The energy generation industry will be dramatically disrupted over the next 10 to 20 years, and electricity could be virtually free within the next 20 years. This will dramatically impact on the power generation industry and will trigger a sea-change in the way it generates revenue, say enterprise resource planning multinational SAP VP futurist and Internet of Things specialist Tom Raftery and South African strategy consultant and futurist Graeme Codrington.
The number of photovoltaic systems installed in the US during 2016 was 95% higher than in 2015. The price of solar generation systems for unsubsidised bids in international auctions was below 3c/kWh in some regions. The price continues to decrease as more capacity is installed and, while wind energy generation system prices are falling more slowly, these are predicted to continue to decrease over the long term, says Raftery.
Codrington concurs, adding that the efficiency of solar systems has doubled over the past 18 months and prices have halved over the past year. One of the largest solar arrays was built in Germany in April last year.
“During a particularly sunny and windy spell, too much electricity was generated and, instead of switching off generation, the utility asked users to use more electricity and provided incentives to encourage energy consumption,” says Codrington.
Conversely, South Africa pays higher prices for – and consumes less – coal-based electricity than it did before the global economic recession.
However, to effectively use solar generation, energy storage technologies are necessary, warns Codrington.
Electric car manufacturer Tesla’s Gigafactory will produce more lithium-ion batteries in one year than were produced worldwide in 2013. The price of battery storage is decreasing while the average energy density of batteries is increasing, which means that they are cheaper to buy and store more energy, adds Raftery.
“The market for energy storage is exploding and this trend will have an enormous impact on utilities. Energy storage technologies, coupled with variable generating sources, will also change the way revenue is generated from electricity supply and consumption.”
More than 400 000 people have committed money to the development of the Tesla Model 3 car. These electric vehicles typically have 70 kWh to 100 kWh batteries installed. If there were 250 000 of these cars on the roads with an average battery size of 80 kWh, this would equate to 20 GWh of storage, or almost 20 nuclear power plants worth of energy driving around on the roads, he highlights.
“Tesla is building virtual power plants [which are similar to the “virtual power plant” aggregated power consumption management system used by Eskom to stabilise the local grid]. Provision of excess electricity from electric vehicles can lead to a revenue sharing model between automotive manufacturers and electric vehicle owners for electricity supplied to the grid,” Raftery explains.
Further, there is also international cooperation to develop new technologies to produce electricity, with the 35-nation International Thermonuclear Experimental Reactor – a prototype fusion reactor built in France – currently producing sufficient energy to sustain its reaction.
“We are building a star,” says Codrington.
Meanwhile, high barriers to entry will not be effective to protect specific industries that historically have high sunk capital costs, such as those typically found in the energy generation and distribution industries. Pay-per-use and as-a-service models will render asset acquisition unnecessary to begin business operations in many industries, and the electricity generation industry is not exempt, emphasises Raftery.
“As the price of energy plummets, utility companies will move to an all-you-can-use model, which will see the services layered on top of basic electricity supply driving revenue generation, as the price of electricity becomes close to zero.”
Specifically, utility companies must investigate ways to become involved in and eventually provide services for the smart home management market. Utilities will be completely changed in ten years’ time, he concludes.