Politicians and energy executives seem to agree that we are in a transition from fossil fuels to renewables. Yet, we hear the same old trope: ‘It won’t happen overnight’. If that is the case, then when will it happen? Next year, in five years or in 50?
‘It won’t happen overnight’ had a different meaning four years ago than today. The speed of cleantech innovation has accelerated tremendously. Looking back a decade from now, we may be surprised how slow things progressed in 2018. Innovation provides hope that ‘It won’t happen overnight’ will not be as long as it once seemed.
In Part I of this two-part series on the energy transition, we’ll consider the innovations transforming the energy industry. In the next installment, we’ll explore the market dynamics.
The Energy Transition Report Card
In recent years, four key technological developments have shifted the future of energy. As a former economics professor and now venture capitalist (my firm invests in innovations for resource intensive industries), I felt that an Energy Transition Report Card would best illustrate the significance of these changes:
- Clean Energy Costs are Falling: A
Cleantech innovation has outpaced Moore’s Law and forced the International Energy Agency (IEA) to adjust its forecasts for clean energy year after year. In the US, unsubsidized solar and wind are already less expensive than coal, oil and natural gas.
International record lows for new wind and solar power are both below 2 cents per kWh (kilowatt hour). Their costs could drop by another 50 to 60% in the next decade. Indeed, 72% of the $10.2 trillion spent on new power generation between now and 2040 will go into solar and wind, Bloomberg NEF predicts. Yes, the installed renewable energy base is still below 20%, but it’s increasing steadily.
- Affordable Batteries: A+
Energy storage, the Achilles heel of clean energy, saw even stronger improvements. The cost of battery packs dropped almost 80% in six years, from $1,000 per KwH in 2010 to $230 per KwH in 2016. They could drop another 70% between now and 2030.
This has major implications for electric vehicles (EVs; a separate item on the Report Card) and smart grids. Consider the 100-megawatt Powerpack battery backup system Tesla recently installed in South Australia. It provides some 30,000 homes with backup power in case there’s no breeze at the wind farm they rely on for their electricity.