Crowdsourcing Successes Force Utilities to Consider their Role in a Sharing Energy Economy

Written April 28th, 2015 by
Categories: Energy Business, Energy Efficiency, Energy Policy, News

This is the year of the crowd, says Jeremiah Owyang. Will a kWber emerge to disrupt the energy industry?


Jeremiah Owyang, founder of Crowd Companies, was the keynote speaker at Efficiency Exchange 2015. His message is hopeful for frustrated utility customers, even if frightening for the utilities.

Uber2015-04-uber-web-screen-snap, Airbnb and Kickstarter are just three examples of successful sharing platforms. There are dozens of others, reaching into every sector of the economy.

Technology empowers people to get what they need from each other – rides, lodging, money – so why not energy? I think the platform should be named “kWber.”

“With crowdsourcing, the crowd becomes an organization, bypassing inefficient companies,” Mr. Owyang says. “Then what role do conventional companies play?” Taxi companies, hotel chains, and now utilities are asking the same question.

Yeloha‘s “Solar Sharing Network” allows members to share renewable energy with each other to reduce their utility bills. Yeloha installs PV on one member’s rooftop, and other members share the output.

If you prefer to own the solar on your roof, Mosaic will crowdfund it. Members fund low-interest loans so other members can buy rooftop solar with no money down. David Bornstein covered Mosaic in the New York Times in 2010. Mosaic’s marketing promises as much as a 20 percent reduction in utility bills.

Do I hear you thinking that utilities are still safe because solar is intermittent? Maybe you skimmed over recent headlines about the Tesla home battery. Energy storage makes power a non-perishable good. A battery is an investment, but electric vehicle owners already have them.

Storage makes peer-to-peer energy sharing practical by eliminating the mismatch of production and consumption curves. (As noted by one UK blogger, batteries also could drive costs up, because owners can wait for higher prices.)

“With Tesla pushing forward with the house battery, and crowd funded solar, we may start to see the rise of local home power generation and storage networks,” Mr. Owyang told me in an interview after his keynote address.

 

CONVENTIONAL BUSINESS models must change to stay current, he says. In the sharing economy, products become services (Netflix), services become marketplaces (Airbnb), marketplaces become platforms (Kickstarter). A century ago, utilities’ generation and distribution platforms became the product, and little has really changed since.

Jeremiah Owyang of Crowd Companies warned utilities about the disruption of a sharing economy

Jeremiah Owyang of Crowd Companies warned utilities about the disruption of a sharing economy

Another old-line industry, banks, had only each other to worry about before Funding Circle, bitcoin and LendingClub came along. At least banks had competition in the market.

Utilities have enjoyed sanctioned monopoly status, except for a handful of states where energy is now deregulated. The idea of competition from their own customers is a shock.

In Europe, where energy policy is a decade ahead of the United States, a Netherlands company named Vandebron is using a Spotify-like subscription model to share clean energy among its members. “That’s all I know about them,” quips Mr. Owyang, “because their web site is all in Dutch.” But a 2014 interview with Vandebron’s founder, in English, says enough:

“It all started with a question,” said Aart Van Veller. “Before Vandebron, independent producers of renewable energy had to sell their energy to an energy company, which in turn would sell it to consumers with a profit. We wondered if we could make such companies obsolete.”

If utilities find the idea threatening, consumers may find it daunting. Early adopters would be the first to try shopping around for electricity from their neighbors. Most homeowners wouldn’t bother with such drastic change until the process became frictionless, like paying the energy bill is today.

Honeycomb diagram of the industry sectors that have experienced disruption by crowdsourcing (Crowd Companies graphic, click for larger version)

Honeycomb diagram of the industry sectors that have experienced disruption by crowdsourcing (Crowd Companies graphic, click for larger version)

“Not all consumers are actively involved with their energy usage, so convincing them to opt in to clean and renewable energy, whilst they may not see the necessity, is a big challenge,” said Mr. Van Veller. “Likewise all new technological innovations face this challenge: becoming relevant to people’s lives.”

Small businesses and commercial energy consumers are more likely to tolerate some friction to reduce their relatively much higher energy bills. Some have talked of “grid defection,” firing their utilities and becoming energy self-sufficient. Sharing electricity makes that idea more viable.

 

SHARE ENERGY using whose wires? That’s a big question for would-be energy crowdsourcers in regulated jurisdictions. Mr. Owyang notes that sharing economies emerge when there is a surplus of something, and that Uber and Airbnb don’t own the assets they share. But to share energy requires the grid infrastructure, typically owned and used by the local utility. What motivates the asset owners to want to play the sharing game?

2015-04-owyang-video-interview-snap“Looking at other industries that are being disrupted now, those models could replicate in the energy space,” Mr. Owyang says. “When that does happen, it’s an opportunity for utilities to participate by creating their own marketplace and creating ways to buy, share and fund energy, and take a cut from those transactions.”

Many of the utility attendees talked with me during the three-day conference. These are the energy efficiency and conservation managers, not the folks who are in the hot seat when considering threats like crowd sourced electricity or grid defection.

The idea raises interesting questions around energy efficiency: Would the most energy efficient customers be the first to go off on their own? Would that be good or bad for the utility’s efficiency goals? The customers with the lowest remaining savings potential would take their load off the utility’s grid and out of the mandatory savings targets in states that have them. Subsidizing and marketing energy efficiency may be indirectly enabling customers to leave.

A larger question is about power reliability and cost, two arguments sure to arise as consumers organize platforms and bypass their utilities. Utilities have focused on those features, but without transitioning the product into a service (e.g., charging customers for uptime instead of kWh). Innovative sharing platforms can make that transition – I imagine, for example, HVAC as a peer-shared service.

Solar costs are falling, but renewable energy still is a big investment. As customer-generators start investing in capacity to meet the demand of a sharing economy, they’ll need some certainty about long-term prices. I recently stayed at an Airbnb, and capital recovery was not in the forefront of my hosts’ minds about sharing their guest room. Likewise, that nice couple was not too worried about being swept aside by shifting politics.

 

THE SHARING ECONOMY is here to stay, and Mr. Owyang makes a strong case for it. There’s little doubt that utilities are here to stay, in one form or another. The message here is that utilities need to be doing more than just worrying about their role in tomorrow’s collaborative marketplace.

“About three years ago the hotel industry thought their competitors were the other major chains,” Mr. Owyang says. “They never imagined that their next competitors would be the people they formerly called their customers. Airbnb turns customers into competitors, and hotels had no idea that could ever happen.”

Watch a video of Jeremiah Owyang’s keynote address (skip to 15:00) and an edited 3-minute video of my interview with him.

Efficiency Exchange is an annual conference hosted by Bonneville Power Administration and the Northwest Energy Efficiency Alliance.

 

Comments? We want to hear them. Please share your thoughts on the social media platforms of your choice, so your peers can join in the conversation. We’ve provided buttons on this page for the most popular sites.

Tags:

About the Author:
http://energypriorities.com
Denis founded Energy Priorities Magazine on Earth Day 2004 and hosts the radio program by the same name distributed by NPR. He has authored hundreds of cleantech articles for a variety of publications, ranging from Sustainable Industries Journal to the New York Times, and he has been interviewed by major news outlets, including FORTUNE and MSNBC. He lives in the Seattle, WA area. Follow him on Twitter: @Cleantech. Contact him here. Disclosure information.
© 2004-2017 Energy Priorities