Solar Power, Storage and the Grid

Category: 2040s Here 2015 Blog
Published Date
Written by Tony Dickey Hits: 933

This week, Tesla, the automaker, becomes the purveyor of batteries. Tesla Energy plans to offer storage batteries for residential and commercial use in a few months . It comes into the deal with Cargill, the food processor, already committed; Tesla Energy also continues with storage facilities at 11 California Walmart locations. More than offer a new product, it is disrupting the energy industry and, eventually, everything tied to it. Tesla represents the shiny vanguard of this movement. Other manufactures with larger capacity are on the same track.

$0.00, Peak Demand

Peak demand typically comes during the middle of the day, when most businesses conduct most activity. It is also when the sun shines brightest. Solar combined with storage  completely upends the entire energy sector. With storage, if your home or business remains connected to the grid you can use your own power to meet your needs. If not adequate, you pay peak demand rates minus your own supply. If you produce more than demand, you can either sell it to a utility, to homes or businesses or store it for later.
Most situations will match these various scenarios according to circumstance, season and so on. Many factories close on weekends, for instance. Either way, the combination of battery and solar (and wind) gives customers greater control. Some may become net producers. As installations grow, ramifications spread.


 LW3A1498 1024x768Image courtesy of Bloomberg Media  

Chinese electric bus and car manufacturer BYD says it’s planning to expand battery production on the heels of Tesla, increasing output so fast that it will almost match the planned output of Tesla’s so-called “Gigafactory” by the time it’s fully operational in five years.
A Chinese ‘Gigafactory’? BYD Says It Could Have Battery Production Capacity Roughly Equal To Tesla Motors In 2020

 

 Implications

With sufficient installation, power companies may no longer justify peak demand. You cannot charge for what you do not deliver. This pressures utilities to reduce prices. The price drop comes with justification. Less demand means lower fuel and maintenance costs. Lower fuel costs carries ramifications for everyone. At some point, return on investment for fossil fuels will be too low to rationalize. Extracting, transporting, storing and managing resources adds to cost at every step. Investors will see the numbers and act accordingly.

Utilities also benefit from a less is more strategy. Under the current paradigm, power companies must expensively equip an entire system to meet any peaks, even if only for a few hours a year. Battery storage bypasses the ned, lowering operating expenses and the price of debt. These companies can also install solar/storage combinations to take advantage of lower prices

'the system must be capable of catering to maximum demand, delivering all the energy required during that hellish week in August when everyone’s running their A/C...the system is designed and maintained to generate far more capacity than typically needed...the American system is overbuilt by 30 to 40 percent.'
Elon Musk’s Grand Plan to Power the World With Batteries
 



As the solar/storage marketplace grows, prices will continue to drop. Eventually, not investing in it essentially hands money to a competitor, turning the shift into a feedback loop.

With greater investment battery/solar technology will improve to where electric vehicles (EVs) reach range parity with traditional ones. For many the choice becomes easy: pay for fuel or do not. With Asian companies looking into producing sub $15,000 US EVs, the choice opens on most income levels. Either via home, business or through public means, many can and will charge vehicles courtesy of abundant energy of sun, wind or ocean wave. Fossil fuel suppliers would have little choice but to reduce prices. At what stage does too low ROI lead to a divestment frenzy?
 
 

Foxconn has largely focused on electronics manufacturing for clients including Microsoft, Sony and Amazon.com. But the company is branching out into new business sectors, as a way to grow its revenue streams. Analysts estimate that it makes as much as half of its revenue from assembling Apple products.

In June, Foxconn’s CEO Terry Gou said that the company is targeting to build electric cars with a price of less than $15,000.

 Foxconn invests in building electric cars in China

 

 

Matter of Timing

This shift will, of course, take a few years to play out. Some will resist to varying effect, but will only delay the inevitable. Fossil fuels market share will dwindle. I guess these reductions will onset sooner than many suspect. China's Warren Buffet backed vehicle maker BYD already dominates the electric bus market. Foxconn and Hoi Han, both contract assemeblers of iPhones and similar electronic devices, already have substantial investment in and experience with lithium-based storage; BYD produces the most LiON batteries in the world.

Grid operators (and automakers?) only certainty is that their century old business model will not survive the next decade.