Navigant Research Blog

Super Bowl 2012: A Power Play

— January 25, 2012

The New Year is upon us, and President Obama has delivered his State of the Union address, which offered high-level insight on the energy sector in the US but was reminiscent of messages we’ve already heard. Now it’s time to turn our attention to another really important event of the year: the 2012 Super Bowl.  As always, this year’s game will be a staggering display of athleticism and energy consumption (rather than verbiage and applause).  These two things, generally not discussed in the same conversation, offer a more nuanced look at the energy sector here in America.

Every year the stats at the Super Bowl pile up like Tom Brady’s passing yards, including the kilowatt-hours (kWh) consumed.  The 2011 Super Bowl in Dallas, Texas set a record, becoming the most highly viewed television program in American history.  Almost 16 million people tuned in, consuming roughly 11.3 million kWh through television sets alone, according to a report by General Electric.  That’s enough electricity to power all the homes in three NFL cities – Green Bay, Pittsburgh, and Dallas – for 10 hours.

While many fans are focused on the number of touchdowns or turnovers, they’re generally unaware of the statistics they post in their own homes, through their electricity consumption.  On a wider scale, this lack of awareness plagues the energy efficient home market, the consequence of forces on both the supply and demand side.  Traditionally, consumers’ utility bills have not provided actionable information, making it difficult to interpret their consumption and how to reduce it.  Simultaneously, home builders and renovators haven’t been able to articulate a sensible value proposition for energy-efficiency measures.

Appliance designs have made considerable gains in energy efficiency, but these gains are eclipsed by the proliferation of consumer electronics, like LCD televisions and digital video recorders (DVRs).  According to the U.S. Energy Information Administration, more than 50 million U.S. homes have more than three TVs, and more than 45 million (40%) homes have a DVR.  The power consumed by appliances and electronics grew from 17% of average home energy use in 1978 to 31% in 2005, according the EIA’s Residential Energy Consumption Survey.  Advances in energy efficiency have historically mattered less to the American consumer than the newest entertainment device.

There is a chance the American consumer has started to pay attention, however.  Major organizations like the NFL have started highlighting residential energy efficiency – like investing in 800 free home energy audits in the Indianapolis area.  And according to a recent Yahoo Real Estate poll the American homebuyer’s dream home might be more energy efficient and constructed of sustainable materials.

Currently, there’s little incentive for consumers to tune in to their energy consumption.  Engaging the American public through the most popular entertainment forums (e.g.  the Super Bowl) and by using devices and outlets they already love (e.g.  televisions and social media) may be the ticket to unlocking the energy efficiency potential in the residential sector.

 

Reviewing Our Top Fuel Cell Trends Forecasts for 2011

— January 24, 2012

As we are publishing our 2012 Top Trend Paper on the Fuel Cell and Hydrogen Sector, now is an opportune moment to look back at 2011 predictions made by myself and my colleagues, Lisa Jerram and Anissa Dehamna, and have a look at how we did.  Were we totally off beam or we spot on?

In our first fuel cell and hydrogen white paper, published in January 2011, we said that in 2011 the following trends were going to be important:

  • The increasing importance of the hydrogen “Juniors”
  • Re-emergence of the private equity firms
  • Tipping points in the stationary fuel cell sector
  • Fuel cell vehicles will continue to see limited, but growing, deployment
  • Necessary consolidation in the fuel cell industry
  • Rising influence of Japan and South Korea in the global fuel cell industry
  • Hydrogen as an energy storage medium
  • Refocusing and rebranding
  • Rare earth restrictions as an obstacle to fuel cell adoption
  • UAVs as a key market for fuel cells

Overall I’d say we got about a 5.4 out of 10, so let’s say a C+.  I will select six critical areas and look at each in turn:

1.  The Increasing Importance of the Hydrogen “Juniors”

The hydrogen production industry is dominated by only a handful of multinational companies, which Pike Research terms the “Majors”.  Going forward, as fuel cells increasingly see commercial deployment across a growing range of applications, hydrogen will start to become visible as a fuel in hydrogen consumption graphs.  How this hydrogen will be produced is an active debate, but one trend we identified during 2010 and we forecast to see grow significantly in 2011 was the critical role of the Hydrogen “Juniors”.  These smaller, more flexible hydrogen producers, the Juniors are developing highly innovative products that have the capability to provide a fast roll-out small-scale distributed hydrogen generation sector.

That is what we said.

What happened was pretty much  as we forecast.  ITM Power, especially, had something of a stellar year.  I aked Dr.  Graham Cooley, CEO of ITM Power if he could sum up 2011 for his company for me and he replied with:

“2011 was a big year for ITM Power.  We launched our Hydrogen On Site Trials (HOST) and showed that hydrogen could be made onsite and was cost competitive with other forms of hydrogen, petrol and diesel.  HOST enabled us to engage with a number of commercial companies who had never been involved in the hydrogen sector before and showcase the reality of hydrogen as a transport fuel.

“We also launched a number of CE Marked hydrogen generation products alongside publishing our cost structure and a sale of our first hydrogen refuelling unit.”

So comparing this with what we said would happen in 2011 I’d say we were just about spot on.

2.  Tipping Points in the Stationary Fuel Cell Sector

Did we ever get this right, but almost for the wrong reasons.  We said at the start of 2011 that a number of applications and companies are still at the level of tipping points (as opposed to learning curves), with the most important one being the transition from batch manufacturing, which is usually done manually, and continuous automated manufacturing.  We also forecast that as 2011 progressed an increasing number of companies, possibly including major automotive manufacturers, would release reduced cost projections.

What we, and no one could foresee, was the impacts caused in 2011 by a number of extreme geological events.  The Japanese earthquake and tsunami, with the knock-on impact at the nuclear plant at Fukushima, is still being felt in many areas.  For fuel cells, specifically, it saw the sell-out of available subsidies for the purchase and installation of residential combined heat and power fuel cells, and the demand reaching a level that companies manufacturing the systems have had to bring in extra capacity.  We have also started to see the emergence of brand new, very large scale facilities, with the 100MW manufacturing plant from POSCO being a prime example.

Clearly the impact of exogenous events such as Fukushima are unpredictable, as least by mere mortals such as those of us in Pike Research, but even taking out the impact of these events we can still see that a number of tipping points have been reached.

3.  Fuel Cell Vehicles will Continue to See Limited, but Growing, Deployment

At the start of 2011 we said that major automakers, including GM, Honda, Toyota, Daimler, ad Hyundai, have pledged to produce commercial fuel cell vehicles by 2015, or even earlier.

So far we are still on track for this 2015 launch date and in 2012 this is still a valid statement.  We went on, though, to say:

Several automakers have pledged to produce small fleets – in the hundreds – for release to consumers and fleets in this timeframe, so 2011 will see the early stages of this ramp up. 

Looking back over the last months, we would like to be able to pinpoint where these micro fleets have appeared, but the reality is that we cannot see them.  2011 in fact was somewhat quiet on the fuel cell electric vehicle front, with the overwhelming majority of releases and attendant, positive and negative, PR going to battery EVs.  On this we were wrong.

4.  Necessary Consolidation in the Fuel Cell Industry

We openly admit that this wasn’t a popular forecast – after all we were openly predicting the demise of a number of companies – but it was, and still is, valid for this phase of evolution in the fuel cell industry.

What we said in January 2011 was that the fuel cell industry is rife with small companies with strong intellectual property that are not well positioned to cross the chasm of death and reach commercial viability.  Conversely, large OEMs, energy companies, and other industrial conglomerates looking to move into the business may find it most appealing to simply acquire a company with an existing product.  Such partnerships have already been formed and 2011 may be the year when they turn into fully-fledged acquisitions.

Here but we were right on the money, with the BIC acquisition of Angstrom Power being the prime example.  BIC, a large multinational, had been working in the area for years but did not have products commercially available.  Angstrom Power, a small innovative company with strong IP, was in need of a large cash infusion.  Marriage made in fuel cell heaven!

5.  Rare Earth Restrictions as an Obstacle to Fuel Cell Adoption

I have to say that we got this one wrong.  We said that as a result of price hikes, and increased demand flow for REMs, SOFC development could be increasingly constrained over 2011, until the full impacts of the hypersensitive REMs markets are fully understood.

Wrong.

6.  UAVs as a Key Market for Fuel Cells

The final prediction we made for the fuel cell and hydrogen industry in 2011 was the continued deployment of tactical fuel cell-powered unmanned aerial vehicles (UAVs), and the move to large-scale adoption and refinement for military use.  Military agencies around the world will continue to allocate funding and resources to the development of this market for portable fuel cells.

We sort of got this right, but really we were about 18 months too soon.  2011 did the see the U.S. military coming out very strongly in support of the further development of fuel cell technology for multiple applications, including UAVs, but deployment was limited.

So for our final prediction we were on the right track, but not quite there.  Now it’s 2012 and of course we are publishing another ten trends – and yes we will critically review these come 2013.

 

Smart Homes Coming, At a Gradual Pace

— January 19, 2012

The promise of smarter homes continued to make noise at this year’s CES, the world’s largest consumer electronics show.  But nothing really wowed me.  You might call this an incremental show – and that’s not necessarily a bad thing.

Keep in mind that CES is huge, with 1.86 million net square feet of space used by exhibitors, record crowds (upwards of 153,000 people) and a record number (3,100-plus) of exhibitors showing off their newest gear.  Among the products, companies and people I saw, these stood out for various reasons:

Devices

Nest (Nest Labs): It’s hard not to like what Nest Labs has done to the lowly thermostat.  The much-publicized Nest device combines the simplicity of an iPod (the company founders, in fact, helped develop Apple’s iPod) with the ability to “learn” how you use energy to heat and cool your home.  The device then aims to help consumers reduce energy consumption and thereby lower their costs.  Company co-founder Matt Rogers told me the catalyst for Nest was to help people “save a ton” on energy consumption with an easy-to-use device.  After launching online last November, Nest Labs quickly ran out of stock.  Orders are wait-listed now as manufacturing ramps up.

Belkin’s WeMo Home Control Switch: This Wi-Fi connected switch sits between a wall outlet and small home appliances.  You turn it on or off through an app on iOS, Apple’s mobile platform, and the switch can be paired with a motion sensor for more functionality.  Availability of these WeMo devices is expected in the summer of 2012.  Other related devices – such as garage door openers, door locks, and baby monitors – are expected to join the WeMo family as well.

Retail

AlertMe and Lowes’s: UK-based AlertMe has partnered with home improvement chain Lowe’s to provide a cloud-based home management system.  AlertMe will be the platform behind Lowe’s new Iris service for North America, which enables consumers to monitor and control their homes through a smartphone or a computer.  The Iris service will launch in mid-2012.  AlertMe CEO Mary Turner told me the goal is to provide consumers with not only an intelligent digital dashboard for their homes, but also the ability to put their homes on “cruise control.”

Technology

ZigBee, Z-Wave, HomePlug, UPnP, HomeGrid (G.hn): Many of the leading networking technology groups were present at CES, as expected, each vying for greater traction in the connected home space.  While each has something to offer, there isn’t room here to dissect them in detail.  Suffice to say, many vendors have interesting products on the market or coming soon based on these technologies, which is very encouraging.  But it all makes for a cluttered landscape in consumers’ minds, and that slows the emergence of mainstream solutions.

Throughout the show, I heard people say, essentially, “The technology is available for smarter homes – it just needs to be deployed.”  For that to happen, I was told, both utility operators and consumers need more education, which while true, means a slower rate of adoption.  Sure sounds incremental to me – and should be expected, given the sluggish economy and the mood of consumers to move cautiously at the outset of trends that involve something as complex as the modern, connected home.

 

At NAIAS, The Beginning of the End of the Battery Wars

— January 18, 2012

After attending the North American International Auto Show, I can state one thing for sure: the number of nickel metal hydride (NiMH) battery hybrids is shrinking fast.  Ford has made a bold move that will likely have other automakers following suit: it has stopped producing a NiMH-based battery hybrid.  All their hybrids will be lithium ion (Li-ion) based batteries, starting this year for the 2013 model year.  Ford claims that this will enable the new Fusion to achieve fuel economy numbers (44 mpg highway/47 mpg city) that are higher than smaller cars like the Honda Civic hybrid (44/44) and well ahead of similar segment cars like the Toyota Camry Hybrid (39/43) and Chevrolet Malibu Eco (which also uses a Li-ion battery in its eAssist system, to achieve 37/25).  The larger Fusion may even start to pinch some demand from the current reigning eco-leader, the Prius (48/51), thanks to its size and sedan body-style (the typically preferred style in the U.S.).  Of course, all this depends on the price, which was not announced at the show. 

Joining the current users of Li-ion batteries in hybrids (BMW, GM, Honda, Hyundai, and Mercedes), the two potential big-volume hybrids announced at the show this year, the Fusion and the Jetta Hybrid, are now both Li-ion based.  With Ford now shifting to Li-ion batteries in all its hybrids, the ranks of NiMH based hybrid vehicles are shrinking fast, with two major exceptions: the Toyota Synergy drive system and the Honda Insight/CR-X.  So, while this may point to the end, the NiMH vs. Li-ion competition is not over… yet.

Two other interesting reveals at the Auto Show were the Lexus 2+2 hybrid coupe and Toyota NS4 plug-in hybrid.  These vehicles, while just design and technology showcases, almost certainly have the underpinnings of the next generation of Toyota’s hybrid system.  Toyota wasn’t talking about this, but I expect we will hear more about the next generation of hybrid in the coming year.  Toyota has put a great deal of effort and money into developing a Li-ion supply chain with its current hybrid battery partner, Panasonic, and is offering that battery in the Prius PHV.  As we have seen Honda do with the Civic, I would expect Toyota to shift some low-volume hybrids (perhaps Lexuses) to Li-ion in the very near future.

It’s clear that this move by Ford will usher in new pressure on competitors to make big jumps in fuel economy.  NiMH producers will see new competitive pressures as a result.

 

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