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Silicon Valley to conquer energy sector?

Richard A. Fuchs Silicon Valley, California
November 29, 2016

Smart technologies like big data, blockchain and the "Internet of Things" are likely to play a big role in the new energy landscape. So, will traditional utilities be replaced by green tech companies from Silicon Valley?

Deutschland IFA 2016 Smart Thermostat der Firma Tado
Image: Tado

Stone Edge Farm is situated among the rolling hills of the Sonoma wine-making region, 70 kilometers north of San Francisco in California. As well as wine, the farm produces vegetables, herbs and olives. And soon, it will expand its output to include solar power for the surrounding community.

"We have the means to supply electricity to our neighbors within a radius of up to 2 kilometers," says Craig Wooster, Stone Edge Farm's technical director.

Silicon Valley und digitale Energiewende
Wooster says the microgrid is an affordable way to power the local communityImage: DW/R. Fuchs

Power to spare

This has been made possible by 500 solar panels, seven battery storage units and a host of other gadgets, which have been digitally integrated into a virtual network. The self-sufficient electricity grid does away with dependence on traditional energy companies.

"With a mini-net like this we can produce much more electricity than we need ourselves," says Wooster. "That makes a micro-grid the ideal solution to sell power very affordably to those who don't have the opportunity to generate it themselves."

The Californian government in Sacramento is currently debating a draft bill to provide a legal framework for power providers to sell electricity direct to their neighbors. If it passes, Stone Edge Farm will be ready to go into business. Technical questions have all been resolved. It is even ready with a Silicon Valley solution for digital billing.

Silicon Valley und digitale Energiewende
Stone Edge Farm is adding green power to its productsImage: DW/R. Fuchs

Blockchain: the next big thing

Tech starts ups like Wattcoin and LO3 Energy want to revolutionize the energy sector with blockchain software that can exchange encrypted data packets between electricity providers and consumers over the internet. Customers and producers would know exactly how much electricity is used, and of course, how much payment is owed. This cuts out a power company playing middle-man.

In Germany too, companies have begun to experiment with encrypted data packets as a billing system. But sophisticated corporate strategies are still in short supply - not least because it is still unclear who will win and lose from a digital revolution in the energy sector.

Eric Dresselhuys is head of Silver Spring Networks, a San Jose company providing smart grid products and developing software to link customers around the world with energy providers. Dresselhuys is convinced that the internet of things - people and equipment connected in real time - will win out. 

Eric Dresselhuys
Dresselhuys sees huge potential for the Internet of Things in the energy sectorImage: DW/R. Fuchs

Consumer power

"When we make things smart, the balance of power is shifted towards the electricity customer," he says. "They can make their own decisions over when, how and where they want to use electricity."

The prosumer - electricity consumers who also have their own power production and storage - is the paradigm of the new energy age. Craig Lewis, director of the Clean Coal Coalition also believes micro grids are the future - a future than demands plenty of Silicon Valley know-now.

"Big data - so monitoring, managing and checking large amounts of data - will determine whether we can match the fluctuating renewable energy supply with storage, electrical vehicles and load management."

Silicon Valley und digitale Energiewende
Craig Lews of the Clean Coal Coalition says data management will be key to the future energy systemImage: DW/R. Fuchs

Lighthouse projects like Stone Edge Farm can provide a blueprint for tens of thousands of other self-contained power grids - publicly, privately-financed, in rural communities and urban districts. Lewis says.

Apps and algorithms

Debbie Raphael is head of San Francisco's environment department. She says it's promising that so many different business models for the new energy world are being developed. A charismatic local politician, she has put the city on a CO2 diet, and is confident that apps and algorithms have a role to play.

One of them is Powertree, which pays homeowners with a free parking spot and roof space to give them over to a solar-powered charging station for e-cars.

Silicon Valley und digitale Energiewende
San Francisco's environment chief says digital technology is is crucial for cutting carbon emissionsImage: DW/R. Fuchs

"Anyone with an electric car can register with the Powertree app and know exactly where to find an available charging station and parking space," Raphael explains. E-car owners pay a monthly fee for the service, covering payments to homeowners for the use of their roof and parking place.

58 houses around the city have signed up to the system, which will officially launch at the start of 2017. If all goes well, the company has plans to roll it out in Germany, too.

Smart is not enough

So, does the rise of blockchain technology, smart apps and the Internet of Things mean traditional energy providers' days numbered? Jigar Shah, a man whose opinion carries considerable weight in the American energy industry, says no.

Shah is New York-based investor in green start-ups. In 2003 he founded SunEdison, one of the first solar power companies in the USA. But he doesn't believe the new tech is enough to overturn the basic principles of the energy market.

Silicon Valley und digitale Energiewende
Powertree uses vacant parking spaces and rooftops to install charging stations, which e-car drivers can locate using their appImage: DW/R. Fuchs

"The Silicon Valleys of the world believe their technology will take over," he says. But he insists this is a fallacy, especially since bringing a product to market in the highly competitive energy sector requires broad cooperation between governments, energy suppliers, businesses and wider society.

Embattled older energy companies can take courage in Shah's message that just being smart is not enough. Shah is currently invested largely in start-ups that use new business models to make existing applications of green energy affordable to bigger sectors of the population. That way, traditional players can also win, he believes. Provided, of course, they are creative enough.