In a stagnant economy, many are still looking for well paid jobs in Silicon Valley. If the high-tech sector did not get hit as hard as in 2001 after the Internet bubble burst, the effects of the 2009 financial crisis are more profound as unemployment numbers continue to be close to double digits. And California's chronic budget problems are making things worse in a State that hoped to be protected from a double-dip recession, which is looming now.
Apart from high-profile but limited success stories in social media, Silicon Valley has struggled to create new jobs, especially in cities like San Jose that are more known for hardware compared to San Francisco. The San Francisco Chronicle reported last week that the smart electric grid yields jobs. Would the promise of a green economic recovery announced two years ago finally come to reality? Energy is a very large market and the thought of making the electric grid more efficient with smart meters and data analytics is very attractive. Moreover the current grid would not be able to support the load of electrical vehicles if they were massively adopted today.
Last week, smart grid stake-holders including utility and start-up representatives met at the Smart Energy International conference held near San Francisco's Fisherman's Wharf. The mood was positive but the tone was more cautious. The encouraging employment news drew on a report commissioned by the Silicon Valley Smart Grid Task Force to show the importance of the smart grid sector in the growing cleantech industry. Unfortunately, the results of the report are premature -- the study only took into account jobs created from 2008 to 2009 -- and actually show a more complex picture. That is the most interesting part.
More than half the 12,500 new jobs were created in the solar industry (59%), and this after huge VC investments and Government loans in 2006-2008. As the US battles to stay competitive against China, it is doubtful that Silicon Valley will be able to replace all the manufacturing jobs lost in electronics with manufacturing jobs in solar. Solyndra is not the only manufacturer to face difficulties. Most of the recent growth in solar in the Bay Area is for lower wage installation and financial jobs following the success of Solar City and SunRun.
So, what about true Smart Grid jobs at the intersect of energy infrastructure and data analytics? The report seems to indicate that Smart Grid is starting to create jobs beyond the first success stories like Silver Spring Networks. But the report did not include Google and Cisco, which is like reporting on the health of the Major League and excluding the New York Yankees and the Boston Red Sox! Earlier this year Cisco and Google backed away from the metering service business.
I talked to the the Smart Grid executive at Cisco who had some interesting ideas about how utilities could facilitate the transition to a smarter grid architecture with innovative business models. As revenues in traditional electricity transport would decrease, utilities could be a local energy broker between locally distributed sources coming from solar, wind, etc.
This is quite a change for a company that used to be excited about the Smart Grid as the next Big Thing. Cisco is realizing now that Smart Grid is a big undertaking and that it will have to work utilities and focus on selling routers, much like it did with the Telephone Carriers that first battled against the Internet. It is about economics and Cisco dubbed it gridonomics. In their white paper, they highlight the need for public and private stake-holders to work together. Do we need the equivalent of the Telecommunications Act (picture below) signed in 1996 under the Clinton Administration?
One of the issues for technology and business innovators is that utilities are in control and they are known to embrace innovation quickly. PG&E, the main utility in the Bay Area, is actually one of the members of the Task Force that commissioned the report. PG&E faced strong resistance to its smart meter program in residential areas, with lawsuits from Santa Cruz and San Francisco counties. Whether it is for lack of information or genuine concerns from consumers, the difficulties encountered by PG&E show that they cannot do it alone either.
So why releasing results early when the picture is much more complex? The conclusions of the report could help PG&E make the public more supportive of smart meter programs if it is perceived to creates jobs locally. The city of San Jose is also a member of the Smart Grid Task Force. Instead of releasing premature results, the report could have listed some recommendations on how to accelerate the growth of the Smart Grid sector.
In the meantime, we can look back in time and remember what it took to get the old telephone carrier model to move to the Internet model. It was not easy. University connected on expansive T1 lines and learned how to make the best of it with the Internet Protocol. Companies like AOL and Skype helped put pressure on Telecommunication and Cable TV giants to offer new services beyond the increased competition among competitive and incumbent carriers created by the 1996 Telecom Act.
The advent of wireless technologies completed the transformation of the phone industry by forcing a much needed consolidation to bring a new architecture forward. And it is the iPhone and iTunes that brought things together and tipped the masses to use voice, data and video services on a single device (smart phone). Does it mean that it will take an attractive product like the Nest thermostat to get consumers to support smart meters?
There is no question that there is an emotional component in changing consumer habits. One of the company that did a great job engaging customers and working with consumers is OPower. At the Smart Energy International Summit this week, one of their representatives talked on a panel on “Successfully Integrating Social Media into Customer Programs ”. Opower announced this week a new application on Facebook. There is however stronger privacy concerns and regulations in the Energy sector. The recent woes that Apple and Google faced are late and small to the level of privacy scrutiny that utilities will have to go through.
Let's face it. The transformation of the electrical grid and the emergence of new energy services will happen but it will take time. And, as Cisco noticed, it is more complicated than what Silicon Valley would like to believe. Historically, getting a head start on a new infrastructure is smart move for the economic development of a city. So that is good for cities like San Jose. But it will be slow. And that is maybe the better news in all of this: Smart Grid is only starting and my take is that it won't be a bubble!