so I’m Aaron Hesse as it says and I
wanted to talk to you today about my
slide show hey disruption technology is
driving disruption with in markets
around the world and with presentations
at TEDx and if you like me you’re
probably wondering when you’re watching
these markets be disrupted by technology
who’s next and I’ve been building
buildings high-performance buildings as
an electrical engineer for some time now
and I’ve noticed that there are a couple
of trends that I wanted to talk to you
today about and I think that they’re
going to significantly impact the way
utilities do business in the near future
so I wanted to tell you about what those
trends are why the utilities matter and
how the utilities will need to
fundamentally change their business
model in order to avoid what analysts
are calling the utility death spiral
so buildings are trend trend number one
buildings are increasingly more
connected more intelligent filled with
more networked devices devices that are
imbued with almost as magical property
where they’re able to significantly
reduce the amount of energy that
buildings need to in order to operate
and we call this trend Network
convergence that is what used to be
separate non-interacting systems all
throughout buildings are now being
converged onto a single Network platform
and these are devices that you might not
necessarily expect for example in
hospitals all nurse call systems are
being given their own network cable and
unique IP addresses on the network it
also includes clocks in school
and their intercom systems even the
heating and cooling systems and right
down to individual plug loads in walls
and commercial buildings and what this
is doing is it’s it’s it’s adding a lot
of infrastructure into the walls and
into the basements a lot a lot of what I
do it’s not something that’s you see
very very often it sort of happens
behind the scenes but in the basement
what you probably used to call a phone
closet now though it’s probably
something like this and and this is this
is a little bit extreme but it’s not
super uncommon and in this building
there’s probably one a lot like this I
tried to find it but it’s probably
behind a locked door and I couldn’t but
I’m guessing there’s one somewhere
nearby
however in new construction when it’s
done correctly it looks more like this
and this is kind of an intimidating
picture right because this just kind of
illustrates the the amount of planning
and engineering that goes into what used
to just be basic lighting systems and
these these systems are allowing
building managers to do some cool things
like fine-tune the amount of energy
that’s being used by all of these
different electronic devices in their
building but where the magic really
happens is actually when all of these
devices start talking to each other so
for example now as standard practice we
install lighting control systems that
have a feature called daylight
harvesting where the light fixture and
the ceiling closest to the window has a
sensor in it and senses the amount of
light coming in through the window and
it’ll dim down to maybe 20% light output
because you know there’s no point in
illuminating an area that’s already lit
by a window but it’ll also tell the
light next to it further away from the
window dim down to 50% and then the
light next to it further away from the
window remain on at a hundred or ninety
depending on how much light is coming in
and that’ll change over the day to keep
the amount of light on a desk or on you
know an office space constant throughout
throughout the changing day and this is
dramatically decreasing the amount of
energy that buildings are consuming in
order to operate on their daily function
and all of these devices are actually
you know I’ll given their own unique IP
and now with this new standard that came
out called IP version 6 it came out in
2012 we now have enough unique IP
addresses to fill every square inch of
the planet with a million individual
unique addresses so and this is this is
a trend that’s not expected to stop
last year Gartner predicted that there
were 6.3 billion devices in the world
and that was expected to increase to
over 20 billion by 2020 so the this is
this is going to continue and buildings
will continue to be more interconnected
and intelligent and the amount of energy
that’s being required for them is going
to decrease decrease very rapidly let’s
keep that in mind as we move on to trend
number two
earlier this year Kauai partnered with
Tesla to build a massive solar array of
capable of producing 13 megawatts of
electricity and what’s unique about this
particular solar array is it also comes
with a 52 megawatt hour battery array
for those of you are curious it’s about
3/4 of a million automotive batteries
and capacity so so it’s it’s huge and
what’s special about this is that the
solar arrays you know if you’re familiar
with the way solar functions the
electricity that’s generated and kind of
goes up and down throughout the days and
nights and depending on the weather but
demand doesn’t and they don’t
necessarily match up so there’s a lot of
inefficiency that happens when you can
generate more electricity than you need
but when you’re compared with a battery
storage device like this the solar array
just powers the batteries and then the
island can be powered from the batteries
constantly and previously Kauai used to
rely primarily on diesel and gas
generating turbines for their
electricity and with this new solar
array they’re estimating that they’re
going to reduce their use of imported
oil from the mainland by 1.6 million
gallons of oil but let’s take that
concept and let’s let’s apply it to the
way electricity is being generated and
transmitted today currently the model
and you know you’re probably familiar
with this is huge generating facilities
whether it’s hydro or
facilities and they rely on economies of
scale so they build them as large as
possible and then they use their own
utilities their own distribution system
to get that to of the customer or to the
to the building or the industrial
facility but what the what the use of
solar in and a battery on-site storage
proves is that this may not necessarily
be the way some buildings are required
to be built we may in the future be
providing more solar arrays on rooftops
and then using batteries nearby to to to
store that energy and then use it as as
needed and we call this concept
distributed generation and this is being
driven by the the rapidly decreasing
costs of solar panels for example also
the rapidly decreasing cost of
lithium-ion batteries Tesla is recently
completing a massive Giga Factory they
call it where they’re going to
dramatically reduce the cost of
lithium-ion batteries Sweden has a
company called North fold doing
something similar so it won’t be long
now before it just makes financial sense
to have some sort of on-site generation
on a building combined with that that
cheap lithium-ion battery this is an
example of something that solar roofing
tiles and battery backup systems might
look like on a home this is made by
Tesla and these solar roofing tiles are
just one example of the many products
that are going to become available we
all think of solar and we think about
you know these huge ugly panels that you
know nobody really wants on the roof but
what if the roofing tile themselves were
able to generate the electricity what if
the an existing building you could apply
tint to the window that generated
electricity there’s a lot of products
like that even right down to window
blinds that you put in your home or in a
commercial building that generates
electricity and then stores that
electricity and a battery backup system
and this isn’t just a possibility this
is a priority for many places for
example Japan has mandated that all new
buildings after 2020 will be able to
store all the energy they need and
discharge on to their building without
using any electricity from the grid a
concept called Net Zero that is
generate everything that they need on
site but also California has mandated
that all new homes be Net Zero homes by
2020 and all new commercial buildings be
Net Zero by 2030 the US government had
to has decided that all new federal
buildings will be Net Zero by 2030 and
they wouldn’t be able to do this without
intelligent building systems driving
down the amount of electricity required
combined with some sort of an outside
generation so you may be surprised to
find out that actually the electricity
that is sold in the US and this the
Department of Energy figure 75% of that
electricity goes to powering buildings
and what’s you know what’s concerning
about that is I don’t about you but if I
if I were running a business and I saw
that 75% of my customer base will soon
have the technology to no longer need me
I would probably start I’d probably
start being a little bit concerned right
however not not everybody has really
that concern some utilities have been
doing business the same way for over a
hundred years and they’re unwilling to
change and some analysts and market
analysts have have predicted that what
that’s going to look like when they fail
to change when this technology disrupts
the market and these utilities are
unable to adapt as a process that they
call the utility death spiral so I’m
going to I’m going to start at the top
and we’re gonna work around clockwise we
talked about distributed generation and
in building two intelligence those
trends are going to continue and the
first thing that that’s going to do is
is going to have a significant impact on
the revenue of utilities the problem
with that though is that utilities have
an enormous fixed cost there the
distribution system their generation
facilities they consume a lot of a lot
of money just to maintain them even when
they’re not selling electricity it’s
completely independent of that you can
look at a lot like splitting rent with
roommates so you’ve got six roommates
and two guys get girlfriends and now
suddenly there’s four people left
splitting the same rent your landlord
doesn’t change the rent but your portion
goes up so the first thing that
utilities are going to want to do is
increase rates
and when utility bills go up people
start looking for ways especially if
you’re a business owner and you own a
building you’re gonna start looking for
ways to reduce your energy consumption
and promote some sort of generation on
site so that you can decrease that cost
to your business or to your household so
now we’re back at the top only with more
momentum more more people who will be
pressured into distributed generation
more people into building intelligent
systems they’ll be renovating and
installing these systems that try to
shed some of that cost and this cycle
creates a positive feedback loop and
that’s what the analysts are calling the
utility death spiral ultimately ending
in rates being astronomical and
utilities going bankrupt so we’re
already starting to see some evidences
of this – a couple years ago green tech
media wrote the energy sector is
changing rapidly and utilities are
reacting by buying up one another’s
assets in the search of the magical
combination that will allow them to
adapt to an increasingly distributed
future I thought that was kind of a
mouthful I kind of liked it this better
its merger time and utility land and
it’s true over the last decade or so it
used to be about a hundred investor
owned utility assist together down to
about 50 about half and like these other
trends it’s not expected to stop as
utilities look for ways to spread out
over a larger geographic region and more
people they’ll start looking for ways to
to get rid of that those losses if
mergers is probably one of the best ways
to do that so it’s kind of a scary
picture the pain right I mean obviously
nobody wants that to happen this is bad
for everybody so let’s let’s paint the
other picture and I think it’s a really
bright future – I think it’s got a lot
of opportunity and a lot of a lot of
positive things for everybody so let’s
go back to that original that rigid
original model right we’ve got the
central generation facilities that are
you know sending electricity over the
power wires to your home I think that
right now utilities really focus on
they’re generating abilities that’s
their their bread and butter that’s how
they that’s how they make money right
it’s very able to generate electricity
and sell it but a lot like so many other
I think the utility’s of the future are
going to need to shift their thinking
away from their product and more on
getting how they get that product to the
customer more on their distribution
systems less on their generation systems
so you can kind of think of it the way
amazon has outgrown being just a
bookseller now it’s an open marketplace
now anybody can jump on to Amazon with a
product and sell their product really
effectively to a very specified oddity
audience with lots of advertising and
it’s a great way for them to create
money and Amazon just takes a cut
because they’re really good at the
distribution part even if they’re not
necessarily selling their own products
so that that I think that looks a lot
more like this model where we’ve got
this energy marketplace where if you’re
a consumer of electricity you can log
into some website and choose which
sources of energy you would like to
purchase from for example you may want
to purchase all you know all solar for
your home for example and there may be a
premium for that but it wouldn’t be that
different from going to the grocery
store and buying organic produce if
that’s something that you felt was
important but if you’re an enterprising
individual and you saw this marketplace
there’s tons of opportunity for you to
get involved the the utility own
generation facilities will just be one
of many options for you to purchase
electricity but there’ll be lots of
other private people who want to jump in
there and sell electricity as well for
example you may want to enter in what’s
known as an electrical arbitrage market
where you have this huge solar you have
this huge battery array and all you do
is go to like the the industrial
facility nearby tell them hey if you
want to avoid charges when your when
your Peaks are high for electricity
I can I can absorb electricity from the
grid and sell it to you when you need it
the most and and save you some money but
you could also for example have your own
generating facility if you wanted to get
together with a community and have your
own solar and battery plan and be sort
of separated from the grid and just you
know maintain that grid for your
community you could do that you there’s
lots of opportunities for even buildings
themselves to sell the
excess energy that they generate back
into that market so what this does is it
allows normal market forces to return to
the utility industry it allows more
choice for customers on what they want
and and less less choice based on you
know some external forces not not
related to the customer so I see this as
being a bright future as long as
utilities are willing to to innovate
focus on focus on changing their ways
and their business model the way they’ve
been doing business for the past hundred
years and adapt to the disruptive
changes just over the horizon thank you
you
wanted to talk to you today about my
slide show hey disruption technology is
driving disruption with in markets
around the world and with presentations
at TEDx and if you like me you’re
probably wondering when you’re watching
these markets be disrupted by technology
who’s next and I’ve been building
buildings high-performance buildings as
an electrical engineer for some time now
and I’ve noticed that there are a couple
of trends that I wanted to talk to you
today about and I think that they’re
going to significantly impact the way
utilities do business in the near future
so I wanted to tell you about what those
trends are why the utilities matter and
how the utilities will need to
fundamentally change their business
model in order to avoid what analysts
are calling the utility death spiral
so buildings are trend trend number one
buildings are increasingly more
connected more intelligent filled with
more networked devices devices that are
imbued with almost as magical property
where they’re able to significantly
reduce the amount of energy that
buildings need to in order to operate
and we call this trend Network
convergence that is what used to be
separate non-interacting systems all
throughout buildings are now being
converged onto a single Network platform
and these are devices that you might not
necessarily expect for example in
hospitals all nurse call systems are
being given their own network cable and
unique IP addresses on the network it
also includes clocks in school
and their intercom systems even the
heating and cooling systems and right
down to individual plug loads in walls
and commercial buildings and what this
is doing is it’s it’s it’s adding a lot
of infrastructure into the walls and
into the basements a lot a lot of what I
do it’s not something that’s you see
very very often it sort of happens
behind the scenes but in the basement
what you probably used to call a phone
closet now though it’s probably
something like this and and this is this
is a little bit extreme but it’s not
super uncommon and in this building
there’s probably one a lot like this I
tried to find it but it’s probably
behind a locked door and I couldn’t but
I’m guessing there’s one somewhere
nearby
however in new construction when it’s
done correctly it looks more like this
and this is kind of an intimidating
picture right because this just kind of
illustrates the the amount of planning
and engineering that goes into what used
to just be basic lighting systems and
these these systems are allowing
building managers to do some cool things
like fine-tune the amount of energy
that’s being used by all of these
different electronic devices in their
building but where the magic really
happens is actually when all of these
devices start talking to each other so
for example now as standard practice we
install lighting control systems that
have a feature called daylight
harvesting where the light fixture and
the ceiling closest to the window has a
sensor in it and senses the amount of
light coming in through the window and
it’ll dim down to maybe 20% light output
because you know there’s no point in
illuminating an area that’s already lit
by a window but it’ll also tell the
light next to it further away from the
window dim down to 50% and then the
light next to it further away from the
window remain on at a hundred or ninety
depending on how much light is coming in
and that’ll change over the day to keep
the amount of light on a desk or on you
know an office space constant throughout
throughout the changing day and this is
dramatically decreasing the amount of
energy that buildings are consuming in
order to operate on their daily function
and all of these devices are actually
you know I’ll given their own unique IP
and now with this new standard that came
out called IP version 6 it came out in
2012 we now have enough unique IP
addresses to fill every square inch of
the planet with a million individual
unique addresses so and this is this is
a trend that’s not expected to stop
last year Gartner predicted that there
were 6.3 billion devices in the world
and that was expected to increase to
over 20 billion by 2020 so the this is
this is going to continue and buildings
will continue to be more interconnected
and intelligent and the amount of energy
that’s being required for them is going
to decrease decrease very rapidly let’s
keep that in mind as we move on to trend
number two
earlier this year Kauai partnered with
Tesla to build a massive solar array of
capable of producing 13 megawatts of
electricity and what’s unique about this
particular solar array is it also comes
with a 52 megawatt hour battery array
for those of you are curious it’s about
3/4 of a million automotive batteries
and capacity so so it’s it’s huge and
what’s special about this is that the
solar arrays you know if you’re familiar
with the way solar functions the
electricity that’s generated and kind of
goes up and down throughout the days and
nights and depending on the weather but
demand doesn’t and they don’t
necessarily match up so there’s a lot of
inefficiency that happens when you can
generate more electricity than you need
but when you’re compared with a battery
storage device like this the solar array
just powers the batteries and then the
island can be powered from the batteries
constantly and previously Kauai used to
rely primarily on diesel and gas
generating turbines for their
electricity and with this new solar
array they’re estimating that they’re
going to reduce their use of imported
oil from the mainland by 1.6 million
gallons of oil but let’s take that
concept and let’s let’s apply it to the
way electricity is being generated and
transmitted today currently the model
and you know you’re probably familiar
with this is huge generating facilities
whether it’s hydro or
facilities and they rely on economies of
scale so they build them as large as
possible and then they use their own
utilities their own distribution system
to get that to of the customer or to the
to the building or the industrial
facility but what the what the use of
solar in and a battery on-site storage
proves is that this may not necessarily
be the way some buildings are required
to be built we may in the future be
providing more solar arrays on rooftops
and then using batteries nearby to to to
store that energy and then use it as as
needed and we call this concept
distributed generation and this is being
driven by the the rapidly decreasing
costs of solar panels for example also
the rapidly decreasing cost of
lithium-ion batteries Tesla is recently
completing a massive Giga Factory they
call it where they’re going to
dramatically reduce the cost of
lithium-ion batteries Sweden has a
company called North fold doing
something similar so it won’t be long
now before it just makes financial sense
to have some sort of on-site generation
on a building combined with that that
cheap lithium-ion battery this is an
example of something that solar roofing
tiles and battery backup systems might
look like on a home this is made by
Tesla and these solar roofing tiles are
just one example of the many products
that are going to become available we
all think of solar and we think about
you know these huge ugly panels that you
know nobody really wants on the roof but
what if the roofing tile themselves were
able to generate the electricity what if
the an existing building you could apply
tint to the window that generated
electricity there’s a lot of products
like that even right down to window
blinds that you put in your home or in a
commercial building that generates
electricity and then stores that
electricity and a battery backup system
and this isn’t just a possibility this
is a priority for many places for
example Japan has mandated that all new
buildings after 2020 will be able to
store all the energy they need and
discharge on to their building without
using any electricity from the grid a
concept called Net Zero that is
generate everything that they need on
site but also California has mandated
that all new homes be Net Zero homes by
2020 and all new commercial buildings be
Net Zero by 2030 the US government had
to has decided that all new federal
buildings will be Net Zero by 2030 and
they wouldn’t be able to do this without
intelligent building systems driving
down the amount of electricity required
combined with some sort of an outside
generation so you may be surprised to
find out that actually the electricity
that is sold in the US and this the
Department of Energy figure 75% of that
electricity goes to powering buildings
and what’s you know what’s concerning
about that is I don’t about you but if I
if I were running a business and I saw
that 75% of my customer base will soon
have the technology to no longer need me
I would probably start I’d probably
start being a little bit concerned right
however not not everybody has really
that concern some utilities have been
doing business the same way for over a
hundred years and they’re unwilling to
change and some analysts and market
analysts have have predicted that what
that’s going to look like when they fail
to change when this technology disrupts
the market and these utilities are
unable to adapt as a process that they
call the utility death spiral so I’m
going to I’m going to start at the top
and we’re gonna work around clockwise we
talked about distributed generation and
in building two intelligence those
trends are going to continue and the
first thing that that’s going to do is
is going to have a significant impact on
the revenue of utilities the problem
with that though is that utilities have
an enormous fixed cost there the
distribution system their generation
facilities they consume a lot of a lot
of money just to maintain them even when
they’re not selling electricity it’s
completely independent of that you can
look at a lot like splitting rent with
roommates so you’ve got six roommates
and two guys get girlfriends and now
suddenly there’s four people left
splitting the same rent your landlord
doesn’t change the rent but your portion
goes up so the first thing that
utilities are going to want to do is
increase rates
and when utility bills go up people
start looking for ways especially if
you’re a business owner and you own a
building you’re gonna start looking for
ways to reduce your energy consumption
and promote some sort of generation on
site so that you can decrease that cost
to your business or to your household so
now we’re back at the top only with more
momentum more more people who will be
pressured into distributed generation
more people into building intelligent
systems they’ll be renovating and
installing these systems that try to
shed some of that cost and this cycle
creates a positive feedback loop and
that’s what the analysts are calling the
utility death spiral ultimately ending
in rates being astronomical and
utilities going bankrupt so we’re
already starting to see some evidences
of this – a couple years ago green tech
media wrote the energy sector is
changing rapidly and utilities are
reacting by buying up one another’s
assets in the search of the magical
combination that will allow them to
adapt to an increasingly distributed
future I thought that was kind of a
mouthful I kind of liked it this better
its merger time and utility land and
it’s true over the last decade or so it
used to be about a hundred investor
owned utility assist together down to
about 50 about half and like these other
trends it’s not expected to stop as
utilities look for ways to spread out
over a larger geographic region and more
people they’ll start looking for ways to
to get rid of that those losses if
mergers is probably one of the best ways
to do that so it’s kind of a scary
picture the pain right I mean obviously
nobody wants that to happen this is bad
for everybody so let’s let’s paint the
other picture and I think it’s a really
bright future – I think it’s got a lot
of opportunity and a lot of a lot of
positive things for everybody so let’s
go back to that original that rigid
original model right we’ve got the
central generation facilities that are
you know sending electricity over the
power wires to your home I think that
right now utilities really focus on
they’re generating abilities that’s
their their bread and butter that’s how
they that’s how they make money right
it’s very able to generate electricity
and sell it but a lot like so many other
I think the utility’s of the future are
going to need to shift their thinking
away from their product and more on
getting how they get that product to the
customer more on their distribution
systems less on their generation systems
so you can kind of think of it the way
amazon has outgrown being just a
bookseller now it’s an open marketplace
now anybody can jump on to Amazon with a
product and sell their product really
effectively to a very specified oddity
audience with lots of advertising and
it’s a great way for them to create
money and Amazon just takes a cut
because they’re really good at the
distribution part even if they’re not
necessarily selling their own products
so that that I think that looks a lot
more like this model where we’ve got
this energy marketplace where if you’re
a consumer of electricity you can log
into some website and choose which
sources of energy you would like to
purchase from for example you may want
to purchase all you know all solar for
your home for example and there may be a
premium for that but it wouldn’t be that
different from going to the grocery
store and buying organic produce if
that’s something that you felt was
important but if you’re an enterprising
individual and you saw this marketplace
there’s tons of opportunity for you to
get involved the the utility own
generation facilities will just be one
of many options for you to purchase
electricity but there’ll be lots of
other private people who want to jump in
there and sell electricity as well for
example you may want to enter in what’s
known as an electrical arbitrage market
where you have this huge solar you have
this huge battery array and all you do
is go to like the the industrial
facility nearby tell them hey if you
want to avoid charges when your when
your Peaks are high for electricity
I can I can absorb electricity from the
grid and sell it to you when you need it
the most and and save you some money but
you could also for example have your own
generating facility if you wanted to get
together with a community and have your
own solar and battery plan and be sort
of separated from the grid and just you
know maintain that grid for your
community you could do that you there’s
lots of opportunities for even buildings
themselves to sell the
excess energy that they generate back
into that market so what this does is it
allows normal market forces to return to
the utility industry it allows more
choice for customers on what they want
and and less less choice based on you
know some external forces not not
related to the customer so I see this as
being a bright future as long as
utilities are willing to to innovate
focus on focus on changing their ways
and their business model the way they’ve
been doing business for the past hundred
years and adapt to the disruptive
changes just over the horizon thank you
you
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