Three Learnings for the Era of Free Electrons
On January 30 in Dubai, eight global utility companies representing 73 million customers worldwide came together to discuss the future of energy and the role startups can play in getting there. These utilities formally launched Free Electrons, a global energy accelerator program aimed at tapping into the power of disruptive energy startups, in alliance with a global network of clean energy accelerators. The program offers a chance for energy startups to scale their solutions in new markets. Utilities will co-develop pilot projects and offer strategic investments to help the best ideas grow rapidly.
swissnex San Francisco is one of the initiators of the Free Electrons program, and co-manages it together with New Energy Nexus, a global program of the California Clean Energy Fund. Laura Erickson of swissnex San Francisco shares her top three takeaways from a day spent with leaders in the global clean energy transition.
1. THE CLEAN ENERGY DISRUPTION IS WELL UNDERWAY
Transformation in the electricity sector is being driven by three main trends: digitization, decarbonization, and decentralization. The cost of solar energy is expected to be at “grid parity” – that is, as cheap, or cheaper to produce and deliver than traditional fossil energy sources, in 80% of world markets this year. That’s according to a Deutsche Bank study shared by Tony Seba from Stanford University, who predicts that conventional energy and transportation will be obsolete by 2030.
Tony explained how this steep decline in the cost of renewable energy technologies is in stark contrast to the rising costs of fossil fuel production. As easily recoverable reserves are depleted worldwide, only more expensive extraction processes remain. That leaves deep sea drilling, fracking, and tar sand mining, which are only feasible if oil prices remain high. That’s a problem for producers and distributors. Despite record low costs, fossil fuel production is still happening at an unsustainable pace, even as the market for renewables is booming as costs decline. To quote science fiction author William Gibson, “the future is already here, it’s just not very evenly distributed”.
2. ELECTRIC VEHICLES REPRESENT THE TIPPING POINT
Solar and solar storage is creating a welcoming environment for new business models. That means a lot of potential to disrupt, and even displace, the energy transmission and distribution services provided by monopoly utilities – especially if you consider vehicles.
Think of electric vehicles as a distributed electric grid on wheels, able to provide backup or meet peak power demands. Battery storage can meet the kind of infrequent demand that has traditionally been provided through expensive gas-fired “peaker plants” that sit inactive until periods of high demand.
Building these peaker plants has, until now, provided the return on capital that investor-owned utilities offer to shareholders. Once the cost of storage is at grid-parity, however, it won’t make economic sense to build new ones. That means utilities will have a difficult case to make to regulators if they want to build one.
This phenomenon further weakens the market power of utilities and increases the need for business model innovation. If these companies, which exist to keep the lights on for everyone (regardless of ability to pay), are to survive the new energy paradigm, they’ll need bold ideas. That’s why the Free Electrons program exists. Utilities must disrupt themselves — or risk being left out of the next era of energy.
3. DISRUPTING OURSELVES IS ESSENTIAL
Technology is critical to the solutions we need to decarbonize our societies. But just as crucial are changes in thinking. We must overcome inertia to embrace radical disruptions to business as usual to avert climate catastrophe.
Loss aversion is the strongest bias among humankind. We are predisposed to keep what we have because we relish the security of knowing it. We’re often reluctant to give up the security of knowing for the promise – and risks – of something new.
We know that renewable energy technologies will one day provide the power we need to support our societies. It could offer incredible benefits and innovation opportunities, creating new jobs and ensuring a future where energy is clean, reliable and easily accessible.
However, fossil fuels have been a reliable source of energy over the last century. An extremely complex and integrated infrastructure has been built to support it. Moving away from fossil fuels isn’t just a matter of finding replacement technologies and infrastructures.
The move requires consciously shifting our mental models. They are like icebergs with only small parts visible on the surface, as explained by MIT’s Otto Scharmer during the Dubai event. He addressed the role that leadership plays in the clean energy transition: Good leadership challenges the unseen mental models that keep us producing the results nobody wants. We must uncover and confront these hidden models to create radical change at scale.
Challenging our own assumptions and patterns of thought is the work of transformational leadership. But it’s also the juice that powers entrepreneurship and the drive to create something new and better, to create true value. With the Free Electrons global energy accelerator program, we’re creating value for businesses in the energy sector by aligning startups with innovative solutions with utilities with resources and a global customer base to scale those solutions. We’ll be creating win-win solutions that ensure a livable planet for us all.
More on the Dubai Launch of Free Electrons Global Energy Accelerator:
Laura is Associate Director at swissnex San Francisco. She studied French at UC Berkeley and recently completed an MBA in sustainable management at the Presidio Graduate School of Management.