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The Innovation Imperative Part 1: ICT Companies as Electric Utilities of the Future

Dag Hammarskjold’s quote, “Not to encumber the earth. No pathetic ‘Excelsior!’ but just this: not to encumber the earth,” may well serve as the motto of the growing sustainability movement. Yet how can economic development occur without energy, and primarily from fossil fuel sources?

The balancing of growth and ecological sustainability — the defining issue of our age — may be resolved in humanity’s favor by cross-disciplinary innovation, especially in ICT (Information and Communications Technologies), and through scientific breakthroughs, such as in the physics of silicon or storage chemistry. Assuming other favorable conditions, however, organizational innovations may have the greatest immediate term impact.

Historical, organizational and industry boundaries must break down, and new associations created, to give birth to the electric utility of the future. In the economist Schumpeter’s words, we need to “combine things differently.” Creative leadership by today’s ICT companies can unleash new value and energize the renewable energy industry. ICT companies can be at the forefront as electric utilities of the future.

Energy Information Management (EIM)

Hypothesis #1: The emerging electric utility of tomorrow is more and more an information company than an energy company.

Why? As every watt becomes more valuable, we will closely monitor and measure it. Information intensity of energy will rise at every step in the value chain from generation to consumption in homes, factories, and offices.

Very soon, for there is no technical barrier, we will differentially value and track brown watts from coal, green watts from solar panels, LED watts, microwave watts, and so forth. We will know usage by room, time of day and appliance. We will be surrounded by cell-phone like displays on all home appliances – TVs, refrigerators, fans air-conditioners and more.

Energy literacy will spread — $/watt-hour will become as commonplace as kilometers/liter and gigabytes. People will know their personal GHG footprint — tons of CO2 equivalent by month — and work with tools to manage it. Just as telecom billing can track each call with astonishing precision, we will generate comparable detailed information about energy use.

Hypothesis #2: If traditional IT and telecom companies rethink their competencies and deploy their assets in novel ways, they may be pioneering electric utilities of the future.

Whereas today we speak of the electric grid as enabled by ICT, in the future, ICT will subsume and even dominate it.

As solar panels are commoditized, renewable energy prices will approach grid electricity prices — a process already underway with a 50 percent drop in solar panel prices in the last two years. At that stage, every household has an incentive to be a micro-power plant and energy self-sufficient. The traditional link with the energy grid might even become secondary in importance, and some may chose complete grid independence.

What will hold together the millions of points of energy generation and consumption? The ICT network — “local area” inside homes and buildings and “wide area” across geography. We will generate terabytes of data, and data management will become an industry in its own right, Energy Information Management (EIM). This will be a huge business; when viewed from a data management viewpoint, the EIM impetus may surpass in scope today’s Internet.

IT and Telecom Services Companies as Utilities

Consider: With the new sources of solar generation, nothing moves, nothing burns, and nothing is emitted. There is neither steam nor turbines nor noise. It is personal electric power that can begin at the household and range up to the industrial. Solar electricity generation can scale.

One may generate household power to offset electricity bills with a 1-kW system, or to contribute to the grid in megawatts as a larger business. Just as telecom antennas for mobile service may be blended into buildings to mask their obtrusive appearance, solar panels may be embedded in roofs, walls, pavements and footpaths.

Given its clean production, and the role information systems play for building scale, cohesion, and control, the emerging photovoltaic electricity business is closer to IT and telecom than production through turbines and steam. Thus ICT competence may be ideal to create and manage the future electricity business.

Telecom service companies might provide the applications and manage the network, just as they do today’s voice and data networks. Software companies may offer individuals and enterprises standalone energy management solutions. Whereas an Internet Service Provider offers connectivity and facilitates downloading of data, the energy utility of the future will generate data that may be uploaded and managed on centralized “cloud” servers.

Who will drive the emergent tele-info-energy industry: today’s utilities, IT companies, or telecom operators? By 2020, the electric power industry as we know it — primarily coal-driven — will be larger, but energy information utilities as new entrants will be born. Enterprises may well be their own utilities.

IT companies today are service providers to electric utilities. They help with Automated Metering Infrastructure (AMI), customer data collection and its management, or with the smart grid. When solar panels are commoditized and their installation becomes as commonplace as plumbing, solar generation can be anybody’s business. In fact, it ought to be everyone’s business, like a home vegetable garden patch.

While innovation cannot be a command performance, there is an urgent need for it. Leadership and scientific breakthroughs may not be timely enough to avert a catastrophe. ICT companies appear well-poised to be not only service providers to today’s utilities, but also renewable energy utilities in their own right.

Watch for Part 2 of this analysis next Wednesday: ICT Companies as Electric Utilities Means Opportunity for India