Tesla – the Google of the electricity industry by Paul Budde

One of the issues that I often spoke about at Global Smart Grid Federation events was that the electricity industry would have to go through a similar transformation process to the one the telecoms industry went through 20+ years ago upon the arrival of the internet. I warned that there was no doubt that eventually a Google-like company would step in and disrupt the electricity industry like Google and others did in the telecoms industry.

It is now 10 years later and we still haven’t seen decisive action from many of the electricity companies. It is extremely difficult for these incumbent players to actually make the transition without clear government direction, and, as a very senior electricity executive once said to me, it will be nearly impossible for the industry to do this on its own without strong government leadership. He argued that without strong action the electricity distribution companies might be relegated to simple pipe operators, and that in those circumstances there was little hope for the traditional incumbent players.

I think that we can now see the Google of the electricity industry appearing on the horizon in the form of Tesla.

Tesla is certainly not an unknown company in the industry in relation to electric vehicles and battery storage systems, but recent acquisitions are making it clear that the company is aiming for nothing less than an end-to-end power supply, storage and distribution supplier, totally based on renewable energy. As a new, innovative and cash-rich company it can, like Google, Facebook and others, expand these systems globally. So rather than disruption operating on a country-by-country basis, the change would be led by a global company. Obviously an electricity utility is rather different from an internet utility; and in relation to infrastructure it is far more complex. Of course national systems will have to be developed, but nevertheless a global concept has now been placed on the table. As with the internet companies, starting new systems from scratch is far easier and cheaper than upgrading the old big-iron grid and its systems.

We have seen that these internet companies have been able to reduce the traditional costs by up to 80% and they have wiped (or are in the process of wiping) total sectors. This process will no doubt be replicated in the energy industry.

Obviously there are many more issues attached to this. Electricity is an absolutely essential utility for our society and economy and within this transformation the big grid will remain an important element for many decades to come.

How this will all develop remains an uncertainty and it will be messy, but one thing is certain – things won’t be the same once Tesla starts rolling out its own end-to-end power systems around the world. Obviously it won’t happen overnight. It will take decades to accomplish. Furthermore, there is nothing stopping local utilities from partnering with Tesla and, by so doing, becoming part of the solution.

It is now approaching two minutes to midnight for the utilities to decide if and where they want to play in this new industry, and this will be a tough decision for them. Sitting on the fence and waiting for the government to show some form of leadership is no longer an option. Obviously if there are no clear government policies relating to where the country as a nation wants to go, those organisations will find it even more difficult to make the right decisions. In Australia current government policies are actually working against such a transformation process and this will make it an uphill battle for the organisations involved to plan their future.

Hopefully the move from Tesla will be a wake-up call for all involved to finally start making some serious decisions about the future of the electricity industry in each individual country.

Paul Budde