Navigant Research Blog

Energy Storage Industry Jobs Linked to Energy Storage Capacity

— May 25, 2017

Jobs in the energy storage industry in the United States are expected to grow substantially over the next decade. In a white paper prepared for the Energy Storage Association (ESA) on an Energy Storage Vision in the United States, Navigant Research modeled the value of 35 GW of energy storage by 2025 against the cost of storage in the same period. Value was measured in terms of job creation, emissions reductions, grid operational cost savings, and reliability.

Jobs in the US Energy Industry

In January 2017, the US Department of Energy (DOE) published its U.S. Energy and Employment Report, calculating the total employment across sectors of the energy industry, including storage. The findings in this report provided a reference point for estimating total employment in the industry between 2017 and 2025.

According to the U.S. Energy and Employment Report, there were a total of 90,831 individuals directly employed in the US energy storage industry during 2016. These direct jobs include battery and component manufacturing and R&D, engineering and construction (project development), operations and maintenance, sales, marketing, management, administrative, and other positions. Most of these portions of the value chain will see job growth as the industry scales.

Energy Storage Capacity and Jobs

Navigant Research estimates that approximately 225 MW of new energy storage capacity was deployed in the United States during 2016. Using the DOE estimate as a starting point, this represents 403.7 jobs per MW of installed energy storage system capacity. Given that the storage industry is still nascent, and considering the complexities of storage technology project development, we expect the number of jobs per unit of capacity to start high and then decrease rapidly over time. By comparing solar PV industry jobs per unit of new capacity over the past decade, Navigant Research estimated future job creation under the ESA Energy Storage Vision market forecast.

In 2008, about 250 MW of new solar PV capacity was installed in the United States, and the industry supported approximately 35,000 jobs. As the market and annual deployments grew, the number of jobs per MW of capacity decreased substantially. In 2016, an estimated 10,800 MW of new solar PV was built in the United States, and the industry employed 260,777 people per the Solar Foundation’s National Jobs Census 2016. This equates to 24.1 jobs per MW of new capacity.

 Decline in Number of Energy Storage Industry Jobs per MW

Navigant Research expects a similar decline in the number of industry jobs per MW of new energy storage capacity as the market matures. The number of solar jobs per MW of new capacity decreased gradually until 2011, the year after the solar industry experienced a bump in deployments. Market growth triggered industry learning, efficiency, and economies of scale in the solar PV space. Given the current state of the storage industry and growth projections, Navigant Research estimates that the energy storage industry is on the verge of experiencing a similarly dramatic decrease in the number of industry jobs per MW of new capacity. The number of jobs per incremental MW in the storage industry is expected to decrease from 403.7 in 2016 to 50.9 in 2021 and 32.5 in 2025 for a total of 368,836 jobs in 2025.

Cumulative Energy Storage Industry Jobs, Vision Scenario, United States: 2016-2025

(Source: Navigant Research)

Navigant Research will discuss the Energy Storage Vision results and other key findings during a webinar with Matt Roberts, executive director of the ESA, on May 30 at 2 p.m. EDT.

 

PJM’s Latest Capacity Auction Shows Drop in Demand Response, but Not Catastrophic

— May 25, 2017

The holding of breath for PJM’s annual capacity auction results ended on May 23, with the results indicating mixed feelings. The price for most of the market was down from $100/MW/day for the 2019-2020 auction last year to $76.53/MW/day for 2020-2021. However, certain subzones cleared at nearly twice that price or more, so bidders in Chicago, Philadelphia, New Jersey, and Cincinnati came out smiling.

For demand response (DR), there was a lot of speculation going into the auction about the effect that the first 100% Capacity Performance procurement would have. Some analysts predicted 50% or greater reductions in DR participation, assuming most DR providers and customers would not want to take on annual performance risk. In my Market Data: Demand Response report for Navigant Research last year, I estimated a 25%-30% reduction, feeling that large commercial and industrial (C&I) customers would continue to participate; DR providers would continue to aggregate midsize C&I customers with more conservative megawatt values; and residential DR would take the biggest hit since it is almost all summer based.

Pricing, Aggregation Rules Influence Auction

The actual reduction was 24% from the last auction, dropping from 10,348 MW to 7,820 MW. Nothing to sneeze at, but far from a total market abandonment. Last year, only 614 MW of DR cleared as an annual product, so there was a large portion that was willing to convert. Pricing may have influenced DR quantities as well. While all zones decreased year-over-year, the zones with the lowest prices showed the biggest drops and those with higher than expected prices shed fewer megawatts.

This was also the first auction in which PJM instituted new aggregation rules, where summer and winter resources could match up with each other to meet the annual obligation. While 2,000 MW of summer resources (mostly DR, energy efficiency, and solar PV) submitted aggregation bids, only 485 MW of winter resources bid (mostly wind), limiting the effects of the new mechanism.

Silver Linings

Historically, EnerNOC has happily proclaimed its percent procurement of PJM DR in the auctions, but has been quiet the last couple of years. However, this year EnerNOC tweeted: “@EnerNOC captures 34% of the DR market in #PJM BRA.”

On the residential DR side, it appears that the Exelon utilities—which have been the biggest bidders in that sector—largely pulled out of the auction from the supply side. The utilities had put out an RFP in March looking for 700 MW of winter resources with which to aggregate, but apparently did not find enough partners. However, this does not mean that they exited the capacity market entirely. PJM reported that, for the first time, price-responsive demand resources cleared in the auction to the tune of 558 MW, mostly in the Baltimore Gas and Electric and Pepco regions—likely from those host utilities. If those megawatts get added to the DR megawatts that cleared in the auction, the drop is only 19% from last year.

All in all, I’d consider this a positive outcome for DR compared to some of the draconian forecasts. Now we’ll have to see how well the market performs once the annual requirement kicks in.

 

Smart Cities NYC ‘17 Themes Reveal an Evolving Market

— May 25, 2017

The revitalized Brooklyn Navy Yard brought together academia, non-profits, private industry, and government leaders from around the world for the Smart Cities NYC ’17 conference and expo. Deliberating the future intersection of technology and urban life, key themes over the 3-day conference included digital inclusion, citizen empowerment, and the potential for technology to increase resident access to essential city services. It was encouraging to see the emphasis on digital inclusion and accessibility displayed by leading suppliers and city officials.

Digital Inclusion and Accessibility

A good example of how digital inclusion is being approached was provided by Microsoft, along with its partners G3ict and World Enabled, with the launch of the Smart Cities for All Toolkit. The toolkit is designed to help city officials and urban planners make more inclusive and accessible smart cities, particularly for the more than 1 billion people with a disability around the world. Tools developed for cities include a guide for adopting information and communications technology (ICT) accessibility standards and a guide for ICT accessible procurement policies, among others. The Smart Cities for All initiative is also in the process of developing a Smart Cities Digital Inclusion Maturity Model that will help cities evaluate their progress toward their ICT accessibility and digital inclusion targets.

A desire for greater inclusivity could also be seen on the transportation side, with many cities discussing the possibilities offered by mobility as a service (MaaS) solutions. MaaS has the potential to broaden transport options and lowers costs for consumers, enabling residents to have better access to potential areas of employment or leisure. One of the common initiatives is the deployment of multimodal transportation planning apps. These solutions, as shown in Xerox’s MaaS apps in Denver, Los Angeles, and most recently Bengaluru, allow residents to choose between an array of public and private options (such as bus, train, rideshare, carshare, and bikeshare) and help inform users of the cheapest or fastest ways to travel. Eventually, cities will be able to offer incentives and discounts to riders for taking certain transport options, for example, to mitigate congestion.

Bridging the Digital Divide

The primary goal of the global smart cities movement is to utilize technology to improve the quality of life in cities. While concerns about security and privacy have been well-documented, less focus is given to the potential for smart cities to increase the divide between small and large cities, the wealthy and the poor, and the healthy and the sick. To ensure these divisions are reduced rather than worsened, smart city programs need to ensure all segments of the population reap the benefits digital technology can provide.

These themes from the conference, along with recent major projects announced in cities such as San Diego and Columbus, provide further evidence that the smart cities market is evolving from one-off pilot projects toward more holistic outcome-focused approaches that consider the needs of all city residents and communities.

 

Ford’s Big Management Shuffle Is About Changing Perceptions

— May 23, 2017

It is often harder to be a century-old company with a record of profitability than it is to be a young one with potential. This sums up the difference between legacy automakers like Ford and Tesla. With only two profitable quarters in its 14-year history, Tesla’s most recent resulted from strategic timing of paying bills and delivering cars. Meanwhile, Ford—despite periods of losses over its 114-year history—has generated immense profits, including records in the past 2 years. Nonetheless, Tesla is the darling of Wall St., while now former Ford CEO Mark Fields and communications VP Ray Day lost their jobs over the weekend.

In the 3 years since Fields succeeded Alan Mulally, the company’s stock price has dropped more than 35% despite record profits. Pre-tax 2017 profits are projected at $9 billion, which is more than Tesla’s total 2016 revenue of $7 billion. Yet, Tesla’s market cap recently topped that of both Ford and General Motors (GM). Clearly, the markets are placing their bets on the perception of where these companies are going in the coming years rather than on the fundamentals of each business.

Fields has been on point in Ford’s effort to be perceived as a forward-thinking technology company since his 2007 CES debut with Microsoft founder Bill Gates to announce SYNC. Even with repeated Las Vegas keynotes by Fields and Mulally and countless investments in developing automated driving and mobility services, investors perceive Ford and other companies that manufacture and sell physical objects as laggards compared to software startups.

Ford isn’t alone in this perception battle. Most automakers are making the pilgrimage to CES to woo the tech community. While few have been hit as hard as Ford, none of the incumbents are getting the love shown to Tesla.

In our Navigant Research Leaderboard Report: Automated Driving, Ford, GM, Renault-Nissan, and Daimler scored highest and ahead of several technology companies. Waymo is arguably somewhat ahead on the pure technology front, but automakers have necessary pieces such as manufacturing, service, distribution, and support infrastructure to make viable mobility businesses. Additionally, automakers have a proven ability to deliver physical products—not just the components and software that control them.

Ford’s leadership team, including Executive Chairman Bill Ford, EVP Joe Hinrichs, CTO Raj Nair, and many others, all supported the direction the company was heading under Fields. However, investors didn’t seem to believe in it.

During a press conference with new CEO Jim Hackett, Ford and Hackett both emphasized that the overall strategy of transformation into a mobility services company is moving full steam ahead. Hackett, who comes to the role from being chairman of Ford Smart Mobility LLC, aims to reinforce the strategy and focus on executing the plans. The elevation of Marcy Klevorn from CIO to EVP and the newly created role of President, Mobility highlights this ongoing commitment.

While Hackett’s success or failure won’t be evident for several years, Ford still needs to change investor and public perceptions to boost its stock price and the sales of vehicles it has today. That challenging near-term task falls to Mark Truby, who moves over from Ford of Europe to replace longtime PR chief Ray Day. Day and his team have had successes on the product communications front, but changing the overall perception of the company among investors who have favored high flying tech stocks has been elusive. Whether Truby or anyone else can succeed will be crucial.

 

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