This post is by ClimateProgress guest blogger Kari Manlove, fellows assistant at the Center for American Progress.
This week's issue of the Economist features a commemorative piece on Bill Gates, who stepped down from his position as Chief Executive Officer of Microsoft last week.
Gates had an arguably turbulent career, due to his aggressive or monopolistic business tactics as the lead in the industry, but one that has been inconceivably successful and world-changing. Among the many legendary attributes the Economist article points out is Gates' determination and eventual responsibility for personalizing computers in the form of desktops. Gates made the technology accessible to individuals, homes, and businesses rather than keeping giant computers centralized.
The article argues the ways in which Gates' ways of doing business are ex post facto. It's the end of era. But it should also be considered the opening of an opportunity for distributed energy generation.
Two academics -- Richard F. Hirsch (professor) and Benjamin K. Sovacool (student) -- who study the history of electricity generation and utility evolution in the U.S. often apply the theoretical framework of historian Thomas P. Hughes. Hirsch and Sovacool write, "Hughes posits that the generation, transmission and distribution of power takes place within a technological system." The system is driven not only by technological and scientific factors, but also by institutional, political, economic, and attitudinal factors, which Hughes labels as momentum.
Based on Hughes' set-up, Hirsch and Sovacool argue [PDF] that in sync with the modern-day technological system, momentum is changing such that it causes utilities to turn to distributed, or on-site and small-scale, generation. The reasons are many, from the effects of deregulation to the heightened environmental concerns surrounding coal-fired electricity (distributed generation is much more friendly to renewable energy sources).
Speaking with much less background and experience, Hirsch and Sovacool's argument intrigues me. So far, distributed generation has not been launched on a large-scale, though there are many arguments about how that could benefit utilities (if they owned and operated the units). But it does seem that the technology trend of the twenty-first century is personalization -- desktops, laptops, iPods, cell phones, GPS systems installed in individuals' vehicles. Plus, distributed generation has so much to offer in terms of energy security and reliability, renewable energy generation, and the potential to change the face of how urban settings use rooftops to electrify cities, reducing the need for large coal plants and transmission/distribution lines.
So I ask myself, what does distributed generation need to take off -- like desktops, like iPhones, like the electrification explosion in the U.S. in the 20th century? Perhaps the answer is a Bill Gates -- a smart guy and strategic businessman, willing to take risks, and ready to make loads of money by personalizing energy generation. With that hope, Gates' business and technological legend is no distant memory.
This post was created for ClimateProgress.org, a project of the Center for American Progress Action Fund.
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Comments View as Flat
cmlawrence Posted 11:10 am
02 Jul 2008
an interesting analogy
Joseph - I really enjoyed the article. In fact, it prompted me to post some thoughts of my own on the topic.
http://www.energyhumanfactor.com/2008/07/energy-revolutio ...
I think it's tough to get people to think about the consumer in the energy space. But that's who is really going to drive this market...
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Sean Casten Posted 9:37 pm
02 Jul 2008
You're absolutely right, Joe
But it bears noting that Bill Gates didn't have to try and get laws changed in 51 jurisdictions to build his business. Yes, his competitors were strong, but ultimately he could succeed with hard work and a good business plan. Not so in the DG industry where the ban on private wires in all 50 states and the mountains of state and federal regs designed to protect utility shareholders from competition act to thwart precisely the type of entrepreneurial behaviors you describe.
Don't take me as overly pessimistic - after all, we're doing our best to be the guy you're looking for! But it's hard not to conclude that those regulatory barriers have caused many a smart, ambitious entrepreneur to conclude that their skills will be more greatly rewarded in any industry but the electric sector.
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anotherID Posted 12:30 am
03 Jul 2008
Even better is the joke
Utility assets are amortized over infinity. It is a good business if you can get it and defend it.
Ratepayers just keep paying for the infrastructure, over and over and over again.
Check out the utility company owned streetlight tariffs for an example.
Talk about predatory tariffs...
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amazingdrx Posted 12:51 am
03 Jul 2008
It needs a Dell
Not a Gates/MSFT. Google is most likely designing the software already, will they take on the device manufacturing roll too?
It needs a utility core system for homes and buildings that operates using distributed computing to form one piece of a distributed smart grid.
A furnace-like box that everything plugs into, that is built adapted to the customer's region and individual location's solar/wind/biogas and geo heat exchange potential. The Colorado team in the last DC green home competition did this with solar PV/heat cogeneration panels.
Heat/cold storage, batteries, and backup biogas generation can make each building self sufficient. plugin hybrids can stire energy for emergencvies too. A device to manage it all is the key. Just like Dell (Apple and others too) was the key to the internet revolution.
All the individual systems are already invented and developed, they need to be interconnected into a smart grid.
Net metering laws would be enough to make this work for now. Peak off-peak rate plans for consumers will help too. Utilities that are voluntarily paying extra for renewable power from customers and developing smart grids, like Wisconsin Electric and Xcel energy, sure are helping this along.
http://amazngdrx.blogharbor.com/blog John Schneider, Northern Wisconsin
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vakibs Posted 1:19 am
03 Jul 2008
it is the technology, not the person
If not for bill gates, the PC industry would have taken off with somebody else. During the late 1970s there were tens of highly motivated startup companies willing to take a lot of risks. A lot of people believed in the promise of this new technology. Not all of them made big bucks, but a few of them did.
The business acumen of Mr. Gates is to monopolize this fledging industry by selling his software to IBM and later to Intel, the hardware manufacturers.
Gates is a smart guy, but he is no angel bringing heaven down to earth.
If the distributed generation technology is so good that it can take off by itself, there will be tens of entrepreneurs betting their careers and money in it.
Whether somebody like Gates will monopolize this industry is another story.
What your poster boy distribution generation needs is not help from a Gates, but inherent maturity that makes sense for the market.
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stopgreenpath Posted 2:37 am
03 Jul 2008
monopolists are the problem, not the solution
as anotherID posted, above, the Big Energy monopolies are the reason we don't all have solar and wind on our own properties, and we aren't all getting paid market rates for that power. They are allowed to externalize/socialize nearly ALL their business expenses, making them inherently anti-competitive. they amortize capital expenses across the grid, and destroy the environment/ public lands without paying the costs of that destruction. this makes any distributed, local, point of use renewable energy impossible to compete.
startup costs are prohibitive - we don't get govt. guarantees and cheap/ free financing, nor "commercial producer" tax breaks/ incentives/ subsides, so we also don't get venture capital which flows where policy directs it.
paybacks are meager - net metering is accounted as a "loss" at the utility on its balance sheet, not against the RPS, and excess power fed to the grid because of increased investment and/or conservation, is given away FREE to the utility to resell at huge profits (it's nearly always the priciest "peaker power.") how do i get that deal?
even CA's new "feed in tariff" is a JOKE. rates are 10-50% of what germans get paid, we are not allowed to have any CSI rebates, we have to toss in our RECs for free, and even a giant carport in the Mojave that uses NO power at all cannot earn enough to repay the costs of installing system in 15 years.
here's a novel idea - utilities have to start absorbing the cost of running their businesses - ALL the costs. once they do that, they will VERY quickly see that purchasing renewable power from local residential and business producers, instead of incurring tens of billions of dollars in capital expenditures, becomes the best FREE MARKET solution. bonus - millions of acres of taxpayer owned wilderness will be preserved, tens of thousands of homes will not be stolen through eminent domain for the massive powerline infrastructure RETI and others are plotting, the Enron-style supply and pricing manipulations will become much less likely, the grid will become more reliable, safer, and less wasteful, and all of US can do the right thing and be compensated for it.
the tech is here, now, to do this. what is needed is political will.
the greenest energy is that which you needn't ever produce.
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WWAGD?! Posted 3:15 am
03 Jul 2008
Enron: Our Hero
The company that did the most to create an Energy Internet was Enron. They would have succeeded if there was more capital available to them.
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solarenurgy Posted 10:45 am
05 Jul 2008
Build it "smart"... they will come
Thanks Joseph, I really enjoyed your post. I have been posting similar thoughts.
Here: http://solarenurgy.net/open-source-economics/
The decentralized aspect to energy generation if indeed the wave of the future. Bill Gates could be one the folks to jump start us down that road. Like us (U.S.) Canada, is going through a milestone experience with distributed renewable energy, nuclear energy and fossil fuels. Here is a post about how renewables may trump nuclear... with the edge being a "smart" grid with decentralized renewable energy generation.
http://solarenurgy.net/will-decentralized-renewables-trum ...
Your last question and excellent point is when and who is going to move us forward to a "smart" grid with distributed personalized energy generation. I belive I have found that answer in a new solar energy startup company. Their business model is not unlike the paradigm shift that happening to the cell phone industry. Once the product was inexpensive and simple the masses quickly adopted the technology. The potential is huge and the solution is simple... the panels are rented, at or less than what a customer is currently paying for their electric, the install and maintenance is free. All with no upfront cost. Sound to good to be true? The only down side is patience. The company is still in it's pilot phase with 1000 homes to be installed later this year. The major funding needed to take them to the next phase is right around the corner. We have been patiently waiting for over a year. I am confident, it not only will happen in a very big way, but it will also make the most profound change in the energy industry we have ever seen. Not to mention... social, economic and national security. It literally and figuratively gives power back to the people.
The energy market is primed for this shift. It is going to happen with or without Bill Gates and with or without this new company.
Again, thanks for the article.
Bruce Marshall-Jones
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stopgreenpath Posted 3:36 am
07 Jul 2008
why can't we have the commercial perks?
Bruce, you make a good point, and there are half a dozen of these "leasing" companies up and running already in CA, but the only thing that makes it economically feasible for them is that THEY get huge "commercial producer" tax breaks that you and I, even if we put the exact same system on our homes, would NOT be allowed.
This is, in a word, insane. Or is it unfair? Corrupt, even? Why on earth can't we get the EXACT tax, capital financing, subsidy and socialization of costs that other producers get?
In Ca at least (which pretends to be sooo progressive on Green Matters), taxpayers and ratepayers either directly or indirectly pay 100% of the costs that utilities and "commercial" producers incur, not to mention guaranteeing their power buybacks, which leads to zero risk, which causes cheap and abundant venture capital to flow to them.
For one example, the kinds of companies you are referring to get a flat 30% Federal TAX CREDIT for the exact same panels on our roofs as we would install, without caps on size or amount, so why the hell don't we? They also get PAID for the power produced on our roofs but the best we can do is "net metering" and hand excess to utilities as a GIFT.
We, the people who actually pay all these bills get to choose between crappy, dwindling rebates with severe caps on system size OR incredibly meager "feed in tariffs" which, even when maxed out, will not pay for any size PV system, even in the Mojave, even over the 20 year contract, and even if not a single watt is used by the producer.
All we are asking is to be placed on a level playing field with Big Energy in these days of renewable energy. We have a once in a lifetime opportunity to achieve PERSONAL energy independence, and are being completely shafted.
Bill Gates is not likely to take the side of the underdog (us) in this, if his treatment of employees and competitors is any indication. We need someone who believes in fairness and the power of individuals, not a mercenary monopolist. Energy industry is already crammed with the latter, including so-called "renewable" industry people.
the greenest energy is that which you needn't ever produce.
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