By: Jesse Berst

Here at SGN, we try to stay firmly grounded in practicalities. We don't spend much time on our soapboxes.

Every so often, however, something comes up that requires us all to shake up our thinking and look at things in a new way. One such change is under way right now, as I have been explaining from the podium in recent keynotes. (The link at the bottom of this article lets you download my presentation and speakers notes for additional details.)

The world is facing unprecedented energy challenges.  The electric power industry will bear the brunt of these problems.  Our industry will see more change in the next 10 years than in the previous 50.

Electric power has always been vitally important, but going forward it will have an even larger role to play in the health of our nation.  And, ultimately, in the health of every nation.

To manage this enormous responsibility, we must find ways for the private sector to help pay the costs of the remake. Even more importantly, we must find ways to accelerate innovation. To recruit more money and more ideas, we must enhance electric power's role as an engine of economic growth.

Electric Power at the Vortex

Anywhere you turn, you see enormous energy challenges.  Climate change, rising costs, energy poverty, aging infrastructure, peak oil, population growth, and rising demand.... The list goes on.

Increasingly, the world is looking to the electric power industry for solutions.  Climate change? Let's ask electric power to put limits on power plants and to integrate massive amounts of renewables into the system. Peak oil?  No problem; we'll just electrify our transportation. Rising costs?  We'll just have the electric power industry integrate demand response and energy efficiency.  Aging infrastructure?  We'll ask them to modernize the grid while they are at it.

But don't you dare raise our rates.

Put simply, we don't have the capital to accomplish all that.  Neither the financial capital nor the intellectual capital.  We are going to have to find new sources of funding and new sources of innovation.

Make no mistake; this is one of the greatest opportunities of the last 100 years.  But it is also a huge responsibility, and one that could go terribly wrong.  To succeed, we must do the following:

• Recognize that we are utterly dependent on electricity for our economy and our lifestyle and our security. We are moving from the petroleum economy to the electricity economy. Therefore, we must...

• Rethink the role of electric power.  And then we must...

• Remake the electric power infrastructure as an engine of innovation and prosperity

A change is coming â€" a change that will determine our nation's fortunes over the next two decades.  In the Petroleum Economy, it was access to cheap oil that determined a nation's prosperity.  In the Electricity Economy, it is access to cheap, reliable, clean electricity.

Against this backdrop, how do we manage the change that is coming?  I believe we need to apply four lenses to our thinking. I refer to them as patterns, profits, platforms, and policies.

Patterns

By patterns, I simply mean learning from the lessons of the past â€" specifically the lessons of previous infrastructure transformations.  If we look back at other national networks -- the railroad network, the interstate highway network, the phone network, the Internet -- we discover that infrastructure innovations have been America's primary engine of innovation and job growth â€" and a primary source of national advantage.

Profits

If we learn from the patterns of the past, if we recognize the vital, national role the electric power infrastructure will play in the new world order, then it becomes obvious that we must align the profit motive toward the betterment of electric power.  We must recruit the best, brightest minds to the cause.  And to do that, we must make electric power the best place to innovate and build the country.

Today, our brightest thinkers are building videogames, Facebook applications, and downloadable ring tones.  They spend their time in those industries because that's where they see entrepreneurial opportunity. Clearly, we must open electric power to innovation and entrepreneurial ambition.

Platforms

To attract innovation, we must take a page from the playbook followed by telecommunications, computing, and the Internet.  We must embrace open standards and encourage a platform approach to key parts of the infrastructure.  When I say platform, I am simply referring to a standard foundation or framework on top of which anyone can build applications.  Microsoft Windows is a platform.  So is the iPhone.  So is a Java-enabled Web browser.

I want to see us encourage that same kind of approach to key parts of the electric power infrastructure:

• The back office

• The control room

• The market (for capacity and for ancillary services)

• The home gateway and energy management interface

Please don't think that I mean we should in any way jeopardize safety and security.  I simply mean that we should be building on top of open, standardized platforms so that entrepreneurs and innovators can simply plug in their new ideas.

Policies

Policy is frighteningly complex and layered.  Even so, I think there are three principles most of us can agree on. The first is to start planning together.  We must end the stovepipes within utilities; and the stovepipes and isolation between utilities.  We must plan together regionally to gain interoperability and economies of scale.  We cannot afford to reinvent the wheel 3,300 times for each of America's 3,300 utilities.

Second, we must plan for the future we want, not the past we came from.  Many of today's regulations date from the Great Depression or even earlier.  Our nation had different challenges then. We wanted utilities to build as much big iron as possible. We regulated to encourage such investments and to make reliability the number-one concern.  But we live in a new world now, one where we want utilities to build fewer carbon-emitting plants. We must regulate for efficiency.

Finally, in light of those first two points, we must reward right actions. If we say we want something for this new future we are entering, then we must remake our policies to provide incentives.  If we want efficiency and demand response, for instance, then we must institute dynamic pricing, and allow third-party aggregators to bid into the market.  If we want utilities to become engines of efficiency, then we must decouple rates so consumers are no longer punished for using less electricity. If we want consumers to become engines of efficiency, then we must make pricing visible and reduce cross-subsidies.  And, as mentioned earlier, if we want breakthrough innovations, then we must build the Smart Grid with open platforms that give access to entrepreneurs with better ideas.

This moment in time is an unprecedented opportunity to remake electric power as an engine of innovation and economic growth.  If we seize this chance, we'll create short-term jobs and we will see the birth of Microsofts and Amazons and Googles. Equally important, we'll be creating a lasting legacy that will create national advantage for decades to come.

Jesse’s address to the Smart Grid Conference