Gridium’s headquarters are just a few miles down the road from Facebook in Menlo Park, California. And in the last week it was hard to talk about Facebook without talking about their latest acquisition, the $19B purchase of 50-employee WhatsApp. If you are in real estate management or energy you might roll your eyes, sigh and return to the “real world”. But take a closer look, and you’ll learn how WhatsApp illustrates what is happening to our utility system.
Much to the disappointment of cleantech investors, this isn’t about how cleanweb apps will reach a billion users. Rather it’s the story of how capital-intensive service businesses suffer from problems of cost sharing across customer classes.
Much of WhatsApp’s growth took place in international markets where mobile phone providers typically make a significant portion of their revenue by charging fees for every SMS message. (The U.S. tends to gravitate to all-you-can-eat service plans). Because WhatsApp allows users to avoid fees by messaging (and soon talking) to their friends over the internet, users were delighted by both the experience as well as the savings.
The WhatsApp acquisition took place right before an annual gathering of telecom executives in Barcelona, where according to Business Insider, Marc Zuckerberg was set to discuss his plans with the industry. The money quote from the article:
The carriers must continue to pay for the wireless infrastructure on which Facebook and WhatsApp sit — even though neither company has spent a penny to build it. Zuckerberg is creating a world in which Facebook provides people with free services and creams off the ad revenue, and the carriers are stuck with the bill.
Long the titans of the mobile landscape — carriers are the people you pay up to $100 a month just to text and talk — they’re now looking at a Zuckerberg-world in which they are “downgraded to simple pipes,” as one of the dinner guests put it.
Any of this sound familiar? If you’re thinking solar (and distributed generation), you can quickly see the analogy. A class of customers significantly reduces their (paid) usage, leaving the service provider with a gaping revenue whole. Costs don’t change and the utility is left being the “backup” provider. On a longer-term basis, there is also a transfer of the customer relationship.
This is exactly the dynamic that is happening in our utility system with distributed generation. And because in most markets energy rates are a zero sum game, the dynamic is even more powerful in utility markets. In short, if you’re not taking advantage of distributed generation in your energy strategy, you’re paying for your neighbor’s system. And since costs stay the same on lower sales, rates must rise.
So what’s your conclusion? Where is the WhatsApp in your energy management strategy?
