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Transportation is the biggest growth opportunity for the electric utility sector in a century

 

I attended AWEA 2019 in Houston during the week of May 20 to sit on a panel with Pattern Energy, EVGo, Siemens, and Scott Rupp, a Chairman from the Missouri Public Services Commission. The topic of our panel was electrification and the opportunity it represents for the renewables industry.

Energy storage is … well, you’ve heard all the buzz. It’s just a fast growing market, an opportunity that everyone knows they must be a part of, but there are still a significant portion of energy project developers, lenders, and contractors who aren’t sure how or when to enter the market.

What few people realize is that the wind industry already entered the storage market, and did it early. In 2008-2009, right in the middle of the Great Recession, the wind industry was deploying advanced lead acid and sodium sulfur batteries to see how they would perform. There were even some Li-ion deployments. The wind industry was first in storage. A lot happened to derail the wind industry’s storage efforts, however, including (a few) expirations of the Federal production tax credits (PTCs), a declining economy, and then a slew of bankruptcies, sell-offs, and ownership changes in the old energy storage players. The sodium sulfur and advanced lead acid products have since given way to cheap and plentiful lithium ion. Meanwhile, the solar industry has surfed the Li-ion wave with great success. I went to AWEA to see if the wind industry was ready to paddle onto that wave yet.

My assessment is… maybe. I put on my walking dress shoes and walked miles along the expansive exhibition floor at AWEA. This is how I used to build business when I was younger and hungry. I’d go to a conference where I didn’t know anybody and I’d walk the exhibition floor, approaching any booth and shaking hands with whomever made the mistake of making eye contact. That’s how I built DNV GL’s hybrid power JIP for the oil & gas sector, and how I found partners for our ARPA-e contracts. Good old fashioned face time.

I’ve been in storage and renewables long enough that I know people at AWEA, but I’m not there like I usually am at the storage conferences or even Solar Power International. I go where the business is, and frankly, AWEA hasn’t been there much, yet.

As I walked miles along the expansive exhibition floor of AWEA and I approached booths and chatted with anyone I could find, I heard a lot of the negative chatter I used to hear everywhere. The usual stuff, like “storage isn’t mature yet” and “we’re not sure of the markets”. Yeah, people have been saying that a long time. I smiled and thanked people for their time.

When I started DNV GL’s battery testing research program in 2008, I heard those kind of statements a lot. In 2014-2015, real project finance deals with merchant market revenues were happening. Today, project finance for storage is happening all over the world in both merchant and regulated markets. It is no longer fair to say storage is not mature or that the markets are uncertain. That’s like saying “I’d buy a phone, but they might come out with something new next year,” or “gee, gas prices might go up.”   But, I did hear some promising statements. I got the impression that some of the wind players are willing to deploy storage at some of their sites because they know something is coming in their market, even though they don’t know what it might be. This is a good sign. This is what happened in 2013 when some of the most aggressive developers wanted to get into storage and knew that being first was more valuable than being certain.

So, I consider this a good sign. And back to the panel… it is also a good sign that we’re about to see the biggest growth in electricity demand in a century.  If you just do the basic math, you’ll be able to see that today’s existing terawatt of peak electricity generation capacity in the US is wholly insufficient to address electricity demand from vehicles, with a really big caveat. It is insufficient if we had to power the entire vehicle fleet at peak. A simple conversion (neglecting losses) is that the 40 quadrillion BTU of peak petroleum consumption[1] converts to an additional electrical need of 1.3 times more capacity. That seems like a scary number.

But that’s where companies like EVGo, Chargepoint, and others come in. We don’t need to charge all those cars during peak hours. We can incentivize charging with variable pricing, we can work with utilities on charger ownership models, and we can use the entirety of the electric vehicle fleet to provide Reg Down across any ISO in the US that can use that service. We can aggregate the loads, we can predict where the loads might be, and we can build the intelligent infrastructure to support it. All of these capabilities are off-the-shelf products and services today. And renewables developers, owners, and operators may be able to finance their projects with power purchase agreements from the aggregated, enormous loads managed by vehicle charging networks. If the regulatory bodies within the states recognize that utilities can’t build their own chargers fast enough, but they require a means to procure them, the it is probably time to develop a procurement mechanism.

If you doubt that electric vehicles are coming, you haven’t been paying attention.  Many of the American Big 3 automakers have stopped making sedans. The Tesla Model 3 and Model S, are both sedans and they hold the #1 and #2 spots (respectively) for the best selling electric vehicles by cumulative sales in the world. What does that tell you? The top 5 best selling plug-in vehicles, by cumulative sales, are: 1) Tesla Model 3, 2) Tesla Model S, 3) Chevrolet Volt, 4) Nissan Leaf, 5) Tesla Model X. If you didn’t catch the detail, 3/5 of the best selling EVs are sedans. All of the top 5 best selling EVs have 4 doors. Just wait until some real viable electric trucks enter the market, such as what is being offered by Rivian, Bollinger Motors, and maybe Ford soon.  It isn’t that people don’t want sedans. It’s that they don’t want boring, gas or diesel powered sedans. They want electric. And soon, they’ll want electric trucks.  The electric utility sector is about to seize the oil & gas sector’s cake and eat it, without even trying.

Electric vehicles will overtake the transportation sector quickly because every segment of vehicles within every automaker will have an electric offering within the next 1-3 years. We’ll need charge management to push that load into the valleys of daily electrical demand and we’ll need storage to offset the peak loads and manage the increased volatility of loads. And since renewables are now the cheapest power on the grid right now, we’ll need a lot more storage to manage that intermittency. This is a fantastic time to be in power generation, renewables, and storage. The market is on very clear growth trajectory with a well-defined demand.

In 2008, if I said that by 2025 the majority of our power would be renewable and the majority of our transportation will be electric, people would have laughed and dismissed it.  They would have roared in laughter if I said this occurred because it was just better and cheaper. But that is exactly what is happening, right under our noses. In America and across the world, this will happen by shear economics and market demand. That was my main message on the panel, with agreement from my peers. We’re watching an electrical revolution occur right before us.  All of us are pretty excited. Are you?


[1] passenger cars and trucks by miles traveled in the US in 2008

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