You know what the electricity business needs? It's own nascent Google, or Microsoft, Boeing, General Electric, or Blackberry type of company working to apply practical business models to consumer energy services around electricity delivery and consumption. A company, in other words, strong enough, technologically rich enough, politically savvy enough, and suitably capitalized to capture consumer imagination and sentiment. A company that can change the balance of power in the electric utility business from the supply side to the demand side, and make good money doing it. In my forthcoming book, "Lights Out: The Electricity Crisis, the Global Economy, and What It Means To You," I pose the issue rhetorically, but, in reality, it is serious business.
I was privileged to speak at an industry conference last week at Carnegie Mellon's Electricity Industry Center (part of the Tepper School of Business). The audience was small but the brain power was highly concentrated. Leonard Hyman, one of the keenest industry experts and observers I know, delivered a dinner address on the ten challenges facing the electricity industry. Afterwards, I asked him if he saw a company, large or small, that could truly act as a force for change in the business. Always refreshingly honest and blunt, his answer was, in a nutshell, no.
On the plane ride home, I sat next to a professor from the conference, an economist and an active member of GridWise, an industry center for collaboration on progressive electricity delivery. I asked her a similar question: Who do you see on the demand management side of the business that could truly disrupt the existing state of inertia? She mentioned a company called Site Controls Inc. I thought about companies like Silicon Energy (now owned by Itron). Then she mentioned Enernoc. I appreciated her insights, but on reflection, I wondered whether these companies had the staying power to truly dominate this part of the business. Maybe Enernoc has a shot if its IPO plan, announced February 13, goes well.
I thought about some of the electric utility subsidiaries, like DTE Energy (affiliated with Detroit Edison Co), Keyspan Corp, and Sempra, all of which appeared to be aggressively pursuing a national market in energy services, at least up until a few years ago. It was always unclear whether these subsidiaries were truly interested in demand response and management or in expanding supply through different market channels. There are fledgling companies out there pursuing the micro-grid business model, although I often feel they end up taking two steps back for every one step forward. Sixth Dimension was one, Encorp was another. There are several others. Large conglomerates like Emerson have all the pieces internally to dominate this end of the business. but I don't see an aggressive posture or a market strategy in place to do so.
We often joke in the industry that the core competency in the electric utility is "managing the regulator." It really isn't a joke. Success in the electricity industry often takes far more energy devoted to regulatory policy and politics than it does to technology or the customer experience. Most of these companies lack that recognition or else they proved that they were good at managing the regulator in their service territory, but not that of another utility. Another issue is that we are not even close to a national market in electricity, in fact we've regressed in recent years, and so state regulators still hold tremendous power over the process.
However, I'd like to put the question out there. What company(ies) do you see that can break the traditional electricity service paradigm? I'd love to hear your suggestions keeping in mind the elements noted above: technologically rich, political and regulatory savvy, well capitalized--and not distracted by revenues coming from other parts of the value chain. Suggestions welcome!