Adapt or die: Flicking the switch on solar

Power companies attempting to fend off solar power are at risk of following the horse and cart into oblivion

My previous post about the lines company Unison's intention to charge extra to households generating their own power prompted several people to contact me, one of whom directed me to a particular quote:

Under the portentous, capitalised title “DISRUPTIVE TECHNOLOGIES” one of an NZ Lines Company’s Trust owners published the following in a recent report:

“The name is a lead, perhaps a clue into the effect that the march of technology will have on the electricity industry of the future.

In the very near future, modern photovoltaic arrays on consumer premises, coupled to the latest efficient design for storage batteries will change the face of the industry, particularly for those consumers who can afford to fund the installations.

Uptake is likely to be rapid along with price reductions in inverse proportions.

This will present both challenges and opportunities for the electricity retail industry and even more challenges for Lines Companies. Already we are seeing the start of a death spiral where consumers are choosing to switch to their own harvest and management of their energy needs for both economic and philosophical reasons.

Those left on conventional supply systems are likely to face even higher costs going forward. As an investor in a generation and retailing company we need to work closer together to chart a good pathway through these issues for our beneficiaries”.

It is worthwhile noting the somewhat breathless language used as well as the immediacy of the “problem” described.

Distributed generation (solar power) is not in the dim, distant future. According to the report the “death spiral” has begun and major change is in “the very near future”. Although the need “to chart a good pathway through these issues for our beneficiaries” is conceded, no strategy, at least in this document, is defined.

It looks like Unison (not the source of the above quote) has decided its “pathway” is to deter distributed generation by making it more expensive for those who go solar but stay on the grid.

The history of disruptive innovation tells us that this strategy is doomed.

I discovered with the assistance of Wikipedia (itself, a disruptive technology that has displaced traditional encyclopedias) that much academic work has been done on disruptive technology or, more broadly, disruptive innovation.

If the Unison directors and managers need a glimpse of their possible future, they could do worse than count the horses in Heretaunga or Emerson Streets on any Friday. At the turn of the last century, horses and horse drawn vehicles were practically the sole means of transport, but within a couple of decades, internal combustion engines powering cars and freight vehicles had taken over. Attempts to fend off the new technology, like the short-lived British rule mandating a flag-bearer walking in front of vehicles, all failed.

Many of the horse traders shifted to selling cars and their yards turned into vehicle dealerships.

Recent history is littered with redundant technologies. Digital photography has replaced chemical photography bringing about the death of an entire industry that produced and processed films. Eastman Kodak, an industrial colossus for most of last century, filed for bankruptcy in 2012. Mechanical typewriters, which were ubiquitous when I grew up, have been entirely displaced by word processors, and in November 2012, Brother's UK factory manufactured what it claimed to be the last typewriter ever made in the UK and donated it to the London Science Museum.

Just as we have seen flat screen television sets displace cathode ray tube technology; light-emitting diodes (LEDs) will almost certainly supplant light bulbs.

Apart from its daft reaction to the spread of solar generation, Unison seems a reasonably well-run outfit, and should consider copying the horse traders who prospered as car salesmen.

Solar power systems have to be sold, installed and maintained. Certain elements, like the batteries, don’t last forever and need regular replacement.

Who better than Unison to ride on the solar bandwagon? The company’s business is electricity and it presumably has a resource of electricians and other valuable, and relevant, intellectual property. Not only does Unison have the capacity to dominate the growth of distributed generation in sunny Hawke’s Bay, it has matchless market intelligence because of its current business.

The company has already diversified into the transformer, contracting and fibre businesses, so why not solar power?

The Unison directors should take the lead in this process. One of them, Wellington Lawyer Lucy Elwood, is quoted as saying:

“It’s interesting what makes an idea fly or an organisation win – often it is governance that makes the difference. I’ve always been interested in the effectiveness that good leadership brings whether it is in a not-for- profit or in a corporate”.

If Unison fails to develop ideas to deal with the solar power challenge, the company will go from a “corporate” to a “not-for- profit”.