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« Cyber Security for the Grid | What if the Smart Grid had Reliable Generation »
Monday
Mar232009

Cargo Cult Energy

I spent last week in Chicago and by of Silicon Valley, talking about new energy. In Chicago, we were talking about the smart grid, and how it enables new markets in energy. Out by San Francisco Bay, the conversation was, of course, about ventures and new businesses and high tech. There were exciting conversations in Chicago, ones that may lead getting the underlying structures of smart energy markets right. There were innovative projects in California, ones that are beginning to answer "What would your stuff do, if it knew the price of energy, now.?" In both locations, there was a tendency to fall into a trap that I call Cargo Cult Energy.

The phrase Cargo Cult names a reaction of some isolated islanders in the South Pacific to what they experienced in World War II. Some of these islanders had never seen internal combustion or manufactured goods or any food that they had not themselves pulled from the sea or hewn from the land. One day a stranger would come, or several. These strangers seemed very determined to cut down trees, and to flatten the land. The strangers were so obsessed that the islanders helped them, even going so far as to build a tower at the end of the flat space.

The strangers would go up into the towers and call down huge flying machines. All the supplies necessary for industrialized war would flow through this airstrip on an isolated island. The leavings dropped by the runways, and pilfered from the warehouses were more wealth than the islanders had ever imagined. The war ended, and the strange men left, and the flying machines came no more. On some islands, myths grew. If only the towers were maintained, if only the right rituals were performed at the end of the runway, then the machines, and then wealth would return.

In Chicago, fat too much of the conversation, before the GridEcon started each day, was of incentives. Over breakfast, alas, the conversation was often not of systems, and technology, and business process. Too often, plans were being built around short term incentives. What incentives do they have in New York? When do the tax incentives expire in Illinois?  We are not talking about priming the pump here. The business plans are short. Can we get in and get out when the incentives expire?

The venture capital guys were clear. They were not interested in funding any project whose business plan was based on tax credits, of utility rebates. What government gives, what the public utility commission grants, can just as easily be taken away tomorrow. Venture money wants long term value. Each technology should be sold on its clear and identifiable business value. Once that case was made, credits, and rebates could be a sweetener, a way to accelerate the business cycle.

Around the bay, I saw some many technology plans. I saw novel integrations of existing technology, in which simple things were made smart, particularly in how they used energy. I saw polymath projects, in which technologies and approaches from all over were combined into a novel product that used smart energy. There is a buzz of something ready to happen. Unfortunately I also saw folks tempted to lose their virtue.

Silicon Valley prides itself on a "virtuous culture of innovation", in which good products win, bad products lose, and hard work gets you ahead. I saw some very interesting, and perhaps some very good products. Too often, though, the management team forgets about the building the internet of things around energy, and gets lured by the siren song of third party programs. It’s great – they won’t even have to pay for it! We’ll pay for the installation with DR dollars! The homeowner won’t care because they’ll get a tax credit! We are not talking about priming the pump here. The business plans are short. "Can we get in and get out when the incentives expire?" In other words, these plans were without Silicon Valley virtue.

The energy markets in the US have been poor markets, looking to the regulators rather than to competitors for 100 years. To the extent that the smart grid enables new markets, successful new ventures will chase those new markets. Unless of course they get seduces by unnatural signals coming from the externa of the old markets. Unless they build their business plans around Cargo Cults.

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    America is shifting to a \"green culture\" where all 300 million citizens are embracing the fact that environmental responsibility is everyone\'s responsibility. To help, you can sign up to receive EPA\'s new consumer newsletter, GO GREEN! This is an excellent newsletter and if you are interested in getting good info I ...

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