Hi Stephen, thanks for the post, it’s a great update on what’s happening at Nest. I remember when the Nest acquisition was announced, and I like many others were very surprised at the price tag. It meant that google seemed to see some huge synergies in the deal that we didn’t see. Based on your post, I must say I’m still a skeptic. While there are potentially some incremental revenue opportunities in data aggregation and analysis, the value of that data to the customers you mention seems marginal. I believe GE would get similar data from product returns, for example. On the product side, I also agree with you that the growth opportunities are limited especially given that fact that savings are marginal. To me, the main opportunity for energy efficiency in residential homes lies in better designs of homes — e.g., high efficiency windows, better insulation, designs to leverage natural heating and cooling resources — and higher efficiency heating and cooling equipment and LED lighting. I believe all of these technologies are proven, and with some upfront investment, can move the needle in residential energy efficiency.
Ward, thanks for an insightful and well-written post. You bring up a difficult challenge of encouraging consumers to install distributed energy generation at their homes, thereby reducing revenue to PG&E and increasing costs to non-participating users, while ensuring stable prices to lower income families. The link here appears to be the fact that lower income families are less likely to install renewable distributed energy facilities at their homes due to the upfront cost of equipment and labor, or due to uncertainty in future changes in residence. I wonder if it would be in the purview of the California state government to underwrite these investments (and, in turn, reap the returns of electricity sales to PG&E) for families that wish to participate but cannot fund themselves.
Maria, thanks for the insightful post. It is unfortunate to learn that FPL opposed legislation to encourage distributed energy generation, though, as you mention, it is understandable given that it represents a potential for a decline in their traditional revenue streams. It does seem likely, however, that a trend toward distributed generation, paired with smart grid capability, will lead to myriad new business models on which FPL can capitalize. You, Arc and Stephen all mentioned excellent ideas for potential incremental revenue opportunities. I wonder if there are significant cost savings to be had as well: could FPL avoid costly capital expenditures in grid maintenance or capacity expansion that they likely have planned for the next couple of decades? As distributed generation and storage increases, it seems the utility may be able to wind down peaker plants, which likely have a significant annual cost, or avoid adding new plants all together.
Maniglass, thanks for raising this interesting topic about the digital PLM platform as well as 3D printing of prototype parts.
Sonja, very interesting idea of using augmented reality in a manufacturing setting. I could see this significantly improving the efficiency of line workers and improving quality. It would also be a way to enable a “heijunka” process like we saw in the Toyota case, where the sequence of parts traveling down the line varies depending on customer demand, instead of by batch. Being able to switch Standard Operating Procedures for each part quickly and seamlessly using an AR headset, for example, would provide both specificity for the sequence of steps each operator needed to perform as well as flexibility to vary the type of part based on customer demand. Similarly, it would also enable quick and easy line balancing by transferring steps in each operator’s SOP across work stations as bottlenecks arise on the line. Great food for thought!
Thanks for the insightful post about AI in manufacturing environments. The shop floor definitely seems to be an appropriate place for AI to play a useful role, given the myriad sources of data and value of quick, data-driven decision making in factory settings. I believe your read of the role AI could play in scheduling to be particularly insightful. In addition to scheduling for new product introductions, I think AI could be extremely helpful in adjusting schedules and staffing levels when factories are presented with changes in demand from customers or changes in supply of workers. For example, if a worker fell ill one day and couldn’t come to work, perhaps the AI system could automatically call in an additional temporary worker, direct him to his work station, and balance the line based on his skill level. That would be amazing!
Thanks again for a thought provoking post!
Hey Ashwini, thanks for the post. As a big fan of Renault-Nissan and Carlos Ghosn (he was our role model in the Japanese acquisition I worked on), it’s great to know more about what they’re doing regarding climate change — not only in their car line-up but also in their internal operations. I think Phoebe makes a great point about the huge opportunity that a brand like Nissan or Renault have to scale EVs across the globe, especially in developing nations. While Tesla has, arguably, a superior EV product, the infrastructure that Renault-Nissan have globally, in terms of manufacturing, distribution, sales, and service, makes them uniquely positioned to move the needle in automobile carbon emissions. I suppose the next question, then, would be: when will it happen? After a cursory look at the Nissan Leaf website, it appears the Leaf has not been truly updated for several years. Tesla continues to invest in EV R&D despite a lacking charging station network; is Renault-Nissan doing the same?
Finally — Maria brings up such an important point…it would be great to know more about what solutions are available to avoid the situations mentioned!
Michael Allen, thanks for the really interesting post. I was unaware of how much thought New York has put into this issue…it’s really great news. But I see now the problem is achieving the goals…and I think that builds on a conversation we started in TOM the other day. I see what you mean that there are parallels between this case and the air conditioner manufacturers convincing governments to adopt eco friendly policies. But I think that was actually a much easier issue to solve than what you have on your hands here. In the A/C case, it was actually a relatively straightforward technology switch, and the costs were actually not too much higher. I think it was kind of an “easy win” for governments. In the case of building efficiency, it’s super complex. I used to work for Johnson Controls, who did a retrofit of the Empire State building, saving 40% in energy costs annually  (also check out Fay’s post). That case was made much easier because there was one owner of the building — Tony Malkin. Most other commercial buildings have multiple — in some cases, hundreds — of different owners, making it really difficult to align incentives, and share the costs of upfront investment.
So I agree with you and Jessie — it will definitely require both the “stick” of regulation, plus the “carrot” of tax breaks or other incentives. Perhaps also the city government could work with property owners to develop some kind of easy, scalable way to ensure the incentives are aligned, both on the benefit as well as the cost sides.
Thanks for the thought provoking post!!
Fay, thanks for the post on Johnson Controls…as you know it’s a company that is close to my heart! I think the commitments they made as part of this announcement are a step in the right direction.
I wanted to comment on the interesting question Daniel posed re: Daikin’s sharing 93 patents. My take is that Daikin is doing this in order to solidify the market leading position of their previously proprietary low GWp R32 refrigerant technology. They are the only air conditioning manufacturer who is vertically integrated into refrigerant supply. Each time you change the refrigerant material, you have to change the architecture of the air conditioner system. The two businesses collaborated over the past 5-10 years to develop low GWP R32 refrigerant and air conditioner units, and they released this to the market about two years ago. Now, as additional refrigerant manufacturers continue to introduce advanced refrigerant, Daikin is seeking to capitalize on their upfront investment by generating network effects around R32: it is actually better for them to convince other manufacturers to design R32 systems to ensure demand for R32 refrigerant. Releasing patents for R32 air conditioners enables this.
I believe there are traditional capitalist intents behind this move, but fortunately it is also a good move for the planet.
NY777, thanks for the fascinating post! Based on your analysis showing that individual developing countries are increasingly receiving funding directly for country-specific projects, and that regional development banks are making regional scale investments, I completely agree that the World Bank is uniquely positioned to invest in programs that will have global impact. And given that climate change is a pressing issue which, to date, has been difficult to tackle due to the issues you mention above regarding externalities, it also completely makes sense as a priority for the World Bank. I also appreciate your comment about the need to select projects to fund based on input from a wide range of countries as a way to generate buy-in and a sense of empowerment. It definitely seems to me that there would be plenty of such issues that affect all countries, such as the couple that you mentioned. Do you envision, though, that some of these technology developers would be private companies? And would they likely be companies based int he US or other developed countries? How would World Bank recipient nations think about this?
Thanks for the great ideas!
HCL, thanks for this great analysis and interesting perspective. It definitely makes sense that climate change poses a national security threat to the US in terms of rising sea levels, volatile and increasingly dangerous weather, and political instability. I noticed the DoD’s website states, “the mission of the Department of Defense is to provide the military forces needed to deter war and to protect the security of our country.” In this light, I believe in principle that your point that the DoD should go on the offensive to fight climate change makes sense. I am wondering though what specific proactive actions you would recommend? Are there any cases of the DoD engaging in these types of offensives in the past?
Very thought provoking, thanks!!