Jerry Franklin is managing director of EnSmart Inc. (FILE)
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ONE OF THE ICONIC EVENTS in the history of businesses evolving too late was the collapse of Eastern Kodak in the digital photography revolution. Kodak was the biggest manufacturer of film for cameras and ironically the inventors of digital photography technology.
Kodak took a decision to stick with what they knew best and didn’t embrace the digital technology change. This decision was the beginning of the end and the company eventually filed for bankruptcy in 2012.
Today, our children take pictures with their mobile phones and view them instantly, yet there are still photographers and camera manufacturers like Nikon and Canon doing well.
The things we have achieved today with digital photography would not have been possible if Kodak was able to keep film alive and stop the digital revolution. New companies like GoPro and the emerging drone photography industry wouldn’t have been possible.
Today, the power industry is going through an evolution and the utility companies are at a crossroad. The evolution of renewable energy technology and battery technology will change the world forever, much like what digital photography did. Companies have to decide if to embrace this change or if to resist it.
I believe the utility companies are in a similar position to Kodak and their survival is dependent on if they embrace the technology early and evolve their business model to generate revenue from new areas that will be created.
Some utility companies’ plans are to maintain market dominance by migrating from fossil fuel generation to large scale renewable energy generation. While this is a step in the right direction, I still believe this approach will not work.
There are already a number of indicators that show utility scale renewable energy solutions have some challenges that will not be easily overcome in the near future. The utility companies are in favour of slow adoption of renewable energy, which gives them time to retire their existing fossil fuel generator assets and to give the battery manufacturers time to overcome some of the challenges of large scale storage.
There is nothing wrong with this approach if you are a utility company, but the question remains: is this the right approach for Barbados and the world?
Studies have already shown that a mix of utility scale renewable energy generation and distributed renewable energy generation (or roof top solar as it’s called) will allow the grid to be more fault tolerant because it removes the possibility of any one failure to cause a catastrophic event on the grid.
The utility companies over the years have facilitated a power consuming culture that has little to no connection to what is required in meeting their uncompromising energy consumption.
Today, we expect electricity at any time in any quantity. Utility companies have spent years and lots of money trying to predict when there is going to be a peak in demand. Today, it means firing up more generators to meet the demand.
What happens when we try to do the same thing with storage? The utilities would have to invest millions of dollars in super large scale storage to try to support this demand and history has proven that once energy is cheaper bad habits will get worse. Many utility companies are already planning on maintaining fossil fuel generators to deal with these peak demand challenges.
So what is the alternative? Distributed storage; evolving the network with storage in homes and smaller utility storage at the community level or at substations. Responding to localised peaks is far easier than national level response. Home storage will eliminate some of the peak demand from the grid and it would address some of the power consumption bad habits.
When individuals have to supply their own power they deal with the consequences of abusive consumption very differently. Additionally, electric vehicles would become part of the utility companies distributed storage.
Even if you have your own renewable energy system for your home, it would make sense to charge your vehicle on the grid and then provide storage to the grid when not needed. Last, but not least, a comprehensive nation-wide efficiency policy would be the only way to address the bad consumption habits and to minimise the peak demand.
Today, we already have some very impressive batteries, but they still don’t meet the needs of a utility level storage. Elon Musk of Tesla decided to break the code of silence and told the world that every household should store their own energy. Battery technology was mature enough for this to be done years ago, but Musk has decided to make it cheaper, more user friendly and package it for the consumer. Musk has made a direct challenge to the status quo and aims to give every home everything they need to be self sufficient.
So we currently have the technology to provide storage for every home or business, it just needs to be priced right. On the other hand, we have storage technology that is struggling to handle utility scale requirements. It is time for utility companies to start considering what their approach is going to be.
They can either try to maintain market dominance through the traditional way of 100 per cent utility generation – while suppressing the technological evolution – or evolve with the market, reduce capital investment in generation and storage plant, invest in the smart grid infrastructure to support more distributed generation and storage, create smart grid services and avoid becoming another Kodak moment.
Jerry Franklin is managing director of EnSmart Inc. He is an engineer, energy auditor, equipment tester, and energy solutions provider.