Obvious Ventures
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Obvious Ventures

The Grid Edge as a Platform

The US electricity grid is the original mesh network. The original web. The original net. It’s just a really archaic version of a net. Until now.

Finally, the electricity grid in the United States (and many other places) is starting to get smart. It’s getting smart not just because it can, but because it has to. The proliferation of distributed generation and energy management at the “grid edge” is forcing this change. The grid edge is the emerging moniker for the smart systems that live at the end of the energy distribution system — your rooftop solar, EV car charger, Nest thermostat, energy storage battery, etc. These smart devices increasingly make up a smart grid edge that simply didn’t exist in the past.

A one-way grid, despite being a web of interconnected nodes, was built over the last century with one simple goal: move energy from a central generating source to a distributed point of use. Using water as an analogy, we flooded a vast canal system to distribute water (energy) to all points. When the canals ran low, more was poured in at the top of the system — often in the form of expensive and polluting large-scale fossil plants. While in many ways a blunt force instrument, this system has served us very well for over 100 years.

However, today the rules are changing. With the advent of affordable distributed power(mainly solar), we no longer need to hide our power plants far away from their point of use to protect us from their pollution. With the arrival of low-cost energy storage, demand response software, and community solar, the canal system is about to change — big time.

Now we are pushing the metaphorical water back upstream. We need to be able to predict and manage the movement of this water. Further, as distributed energy resources become a meaningful part of the energy supply and behavior, we need to track how and when that energy moves.

The modern grid, therefore, needs to act more like the internet and less like an old-fashioned canal system. This “two-way grid” is really a web of electrons that will have direction and intelligence in the same way packets of information are directable on the internet today.

There are at least two big implications of this change taking place.

First, as the two-way grid can be effectively managed, the grid edge will be able to handle a large increase in the number of distributed systems in use. From rooftop solar to batteries to vehicle-to-grid solutions, utilities will finally have tools to manage these assets as tools instead of viewing them as threats. They’ll be able to cut peak demand, give capacity support, curtail production, offer the grid voltage support and frequency regulation, etc. This change will create huge venture investment opportunities.

Second, a new type of commerce will take hold. Asset owners will now be able to sell their systems as services onto the grid. Battery owners may be pooled together to sell capacity and ancillary services. School solar systems might sell into community solar pools on weekends and in summer months when school is out of session. Demand response systems will sell not just to the building owner, but become part of large demand response pools selling solutions back to an open market on the grid.

This type of emerging platform, where many different buyers and sellers come to exchange value, is one of the largest shifts to hit our electricity grid since the invention of the grid itself. The grid is now becoming more and more like the internet — interconnected and multi-directional.

This two-way shift is a major part Obvious Ventures’ Sustainable Systems thesis. Our first investment in this area is Enbala Power Networks. Enbala is truly an operating system for the distribution layer of the grid. With Enbala, utilities, property owners and asset managers can manage and coordinate their interaction in this very fluid platform. Managing load, capacity and ancillary services along with the compensation for the benefits presented from them has been impossible with this platform. Enbala and others are opening a new chapter in effective and modern grid infrastructures.

But there’s more to come. The lack of a commerce and intelligence platform at the edge of the grid has created a bottleneck for innovation. With this build out of the two-way grid and the grid edge platform to support its commerce, we see huge opportunities in even lower-cost solar, distributed storage, demand side management, and energy efficiency. The powerful mix of talented entrepreneurs combined with this new platform will unleash a new wave of innovation.

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Andrew Beebe

Andrew Beebe

#worldpositive investor at Obvious Ventures. Former clean energy tech (and just plain tech) exec and founder.

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