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New Regulations, Financial Tools, and Business Models Paper

Framing the Evolving Interrelationship between Technologies, Regulations, Financial Tools, and Business Models

We sit at the nexus of four big trends in the energy world: Decarbonization, Decentralization, Digitization, and Digitalization

Decarbonization of the grid is driven by the proliferation of renewable technologies and regulatory mandates to reduce and eliminate CO2 from the production of electrons.

Decentralization is propelled by customer choice and competition for cheaper, faster, and cleaner electrons, which have enabled the creation of prosumers (i.e., customers that now produce their own energy locally; e.g. solar PV, natural gas turbines, geothermal, diesel generation sets, and fuel cells). Further empowering these residential and commercial prosumers, a recent FERC ruling, Order 841, indicates that customers with energy storage can now play a part in any wholesale market. The commission has directed grid operators to develop rules for storage to participate in the wholesale energy, capacity and ancillary services markets.

Digitization is the process of changing from analog to digital form all our systems. This is a software-driven process that requires digital twin representation and final build out of intelligent integration of all utility-industrial-commercial-residential-transportation infrastructures.

And finally, Digitalization is the creation of new and/or transformation of business models as well as the new creation of value-added productivity, and/or monetary value, enabled by the application of such new technology methods and solutions.

What we are engaged in is essentially a massive next-generation construction project akin to any major infrastructure effort in the modern age. We are building new digital things: smart cities, buildings, factories, homes, utilities, banks, hospitals, universities and transportation. These new networks will be integrated into one dense, transparent, intelligent, interconnected living and self-healing infrastructure.

Fifteen years of Smart Grid experimentation and technological innovation, which started at Austin Energy in 2004, has brought us to a new threshold. The emergence of 5G and LPWA networks, AI/ML, Blockchain, a galaxy of IoT sensors and data interoperability standards have presented us with a new digitally-connected ecosystem that ties together and moves electrons and data through intelligent, integrated infrastructures.

Just as the movements and migrations of humans and other animals across the face of the earth appear from space unconcerned with political boundaries, so will electrons and data move seamlessly throughout all infrastructure elements listed above.

Indeed, it is no overstatement to suggest that you, the reader, are a node in that infrastructure supply chain and lifecycle. As we speak, information is streaming into and out of your mind through this article and out into the vast integrated resources now within reach to all of us through the global brain known as the Internet.

Another useful analogy through which to visualize highly integrated infrastructure is the human body itself, as discussed by Andres Carvallo in his seminal book The Advanced Smart Grid: Edge Power Driving Sustainability (Second Edition, 2015). “The human body is a shining example of the way that networks organize complex systems. Each of the systems inside the human body can be seen as a highly adaptable network, more accurately nested networks, working together under the central control of the brain, but also replete with autonomous behavior apart from central, top-down control. When a person’s hand touches a hot stove, for instance, by reflex it draws away immediately based on a preprogrammed intelligence that resides in a different part of the brain away from conscious thought, as a matter of survival. No conscious decision is made to withdraw the hand from the heat; it was a reflex reaction to the heat. In a similar way, the advanced smart grid will see autonomous behavior from preprogrammed control messages that go out to the edge. The future of the electric grid lies down this path: to mimic the architecture of both the Internet and natural networks and systems to enable sustainability and provide the ultimate in adaptability.” (p. 13)

Further enabling the intelligent software and communication technologies described above – and being driven by those technologies – is the emergence of new regulatory structures and mandates, innovative financial tools and platforms, and new and evolving business models that unlock new value-added and accelerate the reduction of risk.

The chicken and egg question of which force is driving which may be irrelevant. The concept of the natural monopoly in the public interest is being turned inside out. What once was centralized is becoming widely distributed. The reality is that a digitally-integrated infrastructure is rapidly unfolding before us, and it is up to us to grab the digital bull by the horns and steer it in the most desirable direction possible for the cumulative benefit of all stakeholders and the public interest, especially for those with disabilities, in low income and under-privileged positions in society.

An interconnected, dynamic relationship exists between regulations, financial tools, and business models. This white paper explores this emerging landscape as captured in a panel discussion at the recent Digital 360 Summit produced by CMG in San Marcos, Texas, and hosted there by Texas State University.

To read the entire white paper for free click the link below.
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