Navigant Research Blog

Wave of New Data Powers the Green Building Industry

— October 11, 2011

Over the 10 years of its existence, the LEED certification program has designated 25,000 buildings, representing 1.6 billion square feet of cumulative floor space in the United States and abroad, as officially green.  Three years ago, less than one-tenth of that had been certified.  So, at this point, there is a critical mass of buildings from which to pull data and draw conclusions about how well green buildings perform.

Indeed, the growing mountain of data to mine in the construction industry was one of the key themes of Greenbuild, the green building industry’s flagship conference.  Greenbuild went to Toronto this year, marking the event’s 10th anniversary as well as its first time outside of the United States.  Grumpy airport workers aside, I think most of the conference’s 23,000 attendees would agree that it was a successful event.

Last year, at Greenbuild 2010, attendees tended to talk in a more theoretical sense about what could be done with data; now, the conversation is shifting toward an examination of what to do with the data we now have.  In addition to the growth of the green-certified building stock, advances in building energy management technology are allowing building owners, CEOs, and tenants gain insight into their buildings’ performance in a way that could only be imagined just a few years ago.

As James Finlay of Wells Fargo put it, today’s buildings are like cars with no odometer or speedometer.  Imagine paying for gas once a month rather than when your tank runs out – you can’t do anything about how much gas you’ve used once you receive that bill, nor do you know whether your high bill was related to driving with a lead foot or whether your car is just a gas-guzzler.  That’s how we operate buildings today, and the advent of new forms of data is starting to bring the Prius effect to the building sector.

In addition to making building owners more aware of energy consumption in real-time, data on how green buildings perform in terms of energy use as well as in terms of the real estate markets is lowering hurdles for green building.  Data on energy efficient system performance as well as other metrics such as sales price, occupancy rates, and perhaps even worker productivity will continue to apply hard numbers to the claims of many reports and anecdotal sources that suggest that green means value.  And with that data comes the potential for the lending institutions and appraisers to develop lending instruments that accurately reflect this added value.

What kinds of data can we expect to see in the next few years? The U.S. Green Building Council, for example, is developing a Web-based database called the Green Building Information Gateway that will allow users to access new information on green certified properties, such as energy performance, and analyze data in charts and maps that show green building progress. 

Another important new source of building data will come from commercial building benchmarking laws, which are brewing in several major metropolitan areas throughout the United States.  Although it’s unclear to what extent the data sets generated by these laws will become accessible to the general public, New York City officials expect to release aggregate numbers once the project is in full swing.  In most cases, the data is coming together via the EnergyStar Portfolio Manager, which evaluates building performance against benchmarks established through the DOE’s CBECS database.  (Note: The CBECS database, whose fate has lain in question for the last few months, looks like it’s coming back.)

The rapidly evolving field of building energy management is going to be an engine of building performance data generation, too.  While data will be highly variable in terms of content as well as accessibility, the advent of new technologies such as sensors and networking in commercial buildings will create piles of real-time data on building performance.  In addition, LEED 2009’s five-year utility bill submission requirement and points for technologies like submetering will dramatically increase the number of data-giving nodes throughout the built environment. 

The coming challenge, as I see it, will be getting that data into the right hands in the right format.  Building owners may benefit from largely the same data as lending institutions, but bundling, analyzing, and visualizing that data in a way that transforms the status quo will depend largely on what tools software companies, building service companies, and others bring to the discussion.


South Africa’s Fuel Cell Future

— October 10, 2011

The first part of this blog on South Africa looked at the country’s changing attitude to energy and the move to diversify its portfolio of energy generation technologies.  Part 2 looks at the South African economy and the government’s drive to expand and diversify. 

According to the South African government it has three key economic drivers: the processing and use of domestic raw materials for the benefit of the national economy; the movement of the economy toward knowledge-based industries; and Black Economic Empowerment (BEE), whereby previously disadvantaged groups are provided with economic opportunities.  The government is aiming for a 6% annual growth in GDP from these shifts. 

Looking at the current economic situation in South Africa, it’s clear that the biggest assets are the country’s abundance of raw materials, including 80% of the world’s precious group metals (platinum, palladium, rhodium, ruthenium, iridium and osmium) plus chromium, in just one vast deposit known as the Bushveld Complex.  These resources, along with South Africa’s large deposits of gold and coal, provide the country’s main source of employment and 8% of its annual GDP. 

Developing an Indigenous South African Fuel Cell Industry

Beneficiation, a term derived from the processing of raw ore in the mining industry, refers to the addition of value to an economy from the processing and manufacture of goods from local resources.  This is going to be a key to the South African economy.  For this to happen, precious group metals, primarily platinum, will increasingly be processed and used in some form of manufacturing locally. 

As an emerging market for platinum, fuel cell technology will have a large role to play in this effort.  In 2007 the South African government produced its National Hydrogen and Fuel Cells Technologies Research, Development and Innovation Strategy” (not publicly available online), which centered around three core themes: fuel cell catalysis, systems analysis and technology validation and hydrogen infrastructure.  A key target is to supply 25% of the global fuel cell market with catalysts by 2018.  (For more, see the Hydrogen South Africa Web site.)

A quick note on fuel cell catalysts: fuel cells operate by separating out electron and ions at a catalyst layer on the anode and combining the ions with oxygen molecules at the cathode.  The anode catalyst layer on low-temperature fuel cells is platinum-based, whilst the catalyst on the cathode can be a mixture of precious or base metals. 

As Pike Research forecasts show, the fuel cell industry is predicted to reach over $150 billion by 2018. Supplying 20% of this market with fuel cell catalysts would be worth many millions of dollars annually to the South African economy. 

To do this, though, the country will need to either attract the current fuel cell catalyst companies to relocate some of their manufacturing facilities to South Africa, or create companies from scratch.  In reality the way forward will likely be a mixture of the two, with some companies relocating, attracted by generous labour subsidies, and some forming locally.

Over the next decade the South African economy and the growth of the fuel cell economy could become intrinsically linked.  Whether this will be a good or a bad thing is debatable.  What’s clear is that South Africa is a country in transition that, with the global growth of the cleantech sector, could become a major adopter and producer over the next decade.  If that happens it could help seed a clean energy revolution across Africa – and that would surely be no bad thing. 


Advanced Biofuels Face Uncertain Financing Future

— October 10, 2011

Already languishing in the current deficit/debt landscape and facing mounting criticism in the wake of the Solyndra bankruptcy, the much-maligned DOE Section 1705 loan guarantee program came to a close last week with a flurry of activity.  Despite frustration with the program in the biofuels industry, centering on delays and process uncertainty, two advanced biofuels awards – $105 million to cellulosic ethanol giant POET’s Project LIBERTY in Iowa and $133.9 million for Abengoa Bioenergy for an advanced biofuels plant in Kansas –were among the 11th-hour clean energy qualifiers.

What do the awards mean for the U.S. biofuels industry and what impact will the end of Section 1705 have on the industry’s chances of reaching a mandated 36 billion gallons per year (BGPY) of total biofuels by 2022?  The answer to both questions requires a look at the state of cellulosic biofuels in the U.S., which under the EPA’s revised Renewable Fuel Standard (RFS2), must deliver 16 BGPY by 2022, or 44% of the entire 36 BGPY RFS2 mandate.  

In its Biofuels Strategic Production Report (June 2010), the USDA estimated that 527 biorefineries would need to be built at a cost of $168 billion to meet the additional 21 billion gallons per year (BGPY) of advanced biofuels mandated by 2022 under RFS2.  That works out to the commissioning of around 36 cellulosic biorefineries and an investment of at least $11 billion per year for cellulosic biofuels alone. 

Together, the POET and Abengoa projects will produce roughly 50 MGPY of cellulosic biofuels.  Although a far cry from RFS2’s 16 BGPY cellulosic mandate for 2022, and accounting for less than 1% of the USDA’s annual investment projection, the DOE loan guarantee provides an important cash outlay designed to get these projects up and running. 

Even if more aggressive investments were to come from Big Oil, the cellulosic biofuels industry, which is still in its infancy, is facing a formidable financing challenge in the decade ahead.  Given the scale of the U.S. fuel market in which biofuels must compete – 300 BGPY of petroleum demand representing nearly $1 trillion in market value for transportation fuel alone – a long-term growth outlook is necessary.  Seen in this light, the point of the DOE loan program was never to hit home runs, but rather to return value to taxpayers in the form of improved energy infrastructure without the externalities associated with traditional forms of energy.

As we noted in our Algae-Based Biofuels report, the advanced biofuels industry needs to demonstrate commercial-scale viability for projects to attract the private capital necessary for widespread scale-up.  By helping drive steel in the ground for these early projects, DOE financing could lead to valuable proof-of-concept data that may be used to attract risk-averse private investors in order to drive broader commercialization efforts. 

In our recently published Biofuels Markets and Technologies report, Pike Research assumes that many first round cellulosic biofuels plants will become obsolete – in many cases, even before opening their doors – as a range of technology pathways emerge in rapid succession in the coming decade.  This makes the availability of public financing all the more important.  While we project that biofuels production will miss the RFS2 targets in the latter half of this decade, our estimation that cellulosic biofuels capacity will increase more rapidly in the 2016 to 2018 window depends on the availability of government financing like the DOE’s loan guarantee program to push the industry through a difficult near-term scale-up period fraught with investor anxiety.

Absent public financing mechanisms like the DOE’s 1705  program, we expect the U.S. advanced biofuels industry’s near-term scale-up efforts to slow and potentially stagnate with its long-term fate falling squarely in the lap of the USDA (assuming their biofuels programs survive budget scrutiny), the U.S. military, and international oil markets.    


Fuel Cell Industry Moves Beyond R&D

— October 10, 2011

Getting ready for the annual Fuel Cell Seminar and Expo in Florida next month, I had a quick look at the program.  The seminar is the largest annual fuel cell and hydrogen event in the United States and attracts a global audience.  It provides a good opportunity to understand the state of the fuel cell industry, viewed somewhat from a U.S. perspective.  

This year’s seminar, being held at the Walt Disney World Swan & Dolphin hotel from October 31 to November 3, comes at an interesting time for the fuel cell and hydrogen industries in the United States.  Officials at the U.S. DOE continue to express scepticism about the potential for fuel cells to help the United States address its near-term energy security and greenhouse gas emissions goals, most recently by downplaying hydrogen in their inaugural Quadrennial Technology Review.  This scepticism seems to be based largely on the DOE’s assessment of the state of fuel cells for passenger vehicles.  What is striking about the Fuel Cell Seminar program is that passenger vehicles are discussed very little.  Instead, the program covers the status of backup power and materials handling deployments, a variety of fuel cell power plants, military applications, buses, marine vehicles, and so on.  This variety reflects the disconnect between the mainstream perception of fuel cells and the real state of the technology, where there are major deployments happening in key early markets for stationary power and niche transport applications.

Overall, this year’s seminar will place greater emphasis on the customer experience of fuel cells.  This continues a refocusing of this event over the past two years, and indeed of the industry overall.  As we are seeing wider rollouts of fuel cells in key early markets, players in these markets are shifting from an R&D focus to a commercial one.  This is not always an easy transition for companies to make.  I’ll be interested to hear from a few of these companies making the transition now.  For example, Ceramic Fuel Cells (CFCL) will review the launch of its Bluegen unit, a combined heat and power (CHP) unit being marketed for the residential sector.  CFCL was spun out of an Australian national lab and is now rolling out products in Europe, Asia and the U.S.  As part of this process, they have established a distributor network and opened a high volume manufacturing facility in Germany.  Companies like CFCL will show how the fuel cell industry can make the transition to conventional commercial operations.  It is also noteworthy that a number of companies in this phase are not on the agenda.  Some of these have said they are now focused on conferences for their end users, not for the fuel cell industry.  Fortunately, there will be presentations from the DOE-funded deployments by some of these companies – especially on the materials handling and backup power units – by NREL.

The conference is also attracting a healthy representation from components suppliers such as 3M, Hitachi Metals, and GS Caltex Corporation.  These presentations talk about making the fuel cell better – reducing costs, increasing durability or efficiency — not radically changing it.  This is a stage that comes before, and during, the introduction of early commercial products.  If the seminar is seen as a gauge of where the industry is, this shows an industry moving beyond that R&D phase, in spite of public perceptions to the contrary. 


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