Navigant Research Blog

The Internet Highway – Literally

— October 14, 2013

In the United Kingdom, the independent regulator and competition authority for communications industries is known as Ofcom.   It is accountable to Parliament and responsible for regulating the TV and radio sectors, fixed-line telecoms, mobile phones, postal services, and, probably most importantly, the airwaves over which wireless devices operate.  It also issues licenses for operators to transmit over the wireless electromagnetic spectrum.

With the relatively recent dramatic increase in demand for wireless communications, Ofcom has determined that it needs to look at other ways to allow providers to operate.  On October 2, 2013, Ofcom announced a new initiative to test the potential of using “white space” technology for wireless communications.  About 20 organizations will take part in trials to see if a variety of technologies can use gaps in the frequency band used to broadcast digital terrestrial TV for other applications without interfering with existing users.

Driver Control

Only one of these tests involves road traffic, but that one captured the attention of the mainstream press.  The headline in the Daily Telegraph rejoiced at the prospect of the A14 becoming the United Kingdom’s  “first Internet-connected road,” while the Guardian concluded that the technology could help lead to self-driving cars.  Apparently, an Ofcom spokesman also hinted at the potential for managing vehicle speeds on the road, which led to the Guardian journalist noting that this could “even pave the way for government systems to automatically control car speeds,” thus reviving memories of the European Union plan to put restrictions on all vehicle speeds – an idea that was discarded a few years ago, but which reared its ugly head again last month.  Judging by the comments on the article, the fear of Big Brother is still alive and well.

Vehicle-to-infrastructure (V2I) communications have been in development for many years, and a wide range of wireless technologies have been evaluated, including Bluetooth, Wi-Fi, and cellular.  Dedicated short range communications is the favored technology for safety systems where immediate connection is required, but setting up such an infrastructure is proving to be prohibitively expensive.  Cellular networks also require costly towers to be erected.  The idea of using low-cost transmitters that can use spare capacity in the spectrum is to be applauded.

Talk to the Car

The planned test will simply demonstrate if this idea is practical, and it won’t involve taking control of anyone’s car.  It will mirror similar efforts in the United States that have been underway for more than a year.  The challenge right now is to test the potential for V2I to handle large quantities of data and to deliver useful information.  If congestion is detected, the same wireless medium can be used to send information back to the vehicles to advise alternative routes or, perhaps, set advisory speed limits, which are currently used on some motorways in the United Kingdom to smooth out the traffic flow.

In the future, when autonomous driving is widespread, such V2I systems will be able to communicate directly with the car rather than the driver.  At that point, driving will already be smoother and faster, thanks to automated systems that I described last month.


Federal Shutdown Cripples Energy Efforts

— October 11, 2013

This morning, visitors to the U.S. Energy Information Administration website were met with a banner stating that the “EIA is closed due to a lapse in appropriations.  EIA will not update its website until the agency reopens.”  Among many closures and furloughs, this one is particularly pertinent to participants in the energy industry.  Without critical EIA reports, such as the “Monthly Energy Review,” and weekly updates, such as the “Natural Gas Storage Report” and “Gasoline and Diesel Fuel Updates,” stakeholders in energy industries lose access to free information and industry standards that guide daily decision-making.

A number of outlets have published information on the reaching effects that the government shutdown has, will, and could have on the energy industry in the United States (and abroad due to mutual dependencies on resources and information).  Here, I’ve consolidated some of these stories in order to offer a more complete view of what has been (or more appropriately, has not been) going on.

The New York Times, “Shutdown Is Affecting Energy and Environmental Programs” – Highlights furloughs at major institutions such as the EPA (grants, clean air enforcement), the Nuclear Regulatory Commission, and the Interior Department (affecting offshore oil and wind projects).

Christian Science Monitor, “In Government Shutdown, who keeps the lights on?” – Discusses effects on reliability and security of the electric grid should the Department of Energy and the Federal Energy Regulatory Commission remain closed.

The Wilderness Society website, “Government Shutdown Hurting and Stalling Renewable Energy” – Ties the furlough of employees from the Bureau of Land Management and Fish and Wildlife Service (both under the Department of the Interior) to a stall in permitting for renewable energy projects on public lands.  These projects are a large part of President Barack Obama’s second-term plan to tackle climate change.

C.H. Robinson’s Transportfolio blog, “Government Shutdown and the Energy Information Agency” – Discusses the effects on the transportation industry with the loss of the EPA’s weekly bulletin board information on fossil fuel supply, demand, and prices.

The Desert Sun, “Shutdown Delays Desert Renewable Energy Conservation Plan” – Covers the hold on the Desert Renewable Energy Conservation Plan that balances construction of renewable energy facilities with environmental protection for sensitive environments in Southern California.

Renewable Energy World, “Government Shutdown Damages U.S.  Energy Innovation” – Offers a slightly more specific list of renewable projects that are on hold for permitting during the shutdown.

It is clear that renewables and clean energy projects that require permitting, funding, or both from non-essential government organizations are taking the biggest hit.  Many of these projects have already been stalled due to other regulatory hold ups, and a lot of them are far behind schedule, leaving states and regions highly susceptible to shortcomings in meeting energy efficiency targets during the next few years.  This generally means heavy fines or revisions of targets to lower standards for the amount of renewable energy required — putting the climate-change goals staked out by Obama even further out of reach.


For Utilities, a Dark and Darwinian Outlook

— October 11, 2013

The participants in a panel this week put on by the California Public Utilities Commission and En Banc, “The Business Model for the Electric Utility of the Future,” might have been mistaken for a bunch of aristocrats at a tribunal during the French Revolution.

The panelists included the top executives from California’s leading investor-owned utilities, including Southern California Edison, Pacific Gas and Electric Company, San Diego Gas & Electric, and Southern California Gas Company, and while the guillotine is unlikely to be in their immediate future, they are faced with an uncertain strategic future and a market landscape that is transforming far more rapidly than they, or most of their regulators and customers, grasped even a year ago.

That uncomfortable truth was underlined by this week’s release of a report entitled Energy Darwinism, produced by a star chamber of analysts and managing directors from the energy practice at investment bank Citi.  Its conclusions are stark: “A combination of energy efficiency and competition from new technologies … collectively could impact [utilities’] addressable markets by 50% over the next two decades.”  That’s right, one of the world’s major investment banks believe that the business of conventional power utilities could be cut in half by 2033.

Panic Attack

“Consumers face economically viable choices and alternatives in the coming years which were not foreseen 5 years ago,” according to the report, and the pace of change is likely to accelerate.  “Investors, companies and governments must consider the sea change that we believe is only just beginning.”

To be sure, today’s utilities have established customer bases and billions in infrastructure that could enable them to weather the coming storm: “There are opportunities for new avenues for investment and growth in terms of smart grid, storage, and downstream services,” the Citi authors maintain.  “The question is whether utilities grasp that opportunity and evolve themselves.”

Unfortunately, the evidence to date is discouraging.  As you might expect from an industry with a business model that has changed little in a century, utilities are mostly fighting a rearguard action to delay change, not adapting to capitalize on it.  A July feature in The New York Times described how “in almost panicked tones, [utilities] are fighting hard to slow the spread” of distributed renewable generation and the market mechanisms, in particular net metering, that are enabling it.  Standing athwart history and shouting “Halt!” is seldom a winning strategy in today’s globalized, technology-driven economy.

“We did not get in front of this disruption,” Clark Gellings, a fellow at the Electric Power Research Institute, told the audience at a panel discussion at the annual meeting of the Edison Electric Institute in June.  “It may be too late.”

Surf or Drown

Actually, it’s not.  Utility revenue streams are likely to decline gradually, not suddenly, and the big utilities’ unique capabilities (well-described in a recent blog by my colleague Bob Lockhart) give them the opportunity to become the service providers, architects, and delivery mechanisms for all of the new forms of energy transmission and generation, from rooftop solar panels to microgrids to virtual power plants.  Some utilities are trying to surf the waves of innovation and disruption rather than be swamped by them.

The municipal utilities in Los Angeles and Glendale, California have adopted decoupling mechanisms that should allow them to make money even as customers adopt energy efficiency measures and rooftop solar.  A group of utilities that includes Duke Energy and Edison International have backed Clean Power Finance, a San Francisco-based startup that offers financial services and software to providers of rooftop solar.  San Diego Gas & Electric has become a pioneer in the establishment and support of microgrids in its service area.

“But those are exceptions,” notes New York Times energy reporter Diane Cardwell.  And they are not nearly enough.


For EV Makers, Selling Cars Is Just the Start

— October 11, 2013

Automakers put thinking outside the chassis at the top of their agendas for the Plug-In 2013 conference, held in early October in San Diego, California.  Because of the lack of moving electric vehicle parts that need routine maintenance or replacement (there are no belts to replace or oil changes required and fewer brake pad changes), the entities formerly known as car companies are developing alternative revenue streams beyond selling cars, and grid services were a hot topic of discussion at this year’s annual electric vehicle (EV) confab.

General Motors’ OnStar subsidiary, which focuses on vehicle communications and safety services, is laying the foundation for multiple services that support the power grid.  OnStar’s data centers will track vehicle locations and charging so that the company can participate in demand response (DR) programs, in which power consumers volunteer to reduce power consumption during time of peak power demand.  While some fleets may incorporate their EVs into their own DR programs, OnStar believes it can get a slice of the more than $700 million DR pie by slowing down or stopping the charging of the Chevrolet Volts and Spark EVs (with customer approval, of course).  How EV drivers will be compensated by OnStar is as yet undetermined, but OnStar as an energy aggregator middleman, which in the future could include grid regulation services, is a new twist for the telematics company.  OnStar has a cloud platform for analyzing vehicle data (Advanced Telematics Operating System, or ATOMS), and has been working with partners to study using EVs to offset variable renewable power production.

Right Size, Right Stuff

General Motors and Chrysler are playing leading roles, as part of the Society of Automotive Engineers (SAE), in  developing the communications standards to enable EVs to help out the grid.  Both companies will adopt the OpenADR (automated demand response) standard.  Utilities will send signals to the automakers, which will determine which vehicles are available for DR and pass the request to the charging equipment or to the vehicles through telematics systems.  This will expand automakers’ relationships with motorists and utilities, and could provide a reliable stream of revenue from vehicles post-sale.

Other Plug-In developments:

  • Billy Hayes, vice president of Nissan, told attendees that the company will different-size its EVs by offering a modified version of the Renault Twizy in the United States and Japan in the near future.  EVs are great for Nissan because the company draws converts into its dealerships – 90% of LEAF buyers had last purchased a car from a competitor.
  • BMW has added carsharing to it services.  The DriveNow program now includes more than 100,000 members in its five cities (San Francisco, plus four cities in Germany).  BMW’s Rich Steinberg said that the extended-range version of the i3, which includes a small gas engine, will be added to its carsharing fleet.  Carsharing, whether with EVs or gasoline cars, is another avenue that automakers, including Daimler, are using to diversify revenue streams.
  • Ford, which continues to offer home energy services so that Ford owners can manage their energy consumption, touted its diversified offerings.  Tesla Motors, which prides itself in going it alone, was a no-show.

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