Industry needs power.

What’s the Deal with New Energy Tech?

While the basics of consumer-level mobile tech and industrial or institutional big data make enough sense to your average cocktail sipper, what the hell are the energy startups doing? When you meet someone working in “really cool” energy stuff, what should you be thinking? What are these energy companies doing?

Premise: The Power Grid

The electric energy grid is a colossal feat of engineering much larger than the Hoover Dam. When it works, you get computers and induction furnaces; when it doesn’t, the giant infrastructures of industry and civic life just sort of don’t work for a while. Huge losses, billions of bucks, trouble in hospitals, etc.

Opportunities: Not in Consumer!

Big business has big power bills. Power generators and grid operators have huge costs. The old system is not that efficient, in some ways, and that means opportunities for business.

Now, for consumers, is there much to gain? I would say no. You might save some bucks with a smart thermostat or futuristic energy box, but the returns are about as tangible as a savings account. Will your power be greener or more reliable? If you live in the developing world, then yes! Otherwise, uh, maybe slightly!

Does this benefit “society” at all? Yes. Power outages are incredibly expensive, if you imagine that the entire economy in the affected area stops for hours or days. High-pollution power production is bad and switching away from it is much more complicated than shutting a coal plant and putting up a solar panel.

What Energy Tech Startups Do

Imagine a huge machine, several thousand miles wide, with nodes and substations and wires running along every road, parts doing all kinds of things, controlled by a series of incredibly complicated trading markets, and rather small tolerances for any dials going up or down too far too fast. That’s the power grid.

Now imagine you have huge political will to throw away half of the parts in this machine. That’s the victory of environmentalism. (Yay!) Now imagine you have PUCs and shit breathing down your neck to change things way faster than any of your engineers thinks makes sense.

The power companies are struggling with the transitions, need help from new technology, and are very conservative. Conservative. Working in power, if you make a mistake, you could cause a cascading power outage or damage hundred million dollar equipment in a second. Fair enough. Politically, they have entrenched power (one of the largest and most consolidated industries in the world) and have been bad sports about being on the wrong side of environmentalism. Conservative.

New energy companies try to sell to existing power companies (this is hard) or try to work around them (this is hard). Legally, you can sell power from the roof to the tenant “behind the meter,” but the power company has a legal monopoly on selling power from one unit to another. This monopoly should probably be revoked, but that would be very hard.

New energy companies offer to improve the efficiency of energy distribution, better produce energy behind the meter, milk subsidies, or sell into the energy markets (often with specialty services like providing a slowly increasing amount of power for 3 hours tomorrow afternoon). Some produce equipment for electronics, but that’s a very different business than energy.

Subsidies and renewable energy deserve special note: this is a very important, underdeveloped field where one person builds a solar farm or whatever and the other person bankrolls it. The financier then claims tax subsidies, which are really just tax breaks, and then uses them to avoid paying taxes on money they made some other way. In theory, the solar farm is profitable and pays for itself in a few years, but really it’s a 20 year investment with a return that is hardly competitive assuming a fat principal (if you lend someone a few million dollars you can usually get a nice return). As this sector matures and becomes more efficient, we will increasingly pay for renewable energy by reducing the taxes collected by government from high income entities. That is, we will pay in lost government revenue and less rich people / big company tax dollars will reach government. (This is the kind of plan politicians like, because it’s free today, looks like reducing taxes, and only costs later. On the other hand, it’s completely insane because it means you get almost half your capital investment back if you build renewables with the help of a rich guy who wants to pay less in taxes.)

Happy solar houses.

Why Solar Is Overrated

At this point you may be thinking, “Wait, are you against solar?” It’s like democracy, the worst option except for all the other ones.

Long term, solar prices are decreasing and will eventually produce power at better wholesale rates than coal etc. Short term, we should do whatever we can to reduce warming or human civilization is totally screwed. (Actually, it’s probably too late to prevent this, but we can make it worse by ignoring the problem.)

But, in the medium term, solar is expensive and fucks up the grid. For the solar user, you can buy energy at below retail. Now, to be clear, the price you pay for your solar from Flashy Company is the result of some spreadsheet full of dubious assumption, but whatever. If you saved money this year, great for you! Your panels can’t actually beat wholesale prices. Coal and nuclear are always going to be cheaper power producers. It’s like making tortillas at home: you can do it for less than they cost in the store, but not for less than it cost to make the ones that are in the store.

So, why is solar bad for the grid? Because it’s erratic and there aren’t trained engineers operating it. It just sits there on your roof and produces power or not based on the sun and the clouds and shit. That’s stupid. In Hawaii, solar was so popular (and the subsidies so big) that whole neighborhoods would produce so much power midday that they would feed energy back to the rest of the grid. It’s a big machine, ok. It’s not designed for what it’s not designed for and centralized fossil fuel generation never made power push back from the houses! Second problem: around sundown, all the solar output would drop off rapidly just as people got home and turned on the AC. Boss for them, but that requires the centralized generators dramatically shift their output and those big old machines are not designed to change like a volume knob on the radio. Some fossil fuel generators are designed to do that, but they’re much less efficient. Solar and wind, btw, can’t do that at all.

Alright, that’s just the stuff I can explain in this already too long article, but let’s trust the engineers who have worked on this giant machine for over a hundred years that there are other things that might be complicated about maintaining two alternating electromagnetic waves across thousands of miles and letting any jackass turn on a chainsaw or industrial furnace any time of day without a hitch. Reactive power, frequency regulation, things like that.

Alright, now the big problem with solar. It’s cheap for you and bad for the grid, but there’s this easy-peasy program called “net-metering” that lets you trade your shitty solar power for the grid’s designer energy at 1:1 prices! This would be like if you could make tortillas and then, by government mandate, you could sell them to the grocery store at equal price! Makes no sense. Bad for the grid. But it helps sell solar panels and therefore gets the blood flowing through the industry to advance the tech and reduce prices until solar sucks less. That’s why it’s also a smart program.

What Makes the Smart Grid Smart

The current grid is dumb. Really dumb. There are wires sending things along them, but, for the most part, no sensors or communications to track what’s happening on the wires. This was a great idea before: our roads are the same way and that’s not so bad. But now that the way we use these lines is changing, mostly due to renewables, and the only way to know what’s happening on the lines is to (use some technology to) check.

I bet you could guess what most of these sensors do and how the communication equipment works. And I bet you’d realize, once you guess at this, that you’d end up with a ton of data from buildings, grids, stations, lines, and every other organizational level that could be analyzed in all kinds of ways. As long as you’re measuring, you could go ahead and add some controls to the nodes.

Smart meters are a good example. The dumb meter says how many kwh passed through it and what the peak was. Someone has to come out and read it. The smart meter will measure how much was used in every 15 minute interval with usage spikes per interval (better granularity). It will report this automatically in a usable digital format. This data would allow for better rate planning than “peak and off-peak pricing” which is totally vague and is actually backwards once there’s a lot of solar power in your hood. Is this a big step forward? At one level, no. Another, yes.

(Spikes matter to the grid because power is a capacity game. Power is instantaneous, energy is an amount of power used over time. If someone turns on 100 blenders, you have to allocate that capacity to them all year in order to make sure you can handle that spike when it does happen. Not meeting their need at the spikes means crashing the grid, so is not an option.)

Who cares?

If you read this far, congrats. You now know enough to enlighten your fellow cocktail drinker and to have some clue what to say to someone who works in an energy company other than a utility.

For the most part, these changes are of no consequence to consumers in the developed world. Like many industries, energy companies point to the developing world when they want a chart that goes up and to the right. Theoretically, a developing middle class in India, China, and the rest represents a huge opportunity. But, really, this was true with the previous generation of energy tech, so I wouldn’t hold my breath.

We, developed world people, are getting the renewable energy that we, as democratically represented societies, asked for. And it’s totally fucking up the power industry. Probably it will all come out for the better, but, if we imagine the power companies as Godzilla and everyone else as the helicopters and tanks trying to stop him, things are going to suck for a minute.

What to Expect

Your rates will continue to increase to accommodate changes on the grid. Practical energy storage would be a game changer, so people will push for that and probably develop it even before it really makes financial sense. (It rarely make sense now. Though it can help with usage spikes!) Electric cars could be a huge tie-in product for energy storage, but also might not. More solar will go in, limited only by the unimpressive economic benefit it offers. Some homeowners getting into solar will get scammed because it’s all really a complicated loan based on soon-to-be obsolete panels, but if you get in now, you’ll probably get to keep net-metering when it’s finally phased out, so good for you (though too bad for the grid).

Big power companies will take credit for everything good that happens even though they did their best to block it. Little companies will get creamed. The electric utility monopoly rights will decrease. The industry will be fragmented for a minute and then consolidate again. Your friend in energy tech will find a new job. Energy will be boring again in 40 years or less.