Navigant Research Blog

Advanced Energy Is $1.13 Trillion Market

— April 11, 2014

The publication of the Fifth Assessment Report by the Intergovernmental Panel on Climate Change (IPCC), Climate Change 2014: Impacts, Adaptation, and Vulnerability, made headlines recently with a familiar message: the climate is warming, people are causing it, and we are ill prepared to deal with the direct and indirect effects of climate change.

Indeed, it is a grim outlook, but when looking at one indicator not covered in the IPCC report – revenue from deployment of smart energy technologies – there are signs that things are moving in the right direction to reduce emissions.

One group, the Advanced Energy Economy (AEE), is a national association of businesses and business leaders who seek to make the global energy system more secure, clean, and affordable.  The group takes a big tent approach to clean energy.  It is bankrolled by one of the leading advocates and funders for the United States taking a leadership position in deploying clean energy, Tom Steyer.  AEE has identified seven core segments that make up the advanced energy industry: Transportation, Electricity Generation, Fuel Production, Electricity Delivery and Management, Fuel Delivery, Buildings, and Industry.

For the past 2 years, AEE has commissioned Navigant Research to quantify the advanced energy industry market sizes for the United States and globally.  We have identified 41 categories and 80-plus subcategories that meet the AEE definition and put the detailed findings and key trends in the recently released report, Advanced Energy Now 2014 Market Report.  Below are some key findings from the report that illustrate the breadth and depth of technologies that are capable of reducing emissions and U.S. activity in those markets.

Key Findings

  • The global advanced energy market reached an estimated $1.13 trillion in 2013
  • In the United States, the advanced energy market was an estimated $168.9 billion in 2013 – 15% of the global advanced energy market, up from 11% in 2011
  • Advanced transportation is booming: Navigant Research forecasts annual plug-in electric vehicle sales will reach approximately 467,000 vehicles in the United States and 80,000 in Canada by 2022 – slightly faster than hybrid electric vehicles sales grew in their first decade.
  • The United States accounted for an estimated 18% of the global solar PV market that approached $100 billion annually in 2013 and far surpassed 100 GW of cumulative installations in 2013
  • LEDs are expected to be the leading lighting technology over the next decade, with LED lighting products (including lamps and luminaires) in commercial building markets forecast to grow from $2.7 billion in 2013 to more than $25 billion in 2021
 

U.S. National Parks and Electric Vehicles: A Match Made in Heaven?

— April 8, 2014

The U.S. Clean Cities program and the National Park Service (NPS) recently announced nine new projects to deploy clean vehicles at U.S. national parks. These projects are part of the Clean Cities National Park Initiative launched in 2010. The nine projects mainly feature plug-in electric vehicles (PEVs) and hybrid electric vehicles (HEVs).  Around 21 vehicles will be installed through the funding, including some low-speed electric vehicles (EVs).  The projects also include the installation of EV chargers for park visitors. While any move to make the U.S. parks cleaner is welcome, the relatively modest ambitions of this funding effort reflect the challenge that parks present in the adoption of EV or HEV technology.

Parks have long been an attractive target for greener transportation. This is not only for symbolic reasons, but also for practical reasons. Diesel and gas vehicles are noisy and disruptive. Park vehicles may spend time idling, which is both an emissions problem and a cost concern given the large amount of fuel essentially wasted during idling. These factors would seem to make PEV and HEV technology a good option, but to date, deployments have largely been pilot or demonstration programs and there has yet to be a full-scale shift toward electric drives at the U.S. parks.

A Building Barrier

One major barrier has been the lack of truly commercial vehicles available. As discussed in the Navigant Research report Hybrid and Electric Trucks, most of the traditional truck original equipment manufacturers (OEMs) are offering hybrid versions in the larger trucks classes that are not applicable to the park service. In the truck category, parks would primarily utilize utility trucks, pickup trucks, or vans and trucks outfitted to transport passengers.  These would be vehicles in the Class 2b light duty category or medium duty Classes 3-5, where, until recently, there was more attention focused on producing electrified vehicles for delivery service.

Even though pickup trucks are among the top-selling vehicle in the United States, U.S. OEMs have tailed off production of hybrid pickups and only ever offered demonstration models of plug-in trucks.  However, in the past 18 months, there has been an uptick in companies focused on these class levels and in applications with some applicability to national parks. In January, U.S. startup VIA Trucks announced a major commitment by Canadian company SunCountry to place VIA’s plug-in vans into passenger transport services at Best Western hotels. VIA also develops plug-in electric utility trucks, which will be used at several electric utilities in a pilot project funded in part by the U.S. Department of Energy (DOE). U.S. company Odyne Systems will be delivering 120 utility trucks through the same DOE funding; the plug-in system allows utility workers to avoid engine idling by running equipment off of the battery.

Looking at the larger class of passenger buses that are used in national parks, the biggest push is coming from China’s BYD, which has been targeting parks and transit agencies. While most of the company’s orders are outside of the United States, BYD is making a strong push for the U.S. market. After winning bids in Los Angeles and Long Beach, California, the company began to face major backlash from activists and its U.S. competitors. The Long Beach order was recently canceled, although, evidently, the reason was simply a paperwork glitch. In any case, this environment would make it difficult for the NPS to adopt these buses until BYD becomes more established in the United States through transit deployments like the one in Los Angeles.

While increased vehicle availability will help make electric and hybrid options more feasible for any park looking to convert, the issue of the price premium still looms large. With hybrids costing well over 25% more than conventional vehicles and electric buses often reaching a 100% price premium, cash-strapped public services like the NPS will likely find themselves unable to make the switch even if they want to. Lower-cost options, like propane, continue to see uptake in national parks for this reason. This also explains why the Clean Cities National Park Initiative is still necessary to move these vehicles into U.S. parks.

 

Enabling Remote Microgrids in the Developing World

— April 4, 2014

In my last blog, I wrote about the success mobile network operators (MNOs) are having with electrifying rural communities in developing regions, such as Latin America and Africa, by partnering with companies that sell solar home systems.  Much credit must go to the pico systems themselves, which are a cheap and reliable way to provide for the customer’s basic energy needs (cell phone charging and lighting).  However, there are two greater forces at play that reach far beyond the business of rural electrification: MNOs have found an effective business model in pay-as-you-go (PAYG) and they have employed an effective money transfer technology, known as mobile money.

These two forces answer the question: What has enabled the exponential growth of cell phone usage in the developing world?

Phone Bank

PAYG is a prepaid mobile phone plan.  You pay for a phone with a certain amount of airtime on it and you refill the time in your account as needed.  There’s no contract or monthly rate.  If you run out of time, your service is cut off, plain and simple.  This model works well for the off-grid rural poor who live on an inconsistent daily budget and who typically don’t have bank accounts.  It should be noted that some utilities in developed parts of the world are also experimenting with PAYG meters and they are finding that it is the only model that has successfully led to a change in consumer behavior (in the form of energy conservation).  As my colleague Peter Asmus details in his recent blog, this isn’t the only example of how the developed world can learn about energy solutions from the developing world.

Returning to the unbanked poor of the developing world, MNOs spotted an opportunity to capitalize on the lack of banking infrastructure in remote communities, and they have leveraged vendor networks and mobile technology to offer basic banking services to their customers.  To purchase airtime in the developing world, customers visit their local mobile airtime vendor and pay cash upfront for a scratch card of a certain value.  They enter the code from the scratch card into their phone to redeem the value of the card as mobile money, which goes directly into the mobile money wallet in their phone.  The mobile money wallet is protected by a PIN and acts essentially like a debit account, which can be used to purchase more airtime, along with other goods and services, to send and receive money, and to pay bills.  The MNO charges the customer for transactions made, so it is a lucrative new revenue stream for them.  More significantly for nanogrids, mobile money has opened the door to provide financing to unbanked customers.

Nanogrid Frontiers

Historically, one of the greatest barriers to off-grid households purchasing solar arrays has been the high upfront cost.  Investors, whether they’re vendors, microlenders, or nongovernmental organizations (NGOs), have had a hard time offering PAYG lending schemes to consumers due to the difficulty of collecting a long stream of small payments from a remote village, as well as the inability to monitor the systems.  Mobile money can provide a platform that enables lenders to conveniently offer PAYG schemes to off-grid consumers for the purchase of nanogrids, among other things.  More importantly, mobile money could turn remote parts of the world into profitable frontiers for the nanogrid market.  Many residential solar vendors (such as Simpa Networks in India) already see them that way, and these vendors are finding investors to finance PAYG systems as well as partners to handle the mobile money transactions.

While there is some variability in what these PAYG schemes look like, the keys to success seems to be the ability to track payments and usage easily and the ability to cut off service if a customer falls behind.  To view a list of nanogrid PAYG case studies, check out Navigant Research’s report, Nanogrids, and to learn about other business models that are being used to electrify remote parts of the world, view the replay of our “Remote Microgrid Business Models” webinar.

 

Policy Headwinds for the Wind Industry

— April 4, 2014

Weatherman_webFor the first time in 8 years, the global wind industry installed less wind capacity in an annual cycle than the year before.  A total of 36.1 GW was brought online in 2013, representing a full 20% drop from the 44.9 GW installed the year before, according to the latest figures from Navigant Research’s World Market Update – International Wind Energy Development Forecast 2014-2018.  Policy fluctuations and uncertainty are key factors for the drop and continue to frustrate those in the wind industry.  The countries where policy put the brakes on wind power development globally in 2013 or is dampening its future outlook include:

United States: The biggest dent to global wind growth came from one of the sector’s largest markets, the United States, where new installations fell 92% from a record 13.1 GW in 2012 to just under 1.1 GW in 2013.  This was the result of a dysfunctional federal government, which delayed renewing the wind industry’s key tax incentives.  Strong growth is expected this year and the next, but the broader boom and bust policy cycle is likely to continue in coming years.

Spain: For the beleaguered Spanish wind market, 2013 was the first full year in which installation data clearly reflected the downturn caused by the near total removal of incentives for wind energy.  With just 175 MW of new capacity added in 2013, Spain’s wind industry recorded its lowest growth rate in 16 years. The sector’s collapse is the result of the national government’s decision to withdraw virtually all subsidies for renewable energy projects. The latest electricity market reforms scrap production incentive payments for all new wind plants and attempt to reduce revenue for wind plants already operating.

Italy: Newly installed wind capacity in Italy was down 65% from 1,272 MW in 2012 to just 450 MW in 2013. The decline in new installations was widely expected, with Italy switching policy from a system of tradable green certificates to a structure based on competitive bidding for a capped volume of fixed-price 20-year contracts. The contract prices are significantly lower than prices for wind under the certificate program. The change in market structure set off a rush among developers to connect wind projects to the grid before January 1, 2013 and the drop-off for the full year 2013.

Canada: Wind plant construction hit a record 1,599 MW in Canada last year, but medium- and longer-term forecasts are lower due to policy changes at the provincial level.  Ontario scrapped its feed-in tariff (FIT) program of premium fixed power purchase prices for wind power after the World Trade Organization found the local content rules to be in violation of international law.

Australia: 2013 was a strong year for wind plant construction in Australia, with 655 MW connected, but the future of Australia’s wind power industry is in serious doubt following the late 2013 election that resulted in a conservative coalition government that is openly hostile to wind power.  The new government is planning a number of policy reversals in 2014 that will dilute or collapse price support for wind power generation and strengthen the fossil fuel industry.

European Union: The EU is making progress toward meeting its 2020 climate and energy target, but the view beyond has grown less positive for renewables.  The European Commission proposed a new framework for a climate and energy policy for the 2020-2030 timeframe that includes a proposed renewable energy target of 27% by 2030, lower than the previously discussed 30%.  In addition, under the proposal, the target would not be formally translated into national, binding, country-level commitments, as it is currently structured through 2020 for all EU member states.

For further details on policy headwinds, how they contributed to changing market shares of the top wind turbine OEMs globally and within country specific markets, and a range of other current topics, check out the recently released World Market Update – International Wind Energy Development Forecast 2014-2018.

 

Blog Articles

Most Recent

By Date

Tags

Clean Transportation, Electric Vehicles, Energy Management, Energy Storage, Policy & Regulation, Renewable Energy, Smart Energy Practice, Smart Grid Practice, Smart Transportation Practice, Utility Innovations

By Author


{"userID":"","pageName":"Renewable Energy","path":"\/tag\/renewable-energy","date":"4\/17\/2014"}