Navigant Research Blog

As A123 Fails, Overcapacity Remains in Battery Market

— October 17, 2012

For those in the cleantech industry, the news that lithium ion battery manufacturer A123 has declared bankruptcy was disappointing, but hardly surprising.  A123 has been in a tailspin for the last 9 months or so.  Innovation in battery technology and the growth of the plug-in electric vehicle (PEV) market literally couldn’t come fast enough for A123.

In essence, A123’s narrow customer base and its failure to grab one of the few available high-volume battery contracts in the transportation market, combined with an expensive recall, drove it to bankruptcy.  The company’s largest program, Fisker’s Karma battery, has proven to be a money loser for A123 because of manufacturing defects that resulted in a recall, which cost the company $55 million (the total Fisker contract generated about $42 million in revenue for A123 in 2011).  A123 produced batteries for a handful of other automotive manufacturers, including BMW hybrids and Smith Electric Vehicles, but these were both very small contracts, and Smith has some financial issues of their own.

The battery market has an overcapacity of production for current demand, particularly in transportation.  The total estimated transportation market is expected to consume just under 1 megawatt-hour (MWh) of battery capacity in North America this year, and nearly 3 MWh globally.  The stationary energy storage market is expected to reach 33.6 MW.  A123’s battery cell production capacity in the United States is 360 MWh.  A123’s largest domestic competitors, Johnson Controls (JCI) and LG Chem, both have capacity that is similar in size or slightly larger.  These plants are all dramatically underutilized.

In a proposed deal, JCI would purchase A123’s automotive business, including the manufacturing facilities.  On the face of it, this makes sense because JCI is a large automotive supplier working to develop prismatic Li-ion cells, which A123 has already launched.  Additionally, A123’s newest product, the Nanophosphate EXT Li-ion, is specifically targeted at the stop-start vehicle market, an area of strength for JCI’s advanced lead-acid products.  This move would give JCI a jump on their prismatic development.  However, it does not solve the underlying problem – too much capacity chasing, too little demand.  How JCI will fill this new combined capacity is not immediately clear.  I suspect JCI’s interest in A123’s transportation products is mostly driven by the acquisition of technology, clients, and perhaps some of A123’s cell component manufacturing.  In my opinion, JCI would likely need to do some consolidation of its own, including closing one of the two Li-ion plants it would own.


The Fuel Cell Seminar 2012 – A Personal Agenda

— October 17, 2012

This year’s Fuel Cell Seminar, to be held at the Mohegan Sun in Connecticut on November 5-8, will be interesting.  And not just for the adventure of trying to get to the Mohegan Sun from the United Kingdom.  The fuel cell industry is starting to kick into a real growth curve, with an 83% compound annual growth rate (CAGR) between 2009 and the end of 2011 in units shipped.  This translates into a cumulative 242 megawatts (MW) of all types of fuel cells shipped over the same period.  This also means we are now on the tipping point from a tiny niche market to a potential commercial industry.  But right now that tipping point is more of a precipice, with a skinny rope bridge across the chasm to the mass market.

How thick that rope bridge is depends on the companies themselves, and on events such as the Seminar that help us assess the likelihood of a successful crossing.  As the Seminar has many parallel tracks, it’s important to plan in advance which ones to attend.  Apart from the plenary sessions, which just about everyone goes to, the presentation titles that stick out are the ones that imply more than a company marketing pitch.  U.S. national lab presentations are usually very data-heavy, thanks to multi-year funding from the U.S. Department of Energy (DOE), but realistic? That’s another question.

My personal highlight list from the seminar program and abstracts includes:

“Application of High Efficiency Electrolysis to Provide Grid Stabilization for High Penetration of Renewable Power Sources”: Problem and potential solution in one title.  Yes please.

“Microbial Fuel Cells with Anti-Fouling Conductive Cathode Supports for Stationary Underwater Power Sources”: Underwater stationary fuel cells! With a title like that, who could miss it?

“Cost-Effective and Durable Membrane Electrode Assembly for Automotive Applications”: The supply chain is critical.

“High Pressure Hydrogen from Renewable Energy Sources: Production and Use”: Hot, hot topic

“Portable Power – Where We Are and Where We Are Going”: It will be interesting to see if the DOE has the same data and impressions as we do on the portable power market.

I’ll provide post-Seminar highlights in a blog after the event.  So for everyone trying to find the Mohegan Sun, good luck and safe travels.  See you there – and, by the way, my presentation is in the Stationary Fuel Cell Track, but it covers all applications.


Continuous Commissioning will Transform Energy Efficient Buildings

— October 17, 2012

Today, few buildings meet their energy efficiency and operational potential. High performance buildings such as those certified under LEED generally achieve high levels of efficiency not only at the point of design but also in the first years of operation.  These buildings, though, represent only a small fraction of the total building stock worldwide.  What’s more, efficient performance is guaranteed only in the first few years of operation, allowing buildings to drift outside their ideal energy and operational parameters over time as building use changes and systems degrade.

Today, the common approach to guaranteeing operational efficiency in buildings is through commissioning, or the systematic process of assuring that operational performance meets the builders’ intentions.  This approach is applied only at specified points in a building’s lifecycle, leaving long periods in between during which many systems operate unchecked and fall short of the high performance levels at which the buildings were initially designed to operate, often at considerable cost to the building owners.

In the last few years, the advent of building energy management systems (BEMS) has generated considerable talk of using continuous energy monitoring systems to ensure persistent high performance in buildings.  Applications such as fault detection and diagnostics (FDD) tie into a building’s automation systems and compare ongoing data to predicted performance metrics and alert managers when buildings operate outside their intended parameters.  Many believe that the type of ongoing visibility that an advanced BEMS provides will offer an opportunity to maintain buildings at their operational best, as shown in the diagram below.

Recommissioning versus Continuous Commissioning

(Source: Pike Research)

Such systems have been anticipated for years, and many BEMS developers already offer software platforms with continuous commissioning capabilities.  From a practical standpoint, however, continuous commissioning faces a number of hurdles that will slow its adoption in the near term.  For one thing, intelligent controls and sensors are hardly ubiquitous in buildings today.  Direct digital controls (DDC) represent the foundation of any continuous commissioning system, but adoption of DDC is patchy at best across the building stock, so many building owners or enterprises interested in continuous commissioning may be constrained by a lack of smart buildings under their control.

What’s more, given the relatively low priority of energy among many top-level corporate decision-makers as well as their lack of familiarity with BEMS, many potential BEMS customers today are opting for light (and, hence, less capital-intensive) solutions that exclude many of the deeper capabilities that market leading BEMS platforms offer today.  Continuous commissioning could be described as a premium feature rather than a must-have energy visualization and analytics capability, and it’s often passed over in enterprise energy management installations.

Over time, however, these barriers will be addressed, and continuous commissioning will become more commonplace.  As it does, it will influence the growing market for building commissioning services: It will fundamentally transform the recommissioning process, a once-every-few-years approach to commissioning, into a continuous, software-enabled process.  It will also create a virtuous cycle for basic commissioning and maintenance services, as continuous commissioning will generate leads for equipment repair and service that would otherwise have gone undetected until a major equipment malfunction.


CHP, Solar PV Move Microgrids into the Mainstream

— October 16, 2012

Microgrids are really just miniature versions of the larger utility grid, except for one defining feature: when necessary, they can disconnect from the macrogrid and can continue to operate in what is known as “island mode.”  Because of this distinguishing feature, microgrids can offer a higher degree of reliability for facilities such as military bases, hospitals and data centers, which all have “mission critical” functions that need to continue to operate no matter what.

Along with enhancing reliability, microgrids serve another useful function: they can help the larger grid stay in balance.  As the world moves toward an energy system that looks more and more like the Internet, with two-way power flows thanks to growing reliance upon on-site sources of distributed generation (DG), this increasingly dynamic complexity requires new technology.  But some forms of DG – especially variable renewable resources such as solar or wind — create a greater need for smart grid solutions, such as microgrids.  For example, recent trends in declining prices for solar photovoltaic (PV) systems certainly increase the need for aggregation and optimization technologies.  Why? Distributed solar PV systems can create frequency, voltage, and other power-quality challenges to overall grid operations.

But how much solar PV will actually be deployed within microgrids over the next 6 years all around the world? This is one of the questions addressed in my latest report, Microgrid Enabling Technologies.

Anchor Resource

In order for a microgrid to continue operating in island mode, it has to include some form of on-site power generation.  Without DG, a microgrid could not exist, so these DG assets are the foundation of any such localized smart grid network.

The ideal anchor resource for any microgrid is actually combined heat and power (CHP); a total of 518 megawatts (MW) of CHP capacity that will be deployed in microgrids this year.  This technology leads all forms of microgrid DG deployments today and will continue to hold the edge by 2018 (with 1,897 MW, representing more than $7 billion in annual revenues)  Given that it is a base load electricity resource that also provides thermal energy, today’s microgrid CHP capacity is the largest of any DG option besides diesel generators.

The bulk of CHP installations are with grid-tied systems within institutional campus environments.  The current low cost of natural gas in North America translates into the ability for microgrids to provide lower cost energy services than the incumbent utility grid.  For example, the University of California San Diego microgrid is saving over $4 million annually thanks, in large part, to on-site combustion of natural gas.

Still, Pike Research believes that declining solar PV costs will be one of the largest drivers for microgrids worldwide, and in terms of numbers of new installations, solar PV will be the market leader.  (CHP will lead in terms of total capacity due to the relative scale of CHP systems compared to solar PV.)  With the price of solar PV reaching grid parity in key markets by 2014 and 2015, the variability of this DG resource will necessitate a greater reliance upon energy storage (as well as the networking function of microgrids).  All told, this microgrid solar PV market adds up to almost $2 billion globally by 2018.

Total Microgrid Distributed Generation Vendor Revenue, Average Scenario,
World Markets: 2012-2018

(Source: Pike Research)

If one also includes distributed wind and fuel cells in the overall microgrid DG mix, this segment of microgrid enabling technologies is, by far, the largest target of new investment: 3,978 MW of new generation capacity valued at more than $12.7 billion (see the chart above).


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