Navigant Research Blog

With Thread, Nest Targets Wireless Energy Devices

— July 29, 2014

It’s been a busy year for Palo Alto, California-based Nest.  In January, the firm was acquired by Google.  Last month, Nest announced that it would acquire Dropcam, which offers a Wi-Fi-enabled portable camera that pairs with a cloud-based video monitoring service.  Days later, the company launched the Nest Developer Program, enrolling early partners Mercedes-Benz, LIFX, Whirlpool, and Jawbone.

More recently, Nest introduced Thread, a personal area network (PAN) specification for device interconnectivity.  This specification will be regulated by the Thread Group, of which Chris Boross of Nest will be president.  Competing with other wireless specifications such as ZigBee, Wi-Fi, and Bluetooth Smart, Thread is a low-power mesh-based solution that follows the IEEE 802.15.4 and IPv6 standards.

Much of the coverage (see here and here) of the Nest/Thread announcement has asked whether we really need another standard for networking in-home devices.  Thread, though, has some advantages over Wi-Fi and Bluetooth.  Wi-Fi uses a lot of power, which makes it impractical for low-power battery-operated devices such as thermostats or smoke alarms.  Bluetooth Smart is already installed in most smartphones and is low power, but its range is limited.  ZigBee has encountered problems with vendors making proprietary adjustments to the specification, making it impossible or very difficult for devices to interoperate.

Looking for Options

The burgeoning number of entrants in the networking protocol space signals increased competition and perceived high value to be found in the market for connected devices.  For retail consumers, this means better products at lower prices that are easier to integrate into their connected life schema.

Unfortunately, for utilities looking to integrate energy-saving devices such as smart thermostats and lighting controls into their energy efficiency and demand response programs, multiple network protocol alliances present problems.  In order to implement these programs, utilities are subject to numerous technology restrictions and standards from state public utilities commissions or regional independent system operators.  OpenADR and ZigBee Smart Energy Profile are among these standards, and the further that protocol competition pushes the retail device market away from these, the narrower the options will be for utilities.

Sacramento Municipal Utility District (SMUD) has engaged in extensive research on different models of smart thermostats, hoping to identify those that are easy to use and will yield a stronger customer experience (as well as meet energy efficiency and curtailment goals).  However, any model that the utility looks at is subject to a number of technical requirements.  Since these are set by regulating bodies, it’s unlikely that requirements will remain in stride with developments driven in the commercial market.  As it is, the economics of utility deployments are not always favorable to vendors, particularly in programs where more than one thermostat option is offered and sales volumes are uncertain.  It remains to be seen whether vendors will offer devices and platforms that can be used by the organizations that will require them to meet energy efficiency directives and load curtailment needs.

 

European Grids Look to RF Mesh Networks

— July 23, 2014

Communications networks for smart grids have evolved very differently in Europe than they have in North America, with power line communications (PLC) and cellular technology, thus far, as the leading forms of communications for smart meter connectivity across the pond.  Here in the states, the availability of unlicensed (free) spectrum in the 900 MHz band has led to the leadership of proprietary radio frequency (RF) mesh solutions, such as those provided by Itron, Silver Spring Networks, Elster, Tantalus, Landis+Gyr, and others.

The European Commission, however, has taken steps in recent months to bring 48 European nations into alignment on spectrum policy across the continent.  Specifically, for smart meters and smart grid applications (and other machine-to-machine [M2M] applications), the European Conference of Postal and Telecommunications Administrations (CEPT) announced in February a framework whereby 5.6 MHz of spectrum, from 870 MHz to 875.6 MHz, will be set aside for unlicensed M2M uses, including smart meters and grids.  Details can be found in CEPT’s Electronic Communications Committee (ECC) Report 189.

Indoor Reading

CEPT cited several reasons for supporting interoperability, including the creation of economies of scale and cost reduction, reduction in the risk of cross-border interference, and greater flexibility.  The choice of sub-1 GHz spectrum, where propagation characteristics are stronger than at higher bands, makes the spectrum suitable for reading meters that may be placed indoors, even in basements — a common practice in European nations.

Ofcom, the United Kingdom’s telecommunications regulatory body, this year made amendments to its Wireless Telegraphy Act that allow for commercial operations on a license-exempt basis at 870 MHz to 876 MHz as of June 27, 2014; similar action is likely across the 48 nations that participate in CEPT.

This is good news for vendors, like those named above, but also for utilities across Europe seeking more flexibility in their smart meter and grid deployments.  RF mesh solutions are often less expensive than PLC for near area networks, although that varies widely depending upon the structure of the grid in the region as well as the topography.  Nonetheless, some smart meter/communications solutions providers have struggled financially over the past couple of years after ramp-up for American Recovery and Reinvestment Act (ARRA) funding created a spike in demand that has since fallen rather sharply.

Room to Grow

Europe is poised to be the next big growth area for smart metering, thanks to the EU’s 20-20-20 initiative, which a majority of European nations support.  Navigant Research estimates that current penetration of smart meters across Europe is just 15%, compared with more than 40% in North America.  While several nations have made significant progress in deployment (Italy, Scandinavia), Germany isn’t yet on board with the 20-20-20 initiative, and the United Kingdom and France are just getting rolling.  In Eastern Europe, there has been minimal activity to date, particularly in Russia, home to nearly 100 million meters.  For details on Navigant Research’s global smart meter forecast, look for our report Smart Meters, slated for publication later this year.

The Market for Smart Meters, Europe: 2013-2023

(Source: Navigant Research)

Smart meter shipments in North America are expected to total 121 million between 2014 and 2023; that total is forecast to be 221 million in Europe.  That’s more than $18 billion in anticipated revenue for smart meters — a market of which surely every smart meter vendor will take note.

 

Coming to the Motor City: A Smarter Grid

— July 13, 2014

The smart grid in Detroit is about to get smarter – and so are utility industry executives exploring options for real-time grid data and analytics.  Distribution grid sensor developer Tollgrade Communications recently announced a $300,000 project to deploy its LightHouse sensors and predictive grid analytics solution across DTE Energy’s Detroit network.  The companies aim to demonstrate how outages can be prevented.

The 3-year program was selected as a Commitment to Action project by the Clinton Global Initiative (CGI) at the recent CGI event in Denver, where Tollgrade CEO Ed Kennedy took to the stage with former president Bill Clinton to discuss the project.  Tollgrade, Kennedy said, will make public quarterly reports on the project, beginning in 1Q 2015, identifying best practices and sharing detailed performance statistics.

Cheaper Than Building a Substation

With 2.1 million customers and 2,600 feeder circuits, DTE Energy has already begun piloting the system around Detroit, and Tollgrade says that it hopes to prevent 500,000 outage minutes over the next 3 years.  Because of the heavy concentration of auto manufacturing in the Detroit area, those saved minutes should translate into substantial economic benefits.  The system will leverage several communications protocols, including DTE’s advanced metering infrastructure communications network, reducing the startup cost and improving the return on investment.

The sensors will be placed along troublesome feeders as well as outside substations where older infrastructure increases the likelihood of outages.  Combined with the predictive analytics solution, the sensors cost just a few thousand dollars per location and could help DTE Energy avoid or defer replacing a million-dollar substation.  Both investors and regulators are sure to like those stats.

Predicting Change

Predictive grid analytics has been a hot topic in the industry for the last few years, but only recently have the prices of solutions and sensors fallen to a level where utilities can justify the cost to deploy them widely throughout the distribution network.  Navigant Research expects the market for distribution grid sensor equipment to grow from less than $400 million worldwide today to 4 times that amount by 2023.  (Detailed analysis of distribution grid sensors can be found in Navigant Research’s report, Asset Management and Condition Monitoring.)

Since its first meeting in 2011, CGI America participants have made more than 400 commitments valued at nearly $16 billion when fully funded and implemented.  The Modern Grid was one of 10 working groups this year; others include efforts in Sustainable Buildings and Infrastructure for Cities and States.

Another CGI Commitment to Action grant announced last week will fund a market-based, fixed-price funding program for solar and renewable technologies.  The Feed-Out Program from Demeter Power will support solar-powered carports with electric vehicle charging stations at a net-negative cost to the customer.  In other words, eligible businesses pay a fixed monthly fee to Demeter Power (lower than their previous monthly electricity bill) and their employees and customers enjoy free car charging while parked there.  Demeter will own and maintain the infrastructure.

The program will initially make financing available to commercial properties located in Northern California communities participating in the California FIRST property assessed clean energy (PACE) Program, which is offered through the California Statewide Community Development Authority.  Interested participants must register with Demeter Power Group to participate in the program, which is expected to launch in the first quarter of 2015.

 

To Win, Utilities Must Play Offense as well as Defense

— July 10, 2014

Since I’m originally from the Netherlands and spent several years living in Brazil, the semifinal results of this week’s World Cup soccer (or football, as we Europeans call it) matches have been disappointing, to say the least.  One thing that’s clear from the tournament ‑ one of the most exciting World Cups in my memory, by the way ‑ is that to succeed at this level, teams must play well on both ends of the field: offense and defense.  The Netherlands squad, the Orange, played superb defense on Argentinean superstar Lionel Messi, but failed to muster a goal in 120 minutes of regular and extra time and lost on penalty kicks.  As for Brazil, it played neither offense nor defense.

The same is true for utilities in today’s rapidly transforming power sector.  Playing defense – by sticking with established ways of operating and traditional forms of customer service – is no longer enough to succeed.  Utilities must also play offense; they must proactively develop new capabilities and innovative business models to thrive in a world of proliferating distributed energy resources (DER), greater customer choice, and rising competition from new players.

A Shifting Landscape

Widespread coal plant retirements, stiff renewable portfolio standards in many U.S. states, and the spread of renewable generation are all irrevocably changing the mix of generation assets while increasing the need for load balancing and frequency regulation on the grid.  Navigant forecasts that cumulative solar capacity in the United States will reach nearly 70,000 MW – 60% of it distributed – by the end of 2020.

At the same time, the U.S. Environmental Protection Agency’s (EPA’s) proposed limits on CO2 emissions from existing power plants will drive further changes in the generation landscape.  These limits will bring new natural gas capacity online, put upward pressure on wholesale electricity prices, and make demand response and energy efficiency programs key parts of the answer.

(Source: Navigant Consulting)

Today’s centralized, one-way power system is quickly evolving into an energy cloud in which DER support multiple inputs and users, energy and information flows two ways across the system, and market structures and transactions grow more complex.  The energy cloud is more flexible, dynamic, and resilient than the traditional power grid, but it also brings new challenges to a power sector that until recently has changed little in its fundamental structure for almost a century.

Lead or Lose

Facing declining revenue as customers consume less and produce more of their own power, utilities are faced with large investments to build new transmission capacity, upgrade distribution systems, and invest in new DER businesses.  Given these challenges, utilities must be adept at playing offense and defense.  An updated defensive strategy will entail:

  • Engaging with customers and regulators to understand customer choices vis-à-vis price and reliability
  • Improving customer service and grid reliability at the lowest prices possible
  • Finding equitable ways to charge net metering customers for transmission and distribution services
  • Developing utility-owned renewable assets to appeal to environmentally conscious customers

Playing offense is even more important.  Utilities must:

  • Create new revenue streams through the development of new business models, products, and services
  • Transform their organizations and culture in order to fully integrate sales, customer service, and operations
  • Upgrade the grid and operations to facilitate the integration of DER

These objectives can only be accomplished by implementing new business models that include developing, owning, and operating DER such as rooftop solar, customer-sited storage, and home energy management systems; providing third-party financing for DER; and offering new products and services focused on energy efficiency and demand response.

There is no going back to the old ways of doing business.  Utilities must lead – by playing both offense and defense – or they run the risk of being out of the competition.

 

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