Energy, especially its source and usage, is one of the hottest topics on the planet currently. As countries in the developed world transition into debates over responsible energy production and usage for the future of the planet, the questions on the other side of the world, say Bangladesh for instance, are of a different nature: how do we generate more power to fuel economic growth? How do we connect the 24% of the population without access to electricity to the national grid? How do we make our electricity consumption more sustainable through the use of renewable energy?
These questions need some rethinking. The power sector of Bangladesh is going through a paradigm shift. Power production is experiencing a stable growth, outages are at an all-time low, and people are growing conscious about energy issues- the recent debates over Rampal should serve as a good reminder. Yet, people cannot monitor their own usage effectively. The brunt of the blame for the energy problems of this country is still conveniently passed on to the supply side. Last year, one of the biggest state-owned utility distribution companies alone incurred an estimated loss of USD27 million due to non-technical issues like illegal usage and bill arrears. By the time it took you to get this far along the article, that very company has already lost USD26, an amount equivalent to the average household utility bill per month. In a country where the demand is growing by 10% annually and the supply is growing at 7-8%, the widening demand-supply gap could become an acute problem in the near future.
The traditional response for managing this widening gap is either through raising rates to cull demand or to increase electricity generation by employing more and more power plants run using fossil fuels (75% of electricity generation in Bangladesh is dependent on natural gas, reserves of which are fast depleting). But, at pi STRATEGY, we think a more pragmatic and novel approach can tackle the problem – creating a mechanism to facilitate collaboration and shared responsibility of both supply side and demand side actors.
This idea of an interconnected ecosystem heralds a new dimension in the utility sector that we call Electricity 3.0. It refers to a complete overhaul of the resource allocation, use and payment infrastructure in the power utility sector, facilitated through mobile technology. Electricity 3.0 is an evolving ecosystem. With advances in technology, it will evolve from a supplier focused system to a consumer focused system, allowing the consumer to increasingly play a more significant role in the resource management activity. By leveraging the power of a suite of interconnected devices, commonly dubbed as “The Internet of Things” (IoT), the consumer can step away from the role of a bystander to consciously monitor and adjust usage, simply through the use of a smartphone. In exchange for making this conscious choice, the user could be rewarded by the utility
provider through the network.
This increasing interplay in resource management between both providers and users brings a fresh dimension to the ecosystem – the gradual democratization of the power sector. From an application standpoint, the possibilities are endless. For one thing, energy resources can be managed as much through conserving electricity as producing it. Imagine the implications of such a system for commercial users.
In an Electricity 3.0 world, users could view a list of active household appliances, monitor the amount of power consumed and track the electricity expense in real time through their smartphones. They could selectively alter their power consumption as needed (dimming the lights or increasing the temperature on the air conditioner for example) and notice an immediate effect on their electricity expense. Furthermore, during periods of peak demand, the electricity providers could send notifications to the user’s phone encouraging them to reduce power consumption by a specific amount in exchange for charging them at a lower rate. Such a dynamic pricing system, based on real time usage as opposed to a slab-based pricing on month-end usage would be a significant step towards the efficient allocation of energy resources.
The rationale behind this approach is inspired by a basic consumer trend: consumers tend to consume less when they are made aware of their consumption. For instance, people consume less airtime when they are on a prepaid plan compared to when they are on a post-paid plan. In the power sector, the savings can go up to 6% of the consumption, studies indicate.
The idea for an ‘Internet of Energy’ seems far-fetched at the outset. Yet, a company in Bangladesh is already running a pilot project for smart metering in collaboration with one of the telecom operators in the country. We also have internal capabilities to do this well. A local IT firm has recently been awarded a large scale deployment of smart homes in Japan.
However, the vision for the future does not end here. We believe, at the height of the democratization process, consumers would be able to store, exchange and transact power among themselves at a scale which covers communities, cities or even nations. An integration at this level would truly be the hallmark of Electricity 3.0. A firm in Bangladesh has already applied this concept of “swarm electrification” at a small, rural community using solar home systems. Applying this model at a significantly larger scale requires serious headways in battery technology. Entrepreneur extraordinaire Elon Musk already has a head start in that department. The future is arriving faster than we think.
This article was written in 2018.
pi STRATEGY 