Renewable Energy

Clean Disruption

We are on the verge of the most radical transformation in energy and transportation ever witnessed. According to Tony Seba, internationally renown business disruption and clean technology thought leader and Stanford lecturer, the industrial age of dirty fossil fuelled energy and transportation will be over by 2030 in a wave of so called “clean disruption”. Likely even before. And entrepreneurs, corporates, venture capitalists and policy makers are all starting to sit up and listen. At least the smart ones are.

In his latest book, Clean Disruption of Energy and Transportation – How Silicon Valley Will Make Oil, Nuclear,Natural Gas, Coal, Electric Utilities Obsolete by 2030, Seba refers to how, in perfect technological storm, we are amidst the creation of a cleaner, cheaper and participatory energy future for all. Essentially the same Silicon Valley ecosystem that created bit-based technologies that disrupted atom-based industries globally is now creating bit and electron based technologies that will disrupt the energy industries from China to NZ. Utilities as we currently know them, gone. Coal, natural gas, nuclear energy? Gone. Gasoline Cars? Thing of the past.

How? According to Seba, exponentially improving technologies in Solar PV, Battery Energy Storage (Lithium ion) and smart technologies such as artificial intelligence, sensors, big data, mobile internet, cloud, and the Internet of Things (IOT) is how. Marry these with new business model innovations in finance and sharing and they are rapidly turning the industrial-era of centralised and dirty energy, the gasoline vehicle and the whole urban energy infrastructure upside down.

For any Kiwis out there about to get on the  “who care’s we are renewable anyway” bandwagon listen up. Clean Disruption is not about renewable vs dirty energy. This is about technologies that are disruptive in energy. Solar is becoming king (for reasons to be discussed). And not even NZ, who prides itself on its renewable energy track record, can afford to rest on its Hydro laurels. Meridian Energy are you listening?

Based on current technology cost curves, technological trends and a raft of business model and product innovations Clean Disruption predicts that by 2030 all new energy will be provided by solar or wind. Gasoline, natural gas, nuclear and coal will be obsolete. And all new mass-market vehicles will be autonomous (self-driving) or semi-autonomous electric (EVs). Essentially the whole energy and by extension transportation infrastructure will be obsolete within the next 15 years.

As outlandish or controversial as these predictions seem, they are all coming to life and Seba has the data to prove it. And lots of it. Energy skeptics move aside.

According to Seba, four major factors/mega trends are driving the clean disruption of energy and transport. The first being the MASSIVE growth of Solar. Both in technology improvements and market uptake.

Market trends indicate Solar PV (panels converting sunlight into electricity) have been improving exponentially at the rate of 22% every two years since 1970.  Essentially as solar capacity doubles the cost of solar goes down by 22%.  An exponential cost curve, in favour of the consumer. In NZ Solar PVs have already dropped in price from $100/watt back in the day to 58c (2014) thanks to technology increasing panel efficiency.

According to Deutsche Bank plummeting costs mean solar will be below grid parity across all U.S. states by 2017 – i.e. below what the utilities are selling. For the rest of us global laggards, we will have reached grid parity (i.e. equal to what utilities are selling) by then.

This means in a mere 2 years solar will be cheaper, or at least the same price as centralised grid electricity. Further, marry solar’s exponentially improving technology (cost and performance wise) with a centralised grid based energy industry where costs have only skyrocketed since the 1970s, means the cost of solar will only plummet further. With electricity going up and solar going down central generating utilities will simply no longer be able to compete. Completely disrupting the existing energy industry – irrespective of whether it is dirty or renewable. “This is not about renewable vs dirty energy” says Seba. “This is about technologies that are disruptive in energy”.

Germany’s largest utilities E.ON has already experienced plummeting  revenues and stock price with solar penetrating the market.  The resolve? They are spinning off all centrally generated stations – even hydro – and only keeping solar, wind and customer solutions. Because these are the future of energy. NZ currently pays 23-28cents/kWh for solar. Seba says by 2020 roof top solar will be 6-8cents/kWh. Even if all NZ’s hydro or coal stations garner energy at zero cost, roof top solar will be cheaper than the cost of grid based energy transmission and distribution since power companies still have to add transmission and distribution costs. Therefore irrespective as to whether NZ’s energy supply is renewable or not, NZ power companies will be disrupted, simply on price.

The massively growing demand for solar PV is further fuelling solar’s disruptive forces. The uptake of solar has essentially doubled every two years since 2000, increasing at a 43% compound annual growth rate. Further reducing costs as economies of scale come into play. Seba says if current technology and market uptake figures continue, by 2030 all the energy on earth will come from solar.

But technology does not work in a vacuum. Since the cost of capital for solar is the most important factor determining its uptake Seba says a key driver of solar’s growth has been financial and business model innovation.  New concept business models involving zero money down and third party finance have seen residential and commercial installs for solar exponentially increase. In California, new business model innovations by companies such as Mosaic and Solar City /Solar City New Zealand mean 90% of solar customers now start saving money from day one. By 2017 total installed costs for solar will sit around  $1/kWh according to Citibank and Australia has already got there. Yes electricity markets differ worldwide, but Seba says this figure is similar in every market. Even in NZ.

Seba says there is a common mythology among New Zealanders that solar is not going to happen. “We’re not a sunshiny country, we have hydro, that’s renewable anyway”. Not true says Seba.  Auckland has more sunshine hours than Barcelona so we can’t rest on our hydro laurels for much longer. If you think NZ is immune to this disruption just because we have hydro then think again.

Lastly, improvements in battery technology and the incessant growth of smart technology  have been pivotal in solar’s disruption of today’ s energy paradigm.

The cost and performance of lithium-ion batteries, until now, has been a major deterrent of solar (and EV) uptake. Not anymore. In 2010 IT/Electronics were about the only major industries in the battery game.  Now the multi-trillion dollar industries Automotive and Energy are investing in lithium-ion battery storage. Heavy hitters  like Tesla and LG are investing heavily in their own solar storage Giga factories that will at least double the world capacity for lithium-ion batteries. The result? Solar storage costs are going down at the rate of 16% pa. Because when you get triple investment and triple demand, costs go down (economies of scale), more breakthroughs happen, and you get  huge improvements in technology and processes. Deutsche Bank says this rate may accelerate to 20% in the next few years as solar’s exponential uptake increases.

Independent of solar PV, breakthroughs in battery performance like Tesla’s Powerwall have also led to a spate of additional business model innovations offering energy storage as a service and zero money down new financing models. Companies are saving 10-50% just by having onsite storage enabling them to buy when energy prices are low and use when high. Tesla already offers storage for homes and business and by 2018 Solar City and others will include affordable storage every single solar installation by 2018.  By 2020 all you can eat off the grid energy and storage solutions will cost as little as $36/month. Cheaper than your cable bill.

And it doesn’t end there. Other Silicon Valley technologies like Robots (artificial intelligence), sensors and the internet of things (IOT),  totally outside of the realm of solar, are further fuelling solar’s rise to stardom by helping people to manage their energy use. Now not only can you can have your own energy generation, you can store it and manage it right from your own home, building or warehouse.

Nest Thermostat

Smart devices like Smart air conditioning or NEST’s Learning Thermostat, a sensor-based, internet enabled, artificial-intelligence-based system that knows exactly when you’re home, when you’re not and automatically adjusts heating/cooling to your preferred temperatures   are saving residents up to 50% on energy use without even programming it.

The key take homes?

Clean disruption summarizes what happens to energy when Silicon Valley technologies – Solar, Storage, AI and Sensors all collide. We get a triple punch of energy disruption:  Self generation, Self storage and Self energy management. Pushing energy to the  “edges” – into the hands of the users and away from centralised over priced and under responsive energy utilities. Bringing abundant, cheap, distributed, participatory and clean energy to all.

Just like Silicon Valley technologies revolutionised the architecture of information bringing abundant, cheap and participatory information to the masses, clean disruption is flipping the architecture of centralised expensive energy in its head. Whether you are ready for it or not. Get ready for the ride. It’s happening now and it’s going to be fast.

About the author

Dr Rosie Bosworth

Dr Rosie Bosworth

A fresh voice in a crowded landscape, Dr Rosie Bosworth is a strategic innovation consultant and communications professional with a penchant for driving competitive business growth through disruptive innovation and game changing technology platforms. With over 6 years consulting experience in business innovation, a PhD in disruptive sustainable innovation and technology development, and a background in marketing and account management, Rosie harbours a rare breadth of skills and competencies vital for helping firms thrive in today's dynamic and rapidly changing business landscape.

4 Comments

  • Tony Seba’s ‘exponential increase in technology will save us – a rebuttal (of sorts)
    World renown techno-utopian idealist, and singularitarian, Tony Seba was recently brought to Southland by Venture Southland and Callaghan Innovation to talk to business leaders about the current rate of change in technology and how this is a highly disruptive force to be reckoned with… I didn’t attend the rather expensive seminar, however I do keep coming across links to his talks, etc.

    I’ve reviewed a couple of his talks, and I feel I need to put some stuff into writing:

    Firstly, what I’m NOT saying:

    I’m not saying he’s wrong about the impressive pace of technological change ongoing (although I do think there must be diminishing returns to increases in technological complexity somewhere in there…)
    I’m not denying that the idea of being able to continue to do more, but with less, is attractive. It’s just plain and simple NOT POSSIBLE. The future we face from this point forward is doing LESS with LESS (although it can be more fulfilling and finally free up that social / leisure time that technology originally promised us) as I’ve written about here: http://bit.ly/14oMDiO
    Having said that, the type of disruption that Tony envisages, IF we can keep our techno-industrial civilisation going in the face of declining net energy available, and through the upcoming GFC MK2 (which again is partially attributable to declining energy profit as a root cause http://bit.ly/1Ips07m) would certainly help with sustainability in any foreseeable future.
    Secondly, the rebuttal, in the form of some thoughts and estimates on the potential for renewable electricity generation to replace liquid fossil hydrocarbons as a way to move us and our stuff around (based on what he presents here: https://youtu.be/dUEBDVGXeTE and here: https://youtu.be/lKTHr4diXoc ):

    Tony Seba’s thesis that solar’s costs are decreasing exponentially is unfortunate, as he misses (ignores) several key constraints on solar (taking NZ as an example):

    1.) Liquid fuel for transport’s declining ROI is leading to a disastrous situation brewing in oil supply, something that has been known for a very long time, and which the current depressed price per barrel is bringing about that bit quicker: http://on.wsj.com/1et7tmb

    2.) Solar and EV’s is not liquid fuel for transport, and there are no electric mine trucks, HGV’s, etc as the battery tech is not good enough. You could say well we can at least electrify personal transport, and you’d be right, but we can’t do this for heavy goods vehicles, which comprise 40%ish of NZ’s fuel consumption (See page 25: http://bit.ly/1VIF5OP), and all of the inputs that industry across the globe relies on to produce all the tech that we use the electricity to power.

    3.) I question given point 1, and its concomitant deleterious effects on the economy, whether we have sufficient potential profitability to be able to make a wholesale replacement of our vehicle fleet (even only 20% of it, if you subscribe to his arguments on reducing requirements for vehicles) going forwards, never mind the huge investment in infrastructure to power them. Solar requires a lot of material inputs and the input costs will expand rapidly as other limits affect overall industrial productivity and EROI of extraction activities. These blog posts from Gail Tverberg have lots of highly illuminating points in that direction: http://bit.ly/1uEfevy http://bit.ly/1qDeFgB http://bit.ly/1kS6L2o http://bit.ly/TOXvkL http://bit.ly/11nLEOw

    4.) All hydro electricity generation in NZ is only 14.5 kWh/person/day (84.2 PJ/annum 2012 figures from IEA: http://www.iea.org/Sankey/index.html#?c=New Zealand&s=Balance) and in the same year our energy consumption for transport from fossil fuel was 32.6 kWh/person/day (189.6 PJ/annum), never mind that the hydro generation capacity is mostly spoken for for other uses.

    5.) Can we make up the balance with solar? Our potential for solar energy generation (using the estimation methodology here: http://withouthotair.com/c6/page_38.shtml). NZ population 2012 was 4.4M (https://www.google.co.nz/search?q=nz+population+2012) and 1 petajoule = 277,777,778 kilowatt hours so our fossil fuel liquids consumption was:
    189.6 [PJ/annum] /365 = 0.5194520548 [PJ/day]
    277777778 [kWh/PJ] => 144292237.558356 [kWh/day]
    4433000 population => 32.55 [kWh/person/day] for Transport energy use.
    We can get around 8-9 kWh/p/day PV generation based on this estimate for NZ: http://hot-topic.co.nz/wp-content/uploads/2009/11/ScaddenEnergyNZ.pdf. Add another 15% of the 84.2PJ of hydro if Tiwai Point shuts down, which equates (using the same calculation as above) to another 2.17 [kWh/person/day]
    So the potential energy deficit to be met from another very low carbon emission source is around 32.55-11 which is approx 21.55 kWh/person/day… 

    6.) At best solar is a fossil fuel extender, and it’s potential in terms of being a fossil fuel replacement is routinely and systemically overestimated, as most methodologies don’t account for the energy required to replace it at the end of its useful life: http://bit.ly/TOUHnN

    Here’s some food for thought from a more believable source: Nate Hagens on Energy

    Edit: This also from Nafeez Ahmed:

    As oil prices have slumped over the last few years due to both the shale gas and Saudi oil gluts, the decline in profitability has forced oil majors to slash investments and shut down costly operations.

    US industry experts now forecast that these events are setting the world up for an oil price spike, which could begin in the next six months to two years. There can be little doubt that the US government is aware of the industry’s fears.

    Robert Hirsh, a former senior energy programme advisor for government contractor Science Applications International Corporation, wrote a major report on peak oil for the US Department of Energy in 2005.

    He predicts a likely global oil shock by 2017, accompanied by a stock market crash, inflation, and unemployment.

    He also points out that the Pentagon recognises the risk.

    As oil production decreases due to the cost-cutting contraction of industry operations, along with declines from aging fields, the International Energy Agency predicts an increase in demand growth by the end of this year.

    As demand rises, the question is how quickly existing oil and gas wells can increase global output in the face of this rapidly diminishing spare capacity.

    The answer is not very. Over the next two years, around 200 major international oil and gas projects have been scheduled for final investment approvals. But due to the price collapse – and with it the collapse in profitability – the vast majority of them face postponement, or cancellation.

    According to Tim Dodson, executive vice president for exploration at Statoil ASA, the industry is “struggling big-time to replace their oil resources and reserves”.

    This is part of a wider pattern over the last decade. Oil majors like Royal Dutch Shell, British Petroleum, ConocoPhillips, ExxonMobil and Chevron have all seen their production fall year-over-year by 3.25 percent. Oil and gas extracted last year has not been replaced by new reserves.

    The business model of the shale gas industry is so shaky, according to legendary US hedge-fund manager James Chanos, that when prices do rebound as demand growth hits the limits of declining supply, the oil majors will still be in trouble.

    The end of oil, the next crash

    With insufficient oil available amidst a price rebound, markets will be massively incentivised to flee expensive fossil fuels, empowering cheaper, alternative energy forms.

    Oil majors, still facing high production costs and huge debt obligations, will have to grapple with further borrowing to kick-start costly investments in new production projects. But in the corresponding climate of a new economic recession triggered partly by oil price spikes, how likely is this?

    Like Hirsh, Charles Maxwell, a senior energy analyst at Weeden & Co., forecasts a price spike in the next few years. “That’s going to bite us big time. 2019 is going to be hell.”

    Five years ago, Maxwell told Forbes that “around 2015, we will hit a near-plateau of production around the world, and we will hold it for maybe four or five years. On the other side of that plateau, production will begin slowly moving down. By 2020, we should be headed in a downward direction for oil output in the world each year instead of an upward direction, as we are today”.

    That prediction in 2010 appears to be transpiring today.

    “And at around 2015, we will be unable to produce the incremental barrel in the global system. So a tightness of supply will begin to be felt,” Maxwell warned Forbes. “Let’s say in 2013, we may produce 1 percent more oil than we did the year before and then if we have a demand growth of 1¼ percent in 2013, we’ll be very slightly tightening the system. The difference between supply and demand is not going to be very much at first. It would not normally cause a big rise in price. On the other hand, in 2014, that tightness begins to grow and it is now a trend. By 2015 perhaps we’re only able to produce 0.50 percent more with about 1.25 percent higher demand, so that we’re 0.75 percent short.”

    The next global recession, though, is likely to begin as oil prices bottom out further, potentially forcing many oil companies to virtually shut down production, facing the prospect of further write-downs and bankruptcies that could make the 2008 sub-prime mortgage crisis look a like a walk in the park.”

    – See more at: http://www.middleeasteye.net/columns/iran-deal-about-staving-coming-oil-shock-1366649799#sthash.yTne8Z31.HkuJwopG.dpuf

    Further Reading:

    “Peak oil turned out to be a more complex phenomenon than theorists originally anticipated. It has not been experienced as a precise ‘moment’ or ‘event’, but rather as a dynamic interplay between various forces that have provoked some adaptive adjustments (such as demand destruction or increased investments) in incremental and multidimensional ways. There may never be a ‘shock moment’ of peak oil’s arrival; instead, peak oil may continue to play out as a gradual, unplanned transition to a new set of energy and consumption patterns that are less oil dependent, giving rise to social, economic, and ecological impacts that no one can predict with any certainty. The evolving interrelationship of geological, geopolitical, economic, cultural, and technological variables has continued to surprise analysts – both the ‘cornucopians’, who claim there is nothing to worry about, and the ‘doomsayers’, who think collapse is imminent, as well as everyone in between. No doubt there will be more twists still to come in this energy tale.But what seems clear is that the consequences of peak oil are not going away. Whether the next twist arrives in the form of a new war or financial crisis, a new technology, a bursting shale bubble, or perhaps a radical cultural shift away from fossil fuels in response to climatic instability, intellectual integrity demands that analysts continue to revise viewpoints asfurther evidence continues to arrive. This issue is too important to be governed by ideology.”
    6 page academic paper on the economics of oil: The New Economics of Oil: Alexander, S. 2014 Melbourne Sustainability Issues paper No. 2, Melbourne Sustainable Society Institute http://bit.ly/1HXWhsj
    In a new book (March 2014), former oil geologist and government adviser on renewable energy, Dr. Jeremy Leggett, identifies five “global systemic risks directly connected to energy” which, he says, together “threaten capital markets and hence the global economy” in a way that could trigger a global crash sometime between 2015 and 2020. http://bit.ly/1HXWQmb
    The Energy Policy paper “Global oil risks in the early 21st century”, previously referenced in my submissions to Long Term Plans earlier in the year:
    “The combination of increasingly difficult-to-extract conventional oil combined with depleting super-giant and giant oil fields, some of which have been producing for 7 decades, has led the International Energy Agency (IEA) to declare in late 2010 that the peak of conventional oil production occurred in 2006 (IEA, 2010). Conventional crude oil makes up the largest share of all liquids commonly counted as “oil” and refers to reservoirs that primarily allow oil to be recovered as a free-flowing dark to light-colored liquid (Speight, 2007). The peak of conventional oil production is an important turning point for the world energy system because many difficult questions remain unanswered. For instance: how long will conventional oil production stay on its current production plateau? Can unconventional oil production make up for the decline of conventional oil? What are the consequences to the world economy when overall oil production declines, as it eventually must? What are the steps businesses and governments can take now to prepare? In this paper we pay particular attention to oil for several reasons. First, most alternative energy sources are not replacements for oil. Many of these alternatives (wind, solar, geothermal, etc.) produce electricity— not liquid fuel. Consequently the world transportation fleet is at high risk of suffering from oil price shocks and oil shortages as conventional oil production declines. Though substitute liquid fuel production, like coal-to-liquids, will increase over the next two or three decades, it is not clear that it can completely make up for the decline of oil production. Second, oil contributes the largest share to the total primary energy supply, approximately 34%. Changes to its price and availability will have worldwide impact especially because alternative sources currently contribute so little to the world energy system (IEA, 2010).Oil is particularly important because of its unique role in the global energy system and the global economy. Oil supplies over 90% of the energy for world transportation (Sorrell et al., 2009). Its energy density and portability have allowed many other systems, from mineral extraction to deep-sea fishing (two sectors particularly dependent on diesel fuel but sectors by no means unique in their dependence on oil), to operate on a global scale. Oil is also the lynchpin of the remainder of the energy system. Without it, mining coal and uranium, drilling for natural gas and even manufacturing and distributing alternative energy systems like solar panels would be significantly more difficult and expensive. Thus, oil could be considered an “enabling” resource.
    Oil enables us to obtain all the other resources required to run our modern civilization.

    Peak oil is the result of a complex set of forces that includes geology, reservoir physics, economics, government policies and politics.”

    http://bit.ly/1IIyHCv

    • I agree with your general argument that replacing fossil fuels is never going to be so simple. The suggestion that by 2030 all energy could be solar is completely naive and I’m guessing is based only on projections of economic trends.

      Something you miss in points 4 & 5 (unless I missed something myself) is that electric vehicles are much more efficient than fossil fuel powered at something like 75% efficient (from power outlet to wheels) compared to about 15% efficient for fossil fuel power-trains. So electricity generation wouldn’t have to match the fossil fuel energy consumption – only about one quarter would be required.

  • The article seems more like the hype of a book rather than a useful thought starter about the future. For example the claim, “Based on current technology cost curves, technological trends and a raft of business model and product innovations Clean Disruption predicts that by 2030 all new energy will be provided by solar or wind. Gasoline, natural gas, nuclear and coal will be obsolete.”

    This type of thinking relies on a massive (unstated) set of factors to have completely positive outcomes. For example wind and solar are intermittent generation systems that need to be balanced against base load generation mixed with fast dispatch generation to fill holes in supply when demand spikes.

    The very generation methods that the author claims will be “obsolete” provide those capabilities that mean when we switch on the light, we will have light.

    What is the author going to replace these obsolete generation systems with?

    While I expect that very small scale solar, plus batteries will provide increasingly local generation for homes and maybe small offices, I can’t see us being able to wave goodbye to very large scale generation systems plus their associated transmission and generation systems that provide certainty.

    I do see more use of electric and hybrid vehicles and home charging of those vehicles. This will mean we need more capable centralised generation electricity generation systems to help take the extra load. Ideally these will be 2-way systems that do allow the little guy to feed excess generation back into the system at a fair buy price.

    For a sceptical but pretty expert view on this topic have a look at this article here; http://judithcurry.com/2015/07/28/microgrids-and-clean-energy/.

    Another article which provides a useful framework for looking at the potential to drive costs down in battery technology (a key component in micro grids) and the predictions made in the authors blog can be found here; http://www.mckinsey.com/insights/energy_resources_materials/battery_technology_charges_ahead. However their predictions of cost driver reductions are accompanied with terms such as, ” could fall by” for pretty much every prediction cost reduction they make.

    A final comment, when predictions rely on chains of other predictions the likelihood of them all going your way is pretty low.

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