Navigant Research Blog

How Building Innovations Can Help the United States and China Tackle Climate Change

— November 17, 2014

Under the terms of the U.S.-China Joint Announcement on Climate Change, China has agreed for the first time to set a limit on the rise of its greenhouse gas (GHG) emissions.  As the two biggest economies in the world, the United States and China have the ultimate responsibility for leadership in tackling climate change.  The next big hurdle is driving emissions downward.  Federal regulation on climate change in the United States has been at a standstill, but elements of this agreement shed light on opportunities to reduce emissions while stimulating the economy.

We know buildings demand about 40% of all energy used in the United States, and there is a lot of room for improvement in how we live and work in buildings.  In China, the opportunities to tackle inefficient building operations are just beginning to unfold.  In fact, China’s State Council Development Research Center projects that energy efficiency in buildings could provide 25% of China’s new power needs by 2020.  The central government projects that, by 2020, 60% of the population will be urbanized and more than 1 trillion square feet of new commercial and public buildings will be added to the country’s building stock (learn more from Navigant Research’s reports, Energy Efficient Buildings Asia Pacific and Smart Cities).

Measure, Monitor, Manage, and Mitigate

As the saying goes: you can’t manage what you don’t measure.  The first big benefit of smart building technologies is insight into how your facility is operating.  In order to make improvements, you must have a baseline.  Recognizing this challenge, cities across the United States (including New York City, Seattle, and Chicago) have passed building benchmarking laws to start a new wave of energy awareness.  A wide array of smart building solutions is available to help building owners track their energy use to meet these new demands.

Smart buildings are defined by integrated and dynamic systems.  From the innovators in building energy management systems (as detailed in Navigant Research’s Leaderboard Report: Building Energy Management Systems) to advanced wireless controls for smart buildings, technology is helping building operators and decision makers shift their operations to new schemes for continuous improvement.  Smart building solutions redesign the processes for monitoring and managing systems from heating, ventilation, and air conditioning to plug loads, and in doing so, provide new ways to mitigate GHG emissions from building operations.

The development of smart buildings should be a keystone in the collaboration and innovation targets of the U.S.-China Climate Agreement, because the enabling technologies not only dramatically reduce energy consumption and GHG emissions, but also make real economic sense.


Smart Building Startups Continue to Flourish

— November 17, 2014

Like the “Harvard of the [insert region here],” “the Next Silicon Valley” is a term so trite that it has become meaningless.  You may have heard of the Silicon Hills, the Silicon Strip, Silicon Wadi, or even the Silicon Valley of the East.  It seems that anyone with a pulse is trying to woo tech entrepreneurs into the next Silicon cluster.  Nevertheless, tech activity is not limited to Northern California.  A recent analysis by the Financial Times found that 60% of “unicorns” (tech startups that reach a $1 billion valuation) were created outside of California’s Bay Area.

Indeed, many local governments are trying to establish startup ecosystems to rival Silicon Valley, including the government of Washington, D.C.  Recently, Mayor Vince Gray announced the awarding of grants to tech startups totaling over $800,000.  Several of these companies represent the wave of innovation occurring in smart buildings.  Aquicore, a real-time energy management software for commercial real estate and industrial facilities, received $122,500.  And Azert, the developer of Smart(er) Socket, wall sockets integrated with Apple’s iBeacon technology and Wi-Fi, also received $122,500.

Other People’s Stuff

It might seem strange to think of wall sockets communicating, and even stranger to think of any building infrastructure using an Apple technology.  What’s more, the idea of a software startup that relies entirely on building controls hardware made and installed by other vendors was until recently unthinkable.  In the past, building systems were specifically designed not to work with other vendors’ products in order to ensure a long-term market for replacements and upgrades.  But the convergence of building technology and information technology, the adoption of open protocols, and greater integration between building automation systems have lowered the barriers to entry in the smart building market.

These startups demonstrate that the competitive landscape of smart buildings is changing.  It’s easier than ever to get building data, meaning that a wider pool of competitors is emerging.  What’s striking, and hopefully indicative of future trends, is that these companies are springing up in Washington, D.C., away from the established tech hub of Silicon Valley and away from established global building controls manufacturers.  Future innovation in smart buildings can be driven by anyone, anywhere.


The Dutch Blaze an EV Trail

— November 12, 2014

With the most recent alarming report on climate change from the Intergovernmental Panel on Climate Change (IPCC), governments are once again faced with the question of how to develop policies to address the climate crisis.  The IPCC says that the unrestricted use of fossil fuels must be phased out by 2100.  For some governments, like in the United States, the challenge lies in just getting the public to agree there is a problem.  But even in the European Union (EU), where there is broad consensus on the need for action, it can be challenging to convert this into policies that will successfully drive down greenhouse gas emissions.

One challenge is setting appropriate and achievable targets based on clear-headed analysis, not wishful thinking.  Another challenge is then devising the right mix of carrots and sticks to allow the goal to be met.

The Right Place

The Netherlands’ electromobility initiative is one example of how to develop and implement an environmental policy effectively.  I recently had the chance to talk with a delegation from the Netherlands about the country’s push to promote plug-in vehicle (PEV) adoption and its successes to date.  The first and most critical step was recognizing that the country had the right conditions for PEV adoption.  The Netherlands is a small country, densely populated and highly urbanized.   The Dutch tend to be environmentally conscious already, and the country has an extensive and stable grid network (fueled mostly by fossil fuels but with around 15% renewables).  The country also has some of the highest gas prices in Western Europe, thanks in part to the highest fuel tax in the EU.

Given these conditions, the government’s belief that PEVs could find success was well-founded.  The government has set a goal of having 200,000 PEVs in the Netherlands by 2020.  According to Navigant Research’s report, Electric Vehicle Market Forecasts, total light duty vehicle (LDV) parc (i.e., vehicles in use) in the country will be 8.6 million in 2020.  Two hundred thousand PEVs would be 2.3% of the total vehicles on the road.  That may seem small, but it’s actually an aggressive target, requiring PEVs to average more than 5% of annual LDV sales over the next 6 years.   According to Navigant Research’s PEV forecasts, only Norway, Estonia, and the Netherlands have broken 1% annual PEV sales as of 2014.

Tax Relief

The Dutch government offers significant tax incentives for PEV purchases, PEV leasing, and EV charging equipment installation.  The PEV purchase tax rebate amounts to around €7,000 to €10,000 ($8,700-$12,500).  Perhaps more important, however, is the income tax relief on private use of a company car.  A significant number of cars in use in the Netherlands are company cars or cars leased for company use.  PEVs were exempt from the income tax, saving drivers as much as $5,000 annually.

At the same time, the Dutch government provides incentives for EV charging station deployment, for public and workplace use especially.  As of October 2014, there were more than 9,500 public charging points in the Netherlands.  The effort to roll out infrastructure is supported by Dutch energy and grid companies.

The policies have worked: as of 2014, annual PEV sales in the Netherlands amount to 4% of total LDV sales, and there are a total of more than 32,000 PEVs on Dutch roads.  Moreover, Navigant Research forecasts that the country will actually reach the 200,000 PEV goal by 2019, a year early.

The next phase for the electromobility initiative will see it moving beyond the early PEV adopter phase and promoting further EV charging station workplace and public deployments.  The country’s next target – 1 million PEVs by 2025 – will be a challenge to reach.  But the Dutch have proven that progressive policies can truly shift the vehicle market.


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 South Korean experts I spoke with 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.


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