Navigant Research Blog

Fuel Cell Providers Act Locally

— November 7, 2012

With the election over, the economy and job growth remain the key issues for most Americans.  Energy policy is often promoted as an employment plan – but I’m skeptical that energy policy can be designed to drive large-scale employment.  This may be another political myth like the promise of “energy independence”.  Nevertheless, our research into the growth of the fuel cell market over the past few years, and our assessment of where it’s going, suggest that a counterintuitive approach to job creation may be in order.  In short, if governments want to promote job creation in the fuel cell sector, they should promote domestic demand for fuel cell products.

How do they do that? First, Pike Research has tracked shipments of all fuel cell applications from companies around the globe, and where those shipments are going, from 2008 to today.  This database was used for our analysis of the state of the industry in the Fuel Cell Annual Report 2012.  The vast majority of fuel cell systems from 2009 to 2011 were shipped to the manufacturer’s home market.  This is indicative of the fuel cell industry as still a fledgling market.  Before going commercial, companies will have made enormous investments in their technology, and then invested even more in making a product that can be sold commercially, and yet again in marketing and sales.  In the early phase of commercial sales, companies have to limit their target markets, and it makes most sense to first go after their local market.  For example, providers of stationary fuel cell systems must develop products with the right power rating and certification for their local or regional market, as well as the capability to reform domestic fuels – such as city gas, a fuel supply particular to Japan.  Once the local market is established, the company can move to other regions.  This oversimplifies the strategy a bit – there are companies that are targeting more than one market – but overall this is the state of the fuel cell industry today.

There is a second trend that shows how domestic demand can drive localized manufacturing.  In our recent webinar on the Fuel Cell Industry in 2012, we showed the following graph of revenue by region from 2009 to 2011.

Fuel Cell Systems Revenue by Region, World Markets: 2009-2011

(Source: Pike Research)


Notice that the Asia Pacific is the only region to see consistent growth.  This reflects the dramatic growth from Japan’s Ene-farm program promoting residential CHP and Korea’s promotion of stationary fuel cell power.  It is also the result of companies shifting operations to the actual market where they will be selling.  One notable example of that has been U.S. company FuelCell Power, which announced a long-term deal with Korea’s POSCO Power in March.  The deal includes a licensing commitment that provides for manufacturing based in South Korea.  We can see this happening with other companies that are targeting overseas markets and moving a portion of their manufacturing to those regions, making them, in essence, “domestic” markets.

So for governments that want to promote jobs in the fuel cell industry, at this early stage of commercial sales, it may make the most sense to support the domestic demand for fuel cells that will allow companies to build for their home market – and hire the workers to do so.


Winter Coming, Europe Looks to Battery Storage

— November 7, 2012

As Europe prepares for the looming winter season of high peak electricity demand, large grid operators and utilities in Europe are increasingly looking to the value of battery storage on the grid.  Several notable projects have emerged this year that highlight a preference for established battery providers and for one battery type: lithium ion.  Each highlights a different potential pathway to market for advanced batteries in Europe.

Italy and Spain, both markets that lie at the edge of the European Union’s emerging Super Grid, are now home to two significant lithium ion battery installations.  In Italy, which imports significant volumes of power, Enel has awarded a contract to NEC for the installation of batteries at a substation in the southern region of Calabria.  While no substantive details about the project have been released, NEC brings nearly a century of experience developing technology and a global presence to the project.  Working directly with the utility Enel highlights one potential pathway through which batteries might populate the grid.

In Spain, renewables developer Acciona has partnered with Saft to pair utility-scale solar with a 560-kilowatt-hour lithium ion battery installation. The falling costs of solar power are driving solar installations globally, but distributed systems pairing solar with batteries have only begun to emerge, thanks to unique financing mechanisms like solar leasing.  What Acciona and Saft are undertaking may highlight what independent power developers can do with bulk solar and utility-scale battery systems, when backed by significant experience and capital.  Acciona’s 2011 revenues exceeded €6 billion.  In this case, the business models for developing merchant power plants that combine renewables and batteries remain unchartered territory.  The coming years will be illustrative to this end.

Providing market experience and technical knowledge, these projects could open the door for battery storage.  With each installation the grid storage industry discovers a new technical or market issue, either resolved or in need of modification.  The pace at which the industry is developing could allow for the emergence of new technologies, ones that may be more cost-effective or technically savvy.

These two projects highlight different approaches to battery storage development, with Enel embodying a growing technical need for storage on the part of utilities.  Conversely, Acciona may offer a glimpse of a merchant developer approach.  Regardless, with these early projects, Saft and NEC are carving out important first-mover positions in the European market, relying on reputations of technical achievement and deep pockets which will help them bridge the gap to the emergence of a commercial market, a market Pike Research believes is still a number of years out.


Devastating Storms Make the Case for Microgrids

— November 6, 2012

Hurricane Sandy underscores a compelling reality: today’s power grid is wholly inadequate for today’s hyper-digitalized economy.  With more than 8 million people without power for a matter of days, not hours, momentum is growing for technology solutions, as described on this blog by my colleague Bob Gohn.

Recent evidence corroborates the notion that more severe weather is now business-as-usual.   According to the Center for Research on the Epidemiology of Disasters, 100 million to 200 million people were affected by weather-related disasters between 1980 and 2009, with economic losses ranging from $50 billion to $100 billion annually.  The March, 2011  earthquake and tsunami in Japan was just one obvious example during 2011.  (The Sendai 1 MW microgrid at Tohoku Fukushi University operated for 2 days in island mode while the surrounding region was without power.)  Such natural disasters underscore the need for resilient infrastructure for vital electricity services.

The U.S. power grid was graded a lowly D+ by the American Council of Civil Engineers in 2009.   Lawrence Berkeley National Laboratory (LBNL) statistics show that 80% to 90% of all grid failures begin at the distribution level of electricity service.  The average outage duration in the United States is 120 minutes and climbing annually, while the rest of the industrialized world is less than 10 minutes and getting better.

It has become quite clear that the modern, digital economy requires a more advanced, robust, and responsive power grid framework than what we have today.  While many features of the smart grid can help manage outages and allow power to be restored much quicker than in the past, the most provocative technology that has evolved to mitigate the whims of Mother Nature is the microgrid.  Otherwise, potential on-site distributed energy resources (DER) solutions rooftop solar photovoltaic systems, combined heat and power plants, batteries and other storage devices (including electric vehicles) became stranded assets, going offline as the larger network of nuclear, coal, and natural gas plants also shuts down in the midst of a storm.  Incorporating distributed resources within an islanding microgrid can provide emergency energy services even as the larger grid awaits repairs and restoration.

The increasing frequency of severe weather is prompting utilities to reconsider their historic opposition to customer-owned microgrids that can disconnect from the larger grid and island, allowing critical mission functions to stay up and running.

Microgrid Capacity by Region, 4Q 2012

(Source: Pike Research)

Pike Research has now completed the Q4 update to its Microgrid Deployment Tracker.  All told, Pike Research has identified a total of 3.2 GW of total microgrid capacity throughout the world, up from 2.6 GW in the previous update in 2Q 2012.  As a region, North America is still the world’s leading market for microgrids, with overall planned, proposed, under-development, and operating capacity totaling 2,088 MW.  The microgrid solution to power outages extends to other regions of the world, including India and other regions where power grids are extremely weak, whether the weather is good or bad.




GridPoint Takes Aim at Enterprise Energy Management

— November 6, 2012

GridPoint, the Washington, D.C.-based software company, has been a bit of an enigma over the last few years.  It started in 2003 as a provider of an energy and solar system management solution for upper-end homes, but, realizing the constraints of that market, repackaged its software into a customer engagement platform for utility customers as well as several other smart grid applications like load management.  GridPoint landed a number of high-profile utilities as customers, including Xcel Energy through its $100 million SmartGridCity project in Boulder, Colorado.

It still offers each of these, but has recently taken yet another turn.  The firm has begun developing enterprise energy management systems for large commercial and industrial enterprises.  It acquired energy management software firm ADMMicro in 2009 and has made significant inroads already.  Its enterprise business is actually considerably larger than its utility business today.  It has extended its non-software offerings in the process, with a platform that includes hardware (such as controllers, thermostats, submeters, and other sensors) and services (including network operations center-style energy advisory services).

It’s one of the best-financed cleantech startups, having raised over $240 million to date.  GridPoint was even considering an IPO in 2010, but didn’t follow through, and shortly thereafter replaced its then-CEO with software and communications industry maven John Spirtos.  GridPoint went dark for a period of time, but has started to reappear in the media as Spirtos has led the company deeper into the enterprise energy management space.

In a certain sense, GridPoint’s approach and solution are starting to come full-circle, as its utility customers are now asking GridPoint to go beyond customer engagement and deeper into device-level energy monitoring and management of their ratepayers’ facilities.  This corresponds with the broader trend we’ve been tracking on this blog, in which energy management software companies are looking to market their enterprise platforms to utilities for deployment to their customers.

That field is getting increasingly crowded, with other software companies like C3, Pulse Energy, and BuildingIQ making similar early moves.  GridPoint may have an added strength in its existing relationships and knowledge of what works (and what doesn’t) in deploying next-generation software to the slow-moving utility sector.  And although GridPoint has reimagined itself a number of times over the last few years, the success it has had in serving enterprise customers recently shows how readily same data and analytics engines can be used to tell different stories, be they smart grid- or smart building-related.  If GridPoint maintains this light-footedness, it will serve it well in the evolving smart grid industry.


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