The debate around the ACC and how it’s an example of how design thinking can help with disruptive innovation and the energy transition.
Summary
The Energy Transition is happening, and to make the most of it, we need to be clear on what we’re trying to achieve. In the case of distributed energy resources, we’ve been trying to find a way for a disruptive clean generation to fit into a system designed over a hundred years ago. In the CA debate on the optimal Avoided Cost Calculator, the focus should be on how rooftop solar PV can make the grid work better, not on whether it’s cheaper than traditional and transitional costs.
Bias & Disruption
As the Energy Transition gets underway, we’re at the beginning of what will be an extended and heated debate. So it makes sense to pause, as if we were on the launch pad, to go through our checklist one more time. I’ve just finished reading Jeff St. John’s excellent brief on the CA ACC debate that threatens to upend the CA (California) solar economy, and I’m … disturbed.
One challenge of the Energy Transition is Cognitive Bias (in this case, anything that goes against the norm is considered ineffective). In this case out in CA, they’re discussing the optimal Avoided Cost Calculator (ACC); and from there springs this heated debate. We’ve chosen to work within the framework of the historic grid paradigm when discussing rooftop solar and the grid. With this new technology, we’ve tried to find the best way for a disruptive clean generation to fit into a system designed over a hundred years ago.
In the ACC debate, rooftop solar PV is to be valued based on how it works to make the grid work better (i.e. by avoiding traditional and transitional costs). The debate will be fierce, but its design is deterministic. Any answer to this question will involve discussing the costs and how they are measured compared to the grid. It won’t involve whether any of that matters if we’re asking the wrong question.
Highly Effective Grids
The famous Seven Habits of Highly Effective People, published in 1989, argues in Habit 2, “Begin with the end in mind” (the habit of vision), to “check that your ladder is on the right wall before beginning to climb.” I can’t help but think that we’ve put maintenance of the status quo – making the grid work better – as our wall to climb, rather than a more rapid Energy Transition, our prime directive. We must achieve a rapid, cost-effective transition to a new energy system based on distributed, decarbonized assets. It must be resilient to accommodate increasing disruptions from climate change. Our consideration is not our historic goal – a better grid and lower-cost electricity…it’s no longer all about cheap electricity; it’s about mitigating and adapting to climate change.
Digitilization of Energy
I don’t want to write a ten-page blog, so let me suggest in this post that ACC v Distributed Solar PV is a great case study for Digitalization. By first modeling the problem based on agreed policy goals, then letting data analytics based on AI and machine-learning crunch the numbers and run scenarios, we would have a more straightforward path to get the results that meet our needs. Unfortunately, we may get into a mud-wrestling contest over a question that isn’t the right one to ask because we have a poor definition of the problem in the first place. Consider, if the optimum answer were to rapidly move all energy users to grid independence using rooftop solar, regardless of near-term costs, how could preserving low costs on the grid be anywhere in the universe of options?
The Energy Transition
A quote often attributed to Henry Ford goes: “If I had asked people what they wanted, they would have said faster horses.” (See On Building A Faster Horse: Design Thinking For Disruption). Author Colin Walsh argues that design thinking is key when it comes to disruption, recommending four tips to master this approach:
- Understand that transformative innovation is inherently risky;
- Go slow to go fast;
- Keep the customer at the center of every decision
- Involve the whole company. In doing so, Walsh closes with these words:
The core business focus has moved from operational excellence to innovation. The customer is now at the center of the pyramid, around which processes and products revolve, all tied together with a common thread of design.
Design thinking results in products that customers love and that gain their long-term trust and loyalty. When companies take this approach to heart, things change — industries are disrupted and life improves for millions of people. For companies and industries that lose sight of their customers — well, eventual irrelevance is guaranteed.
This argument would suggest that the CA debate on ACC is about operational excellence, but our core challenge is innovation. If the ACC debate continues with its operational excellence core assumption, the inherent risk is slower innovation and, ultimately, further irrelevance for the energy transition.
At Awesense, we’re building out the Digital Layer to support the Digitalization of Energy so that we all can embrace innovation and rational results that lead more rapidly to the changes we all need. If we have the tools that let us spend our time and debate on the right questions, no matter how complex, we can let data drive our policy arguments rather than political positions.
