There is welcome evidence that the intellectual and financial resources in Silicon Valley are starting to seriously engage in Smart Grid activities.
Take a look at where Smart Grid investment funds are based. Of course, the Federal government’s American Recovery and Reinvestment Act (ARRA) stimulus fund kickstart of $3.4B beat all other sources of money. But from a venture capital perspective, the top 3 US geographic sources of funding in 2009 were
- Silicon Valley (Northern California) – $1.2B
- Southern California – $329.5M
- New England – $283.7M
Much of this investment is going to a category called energy efficiency (EE) rather than alternative energy technology. There are several reasons for this, and the primary reasons are that EE plays have lower funding requirements than alternative energy investments which are capital-intensive, can be brought to market faster than many other Smart Grid technologies, and have a comfort level with many venture capitalists who can relate EE research, development, and deployment (RD&D) to familiar ICT (Information and Communications Technology) RD&D.
Silicon Valley has tremendous intellectual expertise in a number of areas that can and should make significant contributions to advancing Smart Grid solutions. The centers of expertise include
- Software for any application
- Security and encryption
- Semiconductors, processors, and chipsets
- Game design
- Communications and networks
There are more Smart Grid-related conferences, seminars, and webinars here that expose workers from all backgrounds to the challenges and opportunities in this business sector. What I call the region’s innovation infrastructure encourages interesting fusions of different areas of expertise. Workforce mobility and mindset supports innovation with a near constant circulation of resources in companies that expose employees to new technologies, business models, and problem-solving approaches. There is an expectation of sharing knowledge and synthesizing data into new insights. Silicon Valley also has a number of incubators – organizations and business plan competitions that encourage and support the growth of great ideas into viable companies. The concentration of world-class colleges and universities in this region further enhances this concentration of intellectual capital.
The big challenge is how to engage Silicon Valley and utilities together into a full-throttled drive to create the optimal Smart Grid solutions that will reduce energy costs for consumers and utilities, reduce greenhouse gas emissions, and build national energy security. I recently read an article that examined the reasons for Ford Motor Company’s success in revamping its business operations. Mark Fields, EVP and Americas President was quoted as saying, “These high-tech companies work at a very different clock speed than us, a much faster clock speed. We had to jump in. We had to learn. We started thinking like a software company.”
Can utilities learn to move at faster speeds? Can Silicon Valley cultures learn to work with utilities and respect their regulatory and operational environments? For example, utilities need to test all new solutions to ensure that they won’t “break the grid”. Telecom companies have been doing this for years, too, and the lengthy and repetitive investigations not only test the solution, but the patience and financial resources of the solution vendors. Here’s one area where a little process and model innovation should be welcomed by both utilities and Smart Grid vendors to drive down costs of doing business and accelerate introduction of solutions.
The stakes are high, and it’s not a given that the Smart Grid will be built in the most intelligent and cost-effective ways, but the good news is that the great innovation engine called Silicon Valley is going to be a real player in this game.