Turn the Energy Market Upside Down
- Posted by Brian Fino
It’s almost magical – you flip a switch on the wall, and the light comes on. Click the remote and the television powers up. When the temperature gets too warm, the air conditioner kicks in.
We use electricity all the time, every day. And we rarely stop to think about why we are using it, or how much it costs. It’s just there for us, when we decide we need it.
That dynamic is deeply ingrained in the consumer’s consciousness. For more than 100 years, utilities have been generating power to meet demand, at any cost. We use what we want, they generate what we need, and we pay.
Of course, that means the typical energy consumer – with moderate and predictable demands on the grid – is subject to fluctuating costs based on the utility’s aggregate demand, regardless of their personal choices.
But all that is about to change.
Smart grids, connected appliances and electronics and easy access to real-time data and analytics will transform the marketplace. Here’s how it will work:
Producers will generate specific amounts of power at various prices, depending on time of day, day of week or fuel source. They’ll communicate the amounts available – and the associated costs – to consumers and smart appliances connected to the energy exchange.
That transparency will enable consumers or appliances/electronics to make decisions to purchase power based on their own cost or usage preferences. Demand will naturally be curtailed as consumers adapt their behavior, and usage choices, to fit supply.
All this won’t happen overnight. It may take a decade or more for all the pieces to fall into place. We still have a great deal of old-fashioned “dumb” infrastructure in use, along with business models and operating processes that were designed for traditional, regulated markets. And in general, consumers aren’t quite ready to think differently – or at all – about their energy usage.
The good news, however, is that there is already some movement forward. The Aros smart air conditioning unit, Nest thermostat and smart light bulbs, for example, are introducing individuals to the idea of the “connected home,” and developing consumer awareness around the value of understanding energy usage.
What’s needed next is a reorientation of the market that will engage consumers and empower them to make decisions – for example, how much to spend on energy, where that energy may be sourced from, and which appliances, electronics and behaviors are important to them.
This future isn’t far off. It’s economic. It enables choice. And it’s good for the environment.
Imagine that.Tell us what you think @finoconsulting or by email.