Your Products Have Become Commodities

No matter how sophisticated your products are, your manufactured products are becoming commodities as your competitors integrate manufactured products with services and information to deliver real-time intelligent systems that improve efficiency and effectiveness by orders of magnitude. They measure, monitor, and optimize conditions in the entire system (well beyond their products), which has provided them with a much higher potential price point compared to being “dumb” components. The winner will take market share from the others, and it’s already happening. You are either winning or losing at this game.

Due to the “tunnel vision” that limits most companies’ perspective, an outside vantage point is essential to developing and commercializing smart product-services-solutions. BSI’s approach starts with Value Analysis to determine where value is generated in the broader system in which your components operate. Then we do an External Market Scan to know which smart products your competitors have and are developing. Third, we assess your internal capabilities to determine where your current competences and resources (customers, organization, operational capabilities) can fill the gaps, and where you need to invest in new competencies. Fourth, we help you formulate a strategy for becoming Smarter, and quantify the benefit (ROI, NPV, and financial projections). Finally, we help you plan for implementation by developing an action plan, metrics, targets, and milestones.

BSI leverages its more than 30 years of experience consulting to the largest industrial manufacturing, energy, and supply chain leaders worldwide to help you develop and implement a killer strategy for increasing your value added in today’s competitive global market. You will enjoy higher profitability, delighted customers, marketing flexibility, and the capability to innovate more rapidly than ever before. Are you leading or lagging?

 

BSI Completes Comparison of Renewable Energy Economics

Boston Strategies International (BSI) recently completed a study of renewable energy costs and value chains for a branch of the Mexican government’s Instituto Nacional de Ecología y Cambio Climático (National Institute of Ecology and Climate Change). BSI compared the costs and value added of environmentally sustainable technologies for the power generation sector (large scale solar, wind and geothermal, vs combined cycle natural gas technology) to support decision-making in environmental mitigation. The study analyzed the principal actors, elements and processes, as well as costs, value added, and barriers to entry attributable to each segment of the value chain, as inputs to energy policy formulation.

 

The Instituto Nacional de Ecología y Cambio Climático (INECC) produces valuable scientific and technical information on environmental issues and the training of human resources, in order to inform society, support decision making, encourage the protection of the environment, promote the sustainable use of natural resources, and support the Mexican Secretary of the Environment and Natural Resources in reading its goals. It aims to be a leader agency in applied environmental research, that develops and promotes scientific cooperation projects that contribute effectively to resolve the major environmental problems of Mexico, and support the conservation and restoration of the environment in the whole country.

Boston Strategies International is a consultancy that compresses lead time and reduces cost in gas, oil, and renewable power supply chains. Clients typically hire us to cope with legislative reform, technologically challenging projects, cost over-runs, strategic diversification, and major capital programs. We build ongoing project management competency and leadership by transferring our knowledge, analytical tools, and data to in-house staff during every engagement.

Contact us for more information on how we can help your organization.

What is Your Plan For the Upcoming Carbon Tax?

Multinational carbon taxation needs to be executed carefully in order to manage the market value impact in the conventional energy sector.

Of the 190 countries that have ratified the Paris Accord will need to tax carbon in order to meet their goal of limiting global average temperature increase to below 2°C above pre-industrial levels and 1.5°C from current levels. Forty-two countries have a carbon taxation or emissions trading plan in place, and fifteen of the major countries that currently tax carbon (Australia, Chile, Costa Rica, Denmark, Finland, France, Iceland, Ireland, Japan, Mexico, Norway, South Africa, Sweden, Switzerland, and the UK) are doing so at a rate equivalent to 18% per barrel of oil. The number of countries and their level of carbon tax will increase as these countries are tasked with setting more ambitious targets every five years, developing national climate action plans, and establishing accountabilities for execution.

Carbon taxation will pose an existential threat to some conventional oil and gas companies, and significantly impact power producers. Even if there is a long ramp-up period, few oil & gas companies will be able to handle this level of tax without profoundly restructuring their operations and business portfolio.

Economically, the optimal solution would be to apply the tax quickly enough to incentivize diversification into renewables, but slowly enough to allow fossil fuel producers to adapt. The phase-in period, and the structuring of the tax, will need to be tailored to each region, country, and fuel.

Boston Strategies International’s unique knowledge of oil, gas and power costs at every step in the supply chain can help you evaluate alternative scenarios of operating and capital cost adaptation, as well as alternative structures and time-phasing of potential taxes and mandates that would generate the greatest benefit for your organization. We know how much tax can be passed through, how much cost can be shed, and how much synergy can be realized between various types of conventional and renewable power. 

BSI is your best partner for adaptation advisory. We consult to the largest energy companies, lenders, law firms, government agencies and nongovernmental organizations. We have served national oil & gas companies including Saudi Aramco, PdVSA, and Gazprom; international oil & gas companies such as BP, Total, and American Energy; and power producers such as Vattenfall and Iberdrola. Our analytic tools have helped industry majors reduce cost by up to 30%. In addition, our Principals have written hallmark policy and methodological handbooks, including Optimal Supply Chain Management in Oil, Gas, and Power Generation (PennWell 2012); Guide to Supply Chain Management (The Economist 2009); and The High Cost of Low Prices (Business Expert Press, 2017), and we have been leaders in education at Boston University’s graduate school of business and training through numerous professional associations.

BSI Team Short-Listed in Ellen MacArthur Foundation’s “Circular Design Challenge”

 

A team from Boston Strategies International (BSI) submitted a proposal for the Ellen MacArthur Foundation’s Circular Design Challenge, and it was among the top 100 selected by the committee!

There were over 600 proposals from around the world and we are proud of the innovative and exceptional work all the contestants are doing to solve urgent needs around this important topic.

The Circular Design Challenge seeks to inspire creatives to design solutions for plastics packaging to stay in the economy, and out of the environment. Love them or hate them, plastics are everywhere around us. They protect our food, make our cars lighter and hospitals would not run without them. In fact, plastics are so useful, their demand is expected to double in the next 20 years. Yet our plastics system is broken. Only 14% is recycled, resulting in a loss of $80-120 billion per year to the global economy. If nothing changes, there will be more plastics than fish in the ocean by 2050.

The BSI team proposed a new design that would avoid small-format plastic packaging waste. Since small-format packaging is used for so many items across a broad range of merchandise, our challenge to design solutions was compelling.

BSI Studies Energy Storage Applications in Electricity Markets

Boston Strategies International (BSI) recently conducted a study to assess the potential uses of batteries for energy storage in Mexico. The Mexican Energy Reform has brought up the creation of an electricity market in Mexico, where private generators and large industrial consumers can buy and sell power.

BSI provided an overview of the energy marketplace in Mexico and analyzed the technical, regulatory and economic aspects affecting energy storage systems in Mexico. The study compared principal actors, elements and processes, as well as costs, value added, and barriers to entry attributable to each segment of the value chain, and provided product development, marketing, and commercialization recommendations for energy storage systems.

The study was conducted on behalf of Nippon Electric Company, Limited (NEC Corporation), Japan’s first joint venture with foreign capital, which was established in 1983 by Kunihiko Iwadare in association with the U.S. firm Western Electric Company (presently Alcatel-Lucent). The NEC Group is currently focusing on leveraging its strengths in information and communications technology (ICT) to offer Solutions for Society capable of increasing the sophistication of infrastructure systems and services indispensable to society. Through these business activities, NEC remains committed to collaborating closely with each and every one of its stakeholders to create an “information society friendly to humans and the earth” based on value that helps ensure safety, security, efficiency, and equality, enabling people to live more abundant lives.

Boston Strategies International is a consultancy that compresses the lead time and reduces cost in gas, oil, and renewable power supply chains by up to 30% through technology development, value chain engineering, strategic sourcing, and supply contract negotiation. BSI leverages its proprietary economic models and frameworks to advise oil, gas & power operators, regulators and policy-makers, lenders, equipment providers and service providers in the formulation of national and energy tax, subsidy, and investment promotion policies. Our broad experience across all aspects of industrial value chains, combined with our strength in economic analysis, provides robust and trustworthy roadmaps for growth.

Please contact us for more information and services.

BSI President Speaks on the Role of Renewables in Canada’s Energy Future

Boston Strategies International’s President Mr. David Jacoby spoke on the Comparative Economics of Combined Cycle, Solar, Wind, Hydro, and Geothermal Power at the University of Calgary’s Haskayne School of Business (HSB) in Calgary, Alberta, Canada on October 19, 2017.

Renewable energy transformation is fashionable everywhere, but in most geographies, combined cycle power plants fueled by coal and natural gas will continue to dominate for a long time. Solar, wind, hydropower, and geothermal fired plants will compete for their shares of power generation, as coal and even oil recede and biomass fails to reach economic scale.

In the image (Left to Right): Dr. Jaydeep Balakrishnan (Professor, Operations and Supply Chain Management), Mr. David Jacoby (President, Boston Strategies International), and Ms. Bea Ewanchuk, Associate Director-HSB Development

The EU has issued clean energy mandates, Asia has established leadership in low-cost supply of equipment, and Latin America is following the guidance of the Paris accord. Nearly everybody agrees that green is a desirable direction, and solar and onshore wind have lower capital costs than conventional power generation plants, but gas-fired combined cycle plants can in many cases deliver a lower Levelized Cost of Electricity and generate more jobs than solar and wind. The battle for lowest cost production has yet to be played out. Fossil fueled power costs can be driven lower still through smart midstream technology such as UAVs, Radar/LIDAR, Infrared Imaging, and Smart Pigging. The political and economic battle for the best energy sources will ultimately also need to consider economic impact and energy independence.

 

This keynote speech provided a perspective as to the comparative economics of combined cycle, solar, wind, hydro, and geothermal power generation alternatives, and put the comparison into Canadian perspective, using actual project examples and case studies.

Click on the image for an executive summary of the INECC analysis.

 

To access full 43 page slide deck Combined Cycle, Solar, Wind, Hydro, and Geothermal Power featuring 25 graphs and tables, 9 descriptive figures and diagrams, and full text analysis, click on the link below.

Future design concept

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Stand out venues

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Technology upgraded

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Alternative fuel vehicles:Have we passed the tipping point?

b2ap3_thumbnail_Terrafugia-copyTerrafugia’s production of the first U.S. Federal approved flying car, the Transition, suggests that we have taken a huge step closer to accomplishing a Sci-Fi like story. However, the recent global demonstrations on environment served to remind us that the key question we need to be answering is what fuels will various forms of transportation run on in the future?

Research within this arena has revolved on a number of different alternatives. Hydrogen in theory is an ideal fuel since it provides more energy per kilogram than petrol and only produces water as an exhaust.  When NASA scientists really needed a fuel that would go the distance, they used hydrogen to generate power on the Apollo missions. Unfortunately hydrogen does not seem to be the most favorable alternative – for the coming decade at least – because it is very expensive to produce and requires significant amount of space to store. Hydrogen additionally requires significant changes in the current operating infrastructure, such as determining the optimum process for producing hydrogen in the first place and establishing fueling station networks. Another alternative has been electric fuel through batteries, which can be charged using the current grid and produce no exhaust. However, batteries have a limited travel range and long charge times. Solar power is attractive in terms of cleanliness, but has so far required impractically large components to power vehicles.

The closest realistic alternative to fossil fuels in powering various forms of transportation has been bio-fuels. Despite the huge environmental debate related to this energy source, bio-fuels offer a number of advantages such as: no new delivery infrastructure is needed, it is renewable, and it can be considered carbon neutral. Combining this energy source with electricity to produce hybrid vehicles is also becoming a popular choice for auto producers. In fact, BSI’s 2007 report titled “Energy Prices Re-Shaping the Supply Chain: Charting a New Course?”acknowledged the possibility “that combination hybrid-alternative fuel vehicles will become mainstream within ten years,” but given the low baseline (0.2% of all vehicles in 2004), that prospect could take longer.

The alternative energy frontier has advanced more rapidly than expected. Between 2004 and 2014 the percent of new vehicles powered by alternative fuels in the US rose from 8.9% to 10.9%. With increasing attention being given to environmental stewardship and global warming, we can expect continued, even stronger, increases. Boston Strategies International is helping equipment manufacturers configure their partnerships and value chains for that future.

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