There are five steps they can take to avoid the limbo that tanks potentially innovative projects.
Photo credit: Department of Energy
If you have been in the energy industry, you know about pilot purgatory. It’s the place where most of the new and truly transformative ideas inside a utility go to die, because these tend to never leave the pilot phase.
Pilot purgatory is bad for the utility because they never realize the value of the pilot. It’s bad for innovative suppliers — often startup companies relying on venture-backed funding — because they struggle to predict their business and ultimately run out of money. It’s bad for investors who experience the pain once and politely decline the next time they are approached to invest in a new cleantech idea.
In the normal business world, laggards that fail to innovate become stagnant, get disrupted and ultimately go out of business or get taken over — since 2000, over half of the Fortune 500 have gone bankrupt or ceased to exist. And while utilities may think they’re immune given their relative stability and longevity, nothing is certain when an industry is going through a major transition.
The clean energy transition demands that we innovate and embrace the new — especially the AI-powered technology that many regulated utilities consider too risky. With trillions of dollars being spent on the creation and utilization of AI and digital transformation to modernize the grid - particularly at the edge where disruption will occur, those who wait will lose. It demands that we reverse the trend of pilot purgatory to better serve our customers.
Pilot purgatory gets created when one of two things happen in the innovation process: the business blocks new ideas because they are too risky to pilot or the idea makes it to the field but never lands.
The first barrier is what I’ll dub the “cyber-risk-legal-procurement-IT sandwich.” Each of these groups represent a potential snag, given the likelihood that at least one says no to great ideas too early in the evaluation process. Often the reasons cited are security, risk or regulation concerns, and what solo innovator inside a utility wants to challenge these valid assumptions? However, there are many ways to pilot ideas in a safe, risk-free way — assuming these departments understand their role in the innovation process.
The “ghost flight” is the second barrier, which is what happens when a pilot gets off the ground and makes it to the field, but never lands, often for unpredictable reasons. People forget about it when the sponsor changes jobs; value goes uncaptured for the utility and startup; valuable takeaways are never documented. Startups naively think the pilot will lead to a contract and, unable to see the reasons for delay, politely extend resources extra months they can’t afford. (Many of these ultimately go out of business on the runway).
Pilot purgatory becomes the quintessential definition of insanity as the utility is doomed to repeat this endlessly over and over again with the same results.
But the definition of innovation should not be insanity. The cleanest definition of innovation is simply anything new that creates value. The easiest way to create value in the innovation process is to get every idea through the process with documented and captured lessons.
The first step in reversing the insanity is taking back control. Inevitably, when innovation fails it is because we are taking unproven ideas through an unproven process. Instead, focus on the variable you can control: the process.
It’s crucial to have a standardized, sanctioned process for anything new that needs to be proven and surround it with corporate governance oversight, transparency, and reporting. By creating a proven process for the unproven ideas, you can focus on creating value. Over time, introducing new ideas will be less risky. Eventually, this standardized and proven innovation process will become the norm; that’s what true energy transition leadership demands.
Innovation inside a utility is like air traffic: it requires order and clarity to work. In my experience, including our case study with Portland General Electric, utilities using this methodology can cut down their decision-making time by up to 85%. They can shave hundreds of days off of their total pilot time, and ultimately have the cross-functional collaboration required to land every proverbial plane.
The process can be broken into five steps.
Pilot purgatory has plagued the energy industry for decades, but it isn’t inevitable.
Escape from purgatory simply requires recognizing it for what it is: the inability to give innovators a sanctioned, standardized, safe process that normalizes and de-risks the evaluation of unproven new ideas and unlock potential value. From there, we can — and must — simply create a proven process to recognize what to do with new ideas and land every plane.
Let’s not let pilot purgatory become the norm, especially while U.S. utilities could be setting an example for the rest of the world of how to transition the energy system safely, reliably, fairly, and affordably.
If not now, then when? The stakes to decarbonize couldn’t be higher. It’s literally now or never.
Kim Getgen is the CEO and founder of InnovationForce. The opinions represented in this contributed article are solely those of the author, and do not reflect the views of Latitude Media or any of its staff.