What Electricity 1.0 can teach us about Electricity 2.0

[david_jonker]

With The Current War premiering at Toronto International Film Festival on September 9 as part of Our Digital Future film series presented by SAP, it’s the perfect time to consider what the original race to bring electricity to the common citizen can teach us about today’s evolving power industry.

The Current War tells the story of Thomas Edison (played by Benedict Cumberbatch) and George Westinghouse (Tom Holland) competing to create and market the dominant electrical system in the US during the late 1880s and early 1890s. Now known as the War of Currents, the battle between Edison’s direct current (DC) system and Westinghouse’s alternating current (AC) system was one of the defining moments of the Second Industrial Revolution.

Following ruthless propaganda campaigns led by Edison, debates over electrical safety, and a race to show the American people whose system was the most sustainable, the War of Currents settled down when the key players merged and consolidated in the early 1890s. AC power distribution from plants to homes ultimately triumphed, largely because it was cheaper, but DC would still prove very handy, eventually powering our smartphones, computers, cars and more.

The Second War of Currents

The Current War feels especially relevant in a time when the Edison’s and Westinghouse’s of today are competing to bring ‘Electricity 2.0’ to the mainstream. A key component of the Fourth Industrial Revolution, it’s been called a $364 billion opportunity. There will be winners, and there will be losers.

Unlike Electricity 1.0, however, the Second War of Currents has a third major player: the consumer, or perhaps more accurately, the prosumer. The electricity system is going through the biggest shakeup since its introduction 130 years ago. Digitization and decentralization of the grid, the rise of renewable sources like solar and wind, the impact of the Internet of Things and more are coming together to totally reshape the utilities space, and it could give electricity-generating citizens the upper hand.

Electricity 1.0 was built around large, centralized systems, with the utility owning everything from the plant to the meter. Economies of scale worked to keep costs reasonable - a system that encouraged monopolies and fixed rates. Electricity 2.0 promises to remove the need for such centralization. As more easily decentralized sources like wind and solar become cheaper to generate and subsequently larger sources of electricity generation, power is shifting to the little guy.

Signs that democratization of the grid is really happening are already emerging, not least in the promise of blockchain technology. The cryptocurrency Solarcoin pays people in Solarcoin for generating solar power, and Transactive Grid has created a solar power micro grid for residents to buy and sell energy from each other using a blockchain. On the other hand, we are seeing moves from some of biggest utilities to gain some influence and control over how blockchain is used in the industry, perhaps most notably from the Energy Web Foundation.

Electricity 2.0 isn’t the death knell for traditional utilities, rather an opportunity for them to facilitate the inevitable transition to new sources and usher in a more efficient, environmentally-friendly and flexible grid.

Utilities – though they might not yet admit it - realize that being slow or resistant to change will render them irrelevant in this new era of power generation and distribution. Some are already acting, reimagining themselves as systems that can work harmoniously alongside clean, decentralized power, storage and consumer-controlled digital management. Others are suffering at the hands of their own inertia or stagnant government regulations that don’t fit with the looming market reality. 

As SAP IoT futurist Tom Raftery writes in Digitalist, “with the cost of generation dropping with no end in sight, and the cost of storage similarly falling…there is a strong possibility that utilities will have to switch to broadband-like “all-you-can-eat” business models, with the utilities differentiating and making their revenue on added services.”

Imagining a new era of peace in utilities

It all sounds very congenial and utopian, but if the War of Currents (or any free market competition, for that matter) taught us anything, it’s that the power-hungry will inevitably go to great lengths to turn it into a battle for dominance and money. 

Human nature dictates that while many will strive for collaboration in creating an Electricity 2.0 that benefits everyone, there will also be those seeking ways to manipulate and control the system for their own gains. As the devious visionary Edison showed us, however, even the most unsavory tactics can still inspire world-changing innovation. 

The Second War of Currents is playing out before our eyes. Time will tell how much power falls into the hands of the prosumer, how much of the new infrastructure utilities own and control, and how governments choose to regulate the new system.

Though it’s partly a race to create and market the best technology, it will most likely be the cheapest energy system that prevails – just like the AC system did in the 1890s. Much of the smart money is on solar and wind power ultimately becoming the dominant sources, but the level of complexity we are capable of managing today means a diverse mix of sources could reduce the risk of price spikes. Whatever happens, it’s a thrilling time for the electricity industry – a time that would make Edison and Westinghouse proud.

Find out more about Our Digital Future film series presented by SAP at TIFF 17 here.