The New Energy Innovation Economy

I have the privilege of Co-Chairing the Aspen Institute’s annual Clean Energy Forum.  We have just published our report from the 2015 Forum (available at: http://www.aspeninstitute.org/policy-work/energy-environment/our-policy-work/aspen-clean-energy-innovation-forum.  Below is our Forward to that report.

It is fair to say that the last few years have ushered in an era of dynamic change in the electricity sector the likes of which we have not seen in decades.  The late 1970s, thanks largely to the Public Utilities Regulatory Policies Act (PURPA), brought a new set of players into the electricity sector as smaller generators flourished and began to change what we traditionally thought of when we considered how new generation was added to the grid.  In the following decades, wholesale and some retail markets were opened to competition, again bringing a new set of players into the sector.  These changes were significant and, to an extent, altered the traditional model of regulated monopolies providing centralized generation and distribution services to customers.  Independent power producers, non-utility project developers, and new retail businesses were “insurgents” taking advantage of new market opportunities provided by changes in policy.

Today, however, we are beginning to see changes that promise to be much more fundamental than the developments of the past.  Today’s insurgents are not just “energy companies” that, while operating under a different risk-return framework, are seeking to do just what traditionally utilities have always done – generate electrons and sell them to customers.  Instead, we see technologists, software companies, financing providers, and information technology companies seeking to redefine the very nature of energy services and to challenge the century-old-model of a one-way grid enabling centralized generation and distribution of electrons to customer meters whose primary function is to record and report consumption.

We are starting to see distributed generation, data analytics, and connected, smart devices being offered to customers not just to optimize consumption, but to position customers as full participants on a grid or distribution system where both electrons and information can flow freely in two directions.  The promise is for customers to make choices and for the grid to have new options to meet the balance of supply and demand while lowering carbon intensity and reducing the need for new, centralized generation.

The cutting edge of disruption in the electricity sector today is the growth of distributed generation, primarily rooftop solar.  This has led to fervent debates across the country as to how and whether behind-the-meter generation should be encouraged, financed, and charged.  Yet even that debate is rapidly falling behind the cutting edge of change.  Distributed generation is growing at the same time that information and control technologies are ushering in a market beyond “DG” to a more comprehensive suite of distributed energy resources (DER) that promise a more complex and potentially highly beneficial two-way grid that may ultimately blur the lines between the binary construct of “centralized” versus “distributed”.

Central to this potential revolution is the reimagining of the “customer”.  Electricity policy and market innovations in the past were made with only a static view of the customer – the idea that all relevant changes to the system would occur up to the point where the electrons hit the customer’s meter.  That is no longer the case.  Yet new technologies and insurgent businesses can only be disruptive if somebody demands the products.  Skeptics of this new “energy innovation economy” continue to believe that customer interests in energy do not go far beyond reliability and price – and in many cases today that is true.  Evangelists, on the other hand, might remind us that Henry Ford and Steve Jobs changed the world by bringing to customers products that they did not know they wanted or needed.  And, of course, all of these debates must occur with recognition of the need for universal, reliable, and affordable energy and energy services.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s