Chris Hickman President, Innovari Energy Business Model Innovation: Utility-Friendly, Consumer Valued, Regulator Accepted Solutions for the Future of Energy

1. Confiden'al
and
Proprietary
Informa'on
-­‐
This
presenta,on
is
subject
to
proprietary
informa,on
rights
and
confiden,ality
provisions.
Do
not
copy
or
distribute
this
document
without
the
express
wri>en
permission
of
Innovari.
BUSINESS MODEL
INNOVATION:
Utility-Friendly, Consumer
Valued, Regulator
Accepted Solutions for the
Future of Energy
Innovations in
Business Models that can work
Energy
for everyone – Not just for some
1

2. 2
So where is your mind?
The Deregulation of the Utility Industry will
not be unlike the process of making Oil.
OR
Neil Armstrong awarded the single biggest
technology achievement for the last
century to . . . ???

3. Common Issues
 Data Overload
 Lots to do, Little time to do it
 Complexity Increasing
 Significant Trust Issues
 Legal Issues driving instead of common sense
 Process to change getting longer not shorter,
technology changing faster not slower – Policy/
Regulation cannot keep up
 Industry losing many experts for a variety of
reasons
 Consultants are not incented to solve problems
 Experts who are not experts
 Vocal minority driving instead of silent majority
 Misconception of Utilities/Regulators/Consumers
wants, needs and potential desires.
 American Entitlement.
3

4. 4
Looming crisis:
Energy & Electricity
Grid (Economic
recession only
delayed the
inevitable)
US Electric Grid Capacity
760 GW
New Generation Required
135 GW
New Generation “Planned”
57 GW

5. 5
THE PROBLEM:
Typical Daily Load Profile
6
a.m.
12
noon
6
p.m.

6. 6
Application to Energy Industry
Load Duration Curve – Part I

7. 7
Application to Energy Industry
Load Duration Curve – Part II
1% HRS = 14,000 MW
10% HRS = 4,000 MW
10,000 MW @ $2000/kW
$20 Billion for 100 hours
Site Efficiency Makes Grid
“PEAKIER”
Need
System Efficiency &
Peak Load Management

8. 8
Rates /
Returns
Ageing
Smart Grid Infrastructure
What is
Renewables /
Alternatives
Shaping Economic
Conditions
the
Power Access to
Capital
Conservation/
Efficiency
Markets?
Commodity
Conventional Prices
Emissions

9. 9
What Model works for all 4?
Rates /
Returns
Consumers Ageing
Smart Grid Infrastructure
Economic
Renewables /
Vendors
Alternatives
Conditions
Utilities
Access to
Conservation/ Capital
Efficiency
RegulatorsPrices
Conventional
Commodity
Emissions

10. 10
Energy Economics Foundation
The laws of supply and
demand state that the
equilibrium market price
and quantity of a
commodity is at the
intersection of consumer
demand and producer
supply. However, when
demand exceeds supply,
significant shifts in price will
occur.
Unfortunately, with
electricity, blackout
occurs versus just an
escalation or high prices.

11. 11
Regulatory Economics & Utility
Business Principles
 Rate of Return Regulation
Revenue Rqmnt = [Rate Base*ROR%] + Expenses
 IOU’s and their investors only make money on
things in Rate Base
 MOU/COOP – Muni Bonds and RUS Financing -
CapEx more efficient than OpEx
 Fight the model or Use it?
Chasing regulatory change is dangerous/costly

12. 12
THE SOLUTION:
Change the Shape!
6
a.m.
12
noon
6
p.m.

13. 13
What if . . .
 Theload duration curve could be flattened,
eliminating the last 3-8% of the
unmanageable shape?
Is there a need for TOU? Therefore AMI?
Is there a need for billions of upgrades to T&D
if we can increase utilization from 53% to 75%?
Is there a need for billions of central station
generation and peakers and their emissions?
Is there a business model that works for utilities
AND consumers and keeps regulators happy?

14. 14
Evolution of Load Fully automated,
Looks, acts and is
Management
trusted as a utility
five-second
resource if
response owned by utility
intelligently taps
embedded
responsive load in
most buildings
Open ADR Two-way, verifiable
load management
with dynamic
attributes that
allow the grid to
Value
be served and
consumer not to
Previously known
be uncomfortable
as curtailment
Most Existing and resurfaced in
“dispatchable load” residential as Looks, acts and is
driven by manual Comverge trusted as a utility
measures or one-way resource if
Fully automated,
communications owned by utility
five second
response
intelligently taps
embedded
responsive load in
most buildings
Utility Equivalent & Trusted Resource/Product

15. 15
Evolution of Load Fully automated,
Looks, acts and is
Management
trusted as a utility
five-second
resource if
response owned by utility
intelligently taps
embedded
responsive load in
most buildings
Open ADR Two-way, verifiable
load management
with dynamic
attributes that
allow the grid to Site & Grid
Value
be served and automoted
consumer not to negotiation
Previously known
be uncomfortable based on local
as curtailment
rules &
Most Existing and resurfaced in
conditions
“dispatchable load” residential as
manages load
driven by manual Comverge
to create a
measures or one-way “portfolio”
communications
Utility Equivalent & Trusted Resource/Product

16. 16
Why hasn’t it been done?
 Costeffective technology unavailable until
10-15 years ago
Pervasive Comm and low cost hardware exist now
 Business model does not work
Business model has to provide value to utilities
Utilities pay lip service to Demand Response, but
the business model does NOT work for them since
they pay customer to erode their own revenue.
DR must evolve
 Lack of understanding of the energy business
Need Intelligent Power Products not DR
 Chasm between Utility and their Consumer

17. 17
The
Utility/
Customer
Interaction

18. 18
Business Approach:
The utility AND customer must win.
Crossing
the
Chasm
between
u'lity
and
consumer
requires
a
model
that
allows
the
u'lity
AND
the
consumer
to
win!
 U,li,es
have
the
money,
the
volume
and
the
need
for
this
solu,on
 Less
than
5%
of
end
use
consumers
care
today
 If
the
U,li,es
can
solve
the
problem
in
the
next
5-­‐10
years,
consumers
will
care
even
less.

19. How to Innovate the Model?
Create a New Starting Point
 Recognize the gravity of our situation
Electricity is not a political football, it’s our way of life
 Allow common sense a seat at the table
 Establish Trust & Accountability
 Make a conscious decision to make it better
Bury the hatchet, it’s time to move forward
 Focus on how to actually accomplish something
versus how to kill everything
 Give the microphone to the vocal minority to speak,
but don’t let them keep it
 Recognize the silent majority – 10% adoption rates
mean 90% weren’t interested
 Beware the “Experts”

20. FACT
Technology does
NOT solve
problems People
DO!