Electricity 2.0: An Acceleration Agenda

Yesterday at the CTIA Conference on Enterprise and Applications at the Moscone in San Francisco, NDN released our new Acceleration Agenda to speed the rollout of Electricity 2.0.  The Agenda provides a detailed blueprint of the policy and advocacy measures needed to upgrade our electricity architecture. 

Keynoting the same conference, Department of Energy Undersecretary Dr. Kristina Johnson underscored the need to upgrade to Electricity 2.0.  (For an account of her important remarks, click here.)  As Dr. Johnson observed, the smart grid and new technologies have the potential not only to revolutionize energy but also to drive a major new wave of wealth and job creation in the United States.  However, the promise of Electricity 2.0 may not happen--at least in the US--if we fail take action to remove obstacles in the way. 

Indeed, as a high wage economy, the US really has no alternative but to innovate.  We do not want to compete on low cost labor.  Our strengths lie in inventing the future and then converting ideas into new products and services that increase our standard of living but also create high wage jobs for Americans.  But innovation grinds to a halt when it is not rewarded.  The current incentives in our electricity system do not reward innovation as witnessed by a lack of R&D in the industry, and, in fact, often work to resist it.

When Edison and Tesla working on Houston Street in New York City and in Menlo Park, New Jersey, respectively, devised the key electricity technologies that still power the world, they created not only jobs in the electricity industry but the basis for new platforms of innovation in electric appliances and electronic devices that created further waves of growth.  We saw this pattern at work again in the 1990s when the US blazed the trail for the rest of the world in Internet and telecom technologies that led in turn to new platforms for innovation in online video, messaging and social networking. It is not a conincidence that most of that innovation followed fundamental reforms in the sector in the 1990s.

The telecom analogy is not a perfect one.  Electricity differs in important ways: greater capital requirements of electricity lines as opposed to fiber, lack of a declining cost curve for the time being for bandwidth and safety issues surrounding electricity as opposed to data transfer.  Nonetheless, the parallels are strong.  In telecom, innovation and large numbers of new jobs emerged when pieces of the network were opened to new participants armed with new ideas and capital.

In the early stages of the telecom revolution, the participants were large institutions.  As Vint Cerf, the father of the Internet recently recalled these years to me, the Arpanet created a small, platfom for scientists to transmit files and later mail.  When several networks joined together, they created a larger open platform for applications.  In due course, the platforms widened to encompass businesses and then consumers and this is when the Internet exploded as an economic proposition.  Simlarly, at the CTIA conference, at the recent Gridwise Smart Grid conference in Washington and at countless other industry conferences, the action today is taking place among large players in the form of intra-uitility transactions.  But the promise is out there of a networked energy world where businesses and consumers share energy--produced locally or transmitted long distance--over lines managed by utilities, pushing activity to the edge (analagous to the shift of content to the edge of the Internet) and vastly increasing energy capability and resilience--while creating a new US-led industry.

Why has energy been centralized for most of the last century (Westinghouse's vision by the way, not that of Edison who favored distributed DC generation)?  The reasons are several fold but include the following:

  • Zoning.  People prefer to burn coal, the dominant electricity fuel, away from business and residential neighborhoods.
  • Location.  Hydropower has generally been located away from population by endowment while nuclear power is sited remotely for safety.
  • Economies of scale.  The energy yield from large facilities has been higher than from smaller distributed ones, with these economies outweighing the huge costs of distribution.

Of these three factors, however, several are changing.

Solar energy is clean, community friendly and therefore well suited to distributed generation.  Electricity can increasingly be generated in smaller quantities from natural gas using fuel cells (like the Bloom  Box) or new generators (like the Lichtblick) unobtrusively and natural gas is already ubiquitous.  Meanwhile, many industrial facilities can easily produce electricity while producing heat in industrial parks, right where power is needed.

The economies of scale of solar so far have placed localized generation on an even footing with large scale solar. In all likelihood, both will coexist in the future.  Fuel cells may prove more efficient than traditional natural gas fired turbine generation.  And combined heat and power at industrial facilities is cost competitive with baseload power.

What are some of the platforms that could turn into economic tsunamis.  They include microgrids for buildings, office parks and residential developments, network management software, energy efficiency software, electricity commerce platforms and home energy networks.  One interesting new platform we proposed a year ago and companies are now starting to unroll would be a low voltage DC platform--think a USB network running in your home--that could power all your portable electronic devices now requiring clunky transformers.  But once innovation is unleashed, as with the Internet, new platforms may arise that we do not even envision.

The advantage of creating a platform for electricity trading that is open to small producers--from farmers who put up wind turbines to homeonwers who invest in solar panels to store owners who buy a Bloom Box is that it would tap into the energy and desire of millions of Americans to take control of their energy future.  If Germany can convert Germans into energy providers through its feed in tarriff, surely America with its entrepreneurial spirit can create millions of energy entrepreneurs.

As our Acceleration Agenda lays clear, the key to creating these platforms is to open up sections of the electricity network.  These might include the home, network software and demand response using open standards and local networks such as airports, buildings and developments.  The nature of electrical energy means that regulated utility monopolies will still be needed to manage critical flows.  However, portions of the network must be opened to others and incumbent utilities need to be offered incentives to invest in new technologies, products and services. 

We are excited about Electricity 2.0 and the traction it is getting not only in Washington but in the energy, communications and technology communities.  Please check out our acceleration agenda.  Comments are welcome.