Electric Vs Gasoline - The war of ecosystems.

by Nikhil Parchure

When people think of electric vehicles, they think about battery technology, electric drive train and charging systems. But to be fair, the electric vehicle revolution is far more than that. It is a total shift from the gasoline ecosystem we are living in for the past century. Let me explain what I mean by the gasoline ecosystem. Crude oil is pumped from the oil wells and then refined to produce gasoline, diesel, jet fuel, plastics, solvents, lubricants and tar. These multiple products are made from a single raw material. All these products are sold in high volumes and due to high volumes, petroleum refineries manage a near perfect (100%) efficiency. The investment required to set up oil wells, refineries and transport infrastructure is shared by 1000s of products derived from the crude oil. So when you look at the gasoline prices, it has a huge advantage of cost sharing with all other products. 

Now as the gasoline was cheaper and more energy dense than batteries storing the electricity, gasoline ecosystem won the race in the transportation sector. Prior to commercialization of gasoline cars, most of the cars were electric. In the United States companies like Baker electric were making electric cars. (See Jay Leno's Baker electric car demo : Link) but the cost effectiveness and convenience of gasoline cars made these electric cars obsolete. Gasoline cars succeeded because of the convenience and freedom from the limited range of electric cars. People using horse carts and slow trams were able to drive 10 times faster and were able to go to locations not reachable by other means available.

This boom of gasoline cars helped the development of efficient internal combustion engines and that engine technology made inroads in all modes of transportation. Trucks, buses, planes, boats and cars all shared platform developed on the gasoline ecosystem. More cars increased the demand for gasoline which in-turn boosted the output of refineries. This improved volume reflected in more efficiency and further reduction in the cost. The benefits of this cost reduction were significant and were seen across all industries. Many people blame gasoline as a major reason for the global warming but we cannot ignore the tremendous development that gasoline brought to the man-kind. We should not dismiss the achievements of gasoline as a fuel. Cars, tractors, emergency generators and even our lawn mowers are powered by gasoline engines. That may have accelerated the problems of global warming but at the beginning of the century our understanding of global warming was fairly limited. 

During this boom of the gasoline economy, one thing remained surprisingly constant and that is our source of electricity. Even though gasoline became cheaper and improved in efficiency, the internal combustion engine still could not match the efficiency of turbines in thermal power plants. Coal fired power plants are still more efficient than gasoline generators and have provided cheap electricity over past many decades. Cheap coal was hard to replace by gasoline as coal needs no refining or purification, it can be mined and directly used as a fuel. 

Now we are again at an interesting juncture in the history of the mankind. Electric vehicles with advanced battery technology are challenging the gasoline economy. People against electric vehicles may point out the cost and range as major hurdles in the mass adoption but they can not deny the fact that efficiency of the electric motor (95%) will give internal combustion engine (30% efficiency) a run for the money. 

Now the next major challenge for electric vehicle makers is the cost. Interestingly we can learn a lot from the rise of the gasoline economy. The strength of gasoline economy was not only the energy density and convenience of the system but also range of products supporting the system. To make electric vehicles successful, we can reapply the same principle to batteries (fuel storage for EVs) 

We have to make Electric vehicles part of the electric ecosystem. The war is not between who powers your car but war is between who can deliver the usable energy at the cheapest and most convenient way to the end user. The diagram below shows how the ecosystem supports various applications. Each application provides additional volume and advantage to the overall ecosystem. The base of the gasoline ecosystem is crude oil and base of new emerging ecosystem is the battery system. 

Comparing two ecosystems

As we bring more and more applications on a single platform, the efficiency of the manufacturing and cost of the system will drop. And as the cost of batteries and power electronics drops, more and more applications will become viable. This is a very good cycle which will be able to challenge the current gasoline ecosystem. Electric vehicles or any other new technology can win only if the whole ecosystem wins. The hydrogen fuel cell ecosystem is another ecosystem that can challenge the gasoline ecosystem but again to win the war, hydrogen fuel cell has to challenge the whole ecosystem and not succeed only in niche applications.  

I am convinced that the electric ecosystem will have the last laugh. The transition will be a slow gradual process and we will be able to see it pan out over next few decades. Although the issues of global warming will drive the change, the cost of the system remains the ultimate tipping point. By no means I am discrediting the gasoline ecosystem, it has contributed tremendously in the development of mankind but we need the electric ecosystem to take the next step. 

Distributed Generation : System right sizing approach

For many decades the power grid has been an integral part of the human society. Large scale power plants feed the power to the centralized grid, which is connected to distribution sub-stations which in-turn supply power to residential areas, offices and factories. Coal, natural gas, hydro and nuclear power plants with 1,000 MW to 16,000 MW are installed far away from the actual load location. The total power generation capacity in the world is listed as follows.

Source of Electricity (World total year 2008)

-	Coal	Oil	Natural Gas	Nuclear	Hydro	other	Total
Average electric power (TWh/year)	8,263	1,111	4,301	2,731	3,288	568	20,261
Average electric power (GW)	942.6	126.7	490.7	311.6	375.1	64.8	2311.4
Proportion	41%	5%	21%	13%	16%	3%	100%

Data source IEA/OECD (Table source http://en.wikipedia.org/wiki/Electricity_generation) 

From the table it is clear that although renewable energy sources such as Solar PV and wind are deployed on a large scale, it still constitute less than 5% of world energy production. With projected increasing demand, it will be extremely difficult to meet green-house-gas reduction targets. 

The current system of large scale power plants and grid works best when the gap between demand and supply is very small and the fluctuations in the grid can be managed by operating small feeder power plants. But now the difference between peak power and average power load has increased significantly. This poses a significant challenge for power generation and transmission. For example if the average demand is 600 MW for a city and peak demand is 1000 MW then power generation and transmission infrastructure has to be designed or upgraded to handle 1000 MW. But this same infrastructure will perform less efficiently at 600 MW. The machinery in the power plants are designed to operate efficiently at one power output level, any increase or decrease in these output levels will reduce the efficiency. Demand higher than planned capacity can reduce the life of these instruments or even cause a failure, demand lower than planned capacity will reduce the efficiency which will cause increase in cost per kWh and green-house-gas emissions. 

This situation poses a challenge for grid planning, but every challenge creates an opportunity. Combination of distributed generation and stationary storage provides a great opportunity. I created a simple block diagram to explain the system overview. This is a simplified version of the actual system which is implemented in smart grid projects. 

Using combination of renewable energy, energy storage and small scale locale generation can help fill the gap between peak demand and normal demand. The graph below shows the daily power consumption for the one week period. The difference between peak demand and non-peak demand is large. The difference will keep on growing as more and more people move to cities and follow common energy consumption pattern.

Energy Demand during one week (X axis represents time and Y axis represents kW)

This creates an opportunity to deploy distributed on-site generation to compensate for the peak power consumption. This can be done using hybrid system of stationary storage and Solar PV systems. This system right sizing approach will help in improving overall grid efficiency and stability. The cost of electricity from renewable energy or stationary battery storage systems is currently higher than grid power. But this cost difference is reducing rapidly and renewable energy technologies will achieve grid parity in the near future. By integrating renewable energy, stationary storage facilities and micro-turbine based power generation we can help stabilize the grid far better and allow grid to perform more efficiently. 
Ultimately achieving lower cost of electricity using combination of grid power, renewable energy, energy saving instruments and energy storage makes good business case. 


Signing off
Nikhil

Microsoft: May be time to launch a "Workbook" has arrived

When I look at the current technology market, I see huge gains in sales number of smart phones, tablets and phablets (phones with more than 5" screens). But at the same time market for traditional laptops and desktops is shrinking . Microsoft is trying its best to improve these sales by releasing Windows 8 and Surface line of Ultrabooks. Many OEMs are coming with tablet and notebook hybrids, HP envy X2 and Dell XPS 12 are some examples of such devices. But still these laptops are not flying off the shelves and people are still buying tablets from Apple, Samsung and Google. 

Microsoft has a strong portfolio of software products. Office 2013 is one solid productivity software which will perform well. Integration with Office 365 is a really good move by Microsoft and it will surely help Microsoft to sell many consumer and enterprise licenses. But still in the long run alternatives will pose a challenge to dominance of Office suit of software. Microsoft has to maintain its lead in this category as it lags in mobile and tablet market. 

Now as a marketing student, I thought about different strategies that Microsoft can implement to take advantage of its core products and improve the market share in mobile platforms. I tried to list down few challenges Microsoft is facing. 

Cloud technology: Cloud technology has improved significantly over past couple of years and servers are getting more powerful and can easily handle large applications. Business software makers such as "Salesforce.com" and "SAP" offer complete product portfolios from the cloud. Microsoft has not addressed this advancement in technology in Windows 8. Windows 8 still works on the platform which is based on Windows 7. They have done tweaks to improve the performance on tablets but integration with cloud is still limited. 

Multiple devices: Now-a-days people are carrying three or even four devices at a time. Smartphone, tablet and laptop are used for different purposes. Sometimes people carry two different sized tablets for different needs. Microsoft has to create software packages that address this need. One software fit all approach won't work.

Rise of Chromebook: Apple's Macbooks are never a threat to Microsoft's business because Macbooks are expensive and cater to a narrow target market. But Google's Chromebooks are direct threat to Windows 8. Google Apps for business still lacks a lot of capability but the gap is closing very quickly and Microsoft has to quickly address this. Though Chromebook is based on cloud based OS, Google is improving its offline capabilities and within few years Chrome OS will be a big competitor for entry level laptop market.

My Opinion. 

Now after looking at these challenges, I thought about how Microsoft can improve its sales in tablet and laptop market again. I came up with two approaches that can be used. 

1. Use Surface as Nexus line: There is nothing wrong in learning from your competitor. Google used Nexus line of products to demonstrate the desired user experience on Android devices. OEMs used it as a benchmark and developed phones and tablets that came close to those benchmarks. Speed of Android adoption improved rapidly and OEMs benefited by collaborating with Google. Samsung is now challenging Apple using Google's Android operating system. Samsung learned a lot by collaborating with Google on Nexus smart phones. Microsoft is a software company with similar model. Google borrowed OEM model from Microsoft and now its Microsoft's turn to learn from Google. Making Surface line of products as a benchmark Nexus line gives two great advantages to Microsoft.

• It removes the possibility of Microsoft competing with its own OEMs. OEMs will stop finding alternatives to Windows as they will not see surface products as threat but will rather see them as benchmarks. 
• It will reduce the pressure of sales. Though Surface Pro is a good product, it is entering already declining and crowded market. Removing pressure to deliver sales will help design engineers to test the uncharted waters and come up with breakthrough innovation. 

2. Ride the tablet wave: Now there are more than 80 million iPads sold. Many of these iPads are used in business application. But these devices are not good for content creation. You can do picture and movie editing but capabilities like word, excel and powerpoint are missing. So there is a great market opening for companion device. Chromebooks are kinda filling that gap but not completely. Microsoft can easily fill that gap by launching a "Microsoft Workbook". "Workbook" will be a companion device that will have a price point of $175 to $225. Workbook will have "Office 2013, Internet explorer and Skype" Nothing else. It will have a basic architecture of Windows but will have components essential to run Office, Skype and Internet Explorer. So when consumer boots up the device he will see tiles with only these programs. People will love such device, it will fill a big gap in their digital need. It will also counter the surge of Chromebooks. This will also help Microsoft separate profitable Office franchisee from Windows franchisee.  

Technology changes very rapidly so in the future there may be new innovations that may make these suggestions irrelevant, but as of today I think these two options will be worth consideration. 

Signing off

Nikhil

Micro Hybrids: Going Green One Step At A Time

Electric vehicle is the latest and the greatest green technology currently available in the automotive sector. But despite all efforts, incentives and subsidies, electric vehicles remain out of the reach of an average consumer. In my previous blog posts, I have written about technologies such as plug-in hybrids, hybrids, turbo charged engines and micro-hybrids. This article will take a closer look into micro-hybrids and why I think that is the best technology for the current time.

In my opinion, the best technology is the one which makes a mass impact. You can always create a great prototype which is extremely efficient but it is difficult to create a commercial product for the mass market. Such prototype technologies are good for developing future products and defining future product trends but are not suitable for current needs. Considering these factors, I think "micro-hybrids" will be the best technology for current times.

When I talk about micro-hybrids, I am talking about vehicles with small battery packs with regenerative braking, engine start-stop and turbo charger engine technologies. Combination of these three technologies will provide green-house-gas emission reduction and operational cost savings. It will also provide a smaller payback period than electric vehicles or plugin electric vehicles. In the previous post "Efficiency: The Underlying Trend", I briefly wrote about micro-hybrid technologies and also explained why I feel these technologies are important.

Turbo Charged, Direct Fuel Injection Engines: By using high efficiency turbo charged, direct fuel injection engines, the car manufacturer can easily downsize the engine. Instead of using a 1.6 Liter gasoline engine to drive a small sedan, the automaker can use a 1.2 liter turbo charged engine producing the same power output but using less gasoline. As car needs less fuel, it will emit less carbon dioxide and will have a lower operation cost.

Engine Start-Stop Technology:  The technology allows the car to shut off the engine when it comes to a halt in the city traffic and when you put your foot on the accelerator peddle, the engine starts automatically. It eliminates the engine idling fuel consumption, eliminates particulate matter emissions, effectively improves efficiency and reduces fuel costs. The challenge is to keep air-conditioning, heater and auxiliary power systems running. Hence this technology needs bigger battery pack and independent air handling technologies. Some micro-hybrids cut off the air-conditioning systems when the engine shuts off which is not a good design as consumers will not choose such products. Developing a slightly bigger battery pack, electrically operated compressor and heat storage tank for heater application in addition to start-stop technology will match the current comfort level requirement of the consumer.

Regenerative Braking: This technology uses generators which capture the energy from braking and charges the larger battery packs. This allows the vehicle to capture kinetic energy which would have otherwise wasted as brake-pad wear or heat. All hybrids and electric vehicles have this capability but using this technology on a small scale without requirement of high-power electronics and motor will reduce the cost of technology. For example, Nissan Leaf has a 80kW motor which is also used to capture the energy from braking. Instead of using 80kW motor, smaller 5kW system can be used to capture partial braking energy which will help charge the batteries. This motor will not be used to propel the car but will be used only to capture the braking energy. This will allow reduction in the cost of the system and make it more attractive to the average consumer.

These three technologies combined together can add significant efficiency to current cars. I am excited about these technologies because the cost and possibility of the mass deployment. The incremental cost of adding these technologies to existing car models is 10 to 15%. With increasing gasoline prices, the payback period on these technologies will be far less than those on electric vehicles and plug-in hybrid vehicles. I am a big fan of electric vehicles and believe that the electric vehicle is the practical long term future but in the short term these technologies will help us get closer to our goals of emission control and cost savings.

Many market surveys have shown that owners of Nissan Leaf were prior owners of hybrid vehicles such as Toyota Prius and Honda Insight. Technologies mentioned above can act as a catalyst to the consumer interest in zero-emission technology and will help improve the awareness about green technologies.

Focus :- Start-ups need to focus

I like to track developments in the start-up world and while doing that, I come across many interesting start-up companies. Electric vehicles, web technologies, mobile applications and many other innovative ideas are introduced by start-up companies every year. I have observed that many start-ups begin their journey with a unique customer problem. Start-ups do a wonderful job in identifying customer needs but then sometimes they try to do too much too soon. Companies lose focus and start solving many problems at the same time. Mentors and Angel investors do advice start-ups to have a laser sharp focus, but I think the definition of focus is not clear. I have read many articles on web, advising early stage companies to have a laser sharp focus on products and customer problems. These articles also suggest that start-up companies should not waste their energy on pursuing activities which are not core to their mission. I see a problem with this approach, because focus can also make you irrelevant. Defining the meaning of "focus" is very important and I am trying to come up with my understanding of focus.

In my opinion, start-up companies should focus on a single customer problem they wish to solve. For example if any company is solving a problem X then it should only focus on solving that problem. Combining solutions for different customer problems into one product is just going to make your product expensive and unsuitable for the mass market deployment. So according to me, the focus should be on the problem the company is trying to solve and not on products, sales and market segments.  Let me give you an example, let us imagine a start-up company "XYZ auto" '(I am not suggesting any company here but my thought was influenced by one company I came across in real world) is trying to solve a mobility problem of senior citizens and differently-able  people. They have created a nice innovative product to help people move from point A to point B without hassles. Now the primary problem the company solves is "Mobility". So the company should only focus on solving that problem. Now while designing the product, the company will have many choices such as, whether to use high end material, whether to use electric batteries instead of gasoline engine and whether to have low speed or high speed vehicle etc. The company should choose the technology and the product design which effectively solves the primary problem and once they have chosen the technology for that, the next step should be to cut costs, make the product available to entire market and make it affordable for entire target audience. There may be different opinions of experts on this topic, but for me, solving the customer problem and making the product available to everyone who faces that problem is far more important than making cool product. Profitability is important but that should never be the driver for the product design decisions in the beginning.

Reason why I think defining the focus is important, because start-ups face a huge risk of being irrelevant. The technology is reshaping landscapes of all industries. If the start-up is focusing on some technology without paying attention or without evaluating different options, then there is a huge risk of failure. Many people believe that start-ups should never diversify as it takes more money, efforts and time to diversify. But I think start-ups should always work on associated technologies which will enable them to make quick adjustments to products in case of failure of selected technology. This approach will help them achieve the mission with which they started their journey.  

So the statement "Focus is very important" is true, but how you define the focus is also critically important. My simple approach is to focus on problems and try to solve only one problem at a time.

Let me know what you all think, write your opinion in the comments section. I will love to read your point of view.