In the early days of blogtopia (h/t to skippy), there was a political blogger named Rennie. Rennie's product wasn't particularly good--in fact, it was pretty boring--but it was consistent, reliable and the only game in town. Every day, Rennie would post his content, and his subscribers would read it. His readers had no capability to provide feedback, let alone content, to his site. But they accepted these limitations gladly, as they had no other choice.
Rennie was able to keep tabs on his readers by viewing his daily web traffic statistics. After a while, some of his readers became disgruntled with his shallow vapidity and decided they could provide better stories on their own. So they began writing their own content. But Rennie refused to provide them with the capability to post these stories on his site. Eventually these readers stopped reading Rennie and placed more faith in what they themselves had written. Rennie noticed a drop off in his web traffic, but was unconcerned--after all, for every previous reader that left, a new one eventually subscribed. The new subscriber was every bit as much in the dark about what other subscribers were doing as was the subscriber who defected.
Along came a blogger named Markos. Unlike Rennie, Markos understood the value of the independent researcher who was looking for a new type of medium--an electronic community. To accommodate these independent providers, Markos established a system in which individual contributors could post their stories, provide feedback to the stories of others, and even rate content. More important, all subscribers to Markos's site had access to the contributions of everyone else on the site. Markos's content rating systems created a new concept--a marketplace for ideas, with a currency called mojo. It also created the concept of creative arbitrage--an ability for contributors to assess the hourly and even seasonal popularity of certain types of stories, ensuring a relatively even match between the supply of specific content and the demand for it.
Eventually, a substantial number of Rennie's subscribers transferred to Markos's site. Markos's numbers were climbing rapidly, and Rennie's were falling. Facing reality, Rennie changed strategy, and offered subscribers the same options that Markos provided.
The energy counterpart
The fundamental question is: given the same number of subscribers, which site is worth more--Rennie's monolith or Markos's community? The clear winner is Markos--not because of the hardware, but because of the data and metadata imbedded within the community and the community's ability to aggregate, exchange, and synthesize it for additional purposes. The value of the Markos enterprise far exceeds Rennie's even though Markos has no claim to his diarist's PCs. He wins because his is the information-rich environment. The value of the collective data in that environment--and the knowledge that evolves from it--dwarfs that of the hardware supporting it. It is the value embedded in the technology of community.
The counterparts to today's energy situation are clear. Energy is a commodity rich in data: available supply, demand at the point of use, cost, price, degree days. It is also rich in metadata (data about data), e.g., associated greenhouse gas emissions, conversion factors between different sources, and efficiency. The value is right there--waiting to be mined.
But for whatever reason, the focus of alternative energy has always been on the hardware--even in on-target diaries like this one as well as Al Gore's electranet. The disparity between the data a utility or oil company controls and what the end user has is striking--a joke really. They have customer information systems that cost hundreds of millions of dollars to implement. You receive a monthly bill with a little graph. Yes, you have meters--maybe even a smart meter--but you don't have useful data that can be used to make real-time or planned choices other than programming your thermostat.
This imbalance is easy to change. To do so requires three things. The first is renewable energy technology like solar, wind or perhaps geothermal. The second is a means to store energy generated during periods of excess capacity (either from the renewable sources or the utility). Litium-ion batteries would work, but hydrogen is probably better, as it allows arbitrage between electricity and natural gas.
The third and most crucial element is something akin to a "personal energy computer." Such a device would do much more than track real-time use of electricity and natural gas. It would also factor in other data like forecasted time-of-use prices and weather data (e.g., available sunlight, wind speed, ambient temperature). With this data, it could provide a daily and forecasted total energy profile for the site and optimize the user's acquisition of energy from conventional and renewable sources. In other words, it could calcuate how much energy should be acquired during periods when it is cheap (excess capacity from utilities) or free (excess capacity from solar or wind) to store for periods of peak personal demand.
The beauty of the "personal energy computer" is that each one can be networked to others, allowing the aggregation and dissemination of data for the entire virtual community. This takes the concept of what we commonly refer to as "distributed generation" and makes it much more powerful--intelligent generation. It requires no new infrastructure from the utilities. It doesn't require net metering or interconnection standards. Because excess capacity is stored at each site for use during periods of peak demand, intelligent generation creates the ability for participants to arbitrage peak and off-peak energy costs, resulting in significant savings (and much greater efficiency). The fundamental difference? Bytes, not amps, are the electric currency.
How the enroots could evolve
Consider the following example. Start with a solar/hydrogen home like this one that is connected to the grid. Add to it a personal energy computer, or "optimizer," that is programmed to minimize your overall utility costs. To do this, the optimizer forecasts your expected demand, calculates the likely supply from solar panels (including excess supply), and determines how much, if any, off-peak electricity needs to be purchased from the utility at time-of-use rates.
This ability to arbitrage energy costs on a personal basis saves the homeowner 60 percent of his annual utility bill. In the next year, 10 more homeowners in the service area build comparable homes. Within three years, 100 "intelligent generation" homes in the area have been built. Within 5 years, there are 1,000.
During this time, a smart entreprenuer creates a virtual network of the intelligent generation homes that aggregates, summarizes and disseminates their data to each participant. Although the homes do not physically share electricity, they can now make better-informed choices about timing their purchases of electricity from the utility. More important, they now form a virtual co-op. Because these 1,000 homes collectively consume more electricity than the Sears Tower, they can negotiate better rates with the utility or take their business to an independent power producer (IPP). The virtual co-op can lock-in its rates through long-term supply agreements or futures contracts.
While this community has been evolving, dozens of others like it in the United States have been evolving as well. Within 7 years, the user base has increased to 100,000, including entire subdivisions and small businesses. Detroit has been watching this evolution with keen interest, as it represents the creation of the long-awaited hydrogen refueling infrastructure. Automakers from the U.S., Japan, Germany and Korea now see that the market for fuel cell and PHEV cars is real. The most foresighted among them realizes that fuel cell automobiles should also be part of the intelligent generation network, as refueling them is perhaps the most significant variable in the optimization scheme.
Intelligent generation owners with fuel cell cars have now achieved the remarkable. They have shifted their energy paradigm from supply-driven to real-time demand driven. They have become the enroots. Instead of being at the mercy of the petroleum sector, with its eight-week lead times and susceptibility to disruption, the enroots can produce their hydrogen fuel with a 1-2 day lead time and at the lowest available cost. Instead of being victimized by natural gas shortages and brownouts, the enroots can take advantage of daily and seasonal valleys in price to obtain the required commodity for use during times of scarcity.
This shift--which the energy sector cannot halt any more than IBM prevented the adoption of the PC--is profound. It is an embarkation for the democratization of energy.
An historical analogy
If this sounds preposterous, then take a look at exhibit A.
25 years ago, in 1982, the IBM PC had the following characteristics:
It had 512 kilobytes of RAM
It had a clock speed of about 3 megahertz.
It had a hard drive (at least the XT did) of 10 megabytes.
And it cost $2,500--$6,000 in today's dollars.
A comparable machine today has 512 megabytes of RAM--1,000 times as much.
It runs at 3 gigahertz--1,000 times faster.
It has a hard drive of 100 gigabytes--10,000 times as much.
And it costs $1,000--1/6 as much.
Alternative energy, hydrogen, and battery technology is not going to follow Moore's law. But one thing is indisputable. The cost of energy will go up and the cost of technology will come down. We have seen what happened with the PC/Internet in 25 years. We have seen what the blogosphere has accomplished in five.
Building the enroots requires nothing more than renewable energy technology available today, combined with optimization software. As for cost: if intelligent generation can generate cost savings that are 4 percent of the system's net installed cost, it out performs CDs paying 5.5%. If those cost savings are 6 percent of net installed cost, it outperforms the S&P 500. This is within grasp now, particularly if we adopt a new version of the Section 179 tax deduction (to be the subject of a future diary, I promise).
My guess is that I've created a lot more questions than I've answered. But if this diary causes you to look at the energy paradigm we take for granted in a new and different way, then I will have accomplished what I set out to do.
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