Can Tony Seba be right about convergance of technology disruptions in cars and energy in around 2020-21?
by Allen Best
BOULDER, Colo. – Remember when very few people had cell phones—and then, just like that, everybody had one? Then, almost as quickly, everybody was clutching a smart phone.
It was not the first rapid technology disruption—nor the last. Tony Seba, a lecturer at Stanford University, starts out his presentations by showing a picture from New York City’s Fifth Avenue on Easter Sunday in 1908. It’s all horse-drawn carriages—except for one car.
Then, the same scene on Easter Sunday 1913. This time, there’s one horse-drawn carriage. Otherwise it’s all cars.
We’re on the cusp of changes in energy storage, electric vehicles, autonomous vehicles, and solar energy that will be just as transformative, Seba said, in a presentation at the University of Colorado-Boulder on June 8. The presentation was a fund-raiser for Clean Energy Action, a Colorado group.
Disruptions of this sort occur because of cost curves and technology convergence. Both were evident in the rapid adoption of smart phones in about 2007. One was the rapidly plummeting costs of hard disk storage, about 50 percent less every 18 months. Digital imaging also improved rapidly.
When such convergences occur, the adoption rate is not linear, but rather accelerates, rapidly going from 20 percent market penetration to 80 percent. One year, almost nobody had a smart phone. A decade later, everybody does.
Other convergences occur with old business models. Airbnb and other Internet-based bookings are actually an old business model, he said. They’re no more than brokers for booking of lodging. What has made all the difference is the marriage with new technology, especially smart phones. That difference is illustrated even more clearly with Uber, Lyft, and other ride-sharing services.
Now, four technology innovations married to business innovations will “disrupt all energy and transportation” in the next 12 years.
Energy storage will be one major disruptor. Lithium-ion batteries have dropped about 14 percent in costs annually over the last 15 years. Since 2010, the cost reduction has accelerated to about 20 percent each year.
Now, investments in battery technology are ballooning. Tesla has its “gigafactory” near Reno, Nevada, and has plans for three or four more. But they won’t be alone. There will be 12 such megafactories by 2020, said Seba. Among those diving into the market is Dyson, the vacuum maker, which is planning to invest $1 billion in battery manufacturing during the next five years.
This rapid drop in storage costs will have profound implications for our electrical supply. Right now, the electrical grid operates like a just-in-time supply chain absent backup inventory. That means that utilities must be prepared to meet maximum demand. Maximum demand in most places occurs on hot, summer afternoons when every air conditioner is blasting at full throttle. For winter heating, natural gas is more commonly used.
How then to meet this summer-time peak? Utilities must have what are called peaking plants to use a few hours here, a few hours there: 32 percent of generation assets are used just 5.9 percent of the time.
Nationally, this adds up to a lot of investment, about one gigawatt of generating capacity. That’s about what a large coal-fired power plant complex can generate, but just 120 hours a year.
What if you can store energy for those hot, summer afternoons? With more cost effective storage, that’s probably what more and more people will do. Seba estimated that the cost of storing a day’s worth of energy for a home by 2020 or so will be just $1.20 per day.
But you won’t need to store energy for a full day to disrupt the business model of a typical utility. Just 4 to 6 hours of storage will do.
This has profound ramifications to our centralized energy system. Tesla is now powering one island in the Pacific Ocean called Ta’u with 1.4 megawatts of solar capacity backed up by 6 megawatts of storage capacity delivered by Tesla’s SolarCity.
Electric vehicles will be a second major disruptor. EV’s were always compelling because electric motors are five times more energy efficient than an internal-combustion engine that burns gas or diesel. Those engines are only 17 to 21 percent efficient. Most of the energy is dissipated as waste. Electrical motors are 90 to 95 percent efficient.
This means vast saving in fuel costs. Citing “Consumer Reports,” Seba said that an electric Jeep Liberty will save $15,000 in fuel costs during five years as compared to a Jeep Liberty that burns gas.
Maintenance costs will be less for EVs. They have 18 moving parts, compared to more than 2,000 moving parts in an internal combustion engine. The power train for an EV can go 500,000 miles and maybe even a million miles, as Tesla and other manufactures are saying.
EVs will be 10 times less expensive to maintain.
The big drawback on EVs—other than issues of range—has been the up-front cost. Now that is disappearing. “By 2020, you will have $22,000 electric vehicles without subsidies,” he said.
Autonomous vehicles are a third major disruptor arriving, very, very soon. Seba said 33 companies are investing in self-driving vehicles. Elon Musk has said there will be a self-driving car that will travel from California to New York without anybody touching the controls by December 2017.
Again, there is a cost curve that matters. Self-driving cars depend upon technology mounted on the car that maintains a 360-view of the surroundings. In 2010, that LIDAR cost $70,000. By 2016, it was down to $250. This cost reduction is in line with dramatic cost declines and reduced power requirements for computing. Seba said those reductions will continue.
Autonomous vehicles are computers on wheels, Seba said. “Essentially, $2,000 of equipment can make your car self-driving,” he said.
The combination of electric and autonomous vehicles will have profound consequences for how we live and use land allocations. Cars sit idle 96 percent of the time. If we share autonomous cars, they will sit idle only 60 percent of the time. That can free up vast amounts of space currently dedicated to parking. Los Angeles currently has enough space allocated for parking to accommodate three cities the size of San Francisco.
Seba predicts that by 2031, 95 percent of all passenger miles will be autonomous. “I might be off by a year or two,” he allowed.
Autonomous and electric cars will also be 10 times cheaper to operate. They’re the second-largest capital expense in household budgets.
And this has profound implications for our oil-based economy. Seba predicted global demand for oil will peak at 100 million barrels per day in 2020 and then drop about 70 million barrels per day by 2030.
This will leave many oil-extraction operations stranded, because they will be uneconomical. This includes deep-water drilling. Ditto for the tight sands, such as have made the Bakken field in North Dakota and the Jonah field in Wyoming famous. The only oil that can compete is conventional on-shore oil—and then at just $25 a barrel or less.
“The whole geopolitics of oil is going to change.”
Solar constitutes the final disruption identified by Seba in the next few years. Since 2000, the total installed capacity of solar PV has doubled every two years. “If it keeps doubling, how long before solar provides 100 percent of electrical capacity? By 2030, he answered.
Cost matters here. Solar photovoltaic panels are 303 times cheaper than they were in 1970. This has occurred without dramatic breakthroughs in technology. In contrast, the cost of conventional, fossil fuel generation has increased 16 fold over that same time period.
Companies are going solar because it makes economic sense. Sixty-nine percent of corporations are actively pursuing solar purchase. They’re doing it because of cost and reliability. With solar, they have an assured rate. Costs will not rise.
In the past, we have had centralized generation of energy, especially from fossil fuels. But the reduced cost of distributed solar combined with storage will dramatically reduce the need for transmission—because of the exorbitant cost of transmission.
The tipping point, he said, will be 2020 or 2021.
In some places, solar has already become extraordinarily cheap: 2.91 cents a kilowatt-hour in Chile and 2.99 cents in the nation of Dubai. Here, in the United States, solar is expected by some to be below 3.5 cents a kilowatt-hour by 2020. Tucson Electric recently signed a purchase for solar combined with storage for 4.5 cents a kilowatt-hour, and of that solar is 3 cents.
Bottom line? “This is not an energy transition. This is a technology disruption, and it will happen, very, very quickly. And the tipping point is going to be about 2020 for both energy and transportation.”