How well are the utilities reacting to disruptive technology? Who do you see as leading and who is dragging their feet?
- March 13, 2017
- 2165 views
Intelligent insights & conversations with global power industry professionals
Wow... this is the most loaded question I ever saw! What is a disruptive technology? Is disruptive good or bad? It depends on your point of view, and the situation in any particular utility's service area. The truth is (from my point of view of course) that the extreme proponents of "renewables only" and "everything else is bad" think of "disruptive technology" as a perfect business case for solar, wind, energy storage and "vehicle to grid" electric cars. Some of them find reasons to fight amoung themselves, but they do get together in badmouthing Pumped Hydro and Advanced Nuclear (like the AP600 or SMRs), and denegrate those who oppose (or even just want to limit renewables) as "utility shills" at best and "planet killers" at worst. Many utilities are embracing some or all of these new technologies to solve their own uniquie service area problems. Those who are not embracing them are being pressured to accomodate them by their respective regulators (typically Public Service Commissions). The answers to what works best and what doesn't work well will be emerging in the coming years.(The rest of my answer is extracted from my LinkedIn Profile...) Engagement and dialog with all stakeholders is a necessary element of developing sound smart grid, power system and energy policies. Policies should integrate and leverage new technologies in ways that recognize and accommodate both their benefits and drawbacks in order to, both cost effectively and environmentally responsibly, improve performance and preserve reliability of the grid as a whole. The grid and new technologies and processes it serves are increasingly essential to our daily lives, our business processes, our personal safety and the productivity of U.S. workers that is essential to the competitive success of the U.S. economy in the world. Increasingly complex and dynamic real time rate structures will be a major challenge, especially as we move toward increased penetration of net metering, distributed generation, renewables, demand side management, distributed ancillary services, micro grids and try to develop fair compensation that reflects the both benefits and burdens created for the overall integrated power system. A major element of this needs to be "pay for performance" not just for the potential capabilities. It also needs to reflect the real cost benefits achieved during actual events, and as a proportion of all those that responded on demand. Rules of engagement and compensation will be needed for all of the above assets and energy storage as well, so that there will be incentivized to support the needs of the overall power system not just for day to day operation, but for system contingencies and restorations, when periodically needed.
In a nutshell, I fully support the much more digital smart grid, including the above technologies and development of critical enablers such as energy storage and fault current limiters, as a key part of this evolution, but we need to understand and deal with the new challenges they create, not just their intended benefits.
OK, as someone who once met with Prof Clayton Christensen of Harvard Busness School and read his book The Innovators Dilemma, here is somethig I wrote to try to get this idea across and keep it somewhat pure form. I see it SO misused that it sort of worries me on the bastardizations:
Relation of Disruptive Technologies Theory to Renewable Energy Resources
Disruptive technologies are defined by attributes which generally include underperforming the established technology in place but having other features that a few fringe (and generally new) customers value. Typically they are characterized by being cheaper, simpler, smaller and frequently more convenient to use. An obvious example is the first transistor radios which were lacking in clarity, received few stations and fell apart quickly. However, their mobility made them coveted by every teenager of that period.
In many examples of disruptive technologies, a new product, although initially inferior, eventually takes large market share from the established product and in many cases leads to the total demise of that existing product. Some of the reasons postulated for this include:
1) The managers of the mainstream technology listened to what their customer wanted to the exclusion of other factors. While “listening to your customer” has been sage advice in business, it does not allow for products unknown to those “best customers” to develop within such companies. This also applies to consultants who stay “too close” to the current business front-runners.
2) The profit margins of the disruptive technologies are usually lower and established large companies find it difficult to go “downmarket” to a product whose low profit margin and initially limited market would not support the company at its current level. Consider companies who made mainframe computers who had great difficulty getting into personal computers for this reason.
3) The theory of resource dependence which says that a company’s freedom of action is limited by the need to satisfy those entities outside the firm (customers and investors) who give it the resources to survive. This might not allow funds to go to disruptive technologies due to factors 1 & 2 above.
4) A middle manager’s success in an organization may depend upon maintaining courses of action already deemed most profitable. This is a deterrent to championing disruptive technologies with unknown markets.
5) Not only are the market applications for disruptive technologies unknown at the time of their application, they are unknowable.
6) Disruptive technology market entry may initially be a failure if the majority of resources is expended in the first round. Companies should consider probing the market while maintaining some reserves.
This means that products that do not appear useful to customers today (disruptive technologies) may squarely address their needs tomorrow. Recognizing this possibility, it cannot be expected that customers would lead companies toward innovations that they do not now need. Therefore, while keeping close to customers is an important management tool for handling mainstream products, it may provide misleading data for disruptive ones. For these reasons we cannot afford to discount any renewable technologies, which while currently suffering from significant technical and economic barriers, may prove “disruptive”.
 Clayton M. Christensen. The Innovator’s Dilemma. Harvard Business School Press. 1997. p. xv.
 Op. Cit.
 Op. Cit. p. 101.
 Op. Cit. pp. 103-104.
 Op. Cit. p. 147.
 Op. Cit. p. 208.
I suggest that the traditional utilities, as a group, and as members of a cartel, are moving, pitifully slowly, to the envitable changes coming in the energy sector. They will be punished by the market place by their demise and disappearance, and sooner than they wish to acknowledge.The major change to the industry will be less specific "technology," and, more, a wide ranging change to the Business Model of the entire industry. Dramatic advances in reduction of the cost of energy both from traditional natural gas feedstock for thermal production and from advances in solar and wind tied to sustainable batteries, will allow for increasingly rapid conversion of public systems to distributional power generation, from "under the kitchen sink" of each consumer. Big Utilities are becoming, with each passing year, less relevant. Homeowners will be able to produce their own power, and less cheaply than utility companies, and as cheaply as they will soon be doing by their own automobile. "Powerplants" will be painted on roads, on the sides of buildings, with very efficient wind and solar systems, and will use increasing volumes of fuels made from agriculture, industrial, kitchen, and sewage waste. The next 30 years will see the establishment of an entirely different business model of power production and delivery, by the consumer themselves. Just as the small desk top computer in less than 30 years made fast inroads over the Main Frame Computer, so will small, distributional power generation change the role of utility companies, which will become, increasingly, vendors of services, to small operators producing all of their power needs, whether for the home, their communication equipment, or their transport. It is difficult for Big Utility to jump on this bandwagon, since it is a "Hay Ride" leading to the very demise of the utility company model.
It depends upon the technology and where it would be used in the utility. If for example, it goes into a nuclear generating station, the NRC may have to get involved, a very long process. I may look to the utilities that have adopted renewables as a possible indicator for openess to technologies. This may be an impact from the PUC or state initiatives but, it is a start.
I have only worked extensively with utilities in California. Here the utilities are cautious, but work with the CAPUC and Energy Commission to evaluate new technologies, and then implement them if they are suitable and beneficial to consumers. Evaluations and initial implementations frequently are directed through CAPUC rulings and directives. Most California utilities have implemented Advanced Metering Infrastructure (AMI), extensive distributed generation and large Battery Energy Storage Systems (BESS). Many the early microgrids have been implemented through large commercial, governmental and industrial facilities in California working with our utilities.
I think I can answer this as it depends where you are -- I think the bigger companys are trying to change into it. I live in Florida now and it seems like everyone is trying to be bigger and better -- but then you go to a smaller town and it's all about the money-- I think FPL is one of the companys trying to show a new way in tecnology and trying to show the it can be done. But the bottom line is money in this state. North Carolina shares there informaion and I think that great -- Nebraska is still learning but they inform the people they are trying - they are looking out for the people and the state which is good. So the answer to this question is where your located and the management of the company -- if they want to work with the people there are trying/ if there not for the people or the state there in it for the money and don't care !
The question of how utilities are reacting to disruptive technologies (DT) and who are the leaders and laggards can be answered but the list below must be viewed as a snapshot in time. The industry’s response to DP has been steadily ramping up from a slow crawl, and is now quite dynamic. Consequently, the list of leaders and laggards is likely to change significantly within the next few years.
Also, there is some disagreement as to what constitutes disruptive technologies and, depending on how they are defined (e.g.; smartgrid, decarbonization, changes to residential services such as time of day pricing, and, perhaps most importantly, the ability to incorporated distributed generation such as solar and wind both with and without economical energy storage) will also result in a different ranking. With those caveats in mind, a list of the current leaders should include:
SoCal Ed (EIX)
Current laggards (including those with high carbon concentration) include:
Neither of these list should be viewed as all inclusive nor long-term and to the extent that DTs are not clearly defined in this question, a reasonable argument can be made that several of the utilities listed have a degree of subjectivity to them.
Finally, one of the prior answers referenced Clayton Christenson’s groundbreaking work on how industries react to disruptive technologies. However, most of the technologies Clayton cites such as metals fabrication and automobiles are commodity industries, while the electric utility industry is a hybrid commodity-service industry, and its unclear if his insights apply equally to the utility industry. Of potentially greater importance are Clayton’s observations on the metrics used to determine “success” and “failure” and the high potential that we are using the wrong metrics causing companies strive for the wrong goals because we are measuring the wrong attributes.
First, I would not characterize distributed generation as disruptive technology. Thereafter, I would say that although the traditional business model for the electric utility industry is changing on account of renewable energy penetration at the distribution network level, utilities on the west coast of the US have adjusted their attitudes albeit slowly with regulatory prodding and have invested in centralized renewable energy generation facilities as well as cautiously accommodated programs for retail customer level distributed generation. Electric utilities in the northeast US are taking measured steps towards the penetration of renewable energy technology as distributed generation. Despite the introduction of state renewable portfolio standards, issues about transmission investment and transmission cost allocation require federal guidance and electric utilities prefer to minimize their cost disallowance exposure with respect to investments in distributed generation and transmission upgrades and expansion. What remains challenging for all electric utilities is the sharing economy concept among owners of distributed generation facility owners who are interested in exchanging the surplus energy from their facilties with their neighbors who may or may not be owners of similar facilities.
The spread of disruptive technology is not uniformly distributed across the board as the states' energy policies and norms. Therefore, the reactions among the utilities across the board will remain varied.
This is my opinion.
1. First of all Energy Central should provide the needed guidance to all energy players, such that their investments would not go to waste.
2. Energy Central should play an active role in sniffing the best of methodologies that exist curreñtly. This practice should be done freely with the aim of realizing the best metjodology for the future advàncement, without any biased to be exerted upon.
3. Enèrgy Central, must realize itself as the main global budy to enshrine the smartness in promoting the knoledge based knowhow in all aspects with regard to energy generation. Be it with regard to efficiency, sustainability, safety, consistancy in its guaranteed output power, maintenance friendly and, of course economically cheap.
4. As such, Energy Central, should evaluate new found methodoligies quickly and serioußly instead of only feeding info of what others are doing. Modern trend is that people are always looking for better and smarter means, even for energy generation methodology!
5. While energy players are doing "Fire Fighting", with their "Toys" on Energy Generation Methodology, I was able to come up with Solution, But, seemingly, people don't care. This is very alarming by all standards. (I was once Quality Assurance Maintenance Engineerng Chief).
6. The "Drag", as you put it, did come from few players. Some have been assisted by financiers from oil companies, as to ensure their business would not
face any threat from whatever sources. The others, due to investments they have made and still be hoocked by debts.
7. The impects of methodologies used in my design , would have the "Killing", capability, as I could possibility as I could put it. They are capable to establish dominance on all spectrum of energy usages.
I believe the electric industry has always reacts outdated to technology changes; that in the world and more in some regions and countries like USA.
In this one, the industry does not invest unless it obtains governmental support, resulting in a delay of introduction the news technologies; an example in recent years: the renewable technologies and a really energy efficiency measures in all the phases of the fuel cycle, especially in electric generation and transmission.
Related to second question, the answer is the same: the electric industry, if it really takes its role over in the transition process to a sustainable energy sector.
The real issue about adoption of disruptive technologies is all about the money. Utilities that see an opportunity to participate/invest in these technologies embrace them where they do not offset other more profitable functions of the company. In states where disruptive technologies are being suppported by state regulators, the utilities are fighting for their financial survival with rate cases to make up for lost delivery (and in some cases, generation) revenue. In addition, these technologies also come at a cost of dererring or eliminating traditional infrastucture upgrades and new construction and thus reducing new rate bases upon which all utilities earn. So unless there is a fair and balanced revenue opportunity, utilities willl tend to procrastinate DER adpotion.
Lastly, utility engineers are traditionally very conservative and have a hard time depending upon DERs to show up when they are needed. Only one engineering system analysis program can effectively model the interactions and even with that, the reliability and long term effctiveness of DERs is always in question. It has taken time, but in the states where DERs are being required, engineers are being forced to incorporate them into their system as a new tool to operate their systems.
I only sets my goals at achieving huge energy generation by the most trusted natural resources that we could really get. They are The Waters of the sea/ocean, ant The Air from the atmosphere! Any Doubts?
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