I wouldn’t be too surprised if the Australian government passes legislation requiring all residents to shower with a friend in an effort to save water. We’re in a bit of a bind; the longest drought in living memory combined with global warming and climate change means that there is just not enough water to go around.
It’s not just a lack of water causing problems though. Manufacturing more energy (electricity) requires huge amounts of water (for steam), while manufacturing more water requires huge amounts of energy (for desalination). Factor in a growing and increasingly urban population and you quickly realize that washing your car every few weeks and buying energy appliances just won’t cut it.
Take the electrify industry for example. Today’s electricity utilities follow a model that is relatively unchanged since Samuel Insull’s day. Electrons are manufactured in large power stations before they are trucked down wires to where they are consumed by consumer and industrial devices. Demand dictates supply. Electrons are shared equally among devices and if we don’t have enough to meet demand, then everyone gets less than they need. The result is brownouts: motors fuse, traffic lights dim and people crash. Life generally stops.
Micro-generation and CHP (combined heat and power) will alleviate the problem somewhat, but if we want an electricity supply for a sustainable future then we need to completely rethink how electricity is managed. We need to move from a demand-driven system, to a supply-driven system. Rather than racing to manufacture enough electricity to fulfill demand, the focus would be on effectively using the energy available to us.
The technology required to reinvent electricity distribution is already emerging into the commercial world. The global rollout of smart metering is providing us with the basic infrastructure for a new, smarter energy distribution system. The challenge is to move beyond conventional centrally run demand management programmes, and adopt more distributed approaches. Technology is already emerging into the commercial arena demonstrating the first tentative steps on this journey.
Imagine if we could import the retail electricity spot price into the home or factory via smart metering. We have national energy markets, so why not create an energy market inside our houses? Local generation (solar, wind, CHP) would have a price set based on required required return on investment, while energy is imported (if required) based on the spot price. The decision if and when to consume electricity is then devolved to the appliances (fridge, air conditioner etc) by letting them bid for the energy they need.
The intelligence to support this complex behavior might be buried inside the appliance itself, or mediated via a smart plug. A hot water heater would trade of electricity price, usage profile and current water temperature to optimize its operation. Air conditioners might let the internal temperature rise a couple of degrees if its exceptionally hit out side. A dish washer might wait until a quiet period late at night—long after you’ve gone to bed—before running it’s cycle. Lights would always turn on (of course), but would also turn off again if they cannot detect anyone in the room.
Given an understanding of our usage patterns a market can be used to turn of appliances we don’t need, harvest power then it is cheap (by using waste solar power to pump water up hill), or even sell our excess. Technology enables us to understand our usage patterns and align them with the internal and national energy market to most effectively use the energy available to us.
The new complexity this approach creates could be packaged into solutions. Energy retailers could offer energy plans, analogous to mobile phone plans. Each plan would be tailored to suit different habits and needs. Plans might include value-added solutions, such as installing solar or wind power on premises, integrated into the home market.
In the same way that Threadless and Rolls Royce mined the synergies between business and technology to reinvent their respective industries, some companies might use a supply driven network to transform their business models. Rather than selling electricity (generating more profit by selling more) they might reconfigure themselves into power management companies who help you manage your consumption (generating more profit by selling less). This could range from configuring, monitoring and managing you home appliances to match their performance to your needs, through to installing solar panels on your own roof—at their own cost—so that that they can offer solar power on your internal energy market.
What are the challenges and opportunities created when we move to a supply driven model? What happens when we have supply driven homes? Supply driven committees? Supply driven regions? Or when entire networks become supply driven?
Smart metering and smart plugs are showing us the way. We already have a demand signal, though somewhat delayed, and we can retro-fit appliances with smart plugs to support demand management. The next step is to make this infrastructure a little smarter; upgrading the sensor network to support more distributed command and control, and embedding decision making in the home and, ultimately, the appliances themselves. This enables us to push decision making to the edge of the network where it can scale more effectively, provides us with a generation of much more efficient applications, and sets us up for the future.
Another week and another collection of interesting ideas from around the Internet.
As always, thoughts and/or comments are greatly appreciated.
Making things in a post-industrial society [Economist]
Rolls-Royce shows us how to move on from being a traditional product driven firm, to one based on providing smart services. A good example technology driven business model innovation that I talk about a lot.