Innovations aimed at reducing carbon fiber cost and improving composite processing efficiency (see the report “Carbon Fiber Composites Market Update” [client registration required]), combined with continued global scale-up (see the report “Carbon Fiber Update 2016 Edition”[client registration required]), are driving increased adoption of carbon fiber reinforced plastics (CFRPs). As higher volumes enter the market, CFRP recycling is increasingly important not only for environmental and economic benefit, but also to avoid upfront landfill costs and to meet stringent automotive regulations in recyclability. In 2016, the global CFRP market was greater than 60,000 MT and is expected to grow to 183,000 MT or $35 billion in 2020. However, only a small amount of scrap produced per year is recycled and more than $400 million of CFRP ended up in landfills in 2015. 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.
Recent headlines in the $620 billion water industry, including major companies like Siemens and Ashland selling off their businesses and Veolia continuing to hemorrhage, make the sector seem unnavigable. Bloomberg recently published what amounted to an autopsy of the most hyped water market in recent years, frac water treatment. Venture capital (VC) investors, citing slow adoption of new technologies in the industry, have largely taken their money elsewhere. Despite this drumbeat of pessimism, the water sector has large numbers of profitable – sometimes extremely profitable – large companies. A detailed value chain analysis reveals that the industry earns better than 12% operating profits across all sectors despite recent strong headwinds.
By targeting worthwhile market sectors and keeping in mind some key sector-specific principles, a company can build a successful business in this massive, growing, global industry. The companies we surveyed across the value chain, directly representing some 23% of the market, achieve an average 12.9% operating profit, torpedoing claims that it’s impossible to make money in the water business. Going a step deeper, chemicals and materials, equipment, and integrated systems achieve solid 8% to 11% average profits across the companies we surveyed, despite sector-specific headwinds. Customer-facing sectors in public service and small consumer systems do better than 14% profits. Huge profits abound in the highly political $120 billion public services market overall, with key opportunities to improve margins through innovation. Only the highly commoditized engineering and construction businesses, representing only a third of the industry, are stuck in the low single digits. Even in these sectors targeted plays achieve high margins.
With the flux in the industry, the opportunity to pursue acquisitions and enter target markets is ever-enticing, especially for those who mistakenly think of water as another little cleantech business they can roll up. However, water offerings must always rise from a coherent set of offerings that feed back on each other. There are thousands of technology startups in the water space, each focusing on improving some aspect of treatment. Keeping track of these early-stage innovations will allow portfolios to be assembled to leapfrog today’s overcrowded markets. Companies looking for a big idea to shape their water businesses can look at where the startup activity is placing its bets: improvements in wastewater treatment, like the nano-ceramic membranes for wastewater aeration offered by BioGill, and dramatic improvements in monitoring, such as those in ANDalyze’s portfolio, are good places to start. Both will be transformative, and companies that ride these waves will overtake more established players.
Source: Lux Research report “Making Money in the Water Industry” — client registration required.
Earlier this week, technology billionaire Elon Musk revealed his ideas for “hyperloop,” a speculative new mode of high-speed transportation. The system would propel car-sized compartments through low-pressure tubes (like pneumatic tubes once used to move mail through office buildings) at 1,000 km/h. Musk says that connecting San Francisco and Los Angeles (through a proposed $20-fare, 35-minute ride) with the system would cost about $7 billion, or a tenth of the projected cost of California’s beleaguered high-speed rail system meant to connect those cities – and could be built in less than a decade.
Naturally, such a bold idea immediately attracted criticism, such as a USA Today article listing mundane reasons it won’t work like “you’d have to slow down for turns” and “the towers would have to be made safe.” Of course, others fell over themselves praising the plan, reasoning that Musk’s vision is so awesome that even if it doesn’t quite turn out as planned, it would still be great, anyway. While it’s easy to get overly excited or overly skeptical about the concept, a dose of datapoints is useful:
- If Musk hadn’t proposed it, it wouldn’t be worth attention. Musk is a singularly successful entrepreneur, having quickly turned equally-futuristic ideas into successful businesses several times: electronic money (PayPal moves $150 billion a year), electric vehicles (Tesla is profitable (client registration required) and the cars, though expensive, are critically acclaimed), solar energy (SolarCity gets Lux’s much-coveted “Strong Positive” — client registration required), spaceflight (SpaceX, which developed a national-grade space program in seven years and makes a profit). Musk’s solid record lends credibility to an otherwise fanciful idea (client registration required).
- The system requires no exotic new materials, properties of matter, or unproven technologies. Musk’s 57-page detailed explanation of the idea explains how the system might work using relatively off-the-shelf technologies. It acknowledges that there are many engineering problems to be solved, and offers the concept as an open-source blueprint – a starting point for something actually workable. As such, the many solid criticisms of the plan actually move it forward.
- Musk’s announcement should be seen as political commentary wrapped in an engineering design. The white paper opens not with a visionary problem statement, but by stating, “When the California ‘high speed’ rail was approved, I was quite disappointed, as I know many others were too. How could it be that the home of Silicon Valley and (NASA’s Jet Propulsion Laboratory) – doing incredible things like indexing all the world’s knowledge and putting rovers on Mars – would build a bullet train that is both one of the most expensive per mile and one of the slowest in the world?” Like many California taxpayers, Musk is frustrated by the cost overruns, delays, and mediocre performance of the state’s high-speed rail program, and the political problem is arguably the one Musk aims to solve.
Of course, a tech entrepreneur’s political commentary isn’t newsworthy either, and there has been rampant speculation as to whether Musk – or anyone – could successfully build the contraption. Pneumatic transportation is not novel, and similar – if much slower – versions of pneumatically-propelled people pushers have been envisioned, and even deployed, long ago. Paris and New York had air-powered public transit in the 1870s. The vacuum-tube variation Musk is currently proposing has recently been explored in China and in Switzerland. So how does the concept stand up to technical scrutiny?
- Hyperloop’s cost-per-kilometer would be as revolutionary as its speed. California high-speed rail’s high cost per kilometer is as much a consequence of political and environmental issues as the technology, and those concerns would likely dog Hyperloop, too. Musk proposes an elevated, high-technology solution that would indeed address issues like land use, but such systems are if anything even more expensive: the Shanghai Pudong monorail cost $1.3 billion to build and is 30 km long ($40 million/km), while the Airtrain monorail in NYC cost $1.2 billion for just 12 km of track ($100 million/km). One way to defray the cost might be co-locating the route with other state-spanning infrastructure. Using the same right-of-way for a natural gas pipeline or energy transmission lines with PG&E, fiber-optic cable (which are routinely co-located inside city sewers) or water could be part of the calculus (client registration required).
- The passenger pod’s cousin, Tesla, could supply on-board power technology. On-board batteries are not a technological hurdle, because the initial acceleration (and subsequent boosts) needs would be met by external, stationary linear electric motors and their energy sources (client registration required). The on-board batteries would then be used primarily for powering a large electric compressor fan at the front of the Hyperloop. The resulting battery would likely be on the order of 200 kWh – about three Tesla Model S’s worth of energy storage capacity, which can be engineered using today’s battery technology. Moreover, these batteries would contribute only a sliver – less than 0.1% – to the overall cost of the Hyperloop, being dwarfed by infrastructure like pylon construction and land permits.
- Even in sunny California, the solar-powered system would need backup storage. While Musk’s plan assumes the energy requirements of the system could be met by solar energy – perhaps he is hoping that SolarCity will get the installation contract – solar panels would need grid storage to operate at the expected utilization rate. So while solar power will help, the larger energy storage opportunity would be in the stationary batteries required to operate the Hyperloop’s linear electric motors at night or in poor weather.
- The open-source model is an open invitation to rail system manufacturers like Bombardier, Siemens, and ABB. Siemens test-drove crowdsourcing by opening up its engineering software to the Local Motors crowd, with the now-available Rally Fighter vehicle a testimony to its success. As with other “big innovations,” the spinoffs of R&D on Hyperloop would benefit adjacent technologies, and advance the process of collaborative design. Manufacturers of other high-performance transport vehicles, such as automotive, aircraft, and spacecraft – like Musk’s SpaceX or the NewSpace community (client registration required) – should join the Hyperloop crowd.
The high concentrating PV (HCPV) company, GreenVolts, is officially selling its assets after its primary investor, ABB, pulled support from the startup. GreenVolts outsourced its manufacturing to contractors such as Foxconn, so assets up for sale will largely be intellectual property.
GreenVolts obtained exactly what many small solar manufacturers are looking for: a large, well-positioned, strategic investor to add bankability and take responsibility for driving growth. Semprius found that in Seimens, and Miasolé had been looking for a buyer and recently closed with Hanergy. While the advantages of this gaining significant support from a strategic investor are numerous, there is also an inherent risk, as became apparent with GreenVolts and ABB. If the investor proves fickle and decides to cut losses, the solar company will not be able to survive. Strategic investors that invest in solar need to be willing to take a short-term loss for long-term gain.
For the broader HCPV industry, GreenVolts’ failure adds to concern surrounding the industry that has been growing since Amonix shut down its Las Vegas manufacturing facility (client registration required). We expect the situation to get worse before it gets better, but our favorites – Soitec, SolFocus, and Suncore as outlined in the Lux Research report, “Putting High-Concentrating Photovoltaics into Focus” (client registration required) – are still moving forward on capacity and installation targets, and can easily satisfy our 700 MW HCPV demand forecast in 2017.
As hype for HCPV dwindles, companies are starting to look into low concentrating PV (LCPV) as an intermediate technology between expensive, highly efficiency HCPV and cheap, less efficient flat panel PV. SunPower’s C7 product aims to do just that with reflectors that concentrate sunlight 7X onto SunPower’s interdigitated back contact (IBC) solar cells with 22.8% cell efficiency under 7X concentration. The company has an agreement with Tucson Electric Power to install 6 MW of the LCPV product. Low concentration allows for a broader range of reflector options as long as they are cheap and limit optical losses. SunPower’s C7 system uses parabolic trough glass mirrors, but startups like TenKsolar and Absolicon use 3M reflector films, Solaria uses patterned glass, and Cool Earth Solar uses a proprietary refractive film co-developed with Avery Dennison.
Monocrystalline silicon (c-Si) solar cells used in LCPV modules are many times cheaper on a per area basis than multijunction cells used in HCPV modules; however, c-Si cells are more susceptible to heat and UV degradation, and benefits from increased encapsulant transparency will multiply under concentration, which can translate to interesting opportunities for innovative material suppliers. Material and chemical companies may want to look to LCPV as a potential new market for innovative optical or encapsulation materials.
At Singapore’s International Water Week conference in July, Siemens announced the results of its low-energy electrodialysis desalination system. The project for the Singapore government targeted energy usage of just 1.5 kWh/m3, which is near the theoretical limit* for desalination technology. Siemens operated the Singapore plant for the last three years, and during that period reduced its energy consumption to 1.7 kWh/m3. However, they explained to Lux that the system’s opex and capex still needed improvement to be truly competitive with seawater reverse osmosis (RO). Contractually, failing to reach the 1.5 kWh/m3 target holds no penalty. Siemens said that it had completed optimization of the plant, but added that it’s still working in the lab to reduce costs. It aims to unveil the product of that work in 12 months to 24 months.
In learning more about this technology, some things stood out to us. First, the system’s membrane is 10 times more expensive than the threshold for cost effectiveness. This is especially striking given that it’s an off-the-shelf product with no modifications. In addition, the system achieved a relatively low freshwater recovery of 35%. Although electrodialysis systems are not expected to require as much pretreatment as reverse osmosis, this system operated behind an existing ultrafiltration membrane, signifying a best-case scenario. Further, this solely Siemens-driven effort created more than 100 invention disclosures, suggesting the project is at least as much research as development.
While Siemens has proven it is possible to approach the theoretical limits of energy use for desalination using electrodialysis, it has yet to prove it can do so in a cost effective way. Without this, it is unlikely this system will see the widespread implementation implied from the buzz surrounding its press release.
* 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.
On March 3, the building controls giant Johnson Controls announced its acquisition of EnergyConnect, a demand response company, for $32 million. EnergyConnect offers a software-as-a-service energy dashboard focused on the commercial and industrial (C&I) “price-response” demand response market, which helps customers save money by shifting consumption to times with lower electricity rates. It also offers traditional “dispatch” demand response to reduce energy consumption during periods of peak demand.
Building on a 60% revenue growth in 2010, EnergyConnect further increased its acquisition appeal in January when it won a multi-year contract with the California State University (CSU) system, which also happens to be a customer of EnergyConnect’s competitor EnerNOC. This head-to-head competition of direct response players within one institution is indicative of the increasingly competitive C&I marketplace, and the competition will only get hotter as building management systems integrate more deeply with smart-grid systems.
The strategic alignment of Johnson Controls with EnergyConnect furthers the ongoing consolidation in the DR industry, highlighted last year when Honeywell acquired Akuacom (see the May 17, 2010 LRGJ*). The “big four” building controls companies – JCI, Honeywell, Siemens, and Schneider Electric – all now have significant stakes in the lucrative C&I demand response market. As these diversified companies supplement their core offerings with a demand response add-on it will squeeze pure-play demand response providers like EnerNOC and Comverge by driving their margins down (see the November 17, 2010 LRPJ*).
As we reported last fall (see the September 29, 2010 LRPJ*), it is not only the building controls companies who are applying the squeeze, but also utilities (see the September 22, 2010 LRPJ*) and third-party deal-makers. As the size of the pie for C&I demand response grows, the winners will be determined not only by their ability to find new slices in uncharted territory, but also their ability to take bites out of competitors’ pieces by offering multiple DR services. Clients should divest investments in pure-play demand response companies, and look to establish partnerships in the building IT space before the best offerings are off the table (see the Lux Research report, Sifting Winners from Losers in the Building IT Acquisition Frenzy*).
*Client registration required.
In a continuation of Siemens’ membrane-related acquisitions and internal developments in its water business, Siemens Water Technology announced its acquisition this month of the Clearlogx Process chemical feed system from MarMac Water LLC. The Clearlogx system is an automated chemical feed system that enhances organic contaminant removal in water and wastewater. The system’s proprietary controlled release of acid, coagulant, and chlorine reduces membrane fouling and the formation of disinfection byproduct. What is especially interesting is that combining coagulants with a membrane system will result in a more efficient treatment technology.
In our report earlier this year titled “Filtering out growth prospects in the $1.5 billion membrane market” (client registration required) we noted that fouling is the top issue plaguing membrane-treatment systems. So, improving fouling resistance for membranes would allow the technology to gain significant market share. Multi-functional membranes and membrane systems combine multiple technology solutions that can both filter out contaminants from wastewater as well as remove them – either by killing, dissolving, or breaking them down. Often, we see membrane companies pair with a chemical disinfectant or precipitation technology provider to offer customers a more complete treatment train. For large companies, developing such systems is even easier, and the Clearlogx acquisition provides the Siemens’ Memcor membrane system with chemicals that can reduce membrane fouling so they can treat greater volumes of wastewater with membranes that have increased life. Because of the added functionality, we expect to see growth of Memcor’s presence in pharmaceutical and food and beverage process water treatment.
Along with the crude oil and natural gas that fuels modern civilization, the energy industry brings nearly 233 billion barrels of wastewater from beneath the earth’s surface every year. This so-called “produced water” can contain a variety of contaminants – from oil and grease to chemicals, micro-organisms, and radioactive elements. The need to treat this water before disposal or reuse has attracted a multitude of technology developers clambering to tackle the challenge. This week’s graphic ranks 29 companies developing solutions for offshore produced water treatment.
Offshore oil platforms are a wholly different kettle of fish than onshore rigs. Clearly, offshore technologies must fit within strict confines, making large treatment systems simply unfeasible. Plus, disposal options are limited for offshore produced water. Generally it is just discharged into the ocean, and regulation around contaminant levels is strictly enforced. Energy exploration and production companies are required to send monthly discharge samples for testing. Regulation for offshore produced water discharge is mainly focused on dissolved and dispersed hydrocarbon content. This last factor helps explain the favorable position of MyCelx Technologies Corporation and Abtech Industries. Both companies derive their high technical score for developing hydrocarbon absorbing polymer technology, which suits for the size and contaminant considerations of offshore treatment.
Veolia MPPE occupies the Dominant quadrant in several of the report’s figures, including this one. In the case of offshore treatment, the company’s position is due in part to applications in the North Sea, which has the most strict discharge limits of less than 20 ppm of hydrocarbons allowed and a “no damage requirement,” which Veolia’s system is able to address. The challenge with absorbants is that they produce waste (sponge or beads) that also needs to be managed. For this reason, advanced oxidation and coarse filtration are other technologies applied to this market segment.