digital electricity space: neoliberalism and energy saving capital workshop. ‘constructing and...
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Digital Electricity Space: Neoliberalism and energy saving capitalWORKSHOP. ‘CONSTRUCTING AND CONTESTING SPACES FOR LOW-CARBON ENERGY INNOVATION’, SCHOOL OF INNOVATION SCIENCES, EINDHOVEN UNIVERSITY OF TECHNOLOGY, NOVEMBER 26-28, 2013Michael LaBelle, Assistant Professor Central European University,CEU Business School and Department of Environmental Sciences and Policy
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Outline Universal Service to Competitive market
Energy (in)efficiency
Value creation from inefficiencies
New Tech and Business models
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Universal Service, Chinese Walls and Competition“Privatization and deregulation combined with competition, it is claimed, eliminate bureaucratic red tape, increase efficiency and productivity…” (Harvey 2005, 65).
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Energy (in)Efficiency and CompetitionENERGY (IN) EFFICIENCY
Oil Crisis 1970s
‘Neoliberal prosperity’
US: Some states mandate energy efficiency measures.
EU: Large national difference BUT savings and targets are not being met
‘COMPETITIVE CHOICE’ MARKET
Erosion (confusion) of energy efficiency efforts
Dis-embedding of utility removes territorial ‘responsibility’
Investment cycles shift from long-term to short-term
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Collapse of the utility modelTURNING INEFFICIENCIES INTO OPPORTUNITIES
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Failing business models: ‘competitive’ utilities
E.ON 2.0: Selling distribution and generation
RWE: Shrink business and consult (?)
EnBW,: Projects earnings from electricity generation will fall by 80% in the 2012-2020 period (The Economist 2013)
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Innovators Dilemma Focus on the most profitable customers and invest in the most profitable parts of their business while pursing large markets (C. Christensen, Craig, and Hart 2001; C. M. Christensen and Bower 1996).
Low value customers
Ryan Air and Wizz Air
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System inefficiencies and regulations
“Resource inefficiencies are most obvious within a company in the form of incomplete material utilization and poor process controls, which result in unnecessary waste, defects, and stored materials” (Porter and van der Linde 1995, 122).
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Monopolistic Hegemon to Competitive supplier?This value creation occurs in the spaces where utilities ignored due to their supply side and ‘push’ business model, which was focused on increasing demand and building more generation and reach universal geographic coverage.
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Digits: Value creation from system inefficiencies - is the new business
Digitalization of the electricity grid opens the way to bundle value added tailored services to the electricity commodity and possibility contributes to reverse the traditional consumption-driven paradigm of the electricity sector (Giordano and Fulli 2012, 253).
Digitizing the energy infrastructure stems from the integration of communication into the grid and between devices.
The modernization of the grid, even for the monitoring benefit, such as simple meter reading, is leveraged by other companies to extract value.
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Commoditize the WasteCommoditize and extend the production process; not just power plants but from verified energy savings and demand side controlling mechanisms.
In the US a third of US households have a smart meter (Tweed 2012), with 27 million smart meters installed, with 77% done by investor owned utilities (United States Energy Information Administration 2013). The EU is rolling out smart meters to 80% of homes by 2020.
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Business Models
3 Company models
SmarterE: Multiple waste streams in a buildings/facility
ID Energy: Focused on waste creation from machines
Opower: Focused on waste creation through consumer behaviors
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Conclusion: Monetized Electricity Space
Territorial alterations: Universal and monopolistic service shift to ‘competitive’ open systems
Risk aversion and short term investment horizons
Energy inefficiencies become digital: Identification of waste streams and business models
Commodification of waste stream provides entrepreneurial opportunities for deploying new technologies
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The business is in the inefficiencies
In the 1880s, Andrew Carnegie outlined the importance of accounting for each stage of the in-put/out-put of the production processes in steal making
Slate Oct 15,2013
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Game Changer: Risk and Competition
Get rid of the monopolies, competition will spur innovation and lower priced alternatives, thus benefiting consumers.
Risk aversion: No one wants to be responsible for a system collapse and blackout.
“The prospect of increased competition, along with an increased likelihood of cost disallowances under incentive regulation, means that regulated firms are no longer guaranteed cost recovery on their, largely irreversible, investments. Incentive regulation has shifted risk back onto share-holders, so that risk plays an important role in firm investment” (Guthrie 2006, 930).