In May 2017, Volkswagen (VW) brand CEO Herbert Diess claimed that VW will surpass Tesla to be the world leader in electric mobility by 2025 – an aggressive target, but coming from a company with the resources to achieve it. At the International Motor Show in Frankfurt, Germany, VW CEO Matthias Müller announced Volkswagen’s Roadmap E, committing those resources to a strategy that aims to transform one of the world’s largest OEMs. This roadmap is made up of several key initiatives: Continue reading
In late 2016, Elon Musk announced that Tesla would soon be offering solar roofs for homes, and claimed further that the roofs would be less expensive than non-photovoltaic roofs, even without income from photovoltaic generation. The company has partnered with 3M, which produces a film for the tiles to hide the solar cells when viewing from shallow angles. Recently, the company released its estimates for price, as well as the assumptions it relied on in order to reach those figures. Continue reading
The stationary storage landscape is a complex and fragmented one, with battery manufacturers, power electronics providers, software developers, and system integrators all working together to complete projects. In this complex landscape, some partnerships have allowed battery manufacturers better access to the stationary market, while also giving system integrators a more reliable and affordable source of cells. Given this importance, we analyze partnerships in the stationary storage landscape and assess which technology providers have positioned themselves for success – and those that haven’t.
As the automotive industry evolves, two major innovations have emerged almost in parallel – increased electrification, peaking in fully electric vehicles (EVs), and increased driver assist features, peaking in the (not yet achieved) idea of self-driving cars (client registration required for both). A common question we receive is whether these two must be combined: Must self-driving cars be electric? The short answer is no – or, more accurately, not yet. It will be possible to make a competent self-driving car using older internal combustion engine (ICE) technology as the power source that drives the wheels. However, there are six good reasons why it is most likely that self-driving cars will be overwhelmingly electric – that is, six reasons why the two technologies will “merge”: Continue reading
New technology is usually too expensive for the masses to afford. Take Tesla for example, which makes the world’s only truly compelling electric vehicles: With an average purchase price close to $100,000, these vehicles would break the budget for the average consumer. More broadly, even mainstream innovations like consumer electronics, renewable energy, and advanced healthcare remain out of reach for many, especially for cash-poor customers – both individuals and businesses. This is a serious problem, for a number of reasons. First, it denies life-enhancing innovations to a massive subset of the population. Second, it harms all, including the wealthy, as fast-growing economies will be leading contributors to global challenges like climate change where advanced technologies can help. But beyond these big-picture problems, a cash barrier to new technology adoption is simply bad for business, because it causes technology developers to miss a revenue growth opportunity.
But these issues can be solved. To show how, take energy, which presents a good case study for how to better target cash-poor customers. The energy industry is rich with such business models because energy decisions tend to be economically-motivated but may take several years to pay off. To explore this further, consider how energy developers use two broad strategies to sell technology upgrades to retail businesses:
- Transforming a capital expense into an operating expense, with immediate payback: Third-party ownership models have been tremendously successful with solar developers like SolarCity, which will offer our grocery store a no-money-down solar system paid back with a fixed or per-usage fee that immediately lowers its monthly energy bill. To avoid oversizing its solar system, a customer may also seek out an energy efficiency upgrade. These frequently employ a similar pay-for-performance model, in which the monthly fee is calculated as a portion of the cost savings it sees from the upgrade, creating an immediate payback and reducing the risk to the customer. SolarCity started with solar panels only, but it is now owned by Tesla – so expect batteries and other technologies to benefit from this business model soon.
- Sharing the upfront cost with another party, when both can benefit from the purchase: Cost-sharing models reduce the payback period of an investment by exploiting every possible value stream. Sharing the cost of an electric vehicle charging station with Tesla brings a better cost-benefit ratio than purchasing a station outright, and each party benefits: Tesla’s customers are happier since they have more places to recharge (addressing range anxiety), and the retailer boosts its revenue thanks to increased traffic as customers wait for their vehicle to charge. In a similar relationship, a store might work with a microgrid developer like Enchanted Rock (client registration required), sharing the upfront cost of a reliability-enhancing microgrid with the developer, which recovers its investment by selling the microgrid’s capacity when the store does not need it.
Cash-poor customers are not just an issue in energy, though, and these same structures can be found in other industries as well: For example, car-sharing programs like Zipcar and Car2Go have in effect transformed a capital expense into an operating expense in the automotive world, allowing customers to pay for each use of a vehicle – a model that Elon Musk has even alluded to as a way to improve consumer access to Tesla’s vehicles in the future. In consumer electronics, Amazon has famously engaged in cost-sharing by offering a discount on ad-laced electronics (such as smartphones and its Kindle e-reader), covering a portion of the upfront cost, and in exchange, getting value from the device as an advertising channel. In some cases, offering these pricing models requires a cash-rich (or debt-heavy) developer that can carry the upfront cost in place of the customer. However, when designed well, these business models can speed-up adoption of early stage technology and open up new customer segments.
Electric vehicle and battery manufacturer Tesla announced a bid to acquire solar leader SolarCity for $2.8 billion, and has clearly stated its motivation behind the deal: reduce the cost of solar plus storage through vertical integration and be more of an energy company than just an automotive one. The immediate benefits of the union are unclear, the strongest potential impact lies in long-term dominance in the incipient solar-plus-storage business. Continue reading
Artificial intelligence (AI) is a stealthier field than most, but startup Geometric Intelligence is quiet even by those standards. So it was fortunate that we recently heard directly from the founder and CEO, Gary Marcus, and got a few more details. Gary’s background is not in computer science, but in cognitive psychology, such as how children acquire language and music skills. He studied under Stephen Pinker while both were at MIT, has written several books on the topic (including The Algebraic Mind: Integrating Connectionism and Cognitive Science, which gives some clues to his views on machine learning) and is running Geometric while on leave from his lab at New York University. Gary said that Geometric’s approach to machine learning is inspired by this kind of human learning, where we can intuit or guess at a pattern even though we have relatively few examples to follow. “Our first goal is to develop a drop in replacement for deep learning, which requires large datasets. Why is data efficiency important? Because in some fields, like human language, there is an effectively infinite amount of data to process, and it grows and evolves every day.” In other words, Geometric is trying to make machines that learn more efficiently from less data. Continue reading
We recently participated in the invitation-only industry introduction to San Francisco’s latest Smart City initiative – a bid to win part of a $40 million pot of money that the U.S. Department of Transportation has set aside for a few lucky conurbations around the country. San Francisco is one of seven city finalists along with Austin, Columbus, Denver, Kansas City, Pittsburgh, and Portland, and is looking to integrate commercial organizations of all sizes and stripes in a public-private partnership around the future of transportation. Among the speakers were Mayor Edwin M. Lee and the city’s Chief Innovation Officer, Jay Nath, who is part of the Mayor’s Office of Civic Innovation. Addressing about 200 venture investors, entrepreneurs, and leaders from industry, they talked about the confluence of technologies like the Internet of Things (IoT) and autonomous driving, with hardware, startups, social goals, and smart cities: Continue reading
The traditional power industry – underpinned by large, distant, fuel-burning plants and transmission over long distances to reach end users – is on the cusp of serious disruption from distributed generation (DG). However, what type of entity or partnership will emerge to really challenge utilities and other incumbents remains unclear for many. Using a new methodology to evaluate emerging DG players using both technical value and business execution criteria, a specific set of installers and developers of renewables are well placed to succeed, along with a handful of large industrial conglomerates. In most of these cases, select partnerships to bolster technical breadth are key, with startup partnerships being pivotal for any entity aspiring to be the best of the best.
DG brings new opportunities – but also new challenges – to the energy sector. Power generation and integration at or near the location of use leads the DG revolution. Falling capital costs – particularly for solar and wind power – along with favorable policies and third-party ownership models are making for an attractive value proposition for DG, spurring rapid adoption in recent years. DG also brings a new value chain to the power sector, which exists in parallel with the incumbent power delivery value chain and creates opportunities for new entrants. How and where the two intersect is an evolving topic, connected by technologies like distributed energy resource management systems and virtual power plants. In order to make money at a DG systems level, aggregation of technical competencies is critical as the distributed grid of the future builds on four key technology segments: distributed renewables, energy storage, integration hardware, and integration software. Together, they can present a robust and increasingly attractive alternative to the conventional grid, but getting all the pieces right can be difficult for a single company.
Looking at the future intersection of the incumbent grid and the DG version of the grid, we find that some well-positioned players and partnerships are already solidifying into place. Continue reading
The U.S. has always been the world’s leading market for plug-in vehicles. Last quarter, that story changed dramatically: In our Q4 2015 Automotive Battery Tracker (client registration required) update, we found that China sold an astonishing 120,000 plug-in vehicles. This performance means that not only has China leapt to the top of the plug-in sales leaderboard, but also that it quadrupled the U.S.’s volume of units sold. It is a development worth reflecting on: This shake-up has wide-ranging implications for the balance of power in the battery and plug-in vehicle industry, and will profoundly affect how stakeholders plan their future investment and deployment strategies.
However, there is also significant risk of the industry over-hyping the China market, a trend clients should be wary of. Our analysis flags four key concerns behind the raw sales numbers:
1. The China market remains heavily policy-driven, which is expensive and unsustainable: Buyers of plug-in vehicles in China enjoy a range of benefits, including generous financial incentives which subsidize the purchase price, as well as the ability to bypass license plate restrictions and waiting times [(see the report “Clearing the Haze: Demystifying Energy Storage Opportunities in China“) client registration required]. However, such programs can be a victim of their own success. As plug-in vehicle sales increase, subsidies become increasingly expensive for governments, and must eventually be phased out. Plug-in vehicles can also begin to clog roads as their numbers increase, leading to negative backlash and a curtailment of even some non-financial benefits (client registration required). As these subsidies gradually expire, China will have to be careful to transition its plug-in vehicle industry gently, to avoid a sudden crash in unit sales.
2. Fraud happens in China, and the scale of misreporting remains opaque: The aforementioned generous subsidies have invited fraud in plug-in vehicles, where some companies try to abuse policy for monetary gain. For example, China’s central government recently launched a fraud investigation around plug-in vehicle sales, where vehicles are not really built in working conditions, or assembled to very poor standards, and parked in “ghost fleets” that never get used. The government said that it will begin to carry out surprise inspections as a way to combat this fraud. Until they are able to control this situation, the claimed unit sales in China must be taken with a grain of salt.