By Chris Zach | Product Marketing Manager
“Software is eating the world.”
Marc Andreessen, venture capitalist and futurist, offered this distillation of technology and economic trends in an essay in 2011. His thesis was that an increasing share of economic activity and future growth would accrue to companies that, at their core, were driven by software.
Examples of this movement include transportation network companies like Uber, which are replacing the conventional taxi industry. Uber utilizes personal cars rather than dedicated taxis, and it coordinates the activity of riders and drivers through software on smartphones and the cloud.
Another example is Netflix, which first replaced the physical stores distributing movies like Blockbuster, and which is now displacing companies that distribute media over dedicated communication networks, like cable companies Comcast and Time Warner. Netflix’s software uses historical data on viewing patterns to predict which movies and TV shows viewers will want to watch.
Software’s tendency to displace physical assets like cars and buildings doesn’t end with consumer markets. In fact, software is extending its reach to consume the large, foundational infrastructure that powers our modern society.
The conventional electric power grid is the network of wires (and other hardware, like transformers and switches) that transmits electricity between locations where it is generated and where it is consumed. The grid has served us well, supporting our modern lifestyles with electrical appliances to do our work, air conditioning to cool our rooms, and lighting to brighten our day. But the grid infrastructure we rely on is aging, and its capabilities are falling behind the emerging needs of the 21st century.
The old grid is highly centralized, with large power plants producing electricity and lines carrying the power outward to consumers. When it was originally constructed, this grid architecture made sense, because humans were required to make decisions about the grid’s operation, and humans could only communicate slowly (first verbally and then by telephone). Also, the bigger a fossil fuel power plant, the cheaper its electricity, so it made sense to build them few in number and large in size.
The problem with central control and generation is that they are prone to central failure–they are not resilient to problems that inevitably occur and cause power outages. The problem with fossil fuel power plants is, obviously, the damage caused by greenhouse gas emissions.
And then there is the cost. The old grid is expensive, because it needs to be drastically overbuilt to withstand the worst case scenario: the hottest day of the year, when everyone is maxing out their air conditioning, and electricity use is highest. If the grid can’t handle demand on this day, then customers risk losing power. (We call the amount of power that can be transmitted the grid’s “capacity”.)
The evolution of technology, and the capability of software in particular, is enabling a new grid design, and Stem is at the forefront of this new era:
Software is eating the grid.
The grid design of the future replaces costly hardware with software that is cheaper, more flexible, and more sustainable.
The new grid shifts from large, centralized power plants to smaller energy systems, like solar panels and batteries, that are distributed throughout the grid, closer to the people and buildings that consume power. This distributed design allows for more green, renewable energy, and it can be more reliable against power outages during storms and breakdowns because the failure of one piece doesn’t bring down the whole system.
Software is critical to making the distributed grid possible, because with the thousands of systems interacting with each other, only software is capable of making decisions as quickly and accurately as necessary. Each system generates reams of data and changes its performance on a second-by second basis to deliver the power needed for customers.
Stem’s software controls the operation of battery energy storage systems, and these batteries are located at commercial and government buildings distributed throughout the grid. In simple terms, the software decides when to charge and discharge the battery, and how much power to supply. The power of the software emerges when we examine the benefits of the new grid over the old design.
With Stem energy storage installed around the grid, we no longer need to overbuild power lines to handle the worst case scenario. Rather, Stem’s software analyzes the grid’s health and intelligently determines which batteries to discharge to create more capacity and help support the grid’s reliable operation.
As Fortune recently wrote in an article about Stem’s progress, energy storage gives utilities more options for optimizing the grid:
“Utilities can also work with Stem so that they can shift the energy loads of buildings that plug into their grid over onto batteries during peak times of day, like a hot summer afternoon. In this way, they have another option for how to manage the demand on their grids.”
By avoiding the excess capacity we would have otherwise had to install, we can lower the total investment in the grid and save money for everyone. These batteries can be thought of as a virtual power plant, and like most things virtual, they are less expensive and more flexible than the real thing.
Solar and wind energy is the future of our cleaner grid, but these sources don’t work in isolation. Since we can’t control when the sun shines or the wind blows, we need batteries to store extra energy, and we need software to blend the power from the sun, wind, and batteries into a balanced, dependable stream.
In addition to the grid benefits, Stem’s smart storage service helps customers reduce their energy costs automatically and invisibly, without the interruptions to the normal flow of daily operations that come with manual demand reduction efforts. The jump in convenience is like comparing the ease of streaming from Netflix to the hurdles of programming your VCR.
With the promise of more clean energy, lower cost of energy, and more reliable power supply, Stem’s software-optimized battery systems are increasingly replacing conventional grid hardware investments and eating the grid.
The recent $15 million investment in Stem by Mithril Capital is the latest sign of the prospect for software-driven energy storage to reshape the electricity industry.
Mithril’s mission statement provides an indication of their motivation:
“Mithril is a global investment firm that provides capital to leading growth companies. We partner with teams who use technology to build valuable and lasting businesses, often in industries long overdue for change.”
Given that the US is forecasted to need an investment of $2.1 trillion to modernize the grid over the next 20 years, the industry is not only “long overdue for change”: it represents an enormous opportunity to build a software-enabled clean energy future.