Are we in the midst of the most radical innovation the energy sector has seen since the invention of the light bulb?

Electric carmaker Tesla recently chose Reno, Nevada, as the site of their $5 billion battery gigafactory, in partnership with Panasonic. Tesla’s batteries are a hallmark of the company’s innovation in the automotive sector, evidenced by the 200-300 mile range of the Model S, which is far larger than any competitor.

But these batteries are more than just more efficient. They are also a key part of the (r)evolution underway in the energy sector in how power is created, transmitted, used, and stored. And much like the disruptions brought about by the Internet, this shift in power production has profound implications for business as usual. So what is changing, and what are the innovations we can expect when it comes to energy?

The distributed generation

In the past, power was generated in huge dirty plants, often in remote locations, by burning coal or other fossil fuels and then transmitting the electricity to users in a place far away from where it was created.

As property owners in the US have increasingly installed solar panels, many can now provide their own energy and be nearly independent from the grid. Except for the fact that renewable energy like solar is passive and electricity has to be generated at time of use. That’s where Tesla’s batteries and business model come in.

Systems thinking

Many say that the holy grail of renewable energy is storage given that the sun doesn’t always shine and the wind doesn’t always blow. If we are going to stay below our carbon budget, set to expire by 2050, someone has to figure that out. Tesla’s Elon Musk might just be the one to do it.

Together with Musk’s other companies, SpaceX and SolarCity, he is innovating for an uncertain and distributed future. With SolarCity, America’s largest solar power provider, he’s accelerating the energy revolution by making the cost of electricity predictable and precluding the need for a large upfront investment to go solar.

These companies—and potentially competitors given Musk’s savvy patent-sharing policy—all benefit from Tesla’s advances in battery technology and the growing market efficiencies of solar. Musk’s companies are basically part of a distributed industrial ecosystem that helps solve the challenge and opportunity of climate change. But there’s innovation in energy far beyond the battery, too.

An Internet of energy?

Tesla and its sister companies offer one story of how to start scaling a sustainable energy system. But they are but one chapter in the tale, with the overarching theme being the shift from a centralized production system to a distributed network where people can be simultaneously producers and consumers, customers and sellers.

Sound familiar? Like what happened when the world’s information and retail exchange was brought together online via the Internet, major disruptions to business as usual are in store for traditional energy services.

In fact, people are already starting to talk about “the energy internet” and what it means when the world’s locally-generated electricity is fed into a shared grid and managed digitally in a networked fashion. Ironic as it seems, electricity itself may offer the last business frontier for transforming an analog past into a digital future.

Check out some of the exciting innovations in energy that demonstrate this point:

Tesla uses Li-ion battery cells, which dramatically decrease the weight of the Roadster pack and improve acceleration, handling, and range. Tesla battery packs have the highest energy density in the industry.

Tesla uses Li-ion battery cells, which dramatically decrease the weight of the Roadster pack and improve acceleration, handling, and range. Tesla battery packs have the highest energy density in the industry.

In June, Solar Roadways raised over $2.2M on crowdfunding platform Indiegogo to build a modular roadway system that produces energy.

In June, Solar Roadways raised over $2.2M on crowdfunding platform Indiegogo to build a modular roadway system that produces energy.

Nest was recently acquired by Google for $3.2B. Besides being a user-friendly thermostat, the acquisition indicates the value of smart technology, a critical part of the future smart grid.

Nest was recently acquired by Google for $3.2B. Besides being a user-friendly thermostat, the acquisition indicates the value of smart technology, a critical part of the future smart grid.

Bloom Energy makes the top 5 list for VC investment in 2013, having raised over $1.1B in funding with its stationary fuel cells that can create and store power from renewables and traditional energy sources.

Bloom Energy makes the top 5 list for VC investment in 2013, having raised over $1.1B in funding with its stationary fuel cells that can create and store power from renewables and traditional energy sources.

Opower offers behavior-based programs that help utility customers reduce their power usage by transforming the energy efficiency mandates that traditional electricity providers have into profitable consumer-driven programs, with personalized cost-saving suggestions.

Opower offers behavior-based programs that help utility customers reduce their power usage by transforming the energy efficiency mandates that traditional electricity providers have into profitable consumer-driven programs, with personalized cost-saving suggestions.

Green Charge Networks offers lithium ion battery storage solutions, which pump out energy during spikes in consumption and recharge during the lulls, to customers including Levi’s Stadium, the new home of the San Francisco 49ers football team.

Green Charge Networks offers lithium ion battery storage solutions, which pump out energy during spikes in consumption and recharge during the lulls, to customers including Levi’s Stadium, the new home of the San Francisco 49ers football team.

Peer-to-peer energy trading. Some distributed generators, like those harvesting solar power, are already turning off their systems once their own power needs are satisfied, since many receive nothing for putting extra electrons into the grid. In the future, peer-to-peer (P2P) platforms will make it easy for people with excess energy to sell it directly to others, making energy a player in the sharing economy like houses with Airbnb or cars with Lyft.

Peer-to-peer energy trading. Some distributed generators, like those harvesting solar power, are already turning off their systems once their own power needs are satisfied, since many receive nothing for putting extra electrons into the grid. In the future, peer-to-peer (P2P) platforms will make it easy for people with excess energy to sell it directly to others, making energy a player in the sharing economy like houses with Airbnb or cars with Lyft.

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