Full Q&A with Wolf Ketter
Full Q&A with Wolf Ketter
Q: Wolf, can you give a quick sketch of where we are in terms of future – and current – energy at this point in the game?
First of all let’s establish what has happened over the last decades: we are really in the middle of a major paradigm shift – going from a vertical, top down, centralised fossil fuel monopoly to a decentralised energy renewable landscape. That’s the first major shift.
While we’re moving towards that, we are still very dependent on fossil fuels; solar and wind and water power don’t have the same output, and that is a disadvantage compared to fossil fuels. However over the last 20 to 30 years technologies like solar have become cheaper because the production cost for things like solar panels is lower; and they run at low cost. The wind and sun and water are for free, so that’s a big advantage.
And since 2015, the investment in solar and renewable technologies was higher than in traditional energy sources for generating electricity (not yet for transport); also the link between energy use and economic performance is weakening - we are using energy more efficiently every year.
From this standpoint we have another 12 or 15 years or so until with renewables, we are on par with [coal and gas in] the overall energy landscape. And that is big, good news, because there are what I call disruptive forces in this world – the growing world population means more and more people competing for less and less resources, and we need alternative sources of energy unless we want to go into an energy/environmental disaster.
Q: 12 or 15 years until renewables overtake fossil fuels – that sounds positive.
Developments are very positive for society as a whole. Our research team was in the June and December issue of MIS Quarterly in 2016 with papers regarding societal changes and wicked problems. And energy, food, pollution, the financial sector - these are major problems for the world if they are not solved. Those wicked problems are foci for RSM so that is the good news.
Currently the bad news is that renewable energy sources are highly weather dependent so there is volatility as opposed to traditional fossil fuel. But if you have smart software agents and a smart grid and can distribute the energy output from these sources in an intelligent fashion, you can adapt usage patterns to energy availability, and this is coming more and more into play.
And then the fact of energy storage – you can actually store renewable energy now - this was previously only doable on a limited scale. Now, it’s actually on the rise, so prices of batteries that store this energy are going down as are costs for other types of storage, such as in electric cars, and that will really help us to integrate renewables on a large scale.
Q: The ECFEB website states: ‘We find, identify, analyse and build game-changing strategies in the energy sector’. How does that game-changing happen?
Where can RSM contribute game changing strategies? Here’s one way: As Professor of Next Generation Information Systems in the Department of Technology and Operations Management, I am always working at the intersection of machine learning, information, data analysis, and economics. And over the past years what do we notice in technology? We notice that today’s commonplace is yesterday’s inconceivable. Simply by having a mobile phone, we can get all kinds of information.
Extrapolate that personal example of your phone and you realise that tons of data is coming in - loads of data that wasn’t coming in before, that we had no access to. Not long ago, your household usage was measured on a monthly basis at best. Now it can be measured minute-by-minute, and processed to figure out which appliances are running, and perhaps which ones don’t really need to run until the wind starts blowing again. So with the smart grid, we can take this type of data, and actually understand and communicate patterns of energy to create smart metering.
For example in the new world of energy, even though renewables are weather dependent we can predict in advance when there will be sun; then we can tell people the price of energy will be a little lower if they do their laundry later in the day, or charge their vehicles later. So in future we can actually create a more information-rich energy landscape.
At RSM we can develop new models for this new landscape…and no business school has done what we have been doing here at the ECFEB and RSM.
Q: Are there brand-new areas of research/knowledge creation coming from ECFEB that you anticipate will create fundamental change in the energy game?
Yes. For example, one of my PhD students and I gave a talk at the Berkeley Research Lab in February 2017; about two weeks prior to that we gave a similar talk at Uber, which is now the top mobility provider. In both cases we talked about the integration of electric vehicles into the new energy market. That means in future when there is enough energy because there’s been a lot of wind energy generated, for example, prices will be cheaper, and you charge your vehicles inexpensively; and when you have more than you need you can sell it. I actually made an RSM Discovery video about it. These are business cases, which we as a university should be working on.
Further I have taken on a Directorship at the Institute for Energy Economics (EWI) at the University of Cologne, so I remain at RSM as Director of ECFEB but am also working with European governments to advise about this intersection of energy and IT. There are a lot of new developments in the field, and government organisations need knowledge. And I think as a business school we can contribute a lot in terms of research.
Regarding the research on that RSM Discovery video referenced above, I could give invited talks about that work around the world every week; I’ve already spoken at U of Arizona, UC Berkeley, Carnegie Mellon, UC Davis, Stanford, Harvard, U of Minnesota, NYU, Temple and all the best universities because they are currently expanding in these areas. Not many business schools were doing energy research when we started this at RSM 10 years ago. We are making something unique – and not just at RSM. Through our collaboration with the EWI at Cologne, we become literally the biggest energy center in Europe with the know how to advise and affect government regulations. This is where business schools like RSM and Cologne can make suggestions to business and government on how to deal with the changing energy landscape. Often governmental agencies are lacking the IT background, so we bring it all together – energy, IT and mobility.
Q: How does your Centre ‘connect business and society by delivering a vision of the future of energy here and now?’
That is pretty much my vision. I believe in a sustainable society, sustainability for the environment but also the sustainability of the firm. Obviously for firms and society we have to focus on environmental sustainability because if we don’t do better in that regard, we are already doomed.
And there is the status quo to take into consideration also, and I am really working with my team on analysing current markets; and creating new markets designed and structured for the future, and the intelligent algorithms to make better decisions faster. We are energy dependent, and we never know how strong the sun will shine or the wind will blow. We have to learn to live on our current energy income, from the sun, and drastically slow down our withdrawals from our energy ‘savings’; but if we develop intelligent software agents to act on our behalf, that will make the future energy landscape work.
Q: How do you test these ideas for new markets, new business models in energy?
That’s why we’ve developed Power TAC. Power TAC is a simulator that uses intelligent agents and big data to model the high complexity of contemporary and future energy markets, allowing for large scale experimentation. Every year we organise a tournament, and on the final day winners – the ones who are most profitable in the business of supplying customers with energy, at the same time balancing demand with available supply - are announced. Power TAC is where we actually test new models for the new energy business landscape, and this is how we are helping to close the gap between future energy and the current energy landscape. If you look at my inaugural address ‘Envisioning Sustainable Smart Markets and Enabling Sustainable Smart Markets’ it presents the context for this. My vision is that we have highly intelligent technology; it will interact when we need it to; and we need this IT and this technology to make the energy future work. Power TAC enables us to develop new models rapidly.
Q: What are some of the innovations that have emerged from the Centre (and its collaborations) that society might see and/or benefit from in the short term? How is the work of the Centre trickling down into society?
We are starting a major collaboration with the Port of Rotterdam: we are building a smart energy collaborative platform and we call it the Rotterdam Port Energy Co-Operative, to boost industrial energy efficiency. The goal of this is to have a real world instance in the Port of Rotterdam, of how we are making positive change in the world.
Here are our concrete goals: The Port of Rotterdam makes about 20% of all the CO2 emissions in the Netherlands, so we want to cut those by 50%; the follow on is that if we cut those emissions by 50%, it means we are actually cutting greenhouse emissions in the Netherlands by 10%. That’s how large the impact of the Port of Rotterdam is. How do we do it?
Many companies do their operations and energy buys individually, but what they all have in common is that they are on one large energy grid. If they don’t synchronise their operations there are peaks at certain times of day when more energy is needed. That’s a problem. It means that to meet the energy demand, a power plant needs to burn more coal or gas. It’s bad on two levels, the environment and business: first it’s very polluting and then, from a company perspective, it is very expensive because you have to pay peak pricing.
Here’s our idea: as much as possible, we coordinate the supply chains and operations of companies, to avoid these peak power events. That means everybody is actually doing better. The companies are not sacrificing output. And the idea is to create energy clusters composed of a good mix of companies, and it makes sense if Company A starts an hour before Company B to prevent both of them using energy at the same peak times.
Another innovative idea: a cold storage owner who owns food stores, or a food manufacturer, can take advantage if there is a lot of wind or solar energy and really cool down their cold storage from -10◦C to -20◦C when energy is cheap, then turn off the energy in the cold storage for a while. This is an alternative means of cold storage, buying energy to cool when the wind blows and then turning the cooling units off.
Q: Is the ECFEB working with any consumer brands we are familiar with?
Because electricity storage is still not available at a large scale, we are working with BMW on the work we discussed above, with autos as storage units for electrical energy, because we know that these electric vehicles (like the BMW i3) can be a Rosetta Stone in the future energy landscape. Cars are more than 90% idle, so a vehicle is one of the most expensive and underused things in your household.
But if you do have an electric car and you use the battery to store electricity, you can sell the energy back to the grid. Companies like Uber can aggregate their electric cars, charge them, and discharge them into the grid when the sun goes behind a cloud. On the other hand if the wind or solar is good and there are low prices, with lots of energy coming onto the market, a mobility company can charge all its vehicles. Supply and demand must always be in balance in the grid, even a little bit of imbalance means brownouts or black outs, it has consequences for business and humanity.
Q: You’ve been a Visiting Professor at University of California at Berkeley, Haas Business School, since August 2016. What are the most interesting insights from your time in California?
There are many things - it’s a very big energy community and I am actually associated with four different groups at UC Berkeley: my main work is at the Haas Business School but I am also associated with Berkeley Institute of Data Science (BIDS) and with Lawrence Berkeley National Lab and the Industrial Engineering and Operations Research (IEOR) Lab. I am working with all of them, and all this work flows together…it is highly interdisciplinary.
Looking at the mobility-intensive culture of California you realise that maybe with renewables, in future we will have to pay for reliable constant energy, if you need to have your energy on all the time. This is one of the things we are working on with many different groups in California, I could literally give talks here and in the rest of the US every week. I have given talks at top notch universities and also in businesses in Silicon Valley - a place where RSM can really make a contribution.
In the Silicon Valley all the real breakthroughs are from 10 – 15 year ago - Facebook, Google and Yahoo for example. Uber was a big innovation, and now that’s about 6 or 7 years old. So I am left wondering what the major breakthroughs are, and where the big ideas are, and I have a hard time finding them.
I think a lot of what Silicon Valley is focusing on is individualistic things: I work with Strava, I can use Spotify, but these are innovations that serve me as an individual; and I wonder – what is Silicon Valley actually doing for society? That is one of my major insights so far, hence the talk at Uber about electric vehicles and their place in the future energy landscape. Maybe Tesla is going in the right direction, but I think they are very focused on profit - understandable, but I am missing the contribution to society just as I am missing innovative ideas. Energy is a commodity; people don’t really think about it, they care about energy services like clean clothes, warm food, transport and comfortable homes. But if you focus innovation on the individual, who is paying for the infrastructure?
Q: What steps should the EU begin making to accelerate the transition to a 100% renewable energy market – and how does ECFEB contribute to that?
Well actually I have been discussing this with my friends and colleagues in Cologne and even though my vision is 100 percent sustainable energy, as they say in the US “head in the clouds, feet on the ground” – so I have this vision; and I have to see what is realistic right now. And right now we have a certain energy mix; so I think it might be possible by 2050 to achieve 80% renewable, sustainable energy and then maybe we need until 2080…this is a guess…to be 100% renewable. One of the critical elements is storage, which as I mentioned we still don’t have at large scale.
The EU should really support energy research into thermal storage and gas storage and batteries and other varieties of storage and create some scale so that this is economically viable: that is the crux of a carbon free future. Renewables are very volatile, and still you need to have energy available when the sun is not shining and the wind is not blowing…so storage I think is one of the Rosetta Stones in the move to the renewable-fueled future energy landscape.
That is why at ECFEB we’ve decided to start working with cars. We can achieve a lot with cars as an example: Using batteries in electric vehicles is one point; and the second point is really to have an intelligent infrastructure, with smart metering. In the past the whole energy train was demand driven so we decide to make our coffee In the morning and In the evening we cook dinner and watch TV: in the past, fossil fuel based utilities could cater to that.
But now we have turned a corner in this energy landscape – we are going from a demand-driven supply chain to a supply driven supply chain. And in the future the weather will decide whether we’re on the demand driven or supply driven side because the major part of energy will be provided by renewables. With the knowledge that renewables are volatile, what you need is software, intelligent software agents in your home or your car. For example, your smart home agent communicates with information on the grid, realises that there is cheap energy available, and starts your washing machine. That’s how the new energy landscape will work. So automation plays a big role. =
Wolfgang Ketter, Markus Peters, John Collins, and Alok Gupta. Competitive Benchmarking: An
IS Research Approach to Address Wicked Problems with Big Data and Analytics. In Management
Information Systems Quarterly, 40(4):1057–1080, December 2016
Wolfgang Ketter, Markus Peters, John Collins, and Alok Gupta. A Multi-agent Competitive
Gaming Platform to address Societal Challenges. In Management Information Systems Quarterly,
40(2):447–460, June 2016.