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Disruptive innovation is often seen as a vehicle to upend not just existing technologies, or incumbent companies, but entire systems.  But is this what we really want?

One of the many extensions of the idea of disruptive innovation to hit the market (and there is a market for these ideas, make no mistake!) is Big Bang Disruption. The idea of big bang disruption is similar to Clayton Christensen’s original ideal of disruptive innovation, except this type of disruption happens much faster, in some cases verging on instantaneously – or so claim the originators of the idea (for a review of their book, see here).  This concept has been applied to the electricity industry in a recent blog over at greentechmedia, suggesting that technology will shortly enable the destruction of traditional electricity systems.

Widely viewed as innovation challenged and the source of much of the carbon dioxide that drives climate change, there are endless calls for this industry to be disrupted: for existing technologies to be overthrown, opening the way for the democratization of electricity supply through the use of distributed energy generation and storage.  The achievement of this goal would see consumers generating their own electricity, free of the burden of high cost distribution networks and the tyranny of centrally controlled energy markets (with the added benefit of significant profits for the technology providers!).

But is this something we really want?  Take, in the first instance, transmission and distribution networks.  These are highly regulated (generally) public assets because they are natural monopolies.  They have been built up over long periods of time, with taxpayer funds and – despite the clamor for their overthrow – offer a public good.  Why would you choose to junk these assets when they can serve the important purpose of offering backup supply, or the opportunity to sell that locally generated energy to other consumers?  After all, isn’t the sale of excess energy via the grid the business case that has driven the adoption of domestic solar in the past 10 or so years?  Without the grid, subsidized electricity prices for solar energy wouldn’t be particularly useful and the adoption of the technology would be significantly lower that it has been.

Taking another perspective, imagine you are having a conversation with someone from a country about which you know nothing.  In that conversation they say that they have a high value and robust system for getting an essential service to everyone in the country, but they now want to junk that in favour of yet to be proven technologies because they’ve decided that they don’t like the cost of maintaining the existing asset.  That might make sense, but rather than abandoning that asset you’d have to ask whether a new role could be found for the infrastructure, rather than being torn down to be replaced by another set of expensive infrastructure.

Aside from this, electricity grids will continue to serve a public good for some time yet.  Not everyone can afford the capital cost of new distributed generation and storage technologies.  And even if you could, would you be willing to live without power in the event that a product fails?  How quickly is your system likely to get repaired?  How would you feel about paying for service level assurance for your shiny new system to get it’s reliability to a level comparable with modern grids (minutes of outage per year)?  Overthrowing robust, established systems always comes with down sides.

This leads me to the point I really want to make, which is it’s important to consider what is being disrupted when talking about disruptive innovation. I think that there is a real need to see technological change – and perhaps even disruptive change – in our modes of power generation.  But that doesn’t mean that the entire electricity system needs to be overthrown.  Distribution grids can serve an important role in providing backup, high quality supply, support for those not able to ‘upgrade’ and a mechanism for energy trading at a local level.

And this is a legitimate use of the idea of disruption.  While Clayton Christensen focused on (in one case) disruption in the hard disc drive industry, computers continued to exist while drive architecture went through repeated periods of turmoil. The analogy with the power industry is that you can replace one set of technologies (generation) without displacing the system in its entirety.  So it’s important to think about what is being disrupted, rather than claiming that everything is being disrupted.

In the case of electricity systems, it’s going to be more productive to talk about technological disruption rather than system disruption, which is where many discussions of disruptive innovation in the electricity sector seem to land.  We should define the problem that innovation is being used to address before invoking the magical properties of disruptive innovation to argue for what is often an ideological or profit motivated argument to overthrow an established system.  

However, we could seek big bang disruption of the electricity industry.  But be careful what you wish for, because it won’t be cheap and it won’t be painless.  Instead we should be looking for ways to leverage innovation to achieve change, without destroying systems that can continue to add value in a world of democratized energy supply.

Category:
Disruptive innovation, Electricity industry, Energy storage, Technological change

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