Thursday, May 26, 2011

Cleantech: Benefits of a disruptive technology

By Tim Healy, CEO, EnerNOC

To those of us working in the cleantech sector, it’s a familiar storyline: A new technology comes to market that increases productivity and changes business models, and, before long, it’s met with opposition.

Cleantech and smart grid technologies are inherently disruptive. They challenge the status quo. To those who aren’t prepared for change, these disruptions can be unsettling. In the cleantech sector, we’re working constantly to introduce new technologies and solutions that lower costs, conserve natural resources and help businesses grow sustainably. These disruptive technologies are bound to lead to some level of conflict, but we are all in this business because we believe that disruptions can ultimately be beneficial.

Think of what’s happened in other industries: Not long ago, engineers figured out how to place a telephone call over the Internet and fundamentally changed the industry. Though the incumbent telecommunications firms dug in their heels, called in the lawyers, and prepared for battle, the Federal Communications Commission ultimately decided that Internet-based calling would benefit the consumer, and if you call my office today, I’ll answer on a VoIP-enabled phone.

The same type of battle is playing out currently in our nation’s wholesale electricity markets, where smart grid technologies are threatening traditional generators’ business models. Nowhere is this battle more pronounced than in the mid-Atlantic’s regional electricity market, PJM Interconnection. A rules dispute is pitting companies like my firm, EnerNOC, that are focused on managing energy demand, against power generators, whose businesses depend on consumers using more energy, not less. Managing energy demand increases market efficiency and lowers costs, but if these large generators have their way, ratepayers from Philadelphia to Chicago could see hundreds of millions of dollars of rate increases.

EnerNOC’s core business, demand response, was once thought of as a niche service. Now it’s competing directly with some of the nation’s largest energy companies in major energy markets, driving down prices, and changing the way end users think about and use energy. Last quarter, we signed up more than a gigawatt of new demand response capacity. That’s the equivalent of building a new nuclear power plant, or more than 10 peaking power plants, in just three months. Based on speed-to-market and cost-effectiveness, demand-side solutions are tough to beat, and that’s why generators have been so threatened by their rise.
 

Of course, demand response is just one of the technologies that is changing the energy industry. I firmly believe that there is no “silver bullet” for the smart grid; instead, there are many. A “silver buckshot” approach that integrates demand response, energy efficiency, renewable energy, energy storage, and information technologies will create a grid that is cleaner, more efficient and more reliable. You may have seen the recent NOVA program “Power Surge” in which Princeton professor Stephen Pacala presented a similar, multi-solution approach to addressing our nation’s reliance on carbon-intensive energy sources. It’s a powerful message for disruptors like us to keep in mind.

As we continue to push for major change in the energy industry, we will have to build the case for disruptive technologies together. That’s one of the reasons why I relish the opportunity to participate in the New England Clean Energy Council and forums like this one. Let’s continue to work together to challenge one another, change existing business models, and, ultimately, build a better grid.
 

Energy Leaders Forum responses

Mitch Tyson:
Tim makes a powerful case that developing great technology is not enough.  We also need organizational engineering to prepare institutions that manage our electric infrastructure for significant innovation and change.  Electric utilities, in particular, have been around for 100 years. A hundred years ago they were the innovators! But today only some are really adapting to a new world where energy efficiency represents a business opportunity while others are clinging to the old model of continuing to promote energy consumption. The era of cheap energy is over and the era of sustainability and efficiency is emerging. We will need a more integrated grid, more on-line storage, more distributed generation and greater assistance to users to become more efficient. But change isn’t easy and the larger and older the organization, the harder it is. We need to encourage utilities, like National Grid and NStar, that are trying to innovate. After all, disruptive technologies and businesses like EnerNOC are coming and “resistance is futile!”
 

Tim Healy is chairman and CEO of EnerNOC Inc.