Why Innovation?

Deck: 

Also, What, Who, Where, When?

Also, What, Who, Where, When?

Fortnightly Magazine - March 2017

A roundtable of five utility execs, featured in the January and February issues, was all about innovation in electricity. A roundtable of seven more utility execs, featured in the February issue and this one, wasn't all about innovation. But the i-word again dominated the discussion.

Recent issues and this one have had thought-leaders Lisa Wood of the Institute for Electric Innovation, Ken Costello of the National Regulatory Research Institute, Tom Flaherty of Strategy&, Arshad Mansoor of the Electric Power Research Institute and others talking innovation. Indeed, we call a regular column by EPRI scientists "Innovating Like Edison."

Why is innovation all the rage? Yes, continual improvement always makes sense. But the dramatic changes being talked about, are they that urgent?

EES North America

After all, electric service is mature. It is essential to everyone; we can't do without it. And it is more affordable than ever before. If it ain't broke ...

Well, electric service may be mature. But many consumers see our technology as dated, an artifact of a bygone era.

Electric service may be essential to everyone. But many consumers are keen to consider competitors.

And electric service may be more affordable than ever before. But many consumers suspect there are cheaper alternatives, or that there will be in coming years.

Consumers of electric service and the public at large have always been remarkably restive. This has been true all the way back to the days when the electric service industry and this magazine were young.

For Samuel Insull struck a Faustian bargain a hundred and ten years ago. Insull realized universal affordable electric service could only be achieved by constant access to low-cost capital, in bulk. So, he willed the industry to transform.

The industry had been, in the first years of the twentieth century, a multitude of clawing contestant companies. Insull made the industry into a stable of regulated public utilities.

It worked. Insull was right. Regulated public utilities have an extraordinary capacity to raise and apply capital, achieve economies of scale, and broadly allocate costs to consumers. Electricity has become the lifeblood of our society for little more than a penny of every consumer dollar.

Yet, the American people have never been comfortable that such an essential service is in the hands of monopolies. Even if the monopolies are monitored by government watchdogs.

Utilities and the watchdogs (utility regulators) have been constantly excoriated, from the day of Insull's bargain to the present day. Americans have never trusted trusts. And they've had no faith that the agencies charged with checking the trusts aren't, from time to time, in the pockets of the trusts.

Indeed, since and including the inaugural issue of this magazine in 1928, authors have addressed the allegations of regulatory capture, incompetence and worse. Franklin Roosevelt's article in a 1931 issue did the same.

Contemporary commentators say consumers want choice. Many undoubtedly do, while others are indifferent.