New thinking on integrated energy services under ubiquitous Internet of Things

As the earliest industry to be industrialized, the energy industry is supported by classical economics. The conclusions of classical economics have many boundary conditions, such as the rational person assumption, the economic system equilibrium assumption, and the system structure steady state assumption.

However, as the study of complex system theory deepens, many scientists and economists have found that these assumptions are controversial, such as the contradiction between the irrational behavior of the market and rational individuals, and the occasional collapse or evolution of the economic system, rather than the permanent steady-state equilibrium. Therefore, complex economics emerged and permeated. One of the first industries to accept it was probably the Internet, so there was network economics. Many of the "Internet thinking" we talk about today are supported by economics and philosophy, which comes from our understanding and knowledge of complex systems.

I personally think that the influence of "Internet thinking" on the surface and "complex economics" and "complex system philosophy" on the inside is one of the reasons why the power grid company proposed the "ubiquitous power Internet of Things". Behind it is actually a new energy worldview different from the industrial era. If you don't understand the ubiquitous power Internet of Things from this perspective, it is difficult to understand why it is more like an Internet game rather than traditional power informatization.

~Industrial Age VS Information Age~

I personally think that the energy thinking of the industrial age and the energy thinking of the information age are different in the following aspects:

1. The basis of division of labor: In the industrial era, the division of labor between upstream and downstream of the industrial chain was the organizational form, while in the energy industry, resource endowment was the basis for differentiation of division of labor. For example, Saudi Arabia produces oil and Shanxi produces coal, so they naturally become energy producers, while the power grid relies on government permission to operate the transmission and distribution network in the natural monopoly link to form price difference profits.

However, in the information age (or the post-industrial age), this division of labor has been greatly challenged. For example, distributed energy + storage has almost equalized resource endowments (photovoltaic power generation in the eastern region is 900+ hours/year, and the western region may be 30%-50% more, but this difference does not constitute an overwhelming advantage). Even at the end, sales parity has been achieved, and the importance of the power grid has begun to decline. The entire energy ecosystem has undergone tremendous changes.

On the other hand, the scarcity of information resources has gradually emerged, that is, the endowment of information resources has replaced the endowment of energy resources. Information resources have a characteristic of zero marginal cost of use, and the more they are used, the greater their value, which brings about the second difference.

2. Differences in scale effects. Scale effects exist in both the industrial age and the information age, but the value is completely different. In the industrial age, scale effects lead to decreasing marginal costs. For example, in the electricity market competition, the marginal cost of large-scale generators is lower than that of small-scale generators, and they obtain more power generation rights. In the information age, scale effects lead to increasing marginal benefits, that is, the more data is used, the greater its value, and the more data is interacted, the greater its value (if the data of 12306 is only used by the railway, it is just a ticketing service; if 12036 is used by Taobao, then the value is very large; if the data of 12306 and Taobao achieve more interaction and integration, and are provided to other industries, then the data value is even greater).

3. Different values ​​due to differences in scale effects. The values ​​of the industrial age are, first, depreciation thinking, because assets will wear out during use, which leads to depreciation, and depreciation is cost; second, investment thinking, the larger the scale, the lower the marginal cost, which encourages industrial enterprises to expand their scale, invest in infrastructure; third, exclusive thinking, assets cannot be shared, mine is mine, and I can't share it with you, so my marginal cost can't compare with yours. In the information age, first, data assets will not depreciate, as long as they are not lost, they will exist forever; second, marginal costs increase, encouraging more people to use and contribute data together, this contribution cannot be driven by investment, but must meet the needs of users; third, sharing and open thinking, the more resources are used, the more valuable they are, the larger the value network, the higher your valuation.

～New thinking on integrated energy services under ubiquitous Internet of Things～

I believe that the strategic transformation proposed by State Grid Corporation of China is a shift in thinking from the economic thinking of the industrial age to the economic thinking of the Internet age; in terms of strategic layout, it is a shift from the traditional industrial development model driven by heavy assets, heavy investments, and infrastructure to building an ecological platform, constructing a value network, and forming a data-driven, new integrated energy development model.

If you do not understand this change in worldview, it will be difficult to understand why State Grid regards ubiquitous + integrated energy services as a corporate transformation strategy. Given State Grid's ambition as a world-class power grid operator, does it only care about integrated energy projects that generate tens of billions of revenue (and probably tens of billions of profits) each year?

So, let’s take a look at the difference between the integrated energy services of the industrial age and the integrated energy services of the Internet age:

I personally think that even from the perspective of industrial competition in the industrial age, State Grid lacks sufficient competitiveness in integrated energy. In the park or user-level cooling, heating and power engineering and energy-saving service projects, due to the lack of corresponding technical accumulation (resource endowment), it has not shown strong competitiveness with other competitors. Therefore, only under a new thinking model and with a new ecological concept to cultivate new formats, new models and new customer value of integrated energy services can the real Internet thinking be implemented.

In this new business model, we first need to establish various connections at the platform level, connecting people and people (B2B services), people and things (B2M), and things and things (M2M). On the basis of these connections, we build a data platform and then a business platform. Most importantly, based on this construction, we need to cultivate various value ecosystems. If the platform is the soil, then the value ecosystem (various online and offline services) is the flowers, plants, and trees, and customers are the sun and rain.

Of course, this is not something that can be built overnight. I personally think that we can refer to the development of the Internet. Without several or even dozens of rounds of iteration, construction, refinement, elimination, and re-construction, it is difficult to form such a rich industrial ecology. Grid companies are the most advantageous to do this, but they cannot do it with the large infrastructure model of industrial thinking. If it is really done, State Grid will be the real leader in the transformation and upgrading of the entire energy industry.