Tuesday, February 09, 2016

Solar Wars Redux

The tide is shifting… again.  California and Nevada have been the battleground for the two most recent and longest running skirmishes.  But they have not been the only battle fronts.  Think back just a few years when it appeared that solar – and distributed generation or rooftop solar in particular – had the upper hand.  Then came the January 2013 Edison Electric Institute report Disruptive Challenges: Financial Implications and Strategic Responses to a Changing Retail Electric Business.  And, although pundits on both sides declared this report to be exposing an “existential threat” to utilities, that precise term is nowhere to be found in the report. Rather, the EEI report did speak to DG solar as representing a disruptive threat – one of the few times that the term disruptive innovation has been correctly used in the literature.  The utility response to the EEI report was immediate – first in Arizona and then elsewhere.

At the heart of the dispute is how to value the benefits and costs of distributed generation, especially distributed solar, to the grid.  On one side, utilities argued that there was a cost shift as nonparticipants would be required to assume more of the fixed costs of maintaining the grid and on the other solar proponents cited reduced transmission costs and other benefits.  Both are correct, but they are largely irrelevant.

Net metering was justified by the public policy argument that it was needed to incentivize what was then a nascent technology trying to establish itself in the marketplace.  Self-generators, it was argued, should be compensated at the full retail rate for electricity delivered back to the grid. As a public policy argument to help a nascent technology gain a foothold in the marketplace, this made sense.  As an economic argument for sustaining what has now become a mature technology, it makes little.

Utilities in state after state responded to the EEI report by filing applications to reduce net metering compensation and/or implement new fixed charges for self-generators.  Unfortunately, at utility commissions where such applications were filed the dispute became more of a political referendum than an economic one.  Some utility commissions, such as Nevada and Arizona, agreed.  Colorado, for its part, studied net metering for months and then simply kicked the can down the road, maintaining the status quo. Sadly, this has been more of a religious war than a technological and economic one and the Colorado docket in particular was marked by dueling advocacy rather than objective analysis. But the decision must not be based on theology. 

Here are a few general principles that an unbiased observer should find unassailable:

First, why should any business – including utilities – be compensated to make up for consumers using less of their product?  Too big to fail? Were buggy whip makers compensated for the transition to automobiles?  How about ice delivery companies whose business model was disrupted by the advent of refrigeration in the early 1900s?   Innovate or die.

Utilities are the only industry I know of that seem to have the investment/return relationship backwards.  Here in Colorado the major utility, Xcel Energy, recently announced its Our Energy Future plan for Colorado which kicks off not with new services but with a rate case that includes a new monthly grid fee for solar customers. This comes after the Colorado PUC rejected the utility’s efforts to reduce net metering compensation.  Apparently, investor owned utilities are the one business entity for whom No never means No.  Utilities, here’s the way it works. First, you invest. Then, when that investment yields a product or service that is accepted by the marketplace, you realize the rewards…. Finance 101.

Now, for the other side.  Self generators, you are a customer, not a supplier, unless of course your business partner – in this case a utility – wants you to be.  You have no unalienable right to access the grid, unless you pay for it.  Nor do you have a right to sell electricity to your neighbors using that grid, unless you pay for it.  The typical utility customer receiving power pays for that access as do wholesale suppliers.  If you are using that grid to both send and receive power, you should pay for it.

Now let’s talk about that full-retail-rate net metering compensation.  First most every business purchases at wholesale and sells at retail.  Why should electricity be different?  It is often argued that the value of solar energy supplied in the afternoon is far higher than electricity delivered at other times.  True enough.  It then follows that the simple – if not incredibly obvious – answer is to put self-generators on bidirectional time of use (TOU) rates.  If you supply power to the grid, you are paid a wholesale rate based on the rate that the utility pays for power at that time.  Similarly, you pay for power drawn from the grid at a retail rate in effect at that time.  Given the differences in peak vs. off-peak pricing, I expect you may come out ahead. 

With that said, this does not imply that all customers need to be put on TOU rates.  TOU rates, and even tiered rates of various types, have been the bane of typical utility customers who simply want to turn on the lights when needed and not have a side job of managing their electricity consumption every fifteen minutes.

Last, with respect to the dueling advocacy we see in these proceedings, it would be great if commissions would keep two points in mind. First, argument is not evidence. Second, advocacy and conviction, no matter how well intentioned, does not rise to the level of objective analysis in the public interest.

Note: a shorter version of this blog has picked up by Solar Industry Magazine and is available here.

Friday, June 19, 2015

FERC Rules on Delta-Montrose Coop Complaint Targeting Tri-State (Sort of)

What would you do if you were a mid-size electric cooperative that wanted to purchase power from a small local renewable energy generator (in this case a small hydroelectric plant) but were prevented from doing so by the terms of a contract with your wholesale provider that limited third-party purchases to 5% of your total load? That was the situation facing Delta-Montrose Electric Association (DMEA), a central Colorado electric cooperative which sought to support a small hydro project being constructed in its service territory.

The actors in our little drama include DMEA  a Colorado distribution coop with approximately 35,000 members (customers), Tri-State Generation and Transmission Association  a 44 member wholesale cooperative G&T of which DMEA is a member, and Percheron Power, LLC  the developer of a 990kW hydro project seeking to connect with and sell power to DMEA.

Without going into all of the intricacies of the law and contracts surrounding our story, suffice it to say that DMEA was faced with conflicting obligations and social responsibilities. On February 9, 2015, DMEA petitioned the Federal Energy Regulatory Commission (FERC) seeking a declaratory order stating that
  1. Tri-State is a public utility subject to the provisions of the Federal Power Act (FPA) and regulation by FERC, and
  2. DMEA’s obligation to purchase power from small qualifying facilities (QF) under the Public Utility Regulatory Policies Act (PURPA) supersedes a contractual obligation with Tri-State limiting its third-party energy acquisitions and self-generation to no more than 5% of its load.

For its part, Tri-State argues that it is exempt from the provisions of the FPA due to a clause that provides for exemption from such regulation for utilities that are owned by members that sell fewer than 4 million MWh of electricity per year.  Naturally, our audience included a plethora of spectators and fans of either suasion including other Tri-State coops, local governments, renewable energy advocacy organizations, the public at large, and one objective observer/storyteller (me).

Comes now (that’s a term of highly legal obfuscatory vernacular) the FERC who, like the Supreme Court, issues a narrowly scoped decision, ruling partly in favor of both sides, that appears to decide the case at hand without truly addressing the issues and the ramifications thereof (you can find the FERC order here).  On the one hand, they decide that a strict interpretation of the law means that Tri-State is not a regulated jurisdictional utility based on the exemption that excludes regulation of utilities that are in turn owned by exempt utilities – regardless of how large the entity is (consider that each of the 44 Tri-State members sells fewer than 4 million MWh per year but collectively…?). Thus, based on a strict interpretation of the law this may be the correct outcome – even if it is an undesirable one. 

But, all hope is not lost for several pages later, FERC goes on to rule that PURPA does require DMEA to purchase the power from Percheron at DMEA’s avoided cost or at such other price as mutually agreed to. While this implies that DMEA’s PURPA obligation supersedes its agreement with Tri-State, the ruling does not explicitly state that – even though it seems logical that one party should not impose a contractual obligation upon a counterparty that would cause it to violate the law. 

Also not stated, but apparently implied, is that the purchase from Percheron effectively voids the Tri-State Board Policy 109 purchase obligation that requires DMEA to obtain 95% of its energy from Tri-State.  Left unaddressed in the order is Tri-State’s contention that DMEA must first seek alternative dispute resolution with Tri-State before petitioning FERC.  FERC neither agrees nor disagrees with this contention.  They simply don’t address it.

Metaphorically speaking however, this appears to open up a mile-wide chasm in Tri-State’s Policy 109 limiting third party purchases to no more than 5% of a member’s load. With plummeting PV and wind prices, any small generator it seems could build a system and require the coop utility to purchase its power and in so doing constantly diminish the amount that the utility must purchase from Tri-State… do I hear 90%, 85, 80, going once, twice… sold!

Perhaps at this point I might also note that Colorado’s net metering law allows coops to limit the size of net metered systems to 10kW for residential and 25kW for commercial customers. But, with today’s rapidly declining PV costs, why would I worry about net metering when I could construct a system and sell all the electricity to the coop at its avoided cost? Do I sense a business opportunity here? With today’s FERC ruling, the coop appears to no longer have a defense and the QF – or any prospective net metering customer – would appear to have an end-around on Colorado’s net metering restrictions.

Rest assured, these are more than just nuanced distinctions. There are many ramifications that go beyond the narrow scope of this decision and it would have been helpful if FERC had considered them and circumvented some of the obvious disputes that are sure to follow.

Wednesday, April 15, 2015

Transitioning from Technical Professional to Manager

For this post, I am going to make a slight departure from our recent series of articles on technology forecasting and technology scouting (which you can still find herehere, and here) and speak about a subject of great importance to the careers of my fellow scientists and engineers.
It has often been the general experience that when scientists and engineers attempt to make the transition into management, they may not do well.  Sadly, as a reward for doing superb technical work, we sometimes tend to promote – or perhaps condemn – a first class scientist or engineer to a life of misery as a mediocre (or worse) technical manager.  What that technical professional often fails to recognize is that he or she has made a career change.  The new assignment requires a completely different skill set and, unless it is acquired and mastered, the transition can be painfully long and may even end in failure.
It is common knowledge to everyone who has held any type of job over the last several years that the world of work is profoundly changing.  Down sizing, right sizing, reductions in force, outsourcing, reengineering, TQM, lean this or that, and innumerable other management fads have all resulted in an increasingly fluid work place.  Combined with the shortening half-life of a technical professional’s knowledge base, this trend has led many engineers, scientists, and other technical professionals to seek or accept a transition from the world of technical work into management.  In most instances, save for the most pathological of circumstances, such a promotion is seen by the organization’s leadership as a reward for doing exemplary work.  And, the scientist or engineer may relish the opportunity – some to take advantage of long-harbored entrepreneurial dreams, some undoubtedly believing it is the path to more lucrative opportunities in senior management, and some because it has become increasingly difficult to maintain their technical skills over time in a rapidly changing technological landscape.
As scientists and engineers transition from technical work into management, the changing nature of their tasks requires a commensurate adjustment in their skill sets. Management responsibilities require the technical professional to shift from a task focus to a people focus.  Furthermore, the required skills and orientation evolves further with increasingly responsible levels of management from the tactical and operational to the strategic.  However, the skills and orientation required for effective management are often foreign to the technical professional.  Moreover, a difference in value and belief systems may present a cultural impediment to the effective performance of his or her new managerial and leadership responsibilities.
Good engineers and scientists are technically and scientifically oriented.  They are typically analytical, logical, rational, self-directed, task-oriented, and focused.  Good managers, on the other hand, tend to be holistic, creative, people-oriented, and spatial.
Persons showing a proclivity for scientific activities, and who are prone to inventiveness and creativity, are often encouraged to seek educational experiences that develop the mental tools and skills to enable them to excel in that realm.  The educational processes by which these tools are acquired are themselves typically analytical, logical, and focused.  This process also, unfortunately, suppresses the development and application of the creativity that goes with them.  To combat this tendency, we now see in engineering education concerted efforts to strengthen creative talents, maintain a balance between analytical skills and creative skills, and foster teamwork.
Problems of management involve people and other issues that require one to see an entire situation and plan a solution which balances many disparate issues concurrently. In management situations, it is frequently difficult to find two people who even agree on the problem, much less its solution.  Good managers must function well with such ambiguity.  They must respond creatively to conflict and recognize that no two situations are the same regardless of how similar they may appear at first.
The opportunities for engineers and scientists to obtain assignments as managers are plentiful.  The better ones are continually promoted until the only option available is a new assignment in management because dual career ladders do not exist in most organizations.  Engineers and scientists are recognized as being intelligent and good problem solvers.  They are always involved in the resolution of an organization's stickiest problems.  As a result, they are frequently promoted because of their problem solving skills.  Some engineers ultimately recognize that their real aptitudes are not toward science and engineering, but toward those careers driven less by logical analytical activities.  In other words, they picked the wrong career upon starting college. 
Finally, we must recognize that the half-life of a technical education is diminishing, and many engineers for a variety of reasons are either unwilling or unable to invest the time, energy, and perhaps money required to maintain technological competency in an era of rapidly changing technology.  These individuals incorrectly conclude that transitioning into management will be a less stressful path.
Many engineers who have been promoted into management struggle mightily because they fail to recognize the need for a cognitive shift from a task orientation to a people orientation.  In short, they fail to recognize they have made a career change.  Some struggle through and achieve a modicum of success.  Others make the required changes easily and excel.  Still others fail miserably and end up in jobs that are both low tech and outside of management.  In other words, they may end up in the dreaded "staff" positions. 
However, and this is important, none of what I have said should be construed to imply that non-technically trained professionals should be assigned to first or second line supervisory positions over engineers or scientists.  That combination is equally, if not more, pathological than the converse.  For reasons that I will discuss in a subsequent column, you cannot maintain a first class technical organization under the direction of a supervisor who may not appreciate the unique mindset of the technical professional.
In this series of articles, we will examine differences in the nature of engineering problems and management situations, and the implications they hold for successfully making the transition from technical professional to manager.  We will explore the characteristics of technical professionals and examine their impact on the professional's managerial aptitude.  We will also discuss the views of several senior executives concerning the required skill set for managers of technology in their organizations.  A couple of popular situational leadership models will provide a framework for managing technical professionals.  Finally, the series will conclude with some guidelines and recommendations for successfully making the transition from technical professional to manager.

Wednesday, March 18, 2015

Technology Forecasting & Strategic Technology Planning

For this post, I am going to build on our recent series of articles on technology forecasting and technology scouting elsewhere on this blog (see here, here, and here) and speak about how to incorporate the results of your technology forecasting and scouting efforts in the organization’s strategic technology planning efforts.

Recognizing that technological change is a principal driver of competition, an important concern of corporate CEOs and Chief Technology Officers (CTO) is managing the firm's technology development or acquisition effort to support overall company objec­tives.  Given the accelerating pace of technological progress, managing this effort is becoming increasingly difficult but also increas­ingly important. Not too long ago, much of this discussion centered on the question of whether a firm's technology strategy should be predominantly market-pull or technology push.  But, it is more than that.  It is as basic as deciding what business(es) the firm is in now and determining those in which it should participate in the future. 

The most radical such decision I know of occurred several years ago when Boulder, Colorado based Cell Technolo­gy exited the biotech field and reinvented itself as an air ambulance company.  A more interesting example today might be Big Oil.  Are they oil companies?  Energy companies?  Or, recognizing that over 70% of petroleum is destined for use as fuel – and over 90% of transportation fuel is derived from petroleum – are they really transportation companies?  How you see yourself now and in the future impacts the current and future technology portfolio and the skill set that your business must have.  If I were an oil company and concerned about my long term business, it isn’t just oil markets that I would be concerned with.  Nor would staking out a position in electric vehicles or electrical power generation necessarily be where I would focus. 

But, before we get there let’s start with the basics.  Webster's New Collegiate Dictionary defines technology as "the totality of the means employed to provide objects necessary for human sustenance and comfort."  Fair enough, but in this context, we must define "objects" to include both services and goods. Going further, Martino notes that technology may also include "know-how" and software [1]. I like that better, but would extend it even further to include systemic technologies such as management processes and systems. Thus, when referring to a given technology we really mean an entire family of technical approaches that have some major characteris­tic in common or that perform the same function.  For example, internal combustion engine vehicles represent a class of transportation technologies as distinguished from electric vehicles or fuel cell vehicles. Each can be further aggregated or disaggregated according to our needs. 

Essential to making strategic decisions concerning technolo­gy is an understanding of the dynamics of techno­logical change.  Histori­cal data from many fields demon­strate that progress is not random and discontinu­ous, but follows a fairly regular pattern when some performance attribute is tracked over time.  Just as products and processes follow a life cycle, so do technologies.  The resulting Technology S-curve (figure 1) is similar in form to product or process life cycle curves and is at the heart of our earlier discussions on technology trend analysis mentioned earlier.  As we noted then, utilizing various fore­casting tech­niques, a firm can do more than simply monitor tech­nology – it can estimate where the Technology S-curve will lead it and what the likely impact will be on its future lines of business. 

Figure 1 - Technology s-curve.

As shown in figure 1, technology begins with an invention or discovery and initially grows rather slowly as shown by the flat initial portion of the S-curve.  As the diffusion of technology proceeds and the potential for its use becomes known, continued work leads to increasing levels of performance, shown by the steep part of the curve.  Beyond the inflection point, increases in the technology's performance come harder.  Of particular importance is the recog­nition that no technology can be advanced without limit.  There has always been found to be some natural upper limit beyond which a technology cannot progress – though we may not necessarily know what that is at first.  Increases in performance beyond this point require shifting to a new S-curve associated with a new technology or a breakthrough associated with the old one.  More on that in a moment.

Eschenbach and Geistauts defined strategy as a "... fundamen­tal approach for gaining long-term advantage over both competitors and [the] environment ..."  They note that "strategy explicitly considers and tries to control the impact of uncertainty."[3] In this context, technology can be viewed as either an opportunity or a threat. The aggressive, technology‑oriented firm they conclude will wield its technology as a competitive weapon to offer unique or superior products or services, significantly lower production costs, or make substantive improvements in manage­ment processes.

A firm's technological skills, although difficult to invento­ry, are some of its most important assets, even though they don't appear on the bean counter’s balance sheet. Given that technology is a corporate resource, the idea of a technological audit has been proposed to assess a firm's ability to compete on the strength of its techno­logical assets [2].  To aid in this endeavor, table 1 shows the various stages in a tech­nology's life cycle and the importance of each stage to a firm's competitive advantage.

Table 1 - Technology life cycle and competitive advantage [2].
Technology Life Cycle Stage
Importance to Competitive Advantage
I Emerging Technologies
Have not yet demonstrated potential for changing the basis of competition.
II Pacing Technologies
Have demonstrated their potential for changing the basis of competition.
III Key Technologies
Are embedded in and enable product/ process.  Have a major impact on value added stream (cost, performance, quality). Allow proprietary/patented positions.
IV Base Technologies
Minor impact on value added stream.  Common to all competitors – commodity.

By determining the level of the technologies that it relies upon, and doing the same for its competition, a firm can assess its competitive standing vis-a-vis its competitors.  Such is the foundation of science & technology intelligence.  A firm that wishes to adopt an offensive technological strategy should have strong positions in pacing and key technologies while being at the forefront of emerging technologies.  One that finds itself dependent primarily on base technologies is by default going to be a follower in the market place.

A critical determinant in establishing technology strategy is to select the right technology and the right time to pursue it [4].  Returning to figure 1, since the slope of the S‑curve represents technological progress per given level of input, it can also be considered to be a measure of R&D productivity.  Richard Foster, formerly of McKinsey, notes that "you cannot improve the performance of one laboratory over another by a factor of twenty through better organization and project management.  You can only do it by picking the right technologies."[4]

The position of a technology on the S-curve determines the potential that remains to be developed in that technology.  If performance improvement, which may be considered a measure of R&D productivity, has been stag­nating after having reached a previous high, the only way to improve it is to get onto a new S-curve where the rate of produc­tivity growth (i.e. performance improvement) will be higher (see figure 2).  Faced with the technological discontinuity shown here, management must then decide whether to exploit the potential remaining in the present technology or shift to a new technology and, if so, when to make that move [4].

Figure 2 - Transitioning from an old technology (declining growth rate) to a new technology (increasing growth rate).

In deciding which technology to exploit, firms must exercise some foresight as it will take some time after shifting to the new technology to travel down a new learning curve to the point where the new technology becomes profitable.  Considering development lead times, this often means thinking about switching to a new technology just as the current technology is maturing and business is going well.  Foster notes that:

         "The time to begin exploring technological alternatives is when roughly half of the full potential of the present technology has yet to be exploited. Yet this is pre­cisely the time when it is most difficult to get manage­ment to think about new technologies. ....conventional management systems, with their emphasis on short term measurements and rewards, work against the correct diagnosis of the technologi­cal situation."[4]

Here is where some capability at opposite ends of the same coin can be important.  Forecasting both technological trends and market trends is a skill that is – or should be – instrumental to strategic technology planning.  How well do you do this?  In spite of our best efforts, no firm can be right 100% of the time.  This is where flexibility and the ability to respond rapidly to a changing environment can help create and sustain a competitive advantage, especial­ly for the entrepre­neurial firm that must compete against better endowed competi­tors.

Finally, a well thought out strategic technology planning effort will include both near and far term components.  Strategic plans, although forward looking, must be grounded in the present.  In this regard, a quote from Peter Drucker concerning long range planning seems especial­ly apropos to strategic technolo­gy planning:
         "Decisions exist only in the present.  The question that faces the long-range [technology] planner is not what we should do tomorrow, it is: What do we have to do today to be ready for an uncertain tomorrow?"


1. Martino, J.P., 1983, Technological Forecasting for Decision Making, 2nd ed.; Elsevier, 1983, 385p.
2. Burgelman, R.A., and Maidique, M.A., 1988, Strategic Management of Technology and Innovation; Irwin, 1988, 604p.
3. Eschenbach, T.G., and Geistauts, G.A., 1987, Role of technology in strategic management: Engineering Mgmt Int'l, v.4, p.307-318.
4. Wolff, M.F., 1981, Picking the right technology should be first priority: Research Mg­mt., July 1981, p.7-8.

**** Dear Readers, I hope you enjoyed reading this article. On April 23-24, 2015, I will be teaching a workshop on Technological Forecasting for Science & Technology Intelligence in Golden, Colorado.  We’ll discuss both trend analysis and the proper application of expert opinion in formulating strategic technology plans.  We would love it if you would join us for this unique and valuable course.  Details and registration can be found on the TEMI website here – RM

Wednesday, February 04, 2015

Technology Scouting for Fun & Profit

The rapid pace of technological change has technology managers in all industries concerned with how they can keep abreast of developments in related – and unrelated – fields that may create new opportunities or pose threats to their business.  No longer can a manager simply look to the firm’s internal R&D effort or its business partners to provide access to all of the technologies and skills the company needs.  For one thing, over the last 30 years, much scientific research and radical innovation has been pushed upstream into academia and government research centers as corporate R&D centers focus their efforts on supporting current and next generation products.  Furthermore, innovation is increasingly the product of the fusion of two technologies – think bioinformatics, for example – or the application of a known concept to a new field (such as laser printers which were developed from existing copier technology).  No internal effort could possibly hope to master it all – not even in the largest of companies.  So how do these businesses maintain an awareness of emerging technologies and the opportunities (or threats) they may portend?

One approach is to maintain a high enough profile and hope that tech transfer managers, entrepreneurs, and other developers of new technology come to you with their developments.  This may work in some cases, but no business can afford to sit back and hope that important components of its technology portfolio will just walk in the door. Maintaining an awareness of new technological developments has traditionally been the purview of scientists and engineers in the lab whom, it was believed, lived on the front line of S&T development and thus would be familiar with new technologies.  This is a bad assumption.  The short comings of this approach are the same as those noted above that afflict the business more generally – that is, no one can know it all.  Besides, that is not their job.  They have their own projects to look after.  Today, leading technology companies resort to a systematic process of Technology Scouting to proactively search out and acquire new technologies.

Technology scouting doesn’t require a massive effort, but it does call for thoughtful organization.  And, it is not competitive intelligence per se though there is some overlap in research skills. (Competitive intelligence seeks to maintain an early warning system of competitors’ actions while scouting seeks out new technological developments for incorporation into the firm’s technology portfolio.)  Today, technology intensive firms from virtually all industrial sectors including IT, pharmaceuticals, automotive, electronics, chemicals, oil& gas, and more rely on a variety of sources to keep abreast of new developments of interest to the firm.  Even businesses that we seldom think of as technology companies have climbed on board.  For example, low-tech products from toys to food increasingly rely on a variety of technology intensive processes to manufacture them and which impact their competitive position.

So now you’ve decided that your firm needs to scout for new technologies – in self-defense if nothing else.  Where do you start?  The figure below shows the basic elements of a technology scouting program.

First, you must determine precisely what you want this scouting effort to achieve.  And, as we’ve said, this often comes under the general heading of finding opportunities and identifying threats.  In this effort, do not fail to consider the possible societal responses to new technology (Monsanto and Unilever, to name just two, now wish that they had more carefully considered the potential societal resistance in Europe to genetically modified crops). 

Next comes the scouting plan which details the various roles and responsibilities of those in the group.  Who will be responsible for which sets of technologies?  While the focus is clearly on emerging technologies, be careful to ensure a proper alignment between scouting activities and corporate goals and objectives.  To what extent will you manage this effort with in-house resources and will there be a need to go outside the organization for additional expertise? And, as shown, it is often just as important to be aware of what is not happening in the environment as what is happening.

Third, a complete listing of data sources – both secondary and primary – to support the effort must then be developed.  Obviously it is less costly to comb through previously published materials, but figure on obtaining the real nuggets from discussions with other people – internal and external.  There is a skill to doing this.  And don’t fall into the trap of assuming that patent searches will completely reveal the technological landscape.  

Fourth, consider the methods of observation that you expect to employ.  Although the three categories of surveillance are often used interchangeably, I regard scanning as a broad look at the technological landscape to identify areas for more detailed study, monitoring as a continuous look at a specific field or technology to identify new developments of interest, and tracking as a detailed look at advancements in a specific technology or technological approach.  Often, tracking provides the time series data that you will use to conduct a trend analysis (such as Moore’s Law, for example). 

Finally, not to be overlooked are the mechanisms that you will use to convey the results of your scouting activities to senior management and other decision makers.  There are roles for both reports and alerts that the group may issue as well as monitoring databases that may be accessed by employees when they need information on a topic.  But then, the really hard work begins – due diligence on the target technologies of interest and assessing the strategic and operational fit will be critical to moving forward and must not be taken lightly.  But, if done well, the benefits can be enormous.

Ready to get started?  Emerging technologies are everywhere and only a systematic effort will help ensure that you keep abreast of those of most interest to you.  If you need help, contact me at Rich@TEMI.us.

Friday, January 30, 2015

New Renewable Energy Proposals in Colorado's 2015 Legislative Session

No sooner did the new legislative session begin than we saw some proposed changes to -- some would say attacks on -- Colorado's renewable energy standards.  Three bills were recently introduced in the legislature in the new session -- all by Republicans -- and they truthfully could be considered an attack on the RPS. First was a bill introduced in the state Senate (SB15-044) that would reduce the RPS obligation for IOUs from 30% to 15%. I don't see this bill having a snowball's chance in hell of passing. Even if it did survive the Republican controlled Senate, it would surely die in the Democrat controlled House and/or be vetoed by the governor. Moreover, it seems unlikely that Xcel Energy, the state's dominant utility which supported the increase to 30% and has already met the RPS for 10 years out, would support it.  Only Black Hills Colorado Electric, the smaller IOU serving the Pueblo area, would benefit. But, with that said, SB15-044 was just passed out of committee without amendment, predictably on a 5-4 party line vote, and sent on to the full Senate for consideration there.

Another bill introduced in the Senate (SB15-046) would classify solar gardens in coop territory as retail distributed generation and grant a 3x multiplier for coop compliance with the RES (see my 2013 posts on this topic here and here).  My intel says that the 3x multiplier will probably not survive but, given the controversy over the increase in coop RES obligation back in 2013, classifying solar gardens as "retail DG" as it is defined in the Colorado RES could be OK.

In the House (HB15-1118) would expand hydro for compliance with the RES from new hydro less than 30MW, as presently defined, to all hydro regardless of size or vintage. It would also add pumped hydro to the list of resources eligible for compliance with the RES. Back when I worked for the PUC, we seemed to come across this bit of nonsense every couple of years or so and had to go through the drill of explaining why pumped hydro is not considered renewable energy. But, it keeps returning. Simply put, if the water is pumped uphill at night using fossil generated electricity, releasing it in the afternoon doesn't make it renewable energy.  If the water is pumped uphill using wind energy, then it is the wind generator that gets the RECs.  Awarding the RECs to both would amount to double counting which is generally considered verboten.  Moreover, the water is pumped uphill using undifferentiated grid power. This bill was assigned to what is typically regarded as a "kill committee" in the House so I expect it will die an early death.

More recently, SB15-120 was introduced in the Senate by Sen. Matt Jones (D) that would require each provider of retail electric service in Colorado to develop an electric grid modernization plan. This is an interesting bill, the stated goals of which are to  1) Optimize demand side management, 2) Optimize supply side management, and 3) Achieve advanced metering infrastructure (AMI) functionality within 5 years.  Certainly it is difficult to argue with optimizing supply side and demand side management (which refers to enabling energy efficiency and renewable energy integration) but the goal to advance AMI is likely to be controversial -- and potentially costly to ratepayers.  With AMI, more commonly referred to as smart meters, utilities could implement time of use (TOU) rates. AMI is also the foundation for building out the "smart grid."  This bill has been assigned to the Senate Agriculture, Natural Resources and Energy Committee and it will be worth watching to see how it fares.

UPDATE 01FEB2015: I see that the Denver Post has now waded in on this with an editorial that you can find here

UPDATE 11FEB2015: As of this morining neither SB15-046 nor HB15-1118 had been taken up in their respective committees.  On 05Feb, SB15-044 sailed through the full Senate and passed out of the Senate on an 18-17 vote (presumably party line vote though I didn't check the party affiliation for each of the votes) and was sent on to the House.  On 10Feb it was assigned to the House State, Veterans, & Military Affairs Committee (kill committee) where it will presumably languish until the end of the session.