Among technology giants, two predominant business models dictate the way in which consumers connect (and interact) with the broader Internet and the way in which innovation unfolds: open and closed. This tug-of-war between open versus closed has been going on ever since the Internet first started to hit the mainstream. As described by GigaOM, “It’s a battle that has been at the heart of the technology industry for most of its modern history.”
Open models seek to facilitate universal access and maximize creativity, but potentially breed chaos, error, and design catered to the lowest common denominator. Closed systems limit the number of participants and exert more control over the flow of information, but can make it easier to roll out dynamic products while minimizing the potential for error. In more specific terms, it’s a battle between the Google, Android, and Adobe business models and those of Facebook, Apple, and Microsoft. Each carries with it specific advantages and disadvantages.
Advent of the Cloud
Although still in its infancy, in the emerging Energy Cloud, the battleground is divided similarly, with advocates of open and closed models both beginning to stake claims.
The Energy Cloud – the end result of an evolutionary shift away from a financial and engineering model that relies on large centralized power plants owned by utilities to one that is more diverse, in terms of sources of generation and ownership of assets, and enables the integration of new, distributed energy resources in addition to traditional generation – provides a rich ecosystem for breeding innovation as energy becomes increasingly democratized. As depicted in the graphic below, the hallmark of the Energy Cloud is a shift away from one-way power flows to bidirectional flows in which consumers become both consumers and producers of power:
The Energy Cloud
(Source: Navigant Research)
Lessons from the Revolution
There are many lessons from the Internet revolution that can be applied to the Energy Cloud. Open and closed Energy Cloud models alike must balance the need for access, reliability, safety, and ultimately, innovation.
The question comes down to this: will the Energy Cloud take the form of a walled garden, as CompuServe and America Online attempted in the early days of the Internet and Facebook is doing today, or will it remain an open landscape? Or, perhaps of more relevance to stakeholders, which model best serves the goal of fostering a thriving, ubiquitous Energy Cloud?
Likely, both open and closed models will play key roles, as the Energy Cloud will serve multiple objectives simultaneously. According to an essay on the topic from PricewaterhouseCoopers, innovation is almost never an either/or choice. As most companies have discovered, their innovation goals involve a complex mix of closed and open models that is uniquely tailored to their specific innovation objectives.
Customers and Providers
For the incumbent utility, for example, objectives remain focused on preserving market share and maintaining safety and reliability while also growing profitability. For the consumer, access to inexpensive and reliable power around the clock and choice in how and by whom their energy is produced remain key objectives. Some stakeholders will seek to maximize either one of these positions, while others will seek to bridge the two.
In either case, the emergence of the Energy Cloud will require a rethinking of standards, protocols, and relationships among stakeholders. With a slew of innovative technologies gaining market share – solar PV, distributed storage, home energy management systems – the integration of these assets into an efficient and resilient system remains among the greatest challenges ahead for all Energy Cloud stakeholders, and will likely be where the greatest emphasis on innovation will occur.
Tags: Distributed Generation, Energy Technologies, Policy & Regulation, Renewable Energy, Utility Innovations
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