Navigant Research Blog

Take Control of Your Future, Part VIII: The Emerging Energy Cloud and Final Thoughts

— June 16, 2016

Power Cloud ComputingMackinnon Lawrence also contributed to this post.

In the initial blog in this series, I discussed seven megatrends that are fundamentally changing how we produce and use power. Here, I discuss my last megatrend, the emerging Energy Cloud and its role in changing our industry.

What Is Happening?

Since coming back from Chicago, where I attended the EEI Annual Convention, I am even more convinced that the electric power industry is transforming. In the closing session of the convention, several utility CEOs spoke about the current state of this transformation and shared success stories. Although utilities will continue to focus on safe, reliable, and affordable power, they will also have to embrace clean, distributed, and intelligent energy. It was interesting to hear CEOs’ perspectives on customer engagement (“we now actually listen to our customers”), innovation (“we are all in”), and distributed energy resources, or DER (“we want to play”).

While that’s great, we are faced with an enormous dilemma. It is hard to comprehend the complexity of what we are dealing with here. The Energy Cloud will be the product of accelerating innovation, the bulk of which lies beyond our immediate purview. Although we cannot predict or anticipate all the disruptions that will be triggered by emerging technologies, there is an inevitability to this transformation that cannot be ignored. These changes will penetrate all corners of the industry: customers, regulation and policy, technology, business models, and grid operations.

Meanwhile, there is limited or negative demand growth throughout the United States. And because of more efficient ways to use power and more prosumers taking the plunge to generate their own, less and less electrons will flow through the central power system (indefinitely). At the same time, in order to provide safe, reliable power, as well as support a tsunami of DER, exploding Internet of Things (IoT) capabilities at the edge of the grid, and rapid digitalization, significant grid investments are needed. The number one question is: Who will pay for this evolution? The search for new value and pricing models (and there will be many) has begun.

We are at the beginning of the transformation, and I don’t think we have seen anything yet. I predict we will enter a 20-year period of uncertainty, trial-and-error, and both successes and many failures. Along the way, we will figure out ways to transform our power generation, delivery, and consumption system into an orchestrated, flexible, open, and efficient Energy Cloud platform.

The Emerging Energy Cloud

In my blog, “The Impacts of the Evolving Energy Cloud,” I discussed how we are moving away from a centralized hub-and-spoke grid architecture based on large centralized generation assets toward a more decentralized grid with an increased role for renewables, DER, grid-edge IoT, and digitalization. The Energy Cloud is an emerging platform of two-way power flows and intelligent grid architecture. While this shift poses significant risks to incumbent power utilities, it also offers major opportunities in a market that is becoming more open, competitive, and innovative. Fueled by steady increases in DER, this shift will affect customer relationships, shape policy and regulation, change business models, propel continuous technology innovation, and overhaul grid operations in every single region of the world.

The Energy Cloud

Energy Cloud

(Source: Navigant)

North American utilities are at various stages of integrating distributed generation, demand response, energy efficiency, electric vehicles, and electric storage. Navigant expects this integration trend to accelerate. According to our analysis, DER is projected to grow almost 3 times faster than new central station generation in the next 5 years. That makes DER one of the most disruptive factors affecting the grid today and in the future. From a recent Public Utilities Fortnightly-Navigant survey among 400 utility stakeholders, 90% of survey respondents believe that the growth of DER will force a major shift in utility business models. We believe it is critical that utilities have an integrated DER (iDER) strategy and approach.

Path Forward: The Energy Cloud Playbook

The paths that utilities will follow to transition toward the Energy Cloud will be different. More importantly, the pace by which they move through iDER maturity levels will differ greatly. But understanding the North Star and taking the right steps at the right time are vital to making the transition successful.

At an advanced iDER maturity level, utilities have addressed issues arising from high DER penetration such as intermittency, reverse flows, and power quality issues. Utilities are using both information and operations technology (i.e., IT/OT) and have aligned their business processes, operations, and organizations appropriately. DER management systems (DERMSs) and advanced distribution management systems (ADMSs) are managing DER output at the feeder and substation levels. At this advanced iDER maturity level, the utility has augmented its role as a supplier of electricity and has become a platform provider and network orchestrator that enables prosumers to market their DER assets on an open market. This role is critical to fully maximizing the benefits of DER—and it will be key to providing future value to customers and shareholders.

What’s Next?

While the Energy Cloud is in its infancy today, its evolution will be both pervasive and highly disruptive to stable electric industry revenue streams for the next 30 years or more. Navigant projects that the Energy Cloud’s evolution could result in nearly $1 trillion worth of global investment shifting downstream to the retail segment of the value chain. What’s more, it could add an additional $1 trillion to 1.5 trillion in new value from investments in digital infrastructure and associated services by 2030.

As a follow-up to Navigant’s white paper, The Energy Cloud, we will publish our Energy Cloud 2.0 white paper in the next couple of months. This new white paper will move beyond the “what” to identify the “how.” At the same time, it will provide an Energy Cloud Playbook for the different utility, regulatory, investor, manufacturer, and government stakeholders positioning to build, manage, and protect their future in this emerging ecosystem.

Final Advice: Take Control of Your Future

This post is the eighth and final in a series in which I discussed power industry megatrends and the impacts (“so what”) in more detail. Navigant is at the forefront of what is happening in our industry. We continue to collaborate with our clients to help them navigate the rapidly changing energy landscape.

I have received positive feedback and insightful reactions on this blog series from many. Some readers wanted to understand more about the energy technology trends we see. So Navigant is preparing a new series in which we will cover the specific technology trends that we see disrupting our energy industry. Others have requested a megatrends series focused on oil & gas, which we are working on as well.

The megatrends discussed in this series cannot be underestimated. They are accelerating transformation in the energy industry, enabling the entry of new players, putting pressure on incumbent players, and altering traditional strategies and business models. Organizations will need to adapt, and there will be winners and losers as this transformation takes shape. My advice to senior leadership of energy companies is to take an integrated, holistic view of the opportunities and challenges that are flowing from these megatrends. Only then will you be able understand the full impacts and path forward. And that is the only way you can really take control of your future.

I hope you enjoyed this blog series. Stay tuned for future series.

Learn more about our clients, projects, solution offerings, and team at Navigant Energy Practice Overview.

 

The IoT and Intelligent Buildings: An Optimization Roadmap

— June 7, 2016

Intelligent BuildingThere is a lot of discussion around the importance of buildings in tackling big challenges, ranging from climate change to energy resilience. Intelligent building solutions are the tools that maximize the flexibility and responsiveness of facility operations to manage energy consumption, allowing for reduced greenhouse gas emissions and response to grid pressures. The intelligent buildings market has been maturing through investments made predominately by the largest customers managing large portfolios and facilities. Technology, and specifically Internet of Things (IoT) and data-driven services, are the evolutionary developments of the intelligent buildings market that now enable optimization of the market as a whole. The opportunity is huge, and as a result, technology giants are making big investments. New partnerships and acquisitions set the stage for deeper market penetration with enterprise customers as well as the midmarket.

Enhancing the Enterprise

Navigant Research has tracked the development of the intelligent buildings market and specifically the evolution of software solutions. Building energy management systems  have been the focus of our research, as they are the offerings that first disrupted the building automation and facilities management industry. This market continues to evolve, and the focus on investment increasingly spans both energy and operational efficiency. The growing demand for showcasing operational efficiency has been the foundation for big moves on the business front, including partnerships and acquisitions.

Siemens and Capgemini recently announced the Navigator platform, a “joint engagement to provide analytics-based services for connected buildings.” The move underscores the magnitude of opportunity to engage enterprise customers in the intelligent buildings market. As the press release framed it, “Together with Capgemini, Siemens is now further developing this Navigator platform to help corporate real estate owners drive business results and meet energy efficiency goals, while maximizing the lifecycle potential of their customers’ real estate assets.” Other major technology players have announced similar partnerships, including Hitachi’s launch of its Insight Group, which is expected to deepen partnerships with tech partners such as SAP and Microsoft. The investment and commitment of both the building technology and information technology and services giants validates the bullish outlook on the intelligent buildings market for enterprise customers.

Setting the Stage for Midmarket Penetration

The midmarket is another important segment of the facilities industry because of the sheer number of these facilities and a legacy of inefficiency in operations that presents big opportunity for optimization. Navigant Research’s new Building Energy Management Systems for the Midmarket report presents the outlook for investment to 2025. The acceleration of the IoT market and continued growth in customer awareness sets the stage for rapid investment in BEMS for the midmarket, which we estimate to reach $1.6 billion by 2025 (at a 24% growth rate from 2016). Our optimistic outlook on the market is built on clear market signals, including similar partnership and acquisition trends that we are tracking in the enterprise segment.

For example, Current by GE announced the acquisition of Daintree Networks to enhance its IoT and energy management capabilities. As a company press release states, “This acquisition will enable Current to expand its building automation platform and its energy-as-a-service offering to small- and medium-size facilities through the deployment of Daintree’s open, standards-based wireless control systems.” There are others taking advantage of the new opportunities in the midmarket through IoT; for example, Intel has made numerous partnerships with companies from Lucid to Building Robotics.

IoT may seem to be a buzzword, but it is increasingly evident the technology trend is changing the game for building energy and operational efficiency. Expect significant partnership and acquisition announcements through the rest of 2016 as the market continues on a fast pitch to broad customer adoption.

 

Which Voice to Rule Them All? New Google Device Enters Virtual Home Assistant Fray

— June 3, 2016

Computer and TabletWith Google’s recent announcement of its Home product, a voice-activated virtual assistant for your home to control devices, provide information, and manage energy might be closer than you think. The device will compete directly with Amazon’s popular Echo, and consumers are likely winners.

Home won’t be available until later this year, and its cost has not been revealed, though it’s expect to sell for around $180 to match the Echo’s price point. If the Echo’s history is a guide, I anticipate Home will be a hit with consumers, gaining relatively wide and quick adoption. Amazon has sold an estimated 3 million Echo units since its launch in November 2014.

Home will answer questions and hold two-way conversations in addition to executing tasks like playing music or controlling connected smart home devices, such as a Nest thermostat or LED lights. Essentially, it will do what Amazon’s Echo does.

A Step Forward for Voice Activation

So why is this a big deal? Because Home represents another step toward mass adoption of voice-activated interfaces in homes. Instead of pulling out a smartphone or a tablet, firing up an app and using fingers on a touchscreen to control something in a home, using one’s voice is a more natural and simple process. For instance, while cooking in a kitchen with your hands occupied, calling out to Home or Echo to set a timer is quite convenient, as is commanding a TV to mute itself from across the room as you answer a call. Seemingly small applications like these are the future.

From a utility company perspective, the Home device and other smart home (i.e., Internet of Things [IoT]) products represent a small revolution. Nearly half of utility industry executives say the smart home will revolutionize the industry, according to a survey by public relations firm Antenna. The PR firm does note a separate study about current barriers to adoption among consumers, namely the cost to purchase the equipment and the complexity of installing and configuring smart home systems. Those barriers, however, are likely to fall in the near- to mid-term as production volumes build (thus driving down costs) and competing manufacturers reduce the installation complexities. (For a detailed forecast of residential IoT device shipments and revenue, see Navigant Research’s latest report, Market Data: IoT for Residential Energy Customers.)

No Shortage of Competitors

And don’t count out other prominent companies still on the sidelines in this regard. One is Apple; the masterminds from Cupertino are not to be underestimated, as a former colleague says. “Underestimating Apple in this space or even Siri in this space would be fundamentally wrong,” says Michael Gartenberg, an analyst with iMore.com and a former Apple marketing director. I concur. The other is Microsoft, which has yet to launch a virtual assistant product specifically for the home, but could easily do so with Cortana. There is no shortage of competitors in the space.

Given its influence, Google’s entry into this particular market is likely to be significant, going head-to-head with Amazon. For consumers, the competition should drive prices lower, and a flurry of new applications for both product platforms should be just over the horizon. Voice, it seems, is the new touchscreen for homes.

 

Bionic Eyeballs and Digital Ceilings: What the Future Holds for Intelligent Buildings

— May 19, 2016

Intelligent BuildingI am a dedicated fan of sci-fi thriller Orphan Black, but the idea of bio-tech jaw implants shook me to the core in a recent episode—talk about taking wearables to the next level. The thing is, a less diabolical (and more voluntary) implant is not so far-fetched. Enter Google. Earlier this month, the tech giant took one more leap forward in its vision for integrated intelligence—its 2014 patent has been published, setting the stage for the intra-ocular device. Step one.

The good stuff buried in the patent: “The inter-ocular device could include one or more antennas configured to enable communication with an external system and/or reception of wireless power by the intra-ocular device.” For now, it seems this is an ideation of connected health, but the possibilities are really endless. The early experiments with Google Glass could point toward a new reality of contact computing work to be had. In reality, step two—the era of reading operating stats via apps that send operational data tied to nameplates through your eyeballs—is probably a ways off. That said, there are disruptive shifts in facilities management underway today.

Inter-ocular Device

Casey Eyeball Blog

(Source: Google)

Reimagining Infrastructure

Wearables will likely remain outside the body (at least for the next year), but nonetheless, technology is transforming the facilities management industry. The Internet of Things (IoT) is sure making a buzz, but its impact in buildings is real. Navigant Research defines IoT as a scalable, secure, and open platform for aggregating and communicating data for performance improvement. What this means is there is a proliferation of devices that are transforming facilities into data-rich environments, and when these devices are networked as a part of an IoT infrastructure, better information becomes available. This is key; there is a lot of noise surrounding technology advancements and more data, but these solutions only have value if they deliver better information. The effective IoT-enabled intelligent building delivers efficiency in operations and energy, but also a host of other business benefits, including occupant engagement, satisfaction, and productivity.

Networked Building Optimization and Lifecycle Benefits

A unified approach to optimizing performance of multiple systems in a facility is fundamental to the process of developing intelligent buildings. Let’s step back to the technology available today. Cisco, for example, has introduced the Digital Ceiling Framework, a single IP network for directing improvements in both HVAC and lighting. The company recently explained the end-to-end benefits of a unified platform: “The convergence of these disparate systems is providing opportunities that reduce construction and operating cost; enhance physical and cybersecurity of people, assets, and performance in buildings; reduce environmental footprints through the use of advanced analytics; and allow for personalised and customised experiences that appeal to workers from all generations.”

Other major industry players are making big moves to showcase their capabilities in this IoT-enabled approach. As another example, Current announced its acquisition of Daintree Networks in late April. The story is analogous; IoT solutions enable optimization across the facilities value chain through coordinated operations of HVAC and lighting.

The industry is taking note of the benefits of IoT and software. According to a recent survey by Schneider Electric, 65% of facility managers predict IoT will affect building and maintenance within the next year.  There is a huge market to penetrate, when you consider that this same survey found that only 18% of facility managers are using continuous or real-time data. Our research indicates the tides are turning and the pace of investment is accelerating as IoT devices and intelligent building software open the door to broad business benefits for companies operating in facilities large and small.

 

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