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Internet of Things April 2019 Viewpoints

Technology Analyst: Guy Garrud

Legislative Hurdles for Cashless Retail

Why is this topic significant?

Some US states and cities have passed legislation forcing retailers to accept cash payments, presenting a barrier to plans for checkout-free shops.

Description

In March 2018, the mayor of Philadelphia, Pennsylvania, passed a bill that will effectively ban cashless stores from operating in the city. The law will instead require that all retail outlets accept cash as a payment method. A few days later, the governor of New Jersey passed a similar law banning cashless stores and restaurants. The new laws echo an older law in Massachusetts that has required retail establishments to accept cash since the late 1970s.

The new local laws, and similar legislation in other territories, could present a stumbling block to some forms of smart retail. For example, Amazon.com's checkout-free store concept is ill designed for accepting cash payments.

Some exemptions to the cash requirements exist. For example, rental-car companies and hotels can still insist on taking credit-card payments as security against future charges. Likewise, retailers such as Costco (that require a membership for shopping) will not be affected.

Implications

Cash use has been declining in many countries for years now. A March 2019 report in the United Kingdom (funded by but reportedly independent of an ATM operator) described the country's cash-distribution system as "on the brink of collapse," with current trends suggesting that cash machines are closing at a rate of 300 per month and predicting an end to cash use by 2026. India's government has also made a strong push to reduce cash transactions, demonetizing large numbers of bank notes in late 2016, massively reducing the number of notes in circulation, and thereby pushing many vendors to begin accepting digital payments.

Cash has a special legally protected status in most countries, in part because people in lower socioeconomic brackets commonly use cash. Card and contactless payments presume that users have access to a bank account and a sufficiently high credit score to have access to card payments. Because of this presumption, other US states and countries worldwide may pass explicit or implicit legislation preventing retailers from going fully cashless.

Impacts/Disruptions

Amazon and other companies' vision of checkout-free stores might be possible even with legislation demanding that retailers accept cash. Either such companies could work through loopholes such as Costco's (Amazon would likely operate its cashier-free stores as a service for its Prime customers) or by having some limited cash-accepting capacity (some grocery stores already operate card-only checkouts). Component technologies for smart retail (radio-frequency-identification tags, machine-vision-tracking customer shopping baskets, and so forth) could still find use in stores. For example, a checkout system at which the point of sale already knows what items are in a customer's basket could process transactions faster than can a traditional checkout.

Scale of Impact

  • Low
  • Medium
  • High
The scale of impact for this topic is: Medium

Time of Impact

  • Now
  • 5 Years
  • 10 Years
  • 15 Years
The time of impact for this topic is: 5 Years

Opportunities in the following industry areas:

Retail, logistics, smart retail services, cash alternatives, banking

Relevant to the following Explorer Technology Areas:

Virtual Power Plants

By David Strachan-Olson
Strachan-Olson is a consultant with Strategic Business Insights.

Why is this topic significant?

The use of virtual power plants to manage the integration of distributed energy resources into electric grids is becoming increasingly common. VPP operators are also increasing the use of energy storage and demand response as part of their networks.

Description

Virtual power plants (VPPs) fulfill the same role that traditional power plants fill (balancing the supply and demand of the electric grid) but use aggregate capacity from distributed energy resources and in some cases, demand-response resources. Examples of distributed energy resources include cogeneration at industrial facilities; solar, wind, and hydropower; waste to energy; and energy storage. Demand-response resources are electric loads that can reduce energy use or time-shift energy use when signaled by a coordinating entity.

VPPs have existed for decades, but the concept has gained a renewed interest in recent years. Next Kraftwerke in Europe is a leading example of a VPP operator that uses distributed generation resources. Next's VPP has over 6,000 megawatts (MW) of capacity and operates in eight European countries. Next also uses its expertise in VPPs to offer a VPP-as-a-service solution to governments and utility companies. The government of South Australia has ambitious plans to develop a 250 MW VPP by deploying behind-the-meter batteries in 50,000 homes. The project has already completed its first phase of outfitting 100 homes and is now beginning the second phase to outfit about 1,000 homes. In California, Enel subsidiary eMotorWerks is using a network of 10,000 connected electric-vehicle (EV) chargers to participate in California's day-ahead electricity markets. The VPP can delay charging schedules across the 10,000 chargers to provide a reduction in electricity demand.

Implications

A key enabler of new VPPs is the development and commercialization of Internet of Things (IoT) technologies. Companies can now inexpensively outfit distributed energy resources with devices for remote monitoring and control. IoT software platforms allow companies to monitor, control, and optimize easily the performance of distributed energy resources. Additionally, adding connectivity to power-intensive systems in residential and commercial settings enables these loads to participate in aggregated demand-response programs. Examples of power-intensive systems include refrigeration systems in warehouses and EV chargers. As the cost to connect devices to VPPs continues to decrease, smaller loads, such as home air conditioners and refrigerators, could also begin to participate in demand-response aggregation.

Impacts/Disruptions

As power companies transition from fossil fuels to renewable and greenhouse-gas-free sources, the dynamics of the electric grid and electric market will change. Balancing the dynamics of many distributed and intermittent resources is significantly more complicated than operating a small number of centralized large power plants but also potentially more efficient. VPPs offer a solution to these challenges by aggregating and coordinating resources in a specific region into a stable generation profile. Increased use of aggregated demand response as part of VPPs will add flexibility for VPP operators. However, regulation remains a major uncertainty for the adoption of VPPs. Individual countries and territories often have their own specific regulations about what companies can operate in electricity markets and how to integrate distributed energy resources into the electric grid. Stakeholders should monitor developments in innovative electric markets including California, New York, and Germany as indicators of policies other regions might adopt.

Scale of Impact

  • Low
  • Medium
  • High
The scale of impact for this topic is: High

Time of Impact

  • Now
  • 5 Years
  • 10 Years
  • 15 Years
The time of impact for this topic is: 5 Years to 10 Years

Opportunities in the following industry areas:

Virtual power plants, utilities, renewable energy, smart grid, energy storage, connectivity solutions, big data, machine learning

Relevant to the following Explorer Technology Areas: