(Figure 1) It was 120 years ago in 1879 that Thomas Edison, who was then 32 years old, invented the light bulb. Of course, we know that he didn’t really invent it. Instead, what he actually invented was one of the world’s first corporate research and development groups, and under his direction, it was the efforts of that whole group that led to the invention of the light bulb. This was just one of the 1,093 patents that Thomas Edison held over his lifetime.

There are a couple of other interesting things about the invention of the light bulb: While most of the attention was on the discovery of the right kind of filament that would work, Edison actually had to invent a total of seven system elements that were critical to the practical application of electric lights as an alternative to the gas lights that were prevalent in that day.

These were (Figure 2) the development of (1) the parallel circuit, (2) a durable light bulb, (3) an improved dynamo, (4) the underground conductor network, (5) the devices for maintaining constant voltage, (6) safety fuses and insulating materials, and (7) light sockets with on-off switches. Before Edison could make his millions, every one of these elements had to be invented and then, through careful trial and error, developed into practical, reproducible components.

There was one other invention that was critical to the success of the invention of the light bulb. Edison didn’t invent it, and without it, he wouldn’t have succeeded in his attempts at his invention. Others had been trying to develop a workable household electric light for over thirty years, but all had failed because of one thing: they never were able to achieve a really good vacuum inside the bulb, which was critical to prevent their filaments from burning up. Only when Herman Sprengel invented the mercury vacuum pump in 1875 was it really possible to develop a practical electric light bulb.

It took another three years after Edison’s invention of the light bulb before his famous Pearl Street Station began operation, serving a one-square-mile area of New York’s First District. It took twenty years before the fledgling electric light industry would have a million customers. It was still 55 years after Edison was lighting New York City that Congress created the Bonneville Power Administration to help electrify the far reaches of the Pacific Northwest.

Eventually, the industry that developed looked a lot like this (Figure 3): Very large electrical generating stations, usually remote from population centers, linked by a high-voltage transmission grid to the local distribution system that brings power into all the homes and businesses. This structure has fueled the economic engine of virtually all the developed countries of the world, and it has worked exceedingly well.

Why have I recounted the history of 120 years ago at a conference focused on the future? Because I believe there are important lessons that can be learned from this story that will apply to our understandings of how the future is likely to unfold. While Edison’s invention was a seminal event that won’t be repeated, I believe that we are on the verge of a significant transformation of the electric utility industry that will, fifty years from now, perhaps seem equally significant.

This afternoon’s panel presentations on the technological developments now underway, and the exhibitors at the back of the room, will give you a glimpse of the possibilities that will lead to this transformation. I won’t repeat what they can describe better for you. Instead, I simply offer this big-picture view of how the world of the electrical industry will look different maybe ten to twenty years from now (Figure 4). This picture is very different from the earlier picture, isn’t it? Instead of a linear view of how electricity is generated and used, this picture is one of an integrated network. Households and businesses aren’t just energy consumers in this picture; they may be the source of a significant amount of electrical generation feeding back into the grid, becoming part of a vast energy marketplace with many, many buyers and sellers. I call this the "Energy Web," since everything’s linked together; all parts of the system can be in communication with the total, and the many players making independent decisions about how they are going to generate and use electricity are linked by the marketplace.

(Figure 5) Here’s a definition we’ve crafted for what we believe the concept of the Energy Web to be. It’s still quite general, but contains the three essential elements that we think are important: First, the development of distributed generation resources and energy management tools that can meet certain niche needs better than central-station resources; second, the role of the energy marketplace that is created through deregulation; and third, the advent of such tremendous telecommunication capabilities.

Perhaps unlike some forecasters, I do not envision a time when the strands of the Energy Web are largely broken, that is, that consumers use the distributed energy technologies as a means of choosing to go off-grid. There are two reasons for this: first, consumers clearly place a high value on reliability, and reliability is significantly enhanced when they remain connected to the grid; and second, the economic opportunities for the players, to either make money or save money, are so much greater when they are connected to the marketplace.

Having said that, however, I think that there may be something very different going on in the developing countries of the world. The Energy Web connections are a natural outgrowth of the first picture I showed of today’s energy infrastructure. But in the developing countries, that picture doesn’t necessarily apply. There are over 1 billion people of the world today that still don’t have electricity in their homes. For them, distributed generation technology may allow them to leapfrog the entire set of investments that would otherwise be needed to develop the infrastructure needed to support that picture.

Let me use an analogy to explain. It surprises a lot of people to learn that despite the seemingly ubiquitous presence of cell phones in the United States, the country with the most cell phones in use in the world is China! In that country, traditional telephone service lagged the developments of new technology, so that when cell phones became available, they decided they didn’t need to put up the poles and wires in the first place. Similarly, distributed generation technologies will allow countries that don’t have that infrastructure to avoid making those investments in the first place. It’s not difficult to envision a place like the Amazonian regions of Brazil, or many parts of Africa, one day using their biomass resources to create ethanol, which will be converted into hydrogen within a fuel cell to power their homes or businesses in the community, completely independent of central-station electricity. This will be an extremely clean and renewable energy resource, and it will be cheaper than building the power plants, transmission lines and distribution systems necessary to support the infrastructure that exists in the developed countries.

Well, how does this all relate to my story of Thomas Edison and the invention of the light bulb? (Figure 6) First, there is no single development that will mean a breakthrough in the creation of the Energy Web. Just as Edison needed seven different elements to make his electric

light system work, the Energy Web needs slow improvements and some breakthroughs in several areas before it really takes off.

Second, things take time. Edison saw how the whole system should be pieced together almost from the beginning, but it took him two years to invent the light bulb, another three years before he had his first working system installed in New York City, and twenty years before he had one million customers. While the pace of development and consumer acceptance is undoubtedly faster than it was 120 years ago, the development of the Energy Web could take a couple of decades of gradual change before we see a really noticeable difference from the linear, one-directional model of today.

Third, big changes are very disruptive and threaten the status and possibly the livelihood of existing players. Let’s face it, the gas lighting industry just hasn’t been the same since Edison brought his electric light onto the market. What’s interesting is that the gas industry came out with a flurry of technological improvements of their own during the 1880’s in an attempt to meet the challenge. For example, one company developed a gas light based on hydrogen admired for its brilliant white glow. But gas lights just weren’t as convenient, the quality of light was poorer than electric, and they produced more heat in the summer. While gas lighting maintained a cost advantage over electric lights for many years, even that advantage was eventually lost.

The fourth lesson is that surprises almost always happen, and things don’t turn out the way you think they will. In Edison’s case, he championed a system based on direct current at low voltage. But this technology was constrained by the inability of DC to be stepped up to higher voltages, thus reducing line losses over distance. It wasn’t long before George Westinghouse’s system based on AC won out, over a big fight put up by Edison. While I believe that the networked system I envision in the Energy Web is roughly right, I don’t doubt that parts of it will turn out very different than currently envisioned.

Finally, remember that none of Edison’s work in inventing the light bulb would have been possible without a prior invention of a technique to create a perfect vacuum inside a glass jar. What’s the equivalent parallel development that is going to allow the Energy Web to

unfold? In my opinion, it is digital telecommunications. The glue holding the Energy Web together is the ability of all the parts of the Web to instantaneously know what all the other parts are doing. Electricity is increasingly becoming known as a commodity, but it has one feature that is very different than all other commodities: it can’t be effectively stored. The need for electricity to be instantaneously generated at the exact moment it is consumed creates a great deal of price volatility. This figure (Figure 7) illustrates the hourly prices of the California PX market for the first 17 months of its existence, through August of this year. The prices ranged from free, where producers were literally giving the stuff away, to $191/MWh. In the Midwest this summer, prices topped $1000/MWh. This is clearly not your father’s utility industry anymore! This price volatility creates tremendous economic opportunity, and it’s that opportunity that will drive the creation of the Energy Web. However, none of this would be possible but for the development of digital telecommunications.

(Figure 8) Let me illustrate. On the left-hand side is a picture that we’re all familiar with. It’s a typical household electric meter, most of which was invented around the turn of the century. On the right-hand side is a picture of an example of the new generation of electric meter. It looks pretty much the same, but it’s digital. It contains an 8-channel recorder, able to track the consumption of eight different pieces of equipment or circuits in a building. It records both peak and energy consumption. Connected to a phone line, it can record every five minutes and download to a server upon demand. This type of information allows the consumer to both actively manage his energy consumption, and to participate effectively in the energy marketplace. For example, when the electricity price spikes, the customer can receive notice and either cut consumption or possibly fire up their own generation source and sell their power into the market.

The focus of media coverage about the electric utility industry has been on deregulation. While that is certainly an important development, I believe a more important and long-lasting development is the pace of technological change. These technologies are permitting the Energy Web to unfold. The lessons learned by Thomas Edison 120 years ago in developing the light bulb are equally applicable to the development of the Energy Web.