makes about as much sense as pegging the contract price for coffee supplies to tea prices, adjusted for caffeine content,” commented Michael Lynch in a recent Forbes article.

Tale of Two Countries

Dependent on natural gas imports from Russia, for now, Germany is handcuffed by this reality.  The indexing of natural gas to Brent crude, which has hovered mostly above $100 per barrel since the beginning of 2011 makes natural gas a high-priced commodity.  For a country that derives 22 percent of its total primary energy supply from natural gas, energy independence remains an elusive goal.

Even so, Germany has pursued an ambitious effort to become more self-reliant in energy.  Aided by an aggressive Feed-in-Tariff (FiT) and insulated from cheap natural gas, Germany has seen a rapid uptake of distributed renewables like solar, wind, and biogas.  With nuclear facilities shutting down in the wake of the Fukushima Daiichi accident, and renewables still unable to deliver the scale of capacity expansion needed, the country has been forced to double down on coal.

By virtue of historical circumstance, natural gas prices are not nearly as intertwined with international oil prices in the U.K. as they are in continental Europe.  Though the country is a few years behind the U.S. with respect to exploiting shale gas deposits, natural gas will figure heavily into the future U.K. generation mix.

In recognition of this reality, the U.K. government recently eliminated subsidies that, since its inception, would have been available to dedicated biopower under EMR.  Though biopower is one of the few renewable options that can supply baseload power – a stabilizing force in electricity markets – the U.K. government has always expressed reservations about the cost-benefits associated with dedicated electricity production from biomass.

The contrasting German and U.K. experiences muddle predictions for the future uptake of renewables.  While recent movements in the relative price of oil and natural gas have begun to upend long-held structure in the energy production sector, renewables remain both a beneficiary and a victim.


The Fog of Big Data

— August 14, 2013

Big Data and the analytics to extract useful information from it have great potential for smart buildings technology.  As these terms are used more broadly, though, they risk losing their original meanings.  For many people, Big Data means “a lot of data” and analytics is diluted to mean “processing a lot of data.”  These general usages risk blurring the real opportunities afforded by Big Data and analytics in the smart buildings sector.

This was reinforced at two June vendor conferences I participated in: Realcomm’s IBcon conference in Orlando and Schneider Electric’s Xperience Efficiency event in Washington D.C.  Schneider marketing director Kent Evan’s trends presentation at Xperience Efficiency cited the early definition of big data, as described by META Group (now Gartner) analyst Doug Laney in a 2001 research report.  That is, Big Data has three attributes: volume, velocity, and variety.  But Evans reminded the audience that not every data problem in buildings is a Big Data problem – there’s plenty of work we need to do to make better use of the small data we have available to us.

Faster, Faster

While I generally agree with this assessment, it is still worth reviewing how smart building data volume, velocity, and variety are challenging traditional building management systems.  Certainly, data volume is growing as building control systems with hundreds of control points morph into complex systems with many thousands of points, driven by more granular sensors and controls. The velocity of this data is also increasing as sensors are sampled more frequently and denser submetering deployments provide more information to systems operations.  The variety of the data is growing as well, especially as different systems – ranging from HVAC to lighting to security (including video) – become data sources for an increasing range of potential applications.  Building data may not suffer from as many structured versus unstructured data challenges as experienced in other industries, but existing applications are often straining to process this data.  More importantly, new types of processing offer new insights and control optimizations.

This processing issue gets to the second part of my concern about the imprecision of the term “analytics.”  There were dozens of software vendors at the IBcon conference hawking buildings analytics packages, and on the surface, the marketing messages blur the distinction between them.  At the risk of oversimplification, these packages can be sorted into two buckets: those that use complex rules to effectively sort through lots of data to discover the desired information, and those that algorithmically fuse disparate data sets together to infer new actionable information and insights.  Products in both buckets can perform impressive and useful tasks, but the latter is the class of applications that are best described as true analytics.

Perhaps the best advice for building operators trying to sort through the Big Data and analytics hype is to focus on the specific problems at hand and understand how the proposed solutions offered arrive at their answers.  Whether they involve Big Data or little data, analytics or advanced rules engines, solving problems is the ultimate goal.


Volume Will Drive Down Fuel Cell Costs

— August 14, 2013

Less than a week after BASF’s American unit announced that it was pulling out of the production of fuel cell membrane electrode assemblies (MEAs), the U.S. Department of Energy announced $4.5 million in funding for two R&D projects for MEA durability and cost reduction.  The irony of this is not lost on the fuel cell community.  Only a few years ago, BASF invested substantial amounts of money into developing a state-of-the-art fuel cell MEA manufacturing facility.  High-volume production, predicated on high-volume demand, unfortunately, has not materialized.  But the last thing the fuel cell industry needs right now is more R&D.

The history of technology adoption shows that once something works and is good enough for the initial adoption phase, what’s needed to reduce costs is volume.  Get the stuff out of the door.  Ship product.  Here, the fuel cell industry can learn from the solar PV industry.

Both the solar PV industry and the fuel cell industry had very long incubation periods.  Both went through hype cycles.  Both lost the venture capital investment community a lot of money.  More recently, the solar PV industry has made the VC community a lot of money, and Navigant Research forecasts that the fuel cell industry will do the same within the next 5 years.  And, for both sectors, single-year data points give a distorted view of the industries’ health.

Where they differ is that the solar PV sector is now reaching an economic tipping point of production costs of $1 per watt, while the PEM fuel cell sector Navigant Research calculates is still at $10 per watt – too high for significant mass diffusion. (To be clear, this is for PEM-only fuel cell systems that are being shipped today, not next generation systems or hypothetical lab-based systems, which are, as a rule of thumb, 7 years from commercialization.  Chart 1, based on Navigant Research’s solar PV data, shows two important things:

  • Costs come down over time, though in a non-linear fashion
  • Costs come down as installations go up.

Chart 1: Historical Solar PV Adoption and Cost Curve

(Source: Navigant Research)

This is all well known.  Some in the fuel cell industry, though, seem to feel that we can shortcut this standard adoption process by pumping more and more money into R&D.  The thinking: If we can cut the costs of MEAs, which currently represent more than 30% of the cost of the overall system, we can bring down costs and speed up adoption, showing a steeper, more politically acceptable adoption curve.  The problem with this is that the technology still needs to go through the normalization and socialization process, in which adopters use it, break it, recommend it to their friends, find it useful, and basically bring it into their lives.

According to legend, it took 2 years to sell the first 1 million iPods and then less than 6 months to sell the second million.  If Apple had held on to the product until the devices became cheaper, and some would argue, more affordable, would that first 2 years have been shortened?  Unlikely.  People still had to play with the product and understand how it fit into their lives.  The same is true with fuel cell technology.

The moral of this tale is to stop holding onto the technology until it is “better” (i.e., cheaper).  Ship now and continue to make improvements.  Then costs will come down.


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