Bring me sunshine

Last year, for the first time ever in the UK, solar power generated more electricity than coal over the course of a month. In tandem, major advances in battery technology are delivering unprecedented energy-storage capabilities. Are we on the verge of a truly “disruptive” breakthrough? And, if so, who are the winners and losers likely to be?

20 February 2017

James Kyle, Investment Director, Rathbones

A solar panel and a wind turbine are discussing the future of electricity generation. “So,” says the panel, “what do you think about this whole renewable energy thing?” “I must admit,” says the turbine, “I’m a big fan.”

Whatever its merits in strictly comedic terms, the above joke should nowadays resonate with the vast majority of the global population. This alone illustrates how substantially the cause of alternative, non-fossil-fuel sources of energy has advanced in recent decades. Solar panels, wind turbines and other potentially “off-grid” devices are no longer seldom-seen curiosities: they are ever more commonplace and, crucially, ever more efficient.

Renewables have entered the mainstream; but could they be on the brink of dramatically reshaping it? A growing body of evidence indicates that solar energy in particular may be nearing the point at which it might qualify as a truly “disruptive” technology.

In May this year, for example, the amount of electricity generated by solar power in the UK surpassed that produced by coal for the first time. In August, citing its commitment to “the national decarbonisation agenda”, the University of the West of England revealed plans to spend £650,000 on photovoltaic (PV) panels capable of providing up to half of all the energy used by its University Enterprise Zone and Bristol Robotics Laboratory.

Maybe most significantly of all, Tesla, manufacturer of the world’s best-selling electric car, announced on 1 August its intention to buy SolarCity, a leading installer of PV panels in the US, for $2.6 billion. Some commentators quickly dismissed the tie-up as unduly risky — the Wall Street Journal accused Tesla CEO Elon Musk of having a penchant for “incessant cash-burn” — yet others feel it could signal the advent of the game-changer that the renewables industry has long been waiting for.

Why? Because anyone who successfully combines PV panels with effective and economical battery storage might just solve solar energy’s most fundamental and pressing problem: what to do when the sun goes down.

Infographic of items using electricity in a typical homeNowhere on Earth enjoys permanent sunlight. This is an inescapable fact that has forever dogged humanity’s attempts to harness the might of our galaxy’s most important star. Even the ancient Greeks appreciated that Helios had to take a rest from driving his chariot across the sky.

The consequences for energy generation are straightforward enough. In May this year, in another noteworthy milestone, Portugal’s electricity consumption was fully covered by solar, wind and hydro for four consecutive days; but then Portugal tends to be a good place to get a tan. Put very simply: no sunshine equals no solar power.

Analogous criticisms are habitually levelled at other renewables, wind chief among them. In 2015 Denmark set a world record by drawing 42% of its electricity from wind turbines; and yet, as one report of the feat memorably conceded, it was “a particularly windy year”. As Professor Bob Cywinski, a prominent researcher in the field of thorium-fuelled nuclear reactors, remarked in the Winter 2014 edition of Rathbones Review: “Would any parent want their child to have life-saving surgery in a wind-powered hospital?”

Such concerns may no longer apply to solar energy if the sort of vision suggested by Tesla’s move is realised; and perhaps the biggest clue — quite literally — to precisely what that vision might be is to be found at the Tahoe Reno Industrial Center in Storey County, Nevada. Here Tesla’s giant Gigafactory 1 is well on its way to producing more lithium-ion batteries annually than were made worldwide in 2013.

Tesla already relies on the availability, dependability and affordability of such technology for its cars, and it is looking to improve all three. Battery production costs are expected to fall by over 30% in the next six years. General Motors reported in 2015 that its battery packs cost $145 per kilowatt-hour, around 70% cheaper than they were in 2012. Tesla believes it will bring the figure down to approximately $100 per kilowatt-hour soon after the turn of the decade; in the meantime, if recent history is any guide, battery storage could increase by 5% to 10% a year.

Similarly, solar panels are becoming ever more effective and cheaper to buy. The average solar panel is approximately 15% efficient, leaving plenty of room for improvement. Scientists in Canada and the UK are developing new materials that could ultimately triple the efficiency of panels, while technical advances and investment in manufacturing have also brought down production costs significantly — by around 75% between 2010 and 2015, according to the International Renewable Energy Agency.

Many analysts believe Musk could soon bring the cost of a battery/PV bundle lower than the cost of electricity from a utility company — a tipping point that would leave the Tesla-SolarCity double act well placed to respond to a classic case of supply and demand on a monumental scale. With cars and homes equipped with sophisticated and competitively priced batteries capable of storing energy and smoothing delivery, the economics of solar would become much more appealing to the average consumer.

Solar’s overall image might also receive a defining boost. Until now the sector has been practically devoid of universally recognisable, big-name players; instead it has been the near-exclusive preserve of unfamiliar start-ups hawking competing technologies and proprietary financing schemes. Online advertising, mailshots, cold-calling and even door-to-door salesmen have been used to drum up business, seldom to especially great effect. Now, with its cutting-edge reputation and fashionable showrooms, Tesla could make solar chic by doing things not only better but differently.

The emerging parallels with the rise of another resolutely hip Silicon Valley titan have not gone unnoticed. According to one Bloomberg analysis, the outcome could be “the world’s first clean-energy juggernaut — a company that does for solar power, batteries and electric cars what Apple did for computers, phones and software apps”.

Infographic of amount of electricity used by an average household

Tony Seba coined the phrase “clean disruption” in his 2014 book, Clean Disruption of Energy and Transportation. He claims the only people hostile to “a cleaner, healthier and wealthier future” are “the dirty energy companies, their lobbies and their protectors in governments”. He posits that solar will become the world’s main source of power by 2030.

A lecturer in entrepreneurship, disruption and clean energy at Stanford University, Seba first presaged a decisive convergence between PV and battery storage several years ago. Now, with his prediction about to be fulfilled, he compares solar’s apparently inexorable ascent with the stellar trajectories of established “exponential technologies” such as digital photography, smartphones and the internet. “The Stone Age didn’t end because we ran out of rocks,” says Seba. “Stone tools were disrupted by a superior technology: bronze.”

The scenario in which the price of unsubsidised solar generation undercuts the price of power from the grid is known as “grid parity”. “My numbers indicate that by 2020 households in sunny areas around the world will be able to generate solar energy for less than the cost of transmission,” says Seba. “This means utilities won’t be able to compete with rooftop solar even if they generate electricity at centralised stations at a cost of zero. This is what I call ‘god parity’, which means conventional utilities don’t have a prayer.”

Seba is undoubtedly a vocal champion of renewables, yet his rhetoric is rooted in a prospective reality of which the “conventional utilities” whose demise he envisages are all too aware. In 2012 — long before Tesla’s acquisition of SolarCity suddenly upped the stakes — executives of the US’s foremost energy companies met in Colorado to assess the threat posed by solar and to formulate a coordinated riposte to everything from declining sales to the risk of obsolescence.

Despite such behind-the-scenes machinations, many utilities continue to stress their own commitment to PV. Critics are unimpressed. Professors Christopher Wright and Daniel Nyberg, authors of Climate Change, Capitalism and Corporations, argue that such pronouncements are characteristic of major organisations that, while keen to parade their “green” credentials in public, very rarely place environmental considerations above profits.

“The corporate world has repeatedly chosen to spearhead the march towards environmental collapse,” says Professor Wright, leader of the University of Sydney’s Balanced Enterprise Research Network, who has interviewed numerous senior figures in energy companies. “It has managed to convince us that our long-term future is safe in its hands, but the dominant view is really that only the short term matters.”

The falling cost of solar panel modules

£1.61 - Jan 2010

£0.42 - Jan 2015

... approximating to a fall of 75%

Even if mainstream energy producers are sincere, a long-term dedication to solar could be all but futile. “Large-scale solar power plants will still get built,” says Seth Blumsack, an associate professor at Penn State University’s College of Earth and Mineral Sciences, “but it’s in the many millions of rooftops where the real potential for solar energy as a disruptive technology is taking shape. By installing solar panels, a consumer pays the utility less and — for the first time — becomes an energy producer rather than an energy consumer only.”

Seba makes much the same point, explaining that solar “flips the architecture of energy in the same way the web flipped the architecture of publishing”. “In the old days,” he says, “publishing was done by a few companies that owned large centralised printers. They decided what would be published and pushed it down to the users. Now everyone with a Facebook, Twitter or LinkedIn account is a publisher — and the same dynamics work for PV. Everyone can generate energy as well as information.”

Graph showing how more than 20% of UK energy comes from renewable sources Click arrows to expand

The notion that momentous change is invariably born out of crisis has endured since Marx, but the nature of recent change has occasionally suggested otherwise. There was, for instance, no communications crisis per se before the advent of the smartphone. Sometimes it is just a matter of opportunity.

Tellingly, both contexts apply to the rise of renewables generally and solar more specifically. There is the crisis presented by dwindling reserves of fossil fuels and, more pressingly, global warming; and there is the opportunity to mould what management consultancy McKinsey & Company has labelled “the coming resource revolution”. This underscores the likelihood of far-reaching disruption — a transformation Seba calls “a dream come true for anyone who believes in human quality of life”.

It is by no means guaranteed that Tesla and SolarCity will be the principal architects, just as it is by no means guaranteed that Seba’s forecasts will prove unerringly accurate. But solar’s supremacy increasingly appears imminent

Leading the charge

Lithium-ion battery technology is advancing so quickly that today’s electric or hybrid cars could look obsolete remarkably soon.

The latest Nissan Leaf has a range of 150 miles, but it is rumoured that the next generation, due in just a couple of years, will have double the battery capacity and a range of 200 miles.

The company’s researchers are exploring the use of a sodium compound within the battery rather than a carbon one. This could increase the energy density within the battery by 150%, extending the range to 375 miles.

Even greater technological leaps are just around the corner. Car manufacturers are working on upping the voltage of cars from 12 to 48 volts, the battery equivalent of cranking up the pressure in your water system.

Modern cars already use up to 150 motors to power windows, wipers, ABS systems and other features. Increased voltage means engineers can use electricity even more — to supplement engine power during acceleration, to produce more responsive suspension or to improve the efficiency of stop-start technology.

This approach allows smaller engines to be used. A turbo-charged 1.5-litre engine today can already match the power of an older two-litre vehicle, and with 48-volt technology a one-litre engine should be just as powerful yet need fewer gears — all of which reduces weight, fuel consumption and emissions.

Cars being developed with this technology are known as “mild hybrids”. Some experts believe these vehicles will offer 70% of the benefits of a full hybrid at 30% of the cost.

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