Smart Energy -- What's the Big Deal?
In the late 1800s, America began building its electric infrastructure. Large centralized generation, coal-fired power plants, wires crisscrossing the landscape, this was the state of the art a hundred years ago -- and we're still using it today.
Our 19th-century model has its share of 21st-century problems. Blackouts, scandals, pollution and high capital expenditures are among them.
September 22, 2004
"Smart energy" describes a new sector of businesses that are beginning to solve those problems. They're working on alternative energy sources, new ideas for managing energy use in power-hungry facilities, software tools for analyzing it all in real time, and much more.
When it comes to taking the lead, utilities are pushed and pulled by regulation. Business won't wait for the century-old utility industry to be gradually deregulated. Companies will innovate and build solutions. Others will commercialize and sell them. Engineers will figure out how to network them. Entrepreneurs will devise new business models and value chains.
As these entrepreneurial ideas are realized, this sector has the potential to be the next Internet in terms of market opportunity. Spending on electricity is $224 billion a year, according to the GAO. That's just in the US. Each electric meter represents a potential customer.
Consider this: Every summer day in the south, and every winter day in the north, utilities approach the limit of their generating capacity. As electricity demand peaks, utilities wonder whether they can supply it all. It's such a problem that utilities compensate customers who trim back their electricity use during those peak hours of the day.
Now, that's interesting. Name another business model where the vendor pays its customers to use less product.
Here's another example: Twenty factories, all customers of the same utility, install backup generators from one provider. The provider controls them remotely, via internet connections. When the market price of electricity reaches a threshold, the provider turns on all the generators, supplying power to the factories at a favorable rate -- then sells the excess power back to the utility at a premium.
Customer and vendor trade places. Buyer becomes seller. Factories never experience outages, and never pay premium tariffs.
Electricity is a mission-critical resource. Rising energy costs and decreasing reliability are prompting businesses of all kinds to seek new solutions. The opportunities for entrepreneurs in this sector are limitless. So is the potential for businesses to finally control their energy cost, quality and reliability.
This is the end of the first decade of the internet. The next decade -- the energy decade -- will be every bit as interesting.