The 'Next Big Thing'
An orderly mind is a journalist’s best friend.
Of course, I’m referring to my sources, not myself. Some people bestow order upon their discourse, while others deliver buckshot. Sometimes conversations can resemble an exchange of buckshot, ala the Hatfields and the McCoys.
So it was a distinct pleasure to speak yesterday with Ron Willoughby, who’s in charge of "all things T&D" at KEMA. He found us a quiet room to converse at the Ernest N. Morial Convention Center, the other journalist’s friend at conferences.
"It’s the ‘perfect storm,’" Willoughby said, in characterizing the challenges utilities face today. "You’re doing something the system is designed to do, while addressing the system’s efficiency, perhaps selling less power, which drives down revenue, with no rate increase, with 50-year-old infrastructure, or else you’re facing penalties from NERC on your reliability scores."
All the while, Willoughby pointed out, utilities are trying to envision the multiple scenarios of the future in order to make solid decisions today about technology paths and an evolving business case (or cases) that right now boggles the mind.
One example, Willoughby said, is the advent of electric cars. The prospect of moving this country’s transportation fleet from oil-based to electricity is extremely attractive for so many reasons that this is far more than a paper exercise.
The battery is the fundamental technology in play. Will the consumer own that battery and, perhaps, sell it to the utility for use in community energy storage after it has lost 20 percent of its resiliency and is no longer suitable for the vehicle? Will the utility own the battery, lease it to the consumer, who returns it for credit when it passes the line from vehicle-friendly to CES-friendly? Or, will a third party take the lead on this? Will all three models operate simultaneously, with one dominant model emerging? Will another model yet to be conceived emerge?
And, of course, there are the additional implications of mass charging and, possibly, mass discharging from and to the grid, presenting utilities with yet another technical challenge and a morphing business case.
That’s when Willoughby dropped the phrase that, I think, pretty much everyone pays attention to: "The Next Big Thing."
Data management and analytics.
As is often the case, I’d been hearing of the struggles many utilities are having storing and managing data and the pressing need to convert those streams upon streams into actionable intelligence. I’d heard repeated warnings about this from the first day I paid attention to the evolving "intelligent utility." So Willoughby’s remark was timely and it placed the issue squarely before me.
"Data," Willoughby added, "meaning all the intelligence on the grid."
The most basic question utilities face at this juncture is to decide whether to invest in in-house expertise in this area or outsource the task, Willoughby continued. And speed is of the essence, as the actionable intelligence to be gleaned could very well inform critical decisions about capital outlays that may shape operations and business cases for decades.
And how will utilities manage data flows from all the controls and sensors and key performance indicators streaming to decision-makers? How much can be automated at the grid level to relieve operators from knowing too much, distracting them from the really important issues? Can SCADA systems be advanced to handle some or all of these streams or is a standalone system required?
One or two points, succinctly made, with a methodical setup, in a quiet room – and I could at least grasp a better sense of the imperatives and shifting landscape facing utilities. Other conversations in the past couple days in New Orleans were valuable for their rapid-fire back-and-forth and I’ll try to capture those as well in coming days.
But like the calm before a storm, I appreciated that one orderly mind that planted a seed for further investigation. We’ll certainly return to it in the near future.
If you are a utility grappling with the data-laden firehose, please get in touch. I’d like to know how you’re framing the issue and addressing it. Xcel Energy in Denver, for instance, is open and confident enough to admit that their SmartGridCity experiment in Boulder is producing reams of data that require its rapt attention. How about you and your utility? Let me know.
Meanwhile, I’d like to put in a plug for New Orleans, folks. This town has resurrected itself despite the odds. What’s going on here restores my faith in people and their commitment to living on this incredible planet at this amazing juncture in human history. I caught a little music, some wonderful food and met a few local musicians on this, my first visit.
I’ll be back, and soon. Just sayin’.
Phil Carson
Editor-in-chief
Intelligent Utility Daily
pcarson@energycentral.com
303-228-4757
Comments
"Perfect Storm", or "Perfect Opportunity"?
After reading today's article for a second time, I'm not so sure I agree with Willoughby's "perfect storm" metaphor. Perhaps the more appropriate metaphor is. "perfect opportunity".
The power industry used to be a hotbed of innovation, but the pace of innovation slowed and utility managements became more risk averse as the industry matured. Now there's a critical need for new thinking and innovation that could make the industry an exciting enough place to work so that it will attract the best and brightest minds.
We should all be thinking in terms of the "perfect opportunity".
Good point
Thanks for this constructive perspective.
I think Willoughby is thinking sympathetically of the utility manager who has to keep delivering the goods while bringing visibility and effiencies to the grid.
He made perfect sense to me, but perhaps it is indeed time to drop "the perfect storm" from our lexicon.
Thanks, Phil Carson
(Incremental) Efficiency Versus (Breakthrough) Innovation
Mr. Carson,
As you clearly write, the utility manager is trying to increase efficiency (incrementally). However, she is trying under an obsolete business model. That is exactly the problem that state legislators need to address, as soon as possible, to break open the barrier to (The Next Big Thing) business model innovations (breakthroughs) in the power industry to reap "the perfect opportunities.”
Isn't the Next Big Thing About Business Model Innovations?
“Fifteen years ago I used charred paper and card in the construction of an electric lamp on the incandescent principle. I used it too in the shape of a horse-shoe precisely as you say Mr. Edison is now using it.”
Joseph Swan
in a letter to Nature, January 1, 1880
“There you have it. No sooner does a fellow succeed in making a good thing than some other fellows pop and tell you they did it years ago.”
Thomas Edison
in reply
Hello Mr. Carson,
I like very much your contribution. However, as you will see next, I doubt whether the Next Big Thing can also be classified with more certainty as business model innovations. Your response to the title is expected.
The quotes by Swan and Edison may seem just the reverse of your article about the well respected firm KEMA and his expert Mr. Ron Willoughby. But, back in 1988, Stanley Klein made the observation that electric restructuring was "fundamentally an information technology event." I think that by itself may be sufficient to give Mr. Klein some credit.
In March of 2007, I repeated Mr. klein's quote at Carnegie Mellon University in the presentation A Generative Dialogue to Reach the End-State of the Electricity Industry, to argue in slide 3 that “I am glad to be here at CMU to suggest a generative dialogue to get the power industry in the 5th [technological] revolution.” I also argue on slide 21 that “[c]ompetitive utility retailers business model innovations are at the center of the market” and in slide 34 added that “Competitive retailers exploit economies of scope:
Quote begins.
Segmenting customers according to demand side reliability differentiation among many other parameters.
Take control of strategic enterprise solutions to develop innovative business models that reap interdependencies.
Quote ends,
About the same time, “Competing on Analytics: The New Science of Winning, released by Harvard Business School Press in March, is the first book to lay out a plan for businesses to use analytics to their competitive advantage. According to authors Thomas H. Davenport and Jeanne G. Harris, businesses have reached a critical juncture in the history of global competition as we enter what they call the ‘Age of Analytics.’”
Analytics is one of the ways to develop business model innovations. Yesterday, in the Knowledge Problem Blog, Michael Giberson wrote the post More smart grid insight, under which I added the following comment:
Hello Mr. Giberson,
In response to Mr. Hunt’s article Threats to the Utility Business Model Future, I posted an additional smart grid insight:
Quote begins.
Mr. Hunt has shown very important facts on the obsolescence of the utility business model, which I understand can be complemented to favor government restructuring in the power industry as soon as possible. Giving the benefit of the doubt to that business model, he writes that “[t]he traditional central station power generation utility business model is under assault on many fronts. It has endured for 100 years because of its reliability and low average costs.”
However, that apparently enduring front has also been already lost. I do not remember where I learn that the utility business model is nothing more than winning rate cases to the regulator. The main problem is that state regulators instructions need to change to enable business model innovations. The value destruction associated with extending business as usual regulations is not longer advisable for all stakeholders.
As Mr. Hunt will see in the post The ‘Genius’ of the Macrogrid ‘And’ Truly Fair Microgrids, it is not longer true that the business model can endure “because of its reliability and low average costs.” He will also see that microgrids are here to stay.
The conclusion of that post reiterates that: “[s]tate Legislatures need to give a new mandate to state regulators to enable truly politically correct (or better yet truly fair) microgrids. By trying to go the easy way out, microgrid proponents’ ongoing strategy won’t work; it will reveal state governments’ lack of vision that sets the poor to bid against the microgrids.”
Quote ends.
The phrase “business model innovation” can now be found in 77 posts in the EWPC Blog, in which I think I have acted with sustained initiative. The five most viewed articles, with count number within parenthesis, and their summary are:
The Sixth Disruptive Technology (16,732): A set of 6 disruptive technologies can be identified “To do a better job of managing our dwindling energy resources…” AMI and the Smart Grid are the fourth and fifth disruptive technologies to allow a breakthrough paradigm of the power industry for the 21st Century, as the required technologies become available, and will be tightly integrated by business model innovations - the sixth disruptive technology - developed by 2GRs into a systemic superior solution. The first three disruptive technologies are demand response, distributed generation and storage, and energy efficiency.
Demand Integration is NOT the Province of Politics. (9,619): Demand integration and system reliability are not the provinces of politics, but of engineering systems and competition. FERC’s demand response staff assessment begs the question of a properly restructured electricity market. The highly complex paradigm inherent on its market structure will become even more complex if FERC’s correct instructions are implemented. A paradigm shift to the EWPC market structure and design is expected to avoid getting the developed countries’ power industry into that of third world service.
Let EWPC Come to Fruition (7,378 ): As ‘the heat of combat is over, and a decision’ about EWPC can now be reached, ‘all the bitterness disappears, and people work hard to bring’ EWPC ‘to fruition in the best possible way’ to paraphrase Uno Lamm.
EWPC’s Tipping Point (7,150): Aiming to be an irresistible article, it should help start a word-of-mouth epidemic of high proportions in the power industry. By respectfully exposing, and responding inquiries, the insidious power of IMEUC False Facts to obstruct progress, it is one of those little things that can make a big difference. Now all stakeholders will be able to learn how Demand Integration to power system planning, operation and control, brings the clarity and direction of the breakthough EWPC market architecture and design paradigm shift to produce large coordination savings for society as a whole. I repeat that “California has a great opportunity to repair the damages of the BIG California LIE to the world.”
Leadership Answers What to do First (6,767): The answer to the question of what to do first is for the global power industry to get out of the wrong jungle to produce a EWPC based EPAct as soon as possible. That is the kind of leadership needed to face the inevitable fundamental changes required to significantly reduce today’s legislative and regulatory uncertainty.
José Antonio Vanderhorst-Silverio, Ph.D. - LinkedIn
If your point is...
Sir,
Thanks for emphasizing the upshot that got lost in translation here. As you wrote: "Analytics is one of the ways to develop business model innovations."
Of course, data analytics only serve to extract business value from data. Perhaps that was not entirely clear in my own column. But it's the whole point.
Thanks, Phil Carson
There is another point
You are most welcome Mr. Carson.
As you can see above, there is another point, besides the one lost in translation: the urgent need for state government restructuring to replace the incremental efficiency regulatory barriers with breakthrough business model innovation opportunities.