... A US Dollar 200 million innovation experiment
San Francisco, USA, July 13, 2001 / Garching (Munich), Germany, July 15, 2010
On July 15 2010, I attended an remarkable event: General Electric Company (GE) announced in its Global Research Europe Center in Garching its US $200 million (m) its “GE ecomagination Challenge: Powering the Grid”, a commitment to accelerate smart grid technology through open collaboration. With its challenge GE is looking for new, creative ideas to build the next-generation power grid not only to expand further into the clean tech world but also to drive innovation in terms of energy efficiency, renewables, and electric vehicles. The same announcement was made by Jeff Immelt, CEO of GE, at a conference in San Francisco on July 13, 2010.
GE, an Industrial Conglomerate, incorporated in 1892 by US entrepreneur and inventor Thomas Alva Edison (1847-1931), is a diversified technology, media and financial services company. The Company’s products and services include aircraft engines, power generation, water processing, security technology, medical imaging, business and consumer financing, media content and industrial products. The Company serves customers in more than 100 countries and is one of the biggest energy supplier companies of the world and employs about 300,000 people worldwide. Its second quarter 2010 earnings from continuing operations attributable to GE were US $3.3 billion (bn) up 14% from US $2.9 bn in the second quarter of 2009. GE’s segment profit increased 8% compared with the second quarter of 2009, as 93% growth at GE Capital, 13% growth at NBC Universal and 59% growth at Home & Business Solutions, more than offset an 11% earnings decline at Technology Infrastructure.
Ferdinando “Nani” Beccalli-Falco, President and CEO of GE International based in Brussels, Belgium, started the GE ecomagination presentation in Germany with a short update on the lessons learned during the implementation phase of their ecomagination program, which started in 2005:
GE thought when they started: “it costs too much” – They discovered: “it saves money.”
GE thought when they started: “it’s about green” – They discovered: “it’s about industrialization.”
GE thought when they started: “customers will hate this” – They discovered: “customers like saving money.”
GE thought when they started: “this will be action by the elite” – They discovered: “this is about scale and creating jobs.”
GE thought when they started: “we’ll be going it alone”–They discovered: “a system is required.”
Asking Mr. Beccalli-Falco in Garching, Germany, how long it took GE from the „when we started“ stage to the „we discovered“ status, he explained to me that it was reached in a period between three to five years, „… depending on the area of work and the individual customers…“. This is in fact quite an achievement, reached by such a huge company! If only Thomas Alva Edison knew…
Both speakers in San Fransico and Munich stressed that they want GE to continue to be an open technology company for innovation, taking advantage from cooperation with entrepreneurs, technologists and startups from throughout the world. To achieve this goal, the company has initiated it`s innovative ‘coopetition’ model. During the conference, the audience of selected guests from Europe and representatives from the media was also updated on the company’s recent performance in the clean tech sector since to establish the company in the growing sustainable economy. Over the last five years,
1.GE has doubled research and development (R&D) expenditures in clean tech to US $5 bn,
2.Revenues from the ecomagination brand grew 400%, from US $5 bn to US $20 bn over the same time period,
3.The company lowered their own emissions by 22%,
4.and saved US $130 million (m) in energy, water, and other resource costs.
According to the speakers, this is just the beginning as the ecomagination’s goals for the next 5 years (2010-2015) are as follows:
1.double R&D to US $10 bn,
2.reduce GE’s energy intensity by 50%,
3.reduce use of water by 25%,
4.launch 30 new ecomagination products in 2010 and 30 new products in 2011
In GE’s ecomagination Challenge, participants are not only asked to submit their ideas online but also to vote for the most promising teams and thus to „… help us to change the way the world uses energy…“. There are three categories for potential submissions:
Challenge 1: Create – Renewable Energy
According to GE, renewable energy holds extraordinary potential for helping us to create the energy to meet our growing needs. Many forms of renewable energy are highly variable in their output. This is where a more intelligent system must come in, which is able to integrate and to manage renewable energy sources. GE does already develop technologies that protect the quality of power, compensates for voltage fluctuations and manages output intermittency. Moreover it wants to provide utilities with better information about energy production, transmission, consumption and energy system health.
GE is asking potential participants: What kinds of technologies or processes do they think will maximize the penetration of renewables on the grid?
I ask GE at this point: Why are you so surprised that renewable energies are fluctuating? This is by far not new nor does it come by surprise. Sun, wind and even water are fluctuating „by nature“. In the power, or better electricity production, this is known since the implementation of the first photovoltaic and thermal solar power plants, the first wind energy plants and even the old hydro power plants. Let alone geothermal plants. They all exist since generations, generating electricity at pace. Why did GE and other major vendors of electricty creating equipment did not find earlioer solutions for these kinds of „natural“ challenges earlier?
Challenge 2: Connect – Grid Efficiency
According to GE, the U.S should have the most efficient grid in the world. But that’s not the case. The grid wastes energy at every point during every day. The solution is to connect advanced power generation to a more intelligent and more efficient grid – that then connects with consumers. Here GE is looking at different grid technologies that help lower losses and those that anticipate and monitor demand. Reducing losses frees up grid capacity, reduces the need for infrastructure capital expenditure, and protects consumers from steep rate increases. .
GE is asking the potential participants: In terms of technology, processes and policy, what do they think are the best means to help „us“ to realize greater gains in grid efficiency and outage management?
I ask GE at this point: This is also not at all new. Why so addicted to the grid? How can an electricity grid in – let’s say – a small country like Germany today being 1.600.000 kilometers (approx 1.000.000. miles) long ever become smart? Why are you not thinking of the 1.7 bn people worldwide who have neither access to electricity nor to a decent water supply available? Why are big companies like GE at this time so neglected? If only Thomas Alva Edison knew…
Challenge 3: Use – EcoHomes/EcoBuildings
According to GE, energy consumption is growing so quickly that it’s creating an imbalance between demand and supply. This mismatch short-circuits power production and distribution, leading to higher energy costs for consumers and businesses. „We“ need to change how and when we use energy. GE is looking at many promising technologies to help power companies and their customers share information and manage their energy use better.
GE is already working on a wide range of promising technologies, like including smart meters and appliances that let consumers’ appliances “talk” to their power utility; wireless AMI; home area networks; renewable integration tools.
GE is then asking potential participants of the contest: „What new technologies, processes or business models can help consumers use energy more wisely and improve our energy balance?
I ask GE at this point: This third challenge is more or less already defined in challenges number 1 and number 2. Why does GE not mention the worldwide biggest producers of losses which are also the biggest creators of Greenhouse Gases (GHG) incl. CO2? These are the power plants, operating on fossil fuels (coal, „natural“ gas, even oil) as feedstock. Are they holy graves? I do not think so. If you want to initiate a real change, you have to start there, where it gains and maybe even hurts most. But as the utilities are the customers of GE and similar consortia, they maybe do not want to wake them up… If only Thomas Alva Edison knew…
According to the GE Terms and Conditions (these are the legal terms that control the ecomagination Challenge), checked on July 20th, the following is to be expected by successful participants:
Based on the evaluation of the Committee, GE may decide to pursue a business deal with you related to the technology in an entry. Such business deals could include, at GE’s sole discretion, one or more of the following:
(a) An equity investment by GE or others.
(b) A cooperative agreement to develop a product or technology.
(c) A distribution or marketing agreement.
(d) A review of your product or service for possible qualification to be a part of the GE ecomagination program.
In addition to the above awards, the one Entry receiving the most user-submitted votes during the Voting Period will receive, subject to GE’s review of the Entry for inappropriate content, a cash award of US $50,000.
However, the GE terms and conditions also state:
NO OBLIGATION: You acknowledge that multiple participants may submit Entries that contain concepts or technologies similar to your Entry and that GE, its subsidiaries and business partners may already be pursuing technologies that are related or similar to those that you disclose in your Entry. You acknowledge and agree that GE’s action with respect to another Entry, even if similar to your Entry, shall not create in GE any liability to you or others. Further, GE is not and shall not be restricted in any way from pursuing, developing, or commercializing, in any way that GE sees fit, independent of you and at GE’s sole discretion, any technology that is created independent of your Entry. For the avoidance of doubt, you acknowledge that GE is not obligated to take any action whatsoever with regard to your Entry.
WAIVER: By entering the Event, you waive all rights to seek injunctive or equitable relief, or to claim punitive, incidental or consequential damages, or attorneys’ fees.
It this point I ask GE: Do you really consider this to be a reasonable offer? Do you think that the commitment of GE is in balance in regards to the requests made to the potential participants? You are asking third parties like businesses, entrepreneurs, innovators and students to share their best ideas on how to build the next-generation power grid. And they just might get funded. Or may not, see above.
I wonder, how and on which basis/calculation GE can come to announce the sum of US $200 m which is mentioned in the headlines of the GE ecomagination Challenge. Or does this US $200 m price also include external costs for agencies, consultants etc. who are engaged in running the challenge? Not to forget the members of the comittees, designers, webside creators and providers and so on. All this appears to me far out of balance. When companies of the status like GE are actively initiate a global public request for bids (tender), they should have looked at it from all thinkable angles. And even from those, who might not be thinkable, because of lack of imagination. By all means, the terms and conditions of the challenge suggest more a green washing campaign than a fair mission. What a sustainable future really needs are people who think in a more complex way and who are open to real green products and services. We just can’t spend more time trying to keep an infrastructure running which actually changed little since GE has been incorporated in 1892. The foundation of the existing enery system was layed out centuries ago. It only became bigger, but by no means more efficient or smarter , If only Thomas Alva Edison knew.
Also I am curious about the number of real entries which GE is going to receive. I wish them all the very best. I also wonder which effect this action will be having on the GE employees. 35,000 of those are working in R&D alone. I am sure, that you, the GE management, underestimate the power of those individuals, who are on the GE payroll already. And you also underestimate the impact, this GE ecomagination Challenge has on your own employees. Most of them will return „back into normal working mode“ when they hear about this initiative. Their emphasis to work hard for GE and to create „greater values“ for GE will have been highly dampened by the challenge. I also wonder which effect this action will have on other stakeholders. They might get nervous, wondering and questioning themselves: Does my esteemed company GE really has to rely on external knowledge from students? Nothing against students at all from my side, as their intuition is priceless. But a GE shareholder may think: So far, I trust(ed) the GE management as I thought they knew what they were doing, also in respect to future market opportunities.
If only Thomas Alva Edison knew. He`d rather better not, though…
Article by Arno A. Evers, FAIR-PR, Starnberg, Germany
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