Elon Musk is trying to turn Tesla into a verb with announcement of the disruptive innovation adaptation of his auto battery system into a home and business energy storage solution. We all hope he succeeds!
One of the biggest disruptive innovation technology frontier hurdles in the energy industry has been the concept of energy storage. Electricity is instantaneously transmitted when produced at power plants connected to the power grid. It is unique in that keeping the lights on requires a continuous balance of supply and demand. For generations engineers, soothsayers and wizards of all types have flirted with ways to capture lightning in a bottle for later use. It remains the missing link in our distributed energy future.
We have good solutions for utility scale energy storage in pumped hydro and compressed air technologies. They work and are reasonably cost effective in many markets, but not very practical for our garage at home. That is why there has been such excitement about Elon Musk’s announcement about the new Tesla product called Powerwall and its larger commercial-scale solution called PowerPack. The hype around these new products masks some of the practical issues Tesla and others still face in bringing them to market.
The major issue facing the learning curve and adoption rate of new energy storage technologies is not the technology but the complex rate and regulatory framework that still govern the energy industry.
For example, commercial and industrial power customers often pay variable rates or demand charges for energy use so they have incentives to reduce demand at high use times of day (“peak shaving”) or reduce overall demand (”demand response”) in situations where doing so can produce revenue from the grid for making power supply available to other customers.
For residential customers demand response and tiered peak demand rates are mostly a ‘pain in the neck’ producing much more aggravation than they do savings because our homes are not designed or engineered to control all the appliances and uses conveniently. Someday that will happen but we have several generations of equipment replacement and smart grid development yet to go before it happens.
In the mid-1990’s I worked for Dan Yergin at Cambridge Energy Research Associates “CERA”. One of my assignments was to lead an experimental energy advisory service call the Retail Energy Forum in the early days of competition in the electric power industry. We attracted some very large commercial and industrial players to our research service where we used scenario analysis to play “what if” around alternative energy market structures for retail energy business models.
The California energy crisis chilled most of the enthusiasm for retail energy markets as too risky. Across the US power markets few had the patience and stomach for the ‘wild west’ character of those early competitive energy markets.
But for the very serious members of this Retail Energy Forum service the factor that kept them from taking the risk was the difficulty in scaling their business while avoiding being snagged in the morass of energy regulations affect retail energy customers.
Twenty years later disruptive innovation technology is making it possible for larger commercial and industrial players to again consider market entry. Early adopters like Tesla create enthusiasm but still offer plenty of risk—too much for most as yet—but this will change with experience and demonstrations of product success.
Tesla’s powerwall is still a long way from being a retail energy success for residential customers, but it may be very attractive as a sustainability play and demonstration project for many commercial and industrial players and that can make all the difference.