Grid Scale, Microgrids, Microgrids, Solar, Storage

Linearly Extensive Electricity Businesses

In my book, The Microgrid Revolution: Business Strategies for Next Generation Electricity, October 2016, Praeger, I make the case for differentiation of electricity services. That is, parsing the electricity business into product-markets, and pursuing each as an opportunity. Each rectangle in Figure 1 may be treated as a standalone business, and a business plan written for its pursuit. Done right, this will lead to astonishing new businesses of a kind we have barely contemplated.

Figure 1

For instance, we can have global street lighting companies. A municipality can award a contract for the deployment and servicing of all street lighting, from lampposts to LED lamps, and associated fittings and cabling, to such a company. The power for all of them would come through distributed generation (DG) — solar panels, batteries, and gas generators. The electricity would be cleaner, less expensive, and more reliable than the traditional grid. I call such a business linearly extensive.

Linear suggests a focused and narrow service range as opposed to a basket of services — many services to many customers — and extensive indicates there can be no geographical limit to the scope of such a business. Franchise boundaries are meaningless; a company may offer services as easily for the streets of Buenos Aires as for those of Baltimore, and in Mumbai as in Manhattan. The historical regulatory dispensation does not apply to such businesses.

I could have called the street lighting service vertically extensive, but the word has been used in business to mean industries, as in industry verticals. Thus, the term linearly extensive works. There can be many such linearly extensive businesses, for instance, traffic lights for a city, state, or nation; water pumps for agriculture, worldwide; and electric car charging locations.  

Solar powered water pumps for irrigation represent a fascinating illustration of the Enernet of Things (EoT), a new kind of business that brings together Electricity, the Internet, and “Things,” which here means the pumps.

Let us assume most of the pumps would be in the middle of fields, each standalone, with no easy cabling possible, and therefore powered by diesel generators. Let us also assume each pump is within the coverage range of a cellular tower, or Wi-Fi access point, or satellite data networks. All pumps may therefore be inter-networked into one or several connected systems. The water pump network can be regionally, nationally, even globally extensive, and managed centrally and locally, using smartphones. Today, point of sale terminals of retail locations and ATMs are connected using very small aperture terminals (VSAT) satellite dishes. Solar-powered water pumps may be wirelessly networked too.  

One may rightly ask: Your book is titled The Microgrid Revolution, but a linearly extensive business can be very large, and need not be based on actual microgrids. Does not the word microgrid suggest a relatively small system? The explanation is: The word microgrid in the title is a metaphor, a proxy. It represents not only the splintering of the macrogrid into smaller grids, with essentially similar attributes — a cluster of bubbles — but it also represents the fragmentation into small and large, local and global businesses. It stands for differentiation or parsing, and includes within its scope linearly extensive businesses.

The differentiation scope also includes local and intensive businesses; for instance, electrical contractors in a city expanding into solar generation and related businesses, offering a basket of services, in a contained or well-defined geographical area.

Technical advance drives this transformation, which raises interesting business strategy issues: What then do we do? Will we have novel organizational forms? Cooperatives? Non-regulated divisions? Distinct brands? New stakeholders? Novel regulations? New information and resources flow?

The impending metamorphosis is intriguing also for the student of industry structure change. A historically regulated, natural monopoly is splintering into classical, competitive businesses, into microgrids and product-markets, with open geographical scope.