Navigant Research Blog

Are We Approaching the Energy Singularity? Counter Point

— June 27, 2016

Cloud ComputingThe energy singularity sounds awesome, but bring your doubts. Who doesn’t appreciate the thought and effort it takes to make scientific breakthroughs? Exploring possibilities, creating new scenarios, and imagining the unimaginable. Ray Kurzweil’s singularity idea is one such notion, proposing “an era in which our intelligence will become increasingly non-biological and trillions of times more powerful than it is today—the dawning of a new civilization that will enable us to transcend our biological limitations and amplify our creativity.” Artificial intelligence (AI) taking over at an explosive rate—it sounds amazing. My colleague Mackinnon Lawrence suggests this breakthrough is possible for the energy sector within the next couple decades. Maybe.

A Different Grid of Tomorrow

To be sure, the future grid will differ from today’s grid. It might not even be a grid as we know it in 2045, the estimated year of Kurzweil’s singularity vision. Furthermore, changes are already taking place quickly, with the decline of coal-powered plants, the rise of solar power, and the promise of affordable storage technologies, to name a few. Navigant’s Energy Cloud vision already foresees an energy world full of profound changes and decentralized structures, a system more dynamic and responsive than today’s.

It is tantalizing to imagine the future power grid (or ecosystem) with blazing efficiency, unparalleled reliability, and widespread availability. My colleague cites the rapid advancements around self-driving cars and Google processing billions of search queries a day to enable deeper understanding of human thought as examples of the pace of change from machine learning. Machines are getting smarter, but there are also setbacks, particularly where grid assets, old and new, have failed, including:

  • The Fukushima Daiichi nuclear disaster in 2011
  • The San Bruno pipeline explosion in 2010
  • The Ivanpah solar power facility fire in May of this year

Even Google’s vaunted driverless car has collided with a bus. These negative events do not mean the problems can’t be overcome with powerful machines. Perhaps future super-intelligent systems will prevent or reduce the chances of such calamities. But these events do illustrate the downside of technology and the limits of machines.

In the energy sector, there is also the human constraint of regulation and business models. Even if technology breakthroughs take place, will regulators and politicians hold to the past and not allow transformations to emerge? Some are open to change. In California and New York, regulators and politicians have shown a willingness to embrace new ways of thinking about energy and new models. But others are likely to be more stubborn. Nevada regulators approved a price hike for solar customers, and SolarCity and Sunrun promptly pulled their operations from the state. In Montana and Wyoming, coal is still a powerful force for economic and political reasons.

Skepticism Abound

Among leading technology thinkers, respected names have trouble accepting Kurzweil’s future vision. Gordon Moore, cofounder of Intel and namesake of Moore’s Law, says the singularity is not likely to happen, at least not for a long time. Jeff Hawkins, cofounder of Numenta, a company developing a computer memory system based on the human neocortex and founder of Palm and Handspring, expects we will build machines that are more intelligent than humans, but there will be no singularity or runaway growth in intelligence. And Microsoft cofounder Paul Allen, who has devoted resources to his Allen Institute of Brain Science, has expressed serious doubts about the singularity occurring.

Count me among these skeptics. Predictions about breakthroughs often don’t pan out, or take way longer than expected. We were supposed to be commuting in flying cars, living in underwater cities, and colonizing other planets by now. We can imagine such things, but the future is difficult to see clearly. Some of what is imagined for the grid and energy is quite possible—I’m all for the wonderful magic, positive advancements, and geeky possibilities. Kurzweil is someone I respect. But the future also holds potential darkness, shadows, and unintended consequences. Man has a propensity to screw things up (wars), and his machines break down (think Space Shuttle Challenger or Chernobyl). Perhaps I’m stuck in a 2016 mindset, but my bet is the singularity moment is a long way off, if even possible. Moreover, the Kurzweil idea is too Panglossian. Machines will definitely grow smarter and the energy sector will benefit. But the process will be bumpy, unpredictable, and we will see a singular failure, or two, or three.


Are We Approaching the Energy Singularity? Point

— June 27, 2016

CodeElon Musk, doing his best Elon Musk, offered the provocative statement recently at the Code Conference that our existence is actually just a simulation being run by a highly advanced civilization. While a fringe theory, behind the statement is actually a rich vein of academic and philosophical thinking suggesting that we are approaching a point in human history at which the innovation that will occur in the next 5 minutes will outpace everything invented in the last 5 million years. Futurists like Ray Kurzweil describe this point in human history as the singularity.

The energy industry is no exception to this phenomenon. With the pace and scale of innovation accelerating across the energy landscape, grid 2.0 will be unrecognizable from the one we know today. More importantly, the inevitability of significant industry transformation is becoming increasingly difficult to ignore (see my colleague Jan Vrins’ Industry Megatrends blog series), begging the question whether we are approaching an energy singularity. This post suggests we are very likely catapulting toward such an event. In a companion post, my colleague Neil Strother argues a more skeptical approach.

The Energy Cloud and the Energy Singularity

As the end result of rapid innovation, much of which lies beyond our immediate purview, the Energy Cloud describes the confluence of many concurrent disruptions wreaking havoc on conventional ways of doing business. The full realization of the Energy Cloud’s potential as a highly networked grid ecosystem would only be accelerated by such an event.

The future grid will be cleaner, more distributed, and increasingly intelligent. These trends are expected to penetrate all corners of the industry: customers, regulation and policy, technology, business models, and grid operations. These advances will come in fits and starts and evolve differently in accordance with on-the-ground realities across various markets. That being said, the propensity for innovation and change is undeniable; the prolific (and sudden) rise of distributed energy resources (DER) server as a reminder of the destabilizing impact of innovation.

We cannot predict or anticipate all the disruptions that will be triggered by emerging technologies within the Energy Cloud and beyond. However, if you start with a potential endpoint—an autonomous, self-healing, and artificially intelligent grid emerging within the next several decades—we can begin to understand the far-reaching implications of the energy singularity.

The Neural Grid

While today’s grid is a highly transformative machine that has done a fine job powering innovation across the global economy, the crank of history has come full circle as a perfect storm of significant technological leaps that are beginning to take root and transform the industry in dramatic ways.

There is an inevitability to innovation that cannot be ignored. Consider that it was just 2013 when the Edison Electric Institute predicted in its oft-cited Disruptive Challenges paper that DER adoption, fueled by economic trends and policy, would likely cause a disruption of the utility industry, even suggesting the traditional utility could go the way of Kodak, the U.S. Postal Service, or telephone companies if they failed to adapt. Just last year, Energy Secretary Ernest Moniz noted that we are in the [energy] revolution today.

Fast forward to 2016, and the World Economic Forum is predicting that we are in the throes of the Fourth Industrial Revolution, in which the pace, scale, and impact of innovation will rapidly outpace anything we’ve seen in the past. The Fourth Industrial Revolution suggests that human intervention across the grid as we know it today will be mostly a relic of the past. It’s not far-fetched, for example, to consider Siri, Alexa, and Viv as the primary customer contact points for utilities behind the meter. Taking this a step further, a “conscious” grid could obviate the need for regulators or system operators altogether.

With artificial intelligence attracting $17 billion in investments since 2009 (and $2 billion in 2015 alone), machine learning innovation is on the march. Increasingly, this development is going open-source, which is the equivalent of putting innovation on steroids.

  • DARPA sponsored a driverless car challenge in 2004 that resulted in the winning car traveling 7.2 miles. In 2007, the winning entry went 60 miles driving under city conditions. Fast forward to 2015, where you have individuals building self-driving cars in their own garage.
  • Google’s self-driving car logged 1.5 million driving miles in 6 years; Tesla’s autopilot feature has logged 47 million miles in 6 months.
  • Google search processes 12.1 billion queries per day; each provides multiple data points to help understand what makes us human.

If you take these trends to their logical conclusion, grid learning could propel us toward an energy singularity event within the next several decades. Such an event would mark the dawn of the neural grid, with the potential to be far more transformative to human civilization than the dawn of the light bulb.


Take Control of Your Future, Part VIII: The Emerging Energy Cloud and Final Thoughts

— June 16, 2016

Power Cloud ComputingMackinnon Lawrence also contributed to this post.

In the initial blog in this series, I discussed seven megatrends that are fundamentally changing how we produce and use power. Here, I discuss my last megatrend, the emerging Energy Cloud and its role in changing our industry.

What Is Happening?

Since coming back from Chicago, where I attended the EEI Annual Convention, I am even more convinced that the electric power industry is transforming. In the closing session of the convention, several utility CEOs spoke about the current state of this transformation and shared success stories. Although utilities will continue to focus on safe, reliable, and affordable power, they will also have to embrace clean, distributed, and intelligent energy. It was interesting to hear CEOs’ perspectives on customer engagement (“we now actually listen to our customers”), innovation (“we are all in”), and distributed energy resources, or DER (“we want to play”).

While that’s great, we are faced with an enormous dilemma. It is hard to comprehend the complexity of what we are dealing with here. The Energy Cloud will be the product of accelerating innovation, the bulk of which lies beyond our immediate purview. Although we cannot predict or anticipate all the disruptions that will be triggered by emerging technologies, there is an inevitability to this transformation that cannot be ignored. These changes will penetrate all corners of the industry: customers, regulation and policy, technology, business models, and grid operations.

Meanwhile, there is limited or negative demand growth throughout the United States. And because of more efficient ways to use power and more prosumers taking the plunge to generate their own, less and less electrons will flow through the central power system (indefinitely). At the same time, in order to provide safe, reliable power, as well as support a tsunami of DER, exploding Internet of Things (IoT) capabilities at the edge of the grid, and rapid digitalization, significant grid investments are needed. The number one question is: Who will pay for this evolution? The search for new value and pricing models (and there will be many) has begun.

We are at the beginning of the transformation, and I don’t think we have seen anything yet. I predict we will enter a 20-year period of uncertainty, trial-and-error, and both successes and many failures. Along the way, we will figure out ways to transform our power generation, delivery, and consumption system into an orchestrated, flexible, open, and efficient Energy Cloud platform.

The Emerging Energy Cloud

In my blog, “The Impacts of the Evolving Energy Cloud,” I discussed how we are moving away from a centralized hub-and-spoke grid architecture based on large centralized generation assets toward a more decentralized grid with an increased role for renewables, DER, grid-edge IoT, and digitalization. The Energy Cloud is an emerging platform of two-way power flows and intelligent grid architecture. While this shift poses significant risks to incumbent power utilities, it also offers major opportunities in a market that is becoming more open, competitive, and innovative. Fueled by steady increases in DER, this shift will affect customer relationships, shape policy and regulation, change business models, propel continuous technology innovation, and overhaul grid operations in every single region of the world.

The Energy Cloud

Energy Cloud

(Source: Navigant)

North American utilities are at various stages of integrating distributed generation, demand response, energy efficiency, electric vehicles, and electric storage. Navigant expects this integration trend to accelerate. According to our analysis, DER is projected to grow almost 3 times faster than new central station generation in the next 5 years. That makes DER one of the most disruptive factors affecting the grid today and in the future. From a recent Public Utilities Fortnightly-Navigant survey among 400 utility stakeholders, 90% of survey respondents believe that the growth of DER will force a major shift in utility business models. We believe it is critical that utilities have an integrated DER (iDER) strategy and approach.

Path Forward: The Energy Cloud Playbook

The paths that utilities will follow to transition toward the Energy Cloud will be different. More importantly, the pace by which they move through iDER maturity levels will differ greatly. But understanding the North Star and taking the right steps at the right time are vital to making the transition successful.

At an advanced iDER maturity level, utilities have addressed issues arising from high DER penetration such as intermittency, reverse flows, and power quality issues. Utilities are using both information and operations technology (i.e., IT/OT) and have aligned their business processes, operations, and organizations appropriately. DER management systems (DERMSs) and advanced distribution management systems (ADMSs) are managing DER output at the feeder and substation levels. At this advanced iDER maturity level, the utility has augmented its role as a supplier of electricity and has become a platform provider and network orchestrator that enables prosumers to market their DER assets on an open market. This role is critical to fully maximizing the benefits of DER—and it will be key to providing future value to customers and shareholders.

What’s Next?

While the Energy Cloud is in its infancy today, its evolution will be both pervasive and highly disruptive to stable electric industry revenue streams for the next 30 years or more. Navigant projects that the Energy Cloud’s evolution could result in nearly $1 trillion worth of global investment shifting downstream to the retail segment of the value chain. What’s more, it could add an additional $1 trillion to 1.5 trillion in new value from investments in digital infrastructure and associated services by 2030.

As a follow-up to Navigant’s white paper, The Energy Cloud, we will publish our Energy Cloud 2.0 white paper in the next couple of months. This new white paper will move beyond the “what” to identify the “how.” At the same time, it will provide an Energy Cloud Playbook for the different utility, regulatory, investor, manufacturer, and government stakeholders positioning to build, manage, and protect their future in this emerging ecosystem.

Final Advice: Take Control of Your Future

This post is the eighth and final in a series in which I discussed power industry megatrends and the impacts (“so what”) in more detail. Navigant is at the forefront of what is happening in our industry. We continue to collaborate with our clients to help them navigate the rapidly changing energy landscape.

I have received positive feedback and insightful reactions on this blog series from many. Some readers wanted to understand more about the energy technology trends we see. So Navigant is preparing a new series in which we will cover the specific technology trends that we see disrupting our energy industry. Others have requested a megatrends series focused on oil & gas, which we are working on as well.

The megatrends discussed in this series cannot be underestimated. They are accelerating transformation in the energy industry, enabling the entry of new players, putting pressure on incumbent players, and altering traditional strategies and business models. Organizations will need to adapt, and there will be winners and losers as this transformation takes shape. My advice to senior leadership of energy companies is to take an integrated, holistic view of the opportunities and challenges that are flowing from these megatrends. Only then will you be able understand the full impacts and path forward. And that is the only way you can really take control of your future.

I hope you enjoyed this blog series. Stay tuned for future series.

Learn more about our clients, projects, solution offerings, and team at Navigant Energy Practice Overview.


How Can Regulatory Drivers for DER Realign Utility Business Models?

— May 13, 2016

IT InfrastructureThe movement of the electrical grid toward an Energy Cloud model with expanding distributed energy resources (DER) will require new regulatory rules to ensure both reliability and utility profitability. Creating a platform to generate, distribute, and sell energy closer to where it is consumed (referred to as utility 2.0) will require regulation 2.0 changes. Shifting DER and regulatory changes in world markets shape Navigant Research’s DER perspectives, which were highlighted in its recent market forecast report, Distributed Energy Resources Global Forecast.

Those closely following the development of DER models know that movement toward an altered regulatory framework has a number of requirements. These include roadmaps that balance innovation, the economic benefits of competitive markets, the maintenance of reliability, and the reduction of carbon emissions. The 51st State Initiative, a consortium of well-informed industry stakeholders, has created two sets of roadmaps to highlight the type of regulatory changes needed to strengthen the future of the electric industry along these lines.

Advancing Carbon Initiatives

Parallel to DER is the advancement of carbon reduction initiatives in the United States and around the world, as can be seen with the U.S. Environmental Protection Agency’s Clean Power Plan and renewable energy and carbon reduction requirements in both California and New York. DER is likely to play a central role in these efforts. The following developments highlight several recent key regulatory and policy initiatives that are a part of the DER journey:

  • As part of the New York Reforming the Energy Vision proceedings, the New York Public Service Commission (NYPSC) introduced the Benefit Cost Analysis Order. This order will require the NYPSC to place a value on carbon emissions, consider portfolios of DER that capitalize on the grid benefits of DER aggregation software, and consider tariffs that compensate customers who generate their own electricity.
  • NYPSC recently approved Consolidated Edison’s Brooklyn/Queens Demand Management Program to address the overload of substation feeders with a combination of traditional utility-side solutions and non-traditional customer and utility solutions, including energy efficiency and DER.

An important benefit of DER that also includes energy efficiency is the ability mitigate the carbon impact of fossil fuel-based electricity generation. The ability to utilize battery energy storage systems and innovative DER aggregation software suppliers are expected to make demand response, distributed solar, and energy efficiency larger, more reliable parts of the DER landscape. However, the regulation 2.0 changes currently underway will need to align the financial interests of local utilities and distribution system operators. This journey is certain to bring some uncertainty, but also plenty of opportunity for innovation and new business models.


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