"We have 5.5 million subscribers already," OnStar's president, Walt Dorfstatter, tells me, "and we are about to establish a lab dedicated to vehicle connectivity, anticipating the Volt's rollout. Working with other OEMs to put some of our technology on their vehicles is still a definite possibility for us. OnStar is a proprietary technology, but when proprietary becomes prevalent enough, it becomes the de facto standard."
THE KILLER APP FOR THE SMART GRID
All of which portends the biggest, most contentious business space on the horizon, and for the widest array of start-ups: load distribution on the grid. Most important will be companies helping electric utilities digest what OnStar-like platforms place "at the door" and also help them route electricity from renewable sources back into individual cars. Think of the switching infrastructure that enables us to download a program from an "available" server. Something like this capability will have to be built in to the electric grid.
The most conspicuous start-up by far in this expanding space is GridPoint of Arlington, Virginia. The company has raised more than $220 million, with major investments from Goldman Sachs, among others. (GridPoint has just named Posawatz to its advisory board, which already includes networking guru Esther Dyson and energy expert Daniel Yergin.) GridPoint is working with a number of partners to build the nation's first smart grid, in Boulder, Colorado, a $100 million project. Its near-term ambition, according to its CEO, Peter L. Corsell, is to give utilities the means to aggregate and manage a network of distributed energy resources: controlling load, storing energy, and producing power. "There are perhaps 100 million electrical meters in this country," Corsell says. "We are working with companies that account for 40 million."
At the same time, GridPoint is in discussions with virtually all automotive companies with an electric car in the pipeline. When he dreams out loud, Corsell sees a GridPoint component loaded onto every electric car, the way every laptop contains a signal processor. "In order to balance the load of an electric utility -- predict load, shift the load out of peak periods, shape the load by integrating renewable energy, and so forth -- it would be ideal to have our software baked into the electric cars themselves, so that what gets reported from aggregations of cars will come to utilities in a format that integrates with how the grid is managed. The savings for consumers are not at all trivial when the software allows for real-time, dynamic balancing on the grid. The benchmark equivalent to a gallon of gas during peak hours is somewhere between 60 cents and a dollar. The cost from renewable in the middle of the night is more like 20 cents." Posawatz, for his part, sees a natural division of labor: "We see companies like GridPoint managing what utilities do with data behind the door, providing back to our drivers the charging, billing, and other services that will maximize the cost effectiveness and environment benefit of owning an electric vehicle."
That said, neither Posawatz nor Duke Energy's Rowand denies that partnership with GridPoint could eventually become rivalry -- that it matters greatly who determines the format and conveyance of the data placed at the door of power companies and, more important, what gets baked into the cars' consoles. I ask Dorfstatter if he can foresee, for example, GridPoint components preloaded onto all Volt-like vehicles in the future. "It is too early to say," he replies warily. For if OnStar will indeed control these standards early on, it might eventually wish to integrate forward to the management of grids, much as Duke Energy -- or makers of power switching equipment like GE or Siemens -- may wish to integrate backward into vehicles.
Corsell embraces the challenge: "We believe there is room for a layer of technology -- and business -- between the various automotive OEMs and the electric companies," he says. "A great many electric companies simply do not have the IT talent to manage end-to-end smart charging solutions. I think we represent a necessary firewall." But is this not something GM can do without you, I ask? "Do automobile companies really want to assume the liability that comes with mishandled load data?" he asks in response. "Just think of the implications for the warranty. And does Toyota really want to be dependent on a software environment owned by General Motors?" This firewall, Corsell knows, could prove thick enough to contain the most valuable and dynamic pieces of what we will mean by an auto industry in a few years, offering enormous opportunities for new entrants. "The horizons of companies like this will expand with each new generation of smart charging," Corsell says. "We could move into cross-power-company billing, so that what you use when you plug in at your office will appear on your home electricity bill. We could gather data valuable to strategic marketing, analyzing traffic and charging patterns the way Google analyzes surfing. I learn from everyone I talk to."
NOT INVENTED FROM SCRATCH
It is important to understand that electric cars like the Volt will benefit from a supplier base already structured like an ecosystem. Had the technologies of multilateral networking not already existed -- Web 2.0 and the like -- the connected car could never be entertained.
It may be hard to remember that, only a generation ago, big car groups like GM were still gargantuan pyramids of specialization, in which production facilities and critical components were controlled, if not owned, by vertically integrated companies: from metal stamping and engine manufacturing to assembly and distribution. Information was also assembled by a kind of pyramid, with marketing data flowing up to the peak and production decisions flowing down. Car companies competed on engineering platforms -- integrated powertrain, chassis, and suspension designs -- onto which they grafted comparatively less expensive bonnets: molded sheet metal, upholstery, and electronics. GM was the first to perfect this approach. When I sold auto parts as a college student in the late 1960s, a Chevy ball joint was a Pontiac ball joint. Marketing gurus focused on skins, manufacturing honchos on guts: You tried to tantalize with the former and reduce the cost of the latter.
