18 October 2019
The lights go out in Silicon Valley
Beckon Capital has just come back from catching up with friends on the U.S. West Coast who have been part of the Beckon Capital conversation from early days. It has been an opportunity to touch base and consider the challenges facing communities globally, and how they are responding. We were very much looking forward to perspectives from Silicon Valley, not just because it is the mythic epicentre of innovation, but also against a backdrop of a United States challenged by gridlocked government policy and politics, a highly evolved financial system with local bond markets and crowdfunding, and a tradition of citizen initiatives.
I was startled to receive a phone call at 10am from friends in San Jose sounding alarm bells. Was our household aware that there had been an announcement and that there may be a blackout in our area for up to five days? Residents of Silicon Valley were given six hours notice that significant residential areas might be about to suffer extended power loss. There were queues at petrol stations for fuel, at supermarkets for batteries, torches, water… Ultimately 800,000 households (an estimated at 2m people) were hit. Plans went out the window as the area was thrown into crisis.
We found ourselves in the middle of one of the “smartest” communities in the world astonished to find itself dealing with a challenge that could only happen “in the Third World”, to quote Twitter (* this scenario was framed against a backdrop of tent cities for the homeless in San Francisco and Los Angeles). The ability of traditional actors to deliver to people and communities leadership, services, employment, and well-being ‒ and in this specific situation the guarantee of electricity ‒ was again proving inadequate. That a new solution is needed, giving people ability to provide for their own needs, has never been more visible.
Changed climate conditions have pushed the risk of fire to centre stage, globally. What was seen in Northern California were not conventional blackouts, but preventative shut-downs. The shut-downs were instituted by utility Pacific Gas & Electricity [PGE] as their operation of the electricity network has previously been a cause of fire in California; in high winds power lines become entangled with branches fallen from trees. This was one of the causes of the catastrophic fires of 2017 and 2018. Those fires saw PGE seek bankruptcy protection against the cost of litigation, in part because of evidence of past underinvestment by PGE.
PGE is both an author of its fate, and a “victim” of conflicting policy agendas. California, as with many parts of the world, has mandated renewable targets and PGE is working to meet these. Contrarily, PGE has also lobbied aggressively to keep control of the whole network and not allow a more localised distributed structure. It has discouraged roof-top solar and local microgrids for consumers, pushed to raise prices, and it has authorised Return on Equity to finance investment that has not yet started. Add to this the management of state forests being undercapitalised relative to what is needed and the result is that California is literally a tinderbox. California, like many parts of the world is gridlocked because of cumulative legacy structures and competing interests.
It is striking to compare the US to our situation in Australia. Over investment in metropolitan distribution of the existing network has been matched by under investment in the regions. Local regional communities are now having to deal with this misallocation of resources and an opportunity to shift from sole reliance on centralised large structures has become compelling. Rather than relying on reworking the whole network ‒ a network struggling under the weight of competing legacy agendas as in the United States, why not target specific localised business opportunities? Is Australia up to the challenge?
Beckon Capital takes pride in working with Australian regional centres to pursue alternative solutions for waste management and alternative, behind-the-meter energy solutions.