Lux Research recently helped co-chair the Artificial Intelligence (AI) World Executive Summit in San Francisco, CA. During the first day alone, we had the opportunity to hear from a diverse set of speakers, each esteemed in their own right, on their thoughts on artificial intelligence and how some of them were applying such technologies in their respective fields. Two sessions, in particular, did a fantastic job at providing two distinct perspectives on artificial intelligence that serve as sound guidelines for how enterprises should approach the hype surrounding the field. They are each summarized below: Continue reading
GE and Local Motors recently announced the launch of a crowdsourced innovation platform, “Fuse.” The Fuse model is to publicly post problems as a challenge, potentially with a cash prize to solicit submissions, and then evaluate the results. It is part of Local Motors’ new Forth division, and may be joined by similar initiatives with other partners besides GE. As of this publication, Fuse already has four posted active projects related to GE’s innovation needs in non-destructive testing. Fuse will also have 3D printing resources to produce prototypes or for small-batch manufacturing. One GE official claimed that the Fuse model can reduce product development time by 50%, but at this point it is unclear whether that degree of improvement can generalize beyond a few chosen use cases. Continue reading
On Monday, U.S. Environmental Protection Agency (EPA) administrator Gina McCarthy revealed a “Clean Power Plan” to implement Obama administration’s proposal for reducing CO2 emissions from existing power plants down 30% from 2005 levels by 2030. The President had laid out the broad brushstrokes of the proposed regulations in his weekly address on Sunday. EPA’s announcement yesterday underscored that the rules are enforceable with specific targets for each state ranging from lower targets for coal-dominant states, like Kentucky at 23%, and for states with a cleaner energy mix, such as New York at 44%. The EPA rules are not prescriptive for specific technologies, but allow for flexibility by individual states in how they choose to achieve their targets. They can institute Renewable Portfolio Standards (RPS) like much of the Northeast, or set up carbon trading markets, including broad regional ones. Any such plan will include more renewables, both utility-scale and distributed. For some states, the targets may not be a heavy lift: For instance, analysis from the World Resources Institute indicates Minnesota can achieve a 31% reduction by continuing its existing RPS, increasing the use of combined cycle natural gas (currently operating at 11% capacity), and enforcing existing energy efficiency standards.
The EPA will enforce the new rules under section 111-d of the Clean Air Act, but is bound to face many legal challenges prior to that. However, if the U.S. Supreme Court acts on its own precedents set in Massachusetts vs EPA in 2007, the new rules will withstand the legal challenges. More serious challenges may be in the offing on the political front, particularly if a Republican takes the White House in the 2016 presidential election.
The new rules represent the most significant action taken by the U.S. government to address climate change to date, given that existing power plants account for 38% of the country’s carbon emissions, and complement the expected reductions in the transportation sector generated by the EPA’s increased fuel economy standards for automobiles, released in July 2011. This action has raised the hopes of international agencies like the United Nations Framework Convention on Climate Change (UNFCC) regarding a global climate deal in 2015.
We predict four major technology sectors to get a boost:
- Combined cycle gas turbines (CCGT) will gain greater ground
States will continue to look for decarbonizing fossil fuel power plants first, to ensure supply security and to use infrastructure the utilities have already invested in. The administrations’ earlier announced rules regulating CO2 from new power plants have already had some impact, contributing to the coal-to-gas switch for electricity generation. Firms like Platt are already predicting a significant rise in gas prices as a result of the new EPA rules. In this environment, expect that combined cycle gas turbines, which use energy from natural gas burning as well as steam generated from the hot exhaust gas, will rise in demand, given their higher efficiency at 50%, relative to 40% for regular thermal power plants. We anticipate CCGT giants like General Electric to benefit from this rise in demand.
- Commercial- and utility-scale solar demand will rise in unexpected places
Subsidized internal rates of return (IRRs) are already high for commercial and utility solar installations in states like California and Massachusetts, ranging from 10% to 15% (see Lux Solar Demand Tracker — client registration required). However, the new carbon emissions rules will likely open up hitherto unattractive markets due to the lack of significant subsidies, such as Georgia and South Carolina, where we project IRRs between 2% and 5%. As the IRRs rise in the Southeast, expect a greater flow of debt capital and competing business models, such as leasing from SolarCity and solar loans from Sungage, to make their presence felt. Provided the states comply, the new rules will also make it more difficult for utilities to raise legal objections to increasing use of renewables in the energy mix (client registration required).
- Negawatts will prove to be the cheapest compliance option for states and utilities
Saving electricity is considerably cheaper for a utility than producing it. A recent study (client registration required) from the American Council for Energy Efficient Economy (ACEEE) shows that the average cost of saving electricity across all the utility energy efficiency programs in the 20 U.S. states is 2.8 cents/kwh, two times cheaper than even coal power generation. The new rules will make the trade-off even more attractive by raising the cost of generation in coal-dominated states like Kentucky, Ohio, and Wyoming. Expect the utilities dominant in these regions, such as American Electric Power (AEP), to expand their residential energy efficiency programs, leading to the adoption of air barrier materials, light-emitting diode (LED) lights, and double-pane, low-e coated windows.
- Carbon capture and sequestration (CCS) will get a new lease on life
Current costs of CCS using the incumbent integrated gasification combined cycle (IGCC) technology are an astounding $60/ton, according to the U.S. Department of Energy. Therefore, demonstration projects have been few and far between – and even when they do get commissioned, the capital costs are out of control: A case in point being the 582 MW Kemper CCS plant in Mississippi, where the capital costs now stand at an estimated $5.5 billion, compared to $2.4 billion originally budgeted. The new rules will likely accelerate the development of game-changer second- and third-generation CCS, such as use of metal organic frameworks (MOF), which have the potential to get the costs down to $20/ton.
The increased deployment of the above technologies will have an impact beyond the U.S. As CCGT and CCS technologies scale, expect developers like GE, Toshiba, Siemens, and Alstom to expand their footprint in India, China, South Africa, and Vietnam. Leading CCS research institutes in China, such as Huazhong University of Science and Technology, will partner with companies like the Sinopec group to commercialize the second- and third-generation technologies. A greater diversity of financing models will migrate to countries with attractive rates of return for solar projects, such as India. Utilities plagued with energy security issues (client registration required), such as Korea Electric Corporation (KEPCO), are already engaged in smart grid pilot projects and will likely start launching building energy conservation programs.
In short, the impact of the new EPA rules will neither come via a global binding climate deal nor from an absolute reduction in U.S. emissions, but from catalyzing technology development and deployment. Clients engaged in developing CCGT, CCS, solar, wind, and building energy efficiency solutions should take note and use the opportunity to deploy their technologies aggressively.
GE and the University of Wyoming recently announced the delay of their $100 million clean coal research center. GE blamed its decision on low natural gas prices, unclear energy regulation, and lower energy consumption due to the recession. The center, set to come online in 2012, would have gasified coal into syngas (a mixture of CO and H2) for further conversion to electricity. GE will reevaluate the decision in 18 to 24 months.
This announcement comes on the heels of American Electric Power’s (AEP) cancellation of its $668 million commercial-scale carbon capture and sequestration (CCS) project. The “weak economy” and “Congress’ inability to act on climate policy” were cited as the reasons for cancellation. AEP already operates a pilot-scale CCS facility in West Virginia that captures 20 MW of carbon dioxide from the nearby coal power plant and buries it underground. The commercial project, half-funded by the federal government, would have expanded the facility to capture 220 MW of carbon dioxide (from a 1,300 MW plant).
Back in Wyoming, regulatory uncertainty has shelved 87 GW of proposed coal-based power generation in recent years. We have seen fickle government support crash the biodiesel industry,* slow the cellulosic ethanol industry,* pull the plug on the hydrogen economy,* and build an unpredictable solar market in Italy.* And with carbon legislation looming, but nowhere near ubiquitous, a lack of policy is hurting non-renewable energy as well. While governments continue the energy policy debate, clients should spend extra time and money to invest in alternative energy technologies that offer profitability without government support.
* Client registration required.
Late last month, Energy Technology Ventures (a joint venture between GE, NRG Energy, and ConocoPhilips) announced plans to invest an undisclosed amount in Israeli company Emefcy. Additional investors included Pond Venture Partners, Plan B Ventures, and Israel Cleantech Ventures.
Emefcy has developed a microbial fuel cell (MFC) that uses naturally-occurring bacteria in an electrogenic bioreactor to treat wastewater and generate electricity. It works by using bacteria to biologically oxidize organic chemicals dissolved in wastewater. Specifically, the bacteria release electrons, free protons, and CO2 as part of their metabolic processes. The electrons are captured by the anode, while the free protons combine with oxygen that permeates the cathode to make water and complete the electrical circuit.
In effect, Emefcy’s technology harvests renewable energy directly from wastewater. This, the company claims, is less energy-intensive than conventional aerobic processes or methane-producing anaerobic digestion, and enables an energy-positive wastewater treatment plant. According to both Emefcy and Energy Technology Ventures, the benefits of this technology are both economic and environmental. In its release, Emefcy states that “conventional wastewater treatment uses 2% of global power capacity (80,000 megawatts and 57,000,000 tons per year of carbon dioxide), costing $40 billion per year.”
While GE’s interest in the technology is remarkable, arch competitor Siemens reported in a poster session at this week’s Singapore International Water Week that it is in the process of building its own pilot scale MFC.
Emefcy’s target markets include wastewater treatment in the food and beverage, pharmaceutical and chemical industries. We estimate that the addressable market size is $4.25 billion, comparable to that of membrane bioreactors plus conventional aerobic treatment equipment. The company plans to use Energy Technology Ventures’ investment to further develop the technology into a full-scale commercial plant by the end of this year “for municipal and industrial wastewater treatment,” said Emefcy’s CEO Eytan Levy.
GE is a large player in wastewater treatment, and is expanding its technology focus on Israel, calling it the “Silicon Valley of water technology.” In fact, GE recently opened its newest research and development center in Haifa, which will partner with local technology companies and universities to develop clean energy, water, and healthcare technologies. GE is also partnering with Kinrot Ventures, an incubator company that’s based in Israel and active in the water space.
Innovators and investors gathered this month at the sixth annual Lux Executive Summit to take measure of the opportunities and challenges emerging in the wake of a devastating global recession. Among the prospects they discussed were the rising technologies driving developments in energy, the environment, advanced materials, and human health – technologies that will require not millions of investment dollars to advance, but billions. The potential opportunities not only signify better profits, but the possibility of catapulting beyond one-time rivals. Such success, however, will require more than interdisciplinary collaboration. It will demand international coordination.
This week, Lux Populi highlights some of the insights and observations tracked by Lux Research analysts from select Intelligence Services – beginning with our newest, the Lux Research China Innovation service.
China Innovation: China’s two markets
China’s influence and opportunities were a prevalent theme at the Summit, and figured prominently in a keynote presentation from Jack Perkowski, the founder of JFP Holdings, and past CEO and founder of ASIMCO, a major Chinese automotive components manufacturer. Perkowski highlighted the importance of an empowered China-based management team, as well as an understanding of local perspectives around cost as critical aspects for success. Of particular interest were Perkowski’s comments around product (and hence technology) disparity needed to serve China’s two distinct market segments: namely the high-end and low-end consumers.
Foreign companies typically target the high-end, focusing on high-performance and quality. This domain, however, faces intense competition from domestic companies whose technologies are becoming increasingly comparable but offer a cost advantage. Fuelling the adversity is the implementation of policies and regulations by Chinese authorities to ensure the competitiveness of local providers. So, expect an incessant market demand for superior products and services in China. In 2010, China’s gross domestic product (GDP) grew an average annual rate of 11.2%, and the per capita disposable income of urban residents and net income of rural residents rose by 9.7% and 8.6% respectively. With increasing affluence, rising incomes, and government efforts to propel technology momentum, China may potentially outshine Japan as the world’s largest consumer of high-end goods by 2015. However, we note that this does not necessarily translate into a massive shrinkage of the low-end market, which still strives on a free industrial approach.
While clients selling products into China are no doubt aware of the increasing pressure and competition in the high-end market, many struggle to develop strategies, let alone products, to profitably access the lower end consumer. Clients must use the teams present in emerging geographies such as China to identify opportunities and develop products that fit the local market. These teams will no doubt have the highest probability of developing offerings that meet the local need, but they will also open up reverse innovation opportunities already realized by the likes of GE and Caterpillar.
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Summit panelists and attendees shed light on key themes in solar
The sun never sets on emerging technology markets, and Lux Research’s Solar analysts covered a lot of ground at the annual Summit. Among the highlights: Senior Analyst Ted Sullivan gave a presentation entitled, “Taking Away the Punchbowl: Forecasting the Solar Industry in an Era of Declining Subsidies,” which focused on the radical demand shift away from core markets like Germany and Italy and towards emerging markets elsewhere. Whereas Germany and Italy accounted for roughly 2/3 of the market last year, Lux Research expects 1/3 of the market demand for 2015 to come from new countries not yet on the solar map. India, South Africa, and even Brazil are leading contenders to become large solar markets as they introduce subsidies amidst a continuing fall in module prices.
Meanwhile, during networking sessions, Analyst Pallavi Madakasira noted a very active debate whether corporate venture capital (VC) would work better than private VC for emerging technology providers in the PV space. As PV industry consolidations increase, many attendees seemed to favor corporate VC’s ability to support and position a company over the long term. The topic was addressed more directly by the panel “Crossfire: Can Corporate VC and Private VC Get Along?“, which consisted of VCs on both sides. In general, Lux Research believes that corporate VC could work better for later-stage start-ups that are in the process of ramping up their production capacity, because:
- Later-stage start-ups are better positioned, with an established pilot production process, “de-risking” the investment for corporate types
- They have typically scoped out their targeted end market, and can clearly map to an existing business unit at a corporate investor
- Corporations bring significant expertise in scaling manufacturing facilities (Consider, Intel’s recent consulting engagement with Miasolé, for example), and
- Most importantly, corporations often possess the balance sheet and access to finance required to scale manufacturing facilities costing into the billions of dollars
The market for technologies that help inspect and repair the world’s aging water infrastructure is approaching $20 billion worldwide and is growing at a healthy 10%. Currently, that growth is mostly paid for by spiraling consumer water bills rather than government grants, leading municipalities to desperately seek more cost-effective new ways of maintaining their pipe networks. In a recent report, Lux Research argues that the most lucrative solutions will arise from technologies that can monitor the entire water infrastructure and allow owners to target sections in most urgent need of repair.
This week’s graphic ranks how those monitoring technologies stack up according their relative maturity and technical value. Not surprisingly, tried and true monitoring techniques remain popular in the conservative water industry. Most drinking water companies still rely on acoustic techniques to find leaks, while both drinking and wastewater companies use closed-caption TV to survey pipe systems. Both techniques, however, are labor-intensive and scale poorly, offering scattershot and often poorly documented information about pipe networks.
But the Current Winners quadrant clearly highlights the current and future potential of smart meters. Backed by large vendors, like General Electric, and largely accepted by the industry, smart meters have grown into a $200 million industry. Plus, the data they generate heightens the potential of other technologies that help automate collection and application of smart meter data. This helps explain the relatively high potential of computer management, asset awareness and automated inspection technologies.
The big move is toward smart infrastructure monitoring options. Possessing a clear and comprehensive picture of the entire infrastructure could save a water company tens or hundreds of thousands in repairs each year. The first part of that goal is now widespread: Survey-quality GPS, sometimes combined with electromagnetic methods or ground-penetrating radar, can map pipe infrastructure, creating three-dimensional maps that show exactly where the pipe is, correcting the widespread errors in existing maps, and at least ensuring that repair crews will find a pipe when they dig.
Source: Lux Research report “Plugging the Leaks: The Business of Water Infrastructure Repair.”
There was no shortage of insights about the emerging Chinese market at last month’s [Medical Device & Diagnostics Symposium 2010 in Waltham, MA. Sponsored by several Chinese-based organizations such as the Chinese-American BioMedical Association (CABA), the event hosted speakers such as Xuan Kong, Vice President of NeuroMetrix Inc, and Philip Zhang, co-founder of Milstein Zhang & Wu.
Xuan touch on universal business risks (e.g. satisfying multiple parties, including patients, physicians, insurance providers, and the U.S. Food and Drug Administration) and clinical/regulatory risks (i.e. standard of care vs. enabling technologies). But he also discussed challenges of entering emerging markets, such as China, where he emphasized the importance of having a viable business model, marketing, distribution, and IP protection.
Philip also discussed the importance of IP protection in medical devices, highlighting the importance of the “freedom to operate” before briefly outlining the patent law system in China. Several distinctive characteristics include the oriental philosophy (meaning no one shall own the power and fruit of intelligence) and double standard – strong on paper, but weak in enforcement. See Lux Research’s report “Taming the Water Dragons: Opportunities and Challenges in the Chinese Water Sector for more on this. (client registration required).
Due to the absence of a scheduled speaker, the symposium failed to touch on investment opportunities in the medical device industry, especially in China. But our research reveals potentially huge opportunities fueled by increasing demand from a fast-aging population, rising income, and on-going healthcare reform; a cheap but capable workforce from local graduates as well as the waves of Chinese returnees from overseas incentivized by China’s Thousand Talents Program; and China’s disadvantage in technology and innovation. There are overwhelming advantages for multinational corporations in high-end instruments, such as magnetic resonance imaging, as well as for local companies in low-end products, such as medical disposables. Further opportunities await in China’s market for mid-end and/or affordable high-end medical devices (such as GE’s B30 patient monitor, as well as in the country’s small cities/rural areas. Among the possible strategies for market entry: local partnerships like Weigao’s partnership with Medtronic, and local innovations, such as [GE’s multiple R&D centers in China (see the November 30, 2010 LRTJ – client registration required).
Earlier this month, Honeywell announced its acquisition of Akuacom, a Bay-area company that provides automated demand response technology and services for the smart grid. The acquisition beefs up Honeywell’s current smart-grid portfolio by enabling it to provide utilities and independent system operators (ISOs) two-way communication with energy management systems at commercial and industrial sites. This capability lets utilities and ISOs automate the delivery of price and reliability signals to these facilities and more effectively trim peak demand.
With nearly ubiquitous temperature and HVAC controls (several of which already interface with demand response software), Honeywell is already one of the “big four” building controls firms – along with Johnson Controls, Siemens, and Schneider Electric. The company is currently the largest residential demand response player in North America. It also has a presence in more than 10 million commercial buildings and thousands of industrial plants. As such, adding demand response technology will let Honeywell leap from inside the building envelope to the utility and provide an end-to-end connection between energy provider and user to reduce peak energy demand and maintain optimum building efficiency.
The acquisition marks the beginning of industry consolidation that will see a handful of winners emerging from the demand response segment. Among them will be established early entrants like EnerNOC, and a half dozen or so alignments between large building control players and key demand response firms. There may also be one or two stranger alliances between large appliance makers and demand response firms, such as by the Tendril-GE pact. Thus, look for a few more high-profile demand response acquisitions to occur as other stalwart control firms quickly follow suit in the wake of Honeywell’s Akuocom acquisition. Meanwhile, we also expect the vast majority of mass-produced, VC-backed demand response and building energy management firms to be frozen out of the market and fall off the map.
Amidst an uncertain economic climate, top corporate executives, entrepreneurs, investors, and academic luminaries traveled to Boston last month to share the ideas, insights and innovations that helped establish them as today’s business and technology leaders.
The event was the fifth annual Lux Executive Summit, where leading innovators – from IBM to Mitsui to DSM – meet, discuss and learn about the technologies that will drive growth and profits for years to come. This week, Lux Populi highlights some of the insights and observations from the Lux Executive Summit by analysts from each of Lux Research’s Intelligence services.
Biosciences: Pulp/paper producers protest penetration into biofuels
Amidst a lively debate about ethanol’s potential to displace petroleum in the U.S., Samhitha Udupa pointed out to Robert Gelman, a researcher at Ashland, that several of the technology developers that Lux has briefed were struggling with pretreatment processes to breakdown and separate components of lignocellulosic biomass (comprising lignin, hemicellulose, and cellulose). Pretreatment is widely recognized as the most expensive step in cellulosic fermentation, and enzyme giants like Novozymes spent many years designing cheaper enzymes. Interestingly, Gelman vehemently asserted that firms, like Ashland, with experience in pulp and paper have long been experts at separating components of wood, an abundant lignocellulosic feedstock.
So why aren’t more pulp and paper players stepping up to take advantage of a huge unmet need in a soon-to-be high-volume industry?
According to Robert, he had the same thought years ago, and pursued the idea with “many” (emphatically) of his higher-ups, but was met with great skepticism. He asserted that pulp and paper producers are “dinosaurs more interested in reliving ‘Blazing Saddles’ than in exploring adjacent applications for their valuable technologies.” While the cellulosic ethanol industry continues reinventing the wheel – or parts of the wheel – in an effort to bring down costs, pulp and paper producers continue to… produce paper and pulp.
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Green Buildings: Dow says many buildings are actually getting less efficient
Mike Kontranowski, Strategic Marketing Manager of Dow Building Solution’ Thermax brand of rigid insulating board, presented a sobering analysis of the direction of building efficiency during the Summit. Although buildings of all types have become more energy efficient on a per square foot basis for the past 50 years, many buildings constructed over the past decade have bucked the trend and have begun regressing on energy efficiency. This reversal comes despite newfound interest in “green building” among governments, occupants, and the building owners themselves, and despite the plethora of insulation, window, equipment, and other devices that yield far greater efficiencies. More surprisingly, many of the buildings are LEED (Leadership in Energy & Environmental Design) certified, because energy efficiency is only one of many metrics that accrue points needed for certification.
The proximate cause of the backslide in efficiency is a switch to less expensive aluminum wall studs in place of wood or block in recent years. Because aluminum is such a good conductor of heat, walls that are otherwise well-insulated – with insulation batts installed between the studs – see an overall insulating R-value of the wall drop in half, from 11 or more to 5. Thermal images of walls are particularly poignant, showing relatively small amounts of heat escaping from between the studs, while the studs themselves were lit up like Christmas trees.
Fortunately solutions exist even for this problem, including new insulating sheathing technologies from Dow and Owens Corning that cover the exterior of the studs. In addition, aerogel companies, such as Aspen Aerogels and American Aerogel, are developing insulating tapes designed specifically to envelop the studs themselves and lend substantial insulating value. Although, adoption of these technologies isn’t likely to surge in the near term, expect renewed regulatory efforts and impending financial programs like the PACE bonds may accelerate their roll-out further on (see the May 3, 2010 LRGJ – client registration required), and may reverse the unfortunate regression in thermal insulation in modern structures.
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Nanomaterials: Best practices for building a business around nanotechnology
During a panel discussion at the Summit, CTO Seth Coe-Sullivan of QD Vision, President Donald Cho of Finetex EnE, and President Adrian Burden of Bilcare Technologies discussed best practices for building a business around nanotechnology. Common tips included:
- Secure funding early
- Protect intellectual property
- Integrate environmental, health, and safety (EHS) plans with business strategy
- Develop a strong team top-to-bottom
- Developing nanointermediates instead of just nanomaterials, and
- Focus on a small number of target markets
While the trio hit most of the best practices that we’ve touted before, one of the most critical steps for a start-up is forming partnerships early with large corporations (see “Open Innovation and Its Discontents: Solving the Emerging Technology Funding Problem”). With these tips in mind, clients should check each box when engaging start-ups and benchmark the potentials against strong players like QD Vision, Bilcare, and Finetex.
With regard to Finetex, its VP Donald Cho told Lux analyst Jurron Bradley that it supplies nanofiber filters to GE for its turbines to filter the incoming air. While gas turbines may not represent a large opportunity for filter companies, the partnership is a strong vote of confidence for the product and pushes Finetex further in front of its competition. Finetex’s revenues from nanofiber sales are still a modest $1.5 million, but it sports an extensive partner and customer list, which speaks well for its future. Clients looking for a nanofiber supplier, especially for textile and filtration applications, should engage Finetex, but those considering running their own production lines should look to Elmarco for equipment.
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Power: Toyota, Compact Power, and BYD offer contrasting views on the future of Li-ion
Three panel speakers in energy storage provided three very different visions for the future of lithium-ion (Li-ion) batteries and electric vehicles. The panel included Bill Reinert, National Manager for Toyota Motor Sales’ Advanced Technology Group, Prabhakar Patil, CEO of Compact Power (a subsidiary of LG Chem, and battery supplier for the Chevy Volt), and Micheal Austin, VP of BYD America.
Reinert, the most conservative of the three, lamented that at today’s Li-ion battery prices, even a plug-in hybrid vehicle (PHEV) with as little as a 10-mile all-electric range (AER) is still too expensive. While Patil agreed that Li-ion batteries were very expensive today, he felt that costs would drop by a factor of two to four in the next five years to 10 years. Austin, by far the most bullish of the three, claimed that BYD is already producing Li-ion batteries at $500/kWh, as well as the electric vehicles (both all-electric vehicles – EVs – and PHEVs) and grid-storage systems that use them.
Our view aligns most with that of Toyota’s Reinert. Our cost estimates for automotive Li-ion packs to the automaker range between $633/kWh and $686/kWh on the pack level, which is too expensive for any PHEV to compete with a NiMH-powered standard hybrid without serious subsidies (see the Lux Research report “Looking Inside Li-ion Batteries for Cost Reduction“). While we agree with the low end of Patil’s estimates – namely the claim that large-format Li-ion prices will drop by a factor of two over the next decade – we don’t see them dropping by a factor of four in the foreseeable future, due to high materials costs.
However, BYD may have found a solution to the problem of high costs. Austin told us that the keys to BYD’s ultra-low battery prices are 1) BYD’s iron-phosphate cells contain less lithium – an expensive cell material – than other lithium iron phosphate (LFP) cells made by the likes of A123 Systems or K2 Energy and 2) BYD’s pack is a hybrid of energy- and power-cell chemistries, allowing for rapid charging (50% SOC in 10 minutes) while reducing the total cost of the system. Moreover, in June 2010, the Chinese government announced a trial plan in five cities that will pay subsidies of up to 60,000 yuan (roughly $8,800) per electric vehicle directly to the automakers. This allows consumers to buy BYD F3DM PHEVs (with a 24 kWh pack) at roughly $10,000 per vehicle, while BYD’s E6 EV (with a 65 kWh pack) is now priced for U.S. sales at $35,000 – the Chinese consumer price is yet to be set. With these new lowered prices, BYD expects the sales of these vehicles to be very strong.
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Solar: Summit panelists dish on solar industry outlook
Conference invitees attending the Summit’s solar track caught perspective from the industry’s leading lights at two separate panel discussions. First up was the “Top Dogs” panel, wherein Satcon CEO Steve Rhoads and Enphase Energy Founder Raghu Belur discussed the relative merits of centralized inverters versus panel-level microinverters. In addition, Yingli Solar Managing Director Rob Petrina discussed Yingli’s market entry strategy for the U.S.
Overall, all three were incredibly positive about the prospects for the U.S. market in 2010 and 2011 as it begins to soak up demand from Germany. Further, Rhoads and Petrina stressed that the Chinese market is not to be overlooked, especially given the quick pace at which plants can be installed. For example, Satcon cited a total development, engineering and construction time of only a few months for its 38 MW of projects with GCL in China, compared to the 12 to 36 months more typical of U.S. installations
Later that day, Craig Cornelius, Managing Director at Hudson Clean Energy Partners, moderated a panel of “Solar’s Emerging Leaders.” The panel included Dave Pearce, CEO of CIGS start-up NuvoSun; Kurt Barth, founder of CdTe up-and-comer Abound Solar; and Cynthia Christensen, Director of Marketing for Stirling Energy Systems (SES), a developer of a unique variation on solar thermal. The three discussed some of the challenges of overcoming the “bankability” and “warrantability” concerns for new technologies. They suggested the use of third-party insurers and funding initial installations off the company’s own balance sheet were generally accepted best practices in the market downturn. Indeed, SES noted how it spun off a separate project development subsidiary, funded by the same investors, to allow it to focus on technology developments. Clients should watch Abound and SES carefully for their first installations this year, while NuvoSun’s progress with its partner Dow Chemical will determine that company’s future success.
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Water: Top dogs and rising stars discuss opportunities and challenges in the hydrocosm
Two separate panel discussions at the Summit generated insightful commentary on topics ranging from regulation in the hydrocosm, the need for innovation in the field, new market growth opportunities, and the impact of the current low cost of water.
The first panel provided perspective from “top dogs” representing every part of the membrane water treatment system, beginning with David Moll from Dow Water & Process Solutions (the membrane), Bill Musiak from Norit X-Flow North America (the modules), and Jeff Fulgham from GE Water Process & Technologies (system development and other facets).
The panel discussed markets for residential treatment systems, food and beverage processing, wastewater, and two areas of particular excitement: the produced water market and wastewater reuse, all of which we agree are significant growth areas.
We were glad to see the panel unanimously confirm the importance of the wastewater treatment market, which we recently covered in Technologies Turn Waste into Profit (client registration required). The panel also shared our interest in ultrafiltration membranes and the produced water market. Lux Research discussed membranes in a recent report Filtering Out Growth Prospects in the $1.5 Billion Membrane Market (client registration required), and will discuss specifics of the produced water market in an upcoming Water State of the Market Report (SMR) later this year.
The Summit also brought together “rising stars” in the water market, namely Amir Peleg from TakaDu Ltd, Emily Landsburg from Blackgold Biofuels, G.G. Pique from Energy Recovery Inc. (ERI), and Marc Bracken from Echologics Engineering Inc.
The current low cost of water was of particular focus for panelists who discussed how to grow a business given this fundamental truth in the water market. The low cost of water effectively reduces the drive for innovation and new products, since customers are not motivated to alter current water treatments and use patterns.
G.G. and Amir both noted that there is a need for national water policy to push the agenda of innovation, among other benefits. Marc from Echologics noted that repairing the aging water infrastructure is often a pain point for customers because, irrespective of the cost of water, it must still be transported efficiently. Emily noted that Blackgold Biofuels’ business actually helps water utilities stretch their revenue by providing a cash stream from the waste buildup in the pipe infrastructure. In addition to the cost/revenue discussion, the panelists emphasized the need to collaborate, and for solutions that form a “treatment train” instead of claiming to be silver bullet.