Navigant Research Blog

Pike Research and Navigant: The Road Ahead

— July 12, 2012

At this point, many of you have probably seen the news that Pike Research has joined Navigant to offer a strong combination of market research and consulting services for the global energy and clean technology industries.  The Pike Research team is very excited about this combination as we see an extraordinary opportunity to enhance and expand Pike Research’s market intelligence services in the energy and utility world while leveraging the strength and depth of Navigant’s consulting expertise during a period of dramatic transformation and change for all industry players.

Since Pike Research was founded in early 2009, our team has have explored a wide diversity of cleantech industry topics, authoring hundreds of research reports and custom research deliverables for our clients.  The team has published more than 900 blog posts, issued more than 400 press releases, presented at scores of industry conferences, and has been being cited in the media countless thousands of times.  But despite all this research activity, amidst which Pike Research has been recognized as a strong global leader in cleantech market analysis, the journey was really just beginning.  Now, we look forward to the next chapter – providing in-depth market intelligence on an expanded set of critical industry topics as a part of Navigant.

The Pike Research and Navigant teams have worked together closely to identify strategic opportunities for expanded research offerings, particularly by leveraging the broader Energy Practice’s knowledge and expertise in numerous industry sectors.  Going forward, you can expect to see research diving deeper into several key areas that are strong cornerstones of Navigant’s energy industry expertise:

  • Customer engagement
  • Demand side management
  • Emerging technologies
  • Energy certification programs
  • Energy efficiency
  • Energy research & development
  • Military and defense markets
  • Natural gas markets
  • Power generation
  • Power transmission
  • Renewable energy
  • Wholesale electricity markets

In addition, we anticipate continuing to deepen our research activities focused on several key industry stakeholder groups:

  • Electric, gas, and water utilities
  • Energy service companies
  • Gas distribution and pipeline companies
  • Government agencies
  • Independent power producers
  • Project developers

Naturally, during this process of evolution and expansion, we will continue to focus on emerging cleantech markets in our core practice areas: Smart Energy, Smart Grid, Smart Transportation, Smart Industry, and Smart Buildings.  And our strong existing client relationships will continue to be a top priority – even as we expand our reach into new market segments.

The road ahead is an exciting one, and we look forward to continuing to work with all of you as we aim to provide the world’s highest quality, most insightful and valuable market intelligence focused on global cleantech and energy sectors.  As always, we welcome all of your feedback, input, and ideas on the most worthwhile areas for our analysts to research, in addition to any ways that we can better serve our clients and industry stakeholders.


Betting Against Elon Musk

— July 9, 2012

The excitement surrounding Tesla Motors has once again spiked.  The delivery of the production Model S’s (Model Esses? Models S?) has begun – a milestone that many thought questionable.  Telsa Motors has pushed many in the traditional automotive world to reconsider Tesla’s future, as evidenced by significant investments from Toyota and Daimler and the surprisingly buoyant stock price.  Tesla has the well-deserved spotlight, and is gaining momentum.

All this gives further bravado to the deservedly proud Tesla founder Elon Musk, who never shies away from the media’s microphone.  During the Model S delivery event on June 22, Musk proclaimed: “In 20 years more than half of new cars manufactured will be fully electric,” Musk said. “I feel actually quite safe in that bet. That’s a bet I will put money on. … It’s probably going to be in the 12- to 15-year time frame”.  Well, Mr. Musk, I’ll take that bet (though admittedly, my cash reserves will likely dictate a smaller bet than you might be thinking).

Our most recent report on plug-in electric vehicles (PEVs) has the market for battery electric vehicles growing at a very rapid pace (32% compound annual growth rate between this year and 2020).  This pace of growth is likely unsustainable as the market becomes increasingly mature, but let’s for the sake of argument assume that this remains unchanged through 2032 (20 years from now).  This would put the BEV market at about one-third (5.0 million) of the total market in 2032.  But 32% growth for 20 years?  That’s pretty unrealistic.

Let’s assume the average growth is still a strong 10% (what automaker wouldn’t love 10% growth every year for the next 20 years?).  At 10% growth, the market for BEVs would be about 574,000 vehicles in 2032.  However, our forecast for the growth rate between 2019 and 2020 is 8%, which would translate into 480,000 vehicles when extrapolated out to 2032.  Even if the current vehicle market has seen its peak and is now on a downward slide, a one to two million vehicle market by 2032?  This also seems unrealistic.

Annual BEV Light Duty Consumer Vehicle Sales Forecasts, United States: 2012-2032

(Source: Pike Research)

Finally, for purposes of comparison, hybrids have been sold in the U.S. since 1999.  The hybrid market share 12 years later (2011) is 2.1%, or 268,807 vehicles.  Granted hybrids and BEVs are different animals with different lifetime costs and limitations, but one would expect that if BEVs will reach 50% market share in the next 15 years, hybrids would at a minimum have broken the 5% mark (they haven’t).

What would it take for Musk to be correct?  I would speculate that the U.S. market would have to see the confluence of three forces sometime early next decade:  First, automakers will have to diversify their product offerings rapidly, particularly into pickup trucks (which are 14% of the total vehicle market) and SUVs (which are on the way), increasing the appeal of BEVs in middle America and smaller cities.  Second, we would likely have to see an oil shock that makes any gasoline fueled vehicles extremely expensive to operate (gas prices reaching perhaps $8 to $10/gallon in current dollars).  Finally, battery recharging will have to have less impact on consumers, including higher powered wireless charging, improved DC fast charge times, and even fuel cell range extenders (on their way in the next decade).

While clearly some of these market forces are coming and we are seeing wider proliferation of BEVs, I think it’s a safe bet that we won’t hit that 50% market share by 2032, let alone by the middle of the next decade.  But I would be very interested to get some more details on why he’s so optimistic (and hopefully it’s for reasons other than pandering to shareholders).


Building a Foundation for the Next Phase of Smart Grid Deployments

— July 9, 2012

In June PennEnergy announced that the Cisco Connected Grid Field Area Network (FAN) solution won top honors at the Utilities Telecom Council 2012 conference in the Smart Grid/Smart Meter Product & Services category.  According to Cisco, the solution is the first multiservice communications infrastructure for utility field area networks.  Using a common network platform, it can deliver advanced metering infrastructure (AMI), distribution automation (DA), and protection and control applications.

Why is this more than just an industry pat on the back?

Thought leaders focused on grid modernization have been talking about the importance of interoperability for years, and for just as long, standards bodies have been working to drive progress.  The concept is simple: As every architectural engineer knows, without a solid foundation, most structures will eventually collapse.  And as every utility stakeholder knows, no single vendor can deliver everything to the enterprise; mixed vendor environments are virtually assured, and without true interoperability the risk of stranding investments is high.  Interoperability defines the foundation upon which the smart grid must stand, avoiding rapid obsolescence of grid components, driving down costs, and providing the ability to securely leverage technological advances.

Itron and Cisco have been working since 2010 on a delivering a secure, scalable, open, interoperable architecture that can support the monitoring and control of distribution networks.  Itron announced earlier this year that it has brought this system to market with a deployment at BC Hydro, marking a move away from purpose-built systems in utility environments.  If the project is successful, BC Hydro will be able to drive down operational expenses and achieve a long-standing industry goal – a true plug-and-play smart grid.  BC Hydro is anticipating that it will be able to save customers $1.6 billion over the next 20 years, having a flexible system that can evolve with new utility applications.

Cisco’s award at UTC 2012 serves as a valuable reminder for smart grid vendors and implementers: Standards and interoperable systems delivered on open standards are still fundamentally important to the vision of the utility grid.  And it’s just getting started.  Industry partnerships that focus on the functional integration of applications that support the more efficient use of energy from the power plant to the customer, like the one between Cisco and Itron, are the key to moving beyond frameworks to reality.


In Midwest Heat Wave, a Red Alert

— July 6, 2012

July 5 was another scorching hot day in the midwestern United States.  Although I can empathize with our central states – Washington, D.C. has been experiencing temperatures over 100 degrees for several weeks, typical for this time of year – I suspect it’s more difficult to cope with weather that’s unseasonably warm.  Hot days like these provide insight into the resilience (or fragility) of a grid system.  Midwest ISO (MISO, the grid operator for several  Midwest states) provides a map of the Locational Marginal Pricing in its service territory.  In the afternoon of July 5, the map changed a great deal from hour to hour.

Around mid-day on Thursday, the map went red.  This indicates that the marginal price for a megawatt-hour (MWh) of energy is above $1,000.  Only an hour later, prices dropped significantly.  Some areas actually experienced a negative marginal price. The fact that the LMP was negative is not in itself remarkable; this happens whenever there is congestion on a node and MISO uses negative pricing to rein in a bottleneck.  Typical LMP prices range from $50 to $75 for 1 MWh during peak hours in the summer.  In this case, not only was the sharp increase in the marginal price alarming, but so was the volatilty on the system.  Grid operators work hard to avoid volatility in order to provide secure, reliable, and cost-effective energy via transparent markets.  In this case, the market came as close to failing as we are likely to see.

In order to cope with the tremendous imbalance on the system, MISO issued a maximum generation warning, instructing that from 2 p.m. to 8 p.m. Central time any extra generation capacity that had been withheld should be released.  This includes generation from nearby ISOs like PJM Interconnection and NY Independent System Operator, in addition to any additional generation on the MISO footprint.  Essentially, the grid operator was required to call on very expensive resources to meet the grid demands—at wildly inefficient prices.

Locational Marginal Pricing Map, July 5, 2012, 2:05 pm

Locational Marginal Pricing Map, July 5, 2012, 3:05 pm

There are obvious lessons here for energy storage providers.  For the right price, energy storage systems or energy storage services (in the vein of what AES Energy Storage provides) could serve very well as insurance policies against this sort of event.  It’s important to keep in mind, however, that these events are exceptional, not typical, and that MISO rescinded the maximum generation warning early.   MISO has not released any details on what caused the incident.

Alex Lauderbaugh contributed to this report.


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