Disrupting an Ecosystem
The generational grand challenge for mankind has been to revolutionize the energy industry away from fossil fuels. This moonshot benefits from progress from the past. Admiral Rickover commercialized the first nuclear power plant after engineering atomic power systems for the United States Navy. Elon Musk proved that Electric Vehicles could compete against gasoline cars. With the looming threat of climate change, this goal is now imperative.
How would it be possible to finish the job here?
“Necessity is the mother of all invention”
Great strides are being made in EVs, Direct Air Capture, Green Concrete, Green Steel and Hydrogen, yet the availability of green energy with compelling economics drives the commercial success and impact of these other fronts.
This post is about how to slay a dragon and disrupt not just the energy industry, but the energy ecosystem.
1. Understanding the Challenge
It’s simple to pick from a list of available technology options (solar, nuclear, wind) then resign to speculate on which horse will win the race, but the problem goes much deeper than that. This is such a complex problem that a multiple-choice answer simply can’t entail the entire game plan. We require sophisticated tactics to understand the full scope of the mission and unique perspectives.
Energy isn’t just a market, its an ecosystem. Ecosystems are hard to disrupt because they are resilient to any singular attempt to disrupt them.
In this spirit, it’s important to look at the gestalts of the Energy industry, not just as a large market to disrupt, but as a sophisticated ecosystem.
2. How to Slay a Dragon
Confronting this challenge should be nothing short of terrifying. For those starting a company or investing in this challenge, there is a large graveyard of those who have tried. If one chooses not to engage at all, the pernicious effects of climate change are in their 4th quarter. We’re surrounded by cliffs on both sides. There’s a pot of gold under the archetypal dragon, but the challenge is beyond that.
As an entrepreneur, it’s easy to reduce the problem to a profitable venture in a one-dimensional regard. In my 20’s I had reduced this to just building better nuclear power plants such as Small Modular Reactors. As time passed, I realized how reductionist that mindset was (see Speed & Scale). Strategically, it’s also a haymaker: it would be great if it worked out. We also don’t see an easy slingshot of a stone to an unshielded forehead. This will be tough.
Great strategy and tactics come from the imagination. By controlling our perception we can look at things differently. It’s not enough just to think, but to feel. We can look at this like a business opportunity, a war, a political decision. In each of those lenses, I couldn’t see a path forward. Each metaphor would lead to different frameworks and different conclusions.
In my post, “Getting Lightning to Strike the Same Place Twice: Developing New Venture Ideas” I discuss how to use artistic, right-brained modes of perception to perceive a problem before solving. In the theme of Jungian psychology, let’s look at the Shadow of the energy industry, its repressed opposite. Let’s pretend the traditional energy industry was a cryptocurrency ecosystem. What would we notice?
3. Gestalts
1) Network
The electrical grid is over 150 years old and hasn’t significantly upgraded since the time of Thomas Edison. Decades of research has gone into smart grid systems, yet uprooting such a vital, capital-intensive infrastructure is almost impossible.
Why this needs change: The current electrical grid is engineered around heat-based sources of power that produce power continuously. The intermittency of renewable sources such as solar & wind create issues because of the electrical controls necessary to keep the AC of the systems at operable frequencies.
Further, transmission is limited. The electrical grid has difficulty evolving and expanding. Ideal locations for solar (e.g. Southwest) and Wind (Midwest) would need to be able to transport such energy to high energy demand areas such as the East & West coast.
Further, the electrical grid is based on infrastructure from 150 years ago. Our electrical systems are archaic and become less dependable as that infrastructure continues to degrade and weather events become more extreme. In Dr. Amory Lovins work, "Brittle Power", the founder of the Rocky Mountain Institute illustrates just how brittle our electrical grid is.
"The US electric grid can be interrupted by a lightning bolt, rifle bullet, malicious computer program, untrimmed branch, or errant squirrel" - Dr. Amory Lovins
2) Currency
We generally speak of fossil fuels as a source of energy, then follow up with a debate of other sources of power. In this ecosystem, fossil fuels operate effectively as a currency. One could also not that the oil dictates not just energetic power, but also geopolitical power.
The electrical grid as a network operates on a currency of electrons which is supportive of renewables, but renewable energy is incompatible with the energy currency of fossil fuels, fossil fuels themselves (e.g., coal, natural gas, etc…). One may ask why a physical energy currency matters at all:
1. A physical form of energy can be stored for long periods of time
2. A physical currency can also be transported in ways the grid since the grid is limited in its expansion
Money is a great analogy in having both a physical (coins, bills) and digital form factor (data, crypto). Since data can be simply transported wirelessly, digital currencies have become a popular form factor over physical ones.
In the case of energy, this is not the case. Electrons can’t be transported wirelessly effectively in bulk quantities. For this reason, fossil fuels have so many advantages as the physical currency of global energy ecosystem. Renewables have no physical currency beyond batteries, but the limitations in performance such as efficiency, lifetime, and cost have limited their success in disrupting fossil fuels in this dimension.
3) Exchange
The rest of the energy ecosystem converts energy into electric energy. These include physical assets such as power plants (fossil fuels and nuclear) or energy converters (photovoltaics, wind).
In this regard, there is a natural human bias to focus attention on power production such as fossil fuels, nuclear, or even fusion. It’s easy to focus on the source with more explosive power as frankly being more powerful; however, the economics (see “Speed & Scale”) indicate that energy conversion has been undervalued in their propensity for commercial success.
Further, energy converters must be able to supplant fossil fuel plants, the incumbent energy converting assets of this ecosystem. Photovoltaics and wind, though low in cost, are hindered by their intermittency. To truly transition to net-zero, another asset will be needed.
4.Conclusion
As we think about lessons from history, perhaps there is an opportunity here and a solution is possible if we look at the problem in different ways. If we look past the gold, we can appreciate the dragon guarding it. If we can look past the dragon, we see its essence. When we see its essence, we understand how to defeat it.
As we attempt to disrupt the energy industry, we need to be conscious of how to disrupt it in these three dimensions in an integrated fashion. If one disrupts it in any singular approach or on all three fronts without integration, the ecosystem will be resilient to change.