A few years ago I had a conversation with a sceptic about the centralised power production.. They were unable to visualize a time when householders would generate and regulate power production literally in-house. The prospect of leaving trillions of dollars of fossil fuels in the ground has given big oil and coal industry the willies for decades. Whole swathes of industry will be rendered progressively obsolete. Transporting and burning the billions of tons of material it takes to power mankind will cease. What then? With the advent of robots clever enough to do the jobs that remain what happens to the idling humans?
When people get excited about battery technology, it’s usually in connection with electric vehicles.
And it is all very exciting. Shell has introduced electric charging points at various petrol stations in London, Surrey and Derby, which allow electric car drivers to recharge about 80% of their battery in half an hour. It’s a small start, but it is a start.
But there’s another big battery-driven shift going on. And it’s one that could have even bigger consequences than the move towards electric cars…
The rise of the micro-grid
Renewable energy keeps getting cheaper. Solar panels in particular keep getting less expensive and more efficient. It was the fastest-growing form of power generation last year, in terms of capacity added to grids around the world.
The International Energy Agency reckons that solar will continue to dominate future growth. According to IEA executive director Dr Fatih Birol, solar photovoltaic capacity growth “will be higher than any other renewable technology up to 2022”, according to The Guardian.
In sunnier climes, solar energy is already having a huge impact on the economics of electricity production. In the US, for example, wholesale electricity prices will sometimes go negative because of excess generation (too much sun, not enough energy consumption), which means generators in one state are effectively having to pay others to take their overspilll.
That points to the big problem with renewable energy – finding somewhere to keep it. Coal – you can burn that to harvest the energy when you like. Nuclear you can switch on and off. But solar power works when the sun is shining. Wind works when it’s windy.
In other words, you can’t just switch them on and off. You need a middle stage where you can collect the energy and then release it again when you need it.
There are two obvious solutions. One is storage. We’re now getting to the stage where we now have batteries for individual homes. Tesla’s Powerwall is probably the best known, although there’s also a big German manufacturer, Sonnen, and various other providers.
In the US, reports The Wall Street Journal, one property developer – Mandalay Homes – now plans to build estates of ultra energy-efficient homes that come with batteries installed. The idea is to create a “virtual power plant for demand response”.
What does that mean? You’re effectively creating your own little micro-grid, that can take the strain off the main grid by accommodating any spikes in demand.
And this isn’t just happening in the sunny parts of the US. In Japan – spurred partly by the 2011 Fukushima disaster – towns and cities are aiming to become at least partly self-sufficient via the use of microgrids.
As Reuters reports, one city in northern Japan – Higashi Matsushima – has used reconstruction funding to build “decentralised renewable power generation to create a self-sustaining system capable of producing an average of 25% of its electricity without the need of the region’s local power utility”.
The idea is partly to have decent back-up power systems to prevent a repeat of the blackouts that followed Fukushima. But it’s spreading across Japan.
Demand management and smart energy systems
As well as the generation side – fitting renewables into the wider grid and being more generally self-reliant in smaller communities – there’s the consumption side.
Consumption is all about “smart” grids and demand management of energy systems. Basically, this involves enabling all of the devices connected to a grid to talk to each other, and direct and use electricity more effectively. This helps to avoid consumption spikes and makes more sensible use of energy at peak times.
So your various devices would know when was the best time to do the dishwashing, say, or to heat (or cool) the house to a given temperature.
Professor Takao Kashiwagi, who is the head of Japan’s New Energy Promotion Council, tells Reuters that the days of big power plants are numbered. “Instead, we will have distributed power systems, where small power supply systems are in place near the consumption areas.”
It’s all very exciting. Who wouldn’t want a more efficient energy system, ideally powered by a clean and virtually limitless energy source? It could be far more revolutionary than anything we’ve seen so far, including the internet.
And clearly there are huge implications for many sectors here – the potential beneficiaries range from battery manufacturers to the miners of ‘battery’ metals to energy efficient builders to companies involved in the ‘internet of things’.
On the other hand, the “disruptees” – in this case, the utility companies – could have a very interesting challenge on their hands. Particularly as they’ve been seen as dull, reliable stocks for a very long time.
We’ll be looking at how to profit from this in an upcoming issue of MoneyWeek magazine – if you’re not already a subscriber, sign up here.