Navigant Research Blog

South Korea Draws an Ambitious Roadmap for Smart Grids and Smart Cities

— November 12, 2014

South Korea has ambitions to be a world leader in smart grid technology.  The smart grid test bed on Jeju Island has been the proving ground for the technologies, partnerships, and business models required to achieve this goal.  Led by Korea Electric Power Corporation (KEPCO), South Korea’s national power company, the Jeju Island demonstration project involved a wide range of South Korean and international partners.  The project ran from December 2009 until May 2013, had a total budget of around $240 million, and included two substations, four distribution lines, and 6,000 households.  The sub-projects included power grid upgrades, demand response, electric vehicles (EVs), renewable power integration, and new energy market models.

In this regard, Jeju Island mirrors many other smart grid pilots around the world looking at the integration of multiple technologies and new business models, particularly island community smart grid projects such those in Hawaii and Bornholm.

From Islands to Cities

South Korea is different in that the government has now laid out plans to move beyond its initial demonstration project into a wider series of trials and eventually a national rollout of smart grid technologies.  The next phase will involve a series of eight smart grid/smart community projects, to be run between 2015 and 2017.  More impressively, KEPCO has laid out plans to extend these projects into a series of municipal-scale smart grids by 2020.  The final stage of this grand scheme will see smart grid technologies deployed across the whole country by 2030.

The total budget for the pilot projects is $876 million, around $400 million of which will come from central and local governments and the rest from the private sector.  KEPCO alone is investing $155 million.  The government expects the private sector to take the lead in further development from 2018 onward.  As well as smart meters, an EV charging infrastructure, and energy storage, KEPCO is piloting a smart grid station that will provide sophisticated energy management and grid integration for commercial buildings, beginning with up to 220 KEPCO buildings.  It sees these smart grid stations as building blocks for community energy management systems and city-scale energy management.

Big City Vision

These are ambitious plans, and some of the Korean experts I spoke at Korea Smart Grid Week were skeptical about the ability of the government, KEPCO, and other stakeholders to meet the proposed timescales.  However, even if those timescales prove challenging, the vision and the roadmap are impressive.  I don’t know of any other country that has laid out a plan of this magnitude that would see smart grid technologies deployed across all of its major cities by 2020.  Such an achievement really would mark South Korea out as a world leader in both smart grid and smart city infrastructure.

 

Will the Natural Gas Boom Help EVs?

— November 11, 2014

Natural gas is better used to generate electricity to power electric vehicles (EVs) than as a direct transportation fuel, according to a new study by Oak Ridge National Laboratory.  The study, entitled “Well-to-wheel analysis of direct and indirect use of natural gas in passenger vehicles,” rates EVs powered by electricity from natural gas as being more energy efficient, less polluting, and cheaper to fuel than natural gas vehicles.

A contributing factor in the analysis is that natural gas power plants, especially combined cycle power plants, are very efficient in creating electricity, and when that electricity is used for locomotion by an electric motor, the net efficiency is higher than that of a natural gas engine.  The study assesses losses and energy used throughout the system, including leaks during transportation (from pipelines etc.), and during compression and decompression of the gas in the case of compressed natural gas vehicles.  In the case of EVs, the study assesses power losses throughout the distribution grid, electric vehicle charging, and the power transfer to and from the battery.

As seen in the figure below, the study concludes that even a low-efficiency natural gas power plant would provide a more energy efficient source of electricity than using gasoline in a car.  The study used the Nissan LEAF and the natural gas Honda Civic GX as the baseline for the vehicle fuel efficiency.

Wheel to Wheel Energy Use

(Source: Oak Ridge National Laboratory)

Emissions of greenhouse gases, including CO2, are also lower in the case of EVs when either the current mix of generation sources or any type of natural gas power plant are used to create the electricity.  And as is well known, electricity is also cheaper as a transportation fuel: Oak Ridge estimated at time of the study that natural gas costs $1.65 per 25 miles for compressed natural gas vehicles, compared to $1.02 for electricity.

Pipeline Peril

It may seem counter intuitive that an extra step in fuel conversion (i.e., gas to electricity) would still be more efficient, but the greater efficiency of stationary gas turbines relative to small engines (as referenced here by Forbes) explains the math.

However, turning natural gas into electricity for EVs requires sufficient pipeline capacity, and a surge of EVs could overwhelm the regional grid if charging occurs at peak times.  Natural gas also has to compete with other forms of generation on price, and there’s no guarantee that the surplus of natural gas from shale would find its way into EVs, as it may simply replace coal.

The study makes the case for facilities that have combined heat and power to add EVs to the fleet instead of adding the significant cost of a natural gas refueling station.  Conversely, a significant argument for natural gas vehicles is their longer driving range and lower upfront cost.  If an EV’s driving range of 80 to 100 miles doesn’t match with the driving requirements, then the economics or efficiencies won’t matter.

 

Tug of War Over Utility Customers Intensifies

— November 5, 2014

In the last few years residential demand response (DR) has become a thriving market.  Recently, Constellation and Honeywell rolled out a service for all customers in areas that the companies serve designed to encourage consumers to purchase Honeywell thermostats and network them into Constellation’s platform.  Initially introduced only to Startex customers (a Texas subsidiary of Constellation) earlier this year, this service highlights the rising competition for energy customers.

Constellation claims that the program has the potential to shave upwards of $128 annually from customers’ electric bills.  Such services could help utilities reach energy efficiency targets as well as assemble an effective pool for residential DR programs.

There’s only one problem here, and it’s exacerbating tensions between utilities, energy service companies, and regulators.  The problem is that this type of program, also referred to as a hybrid DR model, blurs the lines around who exactly “owns” the customer, as well as who is providing the resource.

The New Disruptors

It seems natural for utilities to be receptive to the continued expansion in resources used to target electric customers for energy efficiency and DR programs.  But many utilities, particularly those in regulated markets, see this as encroaching on an established model in which the utility acts as the face of the service in all cases (regardless of who’s actually providing the service).  As utilities shift from vertical producers and deliverers of kilowatt-hours to being providers of electric services (the Utility 2.0 model), the general consensus is that they want to maintain their statutory ownership of their customer base.  Having already given up so much, it’s likely that utilities will put up a fight in holding onto at least this little bit of status quo and margin.

But that’s not how the many disruptive participants, which have evolved within the energy and utility industry or entered from the broadband and IT spheres, want to play.  They want the customer too, either to expand their business and gain more margin, or because they already own the customer through their primary business (think broadband providers).

Not Letting Go

Looking at it from an economic perspective, some argue that allowing non-regulated service vendors to compete will eventually favor the customer.  Others point out that, while an electric services model does have the characteristics of a highly competitive market, the fact remains that delivering electricity requires substantial and expensive infrastructure, therefore limiting the number of competitors, which could disfavor the end user.  Regulators have been understandably reluctant to institute any sort of rapid overhaul.

I’d argue that regulators and utilities are highly aware that they must change the way they do business in order to facilitate the transition of the energy industry to a lower-carbon state.  But it’s not surprising that they still want to defend their end-user relationships.  Customers like having a single point of contact for their energy services – not separate contacts and bills for delivery and energy efficiency.  Furthermore, as utilities lose revenue associated with dismantled vertical business models, energy efficiency and DR are among the few areas where they have the ability to supplement losses.  As hybrid DR models spread, it’s unlikely that incumbents will let their customer relationships go easily.

 

Partnering Takes the Pain Out of Paying for EV Charging

— October 27, 2014

At the dawn of the modern electric vehicle (EV) era (way back in 2010), EV industry participants recognized that a simple way to pay for vehicle charging was critical to EV adoption.  In fact, I recall having conversations with at least one international payment processing company back then regarding the need for a central clearinghouse for EV charging payments.  I described this segment as a small niche that would grow into a major opportunity over time.  Neither that company nor others chose to start building the necessary relationships.  But today, after years of considerable talk and little action, progress is finally being made as charging networks are collaboration and payment clearinghouses are starting to emerge.

During the past half-decade there have been numerous tales of the frustrations of EV drivers who carry multiple cards to be able to access competing proprietary networks.  The Hubject consortium in Europe has been leading the charge to make charging more consistent by simplifying customer authorization, and the group recently announced a method that enables mobile phones to pay for EV charging.

The PayPal Factor

The intercharge direct system is powered by online payment system PayPal.  Drivers scan a QR code on the charging station with their phone, which connects to the intercharge website where PayPal and other payment options are offered.  Customers who have a contract with an EV services provider can pay their existing rates, and more importantly, EV drivers without a contract can still access any of the 3,000 charging stations that support intercharge.

Things have come full circle for PayPal, which was founded by EV maker Tesla Motor’s founder, Elon Musk.  (Note the irony that, since Tesla offers free charging at its charging website, PayPal largely won’t come into play for its customers.)  PayPal is an effective backend payment system, since it’s used globally for small payment amounts.  PayPal is currently being used in the United States for EV charging payments by General Electrics’s WattStation, and in October ChargePoint announced that it would begin accepting PayPal as well.

Reducing the cost and hassle of roaming between EV charging networks will increase the use of public charging stations, which will result in more charging stations being made available, and in turn higher levels of EV adoption.

Makers Make Progress

Efforts to expand EV charging in the United States are slowly paying off, thanks in part to the work of the EV manufacturers themselves.  Nissan is offering free public charging to buyers of the LEAF and convinced competitors ChargePoint, Car Charging Group, AeroVironment, and NRG to each support its EZ-Charge card.  BMW’s ChargeNow program offers a single card for paying at stations from ChargePoint and NRG’s eVgo network, as well as other partners internationally.

Not all partnerships in the area have worked out; ChargePoint launched an ill-fated joint venture with ECOtality in 2013 called Collaboratev that would have streamlined payment processes across both networks, had ECOtality not gone bankrupt only a few months later.

While proprietary payment systems make business sense for the charging networks, they hurt more than help EV owners and automakers.  If the expected millions of EVs are to rely on public charging, roaming between networks should be as simple as roaming between mobile phone networks or getting money from any ATM.  These recent developments provide hope that such interconnections are starting to emerge.

 

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