Navigant Research Blog

Uber vs. Everyone

— September 17, 2015

Ride hailing service Uber has continued on its tremendous growth trajectory in 2015, with the service now available in around 300 cities throughout 60 countries. That geographic spread easily eclipses any competitors in the space, which are more likely to be localized services, although it is likely that Uber’s success helps many competitors by increasing demand for ride hailing services overall.

But its enormous success has also made Uber an enormous target. Stories of Uber’s battles with city officials, taxi and livery companies, and regulators pop up daily in the news. It’s not surprising, given that ride hailing is so disruptive to the existing order of livery services and the long-established relationship these services have had with regulators. The biggest battle for ride hailing is over whether these companies must comply with regulations governing taxi services in each of the cities where they operate. Stories of regulators clashing with Uber are well-known, especially in cases where the company was banned outright. However, the impact that ride hailing has on traffic congestion and on the use of other mobility modes is a critical area of concern for cities. For example, New York City Mayor Bill de Blasio recently accused Uber of exacerbating congestion in Manhattan, based on an analysis showing that traffic speeds had decreased between 2010 and 2014.

Increasing Costs

Right now, it seems unlikely that the ride hailing genie can be put back in the bottle. Too many people have come to rely on the service, and it’s not just the expected demographic of those 30 or younger. What seems more likely is not that Uber or other ride hailing services will disappear, but that it will face ever increasing costs doing business. This is especially true for Uber. Having so many geographic markets means grappling with different regulations in each one, as well as dealing with different business cultures. In Germany, for example, the company launched a new service with drivers who have commercial driver’s licenses after Germany banned Uber for using private, non-licensed drivers. In Philadelphia, the city’s parking authority imposed a $300,000 fine on Uber for operating illegally in the city, although the state’s public utility commission had earlier indicated the company was operating legally. These kinds of costs will only increase in cities where Uber already operates and as the company continues to expand.

More Data, Please

Another likely outcome will be a demand for more analysis of ride hailing’s impacts on vehicle miles traveled, on congestion, and on the use of alternative modes of transportation. For example, an analysis of New York City traffic speed data came to the conclusion that ride hailing apps were not correlated with lower traffic speeds. Ride hailing companies will be increasingly pressed to supply data to help generate high-quality, objective analysis. This analysis is crucial to understand how ride hailing apps fit in to the new urban mobility landscape, and whether they support policymakers’ goals to reduce congestion.

 

President Renews Commitment to Clean Energy, but Sustained Effort by Stakeholders Needed as Well

— September 17, 2015

U.S. President Barack Obama has renewed his commitment to promoting clean energy and energy efficiency with a set of executive orders designed to drive wider adoption of greener technologies. The president outlined his goals in a speech on August 24, in which he called for a greater penetration of renewable energy sources—wind and solar in particular.

The president’s executive orders encompass funding and a mix of private sector obligations, including:

  • Providing $1 billion in additional federal loan guarantees available for distributed energy projects using innovative technologies.
  • Releasing residential Property Assessed Clean Energy (PACE) financing for single-family homes to invest in clean energy technologies.
  • Creating a Department of Defense Privatized Housing Solar Challenge, as well as noting that companies are committing to providing solar power to housing on more than 40 military bases across the United States.
  • Announcing $24 million for 11 projects in seven states to develop advanced solar technologies that double the amount of energy each solar panel can produce.
  • Approving a transmission line that will support a 485 MW photovoltaic facility to be constructed in Riverside County, California and produce enough renewable energy to power more than 145,000 homes.
  • Creating a new interagency task force to promote clean energy, and announcing commitments from local governments, utilities, and businesses to drive energy efficiency in more than 300,000 low-income households, as well as investing more than $220 million in energy saving activities for veterans and low-income customers to help lower energy bills.

Energy Cloud and New Utility Thinking

These moves by the president and his administration are part of a larger trend already taking place, which Navigant Research has dubbed the energy cloud. In this emerging scenario, a broad range of technical, commercial, environmental, and regulatory changes are expected to combine to alter the traditional hub-and-spoke grid architecture. These changes are also resonating among some utilities. A recent survey of utility executives found that some 30% of respondents are planning investments in behind-the-meter technology (such as microgrids, energy storage, and distributed generation), and more than 40% of respondents are considering these types of investments.

The effort to promote clean energy has momentum and the government at the federal level can play a role, but utilities, their customers, and technology vendors are also needed to sort out what works and what doesn’t as part of a sustained effort. The approach taken by New York’s Reforming the Energy Vision (NY REV) seems to strike the right balance of government regulators setting some new guidelines and letting market participants come up with solutions and business models that can drive the cleaner energy market forward.

 

Automotive Mapping: A New Digital World

— September 15, 2015

German automakers Audi, BMW, and Daimler have announced plans to acquire Nokia’s mapping service HERE in a move that seems part of the continued blending of the automotive and digital worlds. HERE is one of a handful of companies that supplies mapping data to a wide range of end users, competing with Google Maps and TomTom. HERE’s strengths lie in the automotive sector, as its service is the most often used in vehicle navigation systems.

It may be that the automakers simply want to secure the availability of this mapping service to ensure that Google Maps won’t be the only game in town. The same could be said for another interested party in the HERE sale: Uber, which has recently acquired mapping expertise and intellectual property from Microsoft. This was seen as partly a defensive move. It appears that Uber is trying to position itself away from Google, which has been signaling through its investment through Google Ventures a desire to launch its own ride hailing app that could compete with Uber. But Uber has also expressed an interest in autonomous vehicle technologies, declaring to Tesla that it would be prepared to buy a fleet of autonomous electric vehicles. As Navigant Research has discussed, high-quality mapping is critical to the autonomous vehicle sector.

Meanwhile, Apple has continued to make moves that suggest it may launch an electric vehicle of its own. After reports in early 2015 hinted that the company was building an electric van, speculation have only increased when the company moved to hire a former quality control executive from Fiat Chrysler Automobiles and to use BMW’s i3 electric vehicles in a trial project.

Blurred Lines

This brings us back to the story of Audi, BMW, and Daimler acquiring HERE. All of these activities demonstrate that the digital and physical worlds are now fully integrated within auto manufacturing, and that the lines between these industries will continue to blur. Auto companies are now well-established in Silicon Valley, and it is apparent to the OEMs that they will have to be more than just car manufacturers in the future, but also mobility providers. German automakers are especially far along in this realization. BMW, for example, has its own smart parking app and carsharing business. Indeed, most automakers are exploring some of these new mobility concepts. Ford’s 25 global mobility experiments include vehicle sharing, carsharing, and smart parking services, while Toyota has its electric vehicle carsharing trial programs. Other OEMs are also launching carsharing services, developments that will be discussed in Navigant Research’s upcoming Carsharing Programs report.

Acquiring mapping expertise plays into the shift from automakers to total mobility providers. What will be interesting to watch is how daring the auto companies are prepared to be in making this transition. So far, much of the OEM activity is labeled as a trial, indicating that some OEMs are still unsure about the real value of these new services. Indeed, some of the services may well be low revenue generators, but they can help automakers stake out their role in the new urban mobility landscape. This is especially the case in the mature and highly regulated car markets of North America and Western Europe, where private cars will be just one more mobility tool among many.

 

August Presents Prospects and Threats for Renewable Energy

— September 15, 2015

Oil prices experienced a tumultuous year in 2015. With an increase in North American shale oil supply and a lack of management of Organization of the Petroleum Exporting Countries (OPEC) production, an imbalance in the supply and demand of oil has led to wild spikes in oil prices. As oil prices have plummeted over 50% in the past year, renewable energy companies are understandably concerned.

Simple economics explains that when commodities prices are low, consumers will want to purchase and use more of the product. This is no different when it comes to energy prices. Dropping oil prices makes renewable energy sources appear comparatively more expensive, and thus consumers will return to oil.

However, simple economic models are too basic to describe why dropping oil prices aren’t always a harbinger of challenges for the renewable energy market. Volatility is one reason why oil prices won’t collapse renewable energy stocks. Investors understand that markets are erratic. Despite the current downswing, investors in oil should expect an eventual recovery. Lack of control in oil production leads to little price stability. By comparison, investors may view renewable energy technologies as a far more consistent opportunity. Additionally, the decline in the use of oil for electricity generation has limited the impact of oil prices on solar and wind generation sources.

Global Stock Market Crash

This August, China’s stock market suffered a significant fall. An initial 8.5% drop in the world’s second-largest economy had a significant impact globally. This market crash led to immediate further dips in oil prices, causing stock prices for renewable energies to continue to decline as well. One cause of the Chinese market crash was a decision by the Chinese government to devalue its currency in an attempt to reduce costs of exports. China is currently the largest manufacturer of solar panels, often exporting solar panels globally below the production costs of competing manufacturers. As a result of the country’s currency devaluation, there are concerns from competitors that Chinese solar panels will continue to decrease in cost.

A New Clean Power Policy

President Barack Obama rolled out a new clean power policy this month that will provide federal backing for clean energy technologies. The plan calls for $1 billion in additional loans to be made available for distributed energy projects that aggregate numerous distributed energy resources in new and cost-effective ways. Clean energy technology will also be more readily available for residential customers through improvements being made to the property-assessed clean energy (PACE) program. The plan will also allow for significant innovation in distributed energy projects.

Challenges and Potential

While decreased oil prices and a struggling global stock market have had an immediate negative impact on the renewable energy industry, significant policy changes will allow companies the opportunity to fund innovative distributed generation technologies moving forward.

 

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