Is solar an unstoppable force that is on the cusp of unleashing a wave of Schumpeterian creative destruction through technological superiority that incumbent power companies are powerless to resist?
I’m yet to be completely convinced.
Power companies have key government officials on side (and some key politicians, but not all the ones they need) to change the structure of residential power tariffs in ways that will undermine the economics of solar. Tariffs are likely to change in ways that make it harder for households to use solar to minimise their electricity bill. In addition distributors will try to make it harder to connect solar PV systems to the network.
To counter these tariff changes a lot hangs on the economics of batteries, and I’m hearing and seeing different things.
On the pessimistic side I hear science experts in the area suggest that battery improvement will be slow.
But then I look at how industry is gearing up to supply battery energy storage products at scale. If history is any guide the process of these companies competing for first-mover advantage in response to the prospect of a huge latent global market, in combination with a push from government support in Germany and California, means that one way or another they’ll find a way to make this work.
I little while ago I caught up with the head of the United States National Renewable Energy Laboratory, Dr Dan Arvizu. These scientific researchers have been behind some remarkable advances in renewables, but also energy efficiency. They helped develop the technology that underpins First Solar’s cadmium telluride solar cell, which pushed the limits for low-cost solar.
His view suggests we shouldn’t be holding our breath that batteries combined with solar are about to destroy the electricity industry:
"I’m not big on electrochemistry, you know this is kind of battery technology. I used to run essentially a battery R&D element in a former life when I was at Sandia National Labs and we did that for a variety of things that really relate to the national defence. Electrochemistry just moves really, really slowly. I mean, it takes decades. Even lithium-ion batteries which are kind of the latest thing, high density, whatever, even those have moved much more slowly than anybody anticipated."
I heard something somewhat similar from a staff member of the company BYD, the largest supplier of rechargeable batteries globally at the Australian Solar Council’s annual conference. His view was that batteries were not going to be like solar cells. Cost reductions would be more in line with more mature industrial products of about 5 per cent to 10 per cent every five years.
Yet Tom Werner, chief executive of one of the world’s leading solar PV companies, the Silicon Valley-based Sunpower, and a long-standing pioneer in the industry has a powerful and defiant slap-down to such doubts from NREL.
In an interview with Climate Spectator a few weeks ago Werner told me that Sunpower was going to shift the competitive goalposts for both conventional utilities and low-cost Chinese solar panel suppliers. His plan is to vertically integrate from offering solar panels to instead offering a comprehensive energy management solution to customers, with batteries as an integral part.
When I invoked NREL’s Arvizu to suggest this business plan might not work, he said:
“Ask NREL for their crystalline silicon efficiency roadmap … I think we’re shipping today what they’re projecting to happen in 2020.”
I remember having government officials and Bjorn Lomborg lookalikes invoking the likes of NREL a few years ago to say that crystalline silicon solar PV was a dead end. According to these people there was no point encouraging the market deployment of solar because the products available on the market were never going to be cost-competitive. Instead we needed to funnel government money to scientific R&D and demonstration projects to come up with completely new types of solar technology.
But the industry strangely kept persisting with crystalline silicon in spite of the scientific experts’ views. And through incremental improvements and extreme levels of competition they are achieving costs that were supposed to only be possible with a radical scientific breakthrough.
Werner comes from Silicon Valley with his roots in the IT and telecommunications industry. Similar to what I found in my interview with another Silicon Valley solar company, Enphase (Utilities be warned – Silicon Valley is coming after you), he has this self-confidence that comes with being part of a community that specialises in the business of creative destruction.
I don’t know who’s right about batteries, but I’m looking forward to watching the fight unfold.