Navigant Research Blog

Europe’s Severe Energy Burden

— April 11, 2012

Countries in the Organization for Economic Cooperation and Development – i.e,. the developed world – will be decoupling economic growth from energy consumption over the next 25 years or so.  Non-OECD countries, in contrast, will be responsible for most of the increase in energy consumption globally, and the most important driver for this increase will be economic growth.  Burgeoning middle classes in many of the non-OECD countries will adopt energy-intensive lifestyles similar to those found in high-income economies.  The absolute cost of energy is bound to increase over time, and the burden on infrastructure will expose frailties in grid infrastructure that were easy to ignore before.  The end of the world is nigh.

Or maybe not.  Economies such as Germany, France, the United Kingdom, and the rest of Western Europe fall into the OECD classification, along with other major economies such as Japan, Australia, Korea, Canada and the United States.   These countries make up a staggeringly large percentage of the wealth in the world, and the majority of these countries are planning to use less energy  The key to doing less with more is to improve efficiency and energy storage improves the efficiency of the grid as a system.  Therefore, in the broad terms, the answer to the question “Why do we need storage?” is illustrated by the chart below.

Europe, or more specifically, the European Union is in an even more difficult position than North America or OECD Asia thanks to the federation’s 20/20/20 initiative – and even more ambitious targets are on the table for 2050.  Truthfully, EU policymakers have seen the writing on the wall in terms of non-OECD economies’ voracious appetite for energy over the next 10 to 40 years.  Resources will become scarcer, efficiency will be king, and energy diversity will mean energy security.

In true European Union fashion, the Commission gives a guideline for Europe to follow and then works with individual countries to develop specific targets for each nation that take into account that country’s resources.  Once targets are agreed upon (or rather, negotiated), it’s up to each national government to decide how to reach the targets.  It comes as no surprise, therefore, that there are such great disparities between countries and targets.

Countries such as Sweden will rely heavily on biomass whereas Germany and Denmark will rely significantly on wind and even solar.  Hydro will undoubtedly play a large role in reaching the 20/20/20 targets, which will include a significant amount of pumped storage.

Some of these projects will expand upon existing hydro and pumped storage installations.  However, hydro and pumped storage still require a long lead time for permitting – we would expect that a quarter to a half of the capacity additions for hydro and pumped storage will in fact be in the form of upgrades of existing facilities.  Thus, solar and wind (along with other renewables) will continue see significant uptake, as it’s easier to add incremental capacity to these resources.

The chart below shows the stark difference in the renewables burden on each country within the EU.  Countries such as Sweden and Latvia stand out because of their impressively high renewables burden.  However, the greatest opportunity for energy storage will be provided by the countries that show the highest disparity between 2008 shares and 2020 shares.  These include Belgium, Denmark, Germany, Ireland, Greece, Spain, France, Italy, Cyprus, Malta (N.B. small island nations present their own special value proposition for energy storage), the Netherlands, and the United Kingdom.

Europe’s energy burden is severe, but as a result, the continent will lead the way in innovation.  Europe has been known to take the long view on economic issues, and the 20/20/20 initiative is a classic example of ambitious, long-term policymaking.  Other major economies plan on time horizons ranging from every two years (the United States) to every five years (China); in many cases, this does not give the market the clear signals investors require in order to invest in long-term projects.  One of the benefits of Europe’s energy burden is that it gives the cleantech industry a clear signal that Europe is open for business.

 

Connected Cars Get Closer

— April 10, 2012

The United States has been working on various safety-related “V2X” applications since 1999, when the FCC set aside spectrum (the 5.9 GHz band) for short-range vehicle to vehicle (V2V) and vehicle to infrastructure (V2I) communications (“V2X” simply includes both of those categories).  After more than a decade of R&D in this area, developers can finally see a pathway to commercial viability, but the finish line is still several years away.  The time it’s taking to get this technology to market a was a cause of some concern at the recent “V2X for Auto Safety and Mobility” conference, in Detroit, in part because Congress has recently considered opening up the 5.9 GHz band to other, unlicensed uses.  It appears that this is partly a reaction to a sense that safety V2V applications haven’t moved as quickly as had been hoped in 1999, so Congress is now eyeing the valuable bandwidth.

Auto OEMs, Tier 1 suppliers, communications companies and the usual smattering of consultants and associations gathered in Detroit to talk about connected vehicles, machine to machine (M2M) and vehicle to infrastructure connectivity.  Or, as one attendee put it, “We are building the Internet for the road.”

Since this event was U.S.-focused, much of the discussion was on safety applications.  This focus separates the United States, to some extent, from the other ITS markets in Europe and in Asia where sustainability and mobility are big drivers.

The US Department of Transportation is helping to drive the technology forward with its Safety Pilot Driver Clinics, which are helping industry test out some of the safety applications.  These are designed to get driver feedback on several automated safety applications in anticipation of a ruling by the National Highway Traffic Safety Administration (NHTSA) in 2013 on passenger car V2V.  The applications being tested include blind spot warnings; systems that tell the driver to slow down in response to a slowing vehicle in front of her; and notification when a car ahead that the driver cannot see is slowing down.  (As a not overly tall woman who has trouble seeing over all the SUVs on the road, this last one strikes me as especially useful.)  While these systems may simply warn the driver, the end goal is clearly to have the vehicle respond without driver intervention.

The trial is designed to find out how drivers respond –do they find the safety measures helpful or off-putting, and do the V2V applications work correctly (for example, eliminating false warnings)?  The results have not yet been announced, but the DOT representative at the V2X show indicated that, so far, drivers have responded favorably and even indicated they might be willing to pay for these applications.  That is a key point, as the general sense among the OEMs in attendance is that consumers won’t pay for safety features.  Indeed the whole question of how to get anyone to pay for V2X ran through the entire show.  A speaker from Battelle discussed one way to get public agencies to pay for V2X: mileage-based user fee programs.  I’ve talked about these in an earlier blog, on ideas to replace the gas tax.  The speaker described Minnesota’s “test drive” of this system, using smart phones installed in the vehicle.  Participating drivers receive invoices based on the number of miles driven and a varying fee schedule.  While this could help spur public agencies to invest in V2X technology, a smartphone cannot be used for most safety-related apps, which require much faster response time than cellular networks can provide.  Ultimately, the safety applications may simply end up as standard equipment if NHTSA decides to require them in its 2013 decision.

 

Islands Becoming Popular Destination for EVs

— April 10, 2012

When looking for the perfect environment for selling electric vehicles, look to island resorts.  Companies offering plug-in electric vehicles (PEVs) and charging equipment are making inroads in many of the world’s top vacation spots including Hawaii, Bermuda, the Cayman Islands and Singapore.

Islands offer many ideal conditions for PEVs, including:

  • Short driving distances (limited by geography)
  • Expensive gas
  • Local motivation to reduce carbon emissions
  • Higher income residents and tourists who can afford the vehicle premium
  • Abundant sun to enable solar EV charging

These factors add up to islands logically being at the forefront of PEV adoption.  Many islands can be circled without depleting an EV’s battery, so drivers can forget about range anxiety.  Many island governments and cultures stress sustainability due to concerns about rising ocean levels, such as in Kiribati, where they are considering drastic measures.  Many tourists won’t mind paying a premium for renting a zero-emissions vehicle as well as for the convenience of not having to refuel the car.

The Caribbean is home to two such PEV initiatives.  Car seller Cayman Automotive Leasing is bringing EVs to its hometown islands, as well as to Bermuda.  Amp Electric Vehicles has signed a deal with solar EV charging station company U-Go Stations to import its converted electric SUVs into Bermuda as well.  The Bermudan government encourages EV adoption by waving the import tariff for the vehicles, according to U-Go Stations president Bill Policastro. Solar charging stations can make economic sense on islands that often have high electricity prices as they can produce power at peak times and sell excess to the grid.

In Hawaii, where a regular gallon of gas now costs $4.55, according to AAA’s fuel gauge report, EV services company Better Place is rolling out an EV charging network across the islands and has installed 70 public charging stations.  PEV owners on Oahu, Maui, Kauai and the Big Island can even charge their cars for free for this year at any of the public charging stations.  According to Pike Research’s Electric Vehicle Geographic Forecasts report, with a population of only 1.3 million people, Hawaii is expected to have more than 14,000 PEVs on its roads by 2017, which would place it ahead in PEV adoption of much larger states including Kansas, Utah and South Carolina.

Better Place is similarly targeting the Japanese islands as well as the “island continent” of Australia for its EV charging services.

Singapore is home to EV infrastructure startup Greenlots, which is building a network of charging stations across the city-state as well as selling charging equipment to other islands in the region.

With their small geographies, islands can be covered with sufficient public charging infrastructure at a more reasonable cost since the vehicles will never be far from a charging station.  Driving an electric vehicle in a tropical paradise can be both carefree and emissions free.

 

Will We See a Silicon Valley of Smart Energy?

— April 9, 2012

We all know that Silicon Valley is the beating heart of the tech industry, with large corporations, tiny start-ups, entrepreneurs and the finance community all living, working and drinking coffee together.   (This last bit isn’t a throw away reference to our increasing addiction to the black magic bean, but to an article I read in Harvard Business Review in 2010 which said that you are as likely to start up a conversation with a potential investor or tech start-up CEO in the local coffee shop as over a formal meeting in an office.)  This melting pot of groups and interest is the key to the success of the Valley.  The key players are all there breathing in the same idea.

Do we need a Silicon Valley of Smart Energy?  And if so, will we see one emerge?  I believe that yes, we do need one.  By bringing all the actors together in an environment conducive to change, change happens.  Smart Energy is stronger than the sum of its parts, but right now its parts are like hissing cats in a sack, as quick to fight each other as to work together to foster innovation.  Just throwing them together won’t enable this change, but it should help them to understand the value of united action.  Secondly, investors are still quick to run to the more traditional markets of the old energy paradigm and high tech.  Investment in cleantech is still patchy and piecemeal with little evidence of a long term sustainable shift in focus to the Smart Energy sector.  A focused geographical region that comprises all the elements of a thriving tech sector would help draw in investors and generate investment.

If the Smart Energy Valley appeared, where would it be? As a European it pains me to write this, but it’s unlikely to be Europe.  Even though the European countries compose one of the biggest, if not the biggest, market for Smart Energy in the short to medium term, we are simply too institutionally risk-adverse to celebrate the successes, but critically also the failures, that a thriving Smart Energy Valley would need.  Micro valleys (let’s call them “Corries,” from the old Scots word for a round hollow) are springing up all over Europe.  These Silicon Corries though tend to promote a regional activity rather than a market.  So even though they can be very successful in promoting growth in their regions, their impact on the overall market is limited.

Asia Pacific? More likely than Europe, but still an outlier.  In energy at least the focus is still on regional growth and with the markets in Indonesia and China exploding this global focus is still, possibly, on the back burner.  Here I could be wrong.  If the Smart Energy Valley does appear in Asia Pacific it could well be in one of the younger countries – specifically Australia.

Africa or Latin America?  Even with the massive surge in liberalisation of energy investment in Africa and the huge strides that Latin America is making to develop deploy Smart Energy technology, there is simply too much going against them for either to be a realistic candidate.

We are left with India, the Middle East, and North America.  These are my front runners.  I believe a Smart Energy Valley will emerge.  Where will it be? In India, the Middle East or North America.

 

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