To meet federal, state, and local mandates for alternative drive vehicle adoption and fossil fuel reductions, local fleet managers must find replacements for traditional gasoline-powered vehicles that are both economically and environmentally beneficial.  At the Green Transportation Conference hosted by TransEnergy Solutions recently, it was clear that finding the optimum alternative drive vehicle replacement for any given fleet is not easy.

Advanced technologies for alternative drive vehicles come with a price premium, alternative fuel infrastructure requirements, and the need for driver training programs on how best to operate and refuel the replacement vehicle.  The fuel cost savings of the replacement vehicles have to pay back the aggregated costs of those items in as few as 3 years to make the alternative drive vehicles appealing to fleet buyers.

Adding to the difficulty is the fact that there are many alternative fuels and drive technologies for fleets to choose from.  Technologies featured at the conference included regular hybrids, hydraulic hybrids, compressed natural gas (CNG), liquefied natural gas (LNG), liquefied propane gas (LPG), plug-in electric vehicles (PEVs), and fuel-cell vehicles (FCVs).

Find Your Niche

Choosing the wrong technology for the wrong application can turn potential savings into costs.  For instance, purchasing a light duty hybrid to replace a low-mileage light duty fleet vehicle would not likely pay back the cost of the advanced technology, as hybrid technologies accrue the greatest savings per city-mile driven; the more the vehicle is driven on city roads with stop and go traffic, the quicker it pays back its premium.  Equally economically inefficient is purchasing an LNG-powered medium duty truck for inner-city applications, as the evaporative nature of LNG reduces the fuel economy of the technology considerably when the vehicle is idling.

In other words, each alternative drive technology is best suited for a particular market niche.  LPG is particularly suited for smaller fleets with medium duty vehicles and for school bus fleets, since the infrastructure costs are low.  LNG is best suited for long distance heavy duty trucks whose idling time is minimal.  Hydraulic hybrids produce the best returns for fleet vehicles used for stop and go driving, like shuttle buses, refuse trucks, and mail delivery.  The hydraulic hybrid system works like a spring, compressing hydraulic fluid when braking and releasing when accelerating, capturing 70% to 80% of the accumulated energy.  The hydraulic system provides fuel savings and faster acceleration than diesel or CNG-powered vehicles.

The alternative drive vehicle industry still has a long way to go to convince fleet managers of the benefits of transitioning from gasoline and diesel power.  Though lower greenhouse gas (GHG) emissions are great benefits of alternative drive adoption, educating fleet managers on the options that will give them the greatest financial return is the best way to achieve market growth for all alternative drive technologies.

Cecil Adams of The Straight Dope once supposedly wrote, “Around here, we don’t vote on the facts.”  That was before the age of online surveys.  Once again I have in my inbox a request to participate with other executives in a survey of the current sentiment and outlook of the smart grid industry.

When I see these surveys I wonder, “Who really cares what we think?”  The electrons don’t care.  The untrimmed trees under the high voltage lines don’t care.  The hostile nation-state hackers certainly don’t care.  The ratepayers – sorry, I meant to call them customers – don’t care.  And if someone thinks that I am a “smart grid executive,” then I hate to think who else has been identified as an “executive.”

As a market research professional, I admit that I look down my nose at surveys.  They are not primary research, as many losers in last November’s U.S. elections are now aware.  My research involves a lot of time on the telephone, asking questions of key stakeholders in a given research area, then synthesizing diverse responses into one or two theses.  This is rarely straightforward.  One slide from my conference presentation deck asks, “What is the No. 1 cyber security problem facing utilities?”  During one research project I asked 33 people this question and got 28 distinct answers.  It takes three slides to answer what you’d think is a really simple question.

Not Another Monkey

That is what research looks like.  The notion that you can just run another SurveyMonkey to an anonymous audience, arbitrarily designate your audience as executives, and therefore develop conclusions about the industry… just doesn’t sit well with me.

But surveys produce numbers.  Numbers can be analyzed, operated upon, correlated, summarized.  And no matter the source, numbers somehow convey an air of certainty.  Especially if you have a large enough sample size and can claim a statistical error margin of +/- 3%.  That’s just got to be right, doesn’t it?

Not always.  Surveys of sentiment are qualitative.  This particular survey asks questions such as whether my company’s smart grid investment is going to increase, decrease, or stay the same.  Whether the increase is by $100 or by $1 billion, I tick the same box.  There is nothing quantitative going on here.  Yet we often ascribe to survey results the same strength as weather measurements or time signals.

In the spirit of full disclosure, Navigant Research does publish and sell an annual Smart Grid Consumer Survey.  We are open that we are measuring consumer sentiment, nothing more.  And I have used some of the survey results as supporting data for my research.  But I would never draw conclusions solely from anonymous surveys.

For us, research begins with lots of telephone time discussing issues with key stakeholders.  That research continues with our all-star research associates who spend their days tracking down untold quantities of obscure but useful information.  That is how you begin to understand the direction of a market.

As the concentration of carbon in the atmosphere reaches a level not seen in human history, it’s worth considering how much the conventional wisdom surrounding energy has changed in the last 5 years.  In 2008, domestic fossil fuel production (other than coal) was considered to be in permanent decline, with local debates on where to site natural gas import terminals.  Coal-based electricity generation was assumed to be as irreplaceable as it was undesirable.  Increasing energy costs and volatility were unavoidable, while renewable generation cost parity appeared within reach as the bar moved lower.  A nuclear power renaissance was effectively promoted as the only carbonless solution with the potential capacity to displace coal.  The dawn of transportation electrification seemed upon us, while the smart grid took a laser focus on peak load reduction.

Much has changed since then.  Conventional wisdom has caught up with the gas industry experts (including some of my Navigant colleagues), who foresaw how the shale gas boom would reshape the North American energy landscape.  With domestic oil and gas production up sharply, costs are expected to stabilize and volatility decrease.  Planned natural gas import terminals, while still locally controversial, are morphing into export terminals.  Natural gas generation is rapidly displacing coal, leading to significant carbon emissions reductions, though the enabling fracking technologies trigger new concerns.  Even as the cost parity goalposts keep moving, the cost of renewables continues to decline.  The Fukushima accident stalled a North American nuclear renaissance while driving Germany and Japan, at least notionally, to nuclear exits.  Home refueling of natural gas vehicles could replace electric vehicle charging stations in consumer imaginations.  Meanwhile, long-haul trucks, fleet vehicles, and even locomotives are adopting natural gas.  And the smart grid is becoming more important as a means of power resiliency in the face of hurricanes and superstorms than as a vehicle for peak load reduction.

Cheap Gas, Smart Buildings

This all came to mind recently when I moderated a panel discussion titled “The Future Direction of Energy in North America and the Impact on the Intelligent Buildings Sector” at CABA’s Intelligent Buildings Forum in Toronto.  CABA is the Continental Automated Buildings Association, a 25-year old organization dedicated to the advancement of intelligent home and intelligent building technologies (I am privileged to serve on CABA’s board).  The panel participants represented the perspectives of commercial property owner/managers (Cadillac Fairview), utilities (Ontario Power Authority), suppliers (Siemens), and technology researchers (CanmetENERGY).

So what do the major shifts of the last half-decade mean for intelligent buildings?  The panelists agreed that demand for improved energy efficiency remains strong, even if all the incentives for deploying the technology to deliver such efficiency are not always aligned.  Local codes and mandates may be drivers, but even lower-cost energy is not free energy.  Building-to-grid technologies and distributed generation may become even more important if natural gas enables local generation, which is becoming an intriguing option for the storm-ravaged Northeast United States.  Most importantly, all agreed that “cheap, abundant” natural gas is unlikely to spur new interest in dumb buildings.

The Japanese market for building energy efficiency technologies has been strong for decades, thanks in large part to the 1979 Act Concerning the Rational Use of Energy, the foundation of Japan’s stringent building energy codes.  In the 2 years since the Fukushima earthquake and the ensuing energy crisis – which has caused a 17% increase in the price of energy for non-residential customers of TEPCO, the monopoly utility that serves the greater Tokyo region – demand for energy efficiency technologies in Japan has grown significantly.

In particular, demand for building energy management systems (BEMSs) has grown as much as 30% to 40% year-on-year over the last few years, according to discussions I’ve had with market participants and key industry players in Japan.  Although the concept of BEMSs is mature in Japan, given that it is a requirement of the Act Concerning the Rational Use of Energy, the concurrent timing of the energy crisis and the market availability of software-as-a-service (SaaS)-based BEMS software has led to a surge in its adoption.   (It should be noted that the concept of BEMSs in Japan overlaps significantly with the concept of BEMSs in Europe and North America, though BEMSs in Japan often include additional technologies such as building-to-grid connections, smart meter technology, and others that are often considered part of the smart grid in other regions.)

Driving DR

At the recent World Smart Energy Week at the Big Sight in Tokyo, I was focused on learning more about the adoption of technologies such as building energy management systems (BEMSs), direct digital controls (DDCs), demand response (DR), and other intelligent building products in Japan within the 3^rd Eco House & Eco Building Expo.

I attended several sessions of the event’s Smart Grid Technical Conference, where representatives from organizations such as Itron, NEDO, and Toyota discussed smart building technology in the context of the increased intelligence of the utility grid.  In particular, the increased growth of PV and wind in Japan will continue to drive the country’s emerging DR market, which will expand further through the adoption of smart building technology.  As Taichiro Kawahara of Hitachi put it, “Demand-side energy management in Japan must be promoted through demand-side management and demand response.”

The conference not only explored the application of these technologies in Japan, but also compared and contrasted similar successes and challenges with smart grid integration experienced in Europe and North America.  This perspective is critical for ensuring that the adoption of smart grid technology in Japan unfolds as smoothly as possible and for providing Japanese technology developers with important insights into the market landscape in other regions into which many Japanese companies are looking to expand.  This sort of international forum is critical for spreading market-leading technology – and ensuring that the industry doesn’t make the same mistakes twice.