The future of energy = oversupply

We live in a world where energy is expensive because we do not have enough energy generation. Coal, gas, oil, nuclear,... are all costly. Solar and wind energy generation as well as batteries, used to be expensive but costs are declining exponentially. This means that within less than a decade we will move towards an oversupply of cheap energy on windy or sunny days. If you want to read about the details and understand the numbers, then this report will be very useful. The questions however are, can the energy oversupply be accelerated and how do you economically benefit from oversupply?

Accelerating oversupply?

Companies who manage to accelerate a disruptive trend, which is already happening and from which they can benefit economically, tend to win when the tipping point is reached. Tesla is building solar panels, battery storage and electric vehicles, with a plan to become a robot taxi company and a disruptive energy company. In the process of getting there, Tesla disrupted all internal combustion engine and car manufacturers as well as the oil and gas industry. The market valuation is reflecting this. 

However what will happen in the future to the energy sector if in sunny places, houses start generating their own solar energy? The result will be that on certain days demand on the public energy network will implode. Companies focusing on traditional energy creation and distribution are ill-prepared for a future in which in summer and during sunny days, demand for their product will be non-existent. If wind as an energy source is added and cheap batteries are used, then we get to a model whereby most of the days, there will be an energy oversupply. 

Given Tesla’s dominance in solar and batteries, any company wanting to accelerate energy oversupply is best to focus on accelerating wind energy. What if a company would design the best windmills but instead of focusing their business on constructing, selling or operating them, they would open source the designs in order to accelerate costs going down and energy production going up? As long as the company can make more money elsewhere, giving away designs for windmills, can result in a positive business case.

Benefitting from oversupply?

If energy supply and generation produce a fraction of today’s revenues, how do you make money? Any solution should benefit from handling frequent oversupply. The analogy in the entertainment industry was when music and films were expensive to buy or rent, can you become Spotify or Netflix and thrive in a world of unlimited supply?

So let’s design an imaginary “Energy Oversupply Company [EOC]”. Different departments or ventures are part of EOC.

The hardware design department

The hardware design department is a support function and does not generate revenues. It hires windmill designers or organises an X Prize to open source the best windmills for people’s homes or company rooftops. They could also open source designs for other components which need to become a commodity for oversupply to happen faster, e.g. solar inverters, smart meters, EV charger, … Silicon Valley VCs do not like companies which are held back by hardware. They prefer globally scalable software business models. So by making the hardware available for anybody to produce and operate, the time to get to oversupply is shortened. Hardware is often an inhibitor to exponential growth, not an accelerator.

The app revenues venture

The app revenues venture focuses on global solutions to handle energy under and oversupply issues. They are a software business and should try to stay away from being an energy supplier because it would limit globalisation of their solution. 

The key to benefiting from under and oversupply is to be able to manage the process. We are moving from few producers and many consumers, to a model whereby each consumer can be a producer as well. As such, we need software solutions to handle and monetise this.

One approach would be to create app-enabled devices. The windmill, solar inverter and especially the smart meter, could be app-enabled. This means that a customer buys the hardware or gets it installed, goes to the app store associated with the device and buys/subscribes to apps on the device. So what apps can you get?

A simple windmill app could be a wind sensor, providing information around the wind speed. Although useful for weather modelling, selling this data will unlikely generate lots of money. Another app could be windmill insurance. The owner of the windmill pays a small monthly subscription and now is covered for damage to the windmill or wind damage to their home. The insurance can be automated in the sense that if the windmill stops working or measures speeds above a certain level, claims for damage can be approved. 

A final windmill app can be the Uber Wind app. People and companies that do not live in a windy place, could sponsor windmills in windy areas in exchange for part of the energy that gets generated. Wind and sunshine are unevenly distributed, so people living in windy areas are unlikely going to put more windmills on their roof than the energy they need. However if others would pay to install extra capacity in exchange for access to part of the future energy or revenues from them, then they are likely going to install more than what they need. The end result of the Uber Wind app can be that in windy places, people can get windmills for free in exchange for sharing part of the energy they produce. The solar inverter could also have an Uber Sun app, similar to the Uber Wind app.  

The most interesting app-enabled device is probably the smart meter. The smart meter measures how much energy is generated and if excess energy is sent to a local battery, an electric vehicle or pushed back into the grid. In moments of undersupply, the smart meter can negotiate with a decentralised electricity exchange what the price would be for different supply options and decide if energy is bought, taken from the local battery, a neighbouring battery or worse case an EV. All this can be automated with apps and smart contracts on a distributed ledger. 

Additionally the smart meter can measure what happens in the house. Companies like Verv have been working for years on technologies to detect appliances, their usage and predict failure. Incorporating such technologies in a smart meter would allow apps to know things about what happens in your home. Smart meter apps can use information to provide new services, e.g. home insurance premium reducers [leaving on the iron, oven or electric hop are a major source of fire claims, inventory of electrical devices avoids fraudulent claims,... ], appliance warranty insurance & servicing subscriptions, refill subscriptions [detect how many times an appliance is used and reorder automatically detergent, salt, coffee, descaling,...], and many more.

The idea of the app department is to enable app stores with large ecosystems which can bring in revenues at a global scale, similar to how Google and Apple benefit from smartphones. As soon as enough people produce energy, the apps create dynamic markets which the platform gets a revenue share from. Like Netflix found out, it is better to get ￡10/month from 100’s millions than ￡3/movie from your local Blockbuster.

Oversupply Usage Ventures  

Although apps will generate substantial revenues for EOC, the major revenues should come from using the oversupply of energy. The oversupply usage department launches many ventures focusing on oversupply energy consumption solutions. 

Energy oversupply can be used to recycle waste for instance like melting used metals or plastics to print on-demand new products. Waste materials can be bought in bulk cheaply. Anybody can download an app, scan an object / pick a design, have it printed and delivered to their home. Again this department should focus on creating solutions that others build and operate, while they focus on the platform. They can ask the hardware design department to design the appropriate hardware and open source it. The money is in a global platform with a revenue share on all printed products, not on owning a 5% market share of distributed recycling solutions.

Other solutions can be desalination of water [imagine a world where African countries next to the ocean become exporters of drinking water], hydrogen generation [batteries weigh a lot so long-haul flying is likely going to need hydrogen], heating/cooling, robot taxi charging,... 

Let’s give a concrete example of a use case that can create “free heating” for customers while revenue for OEC. Data centre servers generate massive amounts of heat when turned on. In a world of energy oversupply, we can put servers on the walls instead of radiators. When turned on, others pay to run complex distributed computing processes like looking for cures for cancer or validating crypto currency transactions. The heat warms up the house. If homeowners commit to turning on “the radiators” enough time then compute capacity can be pre-ordered and would result in free heating where others pay for the servers and use the excess electricity. EOC would make a commission on each paying workload.  

These are just a handful of examples out of a large pool of possibilities. The idea is to design revenue generating solutions around absorbing the oversupply of energy. 

Who is going to finance all of this? 

This one is easy. The financial services industry is having an oversupply of cheap funding available for anybody coming up with net zero investment opportunities, which they call ESG investments. There are plenty of opportunities at this moment for any company that wants to be disruptive in net zero energy and recycling to get funding.