Navigant Research Blog

Big New York Smart Meter Rollout Plans Take Shape, but Issues Remain

— March 30, 2016

??????????????????Consolidated Edison (Con Ed), the largest utility in New York, recently received approval of its ambitious plans for a smart meter rollout, but the latest details point to some concerns about paying for the requirements and more details about customer engagement.

The plan, approved by the New York Public Service Commission (PSC), calls for the installation of approximately 3.5 million smart electric meters and for some 1.2 million gas meters to be deployed in Con Ed’s service territory starting next year, with an expected completion by 2022.

But in the announcement, the commission said its approval was contingent on the utility providing a detailed plan for providing continued engagement with customers and third parties. In addition, the commission expects 15-minute meter reads for residential customers, whereas the original proposal called for hourly data from meters. With the more frequent reads, the issue of charging fees, if any, for providing the more granular data has yet to be resolved. For non-residential meters, the meter data is to be at 5-minute intervals.

Program Questions

In addition, there are concerns about how Con Ed will implement the Green Button Connect program, which is a federally sanctioned initiative aimed at giving residential customers easy online access to their detailed energy consumption data. Originally, Con Ed indicated hourly data would be available at no charge. But now a group called Mission:data, which represents third-party companies like SolarCity, Stem, Bidgely, PlotWatt, and EnerNOC, has raised the issue of whether Con Ed will be charging a fee for data access. Con Ed has until the end of July to submit new details about data access and who will have to pay.

Undoubtedly, the smart meter rollout envisioned by Con Ed will eventually be deployed and customers should benefit by having a more modern and flexible system. But the devil, as always, is in the details, and when it shakes out, some of the hoped-for capabilities might be less than expected. And third-party energy service providers might be less than satisfied. As we’ve seen with other smart meter implementations—the United Kingdom’s complicated deployment comes to mind—the complexity of an advanced metering infrastructure rollout can sometimes be overwhelming, and the real costs not readily apparent. Bumps in the road have become commonplace, especially with large projects, but a smarter grid is still attainable.

 

Battery Makers Moving from Supporting to Lead Actors in EV Industry

— March 30, 2016

Accumulators and batteries close up.While General Motors (GM), BMW, Audi, and others are in hot pursuit of Tesla Motors for the media’s attention, the battery makers that power their cars are becoming more prominent as industry leaders. LG Chem and the other top-tier battery suppliers are expanding relationships with the automakers that will lead these companies to selling more of the technology found inside a plug-in electric vehicle (PEV).

Most notably, South Korea-based LG Chem is now supplying not only battery packs, but also motors, inverters, and onboard chargers to GM for the upcoming Chevrolet Bolt. LG Chem expects its automotive battery business to reach $1 billion annually this year, and the company is pushing harder into stationary energy storage as well.

LG Chem committed early to the EV battery market, and Navigant Research (then Pike Research) ranked the company as the leader in the industry as early as 2012. It retained its position during the November 2015 Navigant Research Leaderboard Report: Lithium Ion Batteries for Transportation.

EV Battery Manufacturer Rankings, January 2012 (Left) and November 2015 (Right)

John Blog Charts

(Source: Navigant Research)

LG Chem recently won a contract to supply batteries for the upcoming Chrysler Pacifica plug-in hybrid. The company has the most diverse group of customers in the industry, supplying EV batteries to Daimler, Ford, Renault, and Volvo.

Meanwhile, competitor Panasonic is expanding in the burgeoning Chinese EV battery market  by forming a joint venture with Dalian Levear Electric Company to start producing batteries in the country, according to Automotive News China. Panasonic was the world’s largest supplier of EV batteries in 2014 with a 38% market share, according to Navigant Research’s Advanced Battery Tracker 4Q15 report. Panasonic is partnering with Tesla Motors to build the gigafactory, a $5 billion battery manufacturing plant that currently under development in Nevada. Tesla Motors recently canceled the larger 10 kW version of its pricey Powerwall home energy storage system, which was using batteries manufactured by Panasonic. Panasonic also supplies EV batteries to Audi, Ford, Honda, and Volkswagen.

Samsung SDI, LG Chem’s neighboring competitor in South Korea, said it will begin shipping batteries this year to enable a 300 km (186 mile) driving range for EVs, and it’s intent on doubling that range by 2020. Samsung will continue to sell batteries to BMW for the soon-to-be-upgraded i3, as well as the i8 sports car, and to Fiat for the 500e.

The quality and performance of the battery can make or break a PEV, and battery makers such as LG Chem will continue to benefit from that importance to further leverage their relationships with automakers.

 

 

Here’s How Electric Cars Will Not Cause the Next Oil Price Crash

— March 21, 2016

EV RefuelingLast month, Bloomberg Business published an article titled “Here’s How Electric Cars Will Cause the Next Oil Crisis.” The article outlined how declining battery costs will make electric vehicles (EVs) attractive alternatives to conventional petroleum powered vehicles, which will then lead to rapid market adoption. Consequently, EVs will then fuel the next oil crisis in the first half of the next decade. Historically, the word “crisis” when used in regard to energy commodities means resources are tight and prices are high; in this case, Bloomberg is using “crisis” to describe the opposite—a price crash on behalf of an oversupply of oil.

Semantics aside, Bloomberg’s analysis assumes that when EVs displace as much as 2 million barrels of oil per day (an amount equivalent to the oil glut that spurred the 2014 drop in oil prices), global oil markets will witness a similar price crash as has been witnessed since 2014. Navigant Research agrees with many of the assumptions Bloomberg uses in projecting EV sales; however, the overall premise of the article—that EVs will cause the next oil crisis—is sensationalist. It misses the bigger picture on energy and transportation, and likely works against Bloomberg’s own prediction.

It is true that EVs displace oil; Navigant Research estimates that the total amount of oil displaced by electric light duty vehicles in the United States from January 2011 through December 2014 was roughly 2.1 million barrels. However, focusing on EVs betrays a lack of comprehensive understanding on other trends in the automotive industry that are likely to be far more impactful to oil markets. These trends include improvements in conventional vehicle fuel efficiency, adoption of partially and fully autonomous drive systems, and the increasing growth of mobility programs as alternatives to vehicle ownership.

Missing Pieces

The biggest omission in Bloomberg’s article is conventional vehicle fuel efficiency. It’s not a particularly sexy conversation topic compared to electric drive vehicles; however, a small increase in the average conventional vehicle fuel economy has dramatic impacts on oil demand. Consider this: to accomplish the same 2.1 million barrel EV displacement Navigant Research estimated above, the U.S. conventional light duty vehicle fleet needs to improve fuel efficiency by roughly 0.08% in 4 years, which is nothing compared to regulated improvements that are already underway. Navigant Research estimates that U.S. Corporate Average Fuel Economy (CAFE) standards will increase average in-use gasoline powered light duty vehicle fuel efficiency 22% over the next 10 years. Eighty percent of global light duty vehicle markets are governed by increasing fuel efficiency regulations like CAFE standards; when considering the effects of these policies on a global scale, the oil displacement calculations belittle the oil displaced from EVs.

The only trend in the automotive industry that grabs more headlines than EVs is autonomous vehicles, or self-driving cars. The introduction of fully autonomous vehicles may not be too far off; however, adoption of vehicle connectivity and driver assistance systems that allow partial autonomous operation has been underway for quite some time and is penetrating broader vehicle markets at a much quicker pace than EVs. The impact of partially autonomous systems on oil displacement is difficult to measure at this point, but the theory is that if enough vehicles have these systems, there will be fewer accidents, which leads to less congestion on roadways, which in turn has the benefit of increasing the efficiency of all vehicles on the road, both autonomous and non-autonomous.

There’s also declining vehicle ownership to consider. Bloomberg partially acknowledges this trend in its article, claiming that the rise of ridesharing services may also contribute to greater EV adoption because energy cost savings rise in higher mileage use cases. However, if oil prices per barrel stay in the $40-$80 range for the next decade, gasoline-powered hybrids will likely win the energy cost equation over electric drive in most markets for this particular use case. The greater societal shift away from vehicle ownership is not necessarily as much a boon for EVs as it is a detriment to oil consumption. Greater use of alternatives—public transport, bikes, carshare, etc.—increases fuel efficiency per passenger mile traveled.

Misrepresentation

The Bloomberg article likely grabbed a great deal of attention by singling out EVs as the cause of the next oil crisis. However, publishing an article that misrepresents the potential impacts of EVs in the greater context of transportation and energy sector trends provides established oil interests a political target in a particularly active election year. With oil prices low and the return of the United States as a leading oil producer, the economic and geopolitical concerns tied to oil consumption are significantly lessened. Therefore, policymakers may be more amenable to reforms that negatively affect EV sales.

While Navigant Research agrees with many of the assumptions Bloomberg makes regarding battery prices and vehicle costs, these assumptions are largely contingent upon scale—and at this stage in the EV adoption curve, scale is a function of positive governing policy.

It’s unlikely that oil interests would be able to end federal EV purchase subsidies, but they have greater influence at lower levels. State and local governments are low-hanging fruit, and oil interests are likely to be effective at ending state subsidies and/or tacking on additional fees for EV owners who pay none or very few of the gas taxes that fund road upkeep. While the Bloomberg article is not igniting oil industry concerns regarding EVs, it adds fuel to their interests. This may be good for Bloomberg, but not so much for EVs, and therefore not so much for the “crisis” prediction.

 

DER Solutions Emerge from Utility Rate Changes

— March 18, 2016

electric meterAs debates around solar PV net metering and other distributed energy resources (DER) compensation programs continue around the world, there is great uncertainty for many vendors. These compensation mechanisms and programs provide stability and guaranteed revenue streams that are essential for many DER business models. While the reduction or termination of net metering programs may be detrimental in the short term, these policies are likely to be replaced with rate structures that more accurately reflect the costs to serve customers in a given location at a given time. Various DER technologies can provide customers with unprecedented flexibility to respond to changing rate structures to benefit both the grid as a whole and their power bills. Leading vendors are already working to offer innovative solutions that combine multiple technologies into an optimized, flexible DER solution.  

The Hawaii Connection

The rapid growth of Hawaii’s solar PV market over the past several years has resulted in state regulators ending the utility’s net metering program in October 2015. The program was replaced with two new options that allow customers to be compensated below the retail rate for energy sent back to the grid, or keep all the energy they generate onsite and gain faster access to grid interconnection. Although this change is likely to slow solar PV installations in the near term, it opens up vast new opportunities for other DER to help customers save money while improving the efficiency of the grid. Vendors have already responded with new offerings tailored to these rate structures. Late last month, SolarCity introduced their Smart Energy Home offering, which includes solar PV, battery storage, smart electric water heaters, and a smart thermostat designed to maximize solar PV generation and self-consumption. The system automatically modifies energy usage and storage based on how much solar power is available to prevent energy from being exported to the grid in accordance with the utility’s new rate structures.

While SolarCity’s solution may be the first to offer this specific suite of technologies to customers, it is not the only company looking to capitalize on rate structure changes and consumers’ desire for control over their home energy systems. Across the Pacific Ocean, Australian telecommunications company Telstra recently announced plans to roll out a home solar plus storage solution to the millions of customers it already serves in Australia. This plan is part of a whole-home connectivity package that also includes Internet and phone. Telstra has the advantage of a large customer base and well-established customer support to help expand its offering as solar compensation programs wind down throughout the country in the coming years.

Global Trend

Utilities around the world are also getting in on the action, with companies in Vermont, Germany, Australia, and Arizona looking to offer integrated DER solutions to their customers. Perhaps the most intriguing vision for this type of offering comes from Tucson Electric Power, where CEO David Hutchens recently discussed the possibility of offering a type of “premium energy service” that may involve the utility owning and operating a whole suite of DER—including solar, storage, electric vehicle chargers, and more—based on customer needs and wants. These innovative offerings from various stakeholders in the industry are just the beginning of a post net-metering world where DER can provide increasing value to both customers and to the grid as a whole.

 

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