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  • David Brent Grantham

Animal Spirits in the Clean Energy Economy: Disruption, Plasticity and the Innovation Imperative

September 12, 2018

In last year’s article for National Clean Energy Week, I wrote about a next gen utility that develops new technology and data centric business models in response to the disruptions occurring across the power sector. This grand disruption has expanded to include investor types that pose imminent threats to the entrenched order in power and energy markets and they are growing in number and level of investment. Dynamic demand profiles coupled with advanced analytics that include innovative AI technologies have dramatically shifted the balance of purchasing power toward consumer preference. Further disruption occurs via meaningful investments in the power sector by multiple oil & gas majors that now share center stage in the transformation of the overall global energy system. Increasingly disruptive drivers are transforming the operational ecosystems of service providers in ways that were scarcely imagined just a few years ago. These converging forces have emerged as a foreboding presence in an investment theater that features the most significant structural changes to established power infrastructure and markets since George Westinghouse, J.P. Morgan and their Wall Street backers began building today’s centralized infrastructure over a century ago. Animal spirits have been loosed in the power and energy markets and they will not be contained.

The plasticity of distributed generation (DG) and artificial intelligence (AI) technologies and applications should awaken the survival instincts in even the most resistant power and energy companies as they are forced to restructure and reposition themselves in a clean energy economy. The autonomy and optionality now available to residential, corporate and industrial consumers with more purchasing and procurement options than ever before will continue to disrupt and transform. Advanced buying and selling platforms that feature AI and graphical data architectures have forever altered the way consumers access their power sources and supply. Apple has built a complex and dynamic position in the clean energy economy through renewable energy purchase agreements that include retail stores, offices, data centers and co-located facilities in 43 countries. In terms of asset purchases, Apple currently owns installed generation capacity of 626 megawatts, with 286 megawatts of solar pv coming online in 2017 with 15 projects in construction for a total of 1.4 gigawatts installed across 11 countries. Apple’s Clean Energy Portal provides data for its suppliers to investigate their options for power and/or asset purchases with 23 companies making formal commitments and over 85 companies signing up for access to the portal. Microsoft, Intel, Google Inc. (Alphabet), and Bank of America join Apple in the top five of the EPA’s Green Power Partnership Fortune 500 Partners List and all include growing percentages of onsite generation that allows any surplus to be sold to consumers through peer-to-peer transactions using sophisticated software based on localized networks using blockchain technology.

The other dominant force emerges from progressive oil & gas majors that have begun in earnest to integrate renewable energy and advanced hydrocarbon technology investments into their portfolios. Royal Dutch Shell’s (RDS) acquisition of First Utility, one of the UK’s largest, is a savvy move that positions RDS to sell natural gas and electricity and the broadband and data services that optimize consumer choice. BP has invested $200 million for a 43% stake in Lightsource, Europe’s largest solar development company, and has entered into an agreement to purchase Chargemaster which operates POLAR, the largest charging network in the UK with 6,500 charging stations. These moves by RDS and BP into financial, upstream, downstream and data assets are a clear signal that they’re moving toward full vertical integration with clean energy economy portfolios. As of June 2018, ExxonMobil, RDS, Chevron, BP and Total SA had generated $44.6 billion in free cash flow and they are making their largest investments to date in advanced renewable fuels, solar manufacturing and power generation, lithium ion batteries, wind energy and carbon capture technologies to name but a few. Many of these majors made earlier investments in renewable assets with limited success because the scope, scale and price of the technologies didn’t support long term investment strategies. Now, the technologies and applications of the grand disruption that run on advanced data platforms have created investment opportunities that will provide access to the clean energy markets of the future.

The relatively mature investments by corporates combined with oil & gas companies that have tremendous expertise in the energy sector will compel increasing allocations for R&D as researchers and investors begin to understand the growth opportunities that AI offers for maximizing the performance of clean energy systems. As outlined by McKinsey in its September 2018 discussion paper, Notes from the frontier: Modeling the impact of AI on the world economy, the five broad AI categories of computer vision, natural language, virtual assistants, robotic process automation and advanced machine learning will provide long term growth opportunities for companies that learn how to capture and leverage the full potential of AI in the clean energy economy. The National Research Consortium at Innovation Pointe Labs (NRC) designs and develops university to industry research and investment initiatives that feature innovative energy, water, atmospheric and data technologies with a clear path to market impact. Our Advanced Resource Recovery Site (ARRS) will serve as a field laboratory for produced water recycling/reuse and will lead to research that leverages technology to market breakthroughs in freshwater demand side management and viable reuse options in the agricultural, community development and industrial sectors. The ARRS platform will be powered by solar pv and will also include CH4 and CO2 emissions detection via drone monitoring and reporting and the entire research site will feature leading edge data and operational management systems.

NRC pursues technology to market research initiatives that have the potential to drive policy and regulatory support in the clean energy economy and is pleased to be a participant in National Clean Energy Week 2018. This paper is the first of two parts. Part two, Front Running: Racing up the Innovation Curve with AI and High Performance Computing, will be published next week.

David Grantham, Executive Director, National Resource Consortium at Innovation Pointe Labs

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