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Disruptive Technology in Energy

12/2/2014

4 Comments

 
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By Lenka Kollar

Disruptive technologies are constantly changing our lives and the way society functions. It used to take decades for new technologies to be adopted nationwide or worldwide but now it is taking only 5-7 years for full adoption, according to an analysis by the McKinsey Global Institute (MGI).

Dr. Jacques Bughin of MGI recently gave a presentation on disruptive technologies at INSEAD. He discussed the top new technologies that are or will soon be disrupting the economy (read the MGI report here). They include:

  • Advanced materials
  • Advanced robotics
  • Advanced oil and gas exploration and recovery
  • Energy storage
  • Next generation genomics
  • 3D printing
  • Mobile internet
  • Automation of work
  • Internet of things
  • Cloud technology
  • Autonomous vehicles
  • Renewable energy

Of course, I would like to focus on the disruption occurring in energy. There is clearly a natural gas exploration boom occurring, especially in the United States, that is disrupting the electricity sector with very low prices. This has caused numerous nuclear power plants to close or consider closing because of the high relative cost. In addition, subsidies for renewable energy are also making it less expensive. But is the government choosing which technologies to subsidize and which not, is it really economically disruptive?

When energy storage, both on the small and large scale, is perfected, it will surely be disruptive to the energy sector. More efficient small batteries will revolutionize personal device usage. Medium-sized batteries for are becoming more and more utilized in vehicles but still have limitations. Large scale energy storage technology for electricity will allow wind and solar energy to be more viable. More efficient electricity transition would also disrupt the energy sector.

In my operations class at INSEAD, Prof. Karan Girotra argues that it is not new technologies but innovative business models that disrupt the economy. For example, the innovation of the iPhone would have been nothing without the efficient production capacity and marketing of Apple. Keeping this in mind, I think that advanced nuclear technology has the potential to disrupt the energy sector but needs better business models to bring it to life. Small modular reactors can be a game changer but must be efficiently manufactured, shipped, and installed in order to capitalize on the large scale. We have the nuclear technology to disrupt the energy sector but now we need proper implementation.
4 Comments
Tim Finney
12/1/2014 08:55:12 pm

Nice. Perhaps the nuclear energy is missing some of the vital elements of a thriving business. While there is a significant difference between having a smartphone and having an iPhone, there could be a similar distinction between having a nuclear reactor and a specific brand such as an Areva. Although we may be a while away from seeing a unique brand advertise a nuclear reactor during a Super Bowl commercial, maybe we are not that far off. Even if manufacturing, shipping, and installation are all significant components to delivering a quality product, nuclear energy companies may also still have to focus on establishing elite customer service and branding. Providing users with the confidence that they stand behind their product will help separate some companies from others. The difference between a solid and a liquid core in the reactor may end up be being inconsequential when compared to the ability of a company to market itself properly. This is not necessarily an innovative business model; these ideas have been done before in multiple industries and applying them in the nuclear energy space is simply a unique challenge. Firms that move forward with advanced nuclear technology will still have the same opportunity to distinguish themselves as being the company people prefer to go to for nuclear energy. Up to this point with good nuclear technology no one has been able to truly tap into the human condition to create the demand for this disruptive technology. I think you could figure out how to maximize this prospect by the end of the year Lenka. Peace!

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Lenka link
12/4/2014 09:28:01 pm

Hi Tim. I think that existing business models in other industries can definitely be applied to the nuclear industry, especially in terms of manufacturing. The upfront cost of a nuclear power plant is quite prohibitive and making this process more efficient will bring the cost down significantly.

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Tim Finney
12/5/2014 01:02:35 am

There are essentially two options concerning getting the cost down. If price is important then you pick one specific type of reactor and you can mass produce one reactor and the price can be lower over a short period of time. If choice is important then you make many different reactors available which will result in taking longer to get the price down. Determining the demand for various types of reactors will require some research, experience and projections. If you pick one reactor to mass produce, make sure you pick the right one. Some people value choice, others price.

The upfront cost of a nuclear power plant is what it is. Even when you consider getting the price lower after efficiencies are established, the price is still going to be significant. Starting in areas that are willing and able to make long term investments would probably be a good strategy. When considering building many reactors real estate becomes a significant factor fairly quick. The popular focus seems to be the small modular reactors which may change the outlook. I think the good news is that the technology is worth it, and so are you. Trust your judgment and keep asking questions.

Jamesfedrick link
7/17/2020 04:29:26 pm

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