18th May 2012
From renewable to smart
But there is real logic behind smart technologies, particularly in the energy sector. As Bloomberg New Energy Finance says: "The energy smart technologies sectors span advanced transportation, digital energy, energy storage and fuel cells, and energy efficiency. These emerging technologies and innovations have the potential to revolutionise how energy is distributed, stored, traded and saved."
At the heart of the smart story is the smart grid – a combination of digital, wireless, telecoms and computing power that has the potential to transform the energy system, making it more responsive, more robust and more efficient. It has the potential to integrate energy from renewable energy projects into the system, to link demand much more closely to supply through demand management and also to cut costs for both consumers and utilities. To many in the energy sector, it's a no-brainer.
Introduction of smart meters
Yet recent news from the US should give us pause. Power companies are spending $29 billion to upgrade their networks by rolling out smart meters, a programme that will be emulated soon in the UK and that energy minister Charles Hendry recently claimed would create £7bn of benefits. However, customers are not necessarily welcoming the change with open arms, as Bloomberg explains here. Some are concerned about higher bills, because the meters allow utilities to charge higher rates at peak times, privacy and even safety, because of the wireless aspect of the technology.
Anger has been further aroused because the utilities are allowing customers to opt out from the smart meters – but only if they pay. It doesn't help that one of the most immediate benefits of smart meters is that utilities save on meter-reading staff because it can be done electronically. "Escalating consumer opposition is delaying efforts to deliver power more efficiently because the gadgets anchor next-generation transmission grids," Bloomberg points out.
The energy sector can change the world…
The energy sector is littered with transformative ideas that were going to change the world but ran into unanticipated opposition. Even those that succeed do not always fulfil their potential. Nuclear power was supposed to solve the world's energy problems and make electricity so plentiful that it would not be metered. It is one of the world's major energy sources, but even today there is no consensus over whether its benefits outweigh its costs as demonstrated by the Fukushima disaster, Germany's decision to shut its nuclear fleet a decade earlier than planned and the travails involved in building a new generation of reactors in the UK.
Nanotechnology is another field that is still viewed with suspicion, almost a decade after Prince Charles' infamous request to the Royal Society to look at the risks of nanotech – which was widely reported in the media as his "grey goo" speech. Such fears restricted nanotech's initial commercialization to products such as car wax and non-crease trousers.
At the other end of the scale, carbon capture and storage (CCS) was seen as the way to allow us to continue with a fossil fuel-based economy without the climate change consequences and without having to change our lifestyles. Even though scientists say CCS holds minimal risk, plans by Shell to open a CCS project that pumped CO2 into a depleted gas well underneath the Dutch town of Barendrechts were halted by public opposition – and all Dutch CCS projects will have to bury the CO2 they collect under the sea, massively increasing the already considerable costs. Opposition has also emerged in countries such as the US and Germany. But the opposition is not always consistent or rational – the Dutch government recently approved plans for a massive, underground natural gas storage facility. The approval came in the face of objections, to be sure, but the Dutch government is happy to store natural gas underground but not CO2, the gas that we all breathe out every time we exhale.
Food for thought
The message is not that people who are opposed to these new technologies are stupid or uninformed – it is that however convinced you are, as an investor, of the benefits of a particular technology you need to bear in mind that public opinion may differ sufficiently to derail the commercialization of your "world-saving" device or process. Simply dismissing opponents as deluded or behind the times will not work – once people set their minds against something, it is very hard to change their minds.
You also need to take a long view – after its initial stuttering start, nanotech is now helping to make more efficient solar panels, innovative insulation materials, longer-lasting batteries and a range of other cleantech products. Smart grids will become widespread because they offer such a wide range of benefits to virtually everyone involved in the electricity supply chain from generators to customers – but utilities need to spell out the benefits of smart grids and to demonstrate the ways that they are in customers' interests by, for example, offering lower prices for those that commit not to use power at peak times. Given the acknowledged cost savings smart meters can bring, they should also bear the cost themselves rather than insisting on passing it on to consumers. Otherwise they – and their investors – may find it's not such a smart idea after all.
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