Why “disruption” might not be the way for the Energy Transition, but disruption surely is.
The energy industry is in flux. And I should know. Gone are the days that delivering energy brings in enough money. Consumers don’t want more dirty electricity, they want a greener future. The Energy Transition is in full effect. And utilities are looking into ways of making money through new business models. They take inspiration from AirBnB, Uber and the likes.
Utilities are thinking about offering services to open new revenue streams; “heating as a service” and “shower minutes” but they are also looking into the sharing economy as their new business model. Both services as new business model and the sharing economy paradigm lean heavily on the idea that people don’t want to own much anymore in the future.
Making money of this non-ownership is the holy grail in a market where business as usual is declining fast. Above visual was used at last year’s European Utility Week Summit (my gig) in one of the many talks on this subject. By some coined as the Uberfication of Energy.
But is “disruption” such a good thing for the Energy Transition?
Treating customers like real people and not mere meter access points is a very good change the industry is currently going through. Really connecting to people and their needs and coming up with delightful services is an absolute must for Utilities. Although AirBnB and Uber did change customer interactions radically, was this the key element of their success?
Furthermore, how should we think about a new economic paradigm for after the Energy Transition?
Is “disruption” the job of new entrants?
In professor Christensen’s narrow definition of “disruptive innovation” it depends what the starting position is of a new entrant to be considered truly “disruptive”. I agree with Bloomberg’s Justin Fox that disruption entails more than one Harvard professor makes it out to be.
When a person, company, institution or government causes (something) to be unable to continue in the normal way, according to Merriam Webster, it is being disruptive. I think this definition is fine, and I will use it accordingly from now on.
That was quick. I actually thought I had to write 3 more paragraphs to explain why “disruption” is something completely different from disruption. But we’re good right? Of course we are.
The idea that startups and new entrants own the realm of disruption is ridiculous, good for their PR, but absolutely ridiculous. Professor Mazzucato clearly shows just how important the role of the government is in innovative businesses.
Keep calm and manage the Energy Transition
To be more clear, I think disruption is a combined effort where market design, technology, innovation, business models and consumers come together. Something that can be calmy managed. More or less.
This might sound like a reasonable idea, but even cutting edge management thinkers seem to approach it from their own silo. It’s when the silo’s break down the Energy Transition happens.
And I am optimistic. As Roberta Bigliani noted recently, Utilities are much more innovative than people think. Regulators are also putting much more effort to test and get their regulations to help other essential players in the energy system.
Probably my main concern is with the consumers/citizens of the world. David Roberts has time and again pointed out they should demand ownership of the smart grid.
Let’s move to the last point of this article. I would like to zoom in on what regulators can do.
Bright future of a regulated Energy Transition
I believe in writing articles that follow a clear line of reasoning. From now on I will use the word blog posting for this particular publication of mine because I think it follows not a tree of arguments, but more like some thick intertwined shrubs of argument-like creatures out in a very dry dessert.
Having said that I want to come back to the question of a new economic paradigm for after the Energy Transition. A Transition I strongly believe we are already in the middle of. You probably share my opinion if you check the latest market updates.
This transition is not hard. It’s just a lot of work. Don’t forget technology is making things easier. And then I’m not talking about disruptive technology. If we look at innovation as one big disruption machine we are cutting ourselves short. It’s not a competition, it’s a cooperative game we are playing. We only win, when we all win.
The energy transition is something we are doing together. And our institutions are helping us get there faster.
well placed “We are the world” pic
- The technology is there
- Consumers want it
- Businesses want to earn money
- Regulations are in place … wait, what?
Make Energy a regulated Sharing Economy
In a recent article of professor Frenken and his colleagues some misunderstanding was clearified for me about what the Uberfication of Energy means and if this is what we have to regulate for.
The sharing economy and other related economic forms. Frenken et al
Above figure shows different economic forms and how they relate to each other. They all connect to the concept of non-ownership mentioned before. My misunderstanding was how I should see companies like Uber and AirBnB. Thank you kind people of the Utrecht University for solving this matter.
When I rent out my house while I am away on holidays, that is considered part of the sharing economy. But that is not the same as when I have an appartment and run it permantly as an unregulated hotel. Those things are very different. Businesses get a lot of positive PR because they are (wrongly) considered to be part of the sharing economy, so I see the need for them to uphold the confusion.
“There is little doubt that the sharing economy can make a contribution to a more sustainable economy.” Koen Frenken
Running a unregulated energy hotel is how I perceive the Uberfication of Energy. Or a poorly regulated on-demand energy taxi service. That’s not what I want. That’s not at all a bright future. I do see all economic forms mentioned before as possibilities in the Energy Transition though.
- Sharing economy
- Product-service economy
- On-demand economy
- Second-hand economy… (used bath water from your neighbour)
How regulations should work out in detail? I’ll leave that to the people in Brussels. Some of them I will speak soon because they are in in the advisory committee of the European Utility Week Summit (still my gig).
Looking forward to Monday .
Yes, I am the one in the front, new suit and everything.