Smart grid: This too will pass (A little age perspective on utilities)
I was having a private luncheon earlier this week with a couple of senior executives of a major U.S. software company when I was reminded once again that there are some advantages to being in the sixth decade of your life. One of them is that you have a lot more to remember.
One of the executives asked me this question: "When you think of smart grid, what company do you think of? Which one stands out?" I considered the question over a few bites of my lunch (another advantage of being older is you are allowed to mull things over before answering a question) and then replied: "All of them."
That required a little explaining because the executive obviously was wanting to know what he could do to ensure his company stood out. Since this individual is not too far behind me in age, I took us through a little review of history:
"Remember the dot-com bubble?" I asked.
"Remember DSM (demand side management) back in the 1990s?"
"Remember the deregulation/competition movement?"
"Remember the rush for utilities to create new ancillary businesses, most of which are now closed?"
"Remember Enron and Sarbanes-Oxley?"
My answer about how to make his company stand out amidst all the smart grid hoopla was this: "Don't."
"Your company is large, successful, solid, delivers good products to most utilities and has been doing so for a very long time," I continued. "That is your strength. If I were you, I wouldn't even attempt to try to out-shout the rest of the world on smart grid. I would look to my strengths and look to the next major noise-making hype, this one already is at full-throttle and there's no way to get ahead of it. Get ahead of the next one, because there will be a next one."
Right now there is a great deal of political and media hype about global warming, the need for utilities to install smart meters and implement demand response, deploy renewable energy, etc., etc. However, already I am seeing signs of this great movement beginning to wane. Some common sense seems to have accidentally broken out in Copenhagen and no global economy-devastating new mandates emerged. What came out was more of a whimper.
Despite tremendous hoopla around renewable energy, it is becoming apparent to more and more people that most renewable technology just isn't ready to replace carbon-based generation on a very large scale, at least not for a few more decades. There still is a lot of basic science and engineering needing to be done before renewables, or electric cars for that matter, will be ready for prime time.
Yes, the current political line-up may put policies in place that will drive those technologies forward, including the smart grid. But technology can only move at the speed of scientific and engineering breakthroughs and some of these still require breakthroughs against fundamental scientific principles (such as reducing carbon dioxide, a ubiquitous natural gas from coal-fired generation). Fundamental science and engineering breakthroughs come much more slowly. Political alignments also change and there already are signs this one may do the same in the relatively near future. Surveys show 70 to 80 percent of the general public just hasn't signed on to a lot of things that are being pushed, especially a major change in their domestic lifestyles to save the environment.
This newsletter is named Intelligent Utility Daily, an adaptation of the Intelligent Utility Enterprise, which I wrote about several years ago. Utilities will continue to grow more technologically intelligent, they have been doing that for generations and they won't stop now.
In speaking with my colleague, former utility CIO Bart Thielbar, about this issue, he added something I agree with: "I do think the smart grid movement will get right-sized. As an example, the dot-com bust really wasn't a bust as much as it was a right-sizing. Things had been so over-hyped then when compared to reality -- not unlike the smart grid space today -- however, today more commerce than ever is done over the Internet. Similarly, the smart grid will get right-sized, probably some time in 2010, but it will continue to move forward because it is a better way of doing business."
I also was reminded of a comment made more than a year ago by another now-retired utility CIO friend of mine, Gene Zimon, formerly with NSTAR. Noting that smart grid, renewable energy and remaking the industry all is cost-prohibitively expensive, he said utilities will "move at the speed of value." Nothing, barring a complete nationalization of the U.S. utility industry, will change that. Utilities will continue to have to operate within fiduciary and economic principles of common sense. State-level public utility commissions are there to ensure they do, and they still have considerable influence over what utilities do, despite all the noise from Washington.
The current smart grid super-hype will fade into memory, just like all the other industry-changing hyperboles I reminded my friend of at lunch. Some change will take place, some advances will be made, but the hype itself mostly will be relegated to the dust bin of history and the memories of a few of us aged-challenged individuals. And that is a good thing.
I stand by my advice to my luncheon guest, if you are strong, solid and have history and a future, just move at the speed of value and wait for the next hype wave. You can always catch that one, if you want to. This one seems to be already in the "curl" phase.