The Clean Energy Revolution Is Here (And It Is Well Worth the Wait)

Photo by  NASA  on  Unsplash

Photo by NASA on Unsplash

My brother John is a very smart, passionate, politically charged individual, who, in the last few months, started work with Francis Renewable Energy in Tulsa, Oklahoma.  FRE is at the forefront of the energy revolution that is about to sweep the U.S. (whether Donald Trump likes it or not!) and through them, John has been able to channel his energy and political motivation into work about which he's truly passionate.  He talks excitedly about the solar energy industry whenever we speak, so I asked him to write a guest post for me about some of the change he's seeing on the horizon through his new job.  Reading through it, I got really excited and hopeful about the future!  Renewable energy is happening, y'all!

Hello friends of Small Shop!  My name is John Frame, and I am the older brother (and biggest fan) of this blog’s author.  It seems like it was ages ago that Emma asked if I would be interested in contributing a few words about trends in renewable energy, to which I enthusiastically agreed.  I have been feeling badly for not having submitted some notes, but I think the procrastination was probably for the best – since I have a more optimistic outlook each and every day as I watch the market in this region (Oklahoma), the United States more broadly and the greater global energy economy.  

1. Prices of PV solar are falling fast.

I have had the privilege of jumping into the solar photovoltaic industry just as it is poised for the truly explosive growth period that has been expected for SO long by those who have followed it.  The technological advancements and business model innovations have had an anchor-like effect on installation prices of solar energy across all applications (residential, commercial, industrial).  

To illustrate the unbelievable rate at which prices have dropped for solar, I’ve always liked the following metric, which quantifies the rate of price drop for solar relative to the prices of fossil-fuel power generation:  

Screen Shot 2018-01-31 at 1.21.38 PM.png

****Clarification – line 1 indicates that solar PV system prices have dropped 2,110 times relative to the price of power generation from petroleum.  Pretty remarkable stuff, and the drop just continues as we speak. 

These comparisons in price between the various methods of electricity generation are global averages. They vary to some degree based on location, but the take-away from this is that steady advances in the technology of solar power have forced it’s inclusion in worldwide conversations about the best methods of generating power on purely economic terms.  Simply put, solar power is quickly becoming an economically viable option.  

Across most of the planet, solar power is now an economic value proposition as compared to fossil fuel alternatives.

When you take into consideration the sustainability and environmental benefits of solar vs. fossil fuels the decision is becoming quite simple.  And lately it seems that the answers to several logistical and efficiency-related concerns about distributed solar generation are presenting themselves as fast as the challenges arise. 

Some great innovations pertaining to the finance of distributed solar projects have enabled rapid growth in a number of countries, from government subsidy-based incentive structures in the UK and Germany to the state and local utility rebate programs beginning to shape some major US markets.   In much of the third world, solar power is leap-frogging coal and natural gas to become the major source of power generation in places that have never previously had power.  

To those whose main interest in solar power is an environmental one, that is most significant in India, which continues rapidly building out its electricity infrastructure and until recently has had no other alternative for generation than its large coal reserves.  

All of the above is to say what most outside the industry seem to be slowly realizing, which is that the days of solar energy advocacy being primarily framed in terms of social responsibility are dead.  Across most of the planet, solar power is now an economic value proposition as compared to fossil fuel alternatives – completely free of subsidy.  And PV solar is just 1/3 of the story.

Photo by  Asia Chang  on  Unsplash

Photo by Asia Chang on Unsplash

2. Battery prices are falling, too.

Solar energy plus storage (batteries) are projected to beat natural gas on price alone when projected over the life of a proposed natural gas plant. 

Battery prices are projected to fall by 75-80% over the next 5 years in recent research, and in some areas of the United States forecast models have had to be updated with greater frequency when they continually find that their price estimates are being dramatically outpaced by the market.  As forecasts are being updated, we are finding (in recent cases in California) that solar energy plus storage (batteries) are projected to beat natural gas on price alone when projected over the life of a proposed natural gas plant. 

Now the economic viability of some natural gas plants is being called into question and construction plans put on hold.  This just happened (Q4 2017) in the United States, not the most friendly of markets.  Other regions of the world that are more rapidly embracing the technology are seeing solar + battery power systems that can provide consistent and reliable electricity 24 hours a day for a cheaper price per watt than any other form of electricity.  Period. 

3. Electric vehicles are becoming more affordable.

Photo by  Chase Lewis  on  Unsplash

Photo by Chase Lewis on Unsplash

The third element to the equation when it comes to the impending revolution in energy is the decreasing cost and increasing reliability of electric vehicles.  These are adding additional incentive to installing solar + EV charging stations.  With solar + EV charging, drivers can avoiding at-the-pump fuel costs by charging their vehicles with the sun, driving the price per mile of operating the vehicle WAY down.  

Fuel costs, check.  Maintenance costs?  Advance electric motors being deployed in the market today usually have somewhere in the neighborhood of 15 moving parts – a typical internal combustion engine has somewhere in the neighborhood of 200. 

Any statistician will tell you that a reduction in the potential points of failure will dramatically reduce overall rates of failure.  The improved reliability of electric motors has prompted the leading electric vehicle manufacturers to begin offering “unlimited” or 1 million mile warranties on their products.  Maintenance costs, check. 

The average car owner spends something like $9k/year on the two combined.  Again, that’s $9k per year cheaper to own an electric vehicle vs. the exact same make and model with an internal combustion engine, assuming price equivalence. 

Market prices haven’t quite reached parity with internal combustion vehicles, but the coming reality of electric vehicle growth can be seen in the recent decisions by Volvo (among others), that they will begin rapid phase-out of internal combustion vehicles.  One more time: Volvo believes so strongly in electric vehicles that they’re completely phasing out of internal combustion vehicles.

4. Solar allows us to use only as much energy as we need, and store, share and exchange the rest.

Photo by  Julian Wildner  on  Unsplash

So, if it’s cheap to harness the sun’s energy all over the world, and it is becoming affordable to store the energy produced, what’s next?  The next-level of what is possible with distributed solar power is a system perfectly customized to a particular home’s energy usage, with no excess power generation required. 

If we know exactly how much power a home is going to need, and when it will need to have the most (and least) capacity, we can deliver exactly that amount of energy to the individual home with no energy wasted.  This level of customization and energy monitoring isn’t on the horizon – this sort of monitoring and energy planning can be installed in your home tomorrow.  

The best part of the transformation so far is, to me, the way the emerging markets are structured in ways that stand in complete opposition to the incumbent electricity market giants.  The existing electricity infrastructure consists of inefficient, polluting, volatile methods of generation consolidated into huge regional monopolies with zero incentive to adapt to consumer demands. 

If we know exactly how much power a home is going to need, we can deliver exactly that amount of energy to the individual home with no energy wasted. 

The new electricity infrastructure consists of highly efficient distributed generation and storage systems, with markets structured around the most cost-effective means of providing energy to the consumer – and a consumer having choices about where their energy comes from. 

Some great examples of business-model innovations and successful examples of electricity market penetration across the United States have been occurring in states with multiple market participants (utilities, solar installers, legislative bodies) aligned to evaluate what is best for the individual consumer who just wants to flip the switch, get some light, and have a say in how much he pays for it.  

From there, for anyone interested, the range of possibilities around what the best electricity grid of the next 100 years will need to do gets really exciting.  Then you start talking about:

  1. Energy customers potentially being net producers
  2. Electric cars as stores of the energy produced at the market production rate based on real-time demand
  3. Peer-to-peer energy transactions within a community (potential blockchain application for energy)

The bottom line is, the future grid has the potential to be one in which individual consumers are the beneficiaries of a fair, transparent market price for electricity generated by systems they own. 

Thanks so much for your insight John!  Can't wait to see how the next 5-10 years shape up in terms of renewable energy!


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