Insights Cloud Energy
By Dr. Dustin Knutson, Former Director, Energy Services, and Dr. Jeff Suderman, Strategic Advisor, IBTS
"One of the biggest trends is that customers are beginning to want more control over their own energy consumption”.1
Over the past 10 years, cloud computing has evolved from being a relatively obscure term to a common concept. Storing our electronic files, photos and music in Dropbox or iTunes has become a normal part of life. Instead of 100 people setting up a terabyte of safe storage space, one entity creates a storage farm which is large enough for everyone to share.
While the cloud concept is simple, it requires a complex arrangement of servers, security protocol, and hardware within the imaginary cloud. The effective integration of these parts has facilitated shared data storage on an unprecedented level.
In a similar way, we believe that we are at the front-end of an energy revolution. Cloud Energy will change how we generate, store and utilize energy in the next 20 years. As we listened to leaders in the global energy arena at the 2014 Bloomberg Energy Summit, we heard themes that foreshadowed the opportunity that Cloud Energy will provide. Let’s examine what this concept looks like and what it could mean for our energy industry in the future.
“The technology in our energy grid really hasn’t changed in about 100 years”.2
“Renewable energy, in most of its forms, is intermittent, and cannot be fully integrated with the grid without additional storage devices. This poses a big challenge.”3
Energy production and supply methods must adapt in order to meet the demands in the 21st Century. At the 2013 Bloomberg Summit, Governor Murkowski dubbed energy as the bumper sticker of our times because it enables almost every aspect of modern life.4 Research demonstrates a strong correlation between energy supply and innovation (e.g., a one percent increase in energy consumption typically results in a one percent increase in economic output).5 Energy is a catalyst for health in almost every component of life the 21st Century.
History has demonstrated that as a stand-alone strategy, conservation is not a sufficient means to decrease energy usage (For more information, read: The New Energy ROI: Part II). As a result, energy supply and environmental concerns must be addressed by more strategies than washing our clothes after peak electricity usage hours and purchasing LED bulbs.
A key barrier to massive gains in efficiency is rooted in variability in energy production and consumer use. Power generation plants have been built to provide energy for the maximum usage (or peak need). This is equivalent to a family of four purchasing a 10 bedroom home because they need it for their Holiday guests each year. The high cost of energy infrastructure has made this model difficult to sustain.
Another challenge is the variability in the supply of alternate energy sources such as wind and solar. While these are environmentally sustainable and reduce overall demands on traditional energy supply sources, they are susceptible to weather patterns beyond our control. A calm or cloudy day will quickly minimize energy production which then places demand back on the master-grid for supply. This helps lessens overall demand but not as significantly as we need it to do.
Based on these challenges, a new model is required.
“Energy consumers are getting smarter all the time about how energy is coming into their house.”6
Imagine if we could regulate the peaks and valleys of energy production and usage during our 24 hour cycle. This would reduce the need to overbuild energy supply in order to meet peak demand.
Meet the concept of Cloud Energy.
Cloud Energy is our term for a trend that will become a game-changer in the energy market. Cloud Energy will rely on energy storage instead of energy creation capacity as the means to lower our energy costs. In addition to improving our energy consumption habits through efficiency and green energy sources, Cloud Energy will also change how we produce and distribute energy.
Reliable and efficient energy storage will allow us to meet overall demand without having to create infrastructure which meets peak energy demand. By creating the ability to store excess energy for use during peak demand, we can minimize fluctuating demand. Similar to the storage of energy in AA batteries, a cloud supply of excess energy in large scale battery farms will allow us to more effectively manage supply and demand.
In addition, the proliferation of energy microgrids will expedite this opportunity. As home solar usage grows, we are creating an increasingly complex mix of micro power supply sources. Similar to the cloud storage of data, cloud storage of energy will allow individuals to utilize what others cannot and vice versa. Sharing energy by pooling a community supply will even out the peak supply needs which exist in our current structure.
We are at the forefront of this change. As it progresses, here are the three signposts to watch for as this trend grows from infancy into maturity.
1. Storage: Tesla is revolutionizing the automobile market by focusing on energy storage solutions. Their cars without engines have been likened to a cell phone on wheels, a dramatic shift from our combustible propulsion model.7 A key driver behind their success has been the storage of energy in battery cells. Currently, Tesla is seeking to build a new battery factory, the size of which is unprecedented. Some believe that a high quality supply will allow these batteries to serve as mobile back-up energy supply for utilities and microgrids (e.g., they are already supplying battery packs to SolarCity, a solar installer).8 This could create a cloud of mobile and exchangeable energy supply negating some of the negative effects of the energy peak problem. At the Bloomberg Ssummit, U.S. Secretary of Energy, Dr. Ernest Moniz stated, “Technology in electric vehicles today could change the way we organize cities in the future.”9
2. Modularization: Modularization allows us to build an amazing diversity of things from a range of different and transferable pieces. This concept is already impacting the construction of buildings and interior designs. In this way, we expect that modularization of energy generation and power storage will be a force of change. It is projected that the cell phone of the future will be modularized allowing us to upgrade and adapt without replacing the entire phone.10
This same concept of modularity will apply to energy supply as citizens become producers of energy instead of just consumers. Stefan Heck, author of Resource Revolution: How to Capture the Biggest Business Opportunity in a Century (New Harvest, April 2014) discussed how “substitution, optimization, and virtualization along with circularity and waste elimination”11 will also play a critical role in this transformation of the way society thinks and operates. These concepts will help determine how modularization takes shape.
3. Sharing Economy: A culture of sharing is a rising trend within North America. Whether it be car sharing (a five-fold increase since 2006),12 informal bed-and-breakfasts (airbnb.com), or co-housing projects, sharing as a means to increase the quality of life is an emerging driver. Jessica Lennard, Director of Energy Public Affairs at Edelman London, stated that the concept of “community energy is becoming an increasingly important strategy to address environmental issues.”13Similarly, as we become willing to collectively share our energy supply, the peaks and valleys of energy usage will even out, making the shared energy cloud a viable solution.
“The future can be structured differently from the past.”14
During the 2014 Bloomberg Energy Summit, one of the presenters illustrated the theme of ‘Phase Change’ by holding up two cell phones. “Only 25 years ago we used this large mobile phone. If someone hadn’t been crazy enough to do this [large phone], we wouldn’t have this today [small phone]” (Figure 1).15 The future can be structured differently and we see a horizon full of exciting changes for the energy industry.
As we contemplate the future of energy, we must consider that the drivers of change may actually come in the form of batteries. They may be driven from place to place and bring new meaning to the term ‘mobile energy’. Phase change may realistically come in the form of reinvention through modularization, not just through new inventions. And the future of energy, not just entrepreneurial dreams, might be formed in the clouds.
1 Cheung, A. (April 7, 2014). Day one introduction to phase change. Video excerpt from the Bloomberg Future of Energy Summit 2014, New York, NY. Retrieved from http://about.bnef.com/video/summit-2014-day-one-intro-phase-change/
2 Cheung, A. (April 8, 2014). Day two introduction the death of orthodoxy. Video excerpt from the Bloomberg Future of Energy Summit 2014, New York, NY. Retrieved from
3 Czajkowska, A. (April 8, 2014). Day two introduction the death of orthodoxy. Video excerpt from the Bloomberg Future of Energy Summit 2014, New York, NY. Retrieved from
4 Murkowski, L. (April, 2013). Speech at the Bloomberg Future of Energy Summit 2013, New York, NY.
5 Harf, J. E., & Lombardi, M. (2010). Taking sides (7th ed.). Guilford, Conn.: McGraw-Hill/Dushkin. P. 97
6 Zindler, E. (April 7, 2014). Day one introduction to phase change. Video excerpt from the Bloomberg Future of Energy Summit 2014, New York, NY. Retrieved from http://about.bnef.com/video/summit-2014-day-one-intro-phase-change/
7 Wholsen, M. (Feb. 28, 2014). Why Apple could win big with Tesla’s giant new battery factory. Wired. http://www.wired.com/2014/02/teslas-giant-battery-factory-save-apple/
8 Wholsen, M. (Feb. 28, 2014). Why Apple could win big with Tesla’s giant new battery factory. Wired. http://www.wired.com/2014/02/teslas-giant-battery-factory-save-apple/
9 Dr.DustinKnutson. (April 8, 2014). Technology in electric vehicles today could change the way we organize cities in the future, says Moniz. #BNEF2014, [Twitter Post]. Retrieved from https://twitter.com/DrDustinKnutson
10 Honan, M. (Apr. 16, 2014). Google’s new modularized phone may be the last you’ll need to buy. Wired. http://www.wired.com/2014/04/google-project-ara/
11 Heck, Stefan and Rogers, M. (Mar, 2014). Are you ready for the resource revolution? McKinsey Quarterly. http://www.mckinsey.com/insights/sustainability/are_you_ready_for_the_resource_revolution
12 Kiessling, T. (Oct. 23, 2013). Culture of sharing to expand to the internet of things. Wired Magazine. http://www.wired.com/2013/10/culture-of-sharing-to-expand-the-internet-of-things/
13 Dr Dustin Knutson. (April 8, 2014). Trend: Community Energy is becoming an increasingly important strategy to address environmental issues, says @JessicaLennard at #BNEF2014 [Twitter Post]. Retrieved from https://twitter.com/DrDustinKnutson
14 Liebreich, M. (April 7, 2014). Day one highlights. Video excerpt from the Bloomberg Future of Energy Summit 2014, New York, NY. Retrieved from http://about.bnef.com/video/summit-2014-day-one-highlights/
15 Agag, A. (April 7, 2014). Day one highlights. Video excerpt from the Bloomberg Future of Energy Summit 2014, New York, NY. Retrieved from http://about.bnef.com/video/summit-2014-day-one-highlights/