Navigant Research Blog

Crowdsourcing New Consumer Applications for a Smarter Grid

— May 17, 2012

In a smarter grid world, what new software applications will resonate with consumers?  Tendril, a Boulder, Colo.-based software platform provider for energy markets, has made a move in Europe that will help answer the question.  Tendril has partnered with Dutch retail utility Essent to create a unique energy application crowdsourcing project.

Here are details of how the project is expected to unfold:

Later this year, qualified independent software application developers will use Tendril’s Connect cloud platform to gain access to interval-usage data from smart meters.  Armed with this data, the developers are expected to create web-based and mobile applications aimed at energy efficiency in the home (see Pike Research’s latest report on Home Energy Management for our market view) – such as automation tools for switching off lights and controlling thermostats, or “dashboards” for showing real-time energy consumption and pricing.  Then these applications will be made available through a kind of energy “app store” to a small test group of Essent residential customers whose homes are equipped with smart meters; these customers will provide feedback to the developers and rate the apps.  Winning applications won’t be chosen by the utility, but rather by consumers themselves who will be choosing the ones that work best for them.

Eventually, the applications could be made available to all of Essent’s 2 million residential customers, and could go out to millions more through Essent’s parent company, RWE Group, which serves 24 million customers.

The project got a jumpstart during a “hackathon” event in Amsterdam called The Next Web Kings of Code Hack Battle, in late April, at which the project concept was presented to potential developer partners.

I like this idea of bringing software developers into the mix and letting consumers evaluate the results.  Clearly, this will help speed up the process by enabling creative people from outside the traditional energy industry to experiment in new ways.   Who knows, perhaps the Angry Birds of energy is just around the corner.

On May 24 I’ll moderate a panel at ConnectivityWeek in Santa Clara, California, called “Getting Useful Applications to Consumers.”  The panelists and I will be delving into these same types of issues: What consumers want, and what can be made available to them through new applications? And, like the “hackathon” event in Amsterdam, the ConnectivityWeek conference sponsors are holding a similar contest to see who can come up with cool new energy apps.  If you’re in the area, come and join the discussion.

 

Beyond the Fuel Cell Bubble

— May 17, 2012

Living in the United States, it can be easy to think that there is little happening with fuel cells.  For the transportation sector, all of the momentum in the U.S. is on the battery electric vehicle side – with billions in private and public money being invested in the cars, the batteries, and the charging systems.  Fuel cell cars have to a large degree dropped off the public radar in the States.  And for some reason this sense that fuel cell cars are over has bled over into other fuel cell markets that are unrelated to passenger cars.

There is in fact a lot happening with fuel cells, especially in the European Union, Japan, and South Korea.  So it is useful to get outside the bubble one lives in and find out what else is happening.  That’s one of the benefits of the annual World Hydrogen Energy Conference (WHEC), one of the few annual hydrogen industry events specifically designed to offer a global perspective.

This year’s WHEC is being held in Toronto, Canada from June 3rd through the 7th.  Because the event is in Canada, Canadian firms are naturally being highlighted, with fuel cell companies Ballard and Hydrogenics especially prominent.  But this event is about exploring the range of work on fuel cells and hydrogen around the world.  The speaker line-up includes representatives from well over 30 countries.

There is a particularly strong German presence, reflecting the leadership role that Germany has taken in promoting fuel cell cars, buses, and stationary power.  The German National Organization for Hydrogen and Fuel Cell Technology (NOW) has a featured spot and hopefully will give an update on its efforts to support the commercialization of fuel cell technologies.  This program has been allotted $680 million in public funding, matched by a minimum of 50% industry cost share.  The program is explicitly focused on market preparation.  Daimler and Linde are also prominently featured, and will probably talk about their partnership to build 20 public hydrogen filling stations in Germany.

Indeed, the automotive outlook panels overall should prove interesting.  Automakers are about two years out from their target date for commercial vehicles, which means they are focused on bringing down costs for that target.  I am hoping to get some more public signals from them on what to expect.

Another interesting aspect of this show will be the reports from representatives of emerging economies.  South Africa has several speakers on the agenda, which is unsurprising considering that South Africa is the largest producer of platinum.  Nevertheless, fuel cell activity there has been slow to develop.  India and Brazil are also to be highlighted.  The R&D Centre for the Indian Oil Corporation will talk about the potential for fuel cells to provide backup power for the booming telecom market.  Brazil is exploring fuel cell buses, an obvious fit given the size of its bus manufacturing industry. The WHEC agenda highlights the range of activities around the world on fuel cells and hydrogen – providing a useful corrective to our sometimes insular view from the U.S.

 

Buy the Car, Lease the Battery

— May 17, 2012

Almost every big automaker fell short of their first-year sales targets for electric vehicles (EVs), and even though total EV sales in 2011 beat hybrid sales in 2000 (the vehicle’s first year on most markets) by a hefty margin, EVs took a beating from media outlets.  Bad press or not, EV sales will continue to remain a mere fraction of overall vehicle sales until OEMs figure out how to sell EVs at a drastically lower price.  One possible approach currently being tested by French automakers could prove, if successful, to be an industry standard, at least until the cost of EV batteries falls by half.

The reason why an EV’s price has to come down is made clear by a recent New York Times piece that examines the return on investment of an EV against a similar energy efficient vehicle.  For instance, the $31,767 (after tax credits) Volt payback period is estimated at 26.6 years compared to the $19,925 Chevy Cruze Eco.  For this reason the EV market is highly dependent upon a small group of “affluent green” consumers rather than a broader customer base.

The major culprit for the excessive price of the EV is the cost of the battery which can be over 35% of the vehicle’s cost.  To be sure, some battery developers have announced technological breakthroughs that would halve that cost.  But a breakthrough of that type will not be commercially available for five to ten years.

To shorten this delay, French OEMs Mia Electric and Renault are spearheading a business model that may prove attractive to more mainstream drivers.  To reduce upfront costs, Mia and Renault have set up options where EV drivers can purchase the EV without buying the battery.  Instead, EV owners will rent the battery at a cost of around $50 to $100 a month.  Although the total costs over time are still significant, the business model allows for a more affordable initial purchase price and reduces the financial risk to EV owners, in that the battery is guaranteed for life.

Mia began production of its EV in June of 2011 and since then has sold over 1,000 of the cars at a little over €15,000 (after state incentives).  The battery rents for €49/month.  Four EVs from Renault, all with battery rental plans, have reached European markets with estimated prices from €7,000 for the small urban Twizy, to €21,000 for the larger Fluence Z.E. sedan.  Europe’s largest automaker, Volkswagen, may also adopt the business model when it releases its EV offerings next year.

The battery leasing model certainly presents an opportunity for OEMs to make initial prices more competitive with other fuel efficient vehicles.  However no maker selling plug-in models in the United States has indicated it will start a leasing program here.  In an interesting development, Nissan has indicated it may lease batteries, but also just in Europe, where its Leaf will compete against the ZOE, which is made by Nissan’s European partner Renault.  The ZOE is set to sell at half the cost of the Leaf, thanks to the battery leasing program.

U.S.  OEMs could be wary of bearing the financial and legal burdens inherent in leasing a technology with so many perceived unknowns, or perhaps the automakers assume the economics of owning a vehicle and leasing its fundamental power source are too confusing for consumers.  (The familiar telecom model of buying a subsidized handset and paying a monthly service fee would indicate otherwise.)  At any rate, if the European programs boost sales, you can be sure the model will make its way across the Atlantic.

 

Biogas and the Natural Gas Bonanza

— May 17, 2012

It is the odorless and invisible 500-pound gorilla in the room.  Currently hailed as the antidote to U.S. energy insecurity and a bridge fuel for the 21st century, natural gas is every bit as fossil as its coal and petroleum cousins.  But for clean energy, which is coming off a stimulus-fueled high and $100-dollar-plus oil run, could it be a death knell?  My colleague Kerry-Ann Adamson has looked at this question from the point of view of Smart Energy overall.  In my world of bioenergy, the accelerating development and availability of biogas, a renewable form of natural gas, indicates that natural gas surge could actually hasten the transition to clean energy, not impede it.

In 2009, the U.S. passed Russia to become the world’s largest producer of natural gas.  Estimates suggest that at 2010 consumption rates, the U.S. has enough recoverable natural gas resources to supply over a century of use.  Meanwhile, the Nymex price has dipped below $3 per million British thermal units (MMBtu), down from nearly $14 four years ago.  The glut has analysts in the U.S. scrambling to recalibrate energy forecasts and renewable energy project developers searching for new off-take partners to make project economics pencil out.

The boom in shale gas has stripped renewable energy of two of its key arguments: that a heavy reliance on fossil fuels is 1) contributing to irreversible climate weirdness; and, since these fossil fuels tend to come from nefarious nations, 2) making the United States increasingly energy insecure.  With respect to mitigating climate change, studies point to natural gas being less carbon intensive than coal and potentially oil as well.  As for energy security, the sudden bounty of domestic carbon is fuelling what could be a huge shift in U.S. transportation fuel, away from petroleum-based fuels to compressed and liquid natural gas, and potentially hydrogen and fuel cells, longer term.

Crossing the Biogas Bridge

Many believe the natural gas bonanza may be a transition fuel for the larger clean energy transformation.  John Podesta, former chief of staff to ex-President Bill Clinton and now head of the Center for American Progress in Washington writes that natural gas can serve “as a bridge fuel to a 21st-century energy economy that relies on efficiency, renewable sources, and low-carbon fossil fuels.”

No renewable is in a better position to cross this bridge first than biogas.  Vastly underutilized, biogas is essentially natural gas that is produced in a matter of millions of seconds rather than millions of years.  The result of anaerobic digestion – a naturally occurring process in which bacteria feed on organic matter in the absence of oxygen – biogas is commercially produced in anaerobic digesters (AD) and landfill gas recovery facilities designed to treat biowastes such as manure, sewage, energy crops, and organic matter.  Currently, in the U.S., the economics for generating electricity from biogas are dismal.  But with emerging technologies, raw biogas can be stripped of carbon dioxide and other trace gases, bringing it up to the quality level of natural gas.

This renewable natural gas, essentially purified methane, is virtually identical to natural gas, but without the fracking.  It’s a fully fungible alternative, avoiding many of the blending constraints you see with an alternative like ethanol.  Leveraging natural gas infrastructure, it can be distributed as CNG, LNG, or in pipelines via gas-to-grid injection.  Although upgrading biogas to pipeline quality results in a fuel considerably more expensive than natural gas, biomethaneis starting to gain momentum in the U.S., particularly as a potential renewable fuel that can satisfy advanced biofuels mandates under the Renewable Fuel Standard (RFS2) and emerging Low Carbon Fuel Standards (LCFS).

The challenge for the biogas industry will be scaling up in economical ways.  As Pike Research’s analysis in our upcoming biogas report shows, one model that can reduce costs and concentrate supply is the development of community biogas hubs.  Using gathering infrastructure that is shared across several smaller-scale biogas producers linked via a pipeline network to an upgrading facility, upgrading costs can be defrayed among all producers.

Longer term, by leveraging shale gas infrastructure, biogas is poised to capitalize on a free ride to widespread scale up, a notion unheard of in many clean energy technology circles.  Should a massive natural gas infrastructure build-out take place to move shale resources to market, with significant untapped feedstock potential, biogas could emerge as a clean energy Cinderella story over the next decade.

 

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