Posted onin Leadership/Management
What kind of “product” is energy? As recently as 50 years back, energy usage was less about business and more about creature comfort. There were no CIOs, no global computer networks, and there were only a handful of huge computers. Business was conducted over snail mail and faxes. Phones were hardwired. Today, government, business, medical care, and our lifestyles are all intricately interwoven with technology that has an unquenchable thirst for energy. It’s hard to image what life would be like without our energy devouring gadgets.
You would have to go back to 5:27 p.m., November 9, 1965, when one faulty relay took the power lines down for over 80,000 square miles of the Northeastern United States and Canada, affecting 30 million people for almost 12 hours. Thanks to the relative technological innocence of those days and the reliability we have come to expect from the power industry today, the event is barely remembered, though to the people back then, those 12 hours must have seemed an eternity. If this kind of outage happened today, the frustration would be nothing compared to the cost of lost business.
So, is energy a’ valued product or a commodity?’ As we come up with ever more interesting ways to waste it, it’s becoming harder to imagine life without it, and yet nothing changes the fact that ‘an electron is still an electron wherever it comes from.’ (Pablo Vegas, CIO of AEP, CIO Talk Radio, September 29, 2010: Can IT prevent implosion across the energy value chain?) And, while most people know their cable TV or mobile phone bill, they seem to take their energy bill for granted.
The energy industry is, in fact, at a critical juncture. Aging infrastructure needs to be replaced to maintain reliability, while in parallel, environmental and sustainability concerns are becoming major drivers of change. Both require significant investment, right at a time of economic recession that causes rate payers to challenge rate hikes and look for ways to conserve. It’s not a matter of one or the other, it’s both imperatives hitting the industry at a time when the economy is troubled.
Because energy has traditionally been a cyclical industry, some of the investments for environment and sustainability issues can be accommodated along with cyclic improvements to infrastructure. In fact, Xcel has been extraordinarily prescient about energy innovation. The company is currently the number one producer of wind energy with significant investments in solar energy, and working to convert fossil fuel plants.
Future success in the industry will revolve around finding ways to do work differently, and find ways to innovate around business processes, as well as partnering with legislators to help them understand the energy business and decouple electron revenue from usage. AEP CIO Pablo Vegas, for his part, emphasizes how the industry is transforming, and new job roles related to partnerships will evolve: or example, a partnership with Best Buy to help consumers take control of their energy usage.
*Do rate payers perhaps see energy as a semi-fixed cost that they have only limited control over rather than take as ‘for granted?’ If so, how substantially can you control this kind of semi-fixed cost *commodity* without seriously compromising quality of life for individuals or energy for crucial IT needs?