Pretty well everyone accepts that the energy sector is changing, possibly radically, in the near future. The big question is where it’s heading: What will the energy industry, particularly the electricity industry, look like?
Previously unthinkable options have entered the realm of the possible. For example:
• Will everyone have their own futuristic energy-pod at home, with portable power cells that fit in their lunch box?
• Will Uber for Energy allow everyone to buy their energy directly from producers in real time?
• Will huge interregional transmission lines take a big bite out of peak commodity pricing?
• Will micro-grids spend more time trading with each other than with grid operators?
Some of the best minds in the industry are no doubt assessing these kinds of questions – and looking for clues as to where their company should focus its creative attention.
Before trying to assemble conclusions, which would be almost impossible in any case, you can narrow down the options by trying to get a fix on what might not be changing. For example:
1. Is the purpose of the energy system changing?
2. Are consumers likely to want to be more engaged in energy buying choices?
Most people with any history in the energy sector will be pretty confident in saying that the primary purpose of the system will continue be providing safe, affordable services to consumers, as it has always been. With a little less certainty, most would guess that consumers will not become radically more engaged in energy choices. They might become interested in trendy new software that lets them manage choices. However that behaviour is more likely to resemble an interest in software than in energy technology, regardless of what’s humming away under the hood. If you take those two assumptions as given, and add a hypothesis that the level of detail and control available to energy consumers will grow exponentially, a few key components of new energy ventures start to come into focus. There will almost certainly be highly granular energy service control systems available to better serve consumers. However, they will likely be mediated by software that greatly simplifies the choices so that consumers don’t have to think about the details.
Projecting technology change is only part of the picture. To get a sense of where the business side of the system is heading, you need to imagine where the dreamy-eyed innovator is likely to head. Someone with no loyalties to any of the existing players, and an appetite for cash. Someone looking for an untapped opportunity, preferably one that didn’t exist until recently.
For example, if you knew that someone had no prior loyalties, no preconceived notions, and wanted to make money from a new business in the energy sector, you might see them try something like this:
1. Approach medium sized industrial or commercial consumers with a significant energy load, exposed to the full market price of electricity, with a deal for worry-free energy independence. Give it a sassy name like the Wizard of Energy Freedom, and encourage entire classes of customers to sign up, in return for special rewards.
2. Stand above any specific commitment to generation, demand response, storage, or smart grid technology, but promise to make smart deals for the customers, leveraging your expert industry knowledge and buying power. Promise to offer the most effective combination of technology for each set of circumstances.
3. Install a branded control platform that creates a micro-grid, with arbitrage capabilities, drawing on whatever combination of technology suits the customer’s situation: Solar PV, micro-CHP, smart load controls, battery banks, fuel cells, electric vehicle charging, and of course market arbitrage for energy and ancillary services.
4. The control platform would be licensed out to the consumer, allowing them all manner of conveniences when exercizing control over the system, or when collecting information on operations. Just about everything could be monitored from a smart phone and operating decisions could be implemented the same way. The data streams could be shared with the grid operator if appropriate, and/or remarketed depending the circumstances.
5. It will all be packaged with attractive and empowering imagery – with messaging focused on how the system puts you in charge of a vast array of smart technology, taking over functions that were previously controlled by insular old school energy companies. You can even buy and sell services with your friends and neighbours, all using the digital currencies of the future and helping to protect the environment.
Marketing literature could suggest things like this: “Become the local energy guru, the new energy czar, and the self-actualized hero of the future. It’s your energy, you should be in control of it.”
I’m not saying it will be all pretty. Some entrepreneurs may over-reach. Others may crash and burn. But that’s to be expected when a new territory is opened up to pioneers who set out to make early claims on market share. It is a lot like the Wild West because no one is quite sure what kind of laws or regulations will be needed. If new rules are needed, they may not arrive quickly. In a new industry with competitive characteristics, regulators often prefer a hands-off approach until it’s clear what if anything needs to be regulated. Ironically it may be the industry itself that recommends tougher regulatory approaches, to help with building credibility and stability for the industry.
Navigant recently published a paper titled "Navigating the Energy Transformation" saying in part that, "Every company uses one or more of four business models: asset builder, service provider, technology creator, and network orchestrator. Of these, network orchestrator has proven to be the most profitable and scalable." If you find that intriguing, you might ask yourself which companies are most likely to own and control the orchestrator in 20 years from now.
Much like in other mystery stories, it’s a good idea to follow the money. In this case it starts with a consumer who isn’t particularly sympathetic to the needs of the energy industry but wants to have granular control, the latest technology, and low prices. Those companies quickest to offer a reasonable approximation of that wish-list, could do very well.
All these ideas are straw men at this point of course. But if you’re in the energy business, or likely to be affected by it, you might want to consider getting ready for the new energy wizards. They may be using the latest technology to find your lunch box right now.
— Jake Brooks