28 September 2007

How Gross is That?

I remember well during the fun days of dotcom 1.0 when Bill Gross came up with wacky idea after wacky idea, most of which happily bombed. So I wasn't entirely surprised to see him come out with stuff like this:

We started making only Internet companies because we felt this was an incredible new medium that had unbelievably high gross margins. If you could make a Web site, you could sell something online and you could make margins of 90 percent or higher. When we looked back at the ones that were most and least successful, we realized it had nothing to do with their margins. It had to do with how protectable the idea was. Was there a core intellectual property with which you could differentiate yourself and earn sustainable margins? Because you can make good margins online, but if you can't sustain them, it doesn't mean anything.

So that led us to take another look at all businesses - even companies that make physical products. We had shied away from making anything with atoms; we were all caught up in doing only things with bits. But you can make things with atoms and still have a huge amount of intellectual property in them, where you can earn good margins and protectable margins.

That sounds, well, just gross, really, with its sad little obsession about intellectual monopolies. But reading further on I came across this:

I feel that the biggest disruption that will happen in this century is distributed energy generation. In the past, there was an economy of scale, so you had to build a 1-gigawatt nuclear or coal plant somewhere, and you had to do it far away from people because no one wanted it in their backyard. That was possible because of copper. Only copper could keep that plant far enough away that we wouldn't see it or smell it, and copper could bring those electrons magically into our house. But there's a huge loss by the time the power gets to us - with copper, it's up to 15 percent.

When you can build distributed energy generation on your roof with 10 feet instead of hundreds of miles of copper, you can avoid those huge losses. If you can get lower-cost solar, which we're working on very hard, and if you have the subsidies, all of a sudden it makes sense to have your own power plant on your own roof. Having your own power plant on your roof is just an unbelievable concept that wasn't even possible in the 20th century. It is going to be possible - and necessary - this century if we're going to solve the climate problem.

Spot on. Let's hope this is one Gross idea that succeeds.


Anonymous said...

This is not such a good idea as it might at first seem. That big, expensive but distant power plant will be using top quality components, be monitored and tweaked by professionals and will have all the scale effects of surface area to volume ratio in it's favour.

The efficiency gains achieved here massively outweigh the transmission and distribution losses See slide 26 (for which the UK average is 9%, not 15%).

Furthermore, the larger plant costs much less in £/kW, and the network effect means that the total generating capacity which needs to be available has to be much higher for small scale local generation.

Phil Driscoll

Glyn Moody said...

Thanks for those points and the link.

I accept all those, but there's one aspect that I think trumps them all, and that is to do with resilience.

The current system is extremely vulnerable - be it to terrorism or natural diasters. A distributed system - call it an open source approach - seems so much safer and wiser given the kind of world we live and will live in.

Anonymous said...

I agree that resilience is an issue - in particular, nuclear power stations would make a particularly attractive target to terrorist attack.

Some types of large scale installation can provide resilience - take a large wind farm which may have tens or hundreds of 2 to 5 MW turbines - if one turbine is taken out of action, then only a small fraction of the supply needs to be replaced. In contrast, if something like Sizewell B is taken offline, then almost all of the UK's hydro and pumped storage needs to be brought on line to back it up. Large scale CHP systems can also be considered resilient as the heat is stored intrinsically in the distribution system and can be backed up by large thermal stores.

At the end of the day, reliable supply is required, and I'm pretty sure that large and well maintained plant would prove to be significantly more reliable than 'domestic grade' CHP systems. There's obviously a trade-off between resilience and CO2 output, but a massively resilient system is of little use if the planet is uninhabitable :)

Perhaps the most resilient solution is to not require the energy in the first place, so householders spending money on high quality insulation and trying to move the UK housing stock to 'passive house' standards would have a much greater effect than spending the money on small scale CHP and roof mounted solar and wind installations.

Glyn Moody said...

Agree absolutely that it's better not to need so much energy in the first place. Obviously what we'll get is a mix of everything....