Main Business Centers in the US for Software and Technology


us business metro areas

us business metro centers

The US economy as a whole is clearly based on specialization of individual states and cities in certain types of activities.  This “federal division of labor” makes a very diversified whole at the country-level but on a grand scale. However, some key metropolitan areas exist which host the majority of corporate headquarters, nonprofits and government agencies.

In the interest of helping a foreign business choose its ultimate location for sales and marketing activities in the US, here is a brief definition of the most notable of these metropolitan areas.  Major channel partners (agencies, integrators) and customers are also likely to be located around some of these major metropolitan areas.

Los Angeles
Population: 4 million in the city and 13 million in the metro area
Geography: LA is strategically pretty well positioned on the West Coast of the US to serve business with the whole western United States.
Economy: Los Angeles (LA) is a large city with an increasingly diversified base of service business activities, a strong focus on entertainment, the media and technology.
The LA business culture is one of openness to new ideas and technological innovation because of its very diverse population base and its proximity to the US technology center of the Bay Area (San Francisco / Silicon Valley).

New York City
Population: 8 million in the city and 19 million in the metro area
Geography: NYC is pretty well positioned on the East Coast of the US to serve business with the whole eastern United States.
Economy: New York City (NYC) is a major national and international center for finance, insurance, real estate, media and the arts in the United States.
The NYC business culture is often described by speed, elitism, and aggressiveness.  There is little technology focus in NYC apart from smaller hubs in Silicon Alley which really emerged as a result of the Internet explosion.  The lack of history with technology (like in the Bay Area-San Francisco) makes the focus of technology companies from New York often heavily tied to its roots in the media (Razor Fish), advertising (web agencies), of finance sector (financial software).

Washington, DC
Population: 0.5 million in the city and 5 million in the metro area
Geography: DC is not often the base of business activities not focused on federal government and administrations however and is probably not an ideal base for doing business in the rest of the software and web development industry (even on the East Coast).  There is however significant business, government and technology activities in Virginia (just outside of DC).
Economy: In Washington, DC (DC) in 2008, the federal government and its administrations directly accounted for about 27% of the jobs in Washington, D.C.   Many organizations such as law firms, independent contractors (both defense and civilian), non-profit organizations, lobbying firms, trade unions, industry trade groups, and professional associations have their headquarters in or near D.C. to be close to the federal government.  The District has growing industries not directly related to government, especially in the areas of education, finance, public policy, and scientific research.
The DC business culture is one centered on the all powerful federal government power and its ability to generate business through government contractors.

Bay Area (San Francisco – Silicon Valley)
Population: 1.8 million combined in the cities of San Francisco and San Jose and 7.4 million in the metro area (including East Bay, Oakland, Palo Alto area, South Bay)
Geography: San Francisco and the Bay Area is the cultural, financial, and technology center of the US West Coast.  San Francisco has the second highest population density of any major city in North America after New York City. San The Bay Area is also major manufacturing and distribution center, rail terminus/hub, and the fourth largest container shipping port in the United States.
Economy: Befitting of the title Silicon Valley, this region is home to a vast number of technology sector giants. Some notable tech companies headquartered in the Bay Area: AMD, Intel, Cisco Systems, Hewlett-Packard, Apple, Google, eBay, and Yahoo!  As a consequence of the rapid growth of these and other companies, the area has gained increasing political and economic influence both within California and throughout the world.
The Bay Area business culture is one that is focused on technology and the many high staked new ventures financed with venture capital.  Such tech ventures generate enormous quantities of “buzz” and media attention with often a small portion of the published innovation surviving beyond their much publicized launch.  In this atmosphere, foreign technology companies are rarely noticed unless they move their headquarters to the Bay Area and follow aggressive investor-funded market strategies that the Bay Area opportunistic business community is likely to gravitate towards.

Boston
Population: 0.6 million in the city and 4.5 million in the metro area
Geography: Boston is the country’s fourth most densely populated city that is not a part of a larger city’s metropolitan area.
Economy: Boston’s colleges and universities (Harvard, MIT, etc.) have a major impact on the city and region’s economy by attracting high-tech industries to the city and surrounding region.  Boston is home to a number of technology companies and is a hub for biotechnology. Boston also receives the highest absolute amount of annual funding from the National Institutes of Health of all cities in the United States.  Some of the other important industries are financial services, especially mutual funds and insurance.
The Boston DC business culture is one of the closest to the business culture of major Western European economies (England, France, etc.).  It is one marked by conservatism, a strong respect for research and academia.  Boston technologists are often involved with B2B innovation but less with media, consumer, and end user focused innovations.  There is a strong history of software innovation but less than in California.

Seattle-Portland
Population in Seattle: 0.5 million in the city and 3.3 million in the metro area
Population in Portland: 0.5 million in the city and 2.2 million in the metro area
Geography: Portland and Seattle located respectively south and north of the delta of the Columbia River are separated by a 2 hours car drive dotted with suburban towns such as Spokane and Vancouver, WA.   They are close to forming a single metropolitan area and have important dependencies with each other.
Economy: The economy of Portland is centered around electronics and semi-conductors (Intel, Tektronix, Solar World, Triquint, InFocus, etc.), software (WebTrends, Jive, Learning.com, many web agencies, ODSL, Linus Torwalds, etc.) , and a number of lifestyle product categories (Nike, Addidas US, Columbia Sportsware, Leatherman, etc.) and some medical products.  Seattle’s industry is mainly centered around software (Microsoft) and aerospace (Boeing).
The Seattle-Portland business culture is dominated by the Nortwest lifestyle which is viewed as the last frontier for population growth and innovation by many.  There is a strong focus on sustainable development and lifestyle enhancement.  The high education level, low cost of life, and lax fiscal policies has made the area a popular location for new ventures in software and many other domains.

Chicago
Population: 2.8 million in the city and 10 million in the metro area
Geography: Chicago is located in northeastern Illinois at the southwestern tip of Lake Michigan.  Chicago is placed strategically in the northern center of the continent and has traditionally been the center of activity for the large “Midwest” which covers most of rural North America.
Economy: Chicago is a major world financial center.  Manufacturing, printing, publishing, food processing, and healthcare products play major roles in the city’s economy.

If you are interested in getting more information on this topic or related services from the OrigoTerra consulting team, contact us

April 30, 2010 | Tags: , , , , , , , , , , , , , , , , , , , , , , , , | 1 Comment »

US Market Entry Trends from the Perspective of the Information Technology and the Software Industries

OrigoTerra recently prepared a detailed analysis of the US market for a foreign software client wishing to enter the US market.  Here are some highlights which we felt can be useful to any online content-related software company seeking to enter the US market with an enterprise technology product or service.

For decades, the US market has been coveted by foreign entrepreneurs as a land of opportunity, one of the largest single country markets in the world, and hot-bed of entrepreneurialism. US market incumbents have adapted to take full advantage of this constant influx of investments and new entrants. This trend can make US market entry a difficult and risky affair; especially if the new entrant is not aware of how much he is expected in this environment.
Competition is fierce in the U.S. and customers are accustomed to having many options, high quality, and convenient high quality customer service from suppliers. Managers often make decisions in the moment and are ready to close a deal faster than what the foreigners usually expect.

Foreign businesses may find it advantageous to have a phone number in the United States which forwards to their offices abroad or better even a toll free number  (1 800 or 1 888). This clearly ensures the legitimacy of a local presence in the local market with the customers, without requiring an actual physical presence in the US. Agencies also offer a range of support services to businesses, at reasonable prices, such as a mini-office, postal drop, a local business entity, sales representatives, warehouses, shipping channels, etc.

Competition is intense to get exposure to the U.S. market. Advertising and public relations can help promote foreign products in the United States through trade journals, consumer and other media. However, new businesses must be sure to avoid wasteful investments by relying on experienced US marketers to optimize the impact of their expenses.
It is important to note that since the early 2000s some notable European software companies have entered the US market with great success, often perceived as US-based businesses by consumers in the US. The best known such company is probably Skype (UK). There are also other examples of such companies: Autonomy (UK), Fast (Norway), etc. These businesses and their tactics and strategies are often very different from Synomia B2B low key culture. However, they should serve as worthwhile examples that European technology companies can win US market share and use the US as a springboard to global market leadership.


If you are interested in getting more information on this topic or related services from the OrigoTerra consulting team, contact us.

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US Market Search Software and Enterprise Content Management Market Overview

OrigoTerra recently prepared a detailed analysis of the US market for a foreign software client.  Here are some highlights which we felt can be useful to any online content-related software company seeking to enter the US market with an enterprise offering.

The US Business culture is different in many ways from the prevalent business culture of France, Europe, or Asia for instance.  Various factors need to be taken in account in interactions with market participants.  Some of these differences have been well researched and documented by such researchers as Geert Hofstede (http://en.wikipedia.org/wiki/Geert_Hofstede).  The main themes that should be considered are the following:

  1. Attitudes toward risk taking (or “uncertainty avoidance”)

    Compared to the US business culture, the French culture, for instance, is very risk averse.  Without passing judgment on the validity of these attitudes, it is important to try to integrate more risk acceptance into US activities.  Without overlooking the consequences of risk-taking for foreign market entrants, US based staff or partners need to be allowed to take risk and “experiment”.  Such “playful” or “gambling” approach to business is often the basis by which US market participants learn about new products.  As such, they accept failure and are usually ready to experiment repeatedly until they reach success.

    Example:  It is customary for American customers or business partners to accept trying new products on the face value of unverified claims.  However, they are also quick to dismiss them with what foreign businesses could see as a brutal termination of the business relationship if expected outcomes are not met by the experiment.  In such a fashion, the US business culture tends to see investments as bets, while foreign cultures sees them as relationships.

hofstede uncertainty avoidance

Hofstede uncertainty avoidance cultural dimensions chart

  1. Geographical sales coverage customs

    US business customs include a very fluid geographical dynamic in distribution, marketing and sales.  The US economy as a whole is clearly based on specialization of individual states and cities in certain types of activities.  This “federal division of labor” makes a very diversified whole at the country-level but on a grand scale.  A good example is that of businesses who act in the B2B technology sector.  They tend to make relationships across the whole country.  There are rarely any exclusively regional players because most market-making activities (conferences, analysts, advertising, etc.) are national in nature.  A company that would concentrate (even with some significant investments in marketing) solely on a single region of the US would likely be seen as “not actively participating” in the market.  In many niche markets major US cities have little offer and much demand or the other way around.  This uneven allocation of offer and demand doesn’t keep the market from reaching saturation and businesses that engage in the market profit if they participate at the national level.  Business, like lifestyle, in the US is done on a continental scale.  In some cases only, the East Coast and the West Coast can be approached as two somewhat separate entities with each their own market opportunities.  However, it is important to assess if this is valid for any given vertical market considered (i.e. the site search market).  In the search software market, many factors seem to indicate a country-wide or even continent-wide market pattern.

  2. The US culture of written media and information

    AmazonKindleUser221 237x300 US Market Search Software and Enterprise Content Management Market OverviewThe US culture of information and the media is less a text-based and informational than is tends to be in older civilizations like France or China.  It seems relevant to note that the use of the web in the US is more oriented toward ecommerce, new media (brochure/flash sites, video, sound), and applications than in France or England where the web was heavily promoted as a place for eductation, the eductated elites, and as a means of cultural exchange rather than a market medium.  While there was no data to be found about the size distribution of large content sites in the US, the literary and intellectual customs of French culture, for instance, surely translate into a larger occurrence of text-intensive web sites in France.  The US might on the other hand produce less large text-based content sites.Additionally, common cultural bias seems to indicate that users are less concerned about the pertinence of search and about reading through text.  They tend to place a larger value on applications (that do – rather than inform or teach) and on new media (film, streaming video, music, radio, etc.)

    This context may affect perceptions of an advanced premium content management software product by US content strategists and information architecture professionals.

  3. US Web Usage

    The Internet gave birth to the Web in the early ‘90s on a global scale.  However, the adoption and usage patterns that emerged in France and in the US quickly diverged from their common roots.  In France, the Internet adoption started slowly but was later sped up by the coordinated efforts of the government and the major public ISP (France Telecom).  US ISPs and Telcos battled fiercely for market share but missed the media convergence that fueled the successes of Yahoo!, Google, YouTube, and countless new online media startups.  On the other hand, European web media and content deployments are vastly funded by large established companies like nationalized telecom monopolies, in an effort to seize the full opportunity of access, applications, and content that had eluded the large US telcos and ISPs a few years earlier.These historical trends resulted in very different US and Web usage patterns today.  The penetration of Internet usage in North America is at 74% vs. 52% in Europe (Internet World Stats, November 2009).  Without trying to dissect the exact reasons of these differences one can note a few differences that are most likely relevant to any foreign software company wishing to enter the US market.

    To repeat the same French example: French web are readers while US users are buyers and viewers:  French newspaper readership remains strong while US newspapers have struggled for years.  US TV viewers spend 21% more time in front of their TV every week.  US users spend €63 per capita for €31 for France.

    Europe Internet Usage 2011

    Europe Internet Usage 2011
WORLD INTERNET USAGE AND POPULATION STATISTICS
World Regions Population
( 2009 Est.)		 Internet Users
Dec. 31, 2000		 Internet Users
Latest Data		 Penetration
(% Population)		 Growth
2000-2009		 Users %
of Table
Africa 991,002,342 4,514,400 86,217,900 8.7 % 1,809.8 % 4.8 %
Asia 3,808,070,503 114,304,000 764,435,900 20.1 % 568.8 % 42.4 %
Europe 803,850,858 105,096,093 425,773,571 53.0 % 305.1 % 23.6 %
Middle East 202,687,005 3,284,800 58,309,546 28.8 % 1,675.1 % 3.2 %
North America 340,831,831 108,096,800 259,561,000 76.2 % 140.1 % 14.4 %
Latin America/Caribbean 586,662,468 18,068,919 186,922,050 31.9 % 934.5 % 10.4 %
Oceania / Australia 34,700,201 7,620,480 21,110,490 60.8 % 177.0 % 1.2 %
WORLD TOTAL 6,767,805,208 360,985,492 1,802,330,457 26.6 % 399.3 % 100.0 %
NOTES: (1) Internet Usage and World Population Statistics are for December 31, 2009. (2) CLICK on each world region name for detailed regional usage information. (3) Demographic (Population) numbers are based on data from the US Census Bureau . (4) Internet usage information comes from data published by Nielsen Online, by the International Telecommunications Union, byGfK, local Regulators and other reliable sources. (5) For definitions, disclaimer, and navigation help, please refer to the Site Surfing Guide. (6) Information may be cited, giving the due credit to www.internetworldstats.com. Copyright © 2001 – 2010, Miniwatts Marketing Group. All rights reserved worldwide.


If you are interested in getting more information on this topic or related services from the OrigoTerra consulting team, contact us


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Steve Jobs Flash Attack – Apple and Adobe at Odds

Steve Jobs explains in a blog post from Thursday, April 29 entitled “Thoughts on Flash” his view of why Apple abandoned Adobe Flash Technology on Apple devices. Are these criticisms are justified?

Open Systems Concepts At The Heart of the Argument

Job says Adobe Flash products are “100% proprietary” . “These products are only available from Adobe, which has the sole authority on future trends, pricing, etc.”
Shantanu Narayen, Adobe’s general manager, retorted in an interview with the Wall Street Journal that the new development suite Adobe Creative Suite, was designed several mobile platforms. In mid-April, Apple has actually
tightened the conditions for using the SDK for iPhone OS 4 applications to be designed with proprietary tools from Apple and some coding languages like Objective- C, C, C + +.
Of course, Adobe products are proprietary, the site also reminds Blixtsystems, but several tools from Adobe, beginning with his drive , are available in open source.

Open Systems – Open Source and the Games Tech Companies Play
What neither Job, nor Narayen say is that the back-and-forth argument over open and closed systems is not new.  In fact it has been a recurring debate for decades.  The idea of open systems seems sort of miraculous.  Why would a business give access to its proprietary creation for free?  Simply, technology firms have been toying with this strategy as a way to attract users, as well as developers to endorsing a software protocol or system that will eventually bridge them into a closed area.  It’s sort of like bait.  Bait the naive developer by offering him a powerful new tool that saves him much time and then show him and his users why they now have a simple step to make to enter the larger trap of a walled garden containing expensive proprietary software.  Apple and Adobe both know this very well, so don’t be fooled.  Both are calling each other on this but both will keep playing the game.

The only real open system is a software or technology developed for the common good where shareholders are not pressuring the owner or creator to turn the open system into bait for a bigger gain.  If either Adobe or Apple cared so much about the little guy, they’d publish Flash and other significant pieces of their systems under GNU GPL licenses.  Don’t you think so?

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Computer Stress Syndrome – Is It Time for Usability?

Computer Stress Syndrome (CSS) is described in a new heavily promoted study from the Chief Marketing Officer Council’s Customer Experience Board.

Computers have become the companions of our daily lives, whether for our work or forour personal lives. But when these trusted machines act up, nervous breakdowns are never far away… The Chief Marketing Officer Council (CMOC) is an organization of 4,500 marketing directors from 70 countries.

“Computers have become so important that they have also become a double edged sword” , said Murray Feingold, a doctor quoted in the study. “When they work well they are wonderful. But when something is wrong we panic – it’s what I call the computer stress syndrome. ”

On the panel of 1000 respondents, 64% say that their “computer has already been a source of anxiety” . The main causes are the slowdown of the system (51%) and slow start (36%), infections by viruses (16%), inability to connect to the Internet (15%), or WiFi unstable (14%).

Less than Satisfactory Customer Support

These figures must be put into perspective with the assertion by 78% of respondents that they consider themselves computer litterate and capable of solving most problems that their computer may pause. This over-confidence seems shaken when the machine becomes erratic, causing the stress syndrome.

When the problem occurs, 64% of respondents try to repair on their own (37%), ask for help from a friend or family member (18%), or … do nothing (9%). Only 15% call their cutomer support line (Internet Service Provider or computer manufacturer), or visit a computer repair shop (7%). This low score is attributed to a history of unsatisfactory performance for these support centers, coupled with the long wait before having a technician on the phone and the cost of service which is rarely free.

Now What?  Apple-Windows Over-Confidence Syndrome

The study calls for finding a way to make the machines less frustrating, and improved technical support services.  That’s not really anything new.

What seems more surprising is that users have built this over-confidence about their ability to resolve problems before they occur.  Would that be related to the message implied by the ever growing trend of snazzy user interface disguising the messy operating systems and networking protocols applications live on top of? You guessed I just pointed my finger at Microsoft and Apple.  Should we call this the Apple-Windows syndrome?

Before, you start commenting, just ask yourself what a perfect world would be like.  A world where the operating systems would be robust first, usable second.  Because how can you call something easy to use if the engine keeps on failing.  Just like a beautiful car with fancy dashboard controls running on a defective and inefficient engine.  Think of a world where that perfect computer would be priced for its real value (certainly more than the $500 we all expect to spend these days for a personal PC.  Just imagine a world where customer support would be expected to cost something and not come for free and would therefore be manned by competent motivated personnel, not unqualified average Joes reading from a script things like: “Are you sure your computer is plugged-in sir?” and “My goal is your complete and blissful satisfaction, etc.” Comments!

What to Do About it?
If you really feel you suffer from an unmanageable level of stress related to your usage of the computer, there are people  ready to unburden you of some of your stress and (your money).  You can read two reports related to computer and internet usage stress here:

But so not forget that despite how sure you may be that salvation is somewhere on the internet, a stroll in the park and a breath of fresh air far from this very screen might be all it will take to remind you of how  human beings are really made for the earth not for cyberspace ;-)

April 28, 2010 | Tags: , , , , , , , , , , | 1 Comment »

International Web Sites : SEO and Domain Issues, Language and Location Targeting

Today’s international web sites face a whole host of issues related to language of their content and applications as well as the language of the web applications the rely on to be found (search engines) or to promote themselves (social media, etc.).  All these issues have technical solutions but the choices are critical and can require trade offs between the competing imperatives of SEO, SEM, product naming, branding, language targeting, country or location targeting and domain name choices.

URLs Language:  Domain Names AND Search Engines AND Users
If you are launching a multilingual web site or expanding a web site in more than one language, if you care about being found easily and attracting more users through search engine optimization (SEO), then you care about the following.  These are key issues  often neglected at the beginning of a web site project despite strategic implications with regards to branding, site name, and overall web visibility.

The  Facts

  • Because many multi-lingual web sites become multilingual after being created in the single language of their owners country of origin, language is usually represented in the URLs of the site as a /en/ (ex:http://www.domain.com/en/products/thing.html).
  • Search engines like Google (90% of all web search request) analyze web pages and web sites to determine their contents as well as their language before they store them into the search engine’s index.
  • Users tend to search for sites through a language-biased search engine.  ex:  http://www.google.de (German Google) won’t return the same results for a “web” search request as http://www.google.com accessed from the US on a browser set to the US-en locale (US English).
  • Once you decide on a domain name, like mycompany.com, and you advertise it all over, it’s a little late to decide you should have had a separate domain for each language.  So read on and plan ahead…

Questions to ask:

  1. What domain will Google associate with country (ex:US) or language-specific (ex: English) content? (that’s the way Google search works – see http://www.mattcutts.com/blog/subdomains-and-subdirectories/ – Matt Cuts is Google’s Head of Webspam)
  2. What TDL domain (.com, .de, etc.) should I promote in a given country?

If you decide to name your business something MyCompany.com, there is just one problem, the search crawlers of Google don’t care about subfolders, subdomains and locale settings, they will just not look at this site as an English language site unless there is a domain-language pair.  This is a very important issue since I will have to rely primarily on organic search traffic for promotion of this service with little or no marketing funds to spend in the US.

Recommendations:

  1. Use one TLd (Top Level Domain – eg. domain.com or domain.de) per language.  Subdomains (eg: en.domain.com) are acceptable but less ideal.
  2. Localize your domains:  Just as it is recommended to have friendly and localized urls, it’s also desirable to that your website’s domain is in the target audience language.  Keywords in the website’s top level domain rank higher with search engines and visitors. A website whose domain name is www.sailing-boats.com can’t make sense to french speakers (even if the website has content in french) unless it’s spelled www.bateaux-a-voiles.com.

Recommended reading on the issue of language and domains and how it relates to search engines:
http://www.mattcutts.com/blog/subdomains-and-subdirectories/

http://googlewebmastercentral.blogspot.com/2008/08/how-to-start-multilingual-site.html

http://stackoverflow.com/questions/2153949/seo-implications-of-a-multi-lingual-site-with-detection-of-system-culture
 How to target users to the appropriate language content without loosing them in the process?
As I said, I researched the business rules applied by other international web sites with user registration and multiple language (ex: google.com, .de, etc.).  I also looked at the methods used to do Geo IP targeting, language browser locale redirects, and manual user-language choices by large international web sites.

Many web sites just use a language redirect that is based on user language choices made by manually  clicking a flag button, or by a browser locale redirect for the first visit.  This can cause some trouble because many country users have inaccurate locale codes in their browsers, don’t notice the “ Language” buttons available on your site and therefore will think that your site doesn’t have appropriate localized content for them.   The only other way to resolve this seems to use Geo IP location databases.  They are typically 99% accurate on average (including AOL users – see info below).  You can’t use this alone but for the first visit, it’s probably a better guess than browser locale code which is clearly more inaccurate than 99%).

This is what seems like a good set of business rules for the redirect system you end up adopting:

  • First user visit:
    -> do Geo IP lookup and redirect to correct .de or .com domain depending on location
    -> set a cookie or track session (or both) to keep user in this language for the session and next visit
    -> if user registers for an account this becomes a registered user setting in their profile “language”
  • Repeat user visit:
    -> send user to accurate language site based on cookie language stored
  • If user clicks the language button:
    -> Change cookie language setting
    -> if user is registered change user setting in their profile “language”

This may not be complete but it is the basic idea which you can start from depending on your goals and use case.

Here are some resources on free GEO IP Targeting and how to implement it:
http://www.maxmind.com/app/geoip_country
http://www.maxmind.com/app/php
PHP example: http://programmerdot.com/17/maxmind-geoip-php.htm
If you are interested in getting more information on this topic or related services from the OrigoTerra consulting team, contact us.

April 22, 2010 | Tags: , , , , , , , , , , , , , , , , | 10 Comments »

Utility vs IT Nerds and VCs – Does the customer win?

This is a reply to Jesse Berst’s SmartGridNews post at http://www.smartgridnews.com/artman/publish/Business_Strategy_News/Utility-Pitfalls-The-New-Face-of-Smart-Grid-Vendor-Lock-In-2212.html.  Jesse’s post contends that VC-fucnded Smart Grid vendors are out to defeat the well-meaning utilities by locking them into pseudo-monopolies like Microsoft as done with the Windows OS.  No doubt, Jesse really cares about how this would affect the energy end users.  Or does he?

In a previous post in February, Pike Research, had also identified the culture clash trend as “Smart Grid Culture War? Power Guys vs. Netheads”.

technologies and cultures1 Utility vs IT Nerds and VCs Does the customer win?

I find his post a bit manichean. It’s true that there is an influx of IT people in the new energy economy that’s developing. It’s true that the IT industry has a history of selling “vaporware”. But in this changing energy landscape, I would agree that everyone is somewhat involved in the “vapor” selling tactics. Some of SmartGridNews’ sponsors are well known for it. So whose side is SmartGridNews on? Utilities, vendors, customers? Or hopefully just trying to promote stability and growth for everyone in the SmartGridNews readership?

I would argue that many of the traditional utility players are simply encouraging the VC-funded vendors to forge ahead in their risky ventures while defending fiercely their positions as gate keepers of the grid. This is perfect for transferring the risk out of the utility coffers while keeping the upside profit potential. In other words, utilities are fine with forcing VC-funded startups in never-ending cycles of pilot projects but they make sure that the same vendors will have no choice but to make a deal with them once they really want full access to the market. Many smart grid energy products and services just can’t fly without the endorsement of utilities in their distribution to final users.

I would also like to point out that many smart meters rollouts, efficiency programs, renewable portfolio offerings and other utility initiatives are not any less “vaporware-like”. At least in terms of the real benefits they bring to end users. What does SmartGridNews think?

The same thing happened somewhat in the telecommunications industry before and during the deregulation and the Internet bubble. I advise utilities who think that retail and commercial consumers will accept to be the passive participant in this clash of tactics to reconsider. VC-funded vendors and regulated monopolistic utilities will have to work together or they will end up fighting and there is no telling who will win.

April 21, 2010 | Tags: , , , , , , , , , , , , , , , , , | No Comments yet »

Dispatchable and Distributed Energy Generation

This document presents the current state-of-the-art of dispatchable generation.  Distpatchable generation and distributed generation are similar concepts of energy generation on the electric grid.

Dispatchable  generation is utility-centric (as opposed to distributed generation which is also intended for end-users’ own energy needs).  1 to 5MW seems to be a good assumption for size of dispatched generators usually at a commercial or industrial facility (apartment building, hospital, factory, etc.).

The issues identified with DG (Distributed Generation) are :  Emissions, Noise, On-site fuel storage (safety), Visual Impact, Space, Interconnection to grid, Cost effectiveness.

Virtual Generation Plant Software and Networking to tie such resources together for the utility already exists and is used by PGE and others.  CHP and BUGS ties into this because these are the markets that justify a lot of these generation resources being deployed at energy the point of use already.

Distributed Generation FAQ

What is the distributed generation market?

Distributed generation (on-site generation, dispersed generation, etc.) generates electricity from many small energy sources close to the point of use as opposed to in large centralized facilities, such as fossil fuel (coal, gas powered) nuclear or hydropower plants.

Why distributed Generation?
Distributed Generation exists where:

  1. Its cost is lower than centralized generation energy.
  2. Energy users have no or limited access to energy distribution networks.
  3. Where energy sources exist at the point of use that are cheaper to turn to energy locally than package and ship to a centralized generation plant.

Who runs distributed generation resources?
-          Utilities and  energy distributors: historically as a distribution upgrade avoidance strategy
-          Energy users: mostly C&I
-          Such resources only really offer their full potential when they

What are the current issues with Distributed generation?
-          Emissions,
-          Noise,
-          Other environmental side-effects.

What technologies exist?
-          http://www.distributed-generation.com/technologies.htm (circa 2005):

Technology Recip Engine: Diesel Recip Engine: NG Microturbine Combustion  Gas Turbine Fuel Cell
Size 30kW – 6+MW 30kW – 6+MW 30-400kW 0.5 – 30+MW 100-3000kW
Installed Cost ($/kW)1 600-1,000 700-1,200 1,200-1,700 400-900 4,000-5,000
Elec. Efficiency (LHV) 30-43% 30-42% 14-30% 21-40% 36-50%
Overall Efficiency2 ~80-85% ~80-85% ~80-85% ~80-90% ~80-85%
Total Maintenance Costs3($/kWh) 0.005 – 0.015 0.007-0.020 0.008-0.015 0.004-0.010 0.0019-0.0153
Footprint (sqft/kW) .22-.31 .28-.37 .15-.35 .02-.61 .9
Emissions (gm / bhp-hr unless otherwise noted) NOx:  7-9

CO: 0.3-0.7

 NOx:   0.7-13

CO: 1-2

 NOx: 9-50ppm

CO: 9-50ppm

 NOx: <9-50ppm

CO:<15-50ppm

 NOx: <0.02

CO: <0.01

-          http://www.energy.ca.gov/distgen/equipment/equipment.html :

DER Technologies Commercially
Available		 Emerging
Technology
Microturbines

x

x
Combustion Turbines

x
Reciprocating Engines

x
Stirling Engines

x
Fuel Cells

x

x
Energy Storage / UPS Systems

x

x
Photovoltaic Systems

x
Wind Systems

x
Hybrid Systems

x
Combined Heat & Power (CHP)

x

x

CHP Technologies

Table I: Measuring the Efficiency of CHP Systems
System Component Efficiency Measure Description
Separate heat and power (SHP) Thermal Efficiency (Boiler) Energy InputEFFQ � Net Useful Thermal Output Net useful thermal output for the fuel consumed.
Electric-only generation Energy Input Power OutputEFFP � Electricity Purchased From Central Stations via Transmission Grid.
Overall Efficiency of separate heat and power (SHP) ThermalPower SHP Q EFFP EFF QPEFF � �� Sum of net power (P) and useful thermal energy output (Q) divided by the sum of fuel consumed to produce each.
Combined heat and power (CHP) Total CHP System Efficiency � � FQPEFFTotal �� Sum of the net power and net useful thermal output divided by the total fuel (F) consumed.
FERC Efficiency Standard � � F Q 2PEFFFERC �� Developed for the Public Utilities Regulatory Act of 1978, the FERC methodology attempts to recognize the quality of electrical output relative to thermal output.
Effective Electrical Efficiency (or Fuel Utilization Efficiency, FUE): Q EFFThermalF PFUE � � Ratio of net power output to net fuel consumption, where net fuel consumption excludes the portion of fuel used for producing useful heat output. Fuel used to produce useful heat is calculated assuming typical boiler efficiency, usually 80 percent.
Percent Fuel Savings QP Q EFFP EFF F1S ��� Fuel savings compares the fuel used by the CHP system to a separate heat and power system. Positive values represent fuel savings while negative values indicate that the CHP system is using more fuel than SHP.
Key: P = Net power output from CHP system Q = Net useful thermal energy from CHP system F = Total fuel input to CHP system EFFP = Efficiency of displaced electric generation EFFQ = Efficiency of displaced thermal generation

Table II: Summary of CHP Technologies
CHP system Advantages Disadvantages Available sizes
Gas turbine High reliability. Low emissions. High grade heat available. No cooling required. Require high pressure gas or in­house gas compressor. Poor efficiency at low loading. Output falls as ambient temperature rises. 500 kW to 250 MW
Microturbine Small number of moving parts. Compact size and light weight. Low emissions. No cooling required. High costs. Relatively low mechanical efficiency. Limited to lower temperature cogeneration applications. 30 kW to 250 kW
Spark ignition (SI) reciprocating engine High power efficiency with part-load operational flexibility. Fast start-up. Relatively low investment cost. Can be used in island mode and have good load following capability. Can be overhauled on site with normal operators. Operate on low-pressure gas. High maintenance costs. Limited to lower temperature cogeneration applications. Relatively high air emissions. Must be cooled even if recovered heat is not used. High levels of low frequency noise. < 5 MW in DG applications
Compression ignition (CI) reciprocating engine (dual fuel pilot ignition) High speed (1,200 RPM) �4MW
Low speed (102-514 RPM) 4-75 MW
Steam turbine High overall efficiency. Any type of fuel may be used. Ability to meet more than one site heat grade requirement. Long working life and high reliability. Power to heat ratio can be varied. Slow start up. Low power to heat ratio. 50 kW to 250 MW
Fuel Cells Low emissions and low noise. High efficiency over load range. Modular design. High costs. Low durability and power density. Fuels requiring processing unless pure hydrogen is used. 5 kW to 2 MW
Table III: Summary Table of Typical Cost and Performance Characteristics by CHP Technology*
Technology Steam Turbine1 Recip. Engine Gas Turbine Microturbine Fuel Cell
Power efficiency (HHV) 15-38% 22-40% 22-36% 18-27% 30-63%
Overall efficiency (HHV) 80% 70-80% 70-75% 65-75% 55-80%
Effective electrical efficiency 75% 70-80% 50-70% 50-70% 55-80%
Typical capacity (MWe) 0.5-250 0..01-5 0.5-250 0.03-0.25 0.005-2
Typical power to heat ratio 0.1-0.3 0.5-1 0.5-2 0.4-0.7 1-2
Part-load ok ok poor ok good
CHP Installed costs ($/kWe) 430-1,100 1,100-2,200 970-1,300 (5-40 MW) 2,400-3,000 5,000-6,500
O&M costs ($/kWhe) <0.005 0.009-0.022 0.004-0.011 0.012-0.025 0.032-0.038
Availability near 100% 92-97% 90-98% 90-98% >95%
Hours to overhauls >50,000 25,000-50,000 25,000-50,000 20,000-40,000 32,000-64,000
Start-up time 1 hr – 1 day 10 sec 10 min – 1 hr 60 sec 3 hrs – 2 days
Fuel pressure (psig) n/a 1-45 100-500 (compressor) 50-80 (compressor) 0.5-45
Fuels all natural gas, biogas, propane, landfill gas natural gas, biogas, propane, oil natural gas, biogas, propane, oil hydrogen, natural gas, propane, methanol
Noise high high moderate moderate low
Uses for thermal output LP-HP steam hot water, LP steam heat, hot water, LP-HP steam heat, hot water, LP steam hot water, LP-HP steam
Power Density (kW/m2) >100 35-50 20-500 5-70 5-20
NOx ( lb/MMBtu) (not including SCR) Gas 0.1-.2 Wood 0.2-.5 Coal 0.3-1.2 0.013 rich burn 3­way cat. 0.17 lean burn 0.036-0.05 0.015-0.036 0.0025-.0040
lb/MWhTotalOutput (not including SCR) Gas 0.4-0.8 Wood 0.9-1.4 Coal 1.2-5.0. 0.06 rich burn 3­way cat. 0.8 lean burn 0.17-0.25 0.08-0.20 0.011-0.016


Sources

PGE:http://www.portlandgeneral.com/business/medium_large/products_services/dispatchable_standby_generation.aspx

Mark Osborn’s paper:
http://ieeexplore.ieee.org/Xplore/login.jsp?url=http://ieeexplore.ieee.org/iel5/9451/30010/01372948.pdf%3Farnumber%3D1372948&authDecision=-203
 http://www.heco.com/vcmcontent/FileScan/PDF/MECO/IRP/M_DG.pdf

DOE:
http://www.electricdistribution.ctc.com/aggregating_distributed_generators.htm
 http://global.wonderware.com/EN/Success%20Stories/2008%20PortlandGeneralElectric.pdf

DG Issues
http://www.awm.delaware.gov/Info/Regs/Documents/Joe%20Suchecki%20EMA%20Presentation.pdf
•Emissions
•Noise
•On-site fuel storage
•Visual Impact
•Space
•Interconnection to grid
•Cost effectiveness

Biomass/gas:
http://www.oregon.gov/ENERGY/RENEW/Biomass/docs/landfill.PDF
 http://www.saic.com/energy/refineries/alternative-fuel.html


If you are interested in getting more information on this topic or related services from the OrigoTerra consulting team, contact us.

April 13, 2010 | Tags: , , , , , , , , , , , , , , , , , , | 6 Comments »

Smart Grid: The Stormy Relationships of Energy Storage and Energy Generation

Let’s first sum up the thinking that prevailed in the past few years… before punching holes into it :)

The energy industry (composed of utilities, renewable energy producers, electricity distribution operators, technology vendors) is currently undergoing a revolution or at least a major evolution commonly referred to as the Smart Grid.   Much of the smart grid promise is to deliver cleaner energy generation, less dependence of foreign oil and fossil fuels, more secure and robust electric grids to meet tomorrows challenges, and to do it all at no or little premium in retail energy prices.  This promise includes flattening the grid’s production and distribution curves which are skewed by the sometimes very steep demand curve for electricity (peak electricity demand for a few days a year forces the whole system to maintain peak capacity all year while average demand only requires a small portion of this capacity).  Maintaining peak capacity all year long (more generation plants, more transmission lines and equipment, more personnel, etc.) drives prices higher than they should be.  To offset this high capacity requirement, the smart grid will need to include distributed generation and energy storage resources.  Such resources will allow grid actors to avoid growing their transmission equipment because energy will be produced or stored and discharged at the end of the line during peak usage hours and days.  Furthermore, renewable energy will do its magic by adding ever larger quantities of clean electricity to the grid’s production assets.  Here is where the first problem shows up:  renewable energy is often unpredictably intermittent (wind gusts and sunny days are not always at the rendez-vous with demand for energy).   This is a well known problem and, conceptually, the prevailing thought has been:  stick some energy storage next to the wind turbines or solar farms, store when they produce too much and discharge when needed.  Storage therefore seen as the key glue to make all the smart grid grid diverse resources come together and deliver smooth, cheap, and reliable power.

Where do you think this storage idea came from anyway?  Obviously electricity storage and other forms of energy storage have been around for ever.  Batteries are everywhere and when it comes to moving or portable equipment,  they serve a purpose that justify their high value, precious/heavy metals contents, and their failings (shot life, sometimes unreliable).  If you add capacitors to batteries, you have a category: chemical electricity storage.  Important to note here: batteries store electricity, not just any form of energy.  Second, we have physical energy storage technologies: pumped hydro (pump water up a dam or a high-altitude lake and let it flow back down through a turbine when you need power), compressed air (CAES – Compressed Air Energy Storage), flywheels.  Third, we havethermal energy storage which have their advantages but are mostly not related to the electric grid except maybe for the case of storage of hot water in your house’s water heater or a facility’s boiler when electricity is cheap and demand low, for re-use later (when demand high and energy expensive).

Recently, the industry and the government has gathered with excitement at news of enormous storage needs for the smart grid, of promising new storage technologies, and significant funding stimulus plans by the DOE (Dept of Energy), ARPA-E (Advanced Research Projects Agency-Energy):

This great article from John Petersen makes the case that the full $200 Billion of storage needs economic opportunity existing on the US grid can indeed be solved with storage.  John Even goes all the way to calculating a price per kWh through a formula that he has gotten the reports’s authors to approve.  I agree with his formula and recognition of the great Sandia report.  But I do want to disagree with one conclusion he is drawing from it.  I also disagree with how the report implies an “almost” direct correlation between storage’s “economic benefit” and the size of the market for technology vendors.  The reality is that many of the segments in the table below, I contend, can be served just as well with distributed generation for instance than they can with storage technology.  I took his table a few steps further below and in this Grid Energy Storage Market Excel sheet:

Discharge Capacity Benefit Potential Economy MWH Value Total
Duration* (Power: kW, MW) ($/kW)** (MW, 10 Years) ($Million)† Demand Per kWh Market Value
Grid-based Storage Needs Low High Low High Low High CA U.S. CA U.S. $Thousands
1 Electric Energy Time-shift 2 8 1 MW 500 MW 400 700 1,445 18,417 $795 $10,129 92,085 $110 $10,129,350
2 Electric Supply Capacity 4 6 1 MW 500 MW 359 710 1,445 18,417 $772 $9,838 92,085 $107 $9,843,887
3 Load Following 2 4 1 MW 500 MW 600 1,000 2,889 36,834 $2,312 $29,467 110,502 $267 $29,467,200
4 Area Regulation 0.25 0.5 1 MW 40 MW 785 2,010 80 1,012 $112 $1,415 380 $3,727 $1,414,270
5 Electric Supply Reserve Capacity 1 2 1 MW 500 MW 57 225 636 5,986 $90 $844 8,979 $94 $844,026
6 Voltage Support 0.25 1 1 MW 10 MW 400 400 722 9,209 $433 $5,525 5,756 $640 $3,683,600
7 Transmission Support 0.00056 0.0014 10 MW 100 MW 192 192 1,084 13,813 $208 $2,646 13 $197,486 $2,652,096
8 Transmission Congestion Relief 3 6 1 MW 100 MW 31 141 2,889 36,834 $248 $3,168 165,753 $19 $3,167,724
9.1 T&D Upgrade Deferral 50th percentile 3 6 250 kW 5 MW 481 687 386 4,986 $226 $2,912 22,437 $130 $2,911,824
9.2 T&D Upgrade Deferral 90th percentile†† 3 6 250 kW 2 MW 759 1,079 77 997 $71 $916 4,487 $204 $916,243
10 Substation Onsite Power 8 16 1.5 kW 5 kW 1,800 3,000 20 250 $47 $600 3,000 $200 $600,000
11 Time-of-Use Energy Cost Management 4 6 1 kW 1 MW 1,226 1,226 5,038 64,228 $6,177 $78,743 321,140 $245 $78,743,528
12 Demand Charge Management 5 11 50 kW 10 MW 582 582 2,519 32,111 $1,466 $18,695 256,888 $73 $18,688,602
13 Electric Service Reliability 0.083 1 0.2 kW 10 MW 359 978 722 9,209 $483 $6,154 4,988 $1,234 $6,156,217
14 Electric Service Power Quality 0.0028 0.017 0.2 kW 10 MW 359 978 722 9,209 $483 $6,154 90 $68,760 $6,156,217
15 Renewables Energy Time-Shift 3 5 1 kW 500 MW 233 389 2,889 36,834 $899 $11,455 147,336 $78 $11,455,374
16 Renewables Capacity Firming 2 4 1 kW 500 MW 709 915 2,889 36,834 $2,346 $29,909 110,502 $271 $29,909,208
17.1 Wind Generation Grid Integration, Short Dura 0.0028 0.25 0.2 kW 500 MW 500 1,000 181 2,302 $135 $1,727 291 $5,934 $1,726,500
17.2 Wind Generation Grid Integration, Long Durat 1 6 0.2 kW 500 MW 100 782 1,445 18,417 $637 $8,122 64,460 $126 $8,121,897
* Hours
** Lifecycle, 10 years, 2.5% escalation, 10.0% discount rate.
† Based on potential (MW, 10 years) times average of low and high benefit ($/kW).
†† Values are for one year. However, strorage could be used at more than one location, for similar benfits, during its life.
Source: DOE’s Energy Storage Systems Program
Energy Storage for the Electricity Grid: Benefits and Market Potential Assessment Guide

Bloom Energy, the new wonder kid of the energy industry, which got more buzz in a month since coming out of stealth than Google did in its first year, and got $400 million VC money says the same thing I do.  They did mention that their solution is also usable for energy storage.  If it is, then why are they positioning it as an energy generation resource?  Because that is the way of the future.  Transforming electricity into hydrogen and then back to electricity when you need it which would be their fuel cell’s play if it was sold for storage, would be ridiculously inefficient.  On the other hand, firming renewable power or producing electricity on call when the load is high at the end of the line, or generating with syngas or biogas  is the way of the future.  Look at the table above and admire how this type of distributed or centralized generation solves a lot of the needs listed by the Sandia report.

Other needs that have to do with extremely short durations and power quality-related issues can be served by a host of power conditioning equipment.

Finally, I contend, there is no easy way to store electricity on the cheap, it’s just too expensive to store something that’s live, moves around in matter, and tend to require either a big plant, or expensive and dirty chemical batteries.  Batteries are fine where there are no other solutions.  Capacitors do well when they are used for expensive applications.  Hydro and CAES are bulky and site-specific to say the least.  The image below from this battery company makes a nice case for where the price should be:

slide initial capacity capital costb Smart Grid: The Stormy Relationships of Energy Storage and Energy Generation

Source: http://www.gridstoragetechnologies.com/Utility_Power_Storage_Issues_and_Cost.html

What do you think?

April 3, 2010 | Tags: , , , , , , , , | 1 Comment »