Navigant Research Blog

A Shifting Lighting Landscape Provides New Opportunities for Vendors

— March 29, 2018

The commercial lighting market is shifting focus from hardware and the production of light sources such as lamps and luminaires to a broader set of solutions that incorporate lighting controls and value-add features beyond illumination. The Internet of Things (IoT) is helping drive this change as the number of connected devices increases and as connectivity is brought to devices that were previously not connected. To address this shift, lighting manufacturers are repositioning themselves in the market to showcase their abilities beyond lighting and traditional lighting controls.

Deepening Capabilities Creates Broader Portfolio Offerings

In the emerging market of IoT lighting solutions, new and expanded technologies are providing a different way to view the capabilities of a lighting system. Vendors can use new use cases to address specific customer challenges beyond increased energy savings such as space utilization, increasing operational efficiencies, improved employee productivity, and enhanced retail customer experience, among others. Companies are leveraging a growing number of technologies to set themselves apart by providing solutions that use these different technologies.

Many companies see value in offering solutions with a breadth of protocols as these can assist a company’s aim to provide tailed solutions for each use case and to future-proof their portfolio. Philips Lighting recently announced the release of luminaires enabled with Light Fidelity (Li-Fi) technology. Li-Fi provides a two-way wireless communication traveling at high speeds, similar to how Wi-Fi uses radio waves to transmit data, but instead relies on light waves. Icade, the French real estate investment company, is piloting this technology in its office in Paris, France.

Navigant Research’s research brief, Visible Light Communication, discusses the origin of Li-Fi technology, which was first demonstrated by Professor Harald Haas during a TED Talk in July of 2011. The technology has not gained much traction in the commercial lighting market since then, but has potential to garner more attention with Philips Lighting’s bold decision to pioneer this technology with its office portfolio. Philips Lighting recently had several other announcements that are chronicled by my colleague Paige Leuschner in her recent blog, “Trends from Light + Building 2018.”

Expanding Capabilities through Acquisition

Acuity Brands, Inc., another leading lighting manufacturer, recently acquired building analytics company Lucid Design Group, Inc. The acquisition will help expand Acuity’s already robust IoT lighting solution portfolio that includes the company’s sensory network of luminaires, components, and edge devices that are enabled with Atrius and feature advanced sensing capabilities. Lucid’s data and analytics software as a service-based platform, BuildingOS, provides building owners, operators, and occupants the ability to gain insights into building operations in order to increase employee productivity and operational efficiency. Lucid’s capabilities will assist Acuity’s strategy of increasing IoT capabilities by connecting the company’s IoT solutions with broader integrated building data.

New Opportunities

These two lighting powerhouses have demonstrated the opportunities available in the market for new solution offerings to expand IoT capabilities with lighting at the center of an intelligent building’s infrastructure. Philips Lighting and Acuity are not alone in pushing the boundaries of lighting system capabilities. The lighting industry is seeing many incumbent lighting companies seize the opportunity to expand their portfolios to align with the shifting market and new startups looking to make a place for themselves in the growing IoT ecosystem.

 

What Will the Microgrid of the Future Look Like?

— March 6, 2018

Microgrids have been around for a long time. In the past, the majority were powered up by diesel fuel and often were not connected to a traditional utility power grid. But what will the microgrid of the future look like?

As reported in the last update to the Microgrid Deployment Tracker published in 4Q 2017, the remote microgrid market share for total identified cumulative capacity declined from 45% to 39% in the 2Q 2017 update. This trend is more of a reflection of the grid-tied market picking up momentum than a lack of interest in remote off-grid applications. For comparison purposes, the next largest microgrid market segment in the update is the commercial and industrial segment, which has witnessed a recent surge and which Navigant Research estimates will be the fastest-growing market segment over the next decade.

Primary DER in Microgrids Are Going to Change

Rather than focusing on market segments, what about the types of distributed energy resources (DER) being deployed within microgrids? It should come as no surprise that diesel and natural gas generation still lead the resource mix. Looking into the future, a far different picture emerges.

In the Microgrid Enabling Technologies report published this January, combined heat and power was the leading DER choice in terms of capacity for microgrids on a global basis in 2017, with 655 MW deployed, followed by solar PV (392 MW) and then diesel (385 MW). By 2026, however, the DER landscape shifts, with solar PV jumping to a commanding lead with 3,786 MW annually, followed by energy storage with 3,292 MW. Energy storage boasts the most aggressive compound annual growth rate (CAGR) with 37.4%; solar PV follows at a CAGR of 28.7%.

Investment Spending Predicted to Rise

Implementation spending tracks this capacity growth. All eight DER were profiled in the recent report (which also includes biomass, diesel, hydro, and wind power). This market forecast represented just over $4 billion in investment in 2017. That annual spending increases to nearly $23.6 billion by 2026, a 21.7% CAGR. Solar PV ranks as the top DER investment target for microgrids, with annual spending reaching virtually half of all DER investment by 2026 at $6.7 billion. Energy storage spending follows at $4.5 billion annually in 2026.

Collaboration Expected as Power Sources Diversify

In short, solar PV and energy storage will be the most popular MET options for future microgrids. Yet, the more interesting question revolves around the potential role of fossil generators. One clue comes from companies such as Fairbanks Morse, which now offers a power reliability as a service platform. Rather than view solar and storage as a threat, it is investigating how to collaborate with the industry’s overall shift to the Energy Cloud.

Fairbanks Morse is not the only company exploring how the energy as a service model applies to microgrids. Perhaps the biggest single headline for microgrids in 2018 is the partnership between Schneider Electric, Dynamic Energy Networks, and the Carlyle Group, looking to deploy $500 million in microgrids under a microgrids as a service business model.

Microgrid Evolution Is Just Getting Started

Of course, the energy service approach to microgrids is still in incubation. The key to making this approach work are controllers, the magic sauce, if you will. As DER portfolios become commoditized, the innovation shifts to automation, controls, and software. Who are the leaders in this space? Look for my forthcoming report ranking control providers later this month.

Getting back to my opening question, the microgrid of the future will be more sustainable, ultra-resilient, plug-and-play, financed under an energy as a service business model with private capital, and will include both solar and energy storage.

 

Electricity Landscape: Expanding Demand

— January 30, 2018

On January 16, 2018, I attended the US launch of the International Energy Agency (IEA)’s World Energy Outlook (WEO) 2017 at the Center for Strategic and International Studies. Dr. Fatih Birol, Executive Director of the IEA, presented findings from the WEO and highlighted four megatrends in the global energy system:

  • Rapid deployment and falling costs of clean energy technologies
  • Growth in electrification of energy
  • China’s shift to a more services-based economy and a clean energy mix
  • The US’s position as the biggest oil & gas producer globally

Taking these megatrends into account, as well as projections on where existing policies and announced intentions may lead the energy systems, WEO’s New Policies Scenario expects global energy needs to increase by 30% between 2018 and 2040. This growth is mainly driven by India, whose share of global energy use is expected to rise to 11% by 2040. Southeast Asia also contributes immensely to overall growing demand. Developing countries in Asia Pacific are expected to account for two-thirds of global energy growth.

Growing Demand for Electricity

With a rising standard of living in many developing countries, more people will want to buy appliances and electronic devices powered by electricity. Innovative transportation technologies are gaining momentum and are projected to increase electricity demand as well. For example, China will need to add the equivalent of today’s US power system to its infrastructure by 2040 to meet rising electricity demand; India needs to add a power system the size of the current European Union. In fact, global investment in electricity overtook that of oil & gas for the first time in 2016. Dr. Birol emphasized the importance of China and India’s future energy decisions. Their decisions will play a huge role in determining global trends due to the scale of investment and deployment.

WEO Electricity Demand Projections to 2040

(Source: International Energy Agency)

Heating and Cooling Demand Ramping Up

The growing demand for heating and cooling is among various drivers for electrification of energy. In particular, consumers in warmer regions will increasingly install cooling systems. There is great potential for energy savings with energy efficient HVAC products, but that market remains largely untapped at present. According to the recent Navigant Research report, Market Data: Energy Efficient Buildings – Asia Pacific, the energy efficient HVAC market in Asia Pacific is expected to reach $25.6 billion in 2026. Specifically, China’s market is expected to grow at a 10.5% CAGR between 2017 and 2026; and 11.4% in India. Today, heating and cooling in buildings account for approximately 40% of energy consumption.

In addition to demand for heating and cooling, the EV market is expected to grow rapidly. EVs can lead to a major low-carbon pathway for the transportation sector. Notably, Europe and China are aggressively promoting EV deployments. Navigant Research projects global plug-in EV sales to reach 8.3 million by 2026.

Increasing Electricity Demands

Overall, end-use electrification is expanding. The IEA expects the share of electricity in final energy demand to increase from 18% today to 26% in by 2060. So, what does the growing electrification of energy mean? Electrification creates environmental benefits by shifting many end uses of electricity away from fossil fuel sources. It also creates opportunities for boosting energy efficiency.

While there are still many challenges to overcome, such as enforcing energy efficiency regulations and developing EV infrastructure, the electrification of large sectors of the economy holds great growth potential. This growth will be driven by rapidly evolving technologies, emerging innovative business models, and shifting regulatory environment. Together, these are referred to as the Energy Cloud, disrupting the traditional electricity landscape. To learn more about how industry stakeholders can prepare and manage their organization to maneuver through the Energy Cloud disruption and position themselves for long-term success, see Navigant Research’s white paper, Navigating the Energy Transformation.

 

Five Bold Predictions on the Frontier of Energy for 2018

— January 11, 2018

It is that time of the year again, when pundits pontificate about what the future holds, and citizens and corporations alike set goals for the coming year. I’d like to make five predictions for 2018 that underscore why a forecast increase in distributed energy resources (DER) over centralized generation will transform the global economy in sometimes surprising ways.

1. DER Innovation Will Abound

The spotlight continues to shine brightly on solar and energy storage technologies. Yet other forms of DER, especially generators driven by fossil fuels, will push the envelope on new business models in surprising ways. For example, Fairbanks Morse recently announced a new offering it is calling power reliability as a service, allowing remote villages in Latin America to access reliable electricity in locations not accessible by road or even airplane. These generators are forging new partnerships/acquisitions while also integrating upgrades revolving around novel hardware designs: Innovus Power (featuring variable speed generators) and the 360 Power Group (extensively patented modular generators that dramatically reduce fuel consumption and improve reliability), are just two examples.

2. One Microgrid Vendor to Lead Them

A US company will emerge as the leading microgrids controls vendor based on validated performance, offering a controls solution priced below $2,000 for a kilowatt-scale microgrid. The company has wowed US government officials with the performance of its controls solution. The question is: can it effectively market its solution as the go-to platform in a market not quite mature enough for a true plug-and-play solution?

3. Policies to Net Positive Results for DER

Trump administration tax reform and new policy directives at the US Environmental Protection Agency will accelerate smart energy investments by a factor of three. While some of these regulatory tweaks will reduce public government support for renewables such as solar PV, the net results will be positive for DER. A combination of public policy reforms at the state level in the US and actions by the private sector will demonstrate that the transition to key elements included under the Energy Cloud future is unstoppable.

4. Asia Pacific Takes Over Innovation

The center of innovation on the DER front will shift away from North America and toward Asia Pacific, focusing on four countries: Australia, China, India, and Japan. Each of these countries offers a landscape fostering DER opportunities. One could argue that Australia is where the most diverse opportunity exists in terms of DER integration with microgrids and virtual power plants. Australia is also home to Power Ledger experiments with transactive energy.

5. Energy-Water Connection Creates Opportunities

New solution offerings focused on the energy-water nexus will come to the fore in 2018. In California, Advanced Microgrid Solutions is one company to recognize this linkage with innovative grid-connected battery systems supporting public water agencies: Inland Empire Utility Agency, Irvine Ranch Water District, and the Long Beach Water Department. Of course, water is a necessity for life. An even more urgent need for energy-water nexus solutions is in developing world locations such as India, where 1 billion people need access to safe and clean drinking water (and as many as 300 million lack access to electricity). Linking solutions for both water and power through DER-based solutions creates synergy and opportunities, both for do-gooders and for entrepreneurs seeking profit.

A Distributed and Resilient Future

These five trends are not the only things I see in my crystal ball. Yet I believe they will help define 2018 as the world makes the transition from costly centralized power infrastructure to a nimble, flexible, and more resilient paradigm. We are in a historic transformation toward a clean, distributed, intelligent, and mobile grid. Do you agree?

 

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