Electricity 2.0

Last week, NDN released my paper on Electricity 2.0: Unlocking the Power of the Open Electricity Network and since then, talking about E2.0 with many in the electricity and energy world, producers, consumers and other leaders, I am move convinced more than ever of the need to upgrade our electricity architecture.

In a nutshell, the argument I make in the paper is that the US will not recognize the promise of clean energy without fundamental redesign of the network at the core of the energy system: the electricity network.  The electricity network is the only portion of the wider energy network where energy moves at close to the speed of light as opposed to the speed of a tanker or truck.  It translates energy from carbonized plants, falling water and the atom to usable form.  It is the only part of the network able to let falling water in one time zone simultaneously light a city in another.   But our antiquated architecture restricts its amazing qualities.

Many have commented on the antiquated physical state of America's grid.  But the deeper question is why is the grid so underfunded, undersized and unintelligent?  The answer is that America has the grid that the current system was designed to create.  For many years, R&D in the highly regulated electricity sector outside of the industry consortium, EPRI, has been virtually nil.  Our balkanized system operates under a patchwork of multi-tiered regulation.  Since utilities realize no reward for risk and receive a guaranteed rate of return on capital, they have no incentive to innovate.  The incentives all work against clean energy and new technology.  Resistance to innovation, in turn, works its way back up the value chain, constraining purchase of new technology and clean energy developed by others, be they Fortune 500 companies or high tech start-ups.  The clean energy promise has captivated everyone from President Obama to Silicon Valley--largely due to gap between what we have and what is possible.  However, we won't achieve what is possible without an upgrade to Electricity 2.0.

Electricity 2.0 involves an upgrade at multiple levels.

  • It involves the upgrade of our physical wires--network modernization.
  • It requires the upgrade of the software and switches guiding the network--a smarter network.
  • However, far beyond that it requires, a new open, plug and play architecture to facilitate many-to-many connections, richer information exchange between consumer and producer, the blending of the consumer and producer distinction as more people trade with one another and the rollout of innovative new products and services across an electricity commerce platform that leverages the power of an open network.
  • To make all this happen, it requires the rearchitecting and modernization of the regulatory framework underlying the system to reward risk, create competition and create opportunity for incumbents and new players alike. Absent a new architecture, the system will remain frozen in time and investments in meters or new transmission will fail to achieve their goals.

To do these four things, while making the network more reliable and secure, we need nothing less than a Big Bang at the federal and state and local level to consist of federal and state legislation and federal and state rulemaking to create a 21st Century platform for electricity delivery and exchange.  As a starting point, we should look to the model that unleashed innovation and unlocked wealth in the highly regulated telecom world at the start of the Internet era, the 1996 Telecommunications Act.

Ultimately, we cannot expect regulated utilities to lead a revolution.  In the case of the telecom revolution, people designing websites, configuring cellphones and writing code late at night made the revolution.  The American people have the energy, drive and desire to lead a clean energy revolution as well, but we must give them the tools they need to do so.

The stakes are huge.  If we succeed, we will realize the opportunity of clean energy and launch a renewable revolution.  We can lower electricity costs, freeing up purchasing power in household budgets and make American industry competitive in the coming century.

If we fail, and continue with the current system, we will not see clean energy come online at scale, we will see few innovative energy products and the competitiveness of our industry will erode.

Electricity 1.0 served the country well in its day.  But that day is past.  It is time to upgrade our century-old architecture to Electricity 2.0 if America is to stay competitive in the 21st Century.

In coming months, NDN will be working with stakeholders to develop a framework for America to upgrade to Electricity 2.0.