Tesla & The New Economics Of The Coming Renewable Energy Boom

I don’t need to tell anyone of the importance of Tesla’s expansion into home battery technology. A home battery lets you store solar energy to use when the sun isn’t shining, which is a really, really major thing in terms of power distribution. As I’ve been pointing out for years, this is the crucial missing link between photovoltaic cells being a rapidly, rapidly cheapening technology with a lot of rollout potential, and photovoltaic cells being the major source for the world’s power. As I predicted in The Week in 2013:

The promising trends in technology and cost suggest much more than renewable energy becoming the fastest growing energy source in the next 30 years. They suggest that renewables will grow to be the number one energy source in the United States and the world in the next 30 or 40 years.

I’d say that that was actually an overly conservative projection. I now foresee solar to be number one in the next twenty, if not the next ten years.

It’s nice to live in the knowledge that renewable energy will overcome problems posed by diminishing oil reserves and (at least) mitigate anthropogenic climate change. It’s nice to know that as solar efficiencies continue to increase and solar manufacturing costs continue to fall that the long term trend for energy costs is down.

And you can do a heck of a lot of cool things with cheap, decentralized energy, like heating and lighting your home, manufacturing goods and technology and food and tools, and powering computers and artificial intelligence.

This, in my view, is the furnace to power the next fifty or a hundred years of soaring mid-20th century style economic growth. This is the beginning of an energy-driven economic supercycle — which takes us from the era of handheld computing to the era of building asteroid mining space stations and extraterrestrial colonies and maybe even interstellar spacecraft. It’s the main reason why I switched from bearish to bullish in 2013.

But what I really want to know is how to make money out of this trend. If photovoltaic cells and batteries are the new crude oil, coal, gasoline and natural gas (etc), does that mean Musk’s firms (Tesla, SolarCity, SpaceX, etc) are going to be the next Exxon-Mobil or Shell or Gazprom?

Maybe. But I’d tend to see renewable energy and emerging tech index funds as a slightly smarter bet. The trouble is that we’re at a very early stage in the supercycle.

An imperfect analogy: Xerox made an operating system akin to Windows years before Microsoft and Apple did, but Microsoft and Apple were the ones who reaped the bigger rewards. There are a whole load of factors that could dramatically affect which renewable energy systems are the ones that dominate the market: interface, battery-photovoltaic cell integration, price per unit of energy, price per unit of storage, durability and probably some others. And also a slew of more superficial factors such as marketing. If this is going to be as big as I think it is there will be a lot of competition from outside the renewables sector not least from firms like Google, and Apple and Facebook and Samsung as well as from older energy giants like BP, Shell and Exxon-Mobil.

For now, of course, Musk does seem to be establishing himself as the market leader and trendsetter in much the way Steve Jobs once did. But that could all change. It’s even not just a matter of competing firms. Just as the internet decentralized information distribution, and solar is on the cusp of decentralizing energy production, the whole manufacturing and (I’d argue) product design paradigm is edging closer to being transformed by another set of emergent technologies: 3-D printers and home manufacturing. Maybe as home manufacturing begins to become more prominent, open-source collaborative product and component design will beat out the current proprietary model.

The main takeaway here seems to be that this is an incredibly exciting time to be alive. We’re all set to get a lot richer from this, whether or not we bought Tesla at an early stage, just as people in the early 20th century didn’t have to buy Standard Oil shares to do well from that other energy revolution.

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Get ready for a massive renewable energy boom


Renewables will be the fastest growing source of energy between now and 2040, according to new projections from the Energy Information Administration.

The EIA forecasts that from 2012 to 2040, solar, wind, and geothermal production will nearly double, rising 97 percent. The next closest projection is for natural gas, which is expected to grow 56 percent.

Of course, renewables make up a small proportion of global power generation. So even after all that growth, renewables are estimated to account for a measly 3.8 percent of total energy production in 2040, compared with 38 percent for natural gas.

But this is actually an extremely conservative estimate. Renewables — and especially solar — aren’t really like other energy sources. Non-renewables are energy-rich fuels, but there is only a finite supply in the ground. This means that prices are unpredictable and subject to large spikes that badly damage the economy, as occurred in the 1970s and the 2000s.

Read More At TheWeek.com

When Solar Becomes Cheaper Than Fossil Fuels

Solar power has been getting cheaper and cheaper:

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Current estimates suggest that solar might be as cheap as coal by the end of the decade, and half the cost of coal by the end of the next decade:

If the trend continues for another 8-10 years, which seems increasingly likely, solar will be as cheap as coal with the added benefit of zero carbon emissions. If the cost continues to fall over the next 20 years, solar costs will be half that of coal. These predictions may in fact be too conservative given that First Solar have reported internal production costs of 75 cents (46 pence) per watt with an expectation of 50 cents (31 pence) per watt by 2016.

When applied to electricity prices this predicts that solar generated electricity in the US will descend to a level of 12 cents (7 pence) per kilowatt hour by 2020, possibly even 2015 for the sunniest parts of America.

What does that mean? Cheap, decentralised, plentiful, sustainable energy production. This would be a massive relief to global markets that have been squeezed in recent years by the rising cost of oil extraction, which has been passed onto consumers. Falling energy prices — all else being equal — mean more disposable income to save and invest, or to spend.

Some will say that solar is inherently unviable due to the difficulty of storing energy. But huge advances have been made on that front in recent years, and improvements continue.

This — if it comes to pass — would be a basis for a period of strong growth. Independence from foreign oil. Independence from falling EROEI yields on conventional energy. A robust decentralised grid. A new sustainable energy supercycle — and new growth in other industries that benefit from falling energy costs. This has the potential to reverse so many of the negative trends we have seen emerge in recent years, and prove wrong the Malthusians who claim that humanity has over-extended itself and that the era of growth is over.

In the long term, this makes me pretty bullish. But unfortunately this is all still years away. Maybe five, maybe ten, maybe twenty years. We’re not out of the woods yet. Not for a long time.

Solar Dissenters

Quite often, an energy doomer will turn up commenting that I am overlooking the fact that the expansion of the last century has been oil-fuelled and that this century’s new oil scarcity means that the party is over.

These people are wrong — for the same reason that Malthus (and all Malthusians) have always been wrong about everything — they have ignored the hard-to-measure variable of human ingenuity.

Back in September I remarked:

The solar energy hitting the earth exceeds the total energy consumed by humanity by a factor of over 20,000 times. More solar energy hits the world in a day, than we use in fifty years, at current rates.

Nuclear fission has massive unquantifiable tail risk. Solar power has almost zero tail risk.

Goodbye, Fukushima.

The dissenters soon appeared, screaming unintelligibly about solar panels not working at night. Not so.

A new high efficiency solar cell design that can use almost the entire solar spectrum has been announced by Lawrence Berkeley National Laboratory.

What this means is that the resulting solar panels will be able to generate power while it’s dark! What’s more, the new solar technology can be made using existing low cost methods already in operation.

A conventional solar cell captures light from one part of the spectrum. This new solar technology uses different materials stacked in layers, which use different wavelengths. Significantly, these include low and mid-energy wavelengths.

Human ingenuity triumphs again. The beauty of solar is that nothing can compete with its ubiquity, its reliability and its decentralisation. The growth of solar energy melds with nature: solar energy is by far the most abundant source of energy on our planet, far more so than hydrocarbons. Oil and gas are a necessary stepping stone to the solar revolution, nothing more. They are, ultimately, solar energy from aeons ago locked away beneath the earth.

Directly harnessing the power of the stars is an obvious step in the development of any sustainable terrestrial species.

None of this excuses the excesses of Solyndra, though. Solar will deploy as it becomes economically viable for it to do so, not via the assent of politicians.

With conventional energy prices continuing their century-long march upward, that will not be long.