E Commerce & Utilities

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At the recent PICA meeting in Santa Clara, there was a good session on ecommerce and utilities. Here’s the summary from the program. The actual list of presentations follows.

The Power point presentations themselves are TEMPORARILY available for downloading on line (and I have ecopies). I caught part of the Anderson Consulting presentation, and thought the characterization of the various segments was rather well done.

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http://www.pica99.org/panel-sessions.htm

Panel Session 1: “e-Commerce in Electric Utilities”

Tuesday, May 18th, 2:00 – 5:00
Moderator: E. Dobrowolski, KEMA Consulting

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“Where Do You Go From Here – Preparing for the Future”
Edward P. Meehan, Managing Director, Legg Mason Wood Walker, Inc.:
410-454-5525 epmeehan@leggmason.com

With the quickening pace of electric utility deregulation, utility executives are faced with growing challenges on a daily basis. Couple that with the emergence of e-Commerce as a new driver of corporate strategy and the complexity of your business increases geometrically. As regulated utilities look forward, they need to evaluate how to utilize e-Commerce from a defensive basis to reduce costs and streamline operations and from an offensive position to provide superior customer service and develop new business opportunities. One of the challenges today is to understand the strategies being developed by potential competitors and identifying how to bring such competencies in to your organization. We will look at what is developing in this market and raise some focused issues on the new competitors you may be facing.

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“e-Commerce and the Virtual Utility”
Paul Daugherty, Partner, Andersen Consulting &
Brad Holcombe, Partner, Andersen Consulting: 212-708-8279 paul.r.daugherty@ac.com

e-Commerce offers transformational opportunities for Utility companies in both business-business and business-consumer interaction. This topic will discuss the new “virtual” business models that are possible with e-Commerce.

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“Practical Experiences in e-Commerce”
Aaron Daisley-Harrison 425-451-3100 aaron_daisley-harrison@dmr.ca &
Lloyd Robinson, DMR Consulting 206-521-2178 lloyd_robinson@msn.com

Orchestrating a successful e-Commerce project involves all of the classic issues that have faced IT with the added complexity of needing to stitch together software and platforms that were never conceived to work cooperatively. Experiences from actual projects will be presented and the many pitfalls along the road to attaining the brass ring will be pointed out.

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“TransaXions and the Internet: E-Commerce for Energy”
Adam E. C. Yeh, Development Manager, Connext:
206-521-2302 yeha@connext.com

Whether itis delivering reports, authorizing payments, collecting usage information or scanning records, Internet based E-Commerce provides the most cost effective way for business-to-business and business-to-customer transactions. Both Energy Service providers and their customers should be looking at this new form of interaction and business model to evaluate their bottom line savings. Technical issues for deploying Internet technology and E-Commerce solutions in the energy industry, especially in the areas of billing, customer metering and energy transactions will be presented. Emphasis will be on the system architecture and the Graphic User Interface.

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“Providing Deregulation Benefits to Non-Traditional Players through the Internet”
Frank Koza, General Manager, UniGrid, LLC:
215-841-5240 fkoza@peco-energy.com

UniGrid is an Internet based system that is designed to provide the benefits of the newly deregulated energy industry to the Commercial & Industrial sector. The concepts behind UniGrid will be presented with emphasis on the potential uses through the Internet. Leveraging technology from other industries to accomplish this goal will be highlighted.

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“Energydirect.com: The Internet Business Strategy for the 21st Century Utility”
Will Knight, Director, Online Business wrknight@southernco.com 404-506-4956
& Martha Driscoll, C&I Online Business Development 404-506-2317 madrisco@southernco.com

Why companies should view customer access as a value-creating asset. Leveraging the Internet as a customer acquisition and retention tool in a competitive marketplace.

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http://www.pica99.org/panel_presentations.htm
(Powerpoint presentations)

Panel Session #1 — Tuesday, May 18th, 2:00 P.M.
e-Commerce for the Power Industry

Where Do You Go From Here – Preparing for the Future
Edwin P. Meehan, Legg Mason Wood Walker, Inc.

eCommerce: The Virtual Utility
Paul R. Daugherty, Andersen Consulting

e-Business
Lloyd Robinson, Aaron Daisley-Harrison, DMR Consulting

Transactions and Internet E-Commerce for Energy
Adam Yeh, Microsoft Corporation

Developing an Internet Business Strategy for the 21st Century Utility
Martha Driscoll, Will Knight, Southern Company

e-Commerce for Electricty
Edward G. Cazalet, CEO Automated Power Exchange, Inc.

Green Power Marketing in Retail Competition: An Early Assessment

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LBL and NREL recently released this study on green power marketing that finds that the green marketplace is still in an early stage of development with no clear indication of its ultimate size.

The study examines experiences to date with green marketing programs in states across the country. Among the findings:
– pilot programs which include green products are philosophically supported by consumers, but fail to attract real buyers when consumers are asked to switch to green suppliers;
– where markets have been fully opened to competition, green marketers provide a superior quality product over pilot programs;
– disclosure of resource mix is a key element of consumer interest in green products; and evaluating green market demand is difficult.

The abstract  is shown below, and the entire report
can be downloaded at either of these two sites:

LBL’s Electricity Markets & Policy website:
http://eetd.lbl.gov/ea/emp/emppubs.html

DOE’s Green Power Network website:
http://www.eren.doe.gov/greenpower

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Green Power Marketing in Retail Competition: An Early Assessment

(report #  LBNL-42286,    NREL/TP.620.25939)
Ryan Wiser LBNL,    510-486-5474; rhwiser@lbl.gov
Jeff Fang, Kevin Porter, and Ashley Houston,  NREL

February 1999

ABSTRACT

Green power marketing—the business of selling electricity products or services based in part on their environmental values—is still in an early stage of development. This Topical Issues Brief presents a summary of early results with green power marketing under retail competition, covering both fully competitive markets and relevant direct access pilot programs. The brief provides an overview of green products that are or were offered, and discusses consumers’ interest in these products. Critical issues that will impact the availability and success of green power products under retail competition are highlighted. Some of the key observations and conclusions of the work include:

Experience from pilot programs in New Hampshire, Massachusetts, and Oregon—while insightful in many respects—should not be broadly generalized. The direct access pilot programs in these three states all included green marketing. Yet only a fraction of the green products were differentiated based on their renewables content, and the environmental quality of many of the products has been questioned. Because of the nature of pilot programs, however, there are limits to what can be learned from these experiences.

Green power markets have developed in all four states currently open to full competition. Experiences in the more fully competitive markets of California, Massachusetts, Rhode Island, and Pennsylvania provide a more realistic test of green marketing. These markets have only been open for a short time, and each differs substantially. Green power marketing is occurring in each market, however, and a total of 20 green power products have been launched. All of these products have been differentiated based on their renewables content, and 60% of the products include commitments to incorporate some new renewables over time. While concerns remain over the environmental and resource content of some products, overall product quality is superior to that seen in the pilot programs.

The availability and success of green power products will hinge on several factors, including the regulatory rules and public policies established at the onset of restructuring. Differences among the markets discussed here can largely be traced to the design of specific market rules and public policies, particularly the default generation price offered by incumbent utilities. For the green market to succeed, regulators and policymakers will have to develop market structures, rules and policies in ways that are at least neutral to, and perhaps even support, this emerging new market. Surprisingly, market rules that promote vigorous price competition and overall customer switching appear especially important.

Environmental disclosure requirements and certification programs may also play an important role in the success of green power markets. Given ongoing concerns about the credibility and environmental value of some of the green power products, customer information requirements and credibility-enhancing programs may be critical.

Evidence to date shows that green products have had some success in markets newly opened to competition. Niche markets clearly exist for green power. Residential demand has been most prominent, though nonresidential demand has been more significant than many expected. Nonetheless, it will clearly take time for the green market to mature, and there remain legitimate concerns about the ability of customer-driven markets to support significant amounts of renewable energy. Unfortunately, there is currently insufficient data with which to predict the long-term prospects for green power sales with any accuracy.

Emerging Transmission Market Segments (IEEE Article)

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The article cited below is from the January issue of Computer Applic in Power, and for non-subscribers interested in T&D issues, it happens to be available in its entirety on the IEEE website: http://teaser.ieee.org/pubs/mags/9905/rahimi.html

I thought you might find it useful as an overview of the various ways transmission systems are being organized around the world.

>>>>>>>>>>>>>>>>>>>>>>>>>>
Who’s coming to the IEEE PICA Meeting in Santa Clara this month (May 17-20)??

Let me know, and maybe we can get together, or at least say hello at the conference.
Complete details available at: http://www.pica99.org
>>>>>>>>>>>>>>>>>>>>>>>>>>
Remember QuickStab? (UFTO Note March 22) Dr. Savalescu will be at PICA, and would be pleased to offer a private demonstration. Give him a call!
>>>>>>>>>>>>>>>>>>>>>>>>>>
(I just joined IEEE, and am beginning to appreciate the wealth of information it provides to the power industry.)
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IEEE Computer Applications in Power January, 1999 Volume 12 Number 1 (ISSN 0895-0156)

Meet the Emerging Transmission Market Segments
Farrokh A. Rahimi & Ali Vojdani

Around the globe, the electric industry is undergoing sweeping restructuring. The trend started in the 1980s in the U.K. and some Latin American countries, and has gained momentum in the 1990s. The main motivation and driving forces for restructuring of the electric industry in different countries are not necessarily the same. In some countries, such as the U.K. and the Latin American countries, privatization of the electric industry has provided a means of attracting funds from the private sector to relieve the burden of heavy government subsidies. In the countries formerly under centralized control (central and eastern Europe), the process follows the general trend away from centralized government control and towards increased privatization and decentralization. It also provides a vehicle to attract foreign capital needed in these countries. In the United States and several other countries where the electric industry has for the most part been owned by the private sector, the trend is toward increased competition and reduced regulation.

This article presents an overview of the evolving structural models and the main structural components of the emerging deregulated electricity industry. An analysis of the central structural components, namely the independent system operator (ISO) and the power exchange (PX), is provided and used as a basis for structural classification with a view to the supporting computer application needs.

Bomin Technologies – Intelligent Energy Systems

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This unique and interesting company has recently come to our attention, and may be of interest, for their technology, for their business model, and as a potential business partner and/or investment.

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( This summary was adapted from company materials.)

Bomin is a privately-held Swiss-American company that develops, makes and sells Intelligent Energy Systems for buildings. Sales have grown from $2M in 1994, when the Company was formed, to $9.7M in 1997 (average growth rate of more than 64%). Sales were $12.6M in 1998, and are expected to continue growing at more than 30% a year.

Bomin was initially established in the mid-80’s as a developer of technology. Results are now moving into the market, and the company is evolving into a broad based platform for commercialization of innovative energy-related products through an international network of business partners. Bomin’s executive team combines international expertise in business operations, corporate finance and technology commercialization.

Bomin’s products improve efficiency and benefit the environment in three market segments:

– Intelligent Lighting – daylighting and controlled lighting systems, which bring sun or natural daylight into buildings and control the use of artificial light;

– Intelligent Heating – solar thermal-based products, which harness the sun for heating, ventilation, air conditioning, cooling and power generation; and

– Intelligent Control – hardware and software products which improve energy efficiency in pumps, co-generation units and other energy consuming devices.

Bomin is also bringing to market a pipeline of proprietary breakthrough technologies developed in their German and US labs.

– HEATPULSE is a stirling engine that uses mid-temperature waste heat from power generators or industrial processes, or from biomass.

– SUNPULSE is a low-temperature stirling engine developed for application in a solar-powered water pump and a refrigeration and air-conditioning system, for use throughout the developing world.

The company is seeking to raise additional capital to increase sales and marketing of existing products, enable the purchase of several identified acquisition candidates, and further product development and commercialization. An offering memorandum will be provided to qualified parties.

I also have an 13 page Executive Summary (Word document) that I can send on request.

A great deal of information is available from the company’s website at
http://www.bomin.com

UFTO’s Contact: Nicholas Parker, Chairman ( in Toronto)
1-416-763-1020, nmparker@email.msn.com

Capacitive Deionization of Water – A Lot Closer

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UFTO first noted this unique water purification technology in January 1995 (see below to review the basic concept), and again in March 1997, when a license was issued to a commercial firm. The company, Far West, has made tremendous progress, and now appears to stand ready to move out in a big way with the commercial development of Capacitive Deionization Technology (CDT). (The name CDI belongs to something else, so the company has adopted the new shorthand CDT.)

The process operates at low voltage and low pressure, does not require membranes or pumps (and so is less sensitive to corrosives), and can operate at high water temperature (so, for example, boiler water can be treated hot). The technology is modular and scalable, with additional capacity or greater filtration accomplished by simply adding more elements, either in parallel or series.

The technology itself has been dramatically improved, with one tenth the weight and one-twentieth the cost of the original devices. New designs don’t require the aerogels to be supported on a substrate, and a clever technique maintains separation with essentially no structural elements.

The business prospects are strengthened by the arrival of a new president with the right experience and connections to restructure the company, raise money, and move forward aggressively with manufacturing, demonstration projects, and joint venture and marketing agreements worldwide.

Initial focus areas are ultrapure process water, ground and waste water treatment, contaminant removal/concentration, and brackish water treatment for drinking water. There is also a demonstration project underway on utility boiler water. Seawater desalination is also a priority.

A prominent story in “Developments to Watch” in Business Week appeared in the March 15 issue, and the response has been tremendous.

The company website at http://www.farwestgroup.com has a vu-graph presentation with considerable detail about the technology and applications, and a business plan is also available on request.

Far West is a public company (FWST), as an OTC-Bulletin Board stock. (There has been a sudden rise in volume and price yesterday and today!) The company is raising $10 Million through a preferred stock offering.

Contact: Dallas Talley, President
520-293-9778 farwestcdi@aol.com

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Subject: UFTO Note — Capacitive Deionization licensed
Date: Thu, 06 Mar 1997

Livermore has given a license for CDI to a small water company in Tucson, AZ who’ve formed a subsidiary, Terra Research Corp., to pursue applications. The parent company is publicly traded OTC – Far West Group, which does water drilling and pumping and supplies.

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Here is the UFTO writeup about CDI, when Livermore first announced it:

January 1995
Desalination and Waste Water Treatment by Capacitive Deionization (CDI)

On December 20, 1994, LLNL announced a new way to deionize water. The huge effective surface area of carbon aerogels makes feasible the straightforward and well known process of capacitive deionization. Water containing salts, heavy metals or even radioactive isotopes flows through a series of electrochemical cells. An electric potential is applied across the electrodes, which attract the charged ions.

The electrodes are metal plates coated with the aerogel, the high surface area of which allows them to absorb large quantities of ions, which are released later into a small volume “rinse” stream. CDI offers significant benefits over traditional deionization processes, such as reverse osmosis, ion exchange or evaporation. These involve high energy use, reliance on acids and bases, production of corrosive secondary wastes, and use of troublesome membranes. Compared with traditional desalination techniques, CDI could reduce the energy requirement by as much as 100-1000 times.

Potential applications include: treatment of boiler water in power plants, electric residential water softeners, desalination of sea water, waste water treatment (i.e. volume reduction, notably of radioactive wastewater, by a factor of 1000), and more.

A desktop test unit has been operating at LLNL for some time. A patent was filed in May 1994.

Public Interest R&D

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This paper was just published in Utilities Policy, on a timely subject which is of interest to many of you. The authors will have reprints available, and have supplied me with an electronic copy of the (15 page) manuscript, from which I extracted the following excerpts. The complete paper is 10 pages as published.

Contact: Carl Blumstein, 510-642-9588, cjblumstein@lbl.gov

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“Public-Interest Research and Development in the Electric and Gas Utility Industries,”
Utilities Policy: Volume 7, Issue 4, 21 April, 1999, pages 191-199
Carl Blumstein, University of California Energy Institute
Stephen Wiel, Lawrence Berkeley National Laboratory

An unintended consequence of the restructuring of the electricity industry in the U.S. has been a sharp decline in expenditures for R&D by investor-owned utilities. This paper examines how the public interest may be damaged by this decline in R&D expenditures and discusses some of the strategies that could be employed to mitigate the damage.

The restructuring of the electricity industry has been accompanied by a sharp decline in R&D expenditures by investor-owned utilities (IOUs), which have fallen by more than 45% between 1993 and 1996. The trend in the U.S. … is consistent with trends in other countries where the electricity industry has been or is being restructured.

A key driver of this trend is competitive pressures to cut costs. “While cuts are occurring across the board, RD&D departments are particularly vulnerable because in most cases research projects are not considered essential to the operation. In addition, the value of RD&D projects are difficult to quantify and often seen as a long-term investment. These trends are particularly prevalent for IOUs positioning themselves to increase profits for shareholders.” (Schilling and Scheer 1997) While, in retrospect, this trend does not seem surprising, it was certainly not an intended consequence of restructuring. Intentions notwithstanding, policy makers are now confronted with the questions: (1) how will this decline affect the public interest and (2) if some of the effects are adverse to the public interest, what mitigating steps, if any, should be taken?

This paper is intended to stimulate discussion on these questions by examining some of the issues in detail. First, we define public-interest R&D and illustrate the definition with some examples. The examples also give some idea of what may be lost if utility R&D expenditures continue to decline. Then we examine some of the issues that would be raised by efforts to mitigate the decline in utility expenditures for public interest R&D. These issues, which we explore using a series of examples, are funding, governance, and scope. Finally, in a brief conclusion, we discuss our concern that public interest R&D is likely to suffer some serious damage if action is not taken. However, we believe that there are likely to be many workable solutions to the problems we pose.

Technological change is an important contributor to economic growth and R&D is an important contributor to technological change. Any sharp decline in R&D expenditures is, at the least, a cause for concern. On the other hand, restructuring is moving the business of electricity generation decisively toward competition. If history is a guide, this competition will be conducive to innovation. New R&D investments may be forthcoming from the competitors or their suppliers. Thus, concern with the current decline in R&D expenditures should focus on the R&D, if any, that will not be adequately provided by the competitive market. Especially at risk are R&D funds for projects that, from a societal perspective, have measurable public benefits but that private markets will probably be unable to support because these public benefits cannot be appropriated by private firms.

In current discussions about utility industry restructuring this type of R&D has come to be known as public-interest R&D. Among the areas where the benefits of public-interest R&D may be important are health, safety, environment, energy efficiency, and “pre-commercial” technical information. Many R&D projects have both private and public benefits.

Strategic options [to provide] post-restructuring R&D support mechanisms [are discussed], with a description of funding, governance and scope, followed by an analysis of pros and cons. The four options offered are – Direct Industry Control, – Industry Directed Not-For-Profit, – Publicly Directed Not-For-Profit, and – Direct Government Control. These four are not mutually exclusive and do not begin to exhaust the possibilities.

We … conclude … that none of the options described above is sufficient by itself to provide for public-interest R&D after restructuring. In the past, public-interest R&D was sustained by a mixture of public and private, regulated and unregulated, and federal and state institutions and support mechanisms. Today, in the midst of restructuring, it is not surprising that some of these arrangements are being disrupted given the profound institutional upheavals now happening in the energy industry. Public-interest R&D is likely to suffer some serious damage if actions are not taken to deal with these disruptions.

The purpose of this paper is to stimulate discussion concerning what actions to take. The situation is complex, but the problems are by no means insoluble. Indeed, we think there are likely to be many workable solutions. Our hope is that discussion will begin to identify some of the better solutions and will contribute to the evolution of a new mixture of public and private, regulated and unregulated, and state and federal institutions and support mechanisms that will enable public-interest R&D to continue providing benefits after restructuring.

N. Amer Power Quality Equipment Markets

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SPECIAL OFFER TO UFTO CLIENTS
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“North American Markets for Power Quality:
The Top 50 Equipment Suppliers and Service Providers,”
Research Publication: 5621-27, March 1999 (approx. 400 pages; Price: $4450)

Frost & Sullivan, in collaboration with Power Quality Magazine, has produced this major new report. It was written by a friend and colleague, Jane Clemmenson, whose qualifications include many years of experience in the field of power quality, business development, joint venture development, strategic partnering, and technology transfer. She is considered a power quality industry expert, dating back to the mid 80’s when she managed the utility consulting practice at SRI. She has been quoted in Business Week and The Wall Street Journal. She can be reached in Berkeley CA at 510-848-8002, jclemm@gte.net

======================================================================
!!! By special arrangement, UFTO Client companies are being !!!
!!! offered a 25% discount on the purchase price of this report. !!!

Contact: Alex Lopez, Frost & Sullivan,
alopez@frost.com, 650-237-6514, and mention UFTO.
======================================================================

More information is available at:
http://www.frost.com/verity/reports/electronics_semiconductors/rp562127.htm

In addition, I have a PDF version of the brochure which includes the complete table of contents (which at this time is missing from the brochure available on line.) The materials below are from Frost & Sullivan.

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Announcement of the Study (prepublication)

Until now, the market for power quality equipment and services has not been described in total. Studies have focused on narrow segments of the market in isolation. A comprehensive view of the market is necessarily broader and includes analysis of competitive and synergistic forces that operate between technologies and segments of the market. A broad view also provides a vantage point for understanding existing industry partnerships and alliances, for spotting merger/acquisition candidates, and for planning corporate strategy. The “Power Quality 50” provides valuable insight on competitors and identifies which companies should be the focus of competitive benchmarking.

The report defines the total power quality market in the United States and Canada, including revenue estimates, growth rates, industry leaders and market share, for the following equipment or aggregated categories of equipment:

* transient voltage surge suppressors
* power conditioners, including isolation transformers and power distribution units, voltage regulators, motor generators, and harmonic filters
* uninterruptible power supplies
* energy storage systems for power quality applications, including superconducting magnetic energy storage systems, battery energy storage systems, mechanical storage systems including flywheels, and capacitor and ultracapacitor systems
* low- and medium-voltage static transfer switches and custom power products
* power quality test and measurement instrumentation and software including hand-held, portable and transportable, and permanently installed types
* software for power quality analysis and power management software
* a qualitative discussion of the market for standby generators in UPS backup applications will be included

The services market is evolving and with deregulation of the electric utility market, energy service companies (ESCOs) are becoming more active in the front end of equipment sales. Future bundling of power quality equipment into power contracts is likely. The report includes revenue estimates, growth rates, industry leaders and market share for ESCO-provided services, vendor-provided services, and independent consulting. The role of architect-engineer and electrical contracting firms is discussed.

A synthesis section describes how these various segments of the equipment and services market compete or act synergistically. The top 50 equipment suppliers and service providers are identified and profiled, with attention to industry leaders in each segment of the market and the total power quality market. Profiles describe each industry leader in terms of its product lines and market share. Profiles also include company history, ownership and affiliations, facts and figures, financials where available, and a discussion of strategies in the marketplace.

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Portions of the F&S press release:

“Cross-Segment Competition and New Entrants Challenge Power Quality Market Participants”

Cross segment competition is becoming evident in the power quality market as the debate continues about whether it is more cost-effective to protect end-user equipment at the point-of-use, at a branch circuit, or at a facility level. Small, medium and large-scale solutions are available for different applications, and customer education and marketing is essential. Vendors must now educate themselves about products that compete directly with their own, as well as possible alternative products.

Another challenge that is covered in the study is the entrance of new players such as Siemens, Hewlett Packard and General Electric, who bring with them money and strong corporate backing, say the authors of this study. In addition, the recent consolidation of several large companies has heightened competition.

The power quality market is comprised of over 200 companies, half of which hold identifiable market share in one or more segments of this study. The top equipment suppliers and service providers constitute the Power Quality 50, a term originated by Power Quality Assurance and Frost & Sullivan. The Power Quality 50 accounted for 60.2 percent of the total market in 1997.

It is important to recognize the contributions of companies to particular subsegments where they may be market leaders, no matter how small these companies are with regard to the total market. The top contributors on the basis of 1997 revenue in one or more subsegments makes up Frost & Sullivan’s 50 Market Leaders. This study contains detailed profiles of each company listed in the 50 Market Leaders.

This new study, North American Markets for Power Quality: The Top 50 Equipment Suppliers and Service Providers, addresses the major challenges and issues affecting growth in the market. Frost & Sullivan’s objective is to show how these implications impact the market and to assist equipment manufacturers and service providers in better preparing for a successful future.

This research has integrated the Market Engineering consulting philosophy into the entire research process. Critical phases of this research include: Identification of industry challenges, market engineering measurements, strategic recommendations, planning and market monitoring. All of the vital elements of this system help market participants navigate successfully though the power quality industry.

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A news story from the F&S website (available free if you register):

“Primary Restraints in the North American Power Quality Protection Equipment Markets”

The power quality protection equipment markets consists of the following four segments:

– transient voltage surge suppressors (TVSSs)
– power line conditioners (PLCs)
– voltage regulators (VRs)
– shielded isolation transformers

In 1998, the North American market revenues reached $1.4 billion and the market is expected to experience healthy growth throughout the forecast period. Although the markets for power quality protection equipment are growing, manufacturers need to also be aware of several issues which are restraining the revenue growth.

One of the primary restraints affecting the revenue growth of power quality protection equipment is the movement towards the UPS market, based largely on the misconception that they address all power quality problems. In reality, UPSs do not regulate and maintain voltages to electronic equipment nor do they act as an alternative power source. They typically only receive the actual raw electrical power coming in through the sockets. While this misconception has increased the demand for UPSs, it has created a decreasing demand for power quality protection equipment. The incorporation of UPS features into these devices could bring in more revenues for these market segments.

Another restraint that manufacturers should be concerned about is the lack of technological innovation in these products. While the technologies in computers and electronic equipment are continuously and rapidly changing, the technology in power quality protection equipment has remained much the same over recent years. A relative lack of breakthroughs has caused manufacturers to spend valuable resources on other product lines, and decreasing their focus on these products. The power quality protection equipment discussed in this market has remained relatively the same in both appearance and function.

Finally, the third restraint that should be of concern for manufacturers is the general lack of end-user awareness and understanding of the need for power quality protection. Potential and existing end users must become aware and knowledgeable about the possible causes and problems of what is coming through the electrical sockets. Without the appropriate knowledge, customers will most likely not make the best decisions regarding their power problems. A possible effect of this is that by not knowing what power quality protection products are available, consumers may select low-end products to protect their expensive equipment. Using such products can lead to loss of money and damaged equipment.

These are the three issues restraining growth in the North American markets for power quality protection equipment. Manufacturers must create and develop strategies to stay ahead of their competitors and on top of their markets. To learn more about this market, as well as the issues to be aware of, consult Frost & Sullivan’s recent study 5801-27, North American Power Quality Protection Equipment Markets.

Innovators Dilemma – Disruptive Technologies

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This editorial is from the March issue of Power Engineering magazine, and does a nice job introducing an important recent book, while pointing out some major implications for the energy utility industry.

Power Engineering is a Pennwell publication, with free subscriptions.
See http://www.pennwell.com/pages/magazines/toc-pe.htm

Thanks to John Zink for providing UFTO with an electronic copy. John, whom many of you may know, tells me he is retiring on May 15. We’ll miss him.

As for the points raised, is the utility industry paying too little heed to new technologies? Do you agree that the only way is to establish small independent subsidiaries? I’ve also included the review from amazon.com

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Warning: Disruption Ahead

by: John C. Zink, Ph.D., P.E., Managing Editor

Three years ago in Power Engineering I identified what I called “strategic technologies.” I listed distributed generation, energy storage and direct current devices as having the potential to create a paradigm shift (a term I have grown to hate) in the power generation business. In later issues I added electric vehicles and hydrogen technologies to the list because of their similar potential to reformulate the way we think of power generation, distribution and use. I recently discovered a more-definitive work that sheds light on this topic.

A 1997 Harvard Business School book calls such new technologies “disruptive technologies” and examines their characteristics in-depth. The book, The Innovator’s Dilemma ? When New Technologies Cause Great Firms to Fail by Clayton M. Christensen, also offers some advice to companies that wish to profit from these disruptive technologies. I think it deserves a look.

The book describes entrenched technology as “sustaining technology.” Companies develop and refine their major products as desired by their customers, continuing to become more efficient while continuing to upscale their offerings. This process increases profit margins and, hence, company expectations and hurdle rates for new products. However, at some point the market does not need further upscale capabilities in these bread-and-butter products. At that time competition shifts to such things as reliability and delivery time and then, ultimately, to price. When the product reaches this mature stage, the business has turned into a commodities business, and profit margins begin to erode.

Unfortunately, revolutionary new products—the disruptive technologies—are not in the pipeline at these companies. Their product pipeline contains only the unneeded future upgrades to their current offerings. Christensen notes that companies which have a solid competitive position in a sustaining technology are seldom able to simultaneously develop a disruptive technology. This is certainly true in the “upscaling” part of the product cycle. The disruptive technologies, while still in their formative stages, usually have high prices and limited capabilities. They cannot serve the company’s upscale market, nor can they meet the company’s profit requirements.

The book observes that the only way companies with established technologies can exploit disruptive technologies is to establish small, independent subsidiaries with lower profit-margin and market-size expectations.

It is not hard to postulate the development of distributed generation or electric vehicles (EVs) following the disruptive technologies model. For example, EVs are now too limited in range and too expensive to displace internal combustion engine cars. There are niche applications, e.g. city buses, where EV efficiency, life-cycle cost and non-polluting nature give them an advantage, but they cannot now satisfy much of the automobile market. As fuel cells and microturbines develop and begin to fill the role of battery charger for hybrid vehicles, these gradually chip away the performance disadvantage of existing EVs, but they are still not price competitive. However, some begin to recognize hybrid vehicles’ potential application as energy storage devices or as distributed generation devices to provide home electricity when not being used for transportation. Aggressive companies may recognize synergies with their businesses and offer not only clean, economical transportation, but also clean, economical power for the home from the same device.

The auto companies, while experimenting with EVs, are not able to bring about the breakthrough because they see EVs as only a niche transportation market. Electric utilities, while seeking new off-peak “appliances,” appreciate the potential of EVs but are not interested in the next generation, the hybrids, because they do not fit the central station generation market. Thus, the door is open for totally separate companies to get into the auto companies’ and utilities’ cash registers. A disruptive technology has struck again.

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From Amazon.com
What do the Honda Supercub, Intel’s 8088 processor, and hydraulic excavators have in common? They are all examples of disruptive technologies that helped to redefine the competitive landscape of their respective markets. These products did not come about as the result of successful companies carrying out sound business practices in established markets. In The Innovator’s Dilemma, author Clayton M. Christensen shows how these and other products cut into the low end of the marketplace and eventually evolved to displace high-end competitors and their reigning technologies.

At the heart of The Innovator’s Dilemma is how a successful company with established products keeps from being pushed aside by newer, cheaper products that will, over time, get better and become a serious threat. Christensen writes that even the best-managed companies, in spite of their attention to customers and continual investment in new technology, are susceptible to failure no matter what the industry, be it hard drives or consumer retailing. Succinct and clearly written, The Innovator’s Dilemma is an important book that belongs on every manager’s bookshelf. Highly recommended.

Book Description
THE INNOVATOR’S DILEMMA takes the radical position that great companies can fail precisely because they excel at the commonly accepted practices of good management.

It demonstrates why outstanding companies like Xerox, IBM, Sears, and DEC that had their competitive antennae up, listened astutely to customers, and invested aggressively in new technologies still lost their positions of market dominance. And it shows companies today how they can avoid a similar fate.

Drawing on patterns of innovation in a variety of industries, the author argues that good business practices-such as focusing investments and technology on the most profitable products that are currently in high demand by the best customers-ultimately can weaken a great firm. He shows how truly important, breakthrough innovations, or disruptive technologies, are initially rejected by customers who cannot currently use them. This rejection can lead firms with strong customer focus to allow their most important innovations to languish. The fatal disability in these firms is their failure to create new markets and find new customers for these products of the future. As they unwittingly bypass opportunities, they open the door for more nimble, entrepreneurial companies to catch the next great wave of industry growth.

Many companies now face the innovator’s dilemma. Keeping close to customers is critical for current success. But long-term growth and profit depend upon a very different managerial formula. This book will help managers see the changes that may be coming their way and show them how to respond for success.