Will innovation blur the distinction between energy generator and consumer?
Since the drive towards renewable energy began, critics have dismissed it as unreliable, inefficient and intermittent. Solar power, they say, is all well and good but when it’s cloudy or dark, you’re straight back to fossil fuel powered stations. The biggest challenge for wind, wave, solar and other green energy sources isn’t generating power, it’s storing power until people actually want to use it.
We’ve seen numerous innovate large- scale solutions to this. In Norway, they use mountain reservoirs essentially as the world’s largest batteries. When the wind is blowing and the sun is shining during the day but most of the population is at work, excess green energy is used to pump water uphill. At night, when demand for electricity from busy homes is high, the stored water is released from the mountain reservoirs to power turbines and produce instant, clean, cheap energy.
In America, the Advanced Rail Energy Storage Project also uses gravity but does so without water. Surplus energy on the grid powers electric motors that drag 10,000 tons of rock- filled railcars up a 2,000-foot hill. When required to do so, they rumble down again and those same motors act as generators to produce electricity.
These are both innovative but also large cost, large infrastructure projects. Yet over the last few months, we’ve also seen two examples that could disrupt the paradigm of ‘large-scale producer and individual consumer’ by completely redefining those terms.
At the tail end of 2016, Tesla and SolarCity founder Elon Musk launched a range of solar panel roof tiles. Since they look like a conventional roof tile and are the same dimensions, it’s now feasible to build new homes with built-in power generation without any unsightly additional solar panels. It’s my understanding that these will be priced very close to traditional tiles, motivating the builders of today to build the solar-powered homes of tomorrow.
The issue with solar is that it produces most power during the day when we don’t need it, which is why Tesla’s battery technology has such value. Not only will a battery in each home store power for the night, Tesla will also allow homeowners to sell their excess into the grid. This is good news for consumers, who will be able to buy cheap rate electricity produced by other homeowners. It’s even better news for Tesla, who will get the double win of selling you the battery and making money from sale management fees.
How this could effect the power companies fascinates me. They maintain hugely expensive nuclear, gas and coal powered power stations which must be able to kick in the moment they’re needed. So if large numbers of households start to generate power that’s traded at lower prices than the power companies can make it, who pays to keep power stations online during the periods they’re sitting idle?
SolarCity is one of the first disruptors to get my attention. Another is LO3 Energy, a startup that’s developed a peer-to-peer platform for consumers to trade electricity. With LO3, when your neighbour uses a lot of electricity, rather than buying it from the grid, they can buy it directly from you using blockchain technology.
This creates the next generation of interruptions. Not just a situation whereby you can generate electricity from your solar panels but one where you can sell it on to another consumer, cutting out the grid entirely.
Of course, consumer electricity markets are smaller than industrial ones but supplying industries such as aluminium smelting is only a stay of execution. And it’s worth noting that Lockheed believe that viable cold fusion (nuclear without the risk) is just ten years away.
So what happens to the power companies when electricity becomes so cheap that it becomes almost free at the point of use? And who will pay for the grid’s infrastructure – its power lines and sub stations – that we all rely on?
None of this will signal the demise of the energy businesses but I suspect we will see a significant reorganisation of existing energy providers caused by homeowners being able to generate, store and sell their fair share of power.