As the pace of innovation increasingly drives the energy industry, co-ops now have a distinct advantage over investor-owned utilities – because we are smaller, we can be more creative.

So says JB Straubel, one of the co-founders of Tesla Motors, an emerging player in the global electric car revolution.

“I think there’s a lot of focus in the nation around the big investor-owned utilities and looking to them in a lot of cases to lead innovation. But I think due to their size and scale, they actually have, in some ways, more of a luxury to really not be forced into innovation as quickly as perhaps many of you,” Straubel recently told an audience of electric cooperative CEOs.

Innovation Leads to Disruption

Because Tesla is yet a tiny manufacturer compared to the traditional auto giants, its vision of the nexus of cars and electricity can proceed virtually unhindered by the corporate process and structure that often stifles creativity and freedom — the build blocks of innovation.

Tesla must also constantly innovate to create electric cars that not only compete, but disrupt the auto marketplace.

Co-ops can do the same in the electricity industry.

“This is where innovation is going to start, in many cases first,” said Straubel, whose other role at Tesla is Chief Technology Officer. “I think all of you have a chance to really be quite important leaders in the entire technology space in the electric infrastructure and generation industries.”

Disruption and innovation are two sides of the same coin, Straubel said. “Creativity in solving problems starts by challenging the relevancy and constraints in an established – even successful – process”.

In the development of Tesla vehicles, Straubel said the goal was simple – “to build the best car in the world.” The team? About 40 geeky Stanford University engineers, post-grads and students who had worked together on the 2003 American Solar Challenge racing circuit.

Innovation Attracts Naysayers

“We didn’t have a rule book. Almost everyone we talked to – even the investors were critical and didn’t understand our vision. It was depressing and frustrating. Whenever you’re doing innovation and trying to create new products, there’s absolutely more naysayers than there are people supporting you.”

In hindsight, Straubel said it is more conducive to creativity “to not have the expertise and experience. What we didn’t know was helpful. We weren’t burdened with “what we couldn’t do.”

What Tesla “couldn’t do” led them away from using heavy lead acid batteries that had long traditional automakers’ development of electric vehicles . Instead, the company innovated ways to power their vehicles with light-weight lithium ion batteries from the world of cell phones, laptops and avionics.

In turn, Tesla’s quest to build affordable vehicles, including the 215-mile range, $35,000 Model 3 rolled out earlier this spring, led to the company’s construction of the solar-powered Gigafactory in Nevada. By 2020, the facility is expected to produce annually 35 gigawatt-hours of energy storage systems for cars, homes, businesses, and potentially the utility industries.

As a result, Tesla could find itself a major player in the electricity sector.

Tesla: A Player in the Electric Utility World?

“We are looking at the grid as a vast opportunity,” Straubel said. “The grid has never had storage in any significant capacity,” Straubel said. With storage we could have the chance to much more efficiently utilize those assets and defer having to invest in physical infrastructure and distribution assets, because you can shave off the peak demand.”

He said that the press of technology – particular in energy storage and solar generation – is forcing huge change. “As this technology changes, all of the rules should be evolving.”

Co-ops should be part of the evolution, he said, and it should start with forward-looking CEOs and boards who not only understand technology but can nurture cultures that enable creativity.

Also, Straubel said innovation frequently needs room to fail. Executives have to take risks, be willing to try to innovate when necessary and evolve.

Though by definition, co-op boards must seek to minimize risk to safeguard member assets, a board can signal its interest in innovation by asking questions about innovative technologies.


Resources

  • Watch a video of Straubel’s presentation at the 2016 CEO Close-Up Conference. Click here.
  • Video of Straubel interview with Jim Spiers, NRECA Vice President of Business and Technology Strategies. Click here.
  • Bloomberg special report on the shift to electric vehicles. Click here.
  • NRECA information on the state of energy storage technology. Click here.

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