Major investments by governments and private companies alike are betting on transforming the economy into a new electric age, largely powered by renewables such as solar and wind power.
We take a look at how this major industrial change could unfold in the coming years – but beware –it’s going to be a bumpy ride, so fasten your seatbelts.
Can New Investments in Innovative Battery Design and Manufacturing Change the Game?
To power the new electric economy, billions of dollars of investment are pouring into battery research and development – as well as the construction of new battery manufacturing plants. Here are just a few of the recent investment announcements:
- South Korea’s LG Energy Solution, a major EV battery supplier for Tesla, GM, and Hyundai, is set to go public January 27 at an estimated value between 9 and 11 billion dollars.
- Japan’s Toyota Motor Corp plans to spend $13.6 billion on EV batteries by 2030 and has announced it will invest $1.25 billion to build a new EV battery factory in rural Randolph County, North Carolina, which is expected to create 1,750 jobs.
- Ford has announced the construction of new EV factories and battery manufacturing lines in Stanton, Tennessee, and Glendale, Kentucky, in partnership with SK Innovation. Ford expects to invest $11.4 billion and create nearly 11,000 new jobs.
- Tesla is constructing two new “Gigafactory” battery manufacturing facilities in Austin and in Berlin, plus a “Megapack” factory in California’s San Joaquin County, joining its existing battery factory in Sparks, Nevada, and factory and partner investments in Shanghai.
Manufacturers are keen to advance battery technology to make them cheaper to manufacture (by reducing the need for costly minerals, such as cobalt, for example), safer to operate (to avoid the risk of vehicle fires that bedeviled GM’s Bolt compact EV), increase their energy density (e.g. the power output for a given weight) and service lifespan (e.g. number of expected duty cycles) while at the same time reducing the time required for battery recharging.
Companies such as Tesla Motors are expected to adopt next-generation lithium iron phosphate (LiFePO4FP) batteries. These are considered safer to operate compared to more fire-prone lithium-ion (Li-ion) batteries and cheaper to manufacture as well, given that iron and phosphate cost far less than the nickel manganese cobalt (NMC) formulations used in Li-ion battery cathodes. Also, unlike conventional lithium-ion batteries, LiFePO4FP batteries can be recharged far more often without significant loss of power capacity.
Toyota is pursuing a different technology: next-generation solid state batteries. These do not use traditional electrolytes, which theoretically eliminates the risk of fire arising from a traditional battery’s exothermic (heat producing) reaction during charging, which can lead to thermal runaway (and fires). Toyota also claims their solid state batteries will allow cars to drive twice as far as conventional lithium-ion batteries and will be capable of recharging in 10 to 15 minutes.
Will Commercial and Residential Real Estate Properties buy into the Electric Renaissance?
New investments in updated electric power technology are also on the rise in the commercial and residential construction market.
And in a welcome sign for American manufacturing, new investment in solar panel manufacturing is happening here at home, thanks to a combination of tariffs and trade restrictions on Chinese solar technology as well as tax breaks for homeowners installing solar panels (more on that later).
The Hanwha Q Cells factory in Dalton, Georgia – once known for its carpet industry – produces more than 10,000 solar panels a day.
Roofing material manufacturers, such as the giant GAF, which boasts more than 10,000 contractors in its network, are also getting into the game; GAF is introducing a new line of nailable roofing shingles that have solar panels built into the exposed part of the shingle. GAF is hoping to leverage its distribution network to make inroads into a market first pioneered by Elon Musk’s Tesla Solar Panels.
Other changes are in the offing.
The EPA has heavily curtailed the use of most wood stoves due to their impact on air pollution. Regulators in California also plan to reduce pollution by banning the sale of small off-road engines (SORE) using internal combustion engines (ICE) by 2024, which is expected to affect lawn care equipment the most. Meanwhile, New York City has voted to ban natural gas hookups in new buildings to cut down on carbon emissions.
We’ll have more to say about these energy-saving measures in an upcoming article on NetZero building practices for commercial and residential construction projects – including advances in electric heat pumps and air conditioning systems.
Meanwhile, the Battery-Powered Transportation System is coming in Hot
The rapid transition to electric vehicles, which once felt so far in the future, is now upon us.
How quickly will this transition to an EV vehicle fleet take place?
One leading indicator is California, which will eliminate the sale of all ICE-powered vehicles by 2035.
Vehicle manufacturers are convinced that the future is electric – even Toyota (which beat GM in US manufacturing in 2021) has abandoned its longstanding strategy of hydrogen powered vehicles in favor of a massive, sudden shift into EV production plans – announcing its Lexus brand will go all-electric and plans to build 3.5 million EVs by 2030.
Another big surprise has been the interest in EV truck sales, which have produced the bulk of profits for domestic manufacturers. Ford sold out its initial production run of E-150 pickup trucks and now plans to build 150,000 units annually. (Ford is also offering electric crate motors to convert existing vehicles to electric, and its initial run also sold out.)
Startup electric pickup truck manufacturer Rivian went public in November 2021, closing the day valued at $86 billion; it plans to build 150,000 vehicles a year at its Normal, Illinois plant and invest $5 billion on a second manufacturing plant in Georgia capable of producing 400,000 vehicles annually.
Sensing an opportunity for a major comeback, SONY announced a plan to build its own branded EV at the 2022 Consumer Electronics Show in Las Vegas – perhaps stealing a march on the long-rumored electric car from its consumer electronics rival Apple.
But the EV revolution may not be a 1 to 1 replacement for our existing ICE vehicle fleets.
Analysts forecast a growing market for mobility services, such as E-bikes and even small personal city cars, such as the recently introduced Citroen Ami, a tiny low-speed vehicle that can be driven in France without a full driver’s license.
Increased Demand for Renewable Electricity is Outstripping the Ability of the Grid to Deliver Reliable Power
If you are an enthusiast for new technology, our electric future sounds exciting. After all, what’s not to like? We can imagine a world of quiet, non-polluting vehicles and buildings powered by low-cost, renewable energy sources, such as solar and wind.
But there is a fly in the ointment: our current electric grid can’t handle it.
Longstanding Problems with our Legacy Electric Grid
The story of how today’s electric grid came to be a fascinating one, and if you’d like to learn more, we’d highly recommend the 2015 book “The Grid” by Gretchen Bakke, which outlines how the crazy-quilt patchwork of over 3,000 separate utilities across the nation came into existence.
In it, Bakke points out that the modern US grid was significantly less reliable than those of other western countries.
Since the book first appeared in 2015, we’ve experienced even more grid failures, including
- California wildfires caused by downed power lines, including the July 2021 Dixie Fire, which burned 1,505 square miles.
- The 2021 Texas Winter Storm grid failure, which led to 246 deaths.
More powerful storms caused by climate change are increasing the risk for grid failure.
But the biggest risk of all comes from the way electricity is generated.
The Just in Time (JIT) Physics of Power Generation is the Biggest Problem
The spotlight on supply chain issues during the Covid pandemic has shone a light on the difficulty of maintaining Just-in-Time (JIT) stocks on hard to maximize factory production efficiency.
If you look at electricity generation through the lens of JIT supply chains, you can see the difficulty at a glance.
Thanks to the laws of physics, all electrical production is a just-in-time process.
It’s made, then used immediately.
Let that sink in for a moment as you consider the dilemma facing the electric grid manager who has to adjust to real-time shifts in demand (load balancing) by ordering instantaneous electric power production increases as demand goes up – such as during the summer peak in electric demand when most commuters come home from work in the late afternoon and crank up the AC and use major appliances to cook, wash clothes, etc.
Power generation failures are the real nightmare. A sudden thunderstorm forming over a major solar farm or an unexpected drop in prevailing winds at a wind farm can wreak havoc on balancing the grid. Power sources that go offline must be replaced with alternate sources immediately – otherwise, a sudden blackout occurs to protect the grid (and your home or office) from dangerous current spikes.
Keep in mind, it takes 5 minutes to warm up a coal generating plant, 10 minutes to fire up a natural gas plant, and 24 hours before a nuclear plant can begin to produce electricity.
That’s why the electric grid managers long favored “stock resources”, e.g. those steady, reliable, predictable energy sources – such as coal, oil, natural gas, and nuclear.
Efforts to Solve the Grid Problem, Point by Point
1. The Existing Grid is Old and Outdated
Across the country, much of the grid equipment has reached its end of useful life and is due for an upgrade replacement. For example, newer connections would allow the grid to accept power from the latest wind turbines commonly used in Germany (which produce 7.5 mW and up).
2. Climate Change is Making Grid Reliability Worse
Extreme weather events – from “derecho” winds across the Midwest to hurricanes along the Gulf Coast – are knocking down transmission lines at an alarming rate. More unpredictable weather patterns also demand that the grid also needs to be weatherized to handle higher temps in the north and colder temps in the south.
3. Projected 50% Increase in Demand for Energy Worldwide
The EIA projects that the demand for energy will increase by 50% by 2050. In this scenario, it’s hard to imagine meeting goals to curtail carbon emissions without dramatically increasing our use of renewable energy sources.
4. Where/how will we charge millions of electric cars?
The Bipartisan Infrastructure and Jobs Act (BIF) allocated $7.5 billion to build EV charging stations for electric vehicles. However, analysts think that will only cover 15% of the $50 billion overall cost.
5. Interconnecting a Mix of High Voltage and Local Micro Power Sources is Hard
As we pointed out earlier, managing the grid is difficult due to the just-in-time nature of electricity generation. Connecting small producers (such as home solar panels) compounds the problem; hence, many utilities have sought to eliminate residential hookups that “run the meter backward.” Yet local production should be part of the solution, and we need new technology to solve this problem.
6. Overcoming the Renewable Energy Generation Gap at Night
Solar power production obviously tapers off to zero as the sun goes down – but so too does wind production, which typically drops off dramatically due to still overnight winds. What is needed is an integrated approach that combines large scale battery storage systems (which can store energy for use at night or during power generation failures) as well as reliable long-range transmission lines that could, for example, power the east coast from the west coast for an additional 3 hours during the peak energy usage hours in the early evening. For its part, the Biden administration is easing transmission line permitting in an effort to encourage the construction of new power lines.
7. Environmental Damage from Sourcing Rare Earth Metals
Environmentalists are alarmed that the rapid growth in mining minerals from sensitive ecological areas is “moving the problem,” e.g. swapping one environmental disaster for another.
8. Deciding “Who Pays for All This?”
The multi-trillion dollar question is who will pay for the transformation of our power generation and electric grid? Historically, it’s taken a crisis for Congress to act. The 1973 energy crisis helped spur the passage of the 1978 Public Utilities Policy Act (PURPA) to encourage energy independence. It was followed by the Federal Energy Regulatory Commission (FERC)’s Energy Policy Act of 1992, which started the process of electric deregulation, followed by the Energy Policy Act of 2005, which created more tax incentives, subsidies, and loan guarantees. We are at another crossroads, yet even advocates of the Biden administration’s Build Back Better legislation (which is stalled in the Senate anyway) aren’t sufficient to pay for what’s needed to transform the grid. Without a comprehensive plan that includes a way to pay for it (such as a carbon tax perhaps), what will be the result? We’ll look at this question next.
What is the Likely Outcome? Five Future Scenarios
Economic analysts point out that solar and wind technology is following a cost-performance curve that is typical of other similar technologies – with each successive generation, the performance goes up, and the cost goes down.
Aside from the storage problems, solar and wind are already cheaper sources of electricity than fossil fuels, and there is no reason to believe they won’t continue to become even cheaper.
This could lead to an ironic situation where the cost of electric power generation during ideal day conditions is negligible, essentially free.
But if we don’t solve the issues outlined in the previous section, this will be for naught.
Here are five possible future scenarios to consider:
1. Patch and Pray: Make Incremental Changes and Endure the Consequences
This scenario describes our current trajectory, where we nibble around the edges of the problem with small incremental changes rather than tackle the root causes of our power generation and power grid problems.
One possible outcome from this “tragedy of the commons” approach is that the world continues to get warmer, uncomfortably so in many areas, and impossibly so in the warmest regions of the planet where the “wet bulb” effect kicks in, rendering humans unable to sweat out the heat without artificial cooling.
On the other hand, a “hands-off” approach might result in a “collapse” of the fossil fuel industry (due to lack of available financial market financing for stranded assets) well before we are ready to replace it with something else (e.g. renewable fuels and a workable smart grid) – leaving us without reliable power (at night for example).
2. Systematic Overhaul and Restructuring of the Grid
We could decide to bite the bullet, rip off the Band-Aid, or stand and face the music – take your pick of metaphors – and address the issues of power generation and the grid head-on. Unfortunately, the last major US effort to restructure the power grid at scale was the Rural Electrification Act of 1936, the Depression-era legislation that first brought power to small towns and farms across the country.
For a more recent model, we can look to the experience of Germany and its “Energie Wendie” (energy shift) policy which has attempted to realign its power grid away from nuclear and coal toward renewable energy. Yet, despite years of effort and investment, Germany still faces major energy problems due to its lingering dependence on Russian natural gas.
Some advocates of a restructured power generation system and modernized power grid suggest that the best way forward is a giant demonstration project, either through projects on military bases (such as the experiment at a southern California Air Force base that connected the fleet of electric vehicles to the local grid to provide overnight power storage) or as part of rebuilding Puerto Rico’s power grid that was destroyed by two back-to-back hurricanes and a major earthquake.
Yet these are still small-scale approaches to a worldwide problem. Countries such as India are thinking on a larger scale. At COP26, Indian Prime Minister Narendra Modi proposed the Green Grids Initiative—One Sun One World One Grid (GGI-OSOWOG), a plan to connect the nations of the earth into a global power grid capable of sending renewable solar and wind power around the world – the overcoming the problem of generating power at night.
Building a 4,000 sq mile solar farm in the Sahara (roughly 6 times the size of Houston) could theoretically produce between 50 to 70 terawatt hours of electricity a day – enough to power the entire world.
3. Belts and Suspenders Approach: Use Hydrogen and Natural Gas a Bridge
Many in the oil and gas industry have a different vision for the future, one that relies on natural gas (and hydrogen gas) as a “bridge” fuel source that will help tide us over until the renewable energy sources and the power grid are capable of standing on their own two feet.
We’ve written extensively about the idea of a hydrogen economy (which includes natural gas as a fuel source) before, so we won’t repeat the details of the technology here.
But suffice it to say that many environmentalists are up in arms against this approach, viewing it as an effort for the fossil fuels industry to wrest control of a clean energy agenda and lock us into continued dependence on carbon-based energy sources for generations to come.
And when we say environmentalists, we need to include the new German governing coalition in Berlin (which includes the Green Party, long an opponent of nuclear and fossil fuels), which is strongly opposed to EU efforts in Brussels to label natural gas, hydrogen, and nuclear power as “green” energy sources, a classification that makes them eligible for EU financial subsidies.
4. The Electric Generation and Power Grid Breaks Down into Separate Public Grid and Private-Access-Only Off-Grid Systems
As Gretchen Bakke explains in her book “The Grid” (p. 42), access to electric power in the early days of electric lights was a luxury for the rich and powerful who could afford to purchase home electrification kits directly from Thomas Edison, who sold 1,200 “private plants” between 1882 and 1887.
What goes around comes around, it seems. Today, a range of people from eager “do-it-yourselfers,” off-the-grid back-to-nature “earthship” enthusiasts, wary “disaster preppers,” and prudent homeowners and commercial real estate facility managers alike are installing their own power systems, either powered by natural gas generators or solar/wind setups with battery backups, or a combination of both.
What is the motivation? For some, it’s a case of independence and freedom, for others, it’s a valid concern that the power grid is becoming increasingly unreliable.
Taken to an extreme, we might find ourselves in a “haves and haves not” situation, as more users flee to their own private grid; if this happens in large enough quantities, it could undermine the financial basis for universal access to the public power grid.
5. Rogue Billionaires Take Control via Geoengineering
Our final scenario is a bit out there, but bear with us.
The fiction writer and tech visionary Neal Stephenson (famous for his 1992 book Snow Crash that promoted the idea of the Metaverse) is back with another thriller called Termination Shock that revolves around the dangers of climate change. In the book, the protagonist is a tech billionaire who decides to take unilateral action to reverse global warming with unprecedented acts of “geoengineering.”
To say more would be a spoiler, but the idea that an ultra-wealthy individual – or a national figure representing a country – could initiate such an environmental change on a global scale (with all the resulting unintended consequences) is not as far-fetched as it once may have seemed.
Which outcome do you predict will come to pass? We’d love to get your feedback.
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