With 90 years of observations under our institutional belt, EW editors predict what's coming next.
Looking back through the past 90 years in the electrical industry reveals that this market is not so stolid and slow to change as it may seem from an outsider's point of view. New technologies, new techniques and new demands from customers will continue to shake things up. Some of the forces that will drive those changes are already underway. Here's our selection of ten factors we think are likely to shape the further evolution of the electrical market. Feel free to add your own in the comments section on ewweb.com.
Grids Get Smart
The money is flowing and the technology is growing, so it's a safe bet that the U.S. electrical grid (and those of other countries as well) will be upgraded and outfitted with enhanced communication and control technologies. Distributors with operations that serve the utility industry stand to gain a tremendous sales boost from this investment, of course, but the commercial, residential and industrial markets will see significant impacts as well.
The actual intelligence being superimposed on the electrical grid has become a wellspring of new competitors with networking companies such as Cisco that never had much to do with electricity transmission and distribution (T&D) now jumping into the game in a big way. Whether electrical distributors will get a taste of that is unknown but seems fairly unlikely at this point. However, part and parcel with the smarts being installed, many utilities will be upgrading the capacity of their T&D systems and changing out hardware to allow power to flow both ways across the grid, with attendant investment in all the equipment utility distributors stock and sell.
Downstream, traditional distributors will see new products that support utilities' demand response programs, including control systems and smart metering, start to appear in the commercial, residential and industrial markets. These products are the key piece that will allow individual electrical loads to communicate with utilities so that the utilities can fine-tune the overall load on their distribution grids to smooth demand and avoid peaks that would otherwise require bringing additional generation capacity online.
Radical Lighting, Beyond LEDS
Solid-state lighting is still a long way from taking over the general lighting category; in fact it's just beginning to gain traction outside of very specialized applications. So it may seem premature to start talking about the next generations beyond standard light-emitting diodes (LEDs). Nonetheless, some recent radical advances, most of them from the rarified realm of materials research, give us some hints of where solid-state lighting may ultimately go.
Leading the way is the organic light-emitting diode (OLED), technology that has become a key focus of research and development at the lamp companies and universities. OLEDs have just begun to make their way onto the market, mostly in mobile phone displays, cameras and ultra-thin TVs. They make it possible for light sources to take new forms — they can be made flat and even flexible, introducing radical new possibilities for lighting design.
An OLED consists of a light-generating layer of plastic sandwiched between two electrodes, one of which must be transparent. Current OLED technology has two major challenges — OLEDs are relatively expensive to make and the transparent electrode is made of the alloy indium tin oxide. The indium component is both rare and expensive and it's difficult to recycle.
Recent work by researchers at universities in Sweden, working with American colleagues, suggests an alternative to OLEDs: an organic light-emitting electrochemical cell (LEC). Compared to OLED, the LEC is inexpensive to produce and the transparent electrode is made of the carbon material graphene. Graphene is a single-atom-thick hexagonal lattice of carbon, making a nanomaterial that is very strong, an excellent electrical conductor and transparent. Because it's carbon, graphene can be easily recycled, and the researchers showed that it can be produced as a solution in the form of graphene oxide, making manufacture much easier.
Another nanomaterial advance that shows promise, even for conventional LEDs, is the quantum dot. Quantum dots are tiny crystals of semiconducting material just a few tens of atoms across. They are typically made using some combination of zinc, cadmium, selenium and sulfur. When excited by electricity, the dots emit light of varying colors depending on the size of the dot and material used. A handful of companies are developing quantum-dot films that convert the light of blue LEDs (the brightest available) to warmer, more natural light, which will be a key factor in promoting adoption of solid-state sources for general purpose lighting.
Charge of the EV Brigades
The noisy hype around electric vehicles and plug-in hybrids would already be tiresome if it didn't hold the potential to bring another dramatic change to the electrical industry. Vehicle manufacturers large and small from all over the world are rolling out their first all-electric and plug-in hybrid cars and trucks for the mass market, and early demand looks substantial. Now that the cars are beginning to roll, some serious efforts are underway to develop the infrastructure to charge all those batteries.
Various alternatives for handling the recharging have been proposed, from gas-station type shops that will swap out batteries and send you on your way in a few minutes to charging stations for your garage. It may be awhile before it's clear which technology will win out, but regardless, it will take an enormous amount of new electrical equipment to satisfy this demand.
Most homes would require a substantial service upgrade to handle an overnight charging station. Multi-family units would need a whole bunch of charging stations, and since people would also need to charge up away from home, we would expect to see multiple charging stations installed in multi-family residential buildings, office buildings, factory lots and maybe even shopping centers.
If the service-station model prevails, these stations will probably need substation-level power handling capabilities, and we can expect many such stations to use as much solar and wind generation technology as they can get. So regardless of the politics — whether you find the green arguments for EVs compelling or just see them as offsetting pollution from the tailpipe to the power-plant stack — any significant adoption of electric vehicles in the U.S. will mean massive sales opportunities for the electrical industry.
Clearly, the manufacturers realize this. Just in the past few months, Siemens, GE, Schneider Electric, Eaton, Cooper Industries and Legrand, among others, have announced initiatives to play in this market either at the device level, making plugs and receptacles for electric vehicles, or at the whole system level.
Making Peace with the Aftermarket
The market in surplus, used, reconditioned and remanufactured electrical products is a fact of life in the electrical industry and has been since the first electrified-building project produced the first change order. From the beginning electrical product manufacturers and many distributors have wanted surplus dealers to go away, have cursed them and called them names and issued dire warnings about the risks of buying outside the authorized channel. At the same time, these same manufacturers and distributors also buy directly from surplus dealers when a customer needs an obsolete or hard-to find-piece of equipment and some even sell to them when a product line is discontinued or a distributor changes vendors.
The Professional Electrical Apparatus Recyclers League (PEARL) was set up 13 years ago to establish technical standards for testing and refurbishing electrical equipment and business standards for ethics, accountability and transparency among its surplus dealer members. The group has made strides in clarifying the challenges surplus dealers face and putting the necessary tools in place to raise their credibility among the rest of the electrical industry.
Whether it's from PEARL or some other entity, it seems the industry will have to come to terms with the surplus and reconditioned market. Some manufacturers have already begun reaching out to work directly with the dealers to help them develop better reconditioning practices or to seek their support in spotting and reporting sources of counterfeit product. The emphasis on green supply chains fits neatly with the dealers' role in reconditioning, remanufacturing and recycling electrical products.
Continued work by the dealers to raise their visibility and improve their game, and a little open mindedness from the rest of the industry, will allow the industry to handle its legacy equipment responsibly and actually feel good about it.
Green is not Just a Sales Pitch
Electrical distributors are among a host of suppliers facing a rising chorus of demands from customers to prove their green commitment. Recent announcements of efforts to document the environmental impact of supply chains have come from IBM, Armonk, N.Y., and a fairly new association built specifically to address the utility industry supply chain.
The Electric Utility Industry Sustainable Supply Chain Alliance (EUISSCA), Kansas City, Mo., has developed a strategic plan calling for voluntary industry initiatives to reduce greenhouse gas (GHG) emissions in the supply chain. EUISSCA — which includes more than a dozen large electric utilities including Ameren, Duke Energy, Exelon, Pacific Gas & Electric, Southern California Edison and Xcel Energy — said a survey it conducted last year found that only 20 percent of the 240 industry suppliers polled measure their GHG emissions and have established voluntary goals to reduce their emissions.
IBM also rolled out an initiative to push hard on suppliers for proof that they're taking their environmental impact seriously. The company's “first-tier” suppliers — those 28,000 companies it buys from directly — will now be required to gather data on their energy use, greenhouse gas emissions and waste and recycling. Suppliers that have not already done so will have to establish and follow a management system to address their corporate and environmental responsibilities. Among the requirements, suppliers must “measure performance and establish voluntary, quantifiable environmental goals; and publicly disclose results associated with these voluntary environmental goals and other environmental aspects of their management systems” said IBM.
Distributors can expect more of these sorts of demands from major customers, so some proactive investigation of how much energy and water and such you use and how much carbon you generate, and developing a plan to reduce these factors over time will not only prepare you to document your impact for suppliers, it will put you on par to compete with other distributors who've already started down this path.
Homes Powered by PV Roof Shingles
While doing any due diligence on the solar market you may want to do a little research on another twist in the solar game for residential applications. Several manufacturers, including Dow Chemical, Midland, Mich., and Energy Conversion Devices Inc., Rochester Hills, Mich., through its line of UniSolar products, are producing solar shingles that can be installed by roofers with a nail gun and don't require any rooftop penetrations. Electricians are still needed to wire the solar shingling systems into residential electrical systems.
Dow Chemical plans to roll out its Powerhouse line of PV shingles mid-year and has inked partnerships with national builders Pulte Homes, Bloomfield Hills, and Lennar Corp., Miami. According to a Bloomberg report on the Powerhouse shingles, roofing an average-sized home in Tempe Ariz., with these PV shingles would cost $27,000 and generate 2KW to 4KW of power in full sun. After factoring in federal, state and local rebates, the cost would be about $7,400, compared with $9,300 for conventional solar panels. It seems unlikely that electrical distributors would carry the solar shingles unless they had a division servicing as a full-service solar distributor that sold everything under and for the sun. But it's still a technology that electrical distributors, reps and manufacturers should track, because it will compete with conventional PV panels.
The Tablet Computer: an Idea Whose Time has Come?
When Apple's iPad hit the stores in early April, the company's stores were flooded with early adopters who had to get their hands on one of these revolutionary devices and were willing to blow most of their federal income tax refunds to do it. The company sold 300,000 iPads in the first day and at press-time news reports said sales will soon top 1 million units.
The coolness factor aside, what does the iPad — and competing tablet computers sure to hit the market — mean to electrical distributors, reps, manufacturers and contractors, and what can it do in business applications that netbooks, Blackberries and other PDAs don't already do? The sleek, ultra-thin device is lighter than a netbook and despite some reports to the contrary, its touchscreen keyboard is surprisingly easy to use, at least for one ham-handed editor who recently played around with an iPad at an Apple store. It would probably be fine for light order-entry use.
Ranging from $499 to $829 in price (depending on storage capacity and WiFi or 3G connectability) the iPad is going to be more expensive than most netbooks. A plus for salespeople who frequently travel by air is that you don't have to remove an iPad from your briefcase when going through security. One issue with the iPad may be internet access for salespeople on the go. While the iPad model that utilizes Wi-Fi connections to link to the web may be fine for desk-bound employees, salespeople out in the field should probably look at the iPad 3G, which generally speaking provides slower internet access than Wi-Fi and requires a data plan through AT&T that costs $14.99 monthly for 250 MB of data transfer/$30 unlimited. Another factor to consider with the iPad is that some of the real value in the device will eventually be the applications that are developed for it. If someone designs custom iPad applications for sales automation, inventory management, order-entry or other distribution tasks, the iPad may quickly evolve from a nice-but-not-necessary device to a must-have tool of e-business.
BYD Co. Ltd.: A Chinese Giant you May Meet Soon?
Fans of tycoon Warren Buffett, chairman of the Berkshire Hathaway fund, like to track where the Oracle of Omaha invests his billions, because they believe that if he likes a company's growth prospects, it's a pretty darn good candidate for their money, too. That's why they took note of the $230 million investment one of his business units, MidAmerican Energy Holdings Co., made in BYD Co. Ltd., in Sept. 2008. BYD is a massive Chinese industrial conglomerate that makes gas-powered automobilies, electric vehicles, cellphone components, solar panels, electronics and rechargeable batteries. Electrically speaking, the company manufactures LEDs and UPS systems.
The company is making a splash in the financial community, as Business Week recently ranked the company #8 on its listing, “The 50 Most Innovative Companies 2010” — ahead of GE, Sony, Samsung, Ford and Intel. BYD's stock has grown 42 percent on an annualized basis from 2006-2009.
BYD also recently announced a partnership with California's KB Homes, where it will supply the homebuilder with solar panels and lithium-ion battery back-up systems. The energy produced by the solar panels during the peak time is stored by the battery system in the garage and can be used later at night for the home. The battery packs may store as much as 16 KW of electricity and a typical Southern California household uses about 20 KW a day. BYD isn't yet a household name in the electrical industry, but don't be surprised if in the not-too-distant future some of its products start showing up as components in some lighting equipment, UPS systems or other electronic equipment.
Distributors as General Contractors?
Reports are beginning to surface that more electrical distributors are looking at construction or retrofit jobs with an eye toward providing a full-service approach that includes subcontracting the installation or maintenance contracting. It's not really a new idea. At OK Electric Supply, Perth Amboy, N.J., Bernie Erickson has for years taken on lighting retrofits and subbed out the installation work. OK Electric Supply's strategy dovetails nicely with the mission of its parent company, Facility Solutions Group, Austin, Texas, which is a single-source national provider of lighting and electrical products, electrical services, electrical construction, energy management solutions, and signage. Jim Frank, the division manager for FSG's contracting unit and president of the International Association of Lighting Maintenance Companies (NALMCO), says several distributors recently joined NALMCO because of their interest in the lighting maintenance market, including Graybar Electric Co., St. Louis, and Border States Electric, Fargo, N.D.
Dealer, Distributor, Contractor… or Something Entirely Different?
One of the biggest differences between the renewables market and the mainstream electrical market is that the channels of distribution are quite a bit different. Most products in electrical land flow from the manufacturer through an independent rep or factory sales force to electrical distributors and then on to electrical contractors and other end users. But in the renewables market, manufacturers often set up networks of dealers that sell direct to contractors. These dealers often have a more limited line of products or local inventory than what you would typically find from a distributor. That's sometimes the case because the market they are after is relatively small or still evolving. Some industry observers have speculated that as the solar market matures and demand for photovoltaic product increases, it will need larger distributors to carry a more diverse local stock of photovoltaic products than what's typically available from solar dealers.
At least one mainstream electrical manufacturer is entering the renewables market with a unique partnership that involves finding electrical contractors who will be both dealers and installers. The new PowerGen division of Milbank Manufacturing Co., North Kansas City, Mo., has teamed up with Endurance Wind Power, Vancouver, B.C., to build a dealer/installer network of certified electrical contractors. The companies are looking for contractors who want to tap into new business opportunities now available in the installation of 5kW, 35kW and 50kW wind turbines for the residential and light commercial markets.
To be certified as Milbank PowerGen dealers for these wind turbines, electrical contractors must attend two training courses on selling and installing turbines, purchase two turbines, and install one of them as a demonstration unit at their place of business (unless prohibited by local ordinances).