Navigant Research Blog

For Utilities, New Technology Brings Promise and Pain

— January 15, 2014

The double-edged sword of technology is on full view in the electric utility industry today.  Conservation voltage reduction (CVR) and demand response (DR) programs are helping utilities reduce load and adapt to the effects of distributed generation (DG) on the grid – but what about replacing the revenue “lost” through DG?  Distribution automation (DA) can improve reliability and reduce outage times, but it also comes at a price.  The need for resiliency in the face of increasingly severe storms is adding further stresses to utility industry bottom lines.  Meanwhile, big data is both exciting in its potential and intimidating in its volume.  “May you live in interesting times” is often called a Chinese curse, and indeed, these are interesting times.

A glance at the jam-packed program for the electric utility industry confab DistribuTECH, to be held in San Antonio from January 28 through the 30, highlights just how critical new technology is to the industry.  The presence of exhibitors like Verizon, AT&T, Oracle, Accenture, and Waterfall Security Solutions, to name just a few, demonstrate just how important new communications, information technology, and cyber security have become.  Transmission and distribution may be the nuts and bolts, but the other smart grid technologies are clearly top of mind for utility executives.

Progress and Possibility

The show boasts 15 tracks and 74 panel discussions, as well as 5 mega sessions, including “Lessons Learned From Superstorm Sandy,” “Chapter 2:  What Happens to Smart Grid Initiatives After DOE Funding,” and “A Global Look at Smart Grid’s Progress and Future.”

More than 9,500 attendees participated in DistribuTECH 2013, held in San Diego last January, up 15% from the year before.  This year more than 400 companies will be exhibiting their products and services.  In conjunction with the conference, Utility University will offer in-depth courses for utility execs on topics ranging from communications and customer strategies to system integration and standards.

International buyers will also be on hand; DistribuTECH organizer Pennwell Corporation announced last July that the trade show is one of 26 selected to participate in the U.S. Department of Commerce’s 2014 International Buyer Program (IBP).  The show will feature an International Trade Center onsite where foreign buyers can meet and negotiate with sellers, obtain assistance identifying potential business partners, and efficiently navigate the exhibition floor.

Six Navigant Research analysts from the Smart Utility program will be at DistribuTECH this year:  myself (, Kris Torvik (, Neil Strother (, Jim McCray (, Brett Feldman (, and Lauren Callaway (  Feel free to reach out to our Smart Utility team to arrange for briefings; see you in San Antonio!


With Nest Buy, Google Reaches Deeper into Homes

— January 14, 2014

Google’s $3.2 billion acquisition of Nest Labs, maker of smart thermostats and smoke alarms (which I’ve written about previously), is an obvious move by the search giant to reach further into the home with Internet-connected gadgets that tie users to Google services beyond search and other online activities.  It is an Internet of Things (IoT) play, with safety (smoke alarm-carbon monoxide detector) and home energy management (thermostat) as the starting points.  (For a deeper dive into this market, see Navigant Research’s report, Home Energy Management).  And while this deal seems like a great match, there are risks and issues that need to be resolved.

The positives for both companies are clear.  The big cash infusion should give Nest the needed money to pay for expanded marketing efforts, move strategically into new markets outside North America, and hire talented engineers to continue developing disruptive products.  For Google, the company gets a big win on product design.  Nest devices have great design features, which are a testament to the capabilities of founders Tony Fadell and Matt Rogers, both of whom worked at Apple before starting Nest (and who will presumably become quite wealthy thanks to the deal with Google).  Nest has quickly established itself as the standard among connected thermostats, with distribution online, among retailers, and through some utilities.

Price and Privacy

One of the issues with Nest devices, however, is price, especially among mainstream consumers.  The Nest thermostat sells for $249, much more than typical thermostats, and the Protect smoke alarm retails for $129, again higher than prevailing products.  The Nest devices offer more than standard products, but getting past early adopters on price will now become a Google challenge.

Beyond price, installations don’t always go smoothly, and can require the buyer to hire a professional installer, which can add $200 or more to the purchase cost.  Also, a Nest thermostat software update in December 2013 caused some of the devices to go dark when it mattered most, as temperatures plummeted in the Northeast (as noted by my friend and former PC Magazine editor-in-chief Michael Miller).

There are also concerns about how Google will handle the user data supplied via Nest devices.  On January 9, France’s data protection watchdog, known as CNIL,  fined Google the maximum €150,000 ($205,000) for ignoring a three-month requirement to comply with local law regarding the tracking and storing of user information.  Similarly, Google’s previous foray into home energy management did not go so well.  The Google PowerMeter project, a free energy-monitoring tool, shut down in September 2011.  Nest brings real traction to Google in the HEM space, but could increase consumers’ wariness over privacy concerns.

I spoke with Matt Rogers last week while at CES, and he was clearly excited about Nest’s future.  Now, it’s clear why: He knew that future funding was not going to be a problem.  It helps to be acquired by the world’s second most valuable brand, but Google-Nest still faces some serious challenges, which rivals like Honeywell, among others, will be looking to exploit.


2014 Will Be a Memorable Year for Cleantech

— January 13, 2014

Is January 13 too early to call 2014 a year to remember?

We have recently published our fifth annual white paper, Smart Utilities: 10 Trends to Watch in 2014 and Beyond.  The free white paper, more than past editions, details the massive transformations facing utilities and their business models.  Things are just so different now!

Navigant Research offers another peek into the future with our webinar, The Year Ahead in Cleantech, on Tuesday, January 14 at 2 p.m. Eastern Standard Time.  I have dramatically titled the Smart Utilities section of the webinar, Everything You Know is Wrong.  Perhaps that’s overly dramatic, but so much is changing, it’s not far off.  Key trends that will be discussed include:

  • Distributed generation begins to rock utilities’ world: Utility business model are likely to change, perhaps dramatically, as they suffer the one-two punch of reduced energy revenue and increased payouts to distributed generators
  • Solar power generation’s impact on distribution grids will be enormous: Some governments have aggressively supported residential solar generation while others have not -  What happens in either case?
  • New grid-balancing technologies that deal with distributed inputs can make granular, automated decisions that enable utilities to run grids more efficiently while remaining within mandated voltage ranges
  • Energy efficiency may happen in our lifetimes: We have detected signs of life in the home energy market during 2013, with some encouraging pilot programs that may foretell new life for HEM, the forever stepchild of cleantech
  • Utilities are changing their view of the smart grid: We observed some interesting behavior changes during 2013, among both utilities and the vendors that sell to them
  • Smart grid applications continue their rise: Navigant Research has recently completed an examination of Smart Grid IT, and this seminar will discuss some of the leading applications

These topics and more are examined in the white paper.  Many of these issues are by no means resolved, nor is there any clear path to resolution.  But the time to start thinking about these issues, and how they will affect your business, is now.

For more, join us for The Year Ahead in Cleantech, which will also feature discussions on Smart Transportation and Smart Energy.  Click here to register.


Is the BMW i3 Really in Trouble in California Already?

— January 9, 2014

An article from, an advice and news website for equity investors, has declared that just as the i3 is launching, a “critical BMW selling point has been removed, resulting in a huge victory for Tesla as well as BMW’s other competitors.”  The BMW i3 comes in two variations: a battery electric version and a range extended version (called the i3 REx).  The reporter, Anton Wahlman, observes that the BMW i3 REx will not qualify for a white carpool lane sticker in California.  That’s perceived by Wahlman to be a huge disadvantage for BMW.  Is it really?

First, a little primer on California carpool lane stickers is needed here.  There are two carpool lane stickers available in California.  White HOV access stickers are reserved for vehicles that meet federal Inherently Low Emissions Vehicle (ILEV) standards and green HOV access stickers are reserved for qualifying Advanced Technology Partial Zero Emission Vehicles (AT PZEVs).  The California Air Resources Board (CARB) maintains a list of vehicles that qualify for these designations.  (As an aside, the still well-recognized yellow HOV access stickers adorning the back of many a Toyota Prius in California have now sunset and are no longer available.)

Wahlman reports that BMW was working “with California’s regulatory bureaucrats to create a new class of car” that would qualify the i3 REx for a white sticker.  However, in conversations with CARB, I’ve learned that this is not necessarily the case.  The Street is likely referring to the regulatory category Range Extended Battery Electric Vehicle (BEVx) that was added in January 2012.  Regardless of whether in regulatory vernacular the vehicle is a BEVx or not, in order to qualify for a white sticker the vehicle has to qualify for the federal ILEV certification.  CARB told me that BMW has worked with them over the last couple years on several different iterations of the i3 REx prior to launch and it wasn’t clear whether the vehicle would qualify for the ILEV certification.  However, the bottom line is that, in its current form, the REx does not qualify for the ILEV certification and, therefore, does not qualify for the white sticker (the i3 without the range extender, however, does qualify for the white sticker because it is all electric without emissions).

Wahlman does correctly point out that there is a limit of 40,000 green stickers available, and the CARB website indicates that “as of November 8, 2013, 24,452 ‘green’ stickers have been issued.”  When these will run out is a pretty good question, though at the pace that Chevrolet Volts and Prius Plug-ins (both of which qualify for green stickers) have been selling in California, it’s a safe bet that they won’t be available this time next year.

So, is the BMW i3 dead on arrival in California, as The Street would have one believe?  Far from it.  First of all, the question really comes down to this: What will be the take rate of the i3 REx versus the i3 all electric version?  Wahlman claims that the i3 REx is “likely what most prospective BMW i3 customers wanted,” but I’m not sure how he came to that conclusion.  In fact, I suspect the all-electric version will outsell the REx in California, regardless of HOV access – in part, because the performance of REx hasn’t been getting the same rave reviews as the all-electric version, but also because it’s almost $4,000 higher in price.

Then, there is the question of whether this is coup for Tesla.  Competitively speaking, the i3 with the range extender is still almost $25,000 less than a Model S, and the two cars have significantly different body styles.  Are they competitors?  To some degree, yes, because the EV market is still small.  But in the increasingly mature market, they are likely competing in the same way a BMW 328 Grand Turismo competes with a Mercedes E-Class.  The small i3 hatchback will be a fit for some lifestyles (and wallets), while others will need the larger Model S.  While BMW may have been hoping for white stickers for the i3 REx, this hardly qualifies as a major setback for BMW – and it’s probably something they knew was coming.


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