Markets and Innovation

Follow-Up on Pigs, Trail Mix, and Carbon

Catching up on the reading after being on the road for a week is always interesting. The trends and issues bubble up just slightly out of chronological order as I read down through the pile.

One story that caught my eye is that food banks are getting far fewer donations from companies that have long donate improperly labeled or slightly odd canned and packaged material. Food bankers have to work “twice as hard to get half the amount of food”.

The article went on to cite improvements in the manufacturing process as the source of the problem. Make to Order and improved process control were speculated as the reason. But this was clearly speculation.

I couldn’t help but wonder, does this have anything to do with the pigs? Does the ready market for slightly wrong materials as a substitute for corn in agriculture reduce donations to food banks? If so, it is yet another unintended consequence of choosing solutions to energy problems in Washington rather than creating markets…

Pigs, Trail Mix, and Carbon

North Carolina is Pig Country – are at least a lot of it is. Pig farms produce a lot of waste, and the best pig farmers are doing some creative and innovative things about it. But I’m not writing about creative and innovative things today. I’m writing about what happens when government mandates methods rather than results.

In Garland, NC, pigs are eating trail mix. Pigs are moving to trail mix. Pigs are also eating cookies, cheese curls, French fries, and peanut-butter cups. Pigs are changing diets because the price of feed corn went through the roof this spring, driven by Congress’s obsession with picking winners and losers, rather than with setting the rules.

Farmers are practical people, who have relentlessly driven down the cost of food and the percentage of the populace involved in food production over the last century. When the rules change, they adapt. Trimmings, out of date processed food, and even simple mistakes that make a batch taste funny have all previously gone to waste; now, driven by a doubling of corn prices, they are live stock feed. Farmers understand markets.

Congress periodically gets an itch to solve a problem. Or more accurately to be seen to “Do Something” about a problem. But solutions are hard. The world is complicated. Solutions can have unintended effects. But complex approaches do not play well in our sound-bite media.

What plays well in the media is decisiveness. But congresspersons rarely possess the deep domain knowledge necessary to make decisions in complicated areas. Neither, by the way, do many utilities commissions. So they look for someone to explain it to them. And whoever explains it to them usually has a dog in the fight.

Three decades ago, it was necessary to do something about smog. But any changes in actual smog would take a long time to come—than the next election. So congress had to pick a solution. Aided by the massed lobbyists of the platinum industry, whose persuasiveness must have been strong in the days before three martini lunches were disallowed as business expenses, Congress selected the catalytic converter.

There has been a reduction in smog, it’s true. But we have also locked in on using the best technology from the 70’s. Any car company that picks another technology faces possible liability, possible regulatory delays, or they can choose the expensive 30 year old solution, a solution from a time when high end engineering calculators were more expensive than today’s lap-tops and offered less computing and programmability than today’s cell phone. Meanwhile, credible research suggests that the epidemic increase in asthma and allergy over that period is tied to road-side platinum compounds.

Today, aided by the best advice they could get from the lobbyists of the world’s largest agribusiness, congress has incentivized corn to ethanol production. It does so while continuing to defend our shores from foreign sugar, a commodity that might be made into ethanol more cheaply, but that might compete with corn sugar. Even while credible studies suggest that corn ethanol production uses more petroleum than it replaces, the subsidies continue.

Congress should set the goals, and step back. In energy and in carbon, set the bar high, and enable creativity, and market-driven innovation to solve the problems and provide the solutions.

Doing anything else is stupid. You might say pig stupid.

Energy Demand Management and the Home

The argument is over. People have claimed that the home is a market where time of day pricing and user control will not work. That claim is false. Dave Chassin has proved it. It is time to let the state utilities commissioners know and begin planning new business models.

People in the home won’t pay attention. They need the big utility to help and control them or we will never save power in the homes. They must be subjected to programs with ugly names such as “Load Curtailment” and “Demand Control”. The Big U will turn off your water heater when it needs to. It’s for the best.

Dave Chassin is a staff scientist in Pacific Northwest National Laboratory Energy Science and Technology Division. He has more than 20 years of experience in computer applications for the architecture, engineering, and construction (AEC) industry. Dave’s work centers on non-linear system dynamics and high-performance simulation and modeling. Recently he has focused on the emergent econo-physical behavior of large scale engineered infrastructure systems. At Connectivity Week, Dave delivered a preliminary reported on the GridWise Olympic Peninsula Testbed project.

The results were unambiguous. The project let homes set on a daily basis a balance between comfort and economy. During times of high demand, this would result in higher prices for each aliquot of comfort. I won’t go into the details, because I would get them wrong. Dave was cautious about what it meant because he is an engineer and a scientist and will not speak beyond what he knows from the numbers. But the graphs and curves were clear. In aggregate and in detail, they showed that the home user could and would choose energy strategies that result in improved power distribution dynamics as well as reduced energy use.

Dave will study the details for a while. But anyone who saw, knows. We know that the home can be managed the user better than it can be controlled by the utility. Better for the Economy, better for distribution dynamics.

So, what business model will you develop today?

Virtual Home Maintenance and Operation

I have been quiet for a couple days. I am making 4 presentations and sitting on two roundtables in 4 days speaking at BuilConn and GridWise, both at Connectivity Week, and at a follow-up CABA conference.

While I am at Connectivity Week, I hope to catch up on how Sensus is doing. Sensus is originally a controls company that has embraced software as a service. Sensus contacts in place building control systems using existing business internet connections. Sensus analyses the performance and makes suggestions to improve performance and efficiency.

The customer can receive this analysis b email, or by we services, or by logging in to a custom web site. This year they have added RSS to their options. Each maintenance suggestion includes an estimated cost per month of not performing the work, based on local energy pricing.

What makes this Sensus unique is that it is a pure web services play. Sensus collects the metrics using Web services – no chatty control protocols are used. The recommendations are delivered using well known open protocols. The Sensus process is defined from end-to-end to offer building analytics as a service, a component of a service oriented architecture (SOA).

Large enterprises are using web services to componentize the operations of each part of their business. Each operating unit defines its service offerings in terms of web services, enabling other parts of the company to make internal requests against the web service, eliminating internal paperwork and process delays. Businesses that have made this effort find that they can market these services to others, turning cost centers into new sources of business. AIMCO, a REIT owning apartments and providing property management services has aggressively embraced this approach.

One of the GridWise scenarios describes a third party customer face (3PCF). This remote energy manager negotiates acceptable service level for each building system in the home with the end user – presumably using a web-based user interface so this profile can be updated regularly. The energy manager buys power on the owner’s behalf, negotiating the maze of power generation ontologies to make costs effective purchases that meet the owner’s preferences and sensibilities.

In a Service-Oriented world, the 3PCF has an opportunity for an enhanced service offering to its existing customers. One important characteristic of SOAP-based web services is that they are message oriented. The original recipient of a SOAP message can forward the message to another web service, just as the recipient of email can forward on a message to someone else.

The 3PCF already has a persistent internet connection into the home, and is able to discover each building service in the home. The 3PCF could partner with Sensus to gather performance analysis and failure predictions. The 3CPF could request the local maintenance staff from AIMCO to provide maintenance and repair services based upon the owner’s preferences and the building analytics. Without acquiring staff, the 3PCF is now able to offer enhanced knowledge-based maintenance and operation services to augment its energy management business.

And that is how one could build a virtual corporation in the home operations and maintenance space.