I am struggling to find a single function in our society that is not impacted by the electron. The electron is a negatively charged particle that fuels digital work. It makes software work on hardware. It powers motors and manufacturing. It lights our bulbs and amplifies our sound. In my opinion, the electron is the unsung hero of the Internet age.
If the generation, distribution, storage, potential work, and informatics of the electron were properly valued by the market beyond just metering it, a new market and industry could erupt.
Thus far, the electron is not valued for its ability to enable our society to function. Because electrons cost money to generate, distribute, and store, a commodity metering model developed at the founding of the industry. That model is due for a change. It is outdated and does not truly reflect the important role the electron now serves as a platform. As a necessary service, regulations overtook the industry. More on this later.
It might seem strange in the digital computer and Internet age that the value of the electron was not measured in it’s ability to do the digital work. Outside the some 150 utility companies in the USA, its genesis and work value was ignored. But what happens if you start valuing the electron for the work it can perform, just like software as a service might be valued?
I am not proposing that utilities be valued like Internet service providers (ISPs). Rather, I suggest the genesis, storage, and/or transmission of the electron be valued relative to the criticality of the digital work the electron performs. A distributed electricity producer or centralized utility are creating a platform. The market has not valued this. Or has it and the Genie just needs to be released?
The electron enables fascinating technologies. Generating and distributing electrons remains archaic, inefficient, and undervalued. Most do not know that nearly fifty percent of centrally generated energy is lost in vampire effects ranging from friction in power lines to voltage step-down to the appliance plug.
When the world is able to value the electron for the real value and future potential technologies, cleantech energy production will generate another Internet-like growth phenomenon. The value of the electron extends far beyond software and web pages. It is the platform that everything else in the modern technological world is built upon. Interject a solar flare, equipment failure, loss of fuel, or nuclear force, and the platform is disrupted and society stops. However, absent such events the electron moves on powering societies critical functions. The nice thing about the benevolent electron is anyone can build and monetize services upon it.
The highly regulated utility industry does not have the same unbridled freedom to monetize the platform it facilitates. Politically, it is realized the electron is critical to do work that maintains modern human life. It enables necessary functions from 911 telephone calls to heaters and air conditioners; from traffic lights to water purification. As a result, the production and distribution of the electron is classified as an essential service. This classification results in regulation. Highly regulated markets do not attract innovation because they can not attract capital. Capital investments are not made because the regulation prevents the proper monetization (such as valuing the electron as a platform). And so the circle continues. Meanwhile the infrastructure ages and begs for innovation.
Nordhaus and Shellenberger have it right. In their article, “How to Change the Global Energy Conversation” they argue that stimulating innovation in the energy production market is more effective than regulations such as emission caps (The Wall Street Journal, 29 Nov 2010). I add the following caveat. Allowing business model innovation is as equally important as technological innovation. For example, you might imagine getting your electricity for free in exchange for providing usage data the producer can monetize.
The lack of competition gives the impetus to a highly regulated environment. One can envision policy-makers grappling with the idea that an unregulated market would result in an extra abundance of overhead power lines. But what would happen if competition and market forces were unshackled electron generation and distribution? Perhaps distributed energy production would push forward and make overhead power cables obsolete?
Policy is often a preemptive action, or reaction, to the absence of a solution. That is, instead of entrepreneurial innovation being the response brought against the problem, a policy is crafted instead. In the case of the overhead power lines, historically there was little incentive for entrepreneurs to develop distributed power generation to get rid of those unsightly and expensive power lines. Getting into the power generating business is haunted by the shadow of regulation – and that keeps capital from enabling innovation. Everybody loses when such a closed environment surrounds such an open platform.
If the generation and distribution of electricity were opened it would incentivize the growth of the industry. This explosive growth would create multiple new industries and millions of new jobs.
For cleantech energy production to realize its market potential, the value of generating the electron must reflect its ability to foster technological progress. It is time to open the generated of electrons (electricity) so as to match the openness the electron itself enables. It is time to let markets and entrepreneurs solve energy production and distribution problems. The resulting industry will be an open platform. It will enable new industries and explosive job growth. This may include creating jobs to remove and recycle those nasty overhead power lines.
Guest blog bu Jason Barkeloo of Pilus Energy.