A long-belated companion to Steven Chu’s “Time to fix the wiring” essay I posted earlier, this is the white paper I co-authored for the same McKinsey & Company series. Given the roughly five-month delay in uploading this, I suppose “Time to post the writing” might be an apt subtitle… :)
Ever the stickler for citing sources (in university, while writing up a chemical engineering lab report, I once cited a colleague’s report I made use of, in my bibliography of sources – yes, I was a wild one) I was pleased McKinsey kept the footnote crediting the work John Robb and Jeff Vail.
Four years on, it’s encouraging to see how wrong the essay has turned out to be — because all the recent developments are for the better. It would be as if an investor bought a bunch of boring utility stocks for the safe, reliable dividends, only to discover at the end of the year that they got a bunch of capital appreciation as well.
Though on that note, I think fossil-fuel burning utilities are already a risky investment now, because renewables are already eroding their business model in some countries… and since renewables will get dramatically cheaper going forward as production scales up, the phenomenon will inevitably repeat itself around the world. (Speaking of uploading delays, clearly I’ll have to get to part 2 of this series…)
When the essay was written (late 2008), grid energy storage seemed a long, long way from commercialization, so our assumption had been that large-scale hydro plants and smaller-scale fuel cell facilities would complement renewables’ intermittency. (The EV / PHEV adoption rate is such that these are unlikely to offer any appreciable grid storage by 2030, either…)
With Germany’s announcement of a program to subsidize battery-based residential energy storage systems, enabling companies to ramp up production and get the economies of scale with which to drive aggressive cost reductions, it looks like fuel cells will face a lot of pressure at the residential scale.
As for the resiliency benefits of on-site power generation, that seems to have become a priority for many tech companies, in areas where subsidies for on-site generation are available. (I could justify mild subsidies, because on-site generation minimizes the need to maintain or expand transmission infrastructure, which can be expensive.)
One wonders if some of these companies are worried that a renewables future will destabilize the grid: this is a “myth”conception, as many utilities point out. I read somewhere that when Germany began its Energiewende — (renewable) energy transformation — the feeling was that the grid could only handle 5% intermittent renewables (ie. wind + solar). Then it became 10%, and then 20%. Then it became 40%. The latest I’ve seen is 60% with the possibility of 80% for continental Europe. As technology improves, that will only increase. Especially if/when electricity-to-hydrogen or electricity-to-natural gas technology matures, allowing for large-scale storage of excess, intermittent electricity.
On the fuel cell side, Bloom Energy seems to have become adept at acquiring
subsidies market share in the on-site generation space, despite the fact that their technology is less efficient than combined-cycle gas turbines. (That said, turbines are generally LOUD and therefore not suitable for on-site location.) As such, when it comes to larger-scale on-site 24/7 fuel cell power generation, since Ballard isn’t in that game anymore, I root for the folks at ClearEdge Power, whose use of cogeneration makes it possible to achieve overall energy efficiencies of 90%+, even if only a portion of that becomes electricity. :)
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By Matthew Klippenstein and Noordin Nanji
3 March 2009
The way electric power is generated and distributed will change substantially over the next two decades. Power will be democratized, as small-scale production at the individual and community level moves from niche to normal. The resulting “electron-democracy” will still have centralized power plants, but power grid activity will increasingly be dominated by innumerable incremental energy flows between small producers and consumers. This is likely to happen whether or not public policy mandates a shift away from dependence on fossil fuels.
Most centralized plants (hydro excepted) cannot easily adjust to demand fluctuations, leading to steeply discounted off-peak rates and the need to acquire additional plants for high-demand periods. More broadly, an expansive transmission grid dominated by a few central power plants is vulnerable to disruption from both natural phenomena and human malevolence.
In contrast, smaller-scale power generation can respond more nimbly to market demand, in a shorter time frame, with lower capital costs. Filling supplemental power needs with niche supplies rather than primary power facilities creates new generation options that that otherwise would be impractical. Finally, a grid fed by a broad, physically dispersed heterogeneous mixture of power sources would provide robust protection against disruption.1
Putting these strands together and looking forward, the distributed grid might look like this: intermittent wind and solar power generation would be complemented by load-supplementing fuel cell plants, in much the same way that peak power and base load power plants interact today. Electric vehicles (EVs), plug-in hybrid electric vehicles (PHEVs), and batteries would serve as grid energy storage when excess energy is being produced. The latter is analogous to the role of pumped-storage hydroelectric in current utility systems, where water is pumped from a lower reservoir to a higher one for later use in generating hydroelectric power.
Considering the intensifying pace of climate change, governments should play an ambitious role in the transition from today’s grid to tomorrow’s electron democracy. Governments could coordinate with local business to develop centers of excellence for distributed power in targeted industries. Mechanisms such as feed-in tariffs—which grant favorable rates for those generating power from renewables and clean-tech sources—could facilitate the development of these regional technology clusters. They would bring ancillary economic benefits as well.
We are hopeful that by 2030, our energy system will be considerably less dependent on fossil fuels, particularly for electric power generation. Supported by a diverse array of renewables, our energy needs could be met with an overlapping set of complementary clean technologies. In doing so, we would strongly curb our global warming emissions. We would then be poised not only to stabilize the climate, but to transcend the Fossil Fuel Age entirely and open a new “Age of Sustainability” in our human story.
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1 A closer examination of these topics is available from Jeff Vail (A Theory of Power) and John Robb (Brave New War) in their writings on “rhizome” at jeffvail.net and “resilient communities” at globalguerrillas.typepad.com, respectively.