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Align Business Imperatives with Environmental Goals

James Watt is rightly famous for inventing the condensing steam engine in 1769. The Watt engine might today be only a footnote in the history of technology, however, were it not for his business partner, Matthew Boulton. In 1776, Boulton & Watt installed their first engine for a paying customer. Rather than selling the engine itself, however, they sold steam power as a service: customers paid every time the steam piston went up and down.

 

The same was true of Thomas Edison a century later. Edison’s genius wasn’t as an engineer but as a businessman. Joseph Swan had invented the incandescent light bulb in England at the same time Edison did in the U.S. And wealthy homeowners already had their own electrical generators to provide power to their homes. But it was Edison’s development of the central station and the selling of kilowatt hours that made him rightly famous. (More generally, Edison created an “invention factory” in Menlo Park, New Jersey, essentially turning invention itself into a product.

 

I’ve been thinking about these history of technology lessons ever since a new candidate for the MMLD’s Board emailed to ask for my support. Electing them would flip the board majority to greens, they said. Unfortunately, the greens appear more focused on technology than business.

 

The MMLD was born to provide town-owned carbon-arc street lighting for the town, not to sell kilowatt hours to residents. It therefore made sense to create a single entity to both generate power locally and to distribute that power to town owned lights. Now, of course, the MMLD generates, sells, and delivers power to every home and business in town. The market evolved but the business model did not.

 

In 1998, the state of Massachusetts deregulated the electricity marketplace. It separated power distribution from power generation. Power distribution technology – wires, transformers and the like – has always been recognized as a "natural monopoly.” You cannot have one company stringing wires to your house and another company stringing wires to your neighbor’s house. Not only would that create wire pollution, it wouldn't work economically. (Imagine if each of us drove around town on our own private roads.)

 

Power generation, however, thrives on competition. Beyond Marblehead's borders, customers have to pay, for example, National Grid to deliver their power, but they are free to chose power from any provider. Also, if you build your own power plant, National Grid cannot prevent you from connecting that power plant to their grid. That's why you see so many homes and businesses with power plants – solar panels – on their roofs.

 

Moreover, National Grid by law must pay you for your power as much as it charges you to deliver power to you. In contrast, the MMLD pays local power producers 50 to 70 percent less than it charges them for power.

 

The value of deregulation has been proven over the last quarter century. (Although it's called deregulation, public utilities remain heavily regulated.) Customers pay less and get better service. More importantly, for those seeking to confront anthropogenic climate change, the distribution companies are incentivized to reduce power consumption and to help customers generate power as close to the point of consumption (again, rooftop solar) as possible.

 

The MMLD remains the same quasi governmental monopoly it was when it was first created to provide street lighting. Now that it must also maintain a large electric grid, however, that model doesn't work. That’s because to cover the costs of maintaining its grid, the light department (the name itself is a historical anachronism) must sell as much power as possible. That incentive doesn't change simply because the board has a green majority that has pledged to buy power only from “carbon free” sources, which, incidentally, includes nuclear.

 

James Watt and Matthew Bolton helped launch the age of carbon with their condensing steam engine. Their contributions were technological but also economic. They didn't simply have a better pumping engine, they had a better way to sell their wares. The quickest way to end the carbon age is not to fetishize certain technologies or pledge change. It is to align business imperatives with our environmental goals.

 

Dan Albert
Leicester Road, Marblehead

 

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