Opposition to NEMs

Every time we flick on a light we might be expected to feel grateful to Thomas Edison. He invented so much of the basics of modern power supply. But Edison fought hard to stop us having the convenient form of electricity most of us have used unthinkingly all our lives.

Edison’s pioneering work on electricity majored on DC (Direct Current). DC doesn’t travel well, so if you wanted an electrical home you needed a generator, which the Edison company would sell you. The sparks flew when rival Westinghouse began promoting AC (Alternating Current). This was ideal for cheap generation in centralised power stations and could travel long distances through cables. To reap the benefits of AC, society needed a universal public electricity supply.

Edison applied his full inventiveness to the Westinghouse problem. He publicised grisly experiments in which a variety of luckless creatures were electrocuted with AC. But Edison’s generator business did of course lose out to universal electricity supply. Other providers in the uncoordinated stage of a new technology have fought similar battles. When public water supply was mooted in Britain, existing companies bought control of a newspaper to oppose the idea. The USA’s Federal Highway Act resulted in pioneering motorists campaigning against “Government Roads”.

NEMs would disrupt the disrupters. Compared to existing e-markets, it is likely to have much lower charges and further reach. Any company can bid to be among the regulated operators of the new system. Or they can ignore it and carry on their existing business. They may even want to combine the two.

Will they see this as an opportunity or a threat? Take a company operating an online market for loans such as Prosper in the US or Zopa in the UK. NEMs could offer peer-to-peer lending that’s likely to be much more convenient than a single purpose site. Is that a threat or an opportunity? Past experience shows how new public infrastructure can create exponential new levels of usage of a facility and many players will need to be involved in the creation of NEMs. Confident companies may see their expertise being leveraged in a NEMs goldrush. More cautious operators are likely to fight for the Status Quo.

Companies that have most to fear are those with fixed assets that they let out on a small scale. NEMs suddenly allows anyone to do the same with floating assets. Take for example online auto-clubs like Streetcar (UK) or Zipcar (US). What happens to them if thousands of car owners are able to easily, safely and profitably, put their vehicles into local hire markets?

Of course, the car clubs can put their resources into the new market. But they’ll be stuck with fixed costs while competing with resources fluidly going in and out of play in response to local conditions. Ideally, they would see this expansion of the micro-hire market for automobiles as an opportunity, perhaps progressively re-locating their assets around transit points such as train stations where there will be little residential competition.

Many people fear the encroachment of government into their lives. But very few people want government to get out of money creation, or to stop laying down rules of the road for drivers or to repeal all the controls that keep sewage and drinking water sources separate. It’s a question of degree.

Those of us who have worked on NEMs over the years tend strongly towards the view that government should have the absolute minimal involvement possible in the new facility. But companies can’t pass laws or release state facilities. Policymakers have to take that step. That is always going to damn the project for some people.

•  Arguements against NEMs