Navigant Research Blog

“Failed” PEVs Outpace Hybrid Launch

— April 4, 2012

The failure to reach the sales targets for the Chevrolet Volt and Nissan Leaf has led to considerable finger pointing about so-far disappointing attempts to mass market plug-in electric vehicles (PEVs).  PEVs have increasingly become fodder for politics as every misstep reinforces what opponents call their inevitable failure.

But the real problem was in the original lofty expectations for PEV penetration by both the auto makers and the government, which were unreachable given the cost of the vehicles.  As we’ve said all long, the government’s projection of 1 million PEVs on US roads by 2015 was too aggressive given the short timeframe to get new vehicles to market and the nascent state of the technology .  (You can listen to the reasons why in this recorded webinar.)

The automakers failed to consult their history and economics textbooks when projecting how many PEVs they could sell during the first few years of production.  Hybrid vehicles are the closest recent precursors of today’s PEVs, and they didn’t sell in close to the numbers that auto manufacturers hoped to achieve.

The below chart shows the actual sales figures for hybrid sales in the US from 2000 to 2006, compared with the actual sales of PEVs in 2011 and then Pike Research’s projected sales through 2017.  As we can see in the chart, during the first full year of US sales of the Toyota Prius and the Honda Insight 9,350 hybrids were sold, while PEV sales in 2011 were near double that.  When you consider that PEVs cost much more than a hybrid and require significant changes in consumer education and behavior (e.g.,understanding the charging of the vehicles), the PEV launch can be viewed as a relative success.  Lest we forget, the US light duty vehicle market was actually smaller in 2011 (13.7 million) than it was during the 2000s, which makes the PEV launch that much more impressive.

Pike Research forecasts that during their respective first seven years on the market, PEVs will outsell hybrids (in the corresponding years of their launch) every year, and by a whopping 90 percent in total units sold throughout the seven year period.  Despite a higher price tag (that must and will come down), PEVs have many advantage over the hybrids from more than a decade ago: Gasoline cost about half as much in the early 2000s as it does now, and it’s unlikely that we’ll ever see $1.30 gas again.  Thus, the potential for saving money by plugging-in is much greater than was switching to a hybrid during the previous decade.

  • The twin motivators of national energy security (for both military and economic reasons) and reducing global greenhouse gas emissions are much stronger now for governments around the globe.
  • The selection of vehicle models and number of automakers participating will be much greater for PEVs than it was for hybrids.
  • PEVs have the potential to benefit the grid by helping to offset the variability of renewable energy generation, and business models that pay for that benefit will evolve.

All of these reasons add up to PEVs successfully taking hold in the market, while not reaching the stratospheric sales originally envisioned.


Denmark Aims for 100% Renewables by 2050

— April 3, 2012

For such a small country, Denmark certainly knows how to do sustainable energy in a big way.  Late last month the Danish Parliament passed the most ambitious renewable energy goal in the world.  By 2050, the country’s entire economy will be powered by renewable energy.  Given Denmark’s reliance on variable wind power, in order to accomplish this goal the smart grid will need to play an increasing role in aggregating and optimizing the country’s energy resources.

Already, Denmark obtains more than 25% of its electricity from wind power.  Under the new commitment from the Danish government, 35% of the country’s energy will come from renewable sources by 2020, with roughly half of that coming from wind power.  It’s important to note that this 100% renewable goal applies to Denmark’s entire energy supply, not just electricity, and therefore also includes heating, all industrial activity, and transportation.

One could clearly argue that Denmark is in a unique position due to its compact size and community-owned wind, combined, heat & power (CHP) and district heating and cooling networks, which provide a cultural ecosystem of support for sustainable energy strategies and stakeholder buy-in.  (One rarely hears of any NIMBY protests against wind power here!) The goal of 100% renewable energy is also matched with specific policies (and funding) attached to specific wind projects both onshore and offshore.

The country will, by necessity, lead the way with smart grid aggregation and optimization networks such as microgrids and virtual power plants (VPPs).  In order to accommodate larger penetrations of renewable energy, the Transmission System Operator (TSO) is redesigning its market dispatch rules accordingly.  Under the current system, only accepts power bids from power producers of at least 10 megawatts (MW) in size, and load forecasts are updated every 15 minutes.  Under the proposed new real-time market being rolled out, there will be no size limit on scheduled resources, and prices will be updated every five minutes, opening up the door to distributed energy resources – including demand response — that can respond quickly to price signals.

The country has laid the foundation for this new aggressive renewable energy policy by moving forward with trend-setting smart grid renewables integration projects rivaled only by Germany in terms of scale and ambition (my next blog post will cover Siemens and VPPs.)  In 2011, – with significant help from Spirae, an innovative software/hardware provider based in Colorado – completed a cutting edge R&D project with major ramifications for renewables integration: a 65MW VPP, commonly referred to as the “Cell Controller Project.”  It consists of distributed wind and CHP units owned by farmers and village heating districts, and will be operated by

This successful R&D experiment set the stage for an even more cutting edge VVP project of similar size (67 MW) that involves PHEV and residential heat pumps, along with wind and CHP on the Island of Bornholm – the European Union’s smart grid-renewable energy smart grid showcase.  Residents there are already receiving bill credits when the grid operator uses the batteries in plug-in hybrid electric vehicles (PHEVs) as short-term storage to help firm up wind power.

Also known as the “Bright Green City” project, this Bornholm VPP is being developed with DONG Energy with a goal of obtaining 76% of its total electricity from renewables by 2025, with 90 MW of wind power is planned to be added to the existing 30 MW in current operation.   An additional 5 MW of distributed solar PV is also on the drawing boards for Bornholm.   PHEVs are a key part of this greening of local infrastructure effort, leading some observers to come up with a new acronym:  an Electric Vehicle VPP or EV-VPP.   In a partnership to be launched in 2012 with the EV battery provider Better Place, DONG Energy hopes to roll out this EV-VPP throughout Europe.


Demand Response & Efficiency: Why Can’t They Get Along?

— April 3, 2012

It seems only logical that demand response and energy efficiency should go hand-in-hand.  Both spring from concerns about energy usage and aim to accomplish the same outcome, i.e., energy reduction.  But reality doesn’t always follow logic.

Instead, often the two concepts are pursued by different departments and individuals within a utility.  What’s worse, the two organizations in some cases do not even speak to each other. Although demand response contributes to lower energy use, its main goal is not to achieve energy efficiency.  Rather, it aims to reduce the use of electricity on a temporary basis at a specific time (i.e., in times of peak demand, typically within hours or minutes) in order to balance the grid to avoid power shortages.  By contrast, the main objective of energy efficiency or conservation programs is to reduce electricity consumption on a long-term basis with the help of various energy efficiency measures.

Still, there is a strong interrelationship between demand response and energy efficiency.  In the residential sector, demand response is typically a standalone program that aims to achieve 1 kilowatt (kW) and perhaps up to 2.5 kW of energy reduction from the average household – sometimes through a smart thermostat or a load-control switch on an air-conditioning system.  This often requires incentives from the utility.  But when demand response is integrated with behavioral-based energy efficiency programs to raise customers’ awareness about energy conservation, interest in participating in demand response programs improves significantly.  According to Tendril, “When the ground is first seeded with behavioral-based efficiency programs that begin the energy awareness cycle of consumers – by delivering personalized, relevant information about energy use, the ability for them to set an energy savings goal and measure their progress towards that goal in an active learning environment – consumers can then opt in to more complicated energy management programs that include demand response.”

It is quite possible that the demand response and energy efficiency departments have more in common than they realize or are willing to admit.  Better-informed customers may be the link to integrate the two energy efficiency and demand response camps together.  By educating consumers about the benefits of participation and improving their access to detailed data about their energy use and performance, both groups will essentially seek to achieve the same goal – an educated, well-informed and motivated energy consumer.  Indeed, some utilities have already begun to take steps to bring the two initiatives closer together.  For example, industry sources tell me that some have recently appointed a director to head both the demand response and energy efficiency programs in order to coordinate efforts to benefit both and to leverage each other’s skills and know-how.  Instead of working at cross purposes, utilities should make every effort to create synergies between the two organizations so that they can truly work in unison to achieve new and improved energy efficiency and demand response behaviors.


AGA’s McCurdy on the Future of NGVs

— April 2, 2012

Last week, doing some reporting on the economic benefits of abundant, cheap natural gas from shale deposits in the United States, I spoke to Dave McCurdy, the president of the American Gas Association. A seven-term Democratic congressman from Oklahoma, McCurdy headed the Alliance of Automobile Manufacturers before joining the AGA in February, 2011.  His experience in Congress and in the two trade groups gives him a unique view on the spread of natural gas as a replacement fuel, particularly for transportation, so I asked him if the “100-year supply” of low-cost natural gas is driving growth in the natural-gas vehicle market.

“Absolutely,” McCurdy replied.  “It’s starting at the bottom of the pyramid, as a foundational part of the market, with heavy transport. Then it’s moving on to fleet vehicles, school buses, garbage trucks, FedEx vans – these kinds of commercial fleets are tailor made for natural gas.”

That accords with the findings of Pike Research’s 2011 report, Natural Gas Vehicles.  There are currently about 12.6 million natural gas vehicles (NGVs) in use worldwide, the majority of them in Latin America, the Middle East, and Africa.  Worldwide sales of natural gas vehicles are expected to grow rapidly over the next five years, to 3.2 million units annually by 2016 from 1.9 million in 2010, with three-quarters of the increase coming in corporate and government sales.  While senior analyst Dave Hurst foresees the lack of convenient refueling stations continuing to inhibit demand for consumer NGVs, McCurdy, not surprisingly, is more optimistic: “We’re now seeing major manufacturers directly building assembly-type production for engines.  They’re moving toward light duty trucks, and we’ll see a number of autos in the not too distant future.”

AGA’s utility members, McCurdy told me, are making investments to build refueling stations and “fill that infrastructure need,” first along interstate highways, then around commercial fleet routes.

“I was at the Tampa airport the other day, and they’ve opened a natural gas fueling facility. The average price of gasoline is about $3.85 a gallon, and the gallon of gas equivalent in natural gas was less than a dollar. The market is riding that difference.”

The debate over whether cheap domestic natural gas will be the economic panacea its supporters predict is unsettled, and the AGA is, naturally, a biased source.  If 50% of McCurdy’s predictions come true, though, the ripple effects for U.S. motorists, automakers, and conventional oil producers will be profound.

“Seventy-eight percent of all oil imports go to transportation, and we have the ability to reduce that by 50%,” he stated.  “We have an opportunity we’ve not had in my adult lifetime, to truly break our dependence on foreign oil.”


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