There’s an adage in the energy industry that captures how utilities think about systemic change: Everyone wants to be first to be second.
And with good reason. For more than 300 years, utility companies have been rewarded by their boards, regulators, and shareholders for being risk averse. They make new investments only after careful study, long deliberations, and with a primary focus on safety, affordability, and reliability.
That’s a far cry from the mindset of your average startup. I’ve spent more than 20 years leading venture capital investments, and each has been a high-octane ride of do-it-now, break-it-faster, we-can-always-patch-it-later. Many of those investments succeeded. None would have made it in the heavily regulated world of utilities.
I was mulling these differences as I read a recent piece by Bill Gates on the state of the energy transition and the challenges of getting to net-zero carbon emissions. Over the last five years, I’ve had a front-row view of those challenges. And there are two that, if left unanswered, will significantly impact the world’s efforts to combat climate change.
Here’s what I’ve learned as I continue to run a utility-owned venture capital and innovation fund, National Grid Partners (NGP).
DON’T FIGHT THE SYSTEM, MASTER WORKING WITHIN IT
Utilities, by virtue of their size and ubiquity, have a massive role to play in greenhouse gas reduction but they need to see technology in action to believe there’s value in even trying it out. You can throw all the money you want at decarbonization and develop all the innovation you like, but if you can’t demonstrate its impact in stepwise fashion, under real-world conditions, you’re on a road to nowhere.
The best way to show utilities the value of new technologies is through demonstration projects, which provide the proof points needed to expand to full deployments across utilities.
One accelerator making big strides in this area is Incubatenergy Labs. Past projects include linking PG&E with Dryad, a startup whose large-scale IoT network solution provides early wildfire detection.
But demonstrations are only successful if we accept that utilities and startups operate differently and that we need to bridge those differences. So, we must focus on two things that are easy to overlook but really matter: Making it easier for utilities and startups to work together, and sharing the results of that collaboration with the industry at large as quickly as possible.
CLEAR THE ROADBLOCKS
One of the first roadblocks to deploying decarbonization technologies is starting a conversation. Most startups don’t know whom to call at a utility, and most utility managers have no idea how to work with a startup, assuming they even return the call.
The first step is to sit with the business units at the utility, listen to their problems, and look for potential solutions. One example of this in action is LineVision, which mounts dynamic line rating (DLR) sensors on transmission towers and monitors lines for opportunities to increase capacity safely.
After identifying a clear utility need, a pilot project was launched with Duquesne Light Company (DLC) whereby LineVision identified the potential to boost capacity by 25%. The pilot’s success resulted in DLC deploying LineVision’s sensors across additional transmission lines.
This approach—listening for problems and scouting for solutions, whether they exist in our investment portfolio or elsewhere—has helped us launch dozens of critical proofs-of-concept and can work wonders with any utility.
SHARE LESSONS BROADLY, QUICKLY
I still hear too many stories of startups that get blank stares when they pitch their work to utility companies that aren’t sure how to move forward.
To bridge this gap, alliances are needed. People who have worked in both the utility and startup worlds have unique insight into how to do this, and these translators, so to speak, are vital for VCs hoping to make a dent in global decarbonization.
Alliances need to include utility members from around the globe and provide forums to exchange ideas, partner on projects, and share best practices all with the aim of getting to net zero faster. Alliances should also play matchmaker between startups and senior energy executives.
Similar models have already worked in the telecom industry, such as the 5G Consortium and the MITRE Engenuity Open Generation 5G Consortium. By gathering vendor ecosystems together, these two groups are harnessing the power of collaboration, allowing them to work smarter and faster than if they tackled new technology alone.
Likewise, global industry alliances are crucial in taking transformative energy tech from fringe ideas to deployment and making a tangible, widespread impact against climate change. This is already in the works with the NextGrid Alliance (NGA), a membership organization of nearly 100 utilities around the world that’s making strides in bridging the gap between startups and utilities.
This is the future of decarbonization in the energy industry. This is the work we need to do faster: Facilitate more conversations, make more introductions, sponsor more proof-of-concept demonstrations, and share even more lessons learned about what works and what still needs to be thought through.
By going first, we give energy utilities the confidence to be second.
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