The Innovation Chronicles
April 3, 2012

“We love your company, your team, your technology…we love everything but your customer.”

Three regional clean tech entrepreneurs were talking about raising capital last week, and I was struck by how strongly they reinforced the challenges of driving innovation when energy utilities were a central player in bringing an innovation to market.

The energy utilities we have today reflect more than a century’s worth of evolution, from when electricity was first brought to cities. Utilities today are driven by three imperatives: energy must be reliable, universally available, and cheap.

For over 30 years we have pursued a number of strategies and programs to improve efficiency and the use of renewable energy, and those efforts have not achieved anywhere near what was hoped or expected.

Do current utility models have anything to offer us in solving our energy dilemma – transforming our system by driving radical efficiency improvements, smart infrastructure, and multiple kinds of distributed, renewable energy technologies?

Whenever I talk or write about this issue, I emphasize that my point is not to demonize or denigrate energy utilities. They have achieved extraordinary results in terms of reliability and safety through the electricity grid, and the grid is one of the great technical achievements of the 20th Century. Rather, I want to invite utilities to engage in a conversation beyond their current operating parameters and constraints.

If we were to start from scratch, beginning from the perspective of the end users of energy, to build a system that attains not only the same primary imperatives but also carbon-free performance, I seriously doubt any element of our system would look like what we have now, and this presents an extreme challenge.

The Rocky Mountain Institute has launched a program called “Reinventing Fire,” which seeks to influence the very nature of the energy utility. It is worth following the progress of this effort to see if it will engage utility leaders, regulators, and investors in an effort to find a better business model for their customers.

But back to the entrepreneurs. Two of the three are innovating directly in the utility-customer interface.

  • Demand Energy Networks is working on distributed energy storage technologies and applications, with an eye toward changing how peak energy loads are addressed and enabling much greater utilization of renewable energy technologies.
  • Another, Energy Savvy, seeks to provide substantially better tools for managing energy consumption through advanced software and deeper relationships with utilities looking at demand response opportunities.

In listening to their stories, I was struck by just how difficult their start-up experiences have been, at least in part because the customer is so narrowly defined by the utility regulation. The more I think about this challenge, the more I am convinced that innovations must start with the customer, and offer superior service by making the consumption of zero carbon electricity both possible and cost-effective to them.

It may cost more, but we know customers often choose options that are not the lowest price because they see greater value in the more expensive alternatives.


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