Copyright © 2009 Global Smart Energy
• Our industry will see more change in the next 10 years than in
• Electric power has always been crucially important, but going forward it will have an even larger role to play in the health of this nation.
• And ultimately, the health of every nation.
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• Everywhere you turn, you see an enormous energy
• Climate change, rising costs, energy poverty, aging infrastructure, peak oil, population growth, and rising demand.... The list goes on.
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• Increasingly, the world is looking to the electric power
• Climate change? Let's ask the industry to put limits on power plants and to integrate massive amounts of renewables into the system.
• Peak oil? No problem, we'll just electrify our transportation.
• Rising costs? We'll just have the electric power industry integrate demand response and energy efficiency.
• Aging infrastructure? We'll ask them to modernize the grid while they are at it.
• But don’t you dare raise rates!
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• RECOGNIZE — Charts make a point that has been overlooked. If you driving trend for the next two decades.
• Accidental Addiction — 1950, GDP 20% dependent, 2008, 60% dependent. And this is before we electrify our transportation.
• It is the end of the Petroleum Economy, the beginning of the
Electricity Economy.
• RETHINK – We are entering an entirely new era with new rules.
• Electricity is no longer just an enabler. It’s not just something in the background that allows innovation elsewhere.
• It is the source of national advantage.
• REMAKE — As a platform on which innovations are launched and distributed.
• In the Petroleum Economy, access to cheap oil was the chief determinant of economic advantage.
• If you didn’t have enough, you were forced to fight wars for it or accept second-class status.
• In an Electricity Economy, access to cheap, reliable, clean electricity will be the key determinant of national advantage .
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• Against that backdrop, how do we manage the change that is in the next two decades?
• Apply these four lenses to our thinking.
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• By patterns, I simply mean learning from the lessons of the
• More specifically, the lessons of previous infrastructure transformations.
• When we look back, we discover that infrastructure innovations and infrastructure upgrades have been our country’s primary engines of innovation and new jobs and growth.
• Infrastructure is one of the three things that has provided national advantage and kept us at the forefront despite some of our mistakes:
• Educational system
• Entrepreneurial capacity
• Infrastructure
• We are losing our infrastructure advantage across the board, whether railroads, highways, broadband access, cell phones.
• If we lose it in electric power, we are sunk as a superpower.
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• Transcontinental Railroad was authorized by Abraham
• It was completed in May 1869, and over the next 20 years we built out the network until it reached critical mass
• In 1886 Richard Sears, agent of Minneapolis & St. Louis railway, sent 2-page flyer of watches
• By 1895, it had grown to become a 532-page catalog, the Sears
Roebuck catalog.
• Because of this new infrastructure, Sears could undercut the high prices of the general stores.
• Sears dominated mail order retailing for a half-century.
• He realized the railroad network meant new ways to connect, new ways to conduct commerce, a new competitive advantage.
• For Sears
• For 10s of thousands of manufacturers all over the country
• For the country as a whole
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• What can we learn from the telecommunications network and
• We originally regulated phones and created incentives to encourage a massive build out so every home and office could ultimately be connected.
• Under that regulatory regime, here’s what a phone looked like in 1929 (above).
• Here’s what it looked like 30 years later (above).
• The only innovations were colored plastic and coiled cords.
• Then came Telecommunications Act of 1982, which went into force in 1984.
• Within a few years, venture investment had risen tenfold, and we began the process to take it from analog to digital.
• In short order, we got PBXes, multi-line phones,
800 numbers, cell phones, VoIP, and now Blackberries and iPhones that are phones + computers + MP3 players.
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• And we enabled dozens of important and large new revenues .
• We also created national advantage
• If look back at past patterns, we see that opening infrastructure to innovation brings rapid progress.
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• I could tell similar stories about other infrastructure
• It is no accident that the maps look so similar.
• They are all about national networks that create connections, commerce, and competitive advantage.
• Individual advantage
• Company advantage
• National advantage
• Ask ourselves: Where would we be without the jobs and opportunity made possible by :
• The Interstate Highway network and all the new companies and commerce it enabled?
• The Amazons and Googles and Ciscos from the Internet?
• And where will we be if the jobs and revenues created by this next transformation all flow to China or Europe?
• What kind of money is at stake?
• At least $20B today, according to Morgan Stanley and using a narrow definition
• At least $100B by 2030
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• If we learn from the patterns of the past, if we recognize the role than ever before
• Then it becomes obvious that:
• We must align the profit motive toward the betterment of electric power.
• We must make electric power the best place to innovate and build a company.
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• Our brightest minds are building applications for Web 2.0,
• To the extent they consider energy, they work on wind or solar or biofuels.
• That’s fine but...
• It’s the grid that ties everything together.
• It’s the grid that will make things like electric transportation and remote renewables possible.
• It’s the grid that is so far behind.
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• The difference in power between an electric adding machine of the
• Between the rotary phone of the 1950s and the iPhone of today.
• The planes of the 50s and the stealth bomber of today
• Now think about the grid:
• Invented in the Age of Edison
• Designed in the Age of Eisenhower
• Installed in the Age of Nixon
• Done almost nothing new since
• Joke: If Edison came alive, he could understand and operate the grid (Tesla actually).
• What would it say about the aircraft industry if Orville and Wilbur
Wright could come alive and pilot a stealth bomber or a 747?
• What does it say about our industry that Edison and Tesla could pilot our current grid.
• We shouldn’t be content with a last-century grid.
• We shouldn’t believe that innovation can’t occur here. And rapidly.
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• If I had to pick two metrics you could measure today from now —
• When the Electricity Economy will be well underway and recognized by all
• When electric transportation will be mainstream
• When we will be fully immersed in a hot, flat, crowded, globally competitive world
• I would pick:
1. Broadband penetration
2. Smart meter penetration
(Smart meters are not the only or maybe even most important part of Smart Grid, but a useful, visible metric.)
• Sweden, Italy, New Zealand 100% by end of 2009.
• China by 2013.
• We are on pace to maybe be at 30-40% by 2013.
• How much of a head start can we give the rest of the world before we can no longer catch up?
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• The patterns of the past remind us how important electric
• We must get the power of the profit motive working in its behalf.
• That means we need to construct the Smart Grid as an open framework for innovation.
• We must take lessons from other industries and —
• Embrace open standards.
• Encourage a platform approach.
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• Standards give power to the customer:
• More choices, more freedom, more expandability, more future-proofing, lower prices
• Windows is an analogy we’re all familiar with. The iPhone is another.
• Think of the choices, options, low costs we have in computing
• We can have that in electric power
• Realize this: The national electric bill is more than twice the national phone bill. And think of the choice, innovation, value, and low costs in phones.
• We can have that in electric power (where there is more than twice as much money at stake).
• Think of the choice, innovation, value, jobs from the
Internet.
• We can have that in electric power
• And we can make a heck of a lot of money doing it.
VC John Doerr says:
• Internet: 1 billion users, $4 trillion market
• Alternative energy: 4 billion users, $10 trillion
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• To make that possible, we should adopt lessons from telecom, to provide basic services.
• Then other companies build solutions on top of that platform.
• Clearly, we can’t and shouldn’t allow access in a way that jeopardizes safety or reliability or privacy.
• I’m not suggesting we invite people inside our substations to tinker around.
• But there are many places that could be and should be much more open.
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• Talked about Patterns:
• We must realize the importance of infrastructure transformations.
• We must realize that the grid is the next big transformation worldwide.
• A modernized grid is a legacy that will last for generations.
• Talked about Profits:
• We must make electric power the best place to bring innovations and entrepreneurial ambition.
• Talked about Platforms:
• We must structure the Smart Grid to enable rapid innovation.
• Talk about Policy:
• As Morgan Stanley put it recently: Regulatory change is absolutely necessary. The market will stall if it doesn’t occur fast enough.
• Without getting tangled up in details, there are three principles that will help our thinking.
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• It’s important to acknowledge how difficult it is to create and change
• Electric power infrastructure is very fragmented and balkanized.
• It is very difficult to ask them to make sacrifices for the greater good.
• Especially in a democracy where you don’t have centralized command and control.
• And especially when political changes are the slowest and most difficult.
• I often show this illustration to explain why policymakers have the hardest job of all.
• Here is the typical rate of change for technology, business, social and political.
• Even though I was joking about that last point, I’m not joking with this next one:
• The red line is an approximation of the pace of change in electric power regulation.
• Without debating which policies to change, I hope we can agree that we need to decide quickly.
• Regulatory uncertainty and regulatory inconsistency and regulatory obsolescence are crushing the entrepreneurial life out of electric power.
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• How do we move forward rapidly in policy? First, we have to opportunity for that kind of work
• We must end the stovepipes within utilities, between departments.
• We must end the stovepipes and isolation between utilities.
• Planning together, regionally is what will give us interoperability and economies of scale and economies of intelligence.
• We cannot afford to reinvent the wheel 3,300 times for 3,300 utilities
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• The second principle is to skate to where the puck will be.
• Plan for the future we want, not the past we came from.
• The past we came from:
• Urban electrification
• Great Depression
• Rural electrification
• We rewarded big risky investments in massive centralized plants to electrify all of America.
• We made policies to reward big investments and to reward reliability at all costs.
• This was completely justified and correct.
• Now we have to change the rules to create the future we want:
• Achieve efficiency (do more with less), substitute bits for iron, sell less electricity, and make it interoperable
• We must move to a system that rewards utilities and innovators and entrepreneurs for efficiency.
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• Very simple equation: We get what we reward
• If we want...
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• I will give you a quick Stimulus Update and then finish with a
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• I assume that you saw this announcement before you came in
• Here is Secretary Chu’s original promise (see above).
• I confess I was worried that he would not be able to come up with a system that was quick enough and avoided the cumbersome government contracting problems.
• So I was delighted to see this quick and easy system that they have developed.
• Quick warning: I stopped off this morning to get a couple billion. And it really makes it hard to fit your wallet back into your pocket.
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• At SmartGridNews.com, we developed a Stimulus Scorecard to help people be sure they are taking a holistic look that considers all the stakeholders.
• Go to SGN and search for Scorecard to see the full article and explanation.
• We have 23 criteria in all, and we will be updating to version 2.0 soon and adding some more.
• I won’t list them all, but here are a few key points:
• Consumers first:
• Empower consumers as participants, not sheep to be herded.
• E.g. tangible, measurable benefits that consumers can grab onto, that policymakers and regulators can explain to their constituents.
• Utilities win:
• Open, interoperable
• Scalable and replicable — we can build platforms from day one
• Country wins:
• Short-term jobs
• Long-term asset
• Implementation plan and experienced team
• Planet wins:
• Environmentally beneficial
• Enable renewables
• Please contribute and improve!
• Will be distributing to governors and policymakers
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• Unprecedented challenges but unprecedented opportunity as well.
• Several perspectives can help us get it right.
• Talked about Patterns from the past:
• Must realize the importance of infrastructure transformations and that the grid is the next big transformation worldwide.
• Talked about Profits:
• We must make electric power the best place to bring innovations and entrepreneurial ambition.
• Talked about Platforms:
• We must structure our systems to enable rapid innovation.
• Talked about Policies:
• Planning for the future we want.
• Thank you to Senator Cantwell and Tim Thompson and their team:
• For the chance to gather with leaders like you
• For the chance to influence where things go
• Thank you for putting your shoulder to the wheel as well.
• Alan Kay said the best way to predict the future is to invent it.
• This is our chance to invent an electric power infrastructure that truly can be:
• An opportunity for ourselves and our companies as well as
• A lasting legacy for those who come next.
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