Navigant Research Blog

New Chinese Subsidies Target Improved Building Efficiency

— June 10, 2012

The Chinese government recently announced a series of subsidies and incentive schemes aimed at energy efficiency and renewable energy proliferation around the country and on June 1, it started offering subsidies for televisions and fixed-speed air conditioners.  The total volume of available subsidies will be about RMB 26 billion ($4 billion), though the program aims to use the subsidies to drive total consumption of RMB 450 billion ($70 billion).  The program represents part of a national plan to stimulate domestic consumption in 2012 by investing RMB 170 billion ($27 billion). Of that sum, more than 50% will be aimed at energy efficiency and renewable energy products under a series of subsidies (that haven’t been announced yet) and other incentive programs.

China represents the world’s largest construction industry, and about 2 billion square meters of new space are added to China’s building stock ever year, as described in Pike Research’s report entitled “Global Building Stock Database.” A surge in energy consumption has accompanied this growth and China surpassed the United States as the largest emitter of greenhouse gases a few years ago.  However, a recent report from the International Energy Agency adds that China’s carbon emissions intensity per unit of GDP fell by 15% between 2005 and 2011.

In an effort to curb its carbon emissions growth, China’s 12th Five Year Plan, released in 2011, laid out the Chinese government’s ambitions to reduce energy consumption per unit of GDP by 16% from 2010 to 2015.  This most recent wave of subsidies is aimed at helping China meet these goals by targeting specific energy-intensive appliances – televisions and air conditioners – that are responsible for a significant portion of the growth in China’s per-capita energy consumption.

As I wrote in Pike Research’s recent white paper, “Smart Buildings: Ten Trends to Watch in 2012 and Beyond,” the Asia Pacific region’s size relative to the rest of the world is not always reflected in revenues for energy efficiency technology.  Despite the region’s dynamic construction activity, it represents just 25% of the global market for building automation systems (BAS) and controls, 20% of the global market for building energy management systems (BEMS), and 17% of the global market for intelligent lighting controls.  However, as the Chinese government bolsters sales of energy efficiency equipment in the next few years through subsidies and other regulations, China’s market share for smart building technology is expected to grow, placing the building industry at the center of China’s strategy to reduce the energy intensity of its economy.


Green and Clean Port Policies

— June 10, 2012

The idea of clean waterways is nothing new; however, in the past few years, several major ports have been getting special attention for their “green port” initiatives.  Since ports are densely-constructed economic zones bustling with fleets and major infrastructure, characterizing them as cities unto themselves is appropriate.  And, these cities are now going green.

Frequently ports are far removed from urban centers, so it’s difficult to appreciate the scale of their activity.  The busiest port in the world, in terms of numbers of containers, is Shanghai.  In 2011, 31,739,000 twenty-foot containers traveled through there.  While most of the world’s busiest ports are in Asia (mainly in China, Singapore, and South Korea), also ranking in the top 20 are Dubai, Rotterdam, Hamburg, Antwerp, Los Angeles, Long Beach, and Bremen.

Following this trend, the port of Long Beach is implementing a Green Port Policy that targets improvements in wildlife, air quality, water quality, and soil in the port area.  The Pacific Coast Collaborative is spearheading an even broader initiative to improve green practices at ports from Alaska to California.

Why are green ports an important cleantech trend?  Ports are closed systems.  Although vehicles (trains, trucks, ships) carry goods away from ports, the fleets and activities at a port itself remain within a fixed area.  This makes them ideal for alternative fuel fleets because infrastructure can be installed at a few key sites in a port and then entire fleets can be fuelled.

Ports also run 24 hours a day, so they are well-suited for distributed generation, especially technologies that run best at a constant rate of output, such as fuel cells.  But why stop there?  Distributed solar, green building technologies, energy storage, and microgrids would also be well-suited to ports.


Microgrids: The Golden Ticket for Advanced Batteries?

— June 10, 2012

Discussions about markets for advanced batteries – everything from electric toothbrushes to grid storage, and the various consumer-facing products in between – are some of the most interesting conversations we have at Pike Research.  End markets may exist somewhere, but the pathways these technologies will take remain unclear. Will they be lithium ion? Flow batteries?  We’re not sure. So, as we do with many cleantech technologies, we look to the U.S. military for guidance.

Microgrids have been floated as one pathway advanced batteries might take to achieve electricity grid integration.  In Texas, the Army’s Ft.  Bliss installation is now home to a 100 kW (20 kWh) lead acid battery system that is seamlessly integrated with the base’s microgrid.  The installation, and particularly the inclusion of the battery system, is as much about security for the U.S. military as it is about generating a return on investment.  The advantage of batteries is that they can address multiple applications – supply security, frequency regulation, and renewables integration.  While microgrids offer unique control over systems or islanding capabilities, batteries enhance these features and provide avenues to other revenue streams.

Utility procurement of advanced batteries may be a few years off while companies pursue a “wait-and-see” approach, but microgrids – either on islands, off-grid, or for niche applications – could provide a near-term testing ground.  Microgrids may ultimately be where advanced batteries meet the smart grid.  For example, the Jeju Island smart grid project in South Korea will integrate community and residential energy storage as part of a microgrid on the northeastern part of the island.

Pike Research’s upcoming report on advanced batteries for utility-scale applications broadens the discussion on the microgrid opportunity for advanced batteries.  We anticipate the discussion growing over the next year.


Disruptive Technology: The View from San Francisco

— June 10, 2012

A recent Leadership Conference hosted by eMeter (a smart meter company purchased by industrial giant Siemens in December 2011) in south San Francisco, revealed how entrepreneurs are trying to bring the staid electric utility industry into the 21st century.  Under the theme of “disruptive technology,” six different companies were featured in an eye-opening panel on May 23.

The stage for this panel discussion was set by eMeter co-founder and CTO Larsh Johnson and Chris King, a longtime consultant and expert on emerging competitive markets.  They focused their opening remarks on solar photovoltaics (PV) and demand response (DR), two technologies that are turning fundamental assumptions about the electric utility industry upside down.

How? Solar PV can be installed on customer rooftops, generating power in a distributed manner without any air emissions.  Within the next few years, the cost of solar PV will be at parity with large centralized power plants in the United States, and throughout the world.  DR, one could argue, is even more radical.  When coupled with dynamic pricing, DR can meet up to 20% of the total peak power needs of the United States by simply shifting demand at the customer site, creating value without any power generation at all!

Not surprisingly, the panelists echoed similar themes of “disruption.” For example, Asim Hussain, director of product marketing for Bloom Energy, described the virtues of his company’s fuel cell, a 200 kW device that he claimed is the most efficient power plant in the world, converting 60% of natural gas or biogas fuel into power.  These devices also have islanding capability, which enables commercial customers such as Walmart, Apple, and AT&T to create microgrids.

Energy Hub is tapping the hidden power of thermostats.  It offers software that can transform ordinary thermostats into smart devices in a cloud network that then allows ordinary residents to participate in DR programs.  According to Energy Hub CEO Seth Frader-Thompson, 90% of installed thermostats today are programmed incorrectly, whereas 85% could meet the U.S. Environmental Protection Agency’s Energy Star energy efficiency standards.  The 100,000 thermostats the company is currently managing are being sold by under a white label strategy by original manufacturers, cable, and telecom firms – and yes, even utilities.Demand

Nest takes a different approach to thermostats — but is aiming for the same end result.  The company is selling a super-premium thermostat that costs $250 and first came on the market last October.  Designed by some of the folks that brought us the Apple iPod, the sleek look of this thermostat is meant to make efficiency cool and fun.  This “smart” thermostat actually adjusts its settings as it learns your lifestyle and preferences.  According to the company’s Scott McGaraghan, these Nest thermostats have sparked new owners to hold installation parties that they then posted on Facebook.

Speaking of Facebook, Simple Energy is focused on tapping social media and social game mechanics to increase participation in utility demand side management (DSM) programs.  Today, most consumers spend roughly 6 minutes per year interacting with their utility.  This compares to the more than 14,000 minutes consumers spend on average with Facebook, a dramatic difference that this company is trying to exploit.  “We want to meet the customer on a platform they are already using, engage with them, and help drive energy savings up,” said Justin Seagall, the founder and executive vice president of the firm.  The company is seeking to fill a niche in the smart grid movement that utilities have so far been unable to fill.

Ed Cazelet, founder and CEO of TeMix, Inc. and VP of Megawatt Storage Farms, spoke about two disruptive concepts.  The first was advanced energy storage, which he claimed was the cheapest way to integrate variable renewables such as solar and wind power.  So, what then is the problem? The value of storage has not been monetized yet, highlighting the importance of market designs.  His second (but related) concept was “transactive energy,” his push for consumers to purchase energy subscriptions.  He claimed that this approach would solve verification issues surrounding DR, which are currently measured against an assumed (and imaginary) baseline of consumption.  “Our current DR programs are too complex since we have to pay for something we haven’t used yet,” said Cazelet.

Perhaps the best summary of disruptive technology came from the last panelist, Ethan Sprague, director of business development for SunRun, which sold one out of every three solar PV systems last year in California, the largest U.S. market for solar PV.  “What utilities want is control and data,” he said.  “Utilities are nervous about whether the subsidies afforded solar PV are really worth the benefits.”

He acknowledged that solar PV is not new, but what is new is the SunRun financing model, which allows consumers to have solar PV with little or no money down, and enjoy lower priced electricity that that offered by utilities.  “We are selling control and price certainty to our customers, Sprague said, noting that SunRun’s solar lease model is flourishing in the United States, but has not spread to other parts of the world.  What is his bottom line for utilities?

“Instead of focusing on control and limiting what gets on the grid, it is time to evolve.”


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