Navigant Research Blog

Reviewing Our EV Predictions for 2011

— January 5, 2012

Plunging headlong into 2012, it’s a good time to pause and look back at our predictions for what Pike Research forecast would happen in the world of electric vehicles in 211.  Here’s a quick rundown of what Pike Research predicted for 2011 along with analysis of where we hit and missed:

1. The majority of people who drive a plug-in vehicle won’t own it.   

This prediction was on the money as GM and Nissan allocated a good percentage of their vehicles to dealers to make them available for test drives and to corporations for fleet use.  As predicted, car sharing programs are incorporating EVs into their fleets to enable many consumers to get their first taste of electric motoring, and we expect that trend to continue in 2012.

2. Automakers will get pushback from EV owners regarding the length of time it takes to fully charge a vehicle.

We haven’t heard as much negative feedback on charging times as we anticipated, partly due to the fact that most consumers are buying faster Level 2 charging equipment rather than plugging vehicles into a standard outlet.  However, Nissan decided that offering a 3.3-kilowatt onboard charger was a competitive disadvantage for the Leaf and therefore doubled the speed for the 2012 model.

3. Stop-start vehicles will arrive in the United States, albeit in small numbers

Sales of non-hybrid vehicles with stop-start technology were indeed minuscule in 2011.  During 2011 Ford and Volkswagen announced they were bringing stop-start to their North American lineups by 2012, and Wisconsin-based Johnson Controls announced it was investing more than half a billion dollars globally in stop-start battery manufacturing capacity.

4. Many EV charging stations will spend the majority of their time idle

We didn’t exactly go out on a limb with this prediction.  Despite the fact that public charging stations installations have lagged, in many cities there are more public chargers than EVs today.  We’ve heard many anecdotal stories of charging stations that are rarely if ever servicing vehicles and we can expect that to continue in 2012.

5. Fuel cell vehicles (FCVs) will be sold to fleets and consumers in small but growing numbers.

Automotive companies are continuing to slowly push forward towards commercialization of FCVs, but the quantities sold were very limited in 2011.  Based on the lack of availability of vehicles during the year, we sharply reduced our expected sales of FCV for 2011 to less than 700 globally – but that’s up from less than 200 the prior year.

6. Someone somewhere will have a bad EV experience and the media will overreact.

Fortunately for automakers the only negative EV experience that received significant media attention was at a NHTSA test facility.  The web and media did play up the event and some reports accused NHTSA of not responding quickly enough.  However, the coverage avoided overreaction.  Fisker also has an issue about potential fires due to coolant leakage within the battery pack, so we’ll see if the “EV batteries are a fire hazard” follow up stories continue.

7. The advanced battery category will heat up with M&A activity.

Way off.  There were no significant acquisitions or mergers during the year, and the biggest news was actually of an “anti-merger” – the dissolution of the Johnson Controls and Saft joint venture.  We expected some of the smaller companies to be acquired, but the independent battery startups managed to survive on their own despite sluggish EV sales.  Lithium-ion battery maker Boston Power received the most interest from investors as the company is shifting its focus, and its operations, to China.

8. Range anxiety” will prove to be more fiction than fact.

The accuracy of this prediction is hard to quantify, but the hypothesis that EVs would become stranded as drivers would not be able to cope with the shorter driving ranges appears to be false.  The media attention to range anxiety is slowly subsiding and should continue to fade from view in 2012.

9. The best-selling EVs won’t have four wheels.

This one was a gimme.  Global sales of electric bikes and motorcycles are continuing to grow rapidly, and are finally making inroads in the United States.  Two-wheeled electric vehicle sales far outpace all forms of hybrids and EVs, and with companies such as SRAM getting into the game, the gap will continue to widen.

10. The landscape for charging equipment will undergo a seismic shift as the category swiftly moves toward becoming a commodity market.

We were on target in predicting a seismic shift in EV charging equipment, but we picked the wrong one.  Prices didn’t fall as quickly as expected due to lower than expected sales of EVs and chargers.  But an emerging business model where third-party companies own and operate the charging equipment at no cost to the property owner has shaken up the industry.  These charging-as-a-service providers (350 Green, Car Charging Group, etc.) will help drive up volumes and drive down sales.

Overall, six of Pike Research’s 10 predictions mostly hit the mark, while four were off or missed entirely.  Undoubtedly we’ll do better than 60% for 2012.


Ameresco Acquisitions Mark Strong 2011 Finish for Energy Efficient Building

— January 4, 2012

The competitive landscape in the energy efficient building industry has shifted over the last year.  Earlier this month, Ameresco, one of the largest pure energy service companies (ESCOs) in the United States, announced that it had acquired the xChange Point and energy projects businesses (including auto demand response) of Energy and Power Solutions (EPS), an energy management and sustainability firm.

Ameresco has experienced significant growth in the last few years, reaching over $600 million in revenue in 2010, a 44% increase over the previous year.  Its renewable energy business nearly doubled from 2009 to 2010.  In addition, it captured over one-third of the federal ESPC market in 2010, beating out industry stalwarts such as Honeywell and Trane that year.  Ameresco’s acquisitions in the areas of auto demand response and energy management will help enhance the company’s ability to compete in an increasingly IT-driven building services landscape.

This follows on the heels of other major acquisitions over the last twelve months.  Back in March, Schneider Electric acquired Summit Energy, an energy procurement and sustainability services company.  It followed up in June with the acquisition of Viconics, an industrial and commercial HVAC controls vendor.  Johnson Controls made a similar move back in March when it acquired EnergyConnect, a demand response service provider. The list goes on, including Siemens’ acquisitions of Encelium, a lighting and energy management service provider, and Advanced Telemetry, a cloud-based energy management service provider.

These moves lead to two key conclusions about the building space.  The first is that, when faced with the decision of whether to buy or to build, many of the major players are opting to buy, placing them on the map either geographically or technologically, rather than taking the time and invest the resources to build new capabilities.  This is evidence of a rapidly expanding and intensely competitive environment for energy efficiency and energy management, an environment in which the major service providers are looking to plug gaps in their coverage through acquisitions – and quickly.  In some cases, such as the acquisitions by Ameresco and JCI, the objective is to round out their ability to address a specific technology market such as demand response.  In others, such as World Energy’s acquisition of Northeast Energy Solutions, the move helps to expand the parent company’s coverage of a particular region or provide the manpower to capture others.  In any case, the buying spree signals the expansion of the energy efficiency services market.

It also shows that companies are breaking out of their shells in the building efficiency and energy management space to provide a more comprehensive set of solutions than their initial entry points could have provided alone.  This trend has been set by companies like EnerNOC, which has moved beyond its initial demand response solution to a broader set of services including ESCO-like performance contracts and energy procurement over the last few years.

The common thread through these moves is that energy efficiency service providers are aiming to monetize efficiency services across the board.  Yes, an ESCO can provide energy cost savings to building owners through performance contracts, but if it can provide demand response and energy procurement services as well, it can multiply the number of revenue streams coming from a single contract.  Moreover, providing the full suite of services allows the service provider to optimize these services simultaneously, such that the building owner receives the best possible outcome given the complexities of electricity rates, utility regulatory schemes, and wholesale power costs for a particular building in a given territory.  We’ll continue to see these service providers move to comprehensive, monetized efficiency services over the course of the next year.


Canada Looks to the Grid for Emission Reductions

— January 4, 2012

Last month, as the international climate change talks in Durban, South Africa wound up, Canada invoked the country’s legal right to leave the Kyoto Protocol.  Canadian officials cited several reasons for their departure from the accord; the main reason is that Canada is seeking to avoid the financial penalties from its failure to comply with its stated targets for reductions of carbon emissions.  Canada’s representatives have also indicated that Kyoto is irrelevant without the participation of two of the largest polluters: China and the United States.

That argument aside, as oil prices continue to rise over time and the opportunity cost of domestic consumption increases, Canada may decide to maximize the country’s oil exports at the expense of domestic use.  According to the U.S. Energy Information Agency, the country’s 175.2 billion barrels of proven reserves of oil put Canada behind only Saudi Arabia and Venezuela, and it is the only non-OPEC member in the top five.  That means that the global market for oil exports may give Canada an economic reason to reduce the use of fossil fuels, and thus emissions, within its own borders.  Canada, along with other petroleum-exporting countries will simply export a larger proportion of oil along with the emissions they produce.

In terms of electricity generation, Canada’s vast hydroelectricity generation capacity and pumped storage reserves are often cited as the reason why further improvements in emissions are not economically viable.  Cheap, low-carbon hydro prices many other cleantech options out of the market.  For that reason, one opportunity for Canada lies in ensuring the stability of the electrical grid as a system.  The provinces of British Columbia and Ontario have been especially aggressive in introducing the types of market drivers that encourage distributed storage, although without any obvious overall intent.  These drivers include dynamic pricing, distributed solar PV incentives, and plug-in vehicle programs.

For example, in Ontario (a partially deregulated market), there are three different time-of-use prices: 6.2¢ per kilowatt-hour (kWh) for off-peak, 9.2¢/kWh for mid-peak, 10.8¢/kWh for on-peak – and these prices are reviewed every May 1 and November 1 by the Ontario Energy Board (OEB).  British Columbia, and more specifically BC Hydro, is testing smart meters, dynamic pricing schemes, and demand response schemes (hot water heaters and thermostats) in an effort to understand how consumers use and respond to these peak-shaving measures.

Because of Canada’s position as a net energy exporter, and the country’s diverse energy resources (including hydro), any improvements to emissions on the grid side will be limited to incremental improvements in the grid.  Distributed storage is a good option for optimizing an existing system – such as the Canadian grid – bit by bit, and kilowatt-hour by kilowatt-hour.


New Opportunities for Microgrids in 2012

— January 3, 2012

The global market for microgrids, and other forms of aggregation and optimization for distributed energy resources, made some major leaps forward during 2011. While not the commercial opportunity being hyped by some organizations such as the Galvin Electricity Initiative, this smart grid network platform is coming of age, especially in the U.S., due to two major developments.

The first was the adoption of standards for safe islanding by the Institute of Electrical Energy Engineers (IEEE) in July 2011, which should accelerate the shift from pilot validation projects to fully commercial microgrid ventures. Since 2009, a handful of large projects have come on line, especially in California – as platforms for aggregation of distributed renewable resources – and in New York, with combined heat and power (CHP) units as anchor technologies.

Second, a series of Federal Energy Regulatory Commission (FERC) orders – 719, 745, and 1000 – takes steps toward harmonizing innovation occurring independently at the wholesale and retail market levels. Demand response (DR) is seen as a stop-gap resource whose role will expand in markets characterized by volatility, high demand peaks, and lack of new transmission level generation capacity. Microgrids are now being viewed as the ultimately reliable DR resource, since islanding securely takes load off of the utility grid.

The recently updated Pike Research Microgrid Deployment Tracker 4Q 2011 identified over 100 more microgrids than previously highlighted, representing more than 300 megawatts of planned or operating additional capacity, primarily in the remote microgrid segment.

Pike Research’s new report, Remote Microgrids, highlights the fact that this remote sector represents the largest potential investment and revenue, a market currently valued at $3 billion and projected to grow to over $10 billion in the average scenario forecast by 2017. These figures reflect the fact that remote microgrids require the build-out of new renewable distributed energy generation facilities, whereas many of the grid-tied microgrids previously profiled by Pike Research only derive revenues from networking and optimization of existing generation assets.
Pike Research has also identified four sub-segments of the remote microgrid market, which is further commercialized than other segments, but heretofore sorely lacking in available data:

  • Village Power Systems: Perhaps the largest number of remote microgrids operating today would fall into this category, though data is extremely scarce due to the small scale of such projects and to the fact that most installations are located in Asia. According to leading purveyors of this remote microgrid sub-segment, the average village power system has a capacity of 10 kW. It typically provides power to a medical clinic, school, and/or community center in the center of the village.
  • Weak Grid Island Systems: To a purist, microgrids that have any linkage to a larger grid would not be considered “remote.” From the Pike Research perspective, these systems belong in the remote microgrid camp since the underlying assumption is to design and operate a power system as if the larger grid is not there. Weak grid island systems could represent an even bigger opportunity than the campus environment and military microgrid sectors that have been featured by Pike Research in previous microgrid segment reports.
  • Industrial Remote Mine Systems: This sub-segment of the remote microgrid market is the least mature, but also boasts the highest growth rates due to a groundswell of interest in shifting to more sustainable energy strategies for sites controlled by large multinationals. Globally, nearly 75% of existing mines are remote operations, though very few deploy renewable energy generation.
  • U.S. Mobile Military Microgrids: This last category of remote microgrids is the least developed, but has the most policy and financial support from the U.S. Department of Defense. At present, these systems are being deployed in pilot projects in combat missions at FOBs in Afghanistan and other remote DOD sites. They are included in this report because many mobile systems will likely become village power systems to serve humanitarian services once U.S. troops pull back from combat zones such as Afghanistan.

And while Africa and the rest of the developing world are ideal markets for remote microgrids, Comverge, the struggling demand response provider, ended 2011 with a bang when it announced a major deal with South African provider Eskom, one of the largest utilities on the continent. With DR technology now spreading more rapidly throughout the world, new synergies between microgrids, DR and virtual power plants will certainly emerge.


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