Chaos will bring innovation, but who will innovate?

Chaos will bring innovation, but who will innovate?

At ETS16 this past week in Austin, Texas, all I can say is that chaos reigned. But chaos reigned in a good way—really, I swear! This year’s theme was transforming the chaos, and our 650 attendees learned from companies like CenterPoint Energy, NYPA, and EPB in Chattanooga that the old-establishment energy models are cracking, and there are huge opportunities for new approaches and technologies that will deliver more sustainable, reliable energy.

For most of the event, I was holed up in the basement of the Stateside Theatre (yes, there is a basement in the Stateside unlike some other buildings in Texas) to do one-to-one interviews with key event participants. I was fortunate enough to talk with a lot of very smart people—who autographed the chalkboard above—and the hot topic among these interviewees was innovation. What does innovation mean for energy? What does it look like? Who drives it?

People seemed to agree that the technology is here to take energy to the next level—that generally being a more autonomous, distributed grid based on primarily renewable generation—but that energy innovation isn’t just a technological one. Rather, innovation relies on shaping business models that will make new technologies feasible for energy. But who will make these new models a reality?

Our Chaos Index that spun out of ETS16 considered who might drive this change—and there was no consensus. Solution providers, regulators, consumers…they all played a role. Let’s take a closer look at how different stakeholders could help drive innovation.

The utilities. At ETS16 there was a lot of talk about the utility death spiral—that utilities are going suffer a slow, painful death as energy consumption decreases while they are still required to provide and maintain infrastructure for everyone. To add insult to injury, our Chaos Index showed that just 9% respondents believe utilities can truly drive significant change in the industry.

But we don’t think that utilities are dead yet, not even close. Utilities like ComEd with its Utility of the Future platform, EPB with its communitywide fiber-optic network, and Texas utilities like Austin Energy, CPS Energy and Pedernales Electric Cooperative at ETS16 showed that utilities can drive change and innovation within their organizations through new platforms, technologies and programs.

Of course, there are still a ton of questions that linger about the role of utilities as innovators: Should they be driving the agenda?  Should they be the “builders” of the new technology? What are utilities’ core competencies? How much can utilities really control their own innovation destinies? There are so many factors going on outside utilities—they can help drive innovation, but they can’t go it entirely on their own.

The technology companies. Technology and service companies have the expertise to develop a ton of cool, practical products and solutions. Energy storage? Some of them have been doing it for years. The Cloud? Been doing that, too. Machine learning? That’s been around for decades.

The companies speaking at ETS16 were subject matter experts from companies like Siemens, Oracle Utilities, S&C Electric, ABB, Intel, Itron and Black & Veatch, along with a host of other dynamic leaders that really touched on the heart of the change we are seeing, and giving real anecdotes of how to get through this proverbial maelstrom.

They realized that the best technology does little if there aren’t customers who are willing/able to use it, nor the right models to support its deployment. Innovation is really much bigger than the technology itself.

The regulators. Regulators were definitely the punching bag of ETS16. Many people felt that regulators aren’t doing enough to drive a new energy regime. In fact, 72% of respondents in our Chaos Index research thought regulators were doing a poor job of supporting business model transformation.

Peter Kelly-Detwiler of Forbes moderated Creating New Market Structures and Colin Pope of the Austin Business Journal led a discussion among leading economists on the ties to the larger economy. These push-and-pull discussions were riveting as we saw leaders from different viewpoints layout the rationale for their decisions. The humanity of seeing these leaders explain the importance of adapting while enhancing public health, safety and welfare brought home how real the consequences are for every new policy or regulation.

We’re talking about unleashing new models and technologies on mission-critical systems. As one interviewee I spoke with noted, we’re not just developing an app that enables you to track your dog’s exercise. If we mess something up on the grid that would be really bad. The skepticism of regulators is understandable.

Customers. Many of the best conversations at ETS16 started with the customer at the center and evolved from there into the treacherous realms of policy, business models and technology. Most consumers don’t seem highly motivated to make changes in the energy industry at this point. Sure, if the incentives were right—for example, if energy prices were high enough, consumers would demand change—but it just isn’t there yet. There are, however, opportunities to blend energy into the digital world that many people already live in. Energy can draw from other innovations in communications, consumer electronics and data analytics to bring about true change in energy.

Wild cards. There are also other players that can help spur innovative models and approaches. Real estate developers, telecommunications providers, smart cities, universities, municipalities—all of these organizations could help drive the change needed to bring more investment in innovative energy models because they don’t fall under the same constraints of traditional utilities. At ETS16 we saw that civil society leaders such as ISEIF, Smart Grid Consumer Collaborative and Pecan Street, Inc. are really engaging in constructive collaboration across all parties to get to new solutions for all people and society at-large.

The Need for Stronger Partnerships

What came out of ETS16 is that regulators hold a lot of influence over business model innovation, but no one group can do it all. We do believe that utilities can drive a lot of the innovation needed in the marketplace, but it will take an ecosystem of support from solution providers, regulators, consumers and many other parties to make true change a real thing.

A starting point is conversations about the needs and direction of the industry, and things like ETS16 are a great place for that. But there needs to be more. A key piece is better education and understanding by all of the key stakeholders about the real opportunities for change. That’s where Zpryme’s forthcoming benchmarking and best practices study that we launched at ETS16, Utilities in Smart Cities and Energy Innovation, will explore these areas more deeply and tap into what the most innovative utilities, communities and stakeholders are doing today to drive change.

We look forward to continuing the conversation beyond ETS16, and helping to explore the new models, new partnerships and new opportunities coming to energy.

H. Christine Richards is the research director for Zpryme. You may reach her at h.christine.richards@zpryme.com.



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