Disruptive Technology: The View from San Francisco

A recent Leadership Conference hosted by eMeter (a smart meter company purchased by industrial giant Siemens in December 2011) in south San Francisco, revealed how entrepreneurs are trying to bring the staid electric utility industry into the 21st century. Under the theme of “disruptive technology,” six different companies were featured in an eye-opening panel on May 23.

The stage for this panel discussion was set by eMeter co-founder and CTO Larsh Johnson and Chris King, a longtime consultant and expert on emerging competitive markets. They focused their opening remarks on solar photovoltaics (PV) and demand response (DR), two technologies that are turning fundamental assumptions about the electric utility industry upside down.

How? Solar PV can be installed on customer rooftops, generating power in a distributed manner without any air emissions. Within the next few years, the cost of solar PV will be at parity with large centralized power plants in the United States, and throughout the world. DR, one could argue, is even more radical. When coupled with dynamic pricing, DR can meet up to 20 percent of the total peak power needs of the United States by simply shifting demand at the customer site, creating value without any power generation at all!

Not surprisingly, the panelists echoed similar themes of “disruption.” For example, Asim Hussain, director of product marketing for Bloom Energy, described the virtues of his company’s fuel cell, a 200 kW device that he claimed is the most efficient power plant in the world, converting 60 percent of natural gas or biogas fuel into power. These devices also have islanding capability, which enables commercial customers such as Walmart, Apple, and AT&T to create microgrids.

Energy Hub is tapping the hidden power of thermostats. It offers software that can transform ordinary thermostats into smart devices in a cloud network that then allows ordinary residents to participate in DR programs. According to Energy Hub CEO Seth Frader-Thompson, 90 percent of installed thermostats today are programmed incorrectly, whereas 85 percent could meet the U.S. Environmental Protection Agency’s Energy Star energy efficiency standards. The 100,000 thermostats the company is currently managing are being sold by under a white label strategy by original manufacturers, cable, and telecom firms – and yes, even utilities.Demand

Nest takes a different approach to thermostats — but is aiming for the same end result. The company is selling a super-premium thermostat that costs $250 and first came on the market last October. Designed by some of the folks that brought us the Apple iPod, the sleek look of this thermostat is meant to make efficiency cool and fun. This “smart” thermostat actually adjusts its settings as it learns your lifestyle and preferences. According to the company’s Scott McGaraghan, these Nest thermostats have sparked new owners to hold installation parties that they then posted on Facebook.

Speaking of Facebook, Simple Energy is focused on tapping social media and social game mechanics to increase participation in utility demand side management (DSM) programs. Today, most consumers spend roughly 6 minutes per year interacting with their utility. This compares to the more than 14,000 minutes consumers spend on average with Facebook, a dramatic difference that this company is trying to exploit. “We want to meet the customer on a platform they are already using, engage with them, and help drive energy savings up,” said Justin Seagall, the founder and executive vice president of the firm. The company is seeking to fill a niche in the smart grid movement that utilities have so far been unable to fill.

Ed Cazelet, founder and CEO of TeMix, Inc. and VP of Megawatt Storage Farms, spoke about two disruptive concepts. The first was advanced energy storage, which he claimed was the cheapest way to integrate variable renewables such as solar and wind power. So, what then is the problem? The value of storage has not been monetized yet, highlighting the importance of market designs. His second (but related) concept was “transactive energy,” his push for consumers to purchase energy subscriptions. He claimed that this approach would solve verification issues surrounding DR, which are currently measured against an assumed (and imaginary) baseline of consumption. “Our current DR programs are too complex since we have to pay for something we haven’t used yet,” said Cazelet.

Perhaps the best summary of disruptive technology came from the last panelist, Ethan Sprague, director of business development for SunRun, which sold one out of every three solar PV systems last year in California, the largest U.S. market for solar PV. “What utilities want is control and data,” he said. “Utilities are nervous about whether the subsidies afforded solar PV are really worth the benefits.”

He acknowledged that solar PV is not new, but what is new is the SunRun financing model, which allows consumers to have solar PV with little or no money down, and enjoy lower priced electricity that that offered by utilities. “We are selling control and price certainty to our customers, Sprague said, noting that SunRun’s solar lease model is flourishing in the United States, but has not spread to other parts of the world. What is his bottom line for utilities?

“Instead of focusing on control and limiting what gets on the grid, it is time to evolve.”

Article by Peter Asmus, appearing courtesy the Matter Network.

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