Category Archives: Smart Grid

Like watching grass grow? The slow evolution of the hydrogen economy’s $3 billion fuel cell market

Posted on by

Politicians, economists, and environmentalists have dreamt of a hydrogen economy for decades, where hydrogen fuel cells provide a significant portion of our power demand for stationary and transport applications. While such utopian technology visions will always persist, rigorous analysis leads to a different reality. Factoring in all the technology options and competitive solutions, proton exchange membrane (PEM) fuel cells for telecom power and backup will need until 2030 to reach $1 billion, while fuel cells for residential, commercial, and utility generation will not prove cost effective or appealing, even if the hydrogen is free. The automotive fuel cell visionaries may point to their own game-changing potential where a PEM fuel cell market of $2 billion can be projected by 2030, but on the backs of forklifts and light-duty vehicles. Unfortunately, fuel cell buses will remain miniscule. The fate of PEM fuel cell passenger vehicles is even more dire. While the need for infrastructure is a perceived bottleneck, such hydrogen vehicle fueling infrastructure is certainly necessary but ultimately insufficient to overhaul the passenger vehicle market hamstrung by the cost of the fuel cell itself and storage of hydrogen. Corporations looking to benefit off of a potential hydrogen economy will need to win in the handful of countries with very favorable policies towards fuel cells, or tightly defined regions with existing chlor-alkali capacity and islanded grids will offer niche markets for some hydrogen technologies. Fuel cell utopia, as it turns out, is a grand vision that will turn out to be a modest hyper-local reality.

Source: Lux Research report “The Great Compression: The Future of the Hydrogen Economy (client registration required).”

Share this
Facebook facebook   Twitter twitter   Email email   Linkedin linkedin  

Uncertainty around high wind and solar penetration has been weighed, measured, and found wanting…autoDR and storage

Posted on by

Uncertainty surrounding fossil fuel prices, increased regulations on fossil fuel emissions, and a growing desire for energy independence and cleaner power are pushing governments to look to renewables to appease the masses. Although the emergence of modern wind and solar technologies promise to satiate government-mandated need for large-scale renewables, resources depending directly on the wind and sun for their fuel bring with them the same uncertainty as the evening news weatherman. With wind and solar electricity mandated to jump from 1.5% to 11% of electricity generation capacity globally before 2050, grid operators are faced with the unique challenge of being required to guarantee 100% reliability (client registration required) while being compelled to incorporate an increasing proportion of inherently unreliable renewable electricity generation resources. This task may seem straightforward because at first glance the daily and seasonal profiles of wind and solar generation appear to complement one another to meet demand. Upon closer inspection, however, power output from wind and solar resources fluctuates in its frequency, magnitude, duration, and speed, and varies further over timescales of seconds, minutes, hours, days, and months. Grid operators that have turned to natural gas peaker plants in the past will need to incorporate emerging technologies such as automated demand response (autoDR) (client registration required) and grid storage to fill in the generation gaps, but have yet to fully quantify how much of the intermittency these new resources can manage and at what cost.

We have evaluated and quantified the impact of various levels of wind and solar penetration to determine the amount, if any, of autoDR and energy storage that can and should be used to mitigate the impacts of these inherently unpredictable energy supplies in ways that existing and new natural gas capacity cannot. We have determined that at 30% renewable energy penetration, 2% of the highest peak daytime demand can be shifted to the night by autoDR and 0.5% of the annual electricity generated must be stored and shifted to minimize the curtailment of wind resources (see the full analysis in the report “Cloudy with a Chance of Energy: Evaluating Technologies to Manage Grid Intermittency” — client registration required).

Share this
Facebook facebook   Twitter twitter   Email email   Linkedin linkedin  

Wanxiang Finalizes A123 Systems Transaction. So Where to Now?

Posted on by

China Wanxiang Group’s investment in financially troubled A123 Systems has moved quickly from a memorandum of understanding (client registration required) on August 8 to a definitive agreement, executed a week later. Wanxiang is certainly not a new name to those paying attention to the clean tech space. The company is actively expanding internationally, acquiring a $420 million minority stake in GreatPoint Energy, establishing a joint venture with Ener1 (client registration required) and partnering with, investing in, and forming a joint venture with Smith Electric Vehicle (client registration required).

In reality, lithium-ion batteries and the broader electric vehicle (EV) space are only a very tiny part of the group’s whole business. Wanxiang is China’s largest auto part supplier, serving almost all of the automotive original equipment manufacturers (OEMs) in China as well as leading international OEMs. It is famous for universal joints, bearing, drive axles, suspension struts, braking systems, rubber seals, and body panels, and is a bumper supplier for the likes of Audi. Being a highly influential group in Zhejiang province, the company has easy access to bank loans, making the $450 million total investment in A123 less painful for Wanxiang than it would be for many companies.

Chinese companies’ foreign merger & acquisition (M&A) activities are being driven by technology acquisition and/or foreign market penetration, and Wanxiang is no different. Chinese battery companies like ATL, China BAK, and CALB have much longer histories of lithium-ion battery R&D and a greater focus in this area than Wanxiang. As such, the fastest route for Wanxiang to catch up is to acquire technologies from foreign companies, which they will absorb to improve their own products then leverage existing sales channels already in place to distance themselves from would-be domestic competitors.

However, it is questionable whether the heavy investment can drive meaningful change in Wanxiang’s domestic business. Reviewing China’s EV landscape, only 8,368 full electric and hybrid electric vehicles were produced in 2011. Even though the Chinese government plans to put half a million EVs on the road by the end of 2015, only around 92,000 units can be produced in that year (see the report “Hype vs. Policy: The Chinese Market for Lithium Batteries” — client registration required). In addition, local product protection plays an important role in China’s EV market compared to traditional vehicles, adding greater complexity for companies in the EV value chain to supply to other provinces. Wanxiang is located in Hangzhou city, one of China’s six EV pilot cities, so a local market for Wanxiang exists. But it is only a portion of the already disappointing overall EV market in China. The $450 million investment is certainly a long-term bet if China’s EV market is the driving force.

Acquiring reputable foreign technology can also be used to alleviate the “made in China” stigma in developed economy markets. In other interviews with China’s large lithium-ion battery companies, most have indicated they are actively looking for sales opportunities in foreign EV markets, but they lack sales channels. It is challenging for major foreign EV OEMs to accept Chinese-made batteries from the more established, reputable battery suppliers, let alone for a company like Wanxiang that lacks a battery pedigree. This applies to the vehicle market in general, where Chinese automakers are viewed today with the same skepticism met by Japanese automakers during the middle of the last century, and more lately by Korean OEMs. Enter A123, not only with advanced technologies, but very strong customer networks with high-profile EV OEMs around the world ranging from upstarts like Fisker to established high-end brands such as BMW. Wanxiang hopes to increase access to the international EV market through A123′s already existing international customers. However, given A123′s trials and tribulations, which include product recalls and inconsistent customer acquisition, Wanxiang should know that there is some work to do before its foreign EV market penetration can ride on A123′s coattails.

The real medium-term nugget in the deal for Wanxiang may lie in grid storage, which has big market potential in China, and is substantially controlled by only two companies: State Grid and China Southern Grid. State Grid has opened a large grid-storage demonstration project in 2011 (Zhangbei), and Wanxiang is one of the four bid winners, along with CALB, BYD, and ATL. According to interviews with many executives in State Grid, big project winners must have good technology and close relationships with the grid giant, with the latter being much more important than technology. Wanxiang indeed has a very close relationship with State Grid. While it is unlikely that State Grid will open a new large grid storage project within two years, subsequent growth looks assured as renewable energy proliferates. China has installed 17.6 GW in wind turbines during 2011, representing over 20% of China’s power generation installations for the year. However, in our discussions with China’s National Development and Reform Commission (NDRC), only 80% of the wind energy can be utilized until grid storage is deployed. For Wanxiang, it is hard for outsiders to judge if the company will really digest A123′s technology and transfer it into its products, but because of the good relationship between Wanxiang and State Grid, Wanxiang’s acquisition of a controlling share of A123 gives State Grid a strong reason to ramp up battery procurement from Wanxiang.

Winners and losers in China’s domestic lithium-ion battery landscape may well be defined by which can pick up quality assets to shore up their technology and market needs. As we recently predicted:

“As technology developers around the globe struggle to stay afloat, even with quality technology, Chinese companies will be on the lookout for opportunities. In the near term, the foreign opportunity will be technologically focused, and Chinese companies will be looking for technology licensing or joint venture opportunities with large foreign companies, as well as M&A opportunities among startups and small to medium enterprises in foreign countries. Venture capital (VC)-backed Li-ion battery startups will be needing exits, some at pennies to the dollar, making VC-backed startups with advanced technology especially hot targets for Chinese big Li-ion battery companies as they inorganically grow their capability.”

Competitors in the space both in China and around the globe better be ready, as we’ve only just begun the global roll-up, and Chinese entities will not be spectating.

Share this
Facebook facebook   Twitter twitter   Email email   Linkedin linkedin  

$2.3 Billion Acquisition of Elster Unlikely to Pay Off

Posted on by

The Elster Group (Client registration required), a provider of products and services for
advanced metering infrastructure, was acquired late last month to the tune of $2.3 billion by Melrose PLC, a British buyout group. This price, $20.50 per share, is a substantial premium on Elster’s stock price, which has hovered around $15 per share over the previous six months, and is 49% more than the June 11, 2012 Elster stock price.

This move is one of the largest since Toshiba acquired Landis + Gyr (Client registration required) in May of 2011, coincidentally enough, also for $2.3 billion. Melrose, however, is putting itself at risk by paying such a hefty price for Elster, a smaller and less successful
smart grid company compared to Landis + Gyr (Client registration required). Additionally, much of the hype around smart meters has died down, with their global deployment slated to slow down over the next few years as the market becomes saturated by 2018 (see the report “The Data Revolution.” (Client registration required).

While Elster is a strong company that will continue to grow within the advanced metering infrastructure (AMI) market, it will hardly grow enough to make up for the 49% premium that Melrose paid for it. That said, rather than face up against these two well-funded players slated to dominate that space, investors should shy away from further smart meter or AMI investments that lack clear differentiators.

Share this
Facebook facebook   Twitter twitter   Email email   Linkedin linkedin  

Forecasting Global Demand for Grid Storage: 2012 through 2017

Posted on by

The nascent grid storage market is plagued by regulatory uncertainty, unproven technologies, high costs, and a risk-averse client base. Yet opportunities exist. Utilities must manage an increasingly variable load of intermittent renewable energy sources as well as high costs associated with upgrading aging infrastructure. Commercial customers are dealing with demand charges and outages that cost the United States alone between $80 billion and $188 billion annually. Plus, residential customers in markets with time-of-use pricing have an opportunity to arbitrage their energy consumption to reduce their electricity bills.

This week’s graphic appears in the latest report (Client registration required) from Lux Research’s Smart Grid and Grid Storage Intelligence service. The report builds on the service’s dynamic Grid Storage Demand Forecaster to evaluate the internal rate of return (IRR) and levelized cost of electricity (LCOE) of eight grid storage technologies in six applications throughout 44 countries and all 50 US states.

The report’s “Base Case” scenario models the potential demand for emerging grid storage technologies from 2012 through 2017 using current market conditions. Overall, it finds that the global potential for grid storage by 2017 is $113.5 billion, accounting for 185.4 GWh (or 51.89 GW) of capacity.

However, while demand remains strong through 2017, growth will not occur evenly throughout the sector. Renewable energy shifting shows greatest potential among applications, snatching up to $61 billion, or 54% of the demand, in 2017. Meanwhile, in terms of geography, the Asia-Pacific region and EMEA (Europe, the Middle East and Africa) currently hold 88% of the market; but the Americas’ share will more than double from 12% to 25% by 2017, bringing the three global markets closer to parity. Lastly, growth will vary among grid storage technologies as the market shifts from one dominated by molten salt batteries to one with a more diversified mix that also includes Li-ion, advanced lead, and flow batteries.

Source: Lux Research report “Grid Storage under the Microscope: Using Local Knowledge to Forecast Global Demand.”

Share this
Facebook facebook   Twitter twitter   Email email   Linkedin linkedin  

Energy storage economics unveiled at Columbia University Energy Storage Symposium

Posted on by

We caught some of the latest updates from energy storage academics and technology developers during the Energy Storage Symposium at the Columbia University Lenfest Center for Sustainable Energy in New York City. Among the presenters was Dr. Jay Apt, an economist and the Director of Carnegie Mellon’s Electricity Industry Center, who shed light on the intricacies of energy storage economics. One of the key findings of his team was that capital cost of the chosen energy storage technology was the single most important metric for determining the economic viability of a project, and that marginal improvements in efficiency have an almost insignificant impact on project economics.

This conclusion lends further support to expectations that lithium-ion batteries for grid storage will lose market share in the mid- to long term to cheaper technologies such as molten salt and flow batteries as lower-priced technologies become commercially available (see the Lux Research Report “Grid Storage Under the Microscope.” Client registration required).

Cost continues to be the most important barrier to widespread grid storage market penetration, providing opportunities for financial institutions and technology developers to develop creative mechanisms for financing distributed commercial and residential projects (Client registration required). One example of such a mechanism is illustrated by Prudent Energy’s (Client registration required) recently commissioned 600 kilowatt, 3.6 megawatt-hour vanadium redox battery at the Gills’ Onions food processing facility. For this project, Prudent Energy retains ownership over the battery and equipment, while sharing with Gills the cost saving benefits that result from peak shaving and demand charge reduction.

Peak shaving and demand charge applications are among the most cost-effective in several of the unregulated markets in the U.S., despite the highly anticipated impact of the pay-for-performance ruling on ancillary service rates (Client registration required). Demand management is, and will remain, the low-cost option for ancillary services in the near- to mid-term, especially compared to storage. Dr. Apt was keen to point out that demand management shows increased potential in unregulated markets in the U.S. and at cooperative utilities, but that privately owned vertically integrated utilities have little taste or patience for demand response projects because the economics do not benefit them. We took a deeper dive into the economics of demand response around the world last week when we moderated a panel, “DR Around the Globe,” with representatives from Japan, Korea, and China at Connectivity Week in Santa Clara, California.

Share this
Facebook facebook   Twitter twitter   Email email   Linkedin linkedin  

Crowded Lithium-ion Battery Market Sends Ener1 (and Others) Out to Sea, Yielding Bargains in its Wake

Posted on by

Lithium-ion (Li-ion) car and grid storage battery manufacturer Ener1 declared bankruptcy in January after massive debt and limited revenues became too much of a burden for the fledgling company (client registration required) to shoulder. This event should come as no surprise to investors or the industry. Ener1 has been in the headlines several times over the last six months due to its failed investment in Think and its December 2011 delisting from the Nasdaq exchange (client registration required). This bankruptcy adds to the woes (client registration required) of the U.S. Department of Energy, which had provided Ener1 with a $118.5 million matching grant in August 2009. This recent news reiterates the fact that companies touting government support as a major feather in their cap may be enticing investors with false wares. In these cases, government funding provides just enough capital for a company to prove its technical viability despite failing commercially, teeing it up at a bargain price to larger players and investors in the market, much like Beacon Power’s recent fire sale to private equity firm Rockland Capital.

 Ener1 is not the only company struggling within the crowded Li-ion battery space. On January 11, 2012, Altairnano Nanotechnologies (client registration required) was again warned by Nasdaq to get its share price above $1 or it will also be delisted from the exchange. Li-ion batteries must compete not only with each other, but also with the negative press that pounces on the slightest safety slipup (client registration required), including the Chevy Volt that caught fire (client registration required), and the evacuation at the new Saft battery manufacturing plant in Florida. As with many maturing industries, there will be many failures before a few winners emerge. Amidst a pending oversupply of Li-ion batteries and intense competition from low cost manufacturers in China, readers should be wary of Li-ion battery suppliers without a clear competitive advantage or a proven foothold in the market. Also, watch for Chinese companies blessed with deep pockets, government support, and no aversion to low margins. Many are eager to acquire valuable IP and assets from recently broke or struggling companies in order to rid themselves of the low-quality stigma attached to Chinese Li-ion batteries. Case in point: Boston Power’s recent move to China (client registration required).

Share this
Facebook facebook   Twitter twitter   Email email   Linkedin linkedin  

The Lux Top 10

Posted on by

During the fourth quarter of 2011, Lux Research analysts profiled 262 companies across 12 different emerging technology domains in the fourth quarter of 2011.Here are the 10 they thought were the most compelling. Some, such as Proterro, stand out for their disruptive potential. Others, such as Diamon-Fusion, made the grade with well-executed business strategies. The competition for a Top 10 spot will only get hotter as we expand our portfolio of coverage domains to include Energy Electronics and a broadened green buildings portfolio.

1. Diamon-Fusion International – Positive – Advanced Materials

With its transparent silicone film used to coat silica-based substrates, Diamon-Fusion is one of the few startups in the protective coatings space with a strong track record in both technology and business execution.

2. Proterro – Wait-and-see – Bio-based Materials and Components

Proterro is commercializing a strain of photosynthetic organism that produces sugars at levels ten times more productive than sugarcane and in a configuration that could deliver the holy grail of “five cent” sugars (i.e. five cents per pound). But it will need funding and downstream partners to scale its potentially breakthrough technology beyond a lab prototype.

3. Topell Energy – Positive – Alternative Fuels

Working with German utility RWE, Topell Energy scaled its first commercial torrefaction facility in 2011 to convert wood waste into bio-coal pellets. Topell is a leader in the torrefaction space and is positioned to capitalize on healthy incentives in the EU for coal/bio-coal co-firing.

4. Spirae: Wait-and-see – Smart Grid

With the growing grid penetration of renewable energy sources and the inherent difficulty in managing their fluctuating inputs, Spirae could be in a prime position to support utility infrastructure with its comprehensive control and management system – if it can prove its concept on a large scale and secure long-term utility contracts.

5. eIQ Energy – Positive – Solar Systems

One of the few DC/DC optimizer companies staying with stand-alone hardware, eiQ partners with engineering, procurement, and construction companies that can realize its technology’s value in the strong commercial market segment.

6. Pervasive Displays – Wait-and-see – Printed Electronics

Using a technology honed for the One Laptop Per Child Program, Pervasive Displays produces low-power electrophoretic display modules that target application developers for warehouse signage and electronic shelf labels. While Pervasive has power advantages from its control functions, it will need to drive its costs down to compete with more established competitors and access a broader market.

7. Kurion – Positive – Water

A high-risk but high-profit U.S. nuclear contamination control company that rapidly scaled to clean up the Japanese Fukushima radioactive cooling water problem. The work generated massive windfall profits when no one else on the planet was prepared to deal with the problem.

8. Hycrete – Wait-and-see – Green Buildings

Hycrete’s water barrier technology improves the durability of concrete infrastructure at prices significantly cheaper than the incumbent membrane-based approach. But it will need to establish partnerships with well-known infrastructure or chemical companies in order to gain market access in the conservative infrastructure segment.

 

9. Citic Guoan MGL – Wait-and-see – China Innovation, Electric Vehicles

In the sea of Chinese lithium-ion battery developers, state-owned MGL stands out for its traction in China’s electric and hybrid-electric bus market. Its strong government relationships could provide ready channels to market for would-be foreign technology partners. But competition with other domestic firms such as China Aviation Lithium Battery Corporation (CALB) will be fierce.

10. Ablynx – Wait-and-see – Formulation and Delivery

Ablynx engineers its “nanobodies” – therapeutic proteins derived from antibodies in camel blood – to specifically deliver small molecule drugs to a target site. Despite stiff competition in the saturated antibody field and a multitude of emerging targeting strategies (such as DNA aptamers), Ablynx has snagged more than its share of heavyweight partners (Boehringer Ingelheim, Merck Serono, Norvartis, Pfizer), and is generating tens of millions in revenue to assist in its own healthy development pipeline.

Share this
Facebook facebook   Twitter twitter   Email email   Linkedin linkedin  

The hydrogen economy – necessary and sufficient for fuel cell adoption?

Posted on by

The U.S. Department of Energy (DOE) has already stated its skepticism* towards hydrogen fuel cells. So it isn’t surprising that a recent DOE funding round for hydrogen storage technologies totaled a meager $7 million.

It is no secret that fuel cells have failed to make a large impact in the transportation and stationary power generation markets. Despite a long list of subsidies and incentives, they are gaining little traction beyond the uninterruptable power supply (UPS) and telecommunication markets (see the June 2011 Lux Research report Off-grid: A Modest Meal for Starving Storage Developers*).

Even within these markets, pure hydrogen fuel cells are passed-over in favor of fuel cells powered by natural gas, methane or other fuels that are more readily available than H2. The “hydrogen economy,” or the ubiquitous infrastructure for generation, transport, storage and distribution of hydrogen for transport and stationary power, seeks to overcome the issue of fuel scarcity and obscurity. This has many technology developers wondering whether addressing the availability of hydrogen, would prompt fuel cell growth in all markets?

In order to answer the question, we must look at the single greatest barrier to fuel cell adoption – prohibitive capital costs. Without a hydrogen economy, a hydrogen fuel cell requires ancillary hardware including a fuel reformer or hydrolysis unit, as well as a water pretreatment unit if a region lacks access to clean water. Theoretically, a hydrogen economy would eliminate the need for this ancillary equipment, and thereby bring the capital cost for hydrogen fuel cells down between $4/W to $7/W. These lower price points put hydrogen fuel cells on par with natural gas and methane fuel cells. But these prices still require subsidies and incentives to make fuel cells cost competitive with other generation technologies in transportation and stationary power. Lux analysis indicates that fuel cells need to reach prices below $2/W at the system-level in order to attain stable growth in the stationary power markets.

So, while the hydrogen economy is necessary to enable success of the hydrogen fuel cell in transportation and stationary markets, it is not sufficient on its own to ensure stable market growth. In order for hydrogen power and hydrogen fuel cells to prove themselves in the market, clients must continue fundamental work on all nodes along the hydrogen economy and the fuel cell itself; including hydrogen generation*, hydrogen storage, and fuel cell catalysts*.

Share this
Facebook facebook   Twitter twitter   Email email   Linkedin linkedin  

Does China’s battery manufacturing capacity threaten your strategy in grid storage?

Posted on by

It may seem shocking that China, with large manufacturing capacity for relatively low-cost lead-acid and lithium-ion batteries, comprises only 1% of the global installed megawatts of emerging grid storage capacity according to the recently published Lux Research Grid Storage Tracker.* While the North American market has seen tremendous movement on a regulatory* front* for energy storage in the past months, grid storage remains in the pilot stage in China as the Chinese government focuses on electric vehicles.* Is China snubbing the grid storage market and, if so, what does that mean for clients looking towards the Chinese market?

The European, North American, Korean and Japanese markets offer much stronger bets than the Chinese markets for near-term growth of grid storage. Due to a mixture of domestic storage technology developers, relatively swift regulation and government spending, these markets will continue to overshadow China’s grid storage market in the immediate future. However, the tides can, and will shift with staggering speed when China makes its move. Today’s leading markets rely on regulation, market pricing and consumer demand, resulting in slow, steady market growth. Conversely, the Chinese market will see immediate and explosive growth once government and the State Grid Corporation decide to turn their attention to grid storage.

With a growing pool of domestic battery supply and tremendous government funding, the Chinese market can lead global production and consumption of grid storage technologies, just as the world has seen it do in the automotive and solar sectors. The message is clear: clients need to integrate themselves into China’s domestic battery supply chain in order to capitalize on this growth.

However, these regional dynamics offer a valuable insight for clients looking to sell products outside of China. Specifically, the grid storage market offers strong growth for lithium-ion and other storage technologies outside of China, while other existing markets for storage remain China-focused. Based on market conditions earlier in 2011, Lux forecast that electric bikes and heavy electric vehicles will dominate demand for lithium-ion, with the vast majority of demand and supply coming from China. Conversely, the grid storage market is growing today in North America, Europe, Japan and Korea, making these regions primary focal points for companies looking to generate revenues outside of China.

* Client registration required.

Share this
Facebook facebook   Twitter twitter   Email email   Linkedin linkedin