A new segmentation for electric vehicles – McKinsey Quarterly

A recent report from McKinsey suggests automakers should design electric vehicles (EV) for specific driving missions, rather than an everything-for-everybody approach as per typical car design.  

Most liquid-fueled cars (whether gasoline or diesel) are intended for multiple driving missions of varying lengths and speeds.  Car buyers usually purchase a vehicle with much greater capacity and capability than what is most regularly used.  For instance, most driving is typically done on short, local trips in cars carrying a single driver.  Long distance driving, or carrying large payloads of passengers or cargo are typically the exception rather than the rule.

 

The McKinsey study looked at the energy uses in a car, first due to the vehicles’ physical characteristics (such as size/weight and resistance) and secondly by the driving characteristics (such as driving distance, speed, stopping and starting).  The energy storage requirements for differing driving missions can vary significantly even if the size and total miles are similar.

Because energy storage is such a critical factor in an electric car (the incremental cost of more battery capacity increases the cost significantly in an EV, while the cost to add more energy storage for a gas car is relatively insignificant), McKinsey’s conclusion is that automakers should be thinking in radical new ways to segment the market, focusing on specific driving missions and purposes.

Related Posts:

A new segmentation for electric vehicles (pt. 2) – Driving Missions are Short and Local

Merging Green Buildings, Smart Energy Efficient Buildings and Smart Grid

In his article “Linking Green Buildings and the Smart Grid will Spawn a Green Energy Ecosystem,” Patrick Mazza offers insights about the relationships and opportunities between smart grid and smart, green buildings:

A new energy ecosystem is emerging that connects smart, green buildings with a smart, green grid to optimize energy flows. Since commercial and industrial buildings represent around 40 percent of U.S. energy use, and homes another 30 percent, this represents the most significant opportunity for energy efficiency and mass-scale renewable generation.

 But creating this new green energy ecosystem means linking what are today heavily “stovepiped” separate systems within buildings and between buildings and the grid. It also means expanding the definition of green buildings to include the digital smarts that connect diverse systems.

The sad truth is that many green buildings today are neither highly efficient nor particularly intelligent, and this is a missed opportunity,” wrote Paul Ehrlich of the Building Intelligence Group in an article previewing the conference. “We have the potential to deliver green intelligent buildings that are sustainable as well as able to deliver high-performance, low-energy usage.”

“The idea that buildings could give and take energy — that’s where the opportunity presents itself,” he said. With growth in net zero energy buildings, “We’re going to see more emphasis on intelligence in buildings” to measure and manage energy and revenue flows. “My whole vision is having the smart building meet the smart grid.

Smart buildings and the smart grid are two elements of the digital information revolution that are spreading tendrils toward one another. As they meet, they will provide huge benefits in terms of more efficient energy use, integration of on-site energy demand and generation with the grid, and better-functioning buildings that are safer and better places to work and live.

Greater automation and control can be done that go well beyond buildings’ energy management systems.  For instance, automated demand response systems can adjust a building’s energy load to accommodate peak demand conditions.  Typically much demand response is done manually, with a call to the building manager to shut off lights and other electrical loads.

Green buildings are often primarily about materials.  Energy efficiency and energy management are an important part too and are increasingly being integrated into green building designs.  Though green buildings are not necessarily “smart” buildings in the context of integrating  each building with other buildings nearby nor the electrical grid.    We have a long way to go before  whole districts of smart green buildings interacting with one another via smart grid technologies to optimize the whole.

See also:  Wiring the Smart Grid for Energy Savings: Integrating Buildings to Maximize Investment to understand more about buildings (not necessarily green buildings) and the smart grid.

Electrification Roadmap (part 2 of 4) – Challenges and Opportunities

In part 2 of the 4 part series I’ve posted an outline from section 2 of the Electrification Roadmap on the Challenges and Opportunities associated with transportation electrification, excerpted from a report published by the Electrification Coalition.  This section recognizes a range of challenges facing widespread adoption of electric vehicles, as well as offering up possible policy support and solutions to overcome the challenges.  Again, I’m posting an abbreviated outline summary for those not otherwise inclined to register and download a copy of the full report available here.

PART TWO

Challenges & Opportunities

  • 2.1 Overview
  • 2.2 Batteries
  • 2.3 Charging Infrastructure
  • 2.4 Electric Power Sector
  • 2.5 Consumer Acceptance

ABSTRACT

Core Challenges

The successful deployment of GEVs faces a range of challenges. Early GEV batteries will have limited range, may take hours to charge, and will add significantly to vehicle cost. Vehicle charging infrastructure is non-existent, and consumers may hesitate to accept new technology.

Yet, each of these challenges can be overcome to achieve widespread, large-scale deployment of grid-enabled vehicles in the near future. Policy support and innovative business models will drive down battery costs and work to deploy adequate charging infrastructure. The electrical grid reaches most corners of the nation, and only upgrades to the last few feet of wire are required to deploy vehicle chargers in mass. The electric power industry has the capacity to generate and transmit most of the power that will be needed to charge GEVs, certainly in the early to middle stages of deployment. Over the long term, smart-grid technology will manage vehicle-to-grid interface while enhancing the overall consumer experience.

2.1 Overview

Despite the progress currently being made in the global electric vehicle market, substantial barriers to widespread vehicle adoption still exist. Overcoming these barriers will require innovative business models and the support of effective public policy.

2.2 Batteries & Vehicles

GEVs trace their roots to today’s familiar hybrids, but represent a significant advancement in efficiency. Therefore, a great deal of current attention is focused on developing grid-enabled vehicles that meet consumer needs. Most such efforts are dedicated to commercializing advanced batteries that provide the power and range expected by drivers.

2.2.1 The Battery

The battery is a core component in a GEV. Lithium-ion batteries provide requisite energy and power, but add significantly to vehicle cost. Raw materials like lithium are abundant, especially if recycled. Improvements in battery performance are still needed.

2.2.2 Electric Motors

The efficiency of the electric motor as compared to an IC engine is the primary reason that GEVs are more efficient than traditional vehicles. Advances in electric motors will continue to improve the cost effectiveness of GEVs.

2.2.3 OEM Production Format/Supply Chains

Today, only a handful of grid-enabled vehicle models exist globally. While a number of automakers have announced plans to produce GEVs, the ability of manufacturers to scale up production quickly will be a key challenge to electrification.

2.3 Charging Infrastructure

Electric vehicle supply equipment will be needed to charge the battery in grid-enabled vehicles once depleted. While a substantial portion of charging can be done overnight at home, public charging options will provide drivers with added confidence and flexibility. With limited exceptions, public charging infrastructure does not exist today.

2.3.1 Understanding Charging

The vehicle charger is the device that connects the vehicle to the electrical grid and through which the vehicle’s battery is charged. Efforts to standardize chargers, already underway, will be important to ensure network interoperability.

2.3.2 Charging at Home

For drivers with access to a dedicated outlet, the most convenient time to charge their GEV will be overnight at home. This will place minimal strain on the grid and offer other important benefits as well.

2.3.3 Public Charging

Reliable access to a network of public charging equipment will provide GEV owners with confidence and flexibility. Especially in the early stages of GEVs and batteries, consumers will likely demand the ability to recharge frequently.

2.3.4 Public Charging: Who Will Pay?

Financing public charging infrastructure is a challenge. In the absence of access fees, which make GEVs less cost effective for the user, it is unclear how the charging infrastructure can be built.

2.3.5 Striking a Balance?

The greater the number of public chargers deployed, the less each of them might be used. Determining how many are needed to meet drivers’ needs will be critical in making the system work.

2.4 Electric Power Sector

The deployment of GEVs represents an enormous opportunity for the electric power sector to establish an entirely new category of customers. While much of the infrastructure is in place to meet GEV needs, utilities will have to upgrade their information technology, replace some transformers, and seek innovative regulatory treatment so that they can serve this new business.

2.4.1 Hardware

While charging, GEV power demand can rival that of an average U.S. home. To reliably serve large GEV volumes in the short to medium term, the electric industry may need to upgrade neighborhood transformers.

2.4.2 Software

In order to manage demand for electricity and take full advantage of the energy storage capabilities of GEVs, utilities will need to upgrade their IT infrastructure.

2.4.3 GEVs and the Smart Grid

The eventual deployment of smart grid technology is a key milestone in the ability of utilities to manage GEV interface with the power sector. A responsive and intelligent grid will also serve to enhance the GEV experience.

2.4.4 Regulatory Reform

Deploying grid-enabled vehicles at scale will place some additional burden on utilities. While much of this can be managed with investment in new grid hardware and smart grid technology, key regulatory barriers will need to be minimized.

2.4.5 Vehicle to Home and Grid

Vehicle-to-home and vehicle-to-grid technologies promise much for the future, but are likely several generations away from mass deployment. Issues more central to deploying GEVs must first be addressed.

2.5 Consumer Acceptance

Almost a decade since their introduction, penetration rates for gasoline electric hybrid vehicles are still less than 3 percent of vehicles on the road. More technologically advanced grid-enabled vehicles will need to overcome a number of consumer hurdles in order to reach much higher penetration rates.

2.5.1 Identifying the Pitfalls of GEV Acceptance

As with any new technology, expanding consumer adoption alongside the incumbent is a critical and difficult challenge. Investment payback and vehicle range are particularly important issues for GEV consumers.

2.5.2 Consumer Preferences for Vehicle Utility

Divergence from the traditional model of automobile ownership and established consumer preferences for vehicle range, refueling, characteristics and performance have the capacity to affect the rate of GEV penetration.

Related posts:

Electrification Roadmap Released by Electrification Coalition

ELECTRIFICATION ROADMAP:  PART 1 – THE CASE FOR ELECTRIFICATION

ELECTRIFICATION ROADMAP:  PART 3 – ANALYSIS OF THE GOAL

ELECTRIFICATION ROADMAP:  PART 4 – STRATEGIC DEPLOYMENT

Life-cycle costs are established early

Time and money are scarce resources.  It’s a fact in both our personal or professional lives. 

I had a recent conversation with a firm’s leader in the context of early alignment of product development with process development to ensure a successful outcome.  Initial product design decisions are interconnected with initial process decisions, i.e. choices made during product design often dictates process.

 Product development is expensive and time consuming: 

  • It costs a lot of money to conceptualize, research, design, develop, test, tool and launch a new product. 
  • The timing / schedule element gets tricky – not only because “time is money” as it relates to the spend rate of a project, but also there’s an associated opportunity cost (for instance, there’s often too many projects to get done, with the possibly a passing up the next best choice). 
  • Time delays (also known as schedule slips) are not uncommon and exacerbate the costliness.  The causes of delays are many.  Yet with sound practices and countermeasures one can maintain and preserve a development schedule – though worthy of a completely separate discussion.
  • Suffice to say that development projects can be big and complicated, often with many interdependencies and moving pieces to coordinate. PLUS it is very challenging to “schedule innovation.”

These facts are universal for nearly all companies, an even more so for an early stage company and critical to the new venture’s success.

I was reflecting on a recent conversation with a prospective client this week about the relationship between engineering (product development) and process development (both internal – as inside a manufacturing operation, and also external – as in the supply chain). 

In this case, a startup company, having raised $8 million dollars about a year ago, has been feverishly developing their product in preparation for their first product launch.  This company is in the midst of design validation testing, with “near-imminent” launch of their first product into customer field testing, with a pending production release to soon follow. 

I was having a conversation about my helping this venture to launch their product – though we had two vastly different perspectives on the timing of the need.  My prospective client was thinking the time would be right in about 5 to 6 months as they’re nearing completion of design validation testing and making progress in reliability testing and field testing, at that point they’ll be freezing design and moving from preliminary design to providing design details and thus ready to begin ramping up for production.  Their rationale was that there seemed to be little point in doing much work on manufacturing / supply chain / operations development and preparation as the design would likely go through yet more changes based on testing or field results.  From my perspective the timing was already getting very late to leverage my expertise and maximize their return.
I was recalling several studies that examined the cumulative cost impact of decisions made through the life of a project, as well as my own experience over 20+ years.  Take a look at this figure:

Coming back to the time element, fundamental determinants of product cost and quality are effected at the beginning of the product’s conceptual design stage where very basic design choices are made.  These early design choices will influence (or often dictate) manufacturing processes and therefore a product’s cost and quality. 

These initial process decisions, which are often made unknowingly, also have a profound impact on development schedules.  If things aren’t done right, it often means these tasks will need to be repeated and redone (thus consuming more time).   If the proper process decisions (and oftentimes choices of suppliers) aren’t made correctly at the very first opportunity, the product design nevertheless takes form and solidifies around the wrong process alternatives.  The later on in the project such mistakes are discovered, the more costly and difficult it is to make corrections. 

Once such a mistake has been discovered there are two options, either to live with the mistake which will have ramifications on product cost and quality over the entire product’s life time.  Or the other alternative is to go back and correct the initial mistake, which will likely require redesign and lost time – thus with schedule impact.

Typically “early” manufacturing and supply chain involvement often means at the stage when preliminary designs are available for review.  However as indicated in the figure above, a substantial portion of a product’s life-cycle cost has already been determined at this point.  Oftentimes it is too late to make a meaningful impact – it comes back to leverage. 

Putting early effort and emphasis in the project on aligning process development with product development makes a big difference – there’s a greater ability to control costs combined with a lesser likelihood of re-design efforts because of ill-informed design/process decisions made earlier on.   With up to 80% of a product’s lifecycle cost determined early it is imperative to make the right decisions in the early stage of development.  From my perspective it is seldom or never too early – product and process development often have a profound impact on cost and schedule.  Therefore product and process should be paired and done in concert.

Oregon charged up over electric cars

Electric cars in Oregon has been quite a hot topic in the local press of late:

Plugging Oregon into an electric future

Oregon could be home for alternative-fuels industry, but key is commitment to education

Group says electric vehicles will create jobs

Study: Create incentives for electric cars

Also there’s been much controversy around Oregon’s Business Energy Tax Credit (BETC). A positive message in a recent op-ed, A success story with BETC’s name on it, will hopefully build support for the positive contribution of the BETC towards Oregon’s clean-energy economy. Another op-ed about Oregon, ”Growing New Jobs in a Greener World” cited a report by The Pew Charitable Trust stating employment opportunities in Oregon’s clean-energy economy increased at a rate of 50.7 percent, while total jobs grew by only 7.5 percent overall between 1998 and 2007.

Related posts:

Oregon Alternative Fuel Infrastructure Working Group Report

Oregon’s Electric Vehicle (EV) and Alternative Fuel Vehicle Infrastructure Report

Here’s the report to Governor Kulongoski on Electric Vehicle (EV) and Alternative Fuel Vehicles Infrastructure, representing the culmination of work over the past year by a special working group on the topic.  The final report of the Alternative Fuel Vehicle Infrastructure Working Group was released here.

The report makes recommendations on alternative fuels, including electricity, biofuels and compressed natural gas, and the infrastructure needed for widespread adoption in Oregon. 

Among the group’s primary recommendations:

  •  A new Electric Vehicle Executive Council, created by an executive order from Kulongoski, to set a statewide agenda for introducing and deploying electric vehicles and the related infrastructure and services in Oregon.
  •  An effort by the state to work with utility regulators and other governing boards to consider policies designed to overcome barriers to the widespread deployment and use of plug-in hybrid and electric vehicles.
  •  New purchase standards for state-funded fleets to increase the percentage of alternative-fuel vehicles in the fleets.
  •  A new program to provide free home audits prior to installing charging equipment.
  •  The inclusion of electric vehicle manufacturing into the Business Energy Tax Credit program.
  •  A new Transportation Electrification Tax Credit for businesses and other organizations that buy electric vehicles and infrastructure.
  •  A new multi-disciplinary transportation electrification and “smart mobility” Center of Excellence, as a partnership between private industry, universities and trade groups.

Read more