September's final week was a good one for high-profile innovations in the clean-tech industry. Tesla Motors, at a massive party attended by more than a thousand tech hipsters near its Fremont, California factory, unveiled its glitzy, wing-doored Model X electric SUV. Three days later, SolarCity announced what it calls the world's most efficient solar PV panel, achieving a higher than 22% efficiency rate. Tesla and SolarCity founder Elon Musk, appearing that day at SolarCity's annual Inside Energy conference (co-produced with Clean Edge) at NASDAQ in New York, talked about the best way to debunk the it-can't-be-done myths of clean-tech naysayers. "We like to show they aren't true," said Musk, "in the form of a product."
Both SolarCity's new panel (to be manufactured initially in California and later at very large scale at the company's "solar gigafactory" under construction in Buffalo, New York) and the Model X are potentially transformative. Efficiency breakthroughs by SolarCity (as well as SunPower and others) will help to further lower solar costs, critically important with the looming phaseout of the federal investment tax credit for solar at year's end.
For most people, both of these products would be a good answer to the question, "What does clean-tech innovation look like?" They're the result of years of lab research in chemistry, physics, engineering, and software, and in the case of the Model X, visionary design. In other words, they have all the elements - along with the iconic tech entrepreneur's garage - that we typically associate with innovation in a technology sector. (Speaking of which, can't wait for the new Steve Jobs movie.)
But over the next decade and beyond, clean tech is going to need transformative innovation in far less sexy places, like the windowless, beige-walled rooms of utility managers' planning sessions and public utility commission rate hearings.
In the world of electric utilities, the demand-side revolution - distributed generation, efficiency, and increasingly, behind-the-meter storage - is real, growing by the day, and threatening to incumbent players. But to play Captain Obvious for a moment, utilities are not going away. They, and the agencies that regulate them, need to transform. All they need to do is fundamentally change the business model of the way electricity has been generated, distributed, and paid for, for the past 120 years. Should be a breeze.
Take it from one of the world's most innovative brands: Google. At the Inside Energy event, Google's director of operations for data center energy and location strategy, Gary Demasi, spoke about the company's challenges to eventually power its massive global network of data centers with 100% renewable energy; they're at 35% now for the company's global operations. A Google data center in Finland is powered by a Swedish wind farm, for example; another under construction in Alabama - to be housed in a former coal-fired power plant - will run on hydro and other renewable sources from the Tennessee Valley Authority. For Google, these and other data center projects require voluminous work with local utilities, who are often asked to tread new ground to keep a fast-growing commercial customer supplied with clean energy.
"For us, a lot of our innovation work is in market structures and regulatory structures," said Demasi. "This is true at all levels, from the federal Clean Power Plan on down. We have to educate utilities on what industrials want. We don't settle for the current market construct. We demand change."
Some of the more progressive clean-tech states, most notably New York, California, and Hawaii, have set out on the path of utility market and regulatory reform that Demasi and hundreds of other large industrial customers are seeking. New York, with its Reforming the Energy Vision (REV) initiative, is perhaps the most closely watched. Instead of a legislated, extremely aggressive renewable portfolio standard target as in California and Hawaii, New York seeks to fundamentally change the way its power market values assets. Utilities (and all other market players), after decades of focusing almost solely on centralized generation assets as value creators, need to see the demand side - microgrids and load reduction, plus DG - as even more valuable.
If REV can succeed, it will be innovation writ large. "We view the grid as an ecosystem," said Audrey Zibelman, chair of the New York Public Service Commission, who also spoke at Inside Energy. "Whether we inject generation or withdraw demand, we get the same result. We just need to get the price signals right."
It's still early days for this bold effort. REV has launched two major demonstration projects: a series of feasibility study grants for microgrids, and Con Edison's Brooklyn-Queens Demand Management Program, in which the large utility is working with third party Retroficiency and others to avoid building a new $1.2 billion substation with demand reduction and other behind-the-meter actions. "The REV demos are not tech demos," said former FERC chairman Jon Wellinghoff, who shared the panel with Zibelman. "They are new regulatory and business models."
Infusing utilities and regulatory agencies with innovators will mean a major culture shift; we're likely a long way from anyone being thought of as "the Elon Musk of the utilities commission." But, I think it eventually has to happen; it is Musk-like minds that will need to push the regulated monopoly business model to evolve far faster than it otherwise would. People like Zibelman are starting to lead the way.
Eight years ago, Clean Edge managing director Ron Pernick and I released our first book, The Clean Tech Revolution. It sold pretty well. If we wrote another one today called The Utility Rate Structure Revolution, I doubt that many people would buy it. But innovation at that level - as dull and stodgy as it might seems - is every bit as important for the clean tech revolution to succeed.