Energy & Power

US Shale Gas Boom: Tides of Change in the Global Petrochemicals Market

Michael Mbogoro — Tue, 19 Mar 2013 10:25:33 GMT

In recent news, Mitsubishi Chemical Corp is apparently closing down an ethylene plant, partly as a consequence of their competitors, capitalising on the US shale gas boom, to produce cheaper petrochemicals.

The advantages are two-fold. In addition to use as feedstock for chemicals, the cheap gas can also be used as fuel and heating for production plants. It is inevitable that some major petrochemical firms will lose out if they do not shift their investment patterns to low cost areas like the US, or gain cheap supplies from elsewhere.

While some countries like China are speeding up the development of their shale gas resources, it will take a while before these supplies can influence natural gas market particularly in Asia which currently has the highest prices. This situation is already complicated by the huge supply deficit in due to the appetite from China’s growth and the Fukushima disaster in Japan.

What does this mean for the US natural gas export market? It may be cheaper for the US to export primary chemicals, rather than LNG, which requires expensive cryogenic storage and arguably higher risks of fugitive fumes and leakage during transportation and shipping. Overall, I would not be surprised if many of the applications for LNG export licenses do not get approved in light of the shifting nature of demand.

Enter Philippines, Exit India: The Singapore Story

Ravi Krishnaswamy — Wed, 06 Mar 2013 04:05:52 GMT

India's GMR Group, which was building a 800 MW gas fired combined cycle power project, has sold 70% of its stake in the project for US$481 million to a consortium of Manila Electric Company and First Pacific from The Philippines. While GMR is said to have made a handsome profit of US$246 million through the deal, it also underlines the difficult situation the Indian infrastrucutre companies face in their domestic market. Constant cash flow pressures and weak rupee have inhibited the ability of new generation Indian infrastructure companies to pursue their global ambitions. On the other hand, this deal demonstrates the newfound confidence of the Southeast Asian congolomerates, on the back of its surging economy and a stable political environment. Apart from being a stable long term investment, this deal also offers a regional platform for the Philippines consortium. So it is thumps up for the Meralco-First Pacific venture and welcome to Singapore!

Power in Data Centers

Vishal Sapru — Wed, 20 Feb 2013 22:57:41 GMT

The data center demand is increasing due to trend such as virtualization, consolidation, and cloud computing. Many companies are increasing their investments in data center space due to the rising use of online streaming media, online gaming, high-performance computing, and other services. Increasing needs for data storage and physical space constraints have shifted technology toward servers that have greater storage capacity but with the same or lesser foot print. Blade servers are a highly space-efficient alternative to conventional rack servers. However, blade servers have high power requirements and dissipate a lot of heat.

Due to rising costs in data centers and increasing environmental consciousness, data center operators are making efforts to increase energy efficiency and reduce the impact on the environment. This effort is driving data center operators to buy systems with higher energy efficiencies. Collocation and managed hosting services are forcing data center operators to invest in reliable backup power. Likewise, most critical applications are also driving the need for higher redundancy, which also drives the demand for backup power systems. Electricity is the highest operating cost of a data center at 20-25% followed by engineering and installation and power equipment combined at 17-19%. Space and service are also contributors to the overall infrastructure cost in a data center at 15-17% and 13-15% respectively.

The AC data center market represents buoyant growth conditions and growths in vertical segments are expected to keep demand sustained over the next decade. The market for AC data centers continues to be a highly opportunistic with the market estimated at $25 billion in 2012. It is expected to grow at a CAGR of 8.0% for the forecast period from 2012 to 2017. The data center market hold opportunities for all solution providers. Efforts are being gradually shifted from traditional growing markets such as North America and EMEA to Asia-Pacific and Latin America. Newer data center servers, blade servers, cloud servers and a wealth of space-saving and data-preserving methods are being implemented. The small data center market has generated the most revenues due to the flexibility for scaling as well as the ability to spend more easily on the low power networks. Medium data centers are gaining momentum as the power requirements of servers continue to increase significantly. Large data centers with large systems have very few competitors, because of very few traditional products designed in the higher power range. Most end-users and suppliers are adopting an approach combining pre-consultations and integrated design to adopt solutions that could positively impact the total cost of ownership. Latin America is fast emerging as a data center hotspot with several key corporations announcing their data center expansion into the region.

To conclude the data center environment is witnessing several dynamic shifts from the basic concept of servers. The current interest in cloud servers is expected to drive growth in this market. The concept of internal cloud servers has gained significant attention. Some companies have implemented the concept along with the creation of satellite clones to protect data in the case of any failure. Packing more power into blade servers has increased the power requirements of servers. Increased collocation is driving growth in the EMEA market for data centers. Trend is shifting from medium to large as companies are increasing their presence in the large data center segment. Rapid growth of IT equipment accounts for a high percentage of energy use in data centers. Central and Eastern Europe are areas of opportunity as many countries are positioning themselves to invite large multinational companies to set up their facilities. Africa is also considered an opportunistic market. Growth in Asia Pacific region is expected to sustain the global growth of data centers due to the historical trend witnessed on data center build outs in this region. Several markets in this region are opening up their economies with the strong recovery witnessed among the Pacific countries. In Latin America growth expectation is high with key growth regions being Brazil and Argentina. In cloud computing, Latin America is experiencing an increase in the demand, which requires more from server capacity. Higher data center demand will push for more energy efficiency.

City as a Customer

Jinu Mathew — Wed, 13 Feb 2013 03:30:49 GMT

Written by Archana Vidyasekar and Akshay Gakhar

Understanding the Macro to Micro Impact of the Urbanisation Mega Trend and Identifying the Inherent Business Opportunities in Tomorrow's Cities

By 2025, the world urban population will reach 4.6 billion and account for 58% of total population. This means that 6 out of 10 people will live in urban areas by 2025. In developed regions, the growth of urban population will be unprecedented with urban population accounting for 81% of total population by 2025. This rapid rate of urbanisation is not surprising given the aggressive industrialisation the world has seen supported by emerging transport and freight corridors, better trade ties and relaxed government migration policies. This mass exodus to urban areas is transforming cities into enormous economic communities representing huge business and investment opportunities for companies and corporations.

Understanding the flow of urban population, the spatial patterns and identifying the future urban centres is a key exercise that businesses must undertake in an effort to ready themselves for the challenges that will arise as a result of urbanisation. Urbanisation could mean sustainable business practices to ensure ample supply of energy and water in the future against increasing demand, or investment in research & development to identify new material for smart buildings. It could also mean realignment and convergence of businesses' supply chains to make logistics less cumbersome and more agile in urban areas. Opportunities for new products and solutions in FMCG, real-estate, retail and construction industryare also huge and multiple. The implications of urbanisation, therefore, are varied and numerous and cities are in the centre of this key phenomenon.

Provided below are key trends in the evolution of the cities describing the growth of mega cities and other types of cities that will evolve with planned investment, infrastructure and technology development.

The Growth of Mega Cities

As 58% of the world population will be living in urban environments by 2025, there is a large drive for the expansion of cities around the world to become Mega Cities. Mega Cities are large metropolises which have a population of 8 million and above and have a GDP of $250 Billion or more. Currently there are 12 mega cities, however by 2025 this number is set to increase to 35. With Asia contributing to nearly two thirds of the global population in 2025, there is a massive push towards the expansion of their cities due to an increase in urbanisation. As a result Asia will have 18 mega cities which accounts for 50% of all the mega cities in the world. China alone will account for 72% of the mega cities in Asia. By 2025, mega cities will contribute an enormous $30 trillion to the global economy and will have a combined population of 541.6 Million people. The top 10 mega cities alone are going to contribute 13% of the global GDP.

In response to the mega growth in the cities, there are various types of cities that are being developed or planned with a specific focus on technological innovation, environmental efficiency, connectivity, safety and economic growth.

Types of Future Cities

Smart Cities: Smart is the New Green

Green concepts will be replaced by 'Smart' concepts in the future, creating smart cities that are built on Smart Technology, Smart Healthcare, Smart Governance, Smart Healthcare, Smart Energy, Smart Buildings, and Smart Mobility.

Smart Technology will connect the home, office, mobile phone and car on a single wireless IT platform and include adoption of smart grid system, smart home solutions, high speed broadband connection, and roll out of 4G technology. Smart Governance will introduce a host of e-government solutions, green policies and public transport management to the citizens delivered through the IT and mobile platforms. Smart Healthcare will includes energy efficient healthcare system, integrated security solutions in the healthcare units, intelligent healthcare infrastructure, connected home health service and healthcare data governance. Smart Energy will offer a cohesive solution to power management which through a network of technologies and digital solutions will offer improved management of power. Availability of Smart Energy will augment development of Smart Buildings which are green, energy efficient, and intelligent buildings with advanced automated infrastructure.

Smart Cities will also offer Smart Mobility that will allow people and goods to move in the most optimum and sustainable manner with convenient and safe multi-modal transport, electric mobility and infrastructure, reduced congestion and environmental cost, and efficient management of traffic. By 2025, there will be 26 such smart cities that will feature the aforementioned aspects. More than 50% of smart cities will be from Europe and North America. Copenhagen in Denmark will become the first carbon neutral city in the world by 2025 and is set to become the first eco-metropolis of the world.

Sustainable Cities: Aiming for Long-Term Self-Reliance and Sustenance

Sustainable Cities are those cities that have been built on eco-friendly, sustainable initiatives that cut across some or all levels of infrastructure, housing, transport system, and healthcare. By 2025, there will be around 92 sustainable cities globally and Europe will be home to 50% of them. These cities aim to be developed to reduce carbon emissions drastically and aim for a low carbon economy. An example of a sustainable city would be the Sino-Singapore Tiangin eco city which aims to see up to 90% of green mobility and use 20% of recycled energy by 2020.

Billionaire Cities: The Wealth Clusters

Billionaire cities are cities that house the biggest billionaires in the world. They are vital in building investment opportunities due to the large number of multinational corporations they are home too. As a result, billionaires operate out of these cities since they are hubs for investment and economic growth within a country. Moscow has the highest combined wealth of billionaires whereas New York Metropolitan Area has the highest number of billionaires in the world. However with Asian countries experiencing tremendous economic growth there has been a large growth in business activity and the amount of billionaires there. Especially cities like Hong Kong, Mumbai, Beijing, Tokyo and Taipei are experiencing an increase in the amount of billionaires and their net worth. Majority of the youngest billionaires in the world are based in the San Francisco bay area which can be explained due to the great success of technology companies such as Facebook, Google and Apple which are based in California.

Connected Cities: The Fastest Cities of the Future

As connection to the internet has become a day to day necessity and also a human right in a few countries, penetration of internet users is increasing drastically. The concept of a connected city relies heavily on internet connectivity being the backbone of the city, allowing the citizens to be connected to each other, the city and its services and the entire world. By 2020 there will be 10 connected cities with a broadband penetration rate of 100%. They are expected to have connection speeds of more than1Gbps and 3 of the 10 are expected to have speeds of more than 500Gbps. An example is Seoul in South Korea which is set to be the world's first fully connected free Wi-Fi city by 2025.

The future global map, therefore, will be full of new urban territories, comprising of various types of cities representing a range of opportunities depending on need, infrastructure and resources. Cities are no longer just generic target markets which exhibit the same characteristics as most urban areas. They have unique needs and demands and require the same positioning and attention that businesses would offer potential customers!

City as a Customer: Cities and not Countries will Drive Wealth in the Future

Cities are not only set to become dominant contributors of their country's economy, but also the global economy itself. The sheer economic scale of these mega cities will result in them wielding an economic and investment clout on par with that of countries. Eventually cities, rather than countries, will be targeted as hubs of investment, wealth creation and economic growth and they will be on par with countries in terms of their economic and investment influence.

Each city will become a customer showing uniqueness in its infrastructural demand offering cross-sectoral micro implications and opportunities in mobility, healthcare, logistics, smart products, security and retail sectors. This in turn would result in companies altering their product portfolio and in-house services to target cities as a customer. The city infrastructure market will also develop into a new industry offering various new white space marketing opportunities, highly customized and innovative city solutions and new urban business models.

Discussed below are snippets of our research into understanding the micro implications on such industries of urbanisation:

The Urban Future: Are you ready?

With economies displaying rapid urbanisation rates and ever expanding cities developing into mega cities, smart cities and sustainable cities the impact of urbanisation will result in drastic changes made to business models. Companies those are able to look at cities as customers and position themselves as partners and solution providers to cities will not only benefit from new business and investment opportunities but alsoavoid future bottlenecks, wastage and diseconomies of scale by improving their thought-leadership on cities.This would require, in addition to contingency planning, a lot of visionary innovation and realignment of operations from businesses. Partnerships between city governments, solution providers (businesses), and academia will become the working model for most future city projects. Convergence between industries, players, technology and products is inevitable as the world itself converges into urban clusters.

So, are you ready for the great urban challenge?

Smart Data Centers - Growing Energy and Power Demand

Vishal Sapru — Thu, 18 Mar 2010 15:48:17 GMT

Over the last five years, the focus has shifted towards smart (green) data centers. This has led to an increase in data center power and cooling requirements. The density of the equipment packed into each rack continues to grow/increase in conjunction with the requirements for processor cycles, memory, and storage. The average power requirement per rack varied between 1 to 3 kilowatt (kw) but has now increased to 7 to 10 kw per rack with an average of 8 kw per rack. The average power density is about 8 to 8.2 kw per rack but based on data center type the average would be 10 kw or even higher. With the implementation of high-density blade server the power consumption accounts for 20 to 30 kw per rack. The dramatic increase in power consumption has resulted in making most data centers incapable of delivering adequate power and cooling for over-heated equipment.

As per the United States Environmental Protection Agency (USEPA), electricity consumed by servers in the U.S. data centers represented approximately 1.5 percent of the national electricity use. The power and cooling infrastructure that supports IT equipment in data centers also uses significant energy, accounting for 50 percent of the total consumption of data centers. It is estimated that the enterprise class data centers alone account for over 35 percent of this energy use. The USEPA's report to Congress further states that following current efficiency trends, national energy consumption by servers and data centers could nearly double by 2011 to more than 100 billion kWh, representing a $7.4 billion in annual electricity cost.

Some of the key challenges facing the data center industry include energy intensity due to high heat densities, energy efficiency, re-evaluation of traditional cooling solutions, higher occupancy demand and economic conditions.

The efforts of suppliers of power and cooling equipments as well as facilities infrastructure providers in trying to contain inefficiencies in data centers cannot be overlooked. Whether it is innovations leading to enhancements in operational efficiency or introduction of state-of-the-art technology that potentially reduces the total energy consumption, while ensuring performance and availability, the data center space is witnessing a spade of serious supplier-led initiatives.

Example: Fujitsu’s latest Primergy server product, called the Primergy CX1000, is designed to appeal to the economics of cloud service providers especially those that are focused on ultra energy efficiency. By divesting the servers of individual fans and cramming them into its new Cool-Central cabinet architecture, Fujitsu believes it can deliver a 20 percent reduction in power consumption and cooling compared to similarly configured racks. In addition, the upfront cost is about 30 percent less. Primergy racks can be placed back to back, which means they also take up less space. The server nodes are based on the Xeon processor 5600 series. Cool-Central also feature a massive fan, which eliminates the need for redundant ones within each server node.

Similarly, Emerson Network Power introduced SmartAisle™ solution to improve effectiveness of data center cooling. American Power Conversion (APC) has introduced InfraStruXure which is an innovative architecture which fully integrates power, cooling, and environmental management within a rack-optimized design. Active Power has the containerized system which typically includes a standby generator, Active Power’s CleanSource® 300 kVA UPS, a generator starting module, switchgear and chiller rated at 240 kW. Various options are system rated at 480 kW including a standby generator, a CleanSource® 600 kVA UPS, a generator starting module, switchgear and chiller. The increased cost and demand for energy and space efficient solutions has magnified the need for intelligent data center designs. Active Power’s goal is to cool these IT containers in a modular and portable fashion for ease of use and reduced overall costs without compromising on reliability.

The data center industry is expected to witness a spade of new technologies and concepts that could potentially revolutionize power and cooling infrastructure and energy management. Some of these concepts include Chip-level Cooling, Row and Rack-based Cooling, Liquid Cooling, Thermal Storage System, Modular Data Centers, PowerChain Management Solutions, and Data Center Automation.

Power and cooling demand from information technology (IT), telecom and hosting facilities have been systematically growing in the last decade. Energy efficiency concerns and the general economic recovery anticipated within vertical markets are expected to drive the growth in the Data Center Power and Cooling Solutions market.

GENERATION NEXT - Lithium-ion based Hybrid Electric Vehicles (HEV) and Electric Vehicles (EV)

Vishal Sapru — Mon, 11 Jan 2010 09:34:44 GMT

Growing concerns about climate change, increasing fuel costs and developments in battery technology is likely to result in an increase in demand of hybrid electric vehicles (HEV) and electric vehicles (EV). For the past couple of years the focus has been on developing GREEN and CLEAN vehicles.

The global market for Lithium-ion battery for HEV and EV is likely to be $12 to $15 billion in 2015. HEV & EV will be powered by Lithium-ion due to its features such as high energy density, high power density, safety, cost and life. Manufacturing of Lithium-ion cells is currently dominated by Japanese, Chinese and South Korean vendors. These companies operate in North America and Europe through strategic partnerships and subsidiaries.

As the Lithium-ion battery market for automotive applications is emerging, there is tough competition among the cell manufacturers, battery module integrators, and vehicle manufacturers. This has resulted in an increase in strategic partnerships and joint ventures among vendors, such as Ford with Magna (vehicle manufacturer with battery manufacturer), Johnson Controls with Saft (to promote Lithium-ion battery), Nissan & NEC (AESC), among others.

Figure 1 shows roadmap of battery technologies

Figure 2 shows the roadmap of lithium-ion chemistries

Governments around the world are offering incentives such as congestion charging exemption, rebates in road tax among other forms of tax to electric and hybrid car owners. Such incentives increases the attractiveness of HEV and EV, thereby creating a demand for them, which directly drives the demand for lithium-ion batteries. Similarly, the funding allotted in the U.S. Economic Stimulus Bill to develop the most suitable battery for these green cars encourages battery manufacturers. Installation of charging stations for EVs and PHEVs will support their volume growth, which is likely to have a direct impact on the demand of batteries. Many European countries such as the United Kingdom, Republic of Ireland, among others are involved in developing adequate number of charging stations that could enable the EV and PHEV users to charge their vehicles through parking at the charging station. Similarly, the U.S. is also planning to speed up the process of building these charging stations.

Efforts by consortiums such as Project Better Place, United States Advanced Battery Consortium (USABC), and the like promote the usage of EVs and HEVs. For example, these consortiums support the battery leasing model for reducing the initial and maintenance cost of batteries. These organizations have proposed standardization of battery packs to facilitate easy swapping of dead batteries at the service stations. These efforts are likely to enforce transparency and standardization of the HEV and EV battery market.

The overall battery cost forms a major portion of the cost of a EV; however, with new business models such as battery leasing, battery cost is removed from the equation and replaced by a relatively smaller premium. Such business models make EVs more attractive and, hence, drive the need for them, thereby resulting in the demand for Li-ion batteries. The battery leasing model is likely to gain high market appeal, as the maintenance of these batteries is also done by the leasing company. Hence, the operation cost is also reduced.

Cost of lithium used for producing the cathode and electrolyte is low when compared to that of nickel. In addition, about 3-6kg of nickel is required per kWh battery capacity in existing HEVs, whereas only 1-1.2kg of lithium is required per kWh battery capacity for advanced HEVs. Therefore, large-scale manufacturing of Li-ion is expected to reduce the cost of batteries to a large extent. The battery cost is expected to reduce up to half when the manufacturing volumes reach more than 10 million packs per year.