The “Energy Cloud” — Buzzword or the Future?

To get an idea of how people outside of Virginia are thinking about energy policy, I listened two days ago to a webinar produced by Navigant Consulting on the emerging “energy cloud.”

The energy cloud, says Navigant, will come from applying digital technologies to the electric grid, shifting from a one-way flow of electrons on power lines to a multi-directional flow and moving from large, central power stations toward Distributed Energy Resources (DER). “A cleaner, intelligent, increasingly mobile, and more distributed grid is just around the corner.”

After decades of relative stability, Navigant opines, the U.S. is entering a period of great change. “New value will be created and captured across highly dynamic and disruptive Energy Cloud platforms. … Energy incumbents, especially utilities, have less than 5 years to reorient their products and business models around fast emerging technology ecosystems like iDER, Smart Cities, and IoE (Internet of Everything) or risk becoming a fringe player in the emerging energy economy.”

Now, I recognize that Navigant charges exorbitant fees for business-intelligence services by persuading people that its consultants and analysts perceive the onrushing future with greater clarity than anyone else. The firm touts the Next Big Thing and makes the case that disaster will befall anyone who gets left behind. That said, Navigant talks to a lot of people, including those with potentially disruptive technologies and business models, not just established players wedded to the status quo. It would be unwise to dismiss its prognostications out of hand.

Distributed energy will be as disruptive to the electric power industry as solar and wind power, Navigant says. For example: Electric-powered vehicles, which operate on batteries and plug into the grid, will be huge. Over the next 10 years, distributed energy resources — which includes fleets of electric vehicles that can feed into and draw down from the grid at will — will grow at eight times the pace of central-station generation, the firm predicts.

Also, says Jan Vrins, managing director-energy for Navigant, the industry is moving away from one-size-fits-all electric power to highly personalized products and services. “Energy providers are providing what customers are looking for. As energy and electric power becomes more important to our society,” he says, “there’s a significant opportunity to go after new revenue streams around transportation, around industrial and commercial customers.”

Mary Powell

The Un-utility. One of the presenters was Mary Powell, CEO of Green Mountain Energy, a Vermont utility. “I don’t view DER as a threat,” she says. “We see opportunities to create deeper, more substantial relationships with our customers. We have a customer-obsessed culture. … Three or four years ago, we began to focus on how do we accelerate the consumer-led revolution to distributed resources.”

Vermont customers are politically progressive, and they want a different energy future. A decade ago the emphasis was on solar energy and putting solar on rooftops. The conversation has evolved since to smart grids, demand-management, energy efficiency, energy storage, and flattening the peak in energy demand. “We’re not just attacking the peak, we’re crushing it,” Powell says.

Reinventing itself as the “un-utility,” Green Mountain Power has transformed its corporate culture. Instead of thinking about how to grow demand for electricity, the team has asked, “What happens if we lost 40% of our traditional revenue over 10 years? How do we create a new value stream?” The approach has been to experiment a lot. “Try something in a nimble, gritty, low cost way,” says Powell. “Don’t take massive bets. Make lots of small bets, and lean into the ones that offer great value for customers.”

How’s that all working out for Vermonters? The webinar didn’t get into that. Vermont’s electric rates are about 50% higher than Virginia’s. But then, electric bills are lower. Vermonters don’t need air conditioning, and they typically use gas or oil to heat. Can lessons learned in Vermont apply to Virginia? That would make an interesting discussion.

Paula Gold-Williams

Utility-scale solutions in an era of DER. CPS Energy, which supplies electricity to the San Antonio, Texas, area, serves a very different customer base. Energy customers aren’t as politically driven in Texas as in Vermont, but they are changing, and CPS Energy is changing with them, says CEO Paula Gold-Williams.

Some customers want the kind of personalized electricity described in the Navigant playbook. But, Gold-Williams says, “I have customers on the other end of the spectrum who say, ‘I don’t even want to think about it. I don’t want to think about technology. You’re the energy expert, you do what you think is right.’”

CPS is positioning itself to handle both types of customers. The company is investing in smart meters and a two-way grid. The distributed grid can lead to more volatility and outages, she said, “but we’re getting in front of it.” “We’ll have a balance. When customers are ready, we’ll be able to give them the solutions they need.”

The utility has invested $850 million in energy conservation, an initiative that encompasses everything from energy-efficient lighting to local solar solutions. Those investments have avoided the necessity of building 771 megawatts of new generation. Without the conservation, she says, the company would have had to build a coal plant to handle the demand. “We think we’ve made a much better investment.”

The rapid pace of change is altering the company’s investment horizons, said Gold-Williams. “Who wants to spend a billion dollars on a 40-year asset when the technology will change?”

Back in old Virginnie… Green Mountain Power is the kind of electric utility that many Virginia environmentalists would like to see — a company willing to cannibalize its electricity sales in the hope that it can invent new revenue streams providing green, distributed energy. Whether autophagy works as a business model remains to be seen. Even if it does, GMP is about one-tenth the size of Virginia’s largest utility, Dominion Energy Virginia, which makes it easier to reinvent itself as a nimble, entrepreneurial company. 

The thinking behind Virginia’s policy future is more likely to resemble CPS’s strategy. This year’s Grid Transformation and Security Act keeps Virginia’s investor-owned utilities, Dominion and Appalachian Power, firmly in charge of the electric grid, but the legislation does envision a future with smart technologies, two-way electricity flows, more renewable energy, more energy-efficiency, and more demand-side management. The biggest question is how fast the utilities will move toward micro-grids, rooftop solar and other options that allow non-utilities to capture electricity market share.

I detect a lot of hype and managerial buzz words in Navigant’s white paper (see the video above for a condensed view) and I see few specifics on how the varied technology threads will weave together. I personally wouldn’t bet my company’s future — or build state regulatory policy — in anticipation of the “energy cloud” that Navigant describes. But technology is rapidly changing and business models are in flux. Virginia lawmakers and regulators should be cautious about approving capital projects with 40-year time horizons, and they should encourage lots of pilot projects to see what works.

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2 responses to “The “Energy Cloud” — Buzzword or the Future?”

  1. djrippert Avatar

    As a recovering technology consultant I see “energy cloud” as both a buzzword and the future. Virtually everybody engages in marketing and Navigant is doing that with its “Energy Cloud” terminology. Why not? Coke claims it’s the “real thing”, a tractor company claims that, “nothing runs like a Deere”, etc.

    The bigger question is distributed energy. I looked into Tesla’s solar roof and powerwall. For a variety of reasons I couldn’t use them on my new roof in Virginia. However, they are clearly heading in the right direction.

    The so-called energy cloud sounds like a way to manage distributed electrical generation. Imagine what happens if a large percentage of new construction and a large percentage of new roof installations use solar tiles. My roof generates electricity which is stored in my powerwall until I drive home in my electric car which is charged off the powerwall. What’s missing in that sentence? Oh yeah, Dominion. And if the price paid by PJM for the electricity I generate goes high enough I sell the power my roof generates to them. Guess who isn’t necessary in that scenario? Oh yeah, Dominion.

    Tick, tock Dominion. Tick tock.

    1. Dominion is not in that game because “net metering” implies Dominion pays you top dollar for your electrons even when they do not need it. So it amounts to a large subsidy to solar roof owners. If there was some way they could pay you only when they need it, that would be OK. But then that gives you a less attractive incentive case than solar roof advocates would like to see to stimulate that option, which is a relatively expensive energy generation option compared to utility scale solar..

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