(Editor’s note: The following is an excerpt from our forthcoming book, 20/20 Foresight: A Futurist Looks Ahead to the Ten Trends That Will Shape the World of 2020, which I am writing with the able assistance of fellow futurist Simon Anderson. This chapter takes a look at the future of electricity.)
In the spring of 2014, the largest solar flare storm to strike North America in one hundred years disabled hundreds of transformers and transmission lines across the United States and Canada. In the ensuing weeks an estimated 50 million citizens were stranded without electricity and, in a few remote areas, it was a full month before regular power was restored. The event resulted in 15,000 deaths, mainly due to the fact that emergency back-up generators at scores of hospitals across the country were unable to operate for more than a few days, and many life-supporting devices weren’t able to function. The catastrophe also dealt a serious blow to the global economy as thousands of businesses couldn’t operate. Conservative estimates placed the economic damage at $2 trillion – more than 16 times the cost of the 9-11 terrorist attacks.
In the aftermath of the crisis, politicians, regulators, and citizens demanded to know “How could this happen?” A few, more farsighted individuals asked, “What did we learn from this event and how can we prevent it from happening again?”
The scene described below takes place at a board meeting of a regional utility cooperative in the Midwest. The board is preparing a strategic plan for the year 2020. The main protagonists are Dylan, the cooperative’s progressive 40 year-old executive director and Edgar, the board’s more conservative-thinking chairman. The former is new to his responsibilities, while Edgar has served as chair for 15 years. Positioned between the two men is Miriam, a utility industry consultant who has been charged with facilitating the board’s strategic planning session. The following discussion takes place after the board has heard from a series of industry experts discussing the latest “Smart Grid” advances in battery technology, software, sensors, transmission wires, solid-state transistors and commercial developments in renewable energy.
Scenario
Miriam began the afternoon’s final session by addressing Dylan and Edgar. “You both agree that the utility industry can’t return to business-as-usual. You also agree significant changes need to be made in order to make the grid more reliable. That’s good. The bad news is your respective visions of the near-term future are so radically different that compromise might be difficult. I suggest we focus first on the broad areas of agreement – the low-hanging fruit, if you will. Next, we’ll turn to the more controversial areas and let both of you spell out your respective views for the other board members to consider. We’ll then take a vote on the strategic direction of the utility.”
“From our earlier discussion,” continued Miriam, “it’s clear we can agree the consumer has become more efficient in their use of electricity. If there’s a silver lining to the solar flare outage it’s that users have become sensitized to conserving energy because they understand its importance. What’s more is that all of the major appliance manufacturers have accelerated their plans to make their refrigerators, dishwashers and washing and drying machines “Smart Grid” compliant within the coming year – which should further accelerate the push toward energy conservation.”
“I agree,” said Edgar, “and let’s not forget LED lights. They’re becoming less expensive, brighter and longer lasting. Home energy usage should continue to drop further as a result. I also think the consumers will use the appliances to make smarter decisions about when, for example, they run their air conditioners in the summer or how long they operate their humidifiers in the winter.” Edgar then paused before adding, “But I don’t think we can count on smart meters to deliver the long sought-after promise of ‘dynamic’ or ‘real-time’ pricing. For that to take place, we’ll need state regulators across our region to agree to the installation of the devices. Past experience tells us that neither regulators, politicians nor our customers trust the smart meters will deliver lower prices. What’s more, a great number of folks still believe the devices can cause brain cancer or are a blatant invasion of their privacy. We can’t count on smart meters taking root. At least not in our part of the country.”
“I disagree,” said Dylan, “and I’m confident we can lead the way. In fact, I’d like to propose we hire a software programmer with a specialty in gaming dynamics to help us figure out how our customers can use their mobile devices to better monitor and control their home energy usage through the smart meters. Even if the technology lowers their electricity usage by just five percent that’d be equal to not having to produce more than 1 Gigawatt annually – or the equivalent of not building a half dozen mid-sized coal-power plants. We need to focus on this area.” Dylan then emphasized his point by adding, “The most efficient power plant is the one we never need to build.”
“Have you looked at our demographics,” snapped Edgar. “Most of our customers are 55 or older and they aren’t tech-savvy. There’s no way they’re going to embrace smart meters, real-time pricing or gaming dynamics – whatever the hell that is.”
“We need to get serious about building some new next-generation clean-coal power plants,” continued Edgar.
“We need to get serious about focusing on ‘negawatts,’ replied Dylan. “The cleanest energy is that energy which is conserved and, as a result, is never produced.”
Stepping in between the two men in her role as facilitator was Miriam, “You both agree, though, that many of your larger industrial customers – such as the grocery chains – are willing to utilize demand response technology to control their energy use during periods of peak usage in return for substantial savings. It seems that any technology that can help produce ‘negawatts’ makes sense. Also, industry forecasting tools are continuously improving and new data mining technologies are helping us determine which customers to target for these new services.”
Dylan nodded his head in vigorous agreement. Edgar was non-committed and responded by saying, “Yeah that’s true for our industrial customers but I’m talking about our residential customers who make up half of our business.”
“You’re asking the wrong question with regard to our older customers,” said Dylan. “You’re asking: ‘Will they employ smart meters and use gaming dynamics?’ The question you need to ask is: ‘Do our customers want to save money?’ The answer to that is a resounding ‘yes’ – especially among the very customers you are talking about, Edgar. Their views about money were instilled by parents raised during the Depression. They value every penny and if a new device can deliver real savings they’ll embrace it.”
“I’ll believe when I see it,” said Edgar in a dismissive tone.
Not one to back down, Dylan shot back, “The fastest-growing demographic among video-gamers are people 55 and older. Why? I’ll tell you why: Because many of the new games are so easy and intuitive that they can now play them with their grandchildren. My point is that if a technology is simple enough – and if it saves money – people will embrace it.” Catching his breath, Dylan then added, “And if you look closely at the most successful electronics retailers and manufacturers, they are beginning to design, sell and market thermostats and other home energy saving tools such as ‘plug-and-play’ micro wind turbines. They’re making these devices attractive and easy-to-use and install. As more people begin to understand they’re protecting both the environment and their pocketbooks, the market for these tools is going to skyrocket! Who knows: Our greatest challenge in the near future might not be a scarcity of coal and nuclear power but an abundance of renewable energies.”
“OK. Everyone keep their cool,” interjected Miriam. “Let’s keep this conversation moving forward. Over the past few days, we’ve heard from a number of experts telling us solid-state transformers and new high-temperature superconducting transmission wires have reached a price point where utilities can begin installing them on a large-scale basis.”
“That’s right,” said Edgar. “If smart meters are the brains of the smart grid – and I’m still not convinced they are – solid-state transformers are definitely the muscle. They are going to allow us to more efficiently and effectively convert the direct current (DC) power from the new power plants we need to build to the alternating current (AC) our customers use; and the new wires will dramatically reduce on ‘line-loss’. These are two areas we definitely need to make a strategic investment.”
“Not so fast,” said Dylan breaking in, “I agree we need to make a strategic investment in both solid-state transformers and new transmission wires but not for the reasons you suggest. We should be investing in solid-state technology because it’ll allow us to more effectively handle inputs from the various new energy sources beginning to pop up everywhere – such as community solar farms, solar-collecting windows and natural gas operated fuel cells. More significantly, solid-state transformers are going to allow for the bi-directional transfer of power between consumers as well as help us engage in more effect dynamic pricing. In short, these devices are going to facilitate the creation of new business models that we need to take advantage of.”
“Such as…?” chided Edgar.
“I don’t exactly know yet … maybe pre-paid electricity plans. If a customer can only afford to budget a $100 a month for electricity, they might be more willing to agree to a smart meter or a smart device that can help them operate their appliances only when energy is available at affordable prices.”
“I do know that if people can begin producing their own energy from highly-efficient solar cells; low-cost fuel cells and better generating wind turbines and store that excess power in high-storage batteries, then we need to figure out how to play in this future! Solid-state transformers are going to allow citizens to sell the excess power they create from their wind turbines and solar windows and sell it to their neighbors. What’s our role in this new future?”
“Stop right, there,” replied Edgar. “You just made a number of assumptions in that last statement. Look, I understand you think climate change is real and that the world needs to move toward renewable energy, but we just experienced a massive and tragic electricity outage last year and no one – and I mean no one – wants to revisit that experience. The public expects reliable low-cost electricity. The only known sources that do that are coal, nuclear, hydro and, in some limited cases, wind. We need to focus on building newer, cleaner coal plants and some nuclear plants – not worry about how Farmer Joe can sell his excess wind power to Citizen Sally.”
“Now it’s my turn to question assumptions,” interjected Dylan. “First, my emphasis on renewable energy has little to do with my personal concerns over global climate change – which, by the way, I share with almost every credible scientist in the world – and everything to do with economics. Advances in nanotechnology are poised to make solar power competitive with coal in 2015 – not in 2020 or 2030 but next year! Second, advances in material science are allowing for the creation of new wind turbines that have smaller form factors and can operate at lower wind speeds. Third, the fact that three companies are now selling low-cost fuel cells at a profit – without relying on any government subsidies – suggests they’re a real threat to the status quo. Finally, new high storage, grid-capable batteries capable of 25,000 recharges will soon be on the market. These devices will allow us to store the energy produced from the wind turbines on windy days and from solar panels on sunny days and then use that energy when the wind isn’t blowing or it’s cloudy. They’ll also allow Farmer Joe to do the same. In essence, these devices will take the variability out of renewable energy sources. Distributed, decentralized energy is here, now.”
“Moreover,” continued Dylan, “whether you agree with my analysis or not, you need to know a couple of things: First, in Germany 75 percent of all renewable energy is produced by public citizens, not the utility industry. Germany’s reality will soon be our reality. There are also companies out there who understand these numbers and are beginning to assume the upfront cost of producing, installing and maintaining solar cells, wind turbines and fuel cells in exchange for locking customers into fixed contracts below the price we are selling electricity. The bottom-line is that these new businesses don’t require their customers to put down any money on capital expenditures. For all practical purposes, they’re taking the risk out of purchasing renewable energy. How do you get around these realities? Also, how do you get around the reality that there are now a growing number of cities and communities around the world aggressively pursuing “net-zero” carbon emission goals – and they’re doing it not by relying on nuclear power but on renewable energy sources?”
By this time Miriam had lost control of the discussion and decided it best to let both Dylan and Edgar air their arguments without interruption and work afterwards to see what agreement, if any, was possible. If that happened, Miriam thought to herself that the two men’s agreement on solid-state transistors, superconducting wires and ‘negawatts’ might be a good place to start.
“I get around that reality by reminding you we’ve been hearing about these advances for years and nothing – and I mean nothing – has ever come from them! How do you get over the reality that 90 percent of the electricity produced in this country still comes from coal and nuclear!”
“I get over that reality,” replied Dylan, “by reminding you that when change happens, it happens fast. In 1850, the leading source of oil was from whales. The whaling industry couldn’t fathom a different way of doing things. A decade later they were obsolete because of the discovery of oil in the fields of Pennsylvania.”
“In the early 2000’s, the publishing industry couldn’t conceive people would ever warm to the use of electronic books. Today, more 70 percent of all sales are e-books. And, in 2010 the automobile industry couldn’t imagine hundreds of thousands of young consumers would be utilizing their social networks and other location-based tools to engage in car sharing and that those services would cannibalize many of their sales. Less than five years later it’s a reality and the first of the three major U.S. automobile companies will probably go bankrupt in late 2015 or early 2016 … only this time the government isn’t going to step in and bail them out.”
“Look,” continued Dylan, “every industry thinks it’s different; that it’s somehow unique or special and that it doesn’t need to change. Well, I hate to tell you this but there’s nothing special about electricity, and if it can be produced, transmitted and sold cheaper and more effectively it will be.”
“We’ve been an effective and efficient conduit for the production and transmission of electricity for more than 100 years but so what? Our past success is no guarantee of continued future success.”
In a more peaceful and conciliatory tone, Dylan then concluded by saying, “The one thing I know is that we must change. The nature of how electrical power is being produced, distributed and consumed is changing and so must we. I think we’d all be wise to recall the saying: ‘It is not the strongest of the species that survives, nor the most intelligent; it is those most able to adapt.’ Our industry needs to adapt now or we’re going to go the way of the Dodo bird, just like the whaling, publishing and automobile industries.”
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