Navigant Research Blog

Tipping Point Near for LED Lighting

— April 7, 2013

Like children in the back seat on a road trip, many LED enthusiasts keep asking: “Are we there yet?”  The promise of LED lighting has been clear for a number of years, with high expectations that at some point LEDs will take over a significant share of the lighting market.  But when, exactly, will that point come?

The primary barrier is cost.  LED prices have fallen dramatically in recent years, but the cost premium over traditional lighting technologies can still be significant.  A 14W, standard type A screw-in LED bulb retails for around $20.  That is a huge drop from previous years but still far more than an equivalent incandescent or compact fluorescent bulb.  The comparison is even worse for 4-foot linear tubes, the dominant form of lighting in commercial buildings.  An LED product can sell for $65 or more, while the equivalent fluorescent product is less than $2.

Fortunately for the LED industry, it will not be necessary for LED prices to match those of traditional technologies before wide-scale adoption can take place.  Increasing efficiency and a host of other benefits will make LEDs the clear choice in many applications, as long as the upfront cost can be paid back through electricity savings in a reasonable time.  The real question is not when an LED tube will cost less than $2, but rather when will the payback period fall under 2 years?

The answer, needless to say, is not simple.  Subsidies and rebates in countries around the world are already reducing LED payback periods to a point where the economics are favorable.  The wide range of electricity prices between and within countries also affects the value of electricity savings.  Furthermore, some end uses will become attractive targets for LEDs before others.  Cold storage facilities, for example, are already adopting LED lighting en masse.  In those spaces, low temperatures negatively affect fluorescent performance and other lighting types generate far too much heat, leaving LEDs the clear winner.

Navigant Research has synthesized all of the factors affecting LED adoption in a newly updated report titled Energy Efficient Lighting in Commercial Spaces.  The chart below shows the share of LED lamps used in commercial lighting retrofit projects increasing from only 5% in 2013 to 63% by 2013, while fluorescent and other lighting types quickly fall off.

Share of Lamps in Retrofit Projects by Lamp Type, World Markets: 2013-2021

(Source: Navigant Research)



Research Shows Prepay Pays Off

— April 1, 2013

Although utility prepayment programs are not yet a major market in the United States, which lags behind many other countries that have offered such schemes for decades, Navigant Research has forecast that the North American electric prepaid metering market will grow rapidly over the next several years, expanding at a robust compound annual rate of about 23% from 2013 to 2018.

The Salt River Project (SRP) in Phoenix, Arizona, a prominent trailblazer of prepay, has operated prepaid electric services under the M-Power brand for 20 years. Today, about 126,800 residents are enrolled in SRP’s prepay plan, more than 12% of the residences that it serves.  M-Power customers have consistently demonstrated a high level of customer satisfaction in surveys by the utility, but most noteworthy has been their overall reduction in electricity use: around 12%.  Despite SRP’s results and similar finding by other utilities, establishing a reliable and statistically proven link between prepay and energy usage is still difficult.  However, a recent study led by consulting firm DEFG shows a strong positive correlation between prepayment of energy bills and conservation behavior.

Impressive Savings

Using consumer data from Oklahoma Electric Cooperative (OEC), which launched prepay services in 2006, to compare post-pay and pre-pay customers, the study concludes that participants in prepaid plans on the average reduce their energy usage by 11% (about 1,690 kilowatt-hours per year for an OEC customer) ‑ very similar to SRP’s findings. Compared to other energy efficiency measures ‑ and considering the relatively low cost of implementation, from a utility standpoint, and the ease of adoption for customers (there’s no need to purchase a special energy efficiency device, for instance) – this is an impressive figure.  Since the average monthly bill for OEC’s customers is $146, an 11% energy saving translates into a $192-per-year reduction on the customer’s utility bill.

The energy use reductions can be attributed to several factors, including increased awareness of when and how electricity is consumed.  The study also demonstrates that regular (even daily) communication from the utility to the customer that provides actionable information (usage tied to dollars and cents) changes consumption behavior.

This data provides strong evidence that electric prepayment is a winning proposition for both utilities and consumers, and it should convince more utilities to offer prepay options.  What’s more, according to a recent national survey of 1,000 individuals, 38% said that they were interested in prepaid electric services.  This shift is long overdue.


New EPA Proposal: An Environmental Victory?

— March 29, 2013

pinhead_paintingThe U.S. Environmental Protection Agency (EPA) today announced a proposal to lower tailpipe emissions levels from passenger cars and trucks.  To be phased in from 2017 to 2025, the proposed rule also calls for average sulfur content in gasoline to drop to 10 parts per million by 2017.  Meanwhile, the Obama Administration appears to be giving up on a carbon tax and there are warning signs that the EPA will retreat on its power plant greenhouse regulations.  This new announcement thus seems like a return to the EPA’s comfort zone – regulating criteria pollutant emissions from passenger cars.  

However, the proposed regulation does in fact support the EPA’s efforts to limit carbon emissions.  The timing for these proposed standards is clearly aligned with Corporate Average Fuel Economy (CAFE) standards, which will begin to ramp up from 35.5 mpg in 2017 to 54.5 mpg by 2025.  The automotive original equipment manufacturers (OEMs) are going for an “all of the above” approach to complying with the 2025 regulations.  They know they cannot get there just with alternative fuels, so they need to squeeze everything they can out of conventional gas cars.  Low-sulfur fuel allows them to do that by using technologies like direct injection engines.

Indeed, it is clear from the auto industry’s response to today’s announcement just how on board they are with the proposed regulation.  The Association of Global Automakers and Alliance of Automobile Manufacturers both expressed support, citing the benefits of a single, national low-sulfur fuel standard.  Automakers will not only be able to improve fuel economy, they will also be able to sell the same cars in all 50 states – since the EPA rule harmonizes with California’s more stringent standards.

It’s good that the Administration has Big Auto in its camp, because Big Oil is not happy with this proposal.  In fact, the rule will force major investments in refinery upgrades in the United States.  Petroleum refineries are already engaged in a battle with the EPA over its cellulosic ethanol blending mandates, so this new ruling will add more fuel to their argument that the EPA is placing an undue burden on the oil industry.  

Another aspect of the proposed requirements that may cause controversy is that the EPA is in favor of changing the emissions “test fuel” from gasoline with no ethanol to an E15 blend.  While most gasoline in the United States is close to an E10 blend (i.e., with 10% ethanol), the new test fuel will actually leapfrog over this level to the more aspirational E15 target.  As such, this proposal could face blowback from both automakers and refiners.

If I had to make a prediction, the broad rule on emissions and fuel sulfur will stand, though some details such as the E15 test fuel may be tweaked, since automakers can more easily meet stricter CAFE standards with the new rule in place.  If the proposal does stand, the White House would gain an early environmental victory in its second term.  Such a victory would also buttress the ambitious fuel economy goals set in the Obama Administration’s first term by giving OEMs more options for compliance and thus holding off potential challenges to the regulation.


In France, EV Innovation Hits la Rue

— March 29, 2013

You might have guessed that the United States, Germany, or even Israel would be the proving ground for the latest innovations in electric vehicles (EVs), but, in fact, France is where the technology is becoming part of everyday driving.

Carshare programs featuring EVs have expanded rapidly on the streets of Paris.  The Autolib program is now nearly 2,000 cars strong, as both locals and tourists are becoming comfortable with electric drive and short term vehicle borrowing.

Recently, Autolib auto provider Bollore Group announced that it will begin retail sales of its EVs.  Bollore is offering the innovative business model of selling the vehicles and leasing the batteries separately, becoming the second French company (after Renault) to do so.  Battery leasing is more of a psychological marketing tool that splits up the upfront cost of the vehicle and the monthly operational cost (i.e., the battery lease) to make it easier to compare EVs with conventional cars and their fuel costs, but if it continues to be popular with customers, other companies may adopt the strategy.

Think Small – Really Small

Renault offers battery leasing on the tiny Twizy, which has been hailed as the best-selling EV in Europe.  Getting consumers to buy into a smaller-than-smart-car are feats of both engineering and marketing.  Renault and ally Nissan have developed the strongest EV maker partnership, and the tandem recently crossed the 70,000 mark in EV sales.

Renault, Peugeot Citroën, Nissan, and other players from across Europe will be presenting at the eCarTec Paris conference and trade fair on April 16-18, where I’m looking forward to learning more about other upcoming developments in e-mobility.

Another EV car share program will launch next year in Grenoble, France, where Toyota is partnering with the City of Grenoble, Grenoble-Alpes Métropole, Cité Lib, and EDF.  The “last-mile” project looks to use shared emissions-free cars to close the gaps around public transport while reducing the overall use of personally-owned vehicles.  The project will feature 70 EVs, including Toyota’s COMS vehicle and a new model based on the i-ROAD concept that recently debuted with much fanfare at the Geneva Motor Show.

Thinking small – in vehicle size, cost of personal transit, and emissions footprint – is catching on rapidly in haute couture Paris, and this trend is not likely to go out of fashion anytime soon.  The lessons learned in the marketing and logistics of EVs in France are becoming the blueprint for sustainable transportation everywhere.


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