Arizona Eagletarian

Arizona Eagletarian

Thursday, October 3, 2013

Surviving Disruptive Innovation

Not so long ago, I posted about the quandary facing electricity generating enterprises.

The key is that those monopolies (i.e. Arizona Public Service, Salt River Project, and Tucson Electric Power) have not had to deal with competition from disruptive technological innovations. SRP is not regulated by the Corporation Commission but still is subject to state legislation, which is why the quasi-municipal utility spends SO much money lobbying at the Capitol every spring.

Sure, each of those enterprises gives lip service to solar. But since they are each monopolies, how serious have they been about emerging technologies that are hundreds of times more earth-friendly than burning coal or even natural gas?

When Nevada Energy* and Los Angeles Department of Water and Power advised SRP that those two utilities were going to jettison their interest (ownership share) in the coal-burning Navajo Generating Station, SRP refused to acknowledge the disruptive innovation that had just smacked it upside the head. Instead, SRP rallied those with vested interest in NGS and coal mining and succeeded in getting Arizona's four Republican Congressmen to hold a federal government hatefest. Schweikert's district director acknowledged the nature of that August hearing in phone conversations with me.

Walk out your front door and the plain truth stares at you 85 percent of the time -- that harnessing solar energy is Arizona's competitive economic advantage. That's the amount of time, between sunrise and sunset, in Phoenix and Tucson, that the sun's rays reach the ground -- 90 percent in Yuma.

So it should absolutely strike you as peculiar that Jay Heiler, writing on behalf of APS, threw up a serious block of resistance to change last month presenting objections that were at least a decade old. Such objections would have been addressed in any proposals the Corporation Commission might have taken seriously in the first place.

Therefore, when looking at a list of current class offerings at coursera.org I was thrilled to see Surviving Disruptive Technologies. The class is available to take for no charge unless you want a certificate (valuable if you want to have this class on your resumé, in which case it's only about US$50).

I highly recommend this class to candidates for elective office, incumbent lawmakers and other office holders, utility executives, Big Money lobbyists (Jay Heiler, Chuck Coughlin, etc., this means you) and fellow political activists and bloggers.

The bottom line is that ultimately the public power utilities, in order to survive, are going to have to adapt. They are good at resisting change but VERY BAD at making adaptive changes in their organizations. They are going to have to figure it out. Soon. Change is inevitable.

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There is another arena in America that is most definitely going to come face-to-face with disruptive innovation.

The United States House of Representatives just about 48 hours ago shut down the federal government. A rogue faction of Tea Party Republicans -- do not even let anyone get away with claiming this was the fault of both parties -- defied the American system of checks and balances and made a radical attack on the freedom of all of us.

So brazenly stupid was this act of defiance that even Grover himself -- yes, mister "drown the government in a bathtub" Norquist -- attacked the most immediate catalyst of this GOP debacle, Ted Cruz.
Anti-tax crusader Grover Norquist had some choice words for Sen. Ted Cruz (R-TX) in an interview published Wednesday. The founder of Americans for Tax Reform criticized the junior senator from Texas for his anti-Obamacare tactics on the Senate floor last week, joining ranks of Republicans who were similarly angered by Cruz in the runup to the government shutdown Monday.
"He said if you don’t agree with my tactic and with the specific structure of my idea, you’re bad," he told the Washington Post. "He said if the House would simply pass the bill with defunding he would force the Senate to act. He would lead this grass-roots movement that would get Democrats to change their mind. So the House passed it, it went to the Senate, and Ted Cruz said, oh, we don’t have the votes over here."
"And I can’t find the e-mails or ads targeting Democrats to support it," Norquist added. "Cruz said he would deliver the votes and he didn’t deliver any Democratic votes. He pushed House Republicans into traffic and wandered away."
Anyway, circling back to the subject of disruptive innovation, one of the key points University of Maryland Professor Hank C. Lucas Jr. makes in the first session of his class is that the internet has magnified the impact of disruptive technological innovations.

For APS, SRP and TEP this means they are not likely to get away with the same tactics, ultimately, to resist change in the marketplace of ideas and innovations in renewable, sustainable electricity generation. They succeeded in stifling the most recent call for legitimate change in the utility landscape in Arizona by obscuring the message. That will not continue. The truth will come out.

For CONGRESS, however, this means -- in spite of the best efforts of the Koch brothers funded Freedom Works and other manifestations of their ill-conceived astroturf campaigns, the American people will not ultimately tolerate them fiddling while Rome burns.

Turn your attention (after reading this blog post) to Gavin Newsom's book, Citizenville.

In the early days of the spread of the Internet (let's say the 1990s), people were indeed talking about direct democracy. I was one of those people talking (and writing) about it.

Since development of Facebook, Twitter and other social media however, Direct Democracy is poised to become a disruptive innovation that will overtake Congress like the tsunami that took down the nuclear reactors at Fukushima.

It is ONLY a matter of who will articulate and implement the specific technology to allow it to happen. Don't think for a second that the Tea people who have a difficult time spelling big words on their protest signs are going to lead the way.

Another related change I resisted a decade ago was internet voting. The Arizona Democratic Party conducted the Presidential Preference Primary in 2000 online. I was one of those with very real concerns about the security of the vote. I still am. BUT... I guarantee you someone is working on solving that problem right now.

The common thread for enterprises and institutions that do NOT survive disruptive innovation is hubris. Too big, or too some to fail.

Mark my words, a Congress that is too arrogant to respond to the People appropriately will one day succumb and go the way of Blockbuster (say hello Netflix) and Borders Books (say hello Amazon.com).

Seventeen years ago -- the last time Congressional gridlock shutdown the federal government -- the American people were not nearly as connected as they are today.

Will Congress survive disruptive innovation in October 2013?

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NOTE * -- Nevada Power announced on May 29, 2013 that Berkshire Hathaway subsidiary MidAmerican Energy Holding Company would be acquiring all outstanding shares of Nevada Energy's common stock. Berkshire Hathaway, you may know off the top of your head, is owned by Warren Buffett.

Before that May announcement, on April 4, Nevada Energy announced an accelerated plan to get out of the coal-fired electricity business altogether. Then on April 18, Nevada Energy issued a press release noting Solar Electric Power Association recognition.
NV Energy has been ranked fifth on SEPA's annual Top 10 list, which ranks American electric utilities that have added the most new solar power to their systems on a Megawatt basis or a Watts-Per-Customer basis in 2012. 
According to SEPA's report, NVEnergy jumped from number seventeen in 2011 to number five in 2012.

By the way, I don't see anything in the APS press release archive (or on google) about Berkshire Hathaway trying to acquire APS stock. Instead, a Motley Fool story on Buffett's NVEnergy acquisition talks about APS and compares the housing markets in Nevada and Arizona.

Do you think Buffett would be interested in an Investor Owned Utility that has refused to face up to the disruptive innovations on its horizon?

My hunch is NVEnergy is better positioned to survive disruptive innovation than either APS or SRP.

By the way, has Ryan Randazzo reported on any of these points? What value is he really adding to energy reporting for readers of the Arizona Republic?

And how about Phoenix New Times staff writer Ray Stern? He seems to have a hard on for the solar industry in Arizona. Has he connected the dots with Nevada Energy and Warren Buffett?




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