While the energy industry is one of the largest and most influential in the nation, its base infrastructure runs on technology over a century old. To understand what some companies are doing in our region to bring widespread change in the face of greater energy needs and climate change, we spoke with Andrew Scobie, CEO and founder of Faraday Grid.
ABERMAN: What is Faraday Grid, and what are you all trying to do?
SCOBIE: Faraday Grid is a reconception of the energy system as a whole. It’s no longer fit for purpose, and it’s not going to meet our requirements into the future. We’re expecting our energy system to be capable of things it’s no longer capable of, and around the world today, grids are failing. As it is at the moment, I think recent Nobel laureate Bill Nordhaus said that the cost of actually bringing the grid, and the energy system as a whole, to a point at which it can cope with climate change and those kinds of issues, is in the order of 37 trillion U.S. dollars. And that would represent 50 percent of the world’s GDP. So, that’s a crushingly inordinate amount of money to try and get our systems today to be able to cope with what we expect of an energy system for the future.
But if you put it in historical context, it’s something like this: for the last 138 years, we’ve had a 14 times increase in welfare for humans on the planet, and a 14 times increase in the consumption of energy. So, our organization is absolutely committed to sustainable prosperity for everyone, on a basic assumption that energy is the primary input to everything. And as your audience I think would understand, that’s true in the physics as much as it’s true in the science. Our bodies, and everything around us actually, the primary input to it is energy. That’s also true in the economics. If you think about it, energy is not just an input to everything we do. It’s an input to everything we do.
ABERMAN: So, let me break it down a little bit. The current energy grid, the electricity grid’s basically a one-directional thing. The power gets created, and it gets pumped out and delivered through, basically, pipes, to consumers, which is wildly inefficient. And so, Faraday has got this device, or this idea of something called the Faraday exchanger. So, how does this Faraday exchanger change how electricity is delivered to create these efficiencies?
SCOBIE: So if you think about it in terms of precedents, and we don’t do a lot of thinking in precedent terms, but if you think about the Internet, you had a telephone system and you dropped into the location of a switch in networks, a router. And that router became an emergent order, which became the Internet, rather than the telephone system.
So in 1984, I was running a company, and I had a network, and I looked out across the world, and I could see the nascent beginnings of the Internet. And I got involved in the dot-com era. And at that time, I thought I could see this huge potential future for the world. Well, if you can unconstrain the electricity grid in the same way that you unconstrained the Internet, you’re going to be in a massively more value creative place. And many of your audience, who’re in the innovation business, then all of a sudden start to find ways of massively improving the lives of the people.
So what do we know? As you said a moment ago, we’ve had a generation-centric model, a hub and spoke model, which was really rigid and fragile in its nature. That was perfectly fine when energy was provided both as primary energization of the network, and the bundling of stability through an inertial contribution from large spinning reserves. That was fine in a sense, because you could keep that system as stable as it needed to be. But now what we’ve got is decentralized generation, because of course electrons in the wind are actually quite a low density energy form, and we’re trying to capture that. So, it has to inherently be decentralized.
ABERMAN: So in effect, what we’re talking about here is, it used to be in the telecom world you had a centralized provider of telecommunication services, all the switching was handled by a single company, and the information was sent basically in its totality down the system. The Internet and the router phenomenon developed the ability to separate telecommunications information into packets, which could be sent the most efficient route possible, and then reassembled at the end.
Now we’ve got a world where literally, thanks to the Chinese in large part, the solar power industry is to a point where it’s more cost effective to produce power than traditional coal fired generation, for example. So, the whole world has changed, and it sounds like what you’re saying is that the Faraday exchanger becomes almost the router for electricity.
SCOBIE: It is the router for electricity. So, a Faraday grid is the Internet. It’s an emergent order of Faraday exchanges, and other devices. And it’s a dynamically self balancing grid, that is, you used to provide the essential inertial contribution from the generator. And that’s where all the money used to be. But the money’s not there anymore, because we, as you said, the lowest marginal cost for electrons is coming from wind and solar. So, everything’s going to move to the margin, it’s going to move to close to zero cost of primary energy.
But the most important thing is system stability, because the grid has to operate within plus-minus 1 percent at all times, otherwise it overloads and fails. So, all of the expansion of cost that’s going on, you see at the moment a reduction in the wholesale cost of energy on a global basis, and a massive increase in energy cost to consumers. And that’s because you need to have the systems stability. We provide that system stability in the location where the transformer used to be. Just like the router, we go in and occupy that space, and we make the grid the provider of system stability, so the grid becomes agnostic to the nature of supply and demand.
ABERMAN: So this is truly exceptional. It’s revolutionary, it’s going to change the entire business model. I’ve got to ask the question: I’ve seen over the years many people have innovative technologies, are truly changing existing business structure, where the incumbents have zero interest in being changed. You’re here in the States, now you’re hiring up here in D.C. to go after this, why are you going to be able to overcome the inertia, and succeed in changing the electric industry?
SCOBIE: Yeah, that’s exactly the right point. And there’s every reason in the world why the electricity system has been so fundamentally opposed to change through time, not only self-interest, and this is obviously a town that’s full of self-interest at times. But instead, it’s the essential service. If the power goes out, grandma dies. So, it’s a really bad thing. So, insuring power stays on is a primary responsibility. Modernity is a function of our ability to take energy, empower our technology, and pursue our dreams. So, you don’t want to mess with that.
And for 138 years, it’s lifted us out of poverty. That’s really not worth messing with, and right now, what we’re expecting is to be able to decarbonise the system, where you’re digitally injecting energy into a system without any systems stability. So, it’s changing. Legislation’s changing, and the expectations of consumers are changing. And we don’t find resistance from the utilities, particularly the distribution utilities and the transmission utilities. It’s actually generators where we’re going to disrupt massively.
ABERMAN: Before I let you go, you recently announced you’re opening up here, and you want to hire people?
SCOBIE: We’re absolutely hiring. We’re hiring physicists, mathematicians, A.I., data people, engineers, electrical engineers, paralegals, electronic specialists, a whole raft of things. Economists, and a bunch of people. We’re looking for about 100 people right now in the D.C. area.
ABERMAN: Well I have to tell you that this is another great example of, as I’ve often said, if you want to change the world with innovation, this is the place to come. I think the D.C. community is going to be very welcoming to Faraday Grid. And Andrew, congratulations on coming here. We’re looking forward to hearing about your success in the future.
SCOBIE: We look forward to being part of the community, and look forward to catching up with all of your listeners.