Energy Efficiency & Distributed Renewables Will Kill Energy Suppliers

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The International Renewable Energy Agency (IRENA) and Financial Times (FT) held an excellent panel discussion tonight on technology, innovation, business, and the future of energy. It was a wonderful event, and I have several great clips from it to share in the coming days and weeks. To start with, here’s a short one from Michael Liebreich:

If you are not a video person, the essence of the clip is in the title: “Energy Efficiency & Distributed Renewables Will Kill Energy Suppliers.” I think that captures it well enough.

In case you are not already aware, Michael Liebreich was the founder of New Energy Finance (which was in 2009 sold to Bloomberg L.P and became Bloomberg New Energy Finance), was the CEO of Bloomberg New Energy Finance for years before switching to Chairman of the Advisory Board in 2014, and is a former member of the Zayed Future Energy Prize selection panel, among many others things.

Full Disclosure: My trip to and accommodation in Abu Dhabi for the Zayed Future Energy Prize, World Future Energy Summit, and other Abu Dhabi Sustainability Week events is being covered by Masdar. That said, I have full editorial control over the work and am even publishing it without feedback. I am only covering things that I find very interesting or important, and that I think others will find interesting or important.

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Zachary Shahan

Zach is tryin' to help society help itself one word at a time. He spends most of his time here on CleanTechnica as its director, chief editor, and CEO. Zach is recognized globally as an electric vehicle, solar energy, and energy storage expert. He has presented about cleantech at conferences in India, the UAE, Ukraine, Poland, Germany, the Netherlands, the USA, Canada, and Curaçao. Zach has long-term investments in Tesla [TSLA], NIO [NIO], Xpeng [XPEV], Ford [F], ChargePoint [CHPT], Amazon [AMZN], Piedmont Lithium [PLL], Lithium Americas [LAC], Albemarle Corporation [ALB], Nouveau Monde Graphite [NMGRF], Talon Metals [TLOFF], Arclight Clean Transition Corp [ACTC], and Starbucks [SBUX]. But he does not offer (explicitly or implicitly) investment advice of any sort.

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22 thoughts on “Energy Efficiency & Distributed Renewables Will Kill Energy Suppliers

  • Nice video. Final phrase on the excerpt was “…it’s going to be a bloodbath” (click bait!)

  • Like I said before, if politicians and “old companies ” do not get out of the way, or change, they will get run over by the train coming.

    • And the name of that train is cold fusion (LENR)

    • I agree Martin. Lee Iaccoca once said “In the car business, you lead, follow, or get out of the way” and that might just be the model we see developing in the energy business.

      Unfortunately many of our utility executives can’t see the potential that exists to earn vast amounts of money for their stockholders by the electrification of our society.

      Excellent post.

  • Liebreich has it right. An astute utility would notice that enabling demand management at the demand site, residential, commercial, etc. is a profit opportunity. Selling V2G, smart appliances and meters, air conditioning, refrigeration, water pumping, are pure gravy. Utilities can lower their costs and sell smart grid. Instead of resisting the changes, they can benefit from them, if they are smart.

  • LENR is coming, and ALL other energy source will become obsolete.

  • Nice post. thank you for shearing.

  • We are already seeing in Germany that fossil generating plants are losing so much money that they are becoming wards of the state, effectively nationalized. This happened long ago with nuclear, for example through the insurance the market can’t provide. Governments will have to keep many of these plants open for the next 20 years, at low and declining load factors, simply to ensure security of supply. Of course we all hope that enough progress will be made on despatchable renewables (biomass, syngas, geothermal, battery storage, tidal) for it to become possible to phase out this residual fossil capacity, but we aren’t there yet.

    • I think the end game is that utilities will become “Grid providers” that charge everyone a fee to use the grid, they will buy from a limited number of private utilities plants, and the government will maintain a set of money-losing peaker plants that will be required for those rare instances wherein the sun, wind, and other generators are unable to satisfy demand during rare freak occurrences.

      • I don’t think governments will maintain peaker plants. More likely they will be supported either by very high pricing when they are used or capacity payments from your utility provider.

        Some company is going to sell you electricity. It may or may not be the same company that owns the grid. There will be some times in the year that we’ll need to fire up thermal generators just as we now use peakers for critical generation.

        Hopefully someone will come up with a cleaner ‘deep backup’ solution but we’ve got a couple of decades to figure that one out.

        • Well, in plenty of places the government does own the generating capacity and that is likely to continue. It is definitely the better option if the example of Australia’s electricity privatisations is anything to go by. The average cost of generating electricity here is under 3 US cents a kilowatt-hour, but all up I pay 34 US cents, or about 12 times that amount per kilowatt-hour for grid power. And capacity payments in Western Australia have also been an expensive disaster.

          In Australia “deep backup” could quite simply be some extra solar panels, since that’s our most cost effective source of electricity, combined with our existing hydroelectric capacity. Several weeks of cold and wet weather in winter? We run down our dams because the extra solar capacity let us fill them to the brim during our autumn which always averages as insanely pleasant. And wind capacity would also help in unpleasent winter weather, but the economics of rooftop solar are such that we are likely to end up with considerably extra capacity there.

          In the meantime we have more than enough coal and gas plants. And I mean that quite literally. We have much more coal and gas capacity than we need.

  • The question is: Do we want to “kill” (a poor choice of words) centralized power generation or will allow it to kill (an accurate choice of a word here) us?

    • It’s almost as if you equate centralized power generation with fossil fuels.

      The vast majority of new renewable capacity comes from large hydroelectric installations, wind farms, solar farms and biomass plants. Rooftop PV and small scale biomass play a marginal role.

      Centralization is not inherently good or bad. It is a prerequisite for exploiting the economies of scale inherent to most forms of energy generation, so it’s not something you should oppose out of principle.

      Utilities need regulation, sure. But to say that centralized generation is is inevitably a negative concept is absurd. A big wind farm produces power more cheaply and with a lower carbon intensity than any decentralized system.

      • In this instance, Larmion, you are correct. I was equating centralized power with fossil fuel power generation. I do so because coal accounts for the lions share of electrical production in the world today.

        I have no problem with centralized power production if it’s from what is commonly called ‘renewable’ energy. In fact I am a BIG FAN of concentrated solar power with molten salt thermal batteries which obviously requires centralization of production.

        The fossil fuel issue is what really needs to change, not necessarily “centralized power generation”. Thanks for calling me to task on the issue.

      • Rooftop PV plays a small role right now. But it is fast growing and it will play a much bigger role than you think. Rooftop PV is nice because you are generating where electricity is consumed, avoid taxes, reducing transmission requirements, increasing resilience, etc.

        It helps eliminate middlemen.

        • It is fast growing, though not much faster than utility scale solar (and from an incredibly low base).

          The reduced transmission strain argument only applies when rooftop arrays are small enough to maximise self-consumption. Generous net metering has encouraged oversized arrays in many locales, which turns them into expensive versions of big solar farms. Thankfully, countries like Italy and Germany have now adjusted their subsidy regime to encourage smaller arrays.

          That you avoid taxes is hardly a positive. Every power station is taxed, except the ones that happen to be on a roof. That’s an implicit subsidy, and one that no government will let stand once rooftop PV accounts for a substantial share of total electricity production.

          Increased resilience is true in theory, especially in more remote locations. However, countries like France (and Germany before the rise of PV) already had near-perfect reliability in their grid because they have well-designed networks with enough redundancy and proper maintenance. PV is but one of many methods of boosting reliability.

          PV is interesting for one reason and one reason only: it competes with the retail cost of electricity rather than the wholesale cost. On pure cost per kWh produced, it is still one of the most expensive renewable energy solutions out there.

  • It can’t happen soon enough. These dinosaurs have been resisting change and destroying the earth’s atmosphere for far too long. If they die, maybe a couple generations from now someone can make something useful out of their carcasses.

  • The ramping economies of scale and highly favorable technological improvement curves for renewables make them more and more competitive over time. We really are witnessing something that is similar to what happened to the computer industry. But this with regard to energy.

  • Utility companies are going to go through a period of changes and will operate differently in the future. They aren’t going to be “killed”. Some may undergo bankruptcy proceedings due to not acting quickly enough, others will adapt efficiently.

    Utilities will sell less electricity to all customers due to efficiency. (Shrinking market)

    They will sell less to some customers due to end-user solar and perhaps a bit of storage. (Shrinking market)

    But they will sell a lot of electricity for charging EVs. (Growing market)

    The average electricity bill in the US is $100 per month. That is not a large enough budget item to get most people involved in setting up solar and storage. And especially not enough to take them totally offline and running backup generators.

    • $100/month is enough to get people to do net-metering. That is $1200/year and the price goes up every year. A net-metering system can get you a lower price and lock it in at a level that will remain steady for a couple decades. And especially with an electric car to charge, it is quite attractive.

    • $100 a month is $1,200 a year. After two years that’s $2,400. And that’s how much the cheapest installed 1.5 kilowatt rooftop solar systems currently cost in Australia not including subsidy or tax. And with America’s low cost of capital that’s a pretty good deal even if it only operates at 14% of capacity under those leaden gray American skies. And what’s more, according to my electricity bill, the average 2 person household without solar in my area spends about $130 US dollars a month on electricity. So we’re not too different from you and currently we have solar on one quarter of our houses. And that figure is climbing, so I figure the once the US lowers its cost of installation, which it is, it may end up with a fair bit of rooftop solar as well even among people only currently paying $100 a month for grid electricity.

  • Or he could have gone with the more well-known phrase “The Utility death spiral”.

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