“Is someone who works at a utility a utilitarian?” and other bad podcast questions I forgot to ask.
I never imagined I would be fascinated by utilities, and yet life finds a way. This podcast we had on Arizona Public Service’s (APS) Michael Denby, corporate environmental attorney extraordinaire, speaking on his own behalf and not for his employers. Michael let us rib him a little bit about monopolies and how utilities are regulated (at best you’ll get a begrudging ‘maybe it’s a natural monopoly and should be regulated as such’ from Paul and me. Our intuition screams against it.) He was generous with us and I learned a lot here.
Energy trading really caught my imagination for the first time in this podcast. Various energy sources have different tradeoffs. It is hard on the coal and gas equipment to power up and down. Solar only works when it’s sunny, but storage for the time being is quite bad, and is of course dependent on being placed in the right sorts of places. Different regions trade with each other to make sure they get what they need through systems very similar to financial trading. In fact, people are employed to forecast how prices will change, sometimes on quite short timeframes, and act on these predictions through trading to make sure their utility’s energy provision is met at the lowest cost possible and in compliance with their regulation. Sometimes they have so much power on their grid that they need to offload it and will pay other utilities to take it from them! And like many things in this beautiful world of ours, this happens entirely in the background. You only notice a utility if it doesn’t work. I used to produce videos and the job of the producer I always described as “if you do your job well, no one knows you did anything at all. If you don’t, every person on set hates you.” That sounds like life at a utility. Tough crowd, Mike.
Michael sees some big possibilities for utilities in blockchain, though less so in cryptocurrency. We’re big sticklers on separating the two so maybe this is a good place to lay out this difference:
Blockchain: a database that operates in a decentralized manner without a centralized party you need to trust. If it is a public blockchain and isn’t utilizing anonymizing features, data is visible to all in a simple way. Michael sees this as potentially helping utilities in making sure all parties have access to the information they need as there currently are some industry gaps here about how much energy went where, when was this paperwork filed, etc. There are also plenty of people employed to serve the verification functions of the blockchain which can effectively be disintermediated (fancy industry term for ‘taking out the middlemen’.)
Cryptocurrency: a financial instrument that operates through the blockchain. It’s volatile because its market capitalization is so small relative to more established asset classes, and since utilities tend to be risk-averse institutions, their participation in this side of the market is probably unlikely, at least for the foreseeable future. There is the potential for energy trading to settle through cryptocurrency rather than waiting to go through banks... but that would probably be farther out if it happened at all. Though cryptocurrency isn’t only about money. Many tokens have functionality within a network and serve to incentivize desired behavior. “Hey, that sounds like Nori!” you may be thinking, and you would be correct.
As Andreas Antonopoulos likes to say, paraphrased, “money is just blockchain’s first app.” There are plenty of uses of this tech that will become the new “gears within the world” as Denby’s phrase turns. The average person may not notice any of these changes in utilities, in the same way they don’t notice energy traders looking at charts in five-minute increments. It just works better one day. That to me is a wonderful delight.
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