Thirty years ago, each major city sported multiple distinct media and communications “monopolies”. At a high level, they all offered centralized operations through a dedicated delivery network into consumers homes. Cableco. Telco. Newspaper.
Twenty or so years ago, things changed forever. Networking technologies, government support and private investment came together in a perfect storm around communications networking to give birth to the Internet. Without question, it is one of mankind’s most remarkable and empowering advances.
The aforementioned monopolies changed forever. The cablecos and telcos became more powerful and valuable because, despite new competition in their respective content and communications businesses, their delivery networks made them invaluable. Newspapers on the other hand began a prolonged decline with a double whammy; their core media offering encountered extensive new competition, and the value of their physical delivery network was decimated.
In the evolution of the Internet, digital delivery networks became infinitely more valuable. The incumbent businesses that lived atop proprietary networks faced significant challenges in the face of new competition over the new open network.
The Internet gave rise to an explosion of distributed information services that we now rely on. Services that now permeate the fabric of our daily lives. Google. Facebook. Netflix. Uber.
Analogies can only go so far, but there are worthwhile comparisons to what’s happening in energy. Similar to the history of communications networking, new technologies, government regulation and private investment are all coming together to create a perfect storm around energy networks. Solar. Wind. Storage. Demand management. Home automation. Microgrids. Community solar. Virtual power plants. EVs and more.
We’re seeing an explosion of energy services atop the delivery network. It’s about delivering electrons, instead of bits, but the backdrop is eerily similar.
We’re witnessing the birth of the Enernet.
If you buy the analogy, let’s torture it to provide some insight into how things might play out over the long-term.
- Transmission and delivery. Like Comcast and Verizon, companies like ConEdison and National Grid are likely to be long-term winners as the owners of networks that bring the Enernet to individuals and businesses. These players will have to invest aggressively to upgrade their network, but they hold a great hand in the game. Those investments will certainly include new transmission lines that marry renewable generation to load centers, but also new technologies to optimize networks. Among others, these technologies will include software and caching capabilities to optimize utilization of transmission lines.
- Generation. Generators will become more prone to the whims and desires of the public, as new generation sources proliferate, and customers have new choice. Think of generators somewhat like the cable bundle or phone service. Hugely valuable, but over time Netflixes and Skypes will emerge to provide next generation services atop the open network. If incumbent generators take lessons from history, they’ll invest in new electric supply offerings, including solar, wind, storage, microgrids and virtual power plants.
- Oil. Oil may be the newspapers in this analogy. They provide a product over a dedicated, physical distribution network. Over time, forces will migrate energy consumption from their existing channels to the open network. EVs are a good example of how that’ll happen. Mind you, oil companies aren’t going away in any time frame I can imagine, but they will become increasingly challenged by the migration. Food for thought, low-end estimates for the impact of EVs on oil consumption is of the same order of magnitude as the supply-demand imbalance which drove the recent oil crisis. (You can read more about EV impact on oil on CleanTechnica: Electric Vehicles Will Deflate Demand For Oil.
- New generation. The young upstarts. On shore wind, off shore wind, solar, community solar, microgrids, tidal energy, concentrated solar, solar roadways. We’ll continue to see new products, mostly renewables, emerge and offer consumers greener electrons at competitive rates. These are the YouTubes, Vimeos and Facebooks of the Enernet. Big opportunities there, and a lot of players are after it because it’s sexy.
- Infrastructure. To enable all of the above, a whole host of new infrastructure players will emerge. Like Cisco, Apple, Google, Akamai and others who built massive businesses providing core technology, so will new Enernet startups provide increasingly sophisticated technology to enable and drive energy networks. We will see companies whose names haven’t even been invented yet, arise to seize the opportunity. For imaginative and insightful entrepreneurs, energy infrastructure is unbelievably rich soil to seed.
As noted, analogies are rarely perfect, but I do believe there are useful parallels between communications’ past and energy’s present that, at a minimum, bear reflection and discussion.
Energy is standardizing around electricity as the preferred transmission format, on delivery networks that are becoming increasingly open. Just like information networks did around IP.
Electricity is the IP of energy.
Andrew Beebe of Obvious Ventures wrote an informative article on many of these points in The Coming Electrification of Everything. It’s worth a read. It maps out the basis for Obvious’ investment thesis in energy, and the basis of mine as an entrepreneur.
While the emergence of the Enernet may not have the same magnitude of impact as that of the Internet, it will be hugely transformative. New businesses and markets will develop. The landscape of players will shift and change.
That backdrop presents an industry that is worthy of big investments in both time and capital. I’m excited to be a part of it.