Paul Gilding has written an interesting (but long) piece at Renew Economy discussing some of the emerging trends in the renewable energy space, and arguing that established players in the fossil fuel industry are facing inevitable collapse:
I think it’s time to call it. Renewables and associated storage, transport and digital technologies are so rapidly disrupting whole industries’ business models they are pushing the fossil fuel industry towards inevitable collapse…
The utility death spiral is a great example of system complexity that is simple to understand. Solar energy costs have plummeted – so far that in most places you can get electricity cheaper from your own solar panels than you can from a utility. The impact on the grid of people doing so at scale is to lower the overall cost of electricity generation by reducing both peak demand (and so peak pricing) and lowering volume. Utilities are then stuck with expensive physical assets, less sales and lower margins, so they need to increase either the cost per unit of power or impose grid connection charges to customers. But doing either gives customers more motivation to leave the utility – thus the death spiral.
And the disruption is worse for old players because this is not just technology switching. The whole sector is moving to a distributed rather than centralised system, thereby inviting in countless new, nimble competitors into the space. This is fundamental structural change that is going global, as Giles Parkinson from RenewEconomy explains.
If you think this utility problem isn’t enough to seriously threaten the overall fossil fuel industry, then think again – this is just one of a number of fronts where they’re being hammered…
I haven’t mentioned the revolution underway with electric cars, where Tesla is valued at more than half of GM – despite the latter producing 300 times as many cars! Do you think the market knows where that is going? Or the incredible impact of China having to clean up their air or risk economic and social unrest – knowing when China acts the market impacts are world scale.
Or the role of digital technology and dot com billionaires in driving disruptive change via the move to a distributed energy system…
Already businesses in the US can get battery systems from Coda Energy to even- out grid power use and avoid peak pricing. With software monitoring the grid to know the highest value time to respond, it can be installed at zero cost then paid for by sharing the savings with the battery company! And the solar industry is at last in boom times, with the HSBC’s Global Solar index up 65% last year and already up 23% in 2014.
It won’t be long before all these new players take on the old ones in a battle of “business vs business”, a moment I’ve argued was coming…
So, as I see it, the game is up for fossil fuels. Their decline is well underway and it won’t be a gentle one. Of course they won’t just be gone in few years but once the market and policy makers understand what’s happening, it will become self- reinforcing and accelerate rapidly.
I have limited expertise in this area and cannot tell whether Gilding’s claims are plausible or based more on hope. But even if he is only half right about the rise of renewables, the changes to the economy and the business landscape will be immense, and it would be a shame to see Australia get left behind because of myopic policy making.
