Israel Microgrig: The Global Prospective for Microgrids by LUX Research

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Israel Microgrig: The Global Prospective for Microgrids by LUX Research

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  • All heard about developing world, but it is an exceedingly tough nut to crack. We won’t fix it in 30 minutes. My goal is for you to walk away with -An understanding of just how compelling these markets are-A belief that you can actually make a business case-A new framework for understanding, categorizing, evaluating markets
  • Many small perturbations that we thought would trigger our revolution. But they turned out to failBut just because these small shifts in the past have failed to rock our boat, doesn’t mean we are safe from future incidentsThe needs change. And as the needs change, alternative technologies get a new opportunity
  • Many small perturbations that we thought would trigger our revolution. But they turned out to failBut just because these small shifts in the past have failed to rock our boat, doesn’t mean we are safe from future incidentsThe needs change. And as the needs change, alternative technologies get a new opportunity
  • While in areas with reliable grids, we view electricity rates as a cost of doing business; indian companies view it as an investment in growth
  • Many small perturbations that we thought would trigger our revolution. But they turned out to failBut just because these small shifts in the past have failed to rock our boat, doesn’t mean we are safe from future incidentsThe needs change. And as the needs change, alternative technologies get a new opportunity
  • Doesn’t account for regional disparencies. Could lead you to focus only on a few of the most popular countries in a region. Brazil vs rest of SASouth Af versus rest of Africa
  • Getting closer, but doesn’t highlight the country’s technology needsVenezuela and Thailand have simialr PPP, very different country needs. Different level of industry, health of the grid, distribution of population
  • Outages% electrified population
  • “foreign industry presence”GDP per capitaValue-add from mining, manufacturing, construction, electricity, water, and gas industries
  • Most prominent names on the list. All using largely similar generation, storage, lighting technology, with deployment in the 10s to 1,000s.
  • Israel Microgrig: The Global Prospective for Microgrids by LUX Research

    1. 1. The Global Prospective for MicrogridsSteve MinnihanSeniorAnalystLux Research, Inc.
    2. 2. 2About Lux ResearchHelps clients find new business opportunities fromemerging technologies in physical and life sciencesOffers ongoing technology and market intelligence,as well as market data and consulting servicesOver 250 clients on six continents – multinationalcorporations, investors, governments, and SMEsGlobal reach, with over 80 employees in Boston, NewYork,Amsterdam, Singapore, Shanghai, Seoul, andTokyoCombines deep technical expertise with businessanalysis to support strategic decisionsTechnology coverageSolar ComponentsSolar SystemsGrid StorageElectricVehiclesAlternative FuelsBio-based Materials &ChemicalsFormulation and DeliveryChina BioPharmaWaterExploration andProductionAdvanced MaterialsPrinted, Flexible, andOrganic ElectronicsEnergy ElectronicsSustainable BuildingMaterialsEfficient BuildingSystemsChina Innovation
    3. 3. 3AgendaConfirming and Debunking MicrogridClaimsThree Drivers for MicrogridsAn international framework for energy opportunitiesThe emerging options for rural and commercial electrificationConclusions
    4. 4. 4Microgrid advocates make tall promisesClaimsFuel savingsReduced Energy consumptionReduced CO2 emissionCost effective renewableintegrationImproved power quality andreliability
    5. 5. 5Microgrid advocates make tall promisesClaims Utility Industry Customer No gridFuel savingsReduced Energy consumptionReduced CO2 emissionCost effective renewableintegrationImproved power quality andreliability
    6. 6. 6Microgrid advocates make tall promisesClaims Utility Industry Customer No gridFuel savingsReduced Energy consumptionReduced CO2 emissionCost effective renewableintegrationImproved power quality andreliability
    7. 7. 7Microgrid advocates make tall promisesClaims Utility Industry Customer No gridFuel savingsReduced Energy consumptionReduced CO2 emissionCost effective renewableintegrationImproved power quality andreliability
    8. 8. 8Microgrid advocates make tall promisesClaims Utility Industry Customer No gridFuel savingsReduced Energy consumptionReduced CO2 emissionCost effective renewableintegrationImproved power quality andreliability
    9. 9. 9The true drivers for microgridsMicrogrids offer questionable value in utility applicationsIndustrial customers deploy microgrids to improve power quality;additional benefits are secondary in the decision making processCustomers with no grid access or poor grid reliability benefittremendously from primary electrification
    10. 10. 10AgendaConfirming and Debunking MicrogridClaimsThree Drivers for MicrogridsAn international framework for energy opportunitiesThe emerging options for rural and commercial electrificationConclusions
    11. 11. 11Three Drivers for MicrogridsDisaster securityIndustrial Corporate Consumer
    12. 12. 12Supplier vulnerabilityMulti-billioncompanySite ASite BSite CSite DSupplier ASupplier BSupplier CSupplier D
    13. 13. 13Supplier vulnerabilityMulti-billioncompanySite ASite BSite CSite DSupplier ASupplier BSupplier CSupplier D
    14. 14. 14Datacenters offer the best target market formicrogridsTotal capital investmentSecMinHrDayIndefinite
    15. 15. 15Datacenters offer the best target market formicrogridsTotal capital investmentElectricitysupplysecuritySecMinHrDayIndefinite
    16. 16. 16Industrial customers securing their supply in response to increased rateof natural disasters and utility failuresReliability = survivalReliability and security become line items on the balance sheetLesson learned
    17. 17. 17Three Drivers for MicrogridsDisaster securityIndustrial Corporate ConsumerRevenue loss
    18. 18. 18Commercial customers intolerant of Indian gridDaily power outages are the normLarger outages emphasize truevulnerability of the gridDirectly factored into revenue and cashflow projections
    19. 19. 19Lessons learnedPrivate “backup” microgrids thrive while charging inflated electricityratesImproved reliability directly factors into revenue and cash positionInflated electric rates are an investment in company growth
    20. 20. 20Three Drivers for MicrogridsDisaster securityIndustrial Corporate ConsumerRevenue lossPrimary electrification
    21. 21. 21Conventional utilities are disinterested in ruralelectrificationElectricity StatisticsElectricity consumption 771 kWh/capitaPower outages 50 days/yearReliance on generators 20% of consumptionPopulation with electricityaccess20%Cost recovery 39%Source:World BankUtilities are unable to recover cost of powergeneration, transmission, distribution and retailNo incentive to expand grid to rural population
    22. 22. 22A long list of ventures attempt to innovate on thebusiness model
    23. 23. 23Lessons learnedThe developing world is proving to be an avid adopter of microgridtechnologiesUtilities are largely disinterested in improving electrificationPrimary electrification and improved electricity reliability are motivatingresidential and commercial customers
    24. 24. 24AgendaConfirming and Debunking MicrogridClaimsThree Drivers for MicrogridsAn international framework for energy opportunitiesThe emerging options for rural and commercial electrificationConclusions
    25. 25. 25By continent:
    26. 26. 26By GDP:
    27. 27. 27Potential new framework based on energyinfrastructure needsClassifies countries specifically for energy infrastructureAccounts for technological needsAccounts for potential for market adoption
    28. 28. 28A new frameworkForeignIndustryPresenceGDP PerCapita
    29. 29. 29Centralization of generation and demand dictatesthe best technologyForeignIndustryPresenceGDP PerCapita
    30. 30. 30Grid Health indicates the status of existing gridinfrastructureForeignIndustryPresenceGDP PerCapita
    31. 31. 31GDP per capita indicates availability of capitalForeignIndustryPresenceGDP PerCapita
    32. 32. 32Industry indicates the key beneficiaries of enhancedinfrastructureGDP PerCapitaForeignIndustryPresence
    33. 33. 33The 40 lowest countries by GPD per capita
    34. 34. 34AgendaConfirming and Debunking MicrogridClaimsThree Drivers for MicrogridsAn international framework for energy opportunitiesThe emerging options for rural and commercial electrificationConclusions
    35. 35. 35Electricity consumers can be broken into 3categories by their ability to afford electricityCategory Activities Price range ($/kWh) Annualconsumption(kWh)Need-basedconsumptionLightingCell phone charging$10/kWh + 5-10Added valueconsumptionSmall commercial andinstitutional operationsExtended lighting hours$1/kWh - $3/kWh 30-100Inelastic consumers Traditional residential,commercial, andinstitutional operations$0.1/kWh - $2/kWh 1,000+
    36. 36. 36Electricity consumers can be broken into 3categories by their ability to afford electricityConsumptionEaseofaddressingPrice$/kWhPopulationInelasticconsumersValue-addconsumersNeed-basedconsumers
    37. 37. 37Conventional utilities are disinterested in ruralelectrificationIndustrialCustomerResidentialCustomerUtilityHardwareMultinationalElectricityServices
    38. 38. 38Value chain allows small ventures to circumnavigatethe national utilityIndustrialCustomerResidentialCustomerUtilityLocalEntrepreneurESCOSmallVentureHardwareMultinationalElectricityServices
    39. 39. 39A long list of ventures attempt to innovate on thebusiness model
    40. 40. 40A long list of ventures attempt to innovate on thebusiness model
    41. 41. 41Business models are used to manage risk, whiletechnology is undifferentiatedBusiness model Description Example companyLow-cost Directly compete withtier-2 and tier-3 Chineseon low capexSRE SolutionsBarefoot PowerMera Gao PowerNew business models Embracing models outsidecapex purchase andtraditional pay-as-you-goEgg EnergyFlexenclosureFinancing options Company finances systemcapex under pay-as-you-go modelSimpa NetworksShared Solar
    42. 42. 42Summary of barriers to market growthBarrier Description Unique to developingworld?Customers’ low access tocapitalLack of savings or credit YesCorruption andinadequacy in the supplychainTheft, exploitation, delinquency at smalland medium levels of business and politicsYesLack of reliable data Non-existent information ondemographics or consumer behaviorYesCustomers’ lack ofawareness/knowledgeLack of centralized media increases costand time to educate and enlist customersYesDifficulty of scaling sales Cash constraints due to pay-as-you-gomodelNo
    43. 43. 43Case Study: Simpa NetworksBarrier Score ApproachCapital4 High-cost subscription, starting at $1/week, alienates portions of customerbase; higher cost than competing services, more affordable than purchasing asystem outrightSupply chain3 Working with mixture of established multinationals and local entrepreneurs,offering risk diversification in its partnershipsMarket data2 Invests heavily in demographic and usage data, but data is often inaccurate orineffectiveCustomerknowledge3 Customers familiar with subscription model, but the transfer model is foreignScaling sales2 Company reaches simple payback on a system in 4 – 8 years, placing risk andcash constraints on expansion012345CapitalSupplychainMarketdataCustomerknowledgeScalingsalesRely exclusively on existing salesnetworksBiggest struggles are high costs andlack of information
    44. 44. 44Case Study: Mera Gao PowerBarrier Score ApproachCapital 4Low-cost subscription, $0.5/week, effectively overcomes financial concerns formarkets that need both lighting and charging servicesSupply chain 5 Handles all sales, installation, and maintenance functions in-houseMarket data 2 Lacks essential market data, including population and usage behaviorCustomerknowledge 3Customers familiar with subscription model, but battery swapping introducesnovel element and unfamiliarityScaling sales 4Low set-up cost allows company to break-even on an installation in one year;company approaching profitability012345CapitalSupply chainMarket dataCustomerknowledgeScaling salesBringing all functions in-houseSeeing highest success rateStill suffers from alack of information
    45. 45. 45Case Study: EskomBarrier Score ApproachCapital 4Pricing of $0.28/kWh is low enough to draw high subscription rates and drivedemand, but high volume consumers (>5kWh/week) pay more than they wouldunder competing service models.Supply chain 5 Handles majority of functions in-house with a large and qualified staffMarket data 3 Populates its own data, but database is far from completeCustomerknowledge 4Customers are familiar and comfortable with traditional utility model, butEskom still invests in education and consumer engagementScaling sales 4Deployment has proven profitable to date, and revenue from urban/suburbanpopulation further sustains the utility. But increasingly remote areas becomeincreasingly costly to serve012345CapitalSupply chainMarket dataCustomerknowledgeScaling salesElectrified 4 million off-grid homes sincethe 1990’sCommonly sees demand double in firsttwo yearsTolerates inevitable high cost ofcustomer managementStrong preference for “conventional”generation
    46. 46. 46AgendaConfirming and Debunking MicrogridClaimsThree Drivers for MicrogridsAn international framework for energy opportunitiesThe emerging options for rural and commercial electrificationConclusions
    47. 47. 47ConclusionsMultinationals have considerable interest in African innovation,investment, and partnerships• Confusion exists around framework• Fear exists around shortage of data and lack of local networkA proper framework accounts for the specific market needs and thecondition of existing infrastructure in order to determine the bestsolutionA long list of new ventures are attempting to address rural power issues• Limited technological differentiation• Moderate differentiation on business models• Growth is slowed by poor integration with local networks
    48. 48. ThankYouSteve MinnihanSenior Analyststeven.minnihan@luxresearchinc.com+1 (617) 502 - 5334

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